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on Business Economics |
| By: | Böken, Johannes (University of Warwick); Gadenne, Lucie (Queen Mary University of London, Institute for Fiscal Studies and CEPR); Nandi, Tushar (IISER Kolkata); Santamaria, Marta (University of Warwick) |
| Abstract: | Do community networks shape firm-to-firm trade in emerging economies? We study the role of communities in facilitating firm-to-firm trade and firm outcomes using data on firm-to-firm transactions and firm owners’ community (castes) affiliations for the universe of medium- and large- sized firms in West Bengal, India. We find that firms are substantially more likely to trade, and trade more, with firms from their own caste. Studying the mechanisms underlying this effect, we find evidence consistent both with castes alleviating trade frictions and taste-based discrimination by firms against those outside their community. Guided by these stylized facts, we develop a model of firm to-firm trade in which communities affect pair productivity and matching costs and estimate the model using our reduced-form estimates. A counterfactual extending the positive effects of castes on trade to all potential supplier-client pairs would increase the number of network links by 60% and increase average firm-to-firm sales by 20%. |
| Keywords: | JEL Codes: |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:649&r=bec |
| By: | Julian di Giovanni (Federal Reserve Bank of New York); Manuel García-Santana (Universitat Pompeu Fabra); Priit Jeenas (Universitat Pompeu Fabra); Enrique Moral-Benito (Bank of Spain); Josep Pijoan-Mas (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | We provide a framework to study how different allocation systems of public procurement contracts affect firm dynamics and long-run macroeconomic outcomes. We start by using a newly created panel dataset of administrative data that merges Spanish credit register loan data, quasicensus firm-level data, and public procurement projects to study firm selection into procurement and the effects of procurement on credit growth and firm growth. We show evidence consistent with the hypotheses that there is selection of large firms into procurement, that procurement contracts provide useful collateral for firms -more so than sales to the private sector- and that procurement contracts facilitate firm growth beyond the contract duration. We next build a model of firm dynamics with both asset-based and earnings-based borrowing constraints and a government that buys goods and services from private sector firms. We use the calibrated model to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. We find that granting procurement contracts to small firms, either by directly targeting them or by slicing large contracts into smaller ones, helps these firms grow and overcome financial constraints in the long run. However, we also find that reducing the average size of contracts |or making it less likely for large firms to access them| removes saving incentives for large firms, whose negative effects on capital accumulation can overcome the expansionary consequences for small firms and hence generate a drop in aggregate output. |
| Keywords: | Government procurement, financial frictions, capital accumulation, aggregate productivity. |
| JEL: | E22 E23 E62 G32 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2022_2203&r=bec |
| By: | Amirah El-Haddad (German Development Institute); Chahir Zaki (Cairo University) |
| Abstract: | The COVID-19 outbreak has had severe economic consequences across the globe. The crisis emanating from the pandemic has caused demand and supply side shocks, which are more far reaching than any crisis in living memory. We use a new data set from the 2020/21 Egyptian Industrial Firm Behavior Survey (EIFBS) to examine determinants of firms’ resilience during the COVID-19 pandemic. Crisis present the opportunity for what Schumpeter (1934) called creative destruction. Have manufacturing firms been all hit by the crisis equally, or were less efficient firms more likely to exit or downsize their activities thereby ‘cleansing’ the market? Two sets of factors affect firm dynamics and survival: 1) firms’ innate characteristics, such as formality and export status, sector, ownership, age, size and location and; 2) firm behavior which captures the extent to which good managerial practices, innovation, the adoption of advanced technologies and worker training have provided an opportunity for firms to adapt their business models and show greater resilience in coping with the crisis. Our main findings illustrate the vulnerability of private, smaller, informal firms and those that are not located in industrial zones. Also, as expected, preCOVID behavioural characteristics matter for firm dynamics. The food sector and sectors identified as ‘COVID sectors’ show more resilience. More nuanced results show that the effect of some behavioral traits vary by sector and are more influential depending on firm size. |
| Date: | 2022–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1586&r=bec |
| By: | Anastasia N. Stepanova (National Research University Higher School of Economics); Polina A. Khmeleva (National Research University Higher School of Economics) |
| Abstract: | This paper investigates the impact of family participation and founder involvement in business on innovation in high-tech companies from the S&P500 index over the period 1999–2017. We demonstrate that the family firm paradox (family firms tend to invest less in innovation while remaining more efficient in innovation output) is not so obvious for technological companies. We conclude that founder involvement and CEO ownership leads to higher R&D expenditures and income margins in the pharma and IT sectors. However, consistent with previous studies of family participation, family ownership and holding the offices of CEO and chairman, has a negative impact on amounts spent on innovation. |
| Keywords: | Family firms, founder, risk-taking, behavioral finance, corporate governance |
| JEL: | G30 G39 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:91/fe/2022&r=bec |
| By: | Iman Cheratian (Tarbiat Modares University); Saleh Goltabar (Tarbiat Modares University); Mohammad Reza Farzanegan (Philipps-Universität Marburg) |
| Abstract: | Given the importance of firm strategic management in time of crises, this study investigates Micro, Small, and Medium Enterprises (MSMEs) survival strategies during the international sanctions against Iran. Using data from a questionnaire of 486 firms between December 2019 to September 2020, we found that firm strategies in reducing research and development (R&D) expenditures, marketing costs, and fixed/overhead costs and investing in information technology (IT) are positively related to their survivability. Conversely, managerial decisions to “reduce production” and “staff pay cut/freeze” have negative and significant impacts on a firm’s ability to survive during sanctions. Moreover, micro firms are more resilient than their small and medium counterparts. The findings also confirm that age has a significant and positive impact on firm survival. Finally, the results show that having a business plan, access to finance and technology, owner education, export orientation, business networking and consulting services are the key drivers of withstanding the pressure from sanctions. |
| Date: | 2022–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1569&r=bec |
| By: | Andrea Caggese; Ozan Guler; Mike Mariathasan; Klaas Mulier |
| Abstract: | This paper investigates the effect of firing costs on total factor productivity (TFP) and resource allocation. Exploiting heterogeneous changes in firing costs across employee types in Belgium, we find that increasing firing costs reduce firm-level TFP. Firms facing a net increase in firing costs reduce hiring and firing, increase hours worked per employee, adjust the composition of their workforce away from employee types whose firing costs have increased, and rely more on outsourced employees. Instead, we find no evidence of capital-intensive technology adoption. The decline in TFP is smaller for firms with better access to credit. |
| Keywords: | firing costs, employment protection, productivity, misallocation |
| JEL: | E22 E23 E24 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1376&r=bec |
| By: | Claudio Vitari (AMU - Aix Marseille Université, CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon); Elisabetta Raguseo (Polito - Politecnico di Torino = Polytechnic of Turin); Federico Pigni (EESC-GEM Grenoble Ecole de Management) |
| Abstract: | Firms adopt Big data solutions, but a body of evidence suggests that Big data in some cases may create more problems than benefits. We hypothesize that the problem may not be Big data in itself but rather too much of it. These kinds of effects echo the Too-Much-of-a-Good-Thing (TMGT) effect in the field of management. This theory also seems meaningful and applicable in management information systems. We contribute to assessments of the TMGT effect related to Big data by providing an answer to the following question: When does the extension of Big data lead to value erosion? We collected data from a sample of medium and large firms and established a set of regression models to test the relationship between Big data and value creation, considering firm size as a moderator. The data confirm the existence of both an inverted U-shaped curve and firm size moderation. These results extend the applicability of the TMGT effect theory and are useful for firms exploring investments in Big data. |
| Keywords: | Too-Much-of-a-Good-Thing effect,inverted U-shaped curve,Big data,business value,medium and large firms |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03876785&r=bec |
| By: | Pierre Cahuc (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics, CEPR - Center for Economic Policy Research - CEPR); Stéphane Carcillo (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics); Bérangère Patault (UvA - University of Amsterdam [Amsterdam]); Flavien Moreau (IMF - "Research Department International Monetary Fund (IMF)" - International Monetary Fund (IMF)) |
| Abstract: | Does judge subjectivity in labor courts influence firm performance? We study the economic consequences of judge decisions by collecting information on Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias, defined as judge-specific differences on granting compensation for wrongful dismissal, has statistically significant effects on the survival and employment of small firms, especially among very small and low-performing ones. When compensation for wrongful dismissal is instrumented by judge bias, an increase in compensation of 1 percent of the payroll reduces employment growth by 5 percentage points after 3 years for those firms. |
| Keywords: | Dismissal compensation, Judge bias, Firm survival, Employment |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03881619&r=bec |
| By: | Bergeaud Antonin; Schmidt Julia; Zago Riccardo |
| Abstract: | When a technology becomes the new standard, the firms that are leaders in producing this technology have a competitive advantage. Matching the semantic content of patents to standards and exploiting the exogenous timing of standardization, we show that firms closer to the new technological frontier increase their market share and sales. In addition, if they operate in a very competitive market, these firms also increase their R&D expenses and investment. Yet, these effects are temporary since standardization creates a common technological basis for everyone which allows followers to catch up and the economy to grow. |
| Keywords: | Standardization, Patents, Competition, Innovation, Text Mining |
| JEL: | L15 O31 O33 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:876&r=bec |
| By: | Kun Mo; Michel Soudan |
| Abstract: | Distortions in capital markets can create financial constraints that deter firms from pursuing optimal investment plans. This paper explores how much these constraints affect investment by ownership type in China, using a panel data model estimated with observations on listed firms for the period 2005–2017. We find that privately owned enterprises (POEs) in China face greater financial constraints than state-owned enterprises (SOEs), as POE investment plans depend more on the availability of internally generated cash. Correspondingly, we find evidence that Chinese lenders appear less concerned about the credit risk of SOEs, and that an expansion in credit correlates with a disproportionally larger increase in investment for SOEs. |
| Keywords: | Financial markets; Firm dynamics |
| JEL: | E22 G1 G3 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:22-22&r=bec |
| By: | Amirah El-Haddad (German Development Institute); Chahir Zaki (Cairo University, EMNES and ERF) |
| Abstract: | We use data from the 2020/21 Egyptian Industrial Firm Behavior Survey (EIFBS) to assess the effects of the COVID-19 crisis on firm dynamics, behavior and performance. The crisis emanating from the COVID-19 pandemic induced both demand and supply side shocks, which are more far reaching than any crisis in living memory. Our results show that the crisis has hit the entire Egyptian manufacturing sector. But, in line with Schumpeter’s (1934) creative destructive theory, the market shows signs of ‘self-cleansing’, whereby the less efficient are more likely to exit and downsize their activities. Our descriptive results show resilience of larger, public, formal, and export sector firms. Thus, revealing pre-existing fragilities of the private, informal and, more generally the lower productivity firms in the manufacturing sector. The counter cyclicality of the relation implies that contraction of the formal sector expands the informal as the only alternative way to earn a living. As a ‘survival sector’, the informal sector has provided 'helping hand employment'. Pre-crisis good managerial practices, innovation, the adoption of advanced technologies and training workers all provide an opportunity for firms to adapt their business model, as reflected by superior firm dynamics and post-crisis performance. Larger firms and mostly less vulnerable sectors such as fabricated metals and rubber have had more access to government support. It is likely that the government has chosen to support sectors with potentially better chances of survival rather than support the most vulnerable. Firms in pharmaceuticals were also recipients of support, which is sensible in a health crisis. |
| Date: | 2022–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1530&r=bec |
| By: | Heresi, Rodrigo |
| Abstract: | I study the firm-level dynamic response of a commodity-exporting economy to global cycles in commodity prices. To do so, I develop a heterogeneous-firms model that endogenizes declines in aggregate productivity through reallocation towards less productive firms. Within a given sector, commodity booms reallocate market share away from exporters because of currency appreciation and away from capital-intensive firms because of the increase in capital cost. I provide empirical evidence for these channels using microdata for Chile, the worlds largest copper producer. When fed with the commodity super-cycle of 2003-2012, the calibrated model generates about 50% of the observed productivity decline. |
| Keywords: | Productivity;Resource booms;Open economy macroeconomics |
| JEL: | F41 D24 Q33 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:11175&r=bec |
| By: | Léa Marchal; Guzmán Ourens; Giulia Sabbadini |
| Abstract: | We use French employer-employee data to reassess the wage gap between native and foreign workers. We find that the wage gap varies with the export intensity of the firm and the occupation of the worker. A model with heterogeneous firms and workers shows that our findings are consistent with white-collar immigrants capturing an informational rent. The evidence supports this mechanism. First, we show that the wage gap is positively correlated with the complexity of the firm export activity. Second, we show that wages react to changes in export intensity when the export destination coincides with the origin of foreign workers. |
| Keywords: | export, firm, immigrants, wage inequality |
| JEL: | F14 F22 F16 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10092&r=bec |