nep-bec New Economics Papers
on Business Economics
Issue of 2022‒11‒14
fourteen papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Employer Cooperation, Productivity, and Wages: New Evidence from Inter-Firm Formal Network Agreements By Devicienti, Francesco; Grinza, Elena; Manello, Alessandro; Vannoni, Davide
  2. Technology Within and Across Firms By Cirera,Xavier; Comin,Diego Adolfo; Vargas Da Cruz,Marcio Jose; Lee,Kyungmin
  3. Economic complexity and firm performance in the cultural and creative sector: evidence from Italian provinces By Burlina, Chiara; Casadei, Patrizia; Crociata, Alessandro
  4. Relative-Performance Delegation Destabilizes Upstream Collusion By Lee, Jen-Yao; Wang, Leonard F. S.; Sun, Ji
  5. Improving Business Practices and the Boundary of the Entrepreneur : A Randomized Experiment Comparing Training, Consulting, Insourcing and Outsourcing By Anderson,Stephen J.; Mckenzie,David J.
  6. Sparse Production Networks By Andrew B. Bernard; Yuan Zi
  7. Capital-Labor Substitution and Misallocation By Mallick, Debdulal; Maqsood, Nabeel
  8. Human-algorithm interaction: Algorithmic pricing in hybrid laboratory markets By Normann, Hans-Theo; Sternberg, Martin
  9. Coping with COVID-19: Does Management Make Firms More Resilient ? By Grover,Arti Goswami; Karplus,Valerie Jean
  10. Firm-Level Technology Adoption in the State of Ceara in Brazil By Cirera,Xavier; Comin,Diego Adolfo; Vargas Da Cruz,Marcio Jose; Lee,Kyungmin; Soares Martins Neto,Antonio
  11. Institutional Discrimination Against Female Managers as a Barrier to Firm Internationalization and International Trade By Rudsinske, Jonas; Hoch, Felix
  12. Price Discrimination in the Transport Industry and the Gains from Trade By Zheng, Han
  13. The Labor-market Effects of Service Offshoring: A Synthetic Control Approach with High-dimensional Microdata By Kässi, Otto
  14. Firms’ Financing Dynamics around Lumpy Capacity Adjustments By Christoph Görtz; Plutarchos Sakellaris; John D. Tsoukalas

  1. By: Devicienti, Francesco (University of Turin); Grinza, Elena (University of Milan); Manello, Alessandro (University of Turin); Vannoni, Davide (University of Turin)
    Abstract: Using uniquely rich administrative matched employer-employee data, we investigate the impact of formal network agreements (FNAs) among firms under two perspectives. First, we assess the impact of joining a FNA on several indicators of firm performance, and total factor productivity. Second, we investigate whether and how such effects are transmitted to the workers, in terms of wage changes. On the firm-level side, we find an overall significant and economically relevant positive effect of FNAs on firm performance, which resists a large set of robustness tests. However, such a positive effect on firms does not translate into tangible benefits for the workers, on average. After estimating an array of multiple-way fixed effects wage regressions, we find a negative, though small, wage effect. Moreover, we detect a rather marked heterogeneity in the impacts on both firms and workers. The estimation of rent-sharing equations, as well as other tests that exploit unionization data, suggest that the negative effects on wages might be explained by a decrease in workers' bargaining power following the introduction of FNAs.
    Keywords: Inter-firm cooperation, formal network agreements, firm performance, total factor productivity (TFP), wages, matched employer-employee data
    JEL: L14 D24 J31
    Date: 2022–10
  2. By: Cirera,Xavier; Comin,Diego Adolfo; Vargas Da Cruz,Marcio Jose; Lee,Kyungmin
    Abstract: This study collects data on the sophistication of technologies used at the business function level for a representative sample of firms in Vietnam, Senegal, and the Brazilian state of Ceara. The analysis finds a large variance in technology sophistication across the business functions of a firm. 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. The paper documents a stable cross-firm relationship between technology at the business function and firm levels, which it calls the technology curve. Significant heterogeneity is uncovered in the slopes of the technology curves across business functions, a finding that is consistent with non-homotheticities in firm-level technology aggregators. Firm productivity is positively associated with the within-firm variance and the 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 versus non-agricultural gap in cross-country differences in firm productivity.
    Keywords: Food Security,Business Cycles and Stabilization Policies,General Manufacturing,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Food&Beverage Industry,Common Carriers Industry,Construction Industry,Plastics&Rubber Industry,Information Technology,Health Service Management and Delivery,Health Care Services Industry,Transport Services
    Date: 2020–11–16
  3. By: Burlina, Chiara; Casadei, Patrizia; Crociata, Alessandro
    Abstract: Several studies have detected a positive relationship between the spatial dynamics of cultural and creative industries (CCIs) and their social and economic outcomes. In this article, we draw upon the Economic Complexity Index (ECI) as a proxy to capture the social interactive nature that characterises CCIs and the way this affects firm performance. Our assumption is that more complex locations, endowed with different types of more sophisticated production capabilities, allow CCI firms to perform more strongly. This can depend on the higher opportunities of complex knowledge sharing and cross-fertilisation processes among different types of CCI firms or with non-CCI firms. The focus is on Italy, a country with a long-standing historical tradition in culture and creativity. We draw upon an original panel database at firm and province level (for the period 2010–2016) to compute two different ECIs, one for the CCIs and another one for the rest of the economy. Moreover, we analyse the effects these two types of complexity on the performance of firms within sectors with different levels of cultural and commercial value. We find that economic complexity of CCIs but not economic complexity of the rest of the economy matters for CCI firm performance. However, the effect is relatively weak. The same finding applies to all CCI firms, irrespective of their type of sector. Policy implications and directions for future research are discussed.
    Keywords: clusters; cultural and creative industries; economic complexity; firm performance; Italy; provinces
    JEL: J1 R14 J01
    Date: 2022–09–23
  4. By: Lee, Jen-Yao; Wang, Leonard F. S.; Sun, Ji
    Abstract: This paper analyzes upstream firms’ collusive sustainability when downstream firms adopt the relative-performance delegation in an infinitely repeated Cournot or Bertrand game. We find that relative-performance delegation makes managers act more aggressive and upstream collusion more difficult to sustain compared to sales-revenue delegation. The driving force is that downstream relative-performance delegation makes more profits for the deviated firm. This result holds regardless of the competition modes.
    Keywords: Relative-performance delegation; Upstream collusion; Vertically related market; Competition modes
    JEL: D21 D43 L13 L21
    Date: 2022–08–17
  5. By: Anderson,Stephen J.; Mckenzie,David J.
    Abstract: Many small firms lack the finance and marketing skills needed for firm growth. The standard approach in many business support programs is to attempt to train the entrepreneur to develop these skills, through classroom-based training or personalized consulting. However, rather than requiring the entrepreneur to be a jack-of-all-trades, an alternative is to move beyond the boundary of the entrepreneur and link firms to these skills in a marketplace through insourcing workers with functional expertise or outsourcing tasks to professional specialists. A randomized experiment in Nigeria tests the relative effectiveness of these four different approaches to improving business practices. Insourcing and outsourcing both dominate business training; and do at least as well as business consulting at one-half of the cost. Moving beyond the entrepreneurial boundary enables firms to use higher quality digital marketing practices, innovate more, and achieve greater sales and profits growth over a two-year horizon.
    Keywords: Financial Sector Policy,ICT Applications,Information Technology,Financial Sector and Social Assistance
    Date: 2020–12–17
  6. By: Andrew B. Bernard; Yuan Zi
    Abstract: Firm-to-firm connections in domestic and international production networks play a fundamental role in economic outcomes. Firm heterogeneity and the sparse nature of firm-to-firm connections implicitly discipline network structure. We find that a large group of well-established statistical relationships are not useful in improving our understanding of production networks. We propose an “elementary” model for production networks based on random matching and firm heterogeneity and characterize the families of statistics and data generating processes that may raise underidentification concerns in more complex models. The elementary model is a useful benchmark in developing “instructive” statistics and informing model construction and selection.
    Keywords: firm-to-firm networks, model selection, balls-and-bins, buyer-seller matching, underidentification
    JEL: F11 F14
    Date: 2022
  7. By: Mallick, Debdulal; Maqsood, Nabeel
    Abstract: We explore the role of the elasticity of substitution between capital and labor (σ) in misallocation of resources. We show, both analytically and empirically using the cross-country firm level survey data, that the extent of misallocation is substantially large for low σ compared to the Cobb-Douglas value of one that the extant literature invariably assumes. When σ is low, dispersion in marginal products of capital across firms will be larger for given dispersion in capital-labor ratios because marginal product now declines more rapidly with increasing capital. The extent of misallocation is even larger when σ varies across firms. Given the overwhelming evidence that σ
    Keywords: Misallocation, Elasticity of Substitution; CES Production Function; Total Factor Productivity
    JEL: D24 O11 O14 O47
    Date: 2022–10
  8. By: Normann, Hans-Theo; Sternberg, Martin
    Abstract: This paper investigates pricing in laboratory markets when human players interact with an algorithm. We compare the degree of competition when exclusively humans interact to the case of one firm delegating its decisions to an algorithm, an n-player generalization of tit-for-tat. We further vary whether participants know about the presence of the algorithm. When one of three firms in a market is an algorithm, we observe significantly higher prices compared to human-only markets. Firms employing an algorithm earn significantly less profit than their rivals. (Un)certainty about the actual presence of an algorithm does not significantly affect collusion, although humans do seem to perceive algorithms as more disruptive.
    Keywords: algorithms,collusion,human-computer interaction,labora-tory experiments
    JEL: C90 L41
    Date: 2022
  9. By: Grover,Arti Goswami; Karplus,Valerie Jean
    Abstract: The spread of COVID-19 has disrupted firm operations on a global scale. Using a comprehensive data set that observes over 3,000 firms in 16 countries, including several developing countries, shortly before and after the pandemic, we relate firms’ structured management practices to post-COIVD-19 outcomes, and report four main findings. First, structured management practices are associated with more limited downside impacts of the crisis on firm sales and survival in manufacturing but not in services. Better managed manufacturing firms, on average, experience a smaller reduction in sales. Second, in both manufacturing and services, structured management practice scores are correlated with a firm’s ability to adjust or convert product mix and shift to online work arrangements. Third, management scores are not correlated with firm’s ability to adjust on employment margins. Fourth, the resilience of better managed firms is related primarily to incentive practices and is uncorrelated with operations or targeting practices. Monitoring practice scores show a modest correlation with a firm’s ability to switch to remote work arrangements.
    Keywords: Pulp&Paper Industry,Plastics&Rubber Industry,Textiles, Apparel&Leather Industry,Food&Beverage Industry,Common Carriers Industry,Construction Industry,Business Cycles and Stabilization Policies,General Manufacturing,Financial Sector Policy,Labor Markets,Energy and Mining,Energy and Environment,Energy Demand
    Date: 2021–01–19
  10. By: Cirera,Xavier; Comin,Diego Adolfo; Vargas Da Cruz,Marcio Jose; Lee,Kyungmin; Soares Martins Neto,Antonio
    Abstract: This paper uses a novel approach to measure technology adoption at the firm level and applies itto a representative sample of firms in the state of Ceará in Brazil. The paper develops a new measure of technologyadoption at the firm level, which identifies the purpose for which technologies are used and the intensive and extensiveuses. The survey allows for establishing several new stylized facts for Ceará. First, most firms still rely onpre-digital technologies to perform general business functions, such as business administration, marketing, salesand payments, or quality control. Second, these technology gaps are larger in smaller firms, in the manufacturingsector, with large gaps when it comes to Industry 3.0 and digitalization, and especially large in Industry 4.0technologies. The paper also presents some evidence that the main challenge to accelerate technology adoption is lack offirm capabilities. Despite the availability of technology extension services in the state, firms are still unaware ofthe availability of support and unwilling to upgrade technologies.
    Keywords: Food Security,Energy Policies & Economics,Common Carriers Industry,Food & Beverage Industry,Textiles, Apparel & Leather Industry,Pulp & Paper Industry,Construction Industry,Business Cycles and Stabilization Policies,General Manufacturing,Plastics & Rubber Industry,Livestock and Animal Husbandry,Electric Power
    Date: 2021–03–08
  11. By: Rudsinske, Jonas; Hoch, Felix
    JEL: F14 F23 J16 M16
    Date: 2022
  12. By: Zheng, Han
    Abstract: Shipping companies often charges nonlinear and discriminatory pricing for transportation. This paper shows that this nonlinear and discriminatory pricing in the shipping industry could hamper the welfare gains from trade due to withinindustry allocation across heterogeneous firms. I extend a standard heterogeneous firm trade model with variable markups by incorporating monopolistically competitive shipping companies that charge nonlinear and discriminatory pricing against manufacturers. In a standard setting, shipping companies optimally charge a higher transport price to the more productive firms, weakening within-industry reallocation toward productive firms. Elimination of this discriminatory practice could potentially increase the gains from trade.
    Keywords: Price discrimination, Shipping industry, Heterogeneous firms, The gains from trade
    JEL: F12 L91 R13 R41
    Date: 2022–10
  13. By: Kässi, Otto
    Abstract: Abstract I use novel high-quality survey data on firms’ international sourcing activities combined with firm-level financial and linked employer–employee data to study the effect of services offshoring on wages and employment. To overcome the endogeneity related to reverse causality and omitted variables, I use microsynth, a variation of the synthetic control method specially developed for high-dimensional microdata. I find that offshoring firms pay higher wages for both high-skilled and low-skilled workers, and employ fewer FTE workers compared with a synthetic control, but these effects take several years to appear.
    Keywords: Service offshoring, Offshoring
    JEL: F14 C33 J31
    Date: 2022–10–28
  14. By: Christoph Görtz; Plutarchos Sakellaris; John D. Tsoukalas
    Abstract: We study how firms adjust their financial positions around the times when they undertake lumpy adjustments in capital or employment. Using U.S. firm level data, we document systematic patterns of cash and debt financing around lumpy adjustment, remarkably similar across capital and employment. Firm specific fundamentals in Tobin’s Q, profitability and productivity are leading indicators of the lumpy adjustment. Cash and debt capacity are actively manipulated, and contribute significantly quantitatively, to increase financial resources in anticipation of the expansion of firm capacity. Lumpy contractions in productive capacity are undertaken following years where firms reduce cash balances and hold above average levels of debt. During and after contractions, firms rebuild cash and reduce debt growth significantly in a concerted effort to restore financial resources by adjusting their productive operations.
    Keywords: lumpy adjustment, firm capital and employment dynamics, leverage, debt, cash
    JEL: G30 G32 E32
    Date: 2022

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