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on Business Economics |
| By: | Joonkyu Choi; Nathan Goldschlag; John Haltiwanger; J. Daniel Kim |
| Abstract: | We show that early joiners---non-founder employees in the first year of a startup---play a critical role in explaining firm performance. We use administrative employee-employer matched data on all US startups and utilize the premature death of workers as a natural experiment exogenously separating talent from young firms. We find that losing an early joiner has a large negative effect on firm size that persists for at least ten years. When compared to that of a founder, losing an early joiner has a smaller effect on firm death but intensive margin effects on firm size are similar in magnitude. We also find that early joiners become relatively more important with the age of the firm. In contrast, losing a later joiner yields only a small and temporary decline in firm performance. We provide evidence that is consistent with the idea that organization capital, an important driver of startup success, is embodied in early joiners. |
| Keywords: | Founding teams; Premature death; Firm dynamics; Young firm growth; Organization capital |
| Date: | 2023–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2023-12&r=bec |
| By: | Gunnarsson, Emma (Research Institute of Industrial Economics (IFN)); Kärnä, Anders (Research Institute of Industrial Economics (IFN)); Olsson, Martin (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We study the heterogeneity of family firms using registry data on all private firms in Sweden. We restrict our sample to firms with at least one employee, and we define a family firm as a firm where two or more individuals among the owners or the board of directors are related. We focus on the heterogeneity in ownership, employee, and firm characteristics among family firms. We provide several new facts about family firms. The number of family members in family firms varies, consisting predominantly of two relatives, but a substantial share feature four or more. The share of multigenerational family firms has increased over time as has the share of women as owners and CEOs. Family firms employ more old and young workers, have a more compressed wage structure with a lower mean, and have a less compressed tenure distribution with a higher mean. The family firm age distribution is less compressed with a higher mean, and their location distribution is more equally distributed among metropolitan, urban, and rural areas. |
| Keywords: | Family Firms; Firm Organization; Employee Characteristics |
| JEL: | D22 D24 L25 L60 M11 M50 |
| Date: | 2023–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1461&r=bec |
| By: | Maria Bas (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Caroline Paunov (OCDE - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development) |
| Abstract: | This paper disentangles the impacts of trade liberalization on firm market and production decisions. Using firm-product data for Ecuador, we exploit exogenous tariff changes at entry to the World Trade Organization and find positive effects of trade liberalization on revenue total factor productivity (TFP-R). Input-trade liberalization improves firm efficiency, measured by quantity total factor productivity (TFP-Q) and leads firms to raise their markups and to introduce new products following an increase in imported input quality. Output-trade liberalization also improves firm efficiency and raises marginal costs as firms increase input quality and improve the quality of their core products. Firms' markups and product scope decrease. Chinese imports also contributed positively to productivity while the exchange rate's volatility prior to dollarization had reverse effects. We find positive welfare effects as consumers were offered better and cheaper products. Trade liberalization also benefited the more productive firms introduce new or better products while less productive firms were more likely to exit. |
| Keywords: | Gains from trade, Input and output tariff reduction, Revenue and physical quantity total factor productivity (TFP-R, TFP-Q), Markups, Output and input prices, Firm-product-level data, Ecuador |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03211401&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-Benitoz (Banco de España); Josep Pijoan-Mas (CEMFI) |
| Abstract: | We provide a framework to study how different public procurement allocation systems affect firm dynamics and long-run macroeconomic outcomes. We build a new panel dataset of administrative data for Spain that merges credit-register loan data, quasi-census firm-level data and public procurement project data. We find evidence consistent with the hypothesis that procurement contracts provide valuable collateral for firms, and that they do so to a greater extent than private-sector contracts. We then 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, and use it to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. We find that policies that promote the participation of small firms have sizeable macroeconomic effects, but their net impact on aggregate output is ambiguous. These policies help small firms grow and overcome financial constraints, which increases output in the long run. However, they also reduce saving incentives for large firms, decreasing output. The relative strength of these two forces and hence which of them dominates crucially depends on the type of financial frictions firms face and the specific way the policy is implemented. |
| Keywords: | government procurement, financial frictions, capital accumulation, aggregate productivity |
| JEL: | E22 E23 E62 G32 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:2233&r=bec |
| By: | Beatriz González (Banco de España); Enrique Moral-Benito (Banco de España); Isabel Soler (Banco de España) |
| Abstract: | The COVID-19 shock impacted firms severely all over the world. Governments were swift to implement policy measures to aid these firms, but these are coming to an end in the midst of a highly uncertain macroeconomic environment as a result of the war in Ukraine and the surge in energy prices. In this context, policymakers are worried about the potential increase in firm destruction after support policies are lifted, and what its macroeconomic consequences could be. Using data for Spain, we uncover an inverted U-shaped relationship between firm destruction and total factor productivity (TFP) growth: at low levels of firm exit, Schumpeterian cleansing effects dominate and the effect of firm destruction on TFP is positive, but when exit rates are very high, this effect turns negative. In order to rationalize this finding, we build on Asturias et al. (2017) and develop a model of firm dynamics with exit spillovers calibrated to match the non-linearity found in the data. This reduced-form spillover captures amplification effects from very high destruction rates that might force viable firms to exit, for example, due to disruptions in the production network and a generalised contraction in credit supply. Armed with the calibrated model, we perform counterfactual scenarios depending on the severity of the shock to firm exit. We find that when the shock is mild and firm destruction rates upon impact are similar to those observed during the Global Financial Crisis (GFC), TFP growth increases, and the recovery is faster. However, when the shock is severe and firm exit is well above that of the GFC, TFP growth decreases, since high efficiency firms are forced out of the market, which makes the recovery much slower. Overall, our results point to the importance of keeping exit rates low to avoid long term scarring effects. |
| Keywords: | firm exit, productivity |
| JEL: | E22 G33 M21 O47 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:2216&r=bec |
| By: | Fernando Leibovici; David Wiczer |
| Abstract: | This paper studies the role of credit constraints in accounting for the dynamics of firm exit during the Great Recession. We present novel firm-level evidence on the role of credit constraints on exit behavior during the Great Recession. Firms in financial distress, with tighter access to credit, are more likely to default than firms with more access to credit. This difference widened substantially in the Great Recession while, in contrast, default rates did not vary much by size, age, or productivity. We identify conditions under which standard models of firms subject to financial frictions can be consistent with these facts. |
| Keywords: | firm exit; credit constraints; financial distress; Great Recession; financial frictions |
| JEL: | E32 G01 G33 L25 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:96160&r=bec |
| By: | DuckKi Cho; Lyungmae Choi; Jessie Jiaxu Wang |
| Abstract: | We show that the social capital embedded in employees' networks contributes to firm performance. Using novel, individual-level network data, we measure a firm's social capital derived from employees' connections with external stakeholders. Our directed network data allow for differentiating those connections that know the employee and those that the employee knows. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees being known by others. We provide causal evidence exploiting the enactment of a government regulation that imparted a negative shock to networking with specific sectors and provide evidence on the mechanisms. |
| Keywords: | Social capital; Social networks; Labor and finance |
| JEL: | G30 G41 L14 |
| Date: | 2023–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2023-20&r=bec |
| By: | Lafond, François; Astudillo-Estévez, Pablo; Bacilieri, Andrea; Borsos, András |
| Abstract: | Are standard production network properties similar across all available datasets, and if not, why? We provide benchmark results from two administrative datasets (Ecuador and Hungary), which are exceptional in that there is no reporting threshold. We compare these networks to a leading commercial dataset (FactSet) and published results on national firm-level production networks. Administrative datasets with no reporting thresholds have remarkably similar quantitative properties, while a number of important properties are biased in datasets with missing data. |
| Keywords: | Production networks, input-output analysis, firm-level data. |
| JEL: | C80 D57 L14 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:amz:wpaper:2023-08&r=bec |
| By: | Amir Habibi (HU Berlin) |
| Abstract: | I study when a firm prefers to be transparent about pay using a simple multidimensional signaling model. Pay transparency within the firm means that a worker can learn about his own worker-firm match from another worker’s pay. This can either encourage or discourage workers—which affects retention—and so creates a trade-off for the firm when it commits to a level of transparency. The model pre- dicts that when few workers have a high worker-firm match, transparency is always preferred by the firm and becomes more favorable as the value of retaining these ‘star’ workers increases. This prediction is consistent with the firms in the field that choose to be internally transparent about pay. The model also predicts that transparency leads to pay compression, again consistent with evidence from the field. |
| Keywords: | pay transparency; bonus pay; multidimensional signaling; relative pay; |
| JEL: | D82 D86 J30 M52 |
| Date: | 2023–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:395&r=bec |
| By: | Andrea L. Eisfeldt; Gregor Schubert; Miao Ben Zhang |
| Abstract: | What are the effects of recent advances in Generative AI on the value of firms? Our study offers a quantitative answer to this question for U.S. publicly traded companies based on the exposures of their workforce to Generative AI. Our novel firm-level measure of workforce exposure to Generative AI is validated by data from earnings calls, and has intuitive relationships with firm and industry-level characteristics. Using Artificial Minus Human portfolios that are long firms with higher exposures and short firms with lower exposures, we show that higher-exposure firms earned excess returns that are 0.4% higher on a daily basis than returns of firms with lower exposures following the release of ChatGPT. Although this release was generally received by investors as good news for more exposed firms, there is wide variation across and within industries, consistent with the substantive disruptive potential of Generative AI technologies. |
| JEL: | E0 G0 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31222&r=bec |
| By: | Olayinka Oyekola (Department of Economics, University of Exeter); Sofia Johan (College of Business, Florida Atlantic University); Rilwan Sakariyahu (Business School, Edinburgh Napier University); Oluwatoyin Esther Dosumu (Alliance Manchester Business School, University of Manchester); Shima Amini (Department of Finance, University of Leeds) |
| Abstract: | Worldwide, lack of access to finance has been identified by many firms as the most detrimental obstacle facing business entities. This article studies how political institutions and financial liberalisation alleviate or deepen financial constraints faced by firms. We hypothesise that a complementarity exists between political institutions and financial liberalisation in constructing barriers to firms securing bank financing. Evidence from an international sample of over 63, 000 firms in 75 countries, establishes that political institutions, proxied by democracy level in a country, and financial liberalisation, proxied by entry and participation of foreign banks, are significant factors in explaining cross-country disparities in firm-level credit accessibility. Importantly, we find a strong support for our proposition, documenting a remarkably significant and sizeable positive interaction effect between foreign bank presence and the level of democracy for access to finance. These results are robust against various forms of sensitivity checks. Overall, our study provides fresh insights into the financing effects of foreign bank activities interacted with democracy on firms. We conclude that these results may be of considerable benefit to policymakers, especially within developing, and emerging, economies, who are searching for economic growth, to re-evaluate what are the primary lending obstacles for their small and medium-sized enterprises. |
| Keywords: | financial liberalisation, foreign banks, political institutions, access to finance, credit constraints, firm-level data |
| JEL: | G21 G23 G32 O16 |
| Date: | 2023–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:2307&r=bec |
| By: | Joel M. David; Romain Ranciere; David Zeke |
| Abstract: | How does growing international financial diversification affect firm-level and aggregate labor shares? We study this question using a novel framework of firm labor choice in the face of aggregate risk. The theory implies a cross-section of labor risk premia and labor shares that appear as markups in firm-level data. International risk sharing leads to a reallocation of labor towards riskier/low labor share firms alongside a rise in within-firm labor shares, matching key micro-level facts. We use cross-country firm-level data to document a number of empirical patterns consistent with the theory, namely: (i) riskier firms have lower labor shares and (ii) international financial diversification is associated with a reallocation towards risky/low labor share firms. Our estimates suggest the reallocation effect has dominated the within effect in recent decades; on net, increased financial integration has reduced the corporate labor share in the U.S. by about 2.5 percentage points, roughly one-third of the total decline since the 1970s. |
| Date: | 2023–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:96041&r=bec |