nep-bec New Economics Papers
on Business Economics
Issue of 2022‒10‒10
eleven papers chosen by
Vasileios Bougioukos
London South Bank University

  1. International Assortative Matching in the European Labor Market By Peeters, Thomas; van Ours, Jan C.
  2. Decomposing Aggregate Productivity By N. Aaron Pancost; Chen Yeh
  3. Information Frictions and Employee Sorting Between Startups By Kevin A. Bryan; Mitchell Hoffman; Amir Sariri
  4. Discovering pre-entry knowledge complexity with patent topic modeling and the post-entry growth of Italian firms By Marco Guerzoni; Massimiliano Nuccio; Federico Tamagni
  5. Training, Worker Mobility, and Employer Coordination By Martins, Pedro S.; Thomas, Jonathan P.
  6. Economic System Entanglement on Intra-Firm Trade Portfolios: The Impact of Counterparty Credit Ratings on Business-to-Business Credit Dynamics By Desogus, Marco; Casu, Elisa
  7. European funds and firm performance: Evidence from a natural experiment By Gabriel, José Mesquita; dos Santos, João Pereira; Tavares, José
  8. Identifying rent-sharing using firms' energy input mix By Mertens, Matthias; Müller, Steffen; Neuschäffer, Georg
  9. Firm adaptation in COVID-19 times: The case of Portuguese exporting firms By João Capella-Ramos; Romina Guri
  10. U.S. Market Concentration and Import Competition By Mary Amiti; Sebastian Heise
  11. The real effects of FinTech lending on SMEs: Evidence from loan applications By Afonso Eca; Miguel A. Ferreira; Melissa Porras Prado; A. Emanuele Rizzo

  1. By: Peeters, Thomas (Erasmus University Rotterdam); van Ours, Jan C. (Erasmus University Rotterdam)
    Abstract: We investigate whether national borders within Europe hinder the assortative matching of workers to firms in a high skilled labor market. We characterize worker productivity as the ability to contribute to physical output and define firm productivity as the capacity to transform physical output into revenues. We rank workers and firms according to their individual productivity estimates and study the ensuing rank correlation to gauge the degree of assortative matching within and across countries. We find strong evidence for positive assortative matching at the national level, and even more so at the international level. This suggests national borders do not prevent workers and firm from pursuing profitable complementarities in production.
    Keywords: assortative matching, international worker mobility, football managers
    JEL: M51 J63 J24 Z22
    Date: 2022–08
  2. By: N. Aaron Pancost; Chen Yeh
    Abstract: In this note, we evaluate the sensitivity of commonly-used decompositions for aggregate productivity. Our analysis spans the universe of U.S. manufacturers from 1977 to 2012 and we find that, even holding the data and form of the production function fixed, results on aggregate productivity are extremely sensitive to how productivity at the firm level is measured. Even qualitative statements about the levels of aggregate productivity and the sign of the covariance between productivity and size are highly dependent on how production function parameters are estimated. Despite these difficulties, we uncover some consistent facts about productivity growth: (1) labor productivity is consistently higher and less error-prone than measures of multi-factor productivity; (2) most productivity growth comes from growth within firms, rather than from reallocation across firms; (3) what growth does come from reallocation appears to be driven by net entry, primarily from the exit of relatively less-productive firms.
    Keywords: aggregate productivity, growth, misallocation, entry, exit
    JEL: D24 E24 L60
    Date: 2022–07
  3. By: Kevin A. Bryan; Mitchell Hoffman; Amir Sariri
    Abstract: Would workers apply to better firms if they were more informed about firm quality? Collaborating with 26 science-based startups, we create a custom job board and invite business school alumni to apply. The job board randomizes across applicants to show coarse expert ratings of all startups' science and/or business model quality. Making this information visible strongly reallocates applications toward better firms. This reallocation holds even when restricting to high-quality workers. The treatments operate in part by shifting worker beliefs about firms' right-tail outcomes. Despite these benefits, workers make post-treatment bets indicating highly overoptimistic beliefs about startup success, suggesting a problem of broader informational deficits.
    JEL: M50 M51
    Date: 2022–09
  4. By: Marco Guerzoni; Massimiliano Nuccio; Federico Tamagni
    Abstract: Innovation studies have largely recognized the role of knowledge in fostering innovation and growth of entrants. Previous literature has focused on entrepreneurial and managerial capabilities and education and knowledge incorporated in material and immaterial resources. We assume that new firms need to possess different pieces of knowledge, but beyond diversity, business performance relies also on knowledge distinctiveness. In other words, the complexity of a knowledge base is not simply the recombination of homogeneous pieces of knowledge but it also depends on the specific nature of each of them. This paper develops a new complexity indicator able to capture the complexity of the knowledge base by applying a topic modeling approach to the analysis of patent text. We explore the empirical relation between pre-entry complexity of knowledge, as measured by our complexity index, and post-entry growth performance of a sample of Italian firms entering the market in 2009-2011, which we then follow over the period 2012-2021. Baseline results show a significant and positive association between knowledge complexity and growth, even after controlling for firm characteristics and year, sector and region fixed-effects. Robustness analysis reveal this positive effect is stronger in the medium-long run while relatively weaker for innovative SMEs.
    Keywords: pre-entry knowledge base; complexity; text analysis; patents; firm growth; post-entry performance.
    Date: 2022–09–21
  5. By: Martins, Pedro S. (Nova School of Business and Economics); Thomas, Jonathan P. (University of Edinburgh)
    Abstract: This paper presents a new model of firms' decisions on training in a context of potential worker mobility. Such worker mobility can be influenced by employers coordination, namely through the operation of no-poach agreements and employers' associations (EAs). We then present supporting evidence from rich matched panel data, including firms' EA affiliation and workers' training levels. We find that workers' mobility between firms in the same EA is considerably lower than mobility between equivalent firms not in the same EA. We also find that training provision by EA firms is considerably higher.
    Keywords: employers organisations, no-poach agreements, worker mobility
    JEL: J53 J62 L40
    Date: 2022–08
  6. By: Desogus, Marco; Casu, Elisa
    Abstract: In the last five years, Italy has seen a noticeable and steady increase in the supply of trade credit, granting of extensions, and general systemic business-to-business financial support. Focusing on system entanglement, this paper examines the impact in Italy of bank valuations of creditworthiness and credit intermediation on intra-firm trade portfolio dynamics. We further consider the impacts of exogenous shocks to the economy and other disruptive events on payment regularity and risks of insolvency in intra-firm transactions. Mapping portfolio dynamics to a quantum super-system with a Hamiltonian space of phases, we demonstrate that the performance of intra-firm portfolios depends concurrently on bank valuations and that system entanglement allows us to examine the extent to which economic disruptions shift portfolio dynamics from their state of equilibrium.
    Keywords: system entanglement; intra-firm trade; portfolio dynamics; credit valuation
    JEL: C02 C61 G24 H12 M21
    Date: 2021
  7. By: Gabriel, José Mesquita; dos Santos, João Pereira; Tavares, José
    Abstract: Expanding regional eligibility in the access to grants can have important consequences for the performance of firms. We examine a quasi-natural experiment that consisted of a redrawing of administrative areas intended to increase accessibility to European Union (EU) funds using a rich administrative dataset that covers the universe of Portuguese private firms between 2003 and 2010. Our results uncover a positive causal impact of increased eligibility on firms' sales. In contrast, employment and labour productivity do not seem to be significantly impacted by the reform. The effects are heterogeneous: while sales of firms in the services and non-tradable sectors are positively impacted, sales of firms in more competitive sectors are not affected.
    Keywords: Grants,regional policy,private firm,municipalities,Portugal
    JEL: C21 R10
    Date: 2022
  8. By: Mertens, Matthias; Müller, Steffen; Neuschäffer, Georg
    Abstract: We present causal evidence on the rent-sharing elasticity of German manufacturing firms. We develop a new firm-level Bartik instrument for firm rents that combines the firms' predetermined energy input mix with national energy carrier price changes. Reduced-form evidence shows that higher energy prices depress wages. Instrumental variable estimation yields a rent-sharing elasticity of approximately 0.20. Rent-sharing induced by energy price variation is asymmetric and driven by energy price increases, implying that workers do not benefit from energy price reductions but are harmed by price increases. The rent-sharing elasticity is substantially larger in small (0.26) than in large (0.17) firms.
    Keywords: Bartik instrument,energy prices,rent-sharing,wage inequality
    JEL: C26 J30 P18
    Date: 2022
  9. By: João Capella-Ramos; Romina Guri
    Abstract: The COVID-19 crisis has severely impacted firms across the world, with some showing greater resilience than others. Engaging in international markets, in particular, increases firms’ exposure to such a global adverse shock, while also providing firms with opportunities for resilience-enhancing responses to the crisis. Operating in a small open economy, Portuguese firms were particularly vulnerable to disruptions in international trade and global value chains. In this paper we investigate how Portuguese exporting firms have adapted their business activities on the back of the COVID-19 crisis, and whether these adaptations depended on their intrinsic characteristics, notably firm size. Furthermore, we analyse the role of government support measures taken in response to the COVID-19 crisis in the adaptation processes of both exporting and domestic firms. We use the recently available Fast and Exceptional Enterprise Survey – COVID-19 (‘Inquérito Rápido e Excecional ’Empresas’, COVID-IREE) and complement it with balance sheet data from the Integrated Corporate Accounts System (‘Sistema de Contas Integradas das Empresas’, SCIE), covering a sample of approximately 7,000 Portuguese firms. The results suggest that exporting firms were more likely to adapt their business activities in the face of the COVID-19 crisis. We also found evidence that the adaptation processes of exporting firms tended to be multi-dimensional, operating through different adaptation mechanisms, and contingent upon firm size. The results also suggest that government support measures have enhanced the likelihood of both exporting and domestic firms to adapt, providing evidence of their effectiveness and highlighting the importance of firm-oriented policies that promote economic resilience.
    Keywords: COVID-19, firm adaptation, exporting firms, internationalisation, digitalisation
    JEL: H53 H72 O47 O52
    Date: 2022–09
  10. By: Mary Amiti; Sebastian Heise
    Abstract: Many studies have documented that market concentration has risen among U.S. firms in recent decades. In this paper, we show that this rise in concentration was accompanied by tougher product market competition due to the entry of foreign competitors. Using confidential census data covering the universe of all firm sales in the U.S. manufacturing sector, we find that rising import competition increased concentration among U.S. firms by reallocating sales from smaller to larger U.S. firms and by causing firm exit. However, this increase in concentration was counteracted by the expansion of foreign firms, which reduced domestic firms’ share of the U.S. market inclusive of foreign firms’ sales. We find that once the sales of foreign exporters are taken into account, U.S. marketconcentration in manufacturing was stable between 1992 and 2012.
    Keywords: market concentration, markups, import competition, international trade
    JEL: F14 F60 L11
    Date: 2022–08
  11. By: Afonso Eca; Miguel A. Ferreira; Melissa Porras Prado; A. Emanuele Rizzo
    Abstract: We examine the effects of FinTech lending on firm policies using proprietary data on loan applications and loans granted from a peer-to-business platform. We find that FinTech serves high quality and creditworthy small businesses who already have access to bank credit. Firms access FinTech to obtain long-term unsecured loans and reduce their exposure to banks with less liquid assets, stable funds, and capital. We find that firms with access to FinTech loans significantly increase investment, employment, and sales growth relative to firms that get their loan application rejected. We identify these effects by exploiting the number of banks in each municipality as a source of exogenous variation in the probability of obtaining a FinTech loan. Our findings suggest that FinTech allows firms to improve their financial flexibility and reduce bank dependence.
    Keywords: FinTech, SMEs, Small business lending, Lending relationships, Firm growth, Investment, Leverage, Debt structure
    JEL: G21 G23 O33
    Date: 2022

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