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on Business Economics |
| By: | Martino Pelli (Université de Sherbrooke, CIREQ); Jeanne Tschopp (University of Bern); Natalia Bezmaternykh (Ryerson University); Kodjovi M Eklou (European Department, International Monetary Fund) |
| Abstract: | This paper examines the response of firms to capital destruction. Using Indian firm data we establish that tropical storms destroy up to 43% of firms’ capital. We use this exogenous shock to capital and find that within industry less productive firms suffer disproportionately more, both along the intensive (firm sales) and extensive (firm exit) margins. The effect found across industries is 33% larger, and indicates that capital destruction leads to a shift in sales towards comparative advantage industries. This build-back better effect is driven by firms active in multiple industries and, to a large extent, by shifts in the firm-level production mix within a firm’s active set of industries. Finally, while there is no evidence that firms adjust by investing in new industry lines, firms tend to abandon production in industries that exhibit lower comparative advantage. Our baseline estimates imply that for the top 25% of storms, the median firm’s industry sales decrease by at least 2.5% and the exit rate of the median firm increases by at least 2%. |
| Keywords: | firms, capital destruction, creative destruction, hurricanes, India |
| JEL: | F14 O10 Q54 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montec:11-2019&r=all |
| By: | Karasik, Leonid; Rollin, Anne-Marie |
| Abstract: | This paper uses Canadian business microdata for 1999 to 2013 to study the characteristics of private-sector medium-sized firms that transition to the large or small size classes. A firm’s size class is defined over a three-year window to ensure that it represents the firm’s long-term state rather than a transient state for a given year. The paper examines what distinguishes medium-sized firms that become large from those that revert to being small. |
| Keywords: | Size of business, Productivity, Private sector |
| Date: | 2019–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp3e:2019004e&r=all |
| By: | Christian Abele (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Agnès Bénassy-Quéré (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Lionel Fontagné (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We analyse the impact of both the Global Financial Crisis of 2008 and the European sovereign and banking crisis of 2011-13 on firm-level productivity in France, Italy and Spain. We firstly show that relying on a single break date in 2008 misses both the euro crisis and countries' institutional speci_cities. Secondly, although leverage and financial constraints affect firm-level productivity negatively, high-leverage firms su_er more from financial constraints only in Italy, when they are relatively small or when their debt is of short maturity. These results, which are robust to a series of alternative explanations, call for approaches taking into consideration country-level characteristics of financial institutions and time varying _nancing constraints of the firms, instead of pooling data and adopting a common break date. One size does not fit all when it comes to identifying the impact of financial crises on firm level productivity. |
| Keywords: | total factor productivity,firm-level data,financial constraints,crises |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02883685&r=all |
| By: | Benjamin Balsmeier; Lee Fleming; Matt Marx; Seungryul Ryan Shin |
| Abstract: | To what extent does high-growth entrepreneurship depend on skilled human capital? We estimate the impact of the inflow of inventors into a region on the founding of high-growth firms, instrumenting mobility with the county-level share of millions of inventor surnames in the 1940 U.S. Census. Inventor immigration increases county-level high-growth entrepreneurship; estimates range from 29-55 immigrating inventors for each new high-growth firm, depending on the region and model. We also find a smaller but significant negative effect of inventor arrival on entrepreneurship in nearby counties. |
| JEL: | J24 J61 L26 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27605&r=all |
| By: | Pedro S. Martins |
| Abstract: | As work changes, firm-provided training may become more relevant; however, there is little causal evidence about the effects of training on firms. This paper studies a large training grants programme in Portugal, contrasting successful firms that received the grants and unsuccessful firms that did not. Combining several rich data sets, we compare a large number of potential outcomes of these firms, while following them over long periods of time before and after the grant decision. Our difference-in-differences models estimate significant positive effects on take up (training hours and expenditure), with limited deadweight; and that such additional training led to increased sales, value added, employment, productivity, and exports. These effects tend to be of at least 5% and, in some cases, 10% or more, and are robust in multiple dimensions of the analysis. |
| Keywords: | Training subsidies, Productivity, Counterfactual evaluation. |
| JEL: | J24 H43 M53 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:mde:wpaper:0152&r=all |
| By: | Massimiliano Ferraresi (European Commission Joint Research Centre); Gianluca Gucciardi (European Commission Joint Research Centre and Ispra) |
| Abstract: | We exploit the natural experimental setting provided by the Covid-19 lockdown to analyse how performance is affected by a friendly audience. Specifically, we use data on all football matches in the top-level competitions across France, Germany, Italy, Spain, and the United Kingdom over the 2019/2020 season. We compare the difference between the number of points gained by teams playing at home and teams competing away before the Covid-19 outbreak, when supporters could attend any match, with the same difference after the lockdown, when all matches took place behind closed doors. We find that the performance of the home team is halved when stadiums are empty, with this effect being more marked for teams whose attendance rate was very high and for those that do not have international experience. Taken together, these results may play a key role in the design of the future workplace as ‘smart working’—an organisational model where the perception of being observed is less pronounced—is becoming increasingly important. |
| Keywords: | team performance, home advantage, choking, lockdown, natural experiment |
| JEL: | J2 D8 M54 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:ipu:wpaper:94&r=all |
| By: | Daisuke Miyakawa (Associate Professor, Hitotsubashi University Business School (E-mail: dmiyakawa@hub.hit-u.ac.jp)); Kohei Shintani (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: kouhei.shintani@boj.or.jp)) |
| Abstract: | We document how professional analysts' predictions of firm exits disagree with machine-based predictions. First, on average, human predictions underperform machine predictions. Second, however, the relative performance of human to machine predictions improves for firms with specific characteristics, such as less observable information, possibly due to the unstructured information used only in human predictions. Third, for firms with less information, reallocating prediction tasks from machine to analysts reduces type I error while simultaneously increasing type II error. Under certain conditions, human predictions can outperform machine predictions. |
| Keywords: | Machine Learning, Human Prediction, Disagreement |
| JEL: | C10 C55 G33 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:20-e-11&r=all |
| By: | Daunfeldt, Sven-Olov (Institute of Retail Economics (Handelns Forskningsinstitut)); Mihaescu, Oana (Institute of Retail Economics (Handelns Forskningsinstitut)); Rudholm, Niklas (Institute of Retail Economics (Handelns Forskningsinstitut)) |
| Abstract: | We use the entry of 17 external shopping malls in Sweden to investigate how they have affected the performance of incumbent firms located in the city centres of small cities. We find that entry by external shopping malls decreased labour productivity for incumbent firms in city centres by -5.31%. However, when using time-specific fixed effects to control for common time trends in retailing in small cities, the impact on labour productivity, revenues, and number of employees due to the entry of external shopping malls becomes insignificant. The negative impact on incumbent firms is thus not due to the entry of external shopping malls but rather due to long-term negative economic trends in these cities. |
| Keywords: | external shopping malls; city centre; firm performance; agglomeration economies; competition; difference-in-differences |
| JEL: | D22 L25 P25 R12 |
| Date: | 2020–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hfiwps:0010&r=all |
| By: | Ana Dammert; Aisha Nansamba |
| Abstract: | This paper explores whether skills training in business performance and customer practices was a promising way to increase business outcomes among self-employed workers who operate small businesses in developing countries. We randomized training in business-management skills and business and inter-personal skills among BRAC’s Small Enterprise Programme firm owners in Liberia. We found that firm owners who received either training experienced an increase in attention to customers, which consequently enhanced the performance of the businesses, including higher average monthly revenue, less loss of customers, and a smaller likelihood of encountering business losses. Customers, however, reported no effect on their customer experiences. |
| Keywords: | RCT, SME, Liberia |
| JEL: | C93 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:piercr:2019-24&r=all |
| By: | Amir Kermani; Yueran Ma |
| Abstract: | We study the nature of debt among US non-financial firms and its determinants. One approach of debt enforcement lends against the liquidation value of discrete assets (such as fixed assets or working capital). Another approach lends against the going-concern value of the business. Using a new dataset on the liquidation value of different types of assets as well as the going-concern value of distressed firms across major industries, we present several findings. First, non-financial firms have limited liquidation values from fixed assets and working capital, which sum to around 23% of book assets for the average firm. Second, firms with lower liquidation values have more loans with monitoring and tighter performance covenants. Third, lower liquidation values are associated with higher interest rates, but only for debt against discrete assets. We finally present a model that matches the main findings, which demonstrates how covenants and control right institutions facilitate borrowing well beyond liquidation values. |
| JEL: | G32 G33 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27641&r=all |
| By: | João Alfredo Galindo da Fonseca (Université de Montréal, CIREQ); Charles Berubé (Innovation, Science and Economic Development Canada) |
| Abstract: | Does having a spouse influence an individual’s decision to start a firm and what firms they create? The answer to this question is crucial for our understanding of how recent changes to family composition influence firm creation. We develop a model of endogenous entrepreneurship with spousal labour supply decisions and endogenous marriage. Married individuals have three channels, that go in opposite directions, which influence their choice to start a firm relative to the unmarried. Firstly, spouses work less when the business is more profitable partially offsetting the benefit of higher profits (spousal substitution effect). Secondly, if the business fails, the spouse works more hours (spousal insurance effect). Finally, a married individual shares their in-come with their spouse which decreases their income as a worker, their cost to entrepreneurship (spousal opportunity cost effect). We proceed to test empirically the relative strength of these channels. The model is informative of the components of the error term and the conditions for validity of our instrumental variable strategy. Using city level variation in the past composition of immigrants we show higher marriage rates are associated to more entry and lower average size of startups. |
| Keywords: | firm dynamics, macroeconomics, labor markets, family economics |
| JEL: | E24 E23 J63 J64 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montec:05-2019&r=all |
| By: | Picot, Garnett; Rollin, Anne-Marie |
| Abstract: | Using data from Statistics Canada’s Canadian Employer–Employee Dynamics Database (CEEDD), this paper has three objectives: (1) determining how the number of jobs created or destroyed by immigrant-owned private incorporated companies compared with that of firms with Canadian-born owners, (2) determining whether immigrant-owned firms were more likely than firms with Canadian-born owners to be high growth firms or rapidly shrinking firms, and (3) determining which immigrant characteristics were associated with a higher likelihood of immigrant-owned firms being high growth firms or rapidly shrinking firms. This paper addresses gross job creation (jobs created by expanding continuing firms and entering firms), gross job destruction (jobs terminated by contracting continuing firms and exiting firms), and net job change (the difference between gross job creation and gross job destruction). |
| Keywords: | Job departures, Job creation, Immigrants, Entrepreneurs |
| Date: | 2019–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp3e:2019011e&r=all |
| By: | João Alfredo Galindo da Fonseca (Université de Montréal, CIREQ) |
| Abstract: | Are there differences between firms created by unemployed individuals relative to otherwise identical employed individuals? The answer is crucial for understanding the impact of policies that promote entrepreneurship among the unemployed. I develop an equilibrium model of entrepreneurship. Different outside options imply the unemployed are more likely to start firms, but these are smaller and fail more often. I verify these implications using a new administrative Canadian matched owner-employer-employee dataset. I use firm closures to identify random assignments of individuals to unemployment. I find that subsidies for firms started by the unemployed induce a reallocation of resources to low-productivity firms. The mechanism is further tested empirically by verifying that wage workers are more responsive to wages than the unemployed in their decision to start a firm. |
| Keywords: | firm dynamics, unemployment, macroeconomics, labor markets |
| JEL: | E24 E23 J63 J64 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montec:04-2019&r=all |
| By: | Farasat A.S. Bokhari (Centre for Competition Policy and School of Economics, University of East Anglia); Franco Mariuzzo (Centre for Competition Policy and School of Economics, University of East Anglia); Arnold Polanski (School of Economics, University of East Anglia) |
| Abstract: | During patent litigation, pay-for-delay deals involve a payment from a patent holder of a branded drug to a generic drug manufacturer to delay entry and withdraw the patent challenge. In return for staying out of the market, the generic firm receives a payment, and/or an authorized licensed entry at a later date, but before the patent expiration. We examine why such deals are stable when there are multiple potential entrants. We combine the first mover advantage for the first generic with the ability of the branded manufacturer to launch an authorized generic to show when pay-for-delay deals are an equilibrium outcome. We further show that limiting a branded firm's ability to launch an authorized generic prior to entry by a successful challenger will deter such deals. However, removing exclusivity period for the first generic challenger will not. |
| Keywords: | pharmaceuticals, pay-for-delay, reverse payments, authorized generics, first mover advantage |
| JEL: | L41 K21 K41 |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:uea:ueaccp:2015_05v4&r=all |