nep-bec New Economics Papers
on Business Economics
Issue of 2023‒03‒20
eight papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Spatial concentration and firm-level innovation Evidence from Ghana By Anthony Krakah; Gonzague Vannoorenberghe
  2. A Theory of Monopolistic Competition with Horizontally Heterogeneous Consumers By Sergey Kokovin; Alina Ozhegova; Shamil Sharapudinov; Alexander Tarasov; Philip Ushchev; Sergey G. Kokovin
  3. Detecting Learning by Exporting and from Exporters By Jingfang Zhang; Emir Malikov
  4. Downstream Cross-Holdings and Upstream Collusion By Konstantinos Charistos; Ioannis Pinopoulos; Panagiotis Skartados
  5. Spatial Agglomeration, Innovation and Firm Survival for Italian Manufacturing Firms By Arnab Bhattacharjee; Ornella Maietta; Fernanda Mazzotta
  6. Firms’ inflation expectations and price-setting behaviour in Canada: Evidence from a business survey By Ramisha Asghar; James Fudurich; Jane Voll
  7. Self-Efficacy and Entrepreneurial Performance of Start-Ups By Marco Caliendo; Alexander S. Kritikos; Daniel Rodriguez; Claudia Stier
  8. Accounting for Cross-Location Technological Heterogeneity in the Measurement of Operations Efficiency and Productivity By Emir Malikov; Jingfang Zhang; Shunan Zhao; Subal C. Kumbhakar

  1. By: Anthony Krakah (Ghana Statistical Service); Gonzague Vannoorenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: We analyze how the spatial concentration of economic activity affects innovation among firms in Ghana. We use the 2014 census of all establishments to map economic activity at a precise geographic level and the responses to a detailed survey of more than 5000 firms to capture measures of innovation and firm-level characteristics. We find a strong positive effect of the overall density of economic activity on innovation (urbanization economies) but a negative effect of the density of employment in an establishment’s sector (localization economies). Several questions in the survey allow us to address the issue of endogeneity and shed some light on the mechanisms. We control for many firm characteristics and confirm our results on a subsample of establishments declaring that their location is that of their founder’s origin, i.e. firms with a plausibly exogenous geographic location. We find that firms in regions with denser economic activity report less problems to access funding and knowledge, while the presence of firms in the same sector is associated with more uncertainty about the gains from innovating.
    Keywords: innovation, development, localization, urbanization, externalities, Ghana
    JEL: R10 R11 R12 O14 O18
    Date: 2023–02–13
  2. By: Sergey Kokovin; Alina Ozhegova; Shamil Sharapudinov; Alexander Tarasov; Philip Ushchev; Sergey G. Kokovin
    Abstract: Our novel approach to modeling monopolistic competition with heterogeneous firms and consumers involves spatial product differentiation. Space can be interpreted either as a geographical space or as a space of characteristics of a differentiated good. In addition to price setting, each firm also chooses its optimal location in this space. We formulate conditions for positive sorting: more productive firms serve larger market segments and face tougher competition; and for the existence and uniqueness of the equilibrium. To quantify the role of the sorting mechanism, we calibrate the model using cross-sectional haircut market data and perform counterfactual analysis. We find that inequality in the distribution of the gains among consumers caused by positive market shocks can be substantial: the gains of consumers from more populated locations are 3-4 times higher.
    Keywords: firm heterogeneity, geographical space, product space, positive sorting, product niches
    JEL: F10 L11 L13
    Date: 2023
  3. By: Jingfang Zhang; Emir Malikov
    Abstract: Existing literature at the nexus of firm productivity and export behavior mostly focuses on "learning by exporting, " whereby firms can improve their performance by engaging in exports. Whereas, the secondary channel of learning via cross-firm spillovers from exporting peers, or "learning from exporters, " has largely been neglected. Omitting this important mechanism, which can benefit both exporters and non-exporters, may provide an incomplete assessment of the total productivity benefits of exporting. In this paper, we develop a unified empirical framework for productivity measurement that explicitly accommodates both channels. To do this, we formalize the evolution of firm productivity as an export-controlled process, allowing future productivity to be affected by both the firm's own export behavior as well as export behavior of spatially proximate, same-industry peers. This facilitates a simultaneous, "internally consistent" identification of firm productivity and the corresponding effects of exporting. We apply our methodology to a panel of manufacturing plants in Chile in 1995-2007 and find significant evidence in support of both direct and spillover effects of exporting that substantially boost the productivity of domestic firms.
    Date: 2023–02
  4. By: Konstantinos Charistos; Ioannis Pinopoulos; Panagiotis Skartados
    Abstract: We examine the effects of (passive) cross-holdings in the downstream market on the sustainability of upstream collusion. We consider two competing vertical chains with downstream Cournot and homogeneous goods. Each downstream firm holds a (symmetric) non-controlling share of its rival.
    Keywords: competing vertical chains; cross-holdings; passive ownership; tacit collusion
    JEL: D43 L13 L40 L81
    Date: 2023–02–05
  5. By: Arnab Bhattacharjee; Ornella Maietta; Fernanda Mazzotta
    Abstract: Innovativeness of a firm improves not only its own survival chances but can also generate externalities on its neighboring firms. We empirically examine the role of agglomeration economies in how innovativeness affects firm survival in Southern Italy, using spatial weights to model spillovers. Spatial Durbin probit model estimates confirm that innovation is a determinant of firm survival not only for firms that are themselves innovative but also ones located close to other innovative firms. Definition of spatial scale and weight plays an important role. Spillover benefits are enhanced by agglomeration economies, but only at a very local scale.
    Keywords: Firm survival, Spatial models, Innovation, Spillovers, Southern Italian SMEs
    JEL: L20 O3 D22 C21 C41
    Date: 2023–02
  6. By: Ramisha Asghar; James Fudurich; Jane Voll
    Abstract: Canadian firms’ expectations for high inflation may be influencing their price setting, supporting strong price growth and delays in the transmission of monetary policy. Using data from the Business Outlook Survey, we investigate the reasons behind widespread price growth seen in Canada in 2021 and early 2022.
    Keywords: Firm dynamics; Inflation and prices; Monetary policy transmission; Recent economic and financial developments
    JEL: D22 E31
    Date: 2023–02
  7. By: Marco Caliendo; Alexander S. Kritikos; Daniel Rodriguez; Claudia Stier
    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 growthoriented 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 _rm 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
  8. By: Emir Malikov; Jingfang Zhang; Shunan Zhao; Subal C. Kumbhakar
    Abstract: Motivated by the long-standing interest in understanding the role of location for firm performance, this paper provides a semiparametric methodology to accommodate locational heterogeneity in production analysis. Our approach is novel in that we explicitly model spatial variation in parameters in the production-function estimation. We accomplish this by allowing both the input-elasticity and productivity parameters to be unknown functions of the firm's geographic location and estimate them via local kernel methods. This allows the production technology to vary across space, thereby accommodating neighborhood influences on firm production. In doing so, we are also able to examine the role of cross-location differences in explaining the variation in operational productivity among firms. Our model is superior to the alternative spatial production-function formulations because it (i) explicitly estimates the cross-locational variation in production functions, (ii) is readily reconcilable with the conventional production axioms and, more importantly, (iii) can be identified from the data by building on the popular proxy-variable methods, which we extend to incorporate locational heterogeneity. Using our methodology, we study China's chemicals manufacturing industry and find that differences in technology (as opposed to in idiosyncratic firm heterogeneity) are the main source of the cross-location differential in total productivity in this industry.
    Date: 2023–02

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