nep-bec New Economics Papers
on Business Economics
Issue of 2023‒05‒29
nine papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Being at the Core: Firm product Specialisation By Filippo Bontadini; Mercedes Campi; Marcos Dueñas
  2. Intangible Capital as a Production Factor. Firm-level Evidence from Austrian Microdata By Klaus Friesenbichler; Agnes Kügler; Julia Schieber-Knöbl
  3. Digitalisation and productivity: gamechanger or sideshow? By Robert Anderton; Vasco Botelho; Paul Reimers
  4. Enforcing Mandatory Reporting on Private Firms: The Role of Banks By Miguel Duro; Germán López-Espinosa; Sergio Mayordomo; Gaizka Ormazabal; María Rodríguez-Moreno
  5. Internalizing Peer Firm Proprietary Costs: Evidence from Supply Chain Relations By Afrin, Farzana; Kim, Jinhwan; Roychowdhury, Sugata
  6. Learning, Sophistication, and the Returns to Advertising: Implications for Differences in Firm Performance By Steven Tadelis; Christopher Hooton; Utsav Manjeer; Daniel Deisenroth; Nils Wernerfelt; Nick Dadson; Lindsay Greenbaum
  7. Data issues in analyzing agri-food trade in BIMSTEC: Challenges and recommendations By Saroj, Sunil; Roy, Devesh; Kamar, Abul; Pradhan, Mamata
  8. On the pass-through of large devaluations By Carlos Casacuberta; Omar Licandro
  9. Women-led firms’ performance during the Covid-19 pandemic. Evidence from an emerging economy By Grijalva, Diego

  1. By: Filippo Bontadini (LUISS University/University of Sussex); Mercedes Campi (CONICET/IIEP); Marcos Dueñas (IMT)
    Abstract: We propose a novel measure to investigate firms’ product specialisation: product coreness, that captures the centrality of exported products within the firm’s export basket. We study product coreness using firm-product level data between 2018 and 2020 for Colombia, Ecuador, and Peru. Three main findings emerge from our analysis. First, the composition of firms’ export baskets changes relatively littlefrom one year to the other, and products far from the firm’s core competencies, with low coreness, are more likely to be dropped. Second, higher coreness is associated with larger export flows at the firm level. Third, such firm-level patterns also haveimplications at the aggregate level: products that are, on average, exported with higher coreness have higher export flows at the country level, which holds across all levels of product complexity. Therefore, the paper shows that how closely a product fits within a firm’s capabilities is important for economic performance at both the firm and country level. We explore these issues within an econometric framework, finding robust evidence both across our three countries and for each country separately.
    Keywords: International Trade; Diversification; Capabilities; COVID–19
    JEL: F14 L25
    Date: 2023–05
  2. By: Klaus Friesenbichler; Agnes Kügler; Julia Schieber-Knöbl (Statistics Austria)
    Abstract: We examine the role of intangible capital as a production factor using Austrian firm-level register data. Descriptive statistics show that intangible investment has increased over time. The intensive and extensive margins of firms' investments are highly skewed. They differ across sectors. A series of sample splits show that the components of intangible capital play different roles as inputs in the production function. Software and especially licenses are important for SMEs and exporters. Research and development play an important role in production in all specifications. For firms that continuously invest in intangible capital, all components of intangible capital gain importance in the production functions. These patterns differ from those found in previous studies and have implications for the strategic orientation of industrial and innovation policy.
    Keywords: Intangible capital, R&D, Firm level productivity, Investment, Production function, Austria
    Date: 2023–05–10
  3. By: Robert Anderton; Vasco Botelho; Paul Reimers
    Abstract: Is digitalisation a massive gamechanger which will deliver huge gains in productivity, or is it more of a sideshow with only limited impacts? We use a large balance sheet panel dataset comprising more than 19 million European firm-level observations to empirically investigate the impact of digitalisation on productivity growth via various previously unexplored channels and mechanisms. Our results suggest that for two otherwise identical firms, the firm that exhibits on average a higher share of investment in digital technologies will exhibit a faster rate of TFP growth, but not all firms and sectors experience significant productivity gains from digitalisation. Digitalisation does not seem to have relatively stronger impacts on the productivity of frontier firms compared to laggards, nor does it help to turn laggards into frontier firms. Overall, firms should not regard digital investment as a ‘one-size-fits-all’ strategy to improve their productivity. Digital technologies are a gamechanger for some firms. But they seem more like a sideshow for most firms, who attempt to be increasingly digital but are not able to adequately reap its productivity gains.
    Keywords: digital technology/transition; productivity growth; technology adoption; technology diffusion
    Date: 2023
  4. By: Miguel Duro (IESE Business School); Germán López-Espinosa (School of Economics - Universidad de Navarra and IESE Business School); Sergio Mayordomo (Banco de España); Gaizka Ormazabal (IESE Business School, CEPR and ECGI); María Rodríguez-Moreno (Banco de España)
    Abstract: This paper studies firm-level factors shaping the enforcement of financial reporting regulation on private firms and proposes bank lending as a particularly important one. Our tests are based on a rare combination of data sets, which allows us to construct unique measures of misreporting, notably in the form of underreporting of debt. We observe that private firms with bank debt are more likely to file mandatory financial reports and less likely to file information with irregularities. While we also find evidence that the need for bank financing can induce firms to misreport, this concern is mitigated by additional findings suggesting that banks detect reporting issues within private firms’ financial statements. Critically, we observe that firms with reporting issues obtain significantly less credit, especially when the bank has had previous exposure to debt misreporting and when the bank verifies debt information using the public credit registry. In short, our paper documents important firm-level determinants of private firms’ misreporting and highlights that banks play a significant role in the enforcement of mandatory financial reporting on these firms.
    Keywords: enforcement of financial reporting, private firms, debt underreporting, financial distress, public credit registries
    JEL: G21 M41
    Date: 2022–11
  5. By: Afrin, Farzana (Boston College); Kim, Jinhwan (Stanford U); Roychowdhury, Sugata (Northwestern U)
    Abstract: We examine whether the proprietary costs of economically linked peers influence focal firms' merger and acquisition (M&A) decisions, which often involve extensive transfers of proprietary information across merging entities. Using data on supply chain relations, we find that a one-standard-deviation increase in customers' proprietary cost concerns--proxied by the customers' text-based product market similarity with rivals--reduces suppliers' M&A likelihood with the rivals of their customers as well as with the suppliers to the rivals by 16.1%. The effect is more pronounced when the customers possess sensitive information and have greater bargaining power over their suppliers. These findings are consistent with suppliers internalizing the proprietary costs of their customers and avoiding M&As that can leak customers' proprietary information, especially when the customers are economically important to the supplier. Using plausibly exogenous variation in the common ownership between customers and their rivals as a shock to customers' proprietary cost concerns, we conclude that the negative link between customers' proprietary costs and the supplier's M&A activity is likely causal. These findings suggest that the proprietary costs of disclosure can spill over to the investment and strategic decisions of economically related firms.
    JEL: D22 D62 D83 G34 L14 M41
    Date: 2022–08
  6. By: Steven Tadelis; Christopher Hooton; Utsav Manjeer; Daniel Deisenroth; Nils Wernerfelt; Nick Dadson; Lindsay Greenbaum
    Abstract: Why do establishments exhibit wide variation in their productivity and profitability? Can variation in returns to advertising help answer this question? We present results from a large field experiment on Facebook and Instagram that documents variance in advertisers’ ability to generate returns to advertising. We focus on campaigns aimed at boosting sales and tie advertising expenses to revenues for each advertiser. We find that spending on advertising led to significant increases in revenues, number of purchases, number of purchasers, and number of conversions. The heterogeneity in these results by expenditure, age, and engagement documents patterns consistent with learning by doing and variance in how sophisticated advertisers are. Advertisers who engage in more learning activities and more sophisticated data collection exhibit the highest returns and are more likely to continue their activities over time, suggesting that differences in advertising effectiveness may account for some of the variance in productivity across firms.
    JEL: D24 E22 L25 M37
    Date: 2023–04
  7. By: Saroj, Sunil; Roy, Devesh; Kamar, Abul; Pradhan, Mamata
    Abstract: The focus of research on international trade has recently shifted from industries and countries to firms. Firm heterogeneity is shown to be a determinant of trade at both the intensive margin (increase exports per firm/product) and extensive margins (the number of firms exporting – new products, new partners, new varieties, and new prices). It is now widely accepted that exporting firms are larger, comparatively productive, more skilled, and capital-intensive, and pay higher wages than non-exporting firms. The innovations in international trade literature that explains both the emergence as well as levels and the nature of trade flows through value chain integration necessitates examining trade-based exchanges at the highest possible levels of product disaggregation. Developments in trade theory emphasize that it is individual firms not countries that trade and analysis needs to incorporate firm characteristics in decisions and ability for exporting and importing. Firms are the appropriate unit of analysis for trade flows. It helps several paradoxes once the import of firm heterogeneity is understood. Despite the substantive importance of granular level data and the significant level of disaggregated product-level bilateral trade flow data and enhanced computing power that are becoming available, most studies have tended to rely on analysis with high level of aggregation. Recent research on firm heterogeneity in international trade highlights the importance of extensive margins i.e., new products, new partners, new varieties, and cumulative of these i.e., new prices in trade patterns and firms' responses to trade liberalization and other policy changes. However, the high dimensionality of the data and the large number of responses to changes can easily overwhelm researchers. Additionally, bigger data sets may contain more noise, which can mask important systematic patterns. In analysis of trade flows, notwithstanding the rising incidence of differentiated products (varieties) and value chains that transcend national boundaries, methods in agri-food trade analysis in particular have not kept pace in terms of empirical methods and suitable data.
    Keywords: BANGLADESH; BHUTAN; NEPAL; INDIA; SOUTH ASIA; MYANMAR; BURMA; SRI LANKA; THAILAND; SOUTH EAST ASIA; ASIA; international trade; firms; exports; productivity; wages; value chain; innovations; data; agri-food system; policies
    Date: 2023
  8. By: Carlos Casacuberta; Omar Licandro
    Abstract: In 2002 Uruguay faced a sudden stop of international capital flows, inducing a deep financial crisis and a large devaluation of the peso. The real exchange rate depreciated and exports expanded. Paradoxically, export shares and real exchange rates negatively correlate among Uruguayan exporters around 2002. To unravel this paradox, we develop a small open economy model of heterogeneous firms. Domestic firms are price takers in the international market, operate under monopolistic competition in the domestic market, and face financial constraints when exporting. Confronted to a large nominal devaluation, financial constraints deepen. Financially constrained exporters cannot optimally expand in the export market and react by passing-through the devaluation to the domestic price only partially, expanding domestic sales. As a consequence, the more financially constrained exporters are, the less their export shares expand and the more their firm specific real exchange rates depreciate. As a result, export shares and real exchange rates of exporters are negatively correlated as in the data.
    Keywords: Uruguay; export shares; exchange rates
    Date: 2023
  9. By: Grijalva, Diego
    Abstract: In this paper we analyze the on-impact effect of the Covid-19 pandemic on Ecuadorian firms and, conditional on this, we analyze firms' short-run performance. We estimate various econometric models on a combined dataset of almost 5, 000 firms that includes fiscal-year performance variables from the Ecuadorian Superintendencia de Compañías and results from a survey conducted by a major financial institution in Ecuador at the beginning of the pandemic. Our main result is that micro women-led firms and women-led firms outside of the main Ecuadorian cities were more affected at the onset of the pandemic. Despite this impact, their performance by the end of 2020 was not worse compared to less affected firms. We also find that smaller firms as well as firms in the hospitality sector were both more affected and performed worse than other firms. Finally, younger firms were less affected and performed better than older firms, but at the cost of increased debt and less cash.
    Keywords: Firms' performance, Covid-19, emerging economies
    JEL: D22 G32 J16 L25 L26 O54
    Date: 2023–05–05

This nep-bec issue is ©2023 by Vasileios Bougioukos. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.