nep-bec New Economics Papers
on Business Economics
Issue of 2021‒09‒27
nine papers chosen by
Vasileios Bougioukos
London South Bank University

  1. The Dynamics of Referral Hiring and Racial Inequality: Evidence from Brazil By Conrad Miller; Ian M. Schmutte
  2. Turbulent Business Cycles By Ding Dong; Zheng Liu; Pengfei Wang
  3. Matching Workers' Skills and Firms' Technologies: From Bundling to Unbundling By Philippe Choné; Francis Kramarz
  4. The Effects of Going Public on Firm Performance and Commercialization Strategy: Evidence from International IPOs By Borja Larrain; Gordon M. Phillips; Giorgo Sertsios; Francisco Urzúa
  5. She Innovates- Female owner and firm innovation in India By Shreya Biswas
  6. Twenty years of job flows in an emerging country By Rodrigo Ceni; Gabriel Merlo
  7. Does the Gender Mix Influence Collective Bargaining on Gender Equality? Evidence from France By Anne‐sophie Bruno; Nathalie Greenan; Jeremy Tanguy
  8. Intangibles and industry concentration: Supersize me By Matej Bajgar; Chiara Criscuolo; Jonathan Timmis
  9. Agency Costs in Small Firms By Bianchi, Milo; Luomaranta, Henri

  1. By: Conrad Miller; Ian M. Schmutte
    Abstract: We study how referral hiring contributes to racial inequality in firm-level labor demand over the firm's life cycle using data from Brazil. We consider a search model where referral networks are segregated, firms are more informed about the match quality of referred candidates, and some referrals are made by non-referred employees. Consistent with the model, we find that firms are more likely to hire candidates and less likely to dismiss employees of the same race as the founder, but these differences diminish as firms' cumulative hires increase. Referral hiring helps to explain racial differences in dismissals, seniority, and employer size.
    JEL: J71 M51 Z13
    Date: 2021–09
  2. By: Ding Dong; Zheng Liu; Pengfei Wang
    Abstract: Recessions are associated with sharp increases in turbulence that reshuffles firms' productivity rankings. To study the business cycle implications of turbulence shocks, we use Compustat data to construct a measure of turbulence based on the (inverse of) Spearman correlations of firms' productivity rankings between adjacent years. We document evidence that turbulence rises in recessions, reallocating labor and capital from high-to low-productivity firms and reducing aggregate TFP and the stock market value of firms. A real business cycle model with heterogeneous firms and financial frictions can generate the observed macroeconomic and reallocation effects of turbulence. In the model, increased turbulence makes high-productivity firms less likely to remain productive, reducing their expected equity values and tightening their borrowing constraints relative to low-productivity firms. Thus, labor and capital are reallocated to low-productivity firms, reducing aggregate TFP and generating a recession with synchronized declines in aggregate output, consumption, investment, and labor hours, in line with empirical evidence.
    Date: 2021–09–07
  3. By: Philippe Choné (CREST-ENSAE, Institut Polytechnique de Paris, France); Francis Kramarz (Department of Economics, Uppsala University, Sweden)
    Abstract: How are workers matched to their employing firms when workers have multi-dimensional skills and firms differ in the importance of each such skill for their production function? When workers' skills cannot be unpacked and sold separately on skill-specific markets, the implicit price of each skill varies across firms. The wage function is shown to be log-additive in worker's quality and a firm-specific effect that reflects the firm's chosen aggregate mix of skills and the associated equilibrium matching. When individual skills can be purchased thanks to new technologies and increasing access to outsourcing, temp agencies and other pro-market institutions, firms reinforce their hires of skills in which they have a comparative advantage yielding a more polarized matching equilibrium. Generalist workers - endowed with a balanced set of skills - are shown to benefit whereas specialists are negatively affected by markets opening. We also examine the case when workers or firms pay a fee to an unbundling platform. Then we discuss the empirical content of our model and present some empirical evidence based on this content, using Swedish data sources on workers' skills and their employing firm and occupation. We conclude by pointing connections between our contribution and various literatures.
    Keywords: bundling; multidimensional skills; matching ; sorting; heterogeneous firms; polarization.
    JEL: D20 D40 D51 J20 J24 J30
    Date: 2021–07–20
  4. By: Borja Larrain; Gordon M. Phillips; Giorgo Sertsios; Francisco Urzúa
    Abstract: We study the effects of going public using a unique panel of firms in 16 European countries for which we observe financial data before and after firms' initial-public-offering (IPO) attempts. We compare firms that complete their IPO with firms that withdraw their IPO. We instrument the going public decision using prior market returns. We find that firm profitability goes up after going public—contrary to previous results in the literature. We also find an post-IPO expansion in the number of subsidiaries and countries in which IPO firms operate. Our results are stronger for firms in financially dependent industries and in countries with higher investor protection consistent with going public relaxing financial constraints and with a stronger impact when agency conflicts are lower. Overall, our results are consistent with going public inducing a shift towards a strategy of commercialization to increase profitability.
    JEL: G32
    Date: 2021–09
  5. By: Shreya Biswas
    Abstract: Using data from World Bank Enterprises Survey 2014, we find that having a female owner in India increases firm innovation probability using both input and output indicators of innovation. We account for possible endogeneity of female owner variable using a two stage instrumental variable probit model. We find that the positive effect of female owner variable is observed in the sub-samples of firms with more access to internal funding, young firms and firms located in regions with no or less crime This study highlights the need to promote female entrepreneurship as a potential channel for promoting firm innovation in India.
    Date: 2021–09
  6. By: Rodrigo Ceni (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Gabriel Merlo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: In a market economy, firms are continuously exposed to economic shocks that affect their performance and results. In response to these shocks, firms react by reallocating their productive factors, such as capital and labor, to more productive uses. We estimate the job flows over a twenty-year period in Uruguay, exploring firm and worker characteristics. We use panel data from social security administrative records that match employers and employees in formal firms between 1996 and 2015. Job flow levels and their cycles are consistent with international evidence. Entry and exit of firms from the market play an important role, explaining about 30% of the total number of jobs created and destroyed for the whole period with high heterogeneity across industries, firm age, and firm size. In particular, the smallest firms are not as relevant in explaining net growth as political and popular beliefs would suggest, and it is start-ups that have the main role in job creation in Uruguay. Despite representing only 5% of total employment, they created more than one-quarter of new jobs and maintained this role in a fully saturated regression. Among worker characteristics, we found no differences in job flows by gender, but female workers gain participation in the period; there are bigger flow rates among workers under 25 and workers in the first and third wage terciles.
    Keywords: job flows; employer employee match data; formal jobs; Uruguay
    JEL: J23 J63 L25
    Date: 2021–07
  7. By: Anne‐sophie Bruno (CHS - Centre d'histoire sociale des mondes contemporains - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Nathalie Greenan (TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique, CEET - Centre d'études de l'emploi et du travail - CNAM - Conservatoire National des Arts et Métiers [CNAM] - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche - Ministère du Travail, de l'Emploi et de la Santé, LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM]); Jeremy Tanguy (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc)
    Abstract: Gender equality at work has become in recent years a priority for governments. In France, collective bargaining is the main lever to achieve progress on gender equality issues. In a two-tier bargaining framework, industries and firms are required by law to negotiate on the reduction of gender inequalities. Using firmlevel survey data on labor relations issues combined with administrative data, this paper seeks to better understand the dynamics of collective bargaining on gender equality at the firm level by questioning the role played by the gender mix. We find that gender diversity favors gender equality bargaining at the firm level. Underrepresentation and overrepresentation of women reduce the probability of firms negotiating an agreement on gender equality. The introduction of sanctions in the recent period has prompted low-feminized firms to negotiate more on gender equality but had little impact on highly feminized firms.
    Date: 2021
  8. By: Matej Bajgar (Center for Economic Research and Graduate Education - Economics Institute); Chiara Criscuolo (OECD); Jonathan Timmis (The World Bank)
    Abstract: This paper presents new evidence on the growing scale of big businesses in the United States, Japan, and Europe. It finds broad evidence of rising industry concentration across the majority of countries and sectors over the period 2002 to 2014. Rising concentration is strongly associated with intensive investment in intangibles, particularly innovative assets, software, and data. This relationship appears to be stronger in more globalised and digital-intensive industries. The results are consistent with intangibles disproportionately benefiting large firms and enabling them to scale up and increase market shares. We find nuanced implications of these new business models for competition – rising markups and reduced churning amongst the top firms, but falling industry prices.
    Keywords: Competition, Industry and entrepreneurship, Innovation
    JEL: E22 L1 L25
    Date: 2021–09–22
  9. By: Bianchi, Milo; Luomaranta, Henri
    Abstract: We explore how the separation between ownership and control a§ects Örm productivity. Using administrative panel data on the universe of limited liability Örms in Finland, we document a substantial increase in productivity when the CEO obtains majority ownership or when the majority owner becomes the CEO. We exploit plausibly exogenous variations to CEO turnover, induced by shocks to the CEO spouseís health. Extending the analysis beyond typical samples of large public Örms, we show that our e§ects are stronger in medium-sized private Örms. We also investigate possible mechanisms and provide suggestive evidence that increased ownership boosts CEOís e§ort at work.
    Keywords: agency costs;Örm productivity,;CEO ownership.
    JEL: G30 M12 D24 E23 L25
    Date: 2021–08

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