nep-bec New Economics Papers
on Business Economics
Issue of 2021‒09‒06
six papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Opposing firm-level Responses to the China Shock: Horizontal Competition Versus Vertical Relationships? By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc Melitz; Thomas Zuber
  2. Does GVC Participation Improve Firm Productivity? A Study of Three Developing Asian Countries By Urata, Shujiro; Baek, Youngmin
  3. Wage Differences According to Workers' Origin: The Role of Working More Upstream in GVCs By Fays, Valentine; Mahy, Benoît; Rycx, François
  4. Home country institutional harshness and emerging market SMEs internationalization: a strategy tripod perspective By Yadav, Sandeep
  5. The impact of digitalisation on productivity: Firm-level evidence from the Netherlands By Martin Borowiecki; Jon Pareliussen; Daniela Glocker; Eun Jung Kim; Michael Polder; Iryna Rud
  6. Technical Barriers to Trade and the Performance of Indian Exporters By Pavel Chakraborty; Rahul Singh

  1. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc Melitz; Thomas Zuber
    Abstract: We decompose the “China shock” into two components that induce different adjustments for firms exposed to Chinese exports: a horizontal shock affecting firms selling goods that compete with similar imported Chinese goods, and a vertical shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the horizontal shock is detrimental to firms’ sales, employment, and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the vertical shock on firms’ sales, employment, and innovation.
    JEL: F14 F16 F6 O31
    Date: 2021–08
  2. By: Urata, Shujiro (Asian Development Bank Institute); Baek, Youngmin (Asian Development Bank Institute)
    Abstract: We examine the impact of local firms’ participation in global value chains (GVCs) on productivity by considering three different patterns of GVC participation. We conducted a DID-PSM estimation involving three countries, Indonesia, the Philippines, and Viet Nam, and 17 manufacturing sectors in 2009 and 2015. We found an endogenous relationship between firm productivity and GVC participation: firms that enter GVCs have high productivity before participating in the GVCs (selection effect), and only Indonesian firms which entered GVCs had a high productivity growth after joining GVCs (learning effect). These two effects were only found for firms which both import intermediate goods and export output, and not for firms which only either import or export. We also found that indirect exporting does not improve a local firm’s productivity. We give several recommendations to help firms and governments facilitate the participation of firms in GVCs.
    Keywords: global value chains; productivity
    JEL: D24 F14 L11
    Date: 2021–03–31
  3. By: Fays, Valentine; Mahy, Benoît; Rycx, François
    Abstract: This paper is the first to investigate the role of firm-level upstreamness (i.e. the number of steps before the production of a firm meets final demand) in explaining wage differences according to workers' origin. Using unique linked employer-employee data relative to the Belgian manufacturing industry for the period 2002-2010, our estimates show that firms that are further up in the value chain pay significantly higher wages. However, the wage premium associated with upstreamness is also found to vary substantially depending on the origin of the workers. Unconditional quantile estimates suggest that those who benefit the most from being employed in more upstream firms are high-wage workers born in developed countries. In contrast, workers born in developing countries, irrespective of their earnings, appear to be unfairly rewarded. Quantile decompositions further show that, while differences in average values of upstreamness according to workers' origin play a limited role, differences in wage premia associated with upstreamness account for a substantial part of the wage gap between workers born in developed and developing countries, especially at the top of the earnings distribution. These results are shown to be robust to a number of sensitivity tests, including broader or narrower definitions of workers' wages and different firm environments in terms of technological and knowledge intensity.
    Keywords: Wage Gaps,Workers’ Origin,Global Value Chains,Upstreamness,Unconditional Quantile Estimates and Decompositions
    JEL: J15 J31 F16
    Date: 2021
  4. By: Yadav, Sandeep
    Abstract: Purpose - What is the role of the home country institutional environment in emerging market small and medium firms (SMEs) internationalization? Drawing from strategy tripod perspective, this study tests the proposed theoretical model on the impact of institutional harshness on SMEs internationalization. This study also demonstrates the moderating role of firm resources and industry informal competition on the relationship between home country institutional harshness and SMEs internationalization. Design/methodology/approach – This study tests the proposed theoretical model on a survey sample of 5129 Indian and Chinese SMEs from World Bank Enterprise Surveys (WBES). This study uses the Tobit regression model and Logit regression model as estimation techniques. Findings - Based on the institution-based view, the author finds that institutional harshness in the home country increases SMEs internationalization as escape to home country institutional challenges. The findings show that SMEs international quality certificate possession and informal industry competition strengthen the institutional harshness and internationalization relationship. The findings also support the negative moderating effect of SMEs global linkages on institutional harshness and internationalization relationship. Originality/value – This study contributes to institutional theory and international business literature by showing emerging market SMEs international expansion as a response to owner/manager perception of high institutional harshness. The study extends the boundaries of the home country institution escape-based internationalization argument by examining the heterogeneous impact of institutional harshness on SMEs internationalization based on firm resources and industry context.
    Keywords: Emerging market, Internationalization, Institutional harshness, SMEs, Exporting, Institutional theory, Industry context, Firm resources
    JEL: F2 L1
    Date: 2021–03
  5. By: Martin Borowiecki; Jon Pareliussen; Daniela Glocker; Eun Jung Kim; Michael Polder; Iryna Rud
    Abstract: This paper analyses the role of intangibles and digital adoption for firm-level productivity in the Netherlands drawing on a newly constructed panel data set of Dutch enterprises. It provides robust evidence on productivity effects of intangibles and digital adoption using firms’ exposure to sector-wide advances in intangible intensity and digital adoption as an instrument. Results show that intangibles as measured by levels of digital skill intensity have a positive and statistically significant impact on firm-level productivity growth in the service sector and for younger firms. Productivity benefits from software investment are strong for low productivity firms. Together, these findings highlight the potential of intangibles to support the productivity catch-up of laggard enterprises. The evidence also suggests that productivity benefits from ICT hardware investment and the uptake of high-speed broadband are positive and sizeable.
    Keywords: digitalisation, intangibles, productivity, skills
    JEL: D24 E22 J24 O33
    Date: 2021–09–08
  6. By: Pavel Chakraborty (Department of Economics, Management School, Lancaster University); Rahul Singh (Economics and Social Sciences Area, Indian Institute of Management, Bangalore)
    Abstract: We study the effects of technical barriers to trade (TBTs) imposed by destination markets on prices, marginal costs, and markups of Indian manufacturing exporters. Using detailed firm-product-level data on prices and production from PROWESS, we first identify the underlying component of prices (i.e. marginal costs and markups), and use those as our outcomes of interest in the second stage. We find that (i) introduction of TBTs by importing countries increases marginal costs by 5% and prices by 4%, (ii) there is considerable heterogeneity based on exporters’ initial productivity, (iii) productive exporters (those belonging to the lower deciles) experienced an increase in marginal costs and decrease in markups compared to low productivity exporters, and (iv) overall effects are driven by private firms (both domestic and foreign) belonging to intermediate input industries.
    Keywords: technical barriers to trade, prices, marginal costs, markups, exporters
    JEL: F1 F14 F16
    Date: 2021–08–04

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