nep-bec New Economics Papers
on Business Economics
Issue of 2020‒10‒26
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. Firm-Embedded Productivity and Cross-Country Income Differences By Vanessa Alviarez; Javier Cravino; Natalia Ramondo
  2. Institutions, Financial Development, and Small Business Survival: Evidence from European Emerging Markets By Ichiro Iwasaki; Evzen Kocenda; Yoshisada Shida
  3. Unwilling to Train? Firm Responses to the Colombian Apprenticeship Regulation By Santiago Caicedo; Miguel Espinosa; Arthur Seibold
  4. Offshoring and Segregation by Skill: Theory and Evidence By Gueyon Kim; Dohyeon Lee
  5. Payment Innovations, the Shadow Economy and Cash Demand of Households in Euro Area Countries By Hans-Eggert Reimers; Friedrich Schneider; Franz Seitz
  6. Influence of entrepreneurial orientation: How open innovation and risk governance affects firm performance By Susanto, Stefanny Magdalena
  7. The Effects of COVID-19 on U.S. Small Businesses: Evidence from Owners, Managers, and Employees By Georgij Alekseev; Safaa Amer; Manasa Gopal; Theresa Kuchler; JW Schneider; Johannes Stroebel; Nils Wernerfelt
  8. Layoffs and productivity at a Bangladeshi sweater factory By Akerlof, Robert; Ashraf, Anik; Macchiavello, Rocco; Rabbani, Atonu
  9. Networked FDI and third-country intra-firm trade By Toshihiro Okubo; Yuta Watabe

  1. By: Vanessa Alviarez; Javier Cravino; Natalia Ramondo
    Abstract: We measure the contribution of firm-embedded productivity to cross-country income differences. By firm-embedded productivity we refer to the components of productivity that differ across firms and that can be transferred internationally, such as blueprints, management practices, and intangible capital. Our approach relies on microlevel data on the cross-border operations of multinational enterprises (MNEs). We compare the market shares of the exact same MNE in different countries and document that they are about four times larger in developing than in high-income countries. This finding indicates that MNEs face less competition in less-developed countries, suggesting that firm-embedded productivity in those countries is scarce. We propose and implement a new measure of firm-embedded productivity based on this observation. We find a strong positive correlation between our measure and output per-worker across countries. In our sample, differences in firm-embedded productivity account for roughly a third of the cross-country variance in output per-worker.
    Keywords: Development accounting; TFP; Multinational enterprises
    JEL: O40 O10 F41 F23 F62
    Date: 2020–10–13
  2. By: Ichiro Iwasaki (Institute of Economic Research, Hitotsubashi University, Tokyo, Japan); Evzen Kocenda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; Institute of Information Theory and Automation, Czech Academy of Sciences, Prague, Czech Republic; CESifo, Munich, IOS, Regensburg); Yoshisada Shida (Economic Research Institute for Northeast Asia (ERINA), Niigata, Japan)
    Abstract: In this paper, we traced the survival status of 94,401 small businesses in 17 European emerging markets from 2007–2017 and empirically examined the determinants of their survival, focusing on institutional quality and financial development. We found that institutional quality and the level of financial development exhibit statistically significant and economically meaningful impacts on the survival probability of the SMEs being researched. The evidence holds even when we control for a set of firm-level characteristics such as ownership structure, financial performance, firm size, and age. The findings are also uniform across industries and country groups and robust beyond the difference in assumption of hazard distribution, firm size, region, and time period.
    Keywords: small business; institutions; financial development; survival analysis; European emerging markets
    JEL: C14 D02 D22 G33 M21
    Date: 2020–10
  3. By: Santiago Caicedo; Miguel Espinosa; Arthur Seibold
    Abstract: We study firm responses to a large-scale change in apprenticeship regulation in Colombia. The reform requires firms to train, setting apprentice quotas that vary discontinuously in firm size. We document strong heterogeneity in responses across sectors, where firms in sectors with high skill requirements tend to avoid training apprentices, while firms in low-skill sectors seek apprentices. Guided by these reduced-form findings, we structurally estimate firms’ training costs. Especially in high-skill sectors, many firms face large training costs, limiting their willingness to train apprentices. Yet, we find substantial overall benefits of expanding apprenticeship training, in particular when the supply of trained workers increases in general equilibrium. Finally, we show that counterfactual policies that take into account heterogeneity across sectors can deliver similar benefits from training while inducing less distortions in the firm-size distribution and in the allocation of resources across sectors.
    JEL: E24 J21 J24 M50
    Date: 2020
  4. By: Gueyon Kim (University of California, Santa Cruz); Dohyeon Lee (University of Wisconsin--Madison)
    Abstract: This paper examines the labor market consequences of offshoring. We use the Danish employer-employee matched data together with the newly constructed skill measures to evaluate the effect of offshoring on wages and reallocation of workers within offshorable occupations. Offshoring reduces domestic worker wages; and increases the probability of reallocation away from the high-productivity firms to the low-productivity ones. The least-skilled workers further face a greater risk of switching out to a less competitive sector. On the firm-side, offshoring improves the average skill of in-house workers at a lower cost. By estimating a worker-firm matching model, we examine the mechanisms of how offshoring affects labor market inequality and further assess the quantitative importance of various competing hypotheses such as technological change and the expansion of higher education, in addition to offshoring. We find substantially different effects: technology mainly increases the inequality between firms in terms of worker skill quality and average wages, while offshoring mitigates this rising trend.
    Keywords: offshoring, skill, matching, segregation by skill, between-firm inequality
    JEL: F15 F16 F23 J21 J24 J31
    Date: 2020–10
  5. By: Hans-Eggert Reimers; Friedrich Schneider; Franz Seitz
    Abstract: We analyze for the first time cash holdings of private households in all euro area countries from 2002 to 2019 within a panel cointegration framework. Besides the traditional determinants of cash demand like transactions balances and opportunity costs, we concentrate on cashless payments media as substitutes to cash payments and the role of the shadow economy. Moreover, we take due account of country-specific repercussions of the financial and economic crisis of 2008/09, time series properties and distinguish between small and large countries. We find a significant and positive relationship among households' cash holdings, the volume of transactions and the size of the shadow economy irrespective of country size for all euro area countries over our sample period. Additionally, there is a substitution relationship between the accessibility and availability of cashless payments media and cash demand. And a decreasing number of ATMs reduces cash holdings. These results have important political and financial implications.
    Keywords: cash, cashless payments, shadow economy, cash demand function, panel cointegration
    JEL: C23 E41 E58
    Date: 2020
  6. By: Susanto, Stefanny Magdalena
    Abstract: Entrepreneurial Orientation adalah proses pembuatan strategi yang mewakili kebijakan dan praktik sebagai dasar dalam bertindak dan mengambil keputusan dalam berwirausaha (Zhang, O'Kane, & Chen, 2020). Dalam penerapannya, Entrepreneurial Orientation sendiri selalu mengedepankan karakter open innovation dan pengelolaan risikonya dengan harapan dapat mengembangkan organisasi / perusahaan di semua tingkat khususnya terhadap unit bisnisnya (Hughes & Hodgkinson, 2020).
    Date: 2020–10–01
  7. By: Georgij Alekseev; Safaa Amer; Manasa Gopal; Theresa Kuchler; JW Schneider; Johannes Stroebel; Nils Wernerfelt
    Abstract: We analyze a large-scale survey of owners, managers, and employees of small businesses in the United States to understand the effects of the early stages of the COVID-19 pandemic on those businesses. The survey was fielded in late April 2020 among Facebook business page administrators, frequent sellers on Facebook’s e-commerce platform Marketplace, and the general Facebook user population. We observe more than 66,000 responses covering most sectors of the economy, including many businesses that had stopped operating due to the pandemic. The survey asks 136 questions covering topics such as changes in business operations and employment, changes in financing patterns, and the interaction of household and business responsibilities. We characterize the adjustments implemented to survive the pandemic and explore the key challenges to continue operating or to re-open. We show how these patterns differ across industry, firm size, owner gender, and other firm characteristics.
    Keywords: small businesses, COVID-19, working from home, small business finance
    JEL: E30 L26 M13
    Date: 2020
  8. By: Akerlof, Robert (University of Warwick); Ashraf, Anik (LMU Munich); Macchiavello, Rocco (London School of Economics and Political Science); Rabbani, Atonu (University of Dhaka)
    Abstract: Conflicts between management and workers are common and can have significant impacts on productivity. We study how workers in a large Bangladeshi sweater factory responded to management’s decision to lay off about a quarter of the workers following a period of labor unrest. Our main finding is that the mass layoff resulted in a large and persistent reduction in the productivity of surviving workers. Moreover, it is specifically the firing of peers with whom workers had social connections – friends – that matters. We also provide suggestive evidence of deliberate shading of performance by workers in order to punish the factory’s management, and a corresponding deliberate attempt by the factory to win the angry workers back by selectively giving them tasks that are more rewarding. By combining ethnographic and survey data on the socialization process with the factory’s internal records, the paper provides a rare glimpse into the aftermath of an episode of labor unrest. A portrait of the firm emerges as a web of interconnected relational agreements supported by social connections.
    Keywords: Layoffs, Productivity, Morale, Relational Contracts JEL Classification: J50, M50, O12
    Date: 2020
  9. By: Toshihiro Okubo (Faculty of Economics, Keio University); Yuta Watabe (Pennsylvania State University)
    Abstract: In the wave of globalization, foreign direct investment (FDI) is networked. Affiliates locate across countries and trade among them. This paper investigates the FDI networks, in particular, third-country intra-firm trade using the Japanese foreign affiliate data. We find active third-country sales and sourcing within the firm boundary, but only large firms tend to construct production networks. Driving forces for FDI networks are in the allocation of ownership and human resources by parent firms.
    Keywords: multinational firms, networked FDI, intra-firm trade, sales and sourcing, third-country
    JEL: F12 F15
    Date: 2020–09–08

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