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on Business Economics |
| By: | Miguel Anton; Florian Ederer; Mireia Gine; Martin C. Schmalz |
| Abstract: | We present a mechanism based on managerial incentives through which common ownership affects product market outcomes. Firm-level variation in common ownership causes variation in managerial incentives and productivity across firms, which leads to intra-industry and intra-firm cross-market variation in prices, output, markups, and market shares that is consistent with empirical evidence. The organizational structure of multiproduct firms and the passivity of common owners determine whether higher prices under common ownership result from higher costs or from higher markups. Using panel regressions and a difference-in-differences design we document that managerial incentives are less performance-sensitive in firms with more common ownership. |
| JEL: | D21 G32 J33 L13 L21 M12 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30785&r=bec |
| By: | Alex Clymo (University of Essex); Filip Rozsypal (Danmarks Nationalbank; Centre for Macroeconomics (CFM)) |
| Abstract: | Using administrative micro data we document how firms’ sensitivities to business cycles differ by size and age. Among the youngest firms, small firms are more cyclical than large, but the reverse is true among older firms. The differences in cyclicality are large: “young and small firms” are nearly twice as cyclical as large firms, who respond one-and-half to one to the aggregate business cycle. In contrast, “old and small” firms are almost acyclical on average. High leverage firms are more cyclical than low leverage firms which—when combined with the age-profiles and cyclicalities of financial variables—suggests that financial frictions are likely to explain the excess cyclicality of “young and small” firms, but not of large firms. Augmenting a dynamic heterogeneous-firm model with heterogeneous returns-to-scale and entrant wealth allows it to replicate these findings, and implies that financial policies targeted at young firms become less effective in stimulating aggregate output while the opposite is true for direct labor subsidies. |
| Keywords: | firm age, firm size, cyclicality, financial frictions |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2207&r=bec |
| By: | Martins, Pedro S.; Thomas, Jonathan P. |
| Abstract: | This paper studies firm-provided training in a context of potential worker mobility. We argue that such worker mobility may be reduced by employers' associations (EAs) through no-poach agreements. First, we sketch a simple model to illustrate the impact of employer coordination on training. We then present supporting evidence from rich matched panel data, including firms' EA affiliation and workers' individual 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, even when drawing on within-employee variation and considering multiple dimensions of training. We argue that these results are consistent with a role played by EAs in reducing worker mobility. |
| Keywords: | Employers organisations, No-poach agreements, Worker mobility |
| JEL: | J53 J62 L40 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1219&r=bec |
| By: | Marek Ignaszak (Goethe University Frankfurt); Petr Sedlacek (University of Oxford; Centre for Economic Policy Research (CEPR)) |
| Abstract: | Recent empirical evidence suggests that firm selection and growth are largely demand-driven. We incorporate this feature into a model of endogenous growth in which heterogeneous firms innovate and survive based on profitability, rather than productivity alone. We show analytically that firm-level demand variation impacts aggregate growth by changing firms’ incentives to innovate. Estimating our model on U.S. Census firm data, we quantify that 20% of aggregate growth is demand-driven and that the macroeconomic impact of growth policies is fundamentally different compared to a model driven by productivity variation alone. We find empirical support for our model mechanism in firm-level data. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2115&r=bec |
| By: | Bos, Iwan; Marini, Marco A. |
| Abstract: | This paper examines a homogeneous-good Bertrand-Edgeworth oligopoly model to explore the role of firm size and number in pricing. We consider the price impact of merger, breakup, investment, divestment, entry, and exit. A merger leads to higher prices only when it increases the size of the largest seller and industry capacity is neither too big nor too small post-merger. Similarly, breaking-up a firm only leads to lower prices when it concerns the biggest producer and aggregate capacity is within an intermediate range. Investment and entry (weakly) reduce prices, whereas divestment and exit yield (weakly) higher prices. Taken together, these findings suggest that size matters more than number in the determination of oligopoly prices. |
| Keywords: | Bertrand-Edgeworth Competition; Edgeworth Price Cycle; Firm Size Distribution; Oligopoly Pricing; Price Dispersion |
| JEL: | D43 L1 L12 L13 |
| Date: | 2022–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:115800&r=bec |
| By: | Julian Di Giovanni (Federal Reserve Bank of New York, CEPR - Center for Economic Policy Research - CEPR); Andrei A Levchenko (University of Michigan System, CEPR - Center for Economic Policy Research - CEPR, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research); Isabelle Mejean (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR) |
| Abstract: | This paper uses a dataset covering the universe of French firm-level value added, imports, and exports over the period 1995-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. Because the largest firms are the most likely to trade internationally, foreign shocks are transmitted to the domestic economy primarily through the large firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of the observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 45 to 75% of the impact of foreign fluctuations on French GDP is accounted for by the "foreign granular residual"-the term capturing the larger firms' greater responsiveness to the foreign shocks. At the macro level, firm heterogeneity attenuates the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model. |
| Keywords: | Granularity, Shock transmission, Aggregate fluctuations, Input linkages, International trade |
| Date: | 2022–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:spmain:hal-03880697&r=bec |
| By: | Thierry Mayer (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CEPR - Center for Economic Policy Research - CEPR); Marc Melitz (Department of Economics, Harvard University - Harvard University [Cambridge], NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, CEPR - Center for Economic Policy Research - CEPR); Gianmarco Ottaviano (Bocconi University [Milan, Italy], CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, CEPR - Center for Economic Policy Research - CEPR) |
| Abstract: | We document how demand shocks in export markets lead French multiproduct exporters to reallocate the mix of products sold in those destinations. In response to positive demand shocks, French firms skew their export sales toward their best-performing products. We develop a theoretical model of multiproduct firms and derive the specific demand conditions (with endogenous price elasticities) needed to generate these product-mix reallocations. Under those demand conditions, the increased competition from demand shocks in export markets also induces productivity changes within the firm. We empirically test for this connection between demand shocks and the productivity of multiproduct firms. We find that this connection is economically substantial. |
| Date: | 2021–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:spmain:hal-03796148&r=bec |
| By: | Alviarez, Vanessa; Cravino, Javier; Ramondo, Natalia |
| Abstract: | We measure the contribution of firm-embedded productivity to cross-country income differences. By firm-embedded productivity we refer to the components of productivity that differ across firms and that can be transferred internationally, such as blueprints, management practices, and intangible capital. Our approach relies on micro-level data on the cross-border operations of multinational enterprises (MNEs). We compare the market shares of the exact same MNE in different countries and document that they are about four times larger in developing than in high-income coun-tries. This finding indicates that MNEs face less competition in less-developed coun-tries, suggesting that firm-embedded productivity in those countries is scarce. We propose and implement a new measure of firm-embedded productivity based on this observation. We find a strong positive correlation between our measure and output per worker across countries. In our sample, differences in firm-embedded productivity account for roughly a third of the cross-country variance in output per worker. |
| Keywords: | Development Accounting;TFP;Multinational Enterprises |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:11020&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:spmain:hal-03881619&r=bec |
| By: | Maarten De Ridder (London School of Economics (LSE); Centre for Macroeconomics (CFM)); Basile Grassi (Bocconi University; Centre for Economic Policy Research (CEPR); Innocenzo Gasparini Institute for Economic Research (IGIER)); Giovanni Morzenti (Bocconi University) |
| Abstract: | Is it feasible to estimate firm-level markups with commonly available datasets? Common methods to measure markups hinge on a production function estimation, but most datasets do not contain data on the quantity that firms produce. We use a tractable analytical framework, simulation from a quantitative model, and firm-level administrative production and pricing data to study the biases in markup estimates that may arise as a result. While the level of markup estimates from revenue data is biased, these estimates do correlate highly with true markups. They also display similar correlations with variables such as profitability and market share in our data. Finally, we show that imposing a Cobb-Douglas production function or simplifying the production function estimation may reduce the informativeness of markup estimates. |
| Keywords: | Macroeconomics, Production Functions, Markups, Competition |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2210&r=bec |
| By: | Johannes Boehm (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science); Swati Dhingra (CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, CEPR - Center for Economic Policy Research - CEPR); John Morrow (King‘s College London, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, CEPR - Center for Economic Policy Research - CEPR) |
| Abstract: | Resource-based theories propose that firms grow by diversifying into products that use common capabilities. We provide evidence for common-input capabilities, using a policy that removed entry barriers in input markets to show that the similarity of a firm's and an industry's input mix determines firm production choices. We model industry choice and economies of scope from input capabilities. When the model is estimated for Indian manufacturing, input complementarities make firms 5% more likely to produce in an industry and are quantitatively as important as time-invariant drivers of coproduction rates. Upstream entry barriers were equivalent to a 9.5% tariff on inputs. |
| Keywords: | Multiproduct firms,firm capabilities,vertical input linkages,comparative advantage,economies of scope,size-based policies |
| Date: | 2021–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03877257&r=bec |
| By: | Mindsponge, AISDL |
| Abstract: | A recent study published in Frontiers in Psychology offers some insights into how entrepreneurs’ creativity and company growth can be affected by entrepreneurial openness and creative personality |
| Date: | 2022–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:wheqn&r=bec |
| By: | Philippe Aghion (LSE - London School of Economics and Political Science, Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France); Sergei Guriev (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Kangchul Jo (BOK ERI - Bank of Korea Economic Research Institute) |
| Abstract: | We study firm dynamics in Korea before and after the 1997/8 Asian crisis and pro-competitive reforms that reduced the dominance of chaebols. We find that in industries that were dominated by chaebols before the crisis, labour productivity and total factor productivity of non-chaebol firms increased markedly after the reforms (relative to other industries). Furthermore, entry of non-chaebol firms increased significantly in all industries after the reform. After the crisis, the non-chaebol firms also dramatically increased their patenting activity. Finally, markups of chaebol firms declined substantially, especially within industries dominated by chaebols before the crisis. These results suggest that the crisis had the virtue of helping Korea move from catching-up growth based on investment in existing technologies to innovation-based growth. |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03878612&r=bec |
| By: | FATICA Serena (European Commission - JRC); OLIVIERO Tommaso; RANCAN Michela |
| Abstract: | We analyze a large sample of companies operating in the EU-27 in the period 2007-2018 to gain new insights on the determinants of corporate defaults. The sample includes micro, small, medium and large enterprises, both active and defaulting. We document significant differences in the drivers of insolvency across firm size categories. Micro and small firms are significantly more vulnerable to sectoral shocks and to disruptions along the supply chain than larger companies. Instead, the default probability for all firms is significantly larger when companies experience in the previous year negative end-of-the year equity, that is a measure of prolonged financial distress. By exploiting institutional differences in judicial efficiency among EU-27 countries, we find financial distress is more likely to predict default in jurisdictions with more efficient insolvency procedures. Finally, we derive potential implications of our findings, especially with regard to the recent crises hitting European firms and the harmonisation of national insolvency regimes in the EU-27 towards most efficient legal practices, as foreseen under the Capital Markets Union Action Plan. |
| Keywords: | bankruptcy, financial distress, SMEs, EU-27, judicial efficiency |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc131613&r=bec |
| By: | Johannes Boehm (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Jan Sonntag (Sciences Po - Sciences Po) |
| Abstract: | This paper studies the prevalence of potential anticompetitive effects of vertical mergers using a novel data set on U.S. and international buyer-seller relationships and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers' competitors than when they vertically integrate with an unrelated firm. This relationship holds for both domestic and cross-border mergers and for domestic and international relationships. It also holds when instrumenting mergers using exogenous downward pressure on the supplier's stock prices, suggesting that reverse causality is unlikely to explain the result. In contrast, the relationship vanishes when using rumored or announced but not completed integration events. Firms experience a substantial drop in sales when one of their suppliers integrates with one of their competitors. This sales drop is mitigated if the firm has alternative suppliers in place. These findings are consistent with anticompetitive effects of vertical mergers, such as vertical foreclosure, rising input costs for rivals, or self-foreclosure. This paper was accepted by Joshua Gans, business strategy. |
| Keywords: | Mergers and acquisitions,Market foreclosure,Vertical integration,Production networks |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03877289&r=bec |
| By: | Marco Caliendo (University of Potsdam, IZA, DIW, IAB); Alexander Kritikos (DIW Berlin, University of Potsdam, IZA, IAB); Daniel Rodriguez (University of Potsdam); Claudia Stier (University of Potsdam) |
| Abstract: | Self-efficacy reflects the self-belief that one can persistently perform difficult and novel tasks while coping with adversity. As such beliefs reflect how individuals behave, think, and act, they are key for successful entrepreneurial activities. While existing literature mainly analyzes the influence of the task-related construct of entrepreneurial self-efficacy, we take a different perspective and investigate, based on a representative sample of 1, 405 German business founders, how the personality characteristic of generalized self-efficacy influences start-up performance as measured by a broad set of business outcomes up to 19 months after business creation. Outcomes include start-up survival and entrepreneurial income, as well as growth-oriented outcomes such as job creation and innovation. We find statistically significant and economically important positive effects of high scores of self-efficacy on start-up survival and entrepreneurial income, which become even stronger when focusing on the growth-oriented outcome of innovation. Furthermore, we observe that generalized self-efficacy is similarly distributed between female and male business founders, with effects being partly stronger for female entrepreneurs. Our findings are important for policy instruments that are meant to support firm growth by facilitating the design of more target-oriented offers for training, coaching, and entrepreneurial incubators. |
| Keywords: | entrepreneurship, firm performance, general self-efficacy, survival, job creation, innovation |
| JEL: | L26 M13 D91 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:61&r=bec |
| By: | Stephane Bonhomme (University of Chicago); Kerstin Holzheu (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Thibaut Lamadon (University of Chicago, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, IFS - Laboratory of the Institute for Fiscal Studies - Institute for Fiscal Studies); Elena Manresa (NYU - New York University [New York] - NYU - NYU System); Magne Mogstad (University of Chicago, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, IFS - Laboratory of the Institute for Fiscal Studies - Institute for Fiscal Studies); Bradley Setzler (Penn State - Pennsylvania State University - Penn State System) |
| Abstract: | Many studies use matched employer-employee data to estimate a statistical model of earnings determination with worker and firm fixed effects. Estimates based on this model have produced influential yet controversial conclusions. The objective of this paper is to assess the sensitivity of these conclusions to the biases that arise because of limited mobility of workers across firms. We use employer-employee data from the US and several European countries while taking advantage of both fixed-effects and random-effects methods for biascorrection. We find that limited mobility bias is severe and that bias-correction is important. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03882713&r=bec |