nep-bec New Economics Papers
on Business Economics
Issue of 2021‒05‒24
sixteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Technology Within and Across Firms By Cirera, Xavier; Comin, Diego; Cruz, Marcio; Lee, Kyungmin
  2. Firm Heterogeneity in Skill Returns By Boehm, Michael; Esmkhani, Khalil; Gallipoli, Giovanni
  3. Gravity with Granularity By Breinlich, Holger; Fadinger, Harald; Nocke, Volker; Schutz, Nicolas
  4. Judge Bias in Labor Courts and Firm Performance By Cahuc, Pierre; Carcillo, Stéphane; Moreau, Flavien; PATAULT, Bérengère
  5. Network Centrality and Managerial Market Timing Ability By Evgeniou, Theodoros; Peress, Joël; Vermaelen, Theo; Yue, Ling
  6. The Effects of COVID-19 on U.S. Small Businesses: Evidence from Owners, Managers, and Employees By Alekseev, Georgij; Amer, Safaa; Gopal, Manasa; Kuchler, Theresa; Schneider, JW; Ströbel, Johannes; Wernerfelt, Nils
  7. Dynastic Control without Ownership: Evidence from Post-war Japan By Bennedsen, Morten; Mehrotra, Vikas; Shim, Jungwook; Wiwattanakantang, Yupana
  8. Cognitive Ability and Employee Mobility: Evidence from Swedish Microdata By Khashabi, Pooyan; Kretschmer, Tobias; Mohammadi, Ali; Raffiee, Joseph
  9. Vertical Integration and Foreclosure: Evidence from Production Network Data By Boehm, Johannes; Sonntag, Jan
  10. How do firms achieve corporate social performance? An integrated perspective By Walid Ben‐amar; Claude Francoeur; Sylvain Marsat; Aida Sijamic Wahid
  11. Is Public Equity Deadly? Evidence from Workplace Safety and Productivity Tradeoffs in the Coal Industry By Erik P. Gilje; Michael D. Wittry
  12. Cyclical Worker Flows: Cleansing vs. Sullying By John C. Haltiwanger; Henry R. Hyatt; Erika McEntarfer; Matthew Staiger
  13. Work from Home & Productivity: Evidence from Personnel & Analytics Data on IT Professionals By Gibbs, Michael; Mengel, Friederike; Siemroth, Christoph
  14. Intangible Capital and Firm-Level Productivity – Evidence from Germany By Roth, Felix; Sen, Ali; Rammer, Christian
  15. Data vs collateral By Chen, Shu; Gambacorta, Leonardo; Huang, Yiping; Li, Zhenhua; Qiu, Han
  16. Bottom-up Markup Fluctuations By Burstein, Ariel Tomas; Carvalho, Vasco M; Grassi, Basile

  1. By: Cirera, Xavier; Comin, Diego; Cruz, Marcio; Lee, Kyungmin
    Abstract: We collect data on the sophistication of technologies used at the business function level for a representative sample of firms from Vietnam, Senegal and the Brazilian state of Ceará. Our analysis finds a large variance in technology sophistication across the business functions of a firm. Specifically, the within-firm variance in technology sophistication is greater than the variance in sophistication across firms, which in turn is greater than the variance in sophistication across regions or countries. We document a stable cross-firm relationship between technology at the business function and at the firm level that we name the technology curve. We uncover significant heterogeneity in the slope of technology curves across business functions, a finding consistent with non-homotheticities in firm-level technology aggregators. Firm-productivity is positively associated to both the within-firm variance and average level of technology sophistication. Development accounting exercises show that cross-firm variation in technology accounts for one third of cross-firm differences in productivity, and one fifth of the agricultural vs. non-agricultural gap in cross-country differences in firm productivity.
    Date: 2020–11
  2. By: Boehm, Michael; Esmkhani, Khalil; Gallipoli, Giovanni
    Abstract: This paper presents new evidence on worker-firm complementarities. We combine matched employer-employee data with direct measures of workers' cognitive and noncognitive skills, and propose an empirical approach that separately identifies the firm-level return for each attribute. We find that similar skills command different returns across employers and that workers' sorting into firms depends on returns to both attributes. We derive theoretical restrictions that characterize many-to-one matching in employer-employee data, linking within-firm skill dispersion to between-firm differences in average skills. Estimates support these restrictions. Firm heterogeneity in skill returns raises both the average level and dispersion of earnings.
    Keywords: Firm Heterogeneity; inequality; Skill Returns; sorting; wages
    JEL: D30 E23 J23 J24
    Date: 2020–11
  3. By: Breinlich, Holger; Fadinger, Harald; Nocke, Volker; Schutz, Nicolas
    Abstract: We evaluate the consequences of oligopolistic behavior for the estimation of gravity equations for trade flows. With oligopolistic competition, firm-level gravity equations based on a standard CES demand framework need to be augmented by markup terms that are functions of firms' market shares. At the aggregate level, the additional term takes the form of the exporting country's market share in the destination country multiplied by an exporter-destination-specific Herfindahl-Hirschman index. For both cases, we show how to construct appropriate correction terms that can be used to avoid problems of omitted variable bias. We illustrate the quantitative importance of our results for combined French and Chinese firm-level export data as well as for a sample of product-level imports by European countries. Our results show that correcting for oligopoly bias can lead to substantial changes in the coefficients on standard gravity regressors such as distance or the impact of currency unions
    Keywords: Aggregative Game; CES Demand; Gravity Equation; oligopoly
    JEL: F12 F14 L13
    Date: 2020–10
  4. By: Cahuc, Pierre; Carcillo, Stéphane; Moreau, Flavien; PATAULT, Bérengère
    Abstract: Does labor court uncertainty and judge subjectivity influence firms performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias has statistically significant effects on the survival, employment, and sales of small low-performing firms. However, we find that the uncertainty associated with the actual dispersion of judge bias is small and has a non-significant impact on their average outcomes.
    Keywords: employment; Employment protection legislation; Labor courts
    JEL: J01 J08 K31
    Date: 2020–10
  5. By: Evgeniou, Theodoros; Peress, Joël; Vermaelen, Theo; Yue, Ling
    Abstract: We document that long-run excess returns following announcements of share buyback authorizations and insider purchases are a U-shape function of firm centrality in the input-output trade flow network. These results conform to a model of investors endowed with a large but finite capacity for analyzing firms. Additional links weaken insiders' informational advantage in peripheral firms (simple firms whose cash flows depend on few economic links) provided investors' capacity is large enough, but eventually amplify that advantage in central firms (firms with many links) due to investors' limited capacity. These findings shed light on the sources of managerial market timing ability.
    Keywords: Buybacks; insider trading; Market Efficiency; market timing; Network centrality
    JEL: G32 O32
    Date: 2020–09
  6. By: Alekseev, Georgij; Amer, Safaa; Gopal, Manasa; Kuchler, Theresa; Schneider, JW; Ströbel, Johannes; Wernerfelt, Nils
    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: COVID-19; Small business finance; small businesses; Working from Home
    JEL: L26 M13
    Date: 2020–09
  7. By: Bennedsen, Morten; Mehrotra, Vikas; Shim, Jungwook; Wiwattanakantang, Yupana
    Abstract: Dynastic-controlled firms are led by founding family CEOs while the family owns an insignificant share of equity (defined as less than five percent). They represent 7.4% of listed firms in post-war Japan, include well-known firms such as Casio, Suzuki and Toyota, and are often grouped with widely-held firms in the literature. These firms differ in key performance measures from both traditional family firms and non-family firms, and evolve from the former as equity-financed growth dilutes the founding family's ownership over time. In turn, the transition from dynastic control to non-family status is driven by a diminution of strategic family resources.
    Keywords: Family control; ownership; Succession
    JEL: G32 L26
    Date: 2020–10
  8. By: Khashabi, Pooyan; Kretschmer, Tobias; Mohammadi, Ali; Raffiee, Joseph
    Abstract: Cognitive ability and intelligence have been highlighted as the primary personnel measures used for hiring decisions, and gurus and popular business outlets consistently recommend that managers hire people smarter than themselves. However, the sustainability of such hiring strategies with respect to employee retention has not been fully investigated, largely due to data constraints. In this research note, we examine the relationship between cognitive ability and employee mobility, taking advantage of unique microdata from Sweden. Our empirical results show that higher cognitive ability is negatively associated with turnover, implying that cognitively-gifted employees settle with better employment options internally, compared to the external labor market. Nevertheless, when the employee has a significantly higher cognitive ability than their manager , employees are more likely to the firm. The results shed light on the relationship between cognitive ability and mobility, and highlight the role of managers for the success of hiring strategies based on cognitive ability.
    Keywords: cognitive ability; cognitive distance; employee mobility; Managers; retention
    Date: 2020–09
  9. By: Boehm, Johannes; Sonntag, Jan
    Abstract: This paper studies the prevalence of potential anticompetitive effects of vertical mergers using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers' competitors than when they vertically integrate with an unrelated firm. This relationship holds for both domestic and cross-border mergers, and for domestic and international relationships. It also holds when instrumenting mergers using exogenous downward pressure on the supplier's stock prices, suggesting that reverse causality is unlikely to explain the result. In contrast, the relationship vanishes when using rumored or announced but not completed integration events. Firms experience a substantial drop in sales when one of their suppliers integrates with one of their competitors. This sales drop is mitigated if the firm has alternative suppliers in place. These findings are consistent with anticompetitive effects of vertical mergers, such as vertical foreclosure, rising input costs for rivals, or self-foreclosure.
    Keywords: Market foreclosure; mergers and acquisitions; production networks; vertical integration
    JEL: L14 L42
    Date: 2020–11
  10. By: Walid Ben‐amar; Claude Francoeur; Sylvain Marsat (CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA [2017-2020] - Université Clermont Auvergne [2017-2020]); Aida Sijamic Wahid
    Abstract: This study provides an integrated view of the combined direct and indirect effects of the main drivers of CSR performance, at country, firm and CEO levels respectively. We extend prior literature by showing that the institutional context, firm CSR governance practices, and CSRrelated compensation incentives have impacts of different magnitudes on CSR performance, as well as significant combined effects. Using an international sample of 1,272 observations over 20 countries, we document significant indirect cascading effects of the institutional setting and firm-specific governance practices on CSR performance. From a managerial perspective, we find that firms operating in countries that are less oriented towards satisfying the needs of the stakeholders still have the ability to counterbalance this institutional impact and achieve relatively high CSR performance by implementing sound firm-level CSR governance practices and incentives.
    Keywords: Corporate social performance,Institutions,Corporate governance,Corporate social responsibility incentives
    Date: 2021–01–09
  11. By: Erik P. Gilje; Michael D. Wittry
    Abstract: We study how ownership structure, in particular public listing status, affects workplace safety and productivity tradeoffs. Theory offers competing hypotheses on how listing related frictions affect these tradeoffs. We exploit detailed asset-level data in the U.S. coal industry and find that workplace safety deteriorates dramatically under public firm ownership, primarily in mines that experience the largest productivity increases. We find evidence consistent with information asymmetry between managers and shareholders of public firms, and ties of private firm ownership with local communities being first-order drivers of workplace safety and productivity tradeoffs.
    JEL: G30 G32 G34 J24 J38
    Date: 2021–05
  12. By: John C. Haltiwanger; Henry R. Hyatt; Erika McEntarfer; Matthew Staiger
    Abstract: Do recessions speed up or impede productivity-enhancing reallocation? To investigate this question, we use U.S. linked employer-employee data to examine how worker flows contribute to productivity growth over the business cycle. We find that in expansions high-productivity firms grow faster primarily by hiring workers away from lower-productivity firms. The rate at which job-to-job flows move workers up the productivity ladder is highly procyclical. Productivity growth slows during recessions when this job ladder collapses. In contrast, flows into nonemployment from low productivity firms disproportionately increase in recessions, which leads to an increase in productivity growth. We thus find evidence of both sullying and cleansing effects of recessions, but the timing of these effects differs. The cleansing effect dominates early in downturns but the sullying effect lingers well into the economic recovery.
    JEL: E24 E32 J24 J63 J64
    Date: 2021–05
  13. By: Gibbs, Michael (University of Chicago); Mengel, Friederike (University of Essex); Siemroth, Christoph (University of Mannheim)
    Abstract: Using personnel and analytics data from over 10,000 skilled professionals at a large Asian IT services company, we compare productivity before and during the work from home [WFH] period of the Covid-19 pandemic. Total hours worked increased by roughly 30%, including a rise of 18% in working after normal business hours. Average output did not significantly change. Therefore, productivity fell by about 20%. Time spent on coordination activities and meetings increased, but uninterrupted work hours shrank considerably. Employees also spent less time networking, and received less coaching and 1:1 meetings with supervisors. These findings suggest that communication and coordination costs increased substantially during WFH, and constituted an important source of the decline in productivity. Employees with children living at home increased hours worked more than those without children at home, and suffered a bigger decline in productivity than those without children.
    Keywords: collaboration, COVID-19, pandemic, productivity, remote working, telecommuting, working from home, work hours, work time
    JEL: D2 M5
    Date: 2021–04
  14. By: Roth, Felix; Sen, Ali; Rammer, Christian
    Abstract: This paper analyses the impact of intangible capital on firm-level productivity for Germany using panel data from the Community Innovation Survey for the time period 2006 to 2018. Our paper presents three novel results. First, we find a highly significant positive relationship between intangible capital and firm-level productivity with elasticities overall in line with previous findings reported for other large EU economies. Second, our results show that both manufacturing and services are highly intangible-capital intensive, and that intangibles have a greater impact on firm-level productivity in services - particular in the business services sector. Third, our results show that intangible capital investments in German firms are equal to investments in tangible capital since the early 2000s. Overall, the evidence presented in our paper indicates that Germany - in line with other advanced economies - has undergone a structural transition into a knowledge economy in which intangibles act as an important driver of firm-level productivity.
    Keywords: Intangible capital,firm-level productivity,panel data,Germany
    JEL: D24 O30 L22 C33
    Date: 2021
  15. By: Chen, Shu; Gambacorta, Leonardo; Huang, Yiping; Li, Zhenhua; Qiu, Han
    Abstract: The use of massive amounts of data by large technology firms (big techs) to assess firms' creditworthiness could reduce the need for collateral in solving asymmetric information problems in credit markets. Using a unique dataset of more than 2 million Chinese firms that received credit from both an important big tech firm (Ant Group) and traditional commercial banks, this paper investigates how different forms of credit correlate with local economic activity, house prices and firm characteristics. We find that big tech credit does not correlate with local business conditions and house prices when controlling for demand factors, but reacts strongly to changes in firm characteristics, such as transaction volumes and network scores used to calculate firm credit ratings. By contrast, both secured and unsecured bank credit react significantly to local house prices, which incorporate useful information on the environment in which clients operate and on their creditworthiness. This evidence implies that a greater use of big tech credit â?? granted on the basis of machine learning and big data â?? could reduce the importance of collateral in credit markets and potentially weaken the financial accelerator mechanism.
    Keywords: asymmetric information; banks; Big Data; big tech; Collateral; credit markets
    JEL: D22 G31 R30
    Date: 2020–09
  16. By: Burstein, Ariel Tomas; Carvalho, Vasco M; Grassi, Basile
    Abstract: We study markup cyclicality in a granular macroeconomic model with oligopolistic competition. We characterize the comovement of firm, sectoral, and economy-wide markups with sectoral and aggregate output following firm-level shocks. We then quantify the model's ability to reproduce salient features of the cyclical properties of markups in French administrative firm-level data, from the bottom (firm) level to the aggregate level. Our model helps rationalize various, seemingly conflicting, measures of markup cyclicality in the French data.
    Keywords: Aggregate fluctuations; Firm Dynamics; granularity; Markup Cyclicality; Oligopolistic Competition
    JEL: D21 D22 D24 D43 E32 L11 L13
    Date: 2020–10

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