nep-bec New Economics Papers
on Business Economics
Issue of 2022‒10‒24
six papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Dynamics of First-Time Patenting Firms By Øivind Anti Nilsen; Arvid Raknerud
  2. Market Size and Number of Firms with New Technology By Sugata Marjit; Krishnendu Ghosh Dastidar; Gouranga Gopal Das
  3. Macroeconomic and Asset Pricing Effects of Supply Chain Disasters By Vladimir Smirnyagin; Aleh Tsyvinski
  4. Hat die oekonomische Macht von Unternehmen in Oesterreich zugenommen? By Christian Reiner; Christian Bellak
  5. Competition for Loyal Customers By Alexander Usvitskiy; Dmitry Ryvkin
  6. Cournot–Bertrand comparison under common ownership in a mixed oligopoly By Xu, Lili; Zhang, Yidan; Matsumura, Toshihiro

  1. By: Øivind Anti Nilsen; Arvid Raknerud
    Abstract: This paper investigates firm dynamics in the period before, during, and after an event consisting of a first published patent application. The analysis is based on patent data from the Norwegian Industrial Property Office merged with data from several business registers covering a period of almost 20 years. We apply an event study design and use matching to control for confounding factors. The first patent application by a young firm is associated with significant growth in employment, output, assets and public research funding. Moreover, our results indicate that economic activity starts to increase at least three years ahead of the first patent application. However, we find no evidence of additional firm growth after patent approval for successful applicants. Our findings indicate that the existence of a properly functioning patenting system supports innovation activities, especially early in the life cycle of firms.
    Keywords: patenting, firm performance, panel data, event study design
    JEL: C33 D22 O34
    Date: 2022
  2. By: Sugata Marjit; Krishnendu Ghosh Dastidar; Gouranga Gopal Das
    Abstract: In this paper, unlike the conventional wisdom, we demonstrate that the relationship between the size of the market and number of firms would be non-monotonic. While moderate rise in the size would force the local firms to exit and only the foreign firm rules, substantial rise in the size would accommodate all firms. Also, the possibility of survival increases if the local firms could differentiate their product more and then we drift towards the conventional result.
    Keywords: product differentiation, free entry, Cournot, output, market size, technology, FDI
    JEL: L13 D40 F10
    Date: 2022
  3. By: Vladimir Smirnyagin; Aleh Tsyvinski
    Abstract: We build a general equilibrium production-based asset pricing model with heterogeneous firms that jointly accounts for firm-level and aggregate facts emphasized by the recent macroeconomic literature, and for important asset pricing moments. Using administrative firm-level data, we establish empirical properties of large negative idiosyncratic shocks and their evolution. We then demonstrate that these shocks play an important role for delivering both macroeconomic and asset pricing predictions. Finally, we combine our model with data on the universe of U.S. seaborne import since 2007, and establish the importance of supply chain disasters for the cross-section of asset prices.
    JEL: E0 F40 G0
    Date: 2022–09
  4. By: Christian Reiner (Research Office, Lauder Business School, Austria); Christian Bellak (Department of Economics, Vienna University of Economics and Business, Austria)
    Abstract: This contribution asks whether the economic power of firms has increased in Austria in parallel with many other OECD countries. A new conceptualization of corporate power is proposed, It draws a distinction between economic and political power, as well as between economic power due to firm size (termed “scalepower†) and market power in the traditional, more narrow sense. Synthesizing the historical literature on market power in Austria provides evidence of an in some cases unjustified assumption of increased competition intensity, stimulated by events such as the fall of the iron curtain or EU accession. Based on various methods, indicators and data, we provide estimations of markups and of various competition indicators like profitability, concentration rates and firm dynamics to highlight recent changes in the market power of Austrian firms in international comparison. The evidence suggests not only rather large markups of Austrian firms, but also that markups have increased. Together with the results such as rising profit rates, we tentatively conclude that the power of Austrian firms has increased. Drawing on long lasting and still ongoing debates in Europe and the US shows some parallels and documents the necessity of a policy debate on corporate power in Austria.
    Date: 2022–10
  5. By: Alexander Usvitskiy (School of Advanced Studies); Dmitry Ryvkin (Department of Economics, Florida State University)
    Abstract: We consider competition for market shares between two firms that make costly investments to attract and retain customers. The value customers bring to the firms in the next period is higher if these customers are loyal, i.e., they remained with the firm. Based on the retention value and on the prior allocation of market shares, the firms' equilibrium investments either preserve the status quo or redistribute customers so that one of the firms gains and the other firm loses its market share. We conduct a laboratory experiment to test the theory and investigate the effects of the relative retention value and the initial state of the market on competition. The initial state of the market is either randomly assigned or endogenously generated through a preliminary contest between the firms. We find that competitors invest more as the customer retention value rises, but only when it is sufficiently high. Investment also rises with initial market share when it is low, but not when it is high. Somewhat surprisingly, we find that, for a given initial market share, investment is lower when this market share is endogenously won than when it is randomly assigned, which we attribute to within-match learning about the competitor's type.
    Keywords: Competition, Loyalty, Market shares, Dynamic game, Laboratory experiment
    JEL: C72 C92 D21 L21
    Date: 2022–10
  6. By: Xu, Lili; Zhang, Yidan; Matsumura, Toshihiro
    Abstract: Price competition is more intense than quantity competition in private oligopolies, wherein all firms are profit maximizers. However, in mixed oligopolies where one state-owned public firm competes with profit-maximizing private firms, price competition may not provide tougher competition than quantity competition. In this study, we introduce common ownership, a distinct feature of recent financial markets, into a mixed oligopoly model and investigate how common ownership affects this ranking. We find that under common ownership, quantity competition is likely to be tougher than price competition. Moreover, we find that common ownership harms welfare regardless of competition mode. Common ownership enhances private firms’ profits under Bertrand competition while these may decline under Cournot competition.
    Keywords: Cournot model; Bertrand model; common ownership; mixed oligopoly
    JEL: D4 D43 H42 L13
    Date: 2022–09–20

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