nep-bec New Economics Papers
on Business Economics
Issue of 2023‒02‒20
ten papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Dispersion over the business cycle: passthrough, productivity and demand? By Carlsson, Mikael; Clymo, Alex; Joslin, Knut-Eric
  2. Debt Maturity and Firm Productivity—The Role of Intangibles By Nakatani, Ryota
  3. Sparse production networks By Bernard, Andrew B.; Zi, Yuan
  4. Do well managed firms make better forecasts? By Bloom, Nicholas; Kawakubo, Taka; Meng, Charlotte; Mizen, Paul; Riley, Rebecca; Senga, Tatsuro; Van Reenen, John
  5. Coordinated Firm-Level Work Processes and Macroeconomic Resilience By Moritz Kuhn; Jinfeng Luo; Iourii Manovskii; Xincheng Qiu
  6. Do larger firms have higher markups? By Mertens, Matthias; Mottironi, Bernardo
  7. Portability of firm corporate governance in mergers and acquisitions By Tanveer Hussain; Gilberto Loureiro
  8. Measuring the Share of Imports in Final Consumption By Emmanuel Dhyne; Ayumu Ken Kikkawa; Magne Mogstad; Felix Tintelnot
  9. Search, Data, and Market Power By Carl-Christian Groh
  10. Nexus between Digital Infrastructure, Productivity, and International Trade Participation: Firm-level evidence from India’s Unorganized Sector MSMEs By Neha Jain; Sugandha Huria

  1. By: Carlsson, Mikael (Uppsala universitet); Clymo, Alex (University of Essex); Joslin, Knut-Eric (Kristiania University College)
    Abstract: We characterize the dispersion of firm-level productivity and demand shocks over the business cycle using Swedish microdata including prices and analyse the consequences for firms and the aggregate economy. Demand dispersion increases by more than productivity dispersion in recessions. Productivity shocks pass through incompletely to prices and have limited effect on sales dispersion. Demand shocks explain most of the variation in sales dispersion. In a heterogeneous-firm model matching the micro facts, demand dispersion has unambiguously negative effects on output via increased uncertainty and a “wait and see” channel. Productivity dispersion does not generate “wait and see” effects, but affects output negatively by inducing markup dispersion.
    Keywords: demand estimation; productivity; variable markups; business cycles; dispersion; uncertainty; passthrough; adjustment costs
    JEL: D21 D22 D81 E32 L11
    Date: 2023–01–19
  2. By: Nakatani, Ryota
    Abstract: Does the maturity of debt matter for productivity? Using data on Italian firms from 1997 to 2015, we study the relationship among debt maturity, productivity, and firm characteristics. We find that productivity is positively associated with short-term debt and negatively associated with long-term debt. This result supports the hypothesis that the less intense monitoring of firm performance and fewer liquidation fears stemming from the long maturity of debt causes a moral hazard, while short-term debt serves as a disciplinary device to improve firm performance in the short run. This effect is evident in small- and medium-sized enterprises and old firms. In contrast, large firms can utilize long-term financing to improve productivity through long-term investments. Firms improve productivity by purchasing intangible assets financed by short-term debt.
    Keywords: Debt maturity; Productivity; SMEs; Firm size; Firm age; Intangibles
    JEL: D22 D24 G32 O16 O34
    Date: 2023–01–28
  3. By: Bernard, Andrew B.; Zi, Yuan
    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-bias; buyer-seller matching; underidentification
    JEL: F11 F14
    Date: 2022–10–17
  4. By: Bloom, Nicholas; Kawakubo, Taka; Meng, Charlotte; Mizen, Paul; Riley, Rebecca; Senga, Tatsuro; Van Reenen, John
    Abstract: We link a new UK management survey covering 8, 000 firms to panel data on productivity in manufacturing and services. There is a large variation in management practices, which are highly correlated with productivity, profitability and size. Uniquely, the survey collects firms' micro forecasts of their own sales and also macro forecasts of GDP. We find that better managed firms make more accurate micro and macro forecasts, even after controlling for their size, age, industry and many other factors. We also show better managed firms appear aware that their forecasts are more accurate, with lower subjective uncertainty around central values. These stylized facts suggest that one reason for the superior performance of better managed firms is that they knowingly make more accurate forecasts, enabling them to make superior operational and strategic choices.
    Keywords: management; productivity; expectations; forecasting; ES/S012729/2
    JEL: L20 M20 O32 O33
    Date: 2022–01–05
  5. By: Moritz Kuhn; Jinfeng Luo; Iourii Manovskii; Xincheng Qiu
    Abstract: The production processes at many firms rely on a highly choreographed and interdependent network of workers performing specialized jobs. We designed and implemented a targeted employer survey to measure the extent of coordination in work processes. We link this firm-level coordination measure to administrative data and find that firms with a more coordinated work process are more productive, pay higher wages, and experience lower worker turnover. Yet, these firms suffer more severe negative consequences from worker absences and adopt various strategies to mitigate such risk, the reliance on which we document. While the standard unemployment insurance policy pays benefits to workers who lose their jobs, the short-time work policy widely adopted in Germany compensates workers who remain employed with reduced hours for the associated loss of earnings. This policy can benefit employers with a more coordinated production process because they can lower the scale of production by reducing hours while keeping all workers needed for the production process employed, increasing the resilience of these employers to large idiosyncratic and aggregate shocks
    Keywords: Labor markets, Coordination, Economic resilience, Work process, Covid-19
    JEL: E23 E24 J24 J65
    Date: 2022–11
  6. By: Mertens, Matthias; Mottironi, Bernardo
    Abstract: Several models posit a positive cross-sectional correlation between markups and firm size, which, among others, characterizes misallocation, factor shares, and gains from trade. Yet, taking labor market power into account in markup estimation, we show that larger firms have lower markups. This correlation turns positive only after conditioning on wage markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias) and hold across 19 European countries. We discuss the resulting implications and highlight studying input and output market power within an integrated framework as an important next step for future research.
    Keywords: firm size, markdowns, market power, markups
    JEL: J42 L11 L13 L25
    Date: 2023
  7. By: Tanveer Hussain (School of Economics and Management, University of Minho, Portugal); Gilberto Loureiro (NIPE/Center for Research in Economics and Management, University of Minho, Portugal)
    Abstract: We study the corporate governance portability from bidders to targets in Mergers and Acquisitions and its impact on bidder announcement returns. We find that the bidder’s cumulative abnormal returns are higher in acquisitions where the bidder’s corporate governance quality exceeds that of the target. This result suggests a positive valuation effect for bidder shareholders resulting from the portability of good firm corporate governance from bidders to targets. We also find that this effect is stronger when bidders are domiciled in countries with better corporate governance. The results pass several robustness tests, including alternative measures of firm corporate governance and different sample periods.
    Keywords: corporate governance portability; global mergers and acquisitions; M&A announcement returns; international corporate governance
    JEL: G30 G34
    Date: 2022
  8. By: Emmanuel Dhyne; Ayumu Ken Kikkawa; Magne Mogstad; Felix Tintelnot
    Abstract: We use Belgian data on domestic firm-to-firm transactions and ask how the measurement of the share of imports in final consumption is affected when one uses data recorded at higher levels of aggregation. We find that aggregating detailed firm-to-firm transaction data to the firm level and imposing homogeneity assumptions in the composition of firms’ input and output do not substantially affect the measurement of the share of imports in final consumption. However, using the national IO tables alone may understate the share of imports in final consumption and, thereby, the gains from trade.
    JEL: F1
    Date: 2023–01
  9. By: Carl-Christian Groh
    Keywords: search, information exchange, antitrust, price discrimination approach, German Competition Act, 19a designations, competition law I study the relationship between data and market power in a duopoly model of price discrimination with search frictions. One firm receives a signal about the valuation of any arriving consumer while its rival receives no information. A share of consumers, referred to as searchers, have equal valuation for the good of either firm and optimally choose which firms to visit. The remaining consumers are captive. In equilibrium, a large majority of searchers will only visit the firm with data. The market share of the firm with data converges to one as the share of searchers in the market goes to one, regardless of the signal structure. Reductions of search frictions induce higher market concentration. The establishment of a right to data portability can address the competitive imbalances caused by data advantages.
    JEL: D18 D83 L13 L86
    Date: 2022–11
  10. By: Neha Jain (Indian Institute of Foreign Trade (IIFT), New Delhi); Sugandha Huria (Indian Institute of Foreign Trade (IIFT), New Delhi)
    Abstract: The study investigates whether access to digital ways of conducting a business can enhance the productivity of the unorganized sector MSMEs in India, and hence, foster their participation in international trade. The analysis is conducted using the National Sample Survey’s (NSS) 73rd round on unincorporated non-agricultural Indian enterprises for the year 2015-16, covering approximately 2, 90, 000 firms, and performing separate analysis for both manufacturing and services firms. The key findings are: First, access to ICT infrastructure has a positive impact on firm-level productivity while controlling for firm-level characteristics. Second, the quantile regression analysis confirms the robust impact of digital assets across different levels of productivity. Third, the Probit Regression Model highlights the combined positive and significant impact of digital infrastructure and productivity on the international trade participation of an unorganized sector MSME. These findings can serve as a motivation for accelerating ‘bottom-up approach’ in the policy efforts towards better productivity and digital transformation of these firms, particularly for manufacturing MSMEs.
    Keywords: Digitalization, Productivity, MSMEs, Exports
    JEL: D24 F61 J24 L86 L81 O33
    Date: 2022

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