nep-bec New Economics Papers
on Business Economics
Issue of 2023‒07‒17
seventeen papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Productivity and Quality of Multi-product Firms By Mauro Caselli; Arpita Chatterjee; Shengyu Li
  2. Trade disruptions in Europe: Evidence from the EIB Investment Survey 2022 By Brasili, Andrea; Harasztosi, Peter
  3. Corporate taxes, productivity, and business dynamism By Andrea Colciago; Vivien Lewis; Branka Matyska
  4. The effect of board characteristics and life-cycle on corporate performance By Yakubu, Ibrahim Nandom; Bunyaminu, Alhassan; Doumbia, Musah Osumanu; Abdul-Fatawu, Mohammed
  5. Firm Investments in Artificial Intelligence Technologies and Changes in Workforce Composition By Tania Babina; Anastassia Fedyk; Alex X. He; James Hodson
  6. The Empirical Distribution of Firm Dynamics and Its Macro Implications By Nir Jaimovich; Stephen J. Terry; Nicolas Vincent
  7. Entry Barriers and Growth: The Role of Endogenous Market Structure By Helu Jiang; Yu Zheng; Lijun Zhu
  8. Technology, Innovation, and Firm Competitiveness: Firm Level Analysis in Cambodia By Hing, Vutha; Thangavelu, Shandre M.; Kong, Ratha
  9. Internationalization of the Rural Nonfarm Economy and the Cloud: Evidence from US Firm-level Export Data By Han, Luyi; Wojan, Timothy R.; Goetz, Stephan J.
  10. Techies and Firm Level Productivity By James Harrigan; Ariell Reshef; Farid Toubal
  11. Firm Inflation Uncertainty By Ivan Yotzov; Lena Anayi; Nicholas Bloom; Philip Bunn; Paul Mizen; Özgen Öztürk; Gregory Thwaites
  12. Who creates jobs with broad skillsets? the crucial role of firms By De Marzo, Giordano,; Mathew, Nanditha,; Sbardella, Angelica,
  13. COVID-19, Innovative Firms and Resilience By Michele Battisti; Filippo Belloc; Massimo Del Gatto
  14. Competition and Risk Taking in Local Bank Markets: Evidence from the Business Loans Segment By Chiara Canta; Øivind A. Nilsen; Simen A. Ulsaker; Øivind Anti Nilsen
  15. Cooperative vs. Non-cooperative R&D under Uncertain Probability of Success By Chatterjee, Rittwik; Kabiraj, Tarun
  16. Impact of innovation and exports on productivity: are there complementary effects? By Petković, Saša; Rastoka, Jelica; Radicic, Dragana
  17. Unaware Corporate Social Responsibility: Impact of Firm Size, Motivations and External Pressures By Olivier Beaumais; Mireille Chiroleu-Assouline

  1. By: Mauro Caselli (School of International Studies & Department of Economics and Management, University of Trento); Arpita Chatterjee (UNSW School of Economics); Shengyu Li (UNSW School of Economics)
    Abstract: This paper proposes a novel method to estimate productivity and quality at the firm-product level, together with transformation function and demand parameters. The method relies on firm optimization conditions to obtain a one-to-one mapping between observed data and unobserved productivity and quality. It has the advantage of allowing for heterogeneous unobserved intermediate input prices and scalability to handle a large number of products, without imputing firm-product input shares or relying on productivity evolution. We apply this method to a set of Mexican manufacturing industries. We find that multi-product firms’ better performing products have both higher productivity and higher quality, with the former emerging as a stronger predictor of within-firm performance. However, firms face a trade-off between quality and productivity, which we refer to as the cost of quality. The cost of quality is higher for more differentiated products and declines with product age. In a counterfactual exercise, we show that a reduction in the cost of quality can lead to substantial firm-level productivity gains and that, on average, about 26.5 percent of these gains are due to the within-firm reallocation of production. Importantly, a larger product scope allows more room for intra-firm resource reallocation, leading to higher productivity gains. This reveals a new mechanism for enhancing the performance of multi-product firms.
    Keywords: multi-product firms, production function, productivity, output quality, intra- firm reallocation
    JEL: D24 L11 L15 O47
    Date: 2023–06
  2. By: Brasili, Andrea; Harasztosi, Peter
    Abstract: Using firm level survey data we draw a portrait of incidence of recent trade related shocks, such as disruptions in logistics or access to materials, and undertaken responses in the economies of the EU. The paper focuses on firm heterogeneity in explaining the willingness to respond to these shocks and in explaining the type of response taken: diversification across trade partners or focusing on domestic markets and suppliers. We find that younger, larger, more productive firms are more likely to respond actively to trade shocks and disruptions, especially with diversification. At the same time, less productive, less innovative firms and firms using imported inputs, but that do not trade themselves are discouraged from engaging directly in international trade.
    Keywords: international trade, firm heterogeneity, disruptions
    JEL: D21 F1 L23
    Date: 2023
  3. By: Andrea Colciago; Vivien Lewis; Branka Matyska
    Abstract: We identify the effects of corporate income tax shocks on key US macroeconomic aggregates. In response to a corporate income tax cut, we find that: (i) labor productivity increases; (ii) entry increases with delay; (iii) exit increases; (iv) total labor increases by more than production labor. To rationalize these empirical findings, we build a New Keynesian model with idiosyncratic firm productivity, and entry and exit. Our model features productivity gains due to selection and cleansing along the entry and exit margins. Models with homogeneous firms fail to account for the selection and cleansing process and produce counterfactual results.
    Keywords: corporate taxation; productivity; firm entry and exit
    JEL: E62 E32 H25
    Date: 2023–06
  4. By: Yakubu, Ibrahim Nandom; Bunyaminu, Alhassan; Doumbia, Musah Osumanu; Abdul-Fatawu, Mohammed
    Abstract: This research investigates the effect of board characteristics and corporate life-cycle on the performance of listed firms in Ghana covering the period 2009–2018. The paper adopts the approach propounded by Dickinson (2011) to cater to proxy measures of firms’ life cycle stages. Using the pooled estimated generalized least squares (EGLS), the findings reveal that chief executive officer (CEO) tenure has a positive significant effect on performance. The presence of inside directors negatively and significantly influences performance. The results further indicate that at different levels of statistical significance, the various stages of the firm’s life cycle have a negative impact on the main dependent variable (ROA). With the alternative firm performance proxy (ROE), the results report that aside from the decline stage which negatively drives performance, the rest of the stages (i.e., introduction, growth, and maturity) have a positive influence on performance. However, only the growth and maturity stages exert a significant effect on performance. As part of the suggestions, the study proposes that firms should reduce the proportion of executive directors and appoint more non-executive directors to the board to boost performance. Also, firms should endeavor to increase investment in research and development at every stage of their production to ensure steady profit growth.
    Keywords: Corporate Governance, Board Characteristics, Firm Life Cycle, Corporate Performance, Ghana
    JEL: G3
    Date: 2023–04–07
  5. By: Tania Babina; Anastassia Fedyk; Alex X. He; James Hodson
    Abstract: We study the shifts in U.S. firms' workforce composition and organization associated with the use of AI technologies. To do so, we leverage a unique combination of worker resume and job postings datasets to measure firm-level AI investments and workforce composition variables, such as educational attainment, specialization, and hierarchy. We document that firms with higher initial shares of highly-educated workers and STEM workers invest more in AI. As firms invest in AI, they tend to transition to more educated workforces, with higher shares of workers with undergraduate and graduate degrees, and more specialization in STEM fields and IT skills. Furthermore, AI investments are associated with a flattening of the firms' hierarchical structure, with significant increases in the share of workers at the junior level and decreases in shares of workers in middle-management and senior roles. Overall, our results highlight that adoption of AI technologies is associated with significant reorganization of firms' workforces.
    JEL: D22 E22 J01 J23 J24
    Date: 2023–06
  6. By: Nir Jaimovich; Stephen J. Terry; Nicolas Vincent
    Abstract: Heterogeneous firm models are ubiquitous in modern macroeconomics. We revisit a central feature of these models: the idiosyncratic shock process faced by firms. Using a large representative firm-level dataset, we document nonparametrically that the common assumption, a Gaussian AR(1) shock process, is at odds in important ways with observed fat-tailed firm dynamics. We embed these findings within a standard quantitative general equilibrium heterogeneous firm dynamics model and show that the nature of firm-level shocks has a sizable quantitative effect on the economy’s responsiveness to aggregate shifts.
    JEL: E0
    Date: 2023–06
  7. By: Helu Jiang (Institute for Advanced Research, Shanghai University of Finance and Economics. 111 Wuchuan Road, Shanghai, China, 200433.); Yu Zheng (Queen Mary University of London and CEPR); Lijun Zhu (Peking University)
    Abstract: We use China’s growth experience as a laboratory to study how reductions in entry barrier contribute to economic growth by inducing a more competitive market structure. The removal of entry restrictions on private firms in the late 1990s and early 2000s made the Chinese economy more competitive and dynamic, propelling the growth acceleration from the early 1990s to late 2000s. We develop a model of endogenous productivity and market structure with heterogeneous firms and frictional entry and calibrate it to Chinese manufacturing from 2004-7. We show about 25% of the productivity growth in 2004-7 is contributed by the reduction of entry barriers during the reforms in the previous decade. While close to 40% of the gain in growth comes from entry bringing about younger firms with higher growth potential, over 60% of the gain in growth comes from entry enforcing tighter market competition which strengthens all active firms’ incentive to grow. We also provide suggestive evidence that this mechanism may be at play in a wider economic context.
    Keywords: Entry Barriers; Firm Dynamics; Market Structure; Endogenous Growth
    JEL: D22 D43 O11 O30 O47
    Date: 2023–06–23
  8. By: Hing, Vutha (Asian Development Bank Institute); Thangavelu, Shandre M. (Asian Development Bank Institute); Kong, Ratha (Asian Development Bank Institute)
    Abstract: We examine the innovation and competitiveness of firms, especially with regard to the channels of technology transfer and the nature of innovation activities that influence firm performance in Cambodia's economy. Despite the growing importance of innovation, there has been no empirical analysis of the factors affecting technological and innovative development and the impact that these factors have on firms’ productivity in Cambodia. We use the World Bank Enterprise Survey for Cambodian enterprises for our empirical implementation. The results of the research indicate that overseas linkages that include both upstream and downstream activities could affect productivity growth at both firm and industry levels. We also find that technology and innovation have a positive impact on the productivity of firms in Cambodia.
    Keywords: technology; innovation; productivity; human capital; export and import
    JEL: D24
    Date: 2023–01
  9. By: Han, Luyi; Wojan, Timothy R.; Goetz, Stephan J.
    Keywords: Community/Rural/Urban Development, International Relations/Trade, International Development
    Date: 2023
  10. By: James Harrigan; Ariell Reshef; Farid Toubal
    Abstract: We study the impact of techies—engineers and other technically trained workers—on firm-level productivity. We first report new facts on the role of techies in the firm by leveraging French administrative data and unique surveys. Techies are STEM-skill intensive and are associated with innovation, as well as with technology adoption, management, and diffusion within firms. Using structural econometric methods, we estimate the causal effect of techies on firm-level Hicks-neutral productivity in both manufacturing and non-manufacturing industries. We find that techies raise firm-level productivity, and this effect goes beyond the employment of R&D workers, extending to ICT and other techies. In non-manufacturing firms, the impact of techies on productivity operates mostly through ICT and other techies, not R&D workers. Engineers have a greater effect on productivity than technicians.
    Keywords: productivity, R&D, ICT, techies, STEM skills
    JEL: D20 D24 F10 F16 F60 F66 J20 J23 J24 O52
    Date: 2023
  11. By: Ivan Yotzov; Lena Anayi; Nicholas Bloom; Philip Bunn; Paul Mizen; Özgen Öztürk; Gregory Thwaites
    Abstract: We introduce a new measure of own-price inflation uncertainty using firm-level data from a large and representative survey of UK businesses. Inflation uncertainty increased significantly from the start of 2021 and reached a peak in the second half of 2022, even as a similar measure of sales uncertainty declined. We also find large cross-sectional differences in inflation uncertainty, with uncertainty particularly elevated for smaller firms and those in the goods sector. Finally, we show that firms which are more uncertain about their own price expectations experience higher forecast errors 12 months later. These findings suggest that studying inflation uncertainty at the firm level may be an important new dimension to understanding firm performance.
    JEL: E0
    Date: 2023–06
  12. By: De Marzo, Giordano,; Mathew, Nanditha,; Sbardella, Angelica,
    Abstract: Our study investigates the heterogeneity of skill demands within occupations, the firm activities that are associated with demand for broader skill sets, and the firm characteristics that are related to particular skills and different combinations of skills. We use a unique matched database of firm- level data and online job vacancy data for a developing economy, namely, India. Employing a multi-level machine learning technique and an innovative skill taxonomy, we identify and categorize skill requirements of firms. Our empirical analysis provides robust evidence of significant heterogeneity in skill requirements across firms within the same occupations. Additionally, we show that firms demanding diverse skills differ from their counterparts. Firms that are competitive in international markets, as well as those that are more innovative, require digital skills and specific combinations of digital and other skills. Our findings highlight the crucial role played by firms in defining the changing nature of work.
    Keywords: employment creation, skill, platform workers
    Date: 2023
  13. By: Michele Battisti; Filippo Belloc; Massimo Del Gatto
    Abstract: This paper explores the empirical association between patents and various indicators of firm resilience during the COVID-19 pandemic with worldwide firm-level data from manufacturing industries. The study shows that patent-intensive firms have a reduced probability of exit, in particular if they are larger and if engaging with complementary investments in R&D and other intangibles. Additional estimates show that firm productivity has been an important transmission channel. Taken together, the results presented in the paper offer evidence-based findings pointing to patents as an important potential factor contributing to firm resilience during the COVID-19 pandemic. Policy insights are discussed.
    Keywords: Firm resilience, patents, productivity, COVID-19
    JEL: D20 L60 O30
    Date: 2023–02
  14. By: Chiara Canta; Øivind A. Nilsen; Simen A. Ulsaker; Øivind Anti Nilsen
    Abstract: This paper studies empirically the relationship between competition and risk taking in banking markets. We exploit an unique dataset providing information about all bank loans to Norwegian firms over several years. Rather than relying on observed market shares, we use the distance between bank branches and firms to measure the competitiveness of local markets. The cross-sectional and longitudinal variation in competition in local markets are used to identify the relationship between competition and risk taking, which we measure by the non-performing loans and loss provision rates of the individual banks. We find that more competition leads to more risk taking. We also examine the effects of bank competition on the availability of loans. More competition leads to lower interest rates and higher loan volumes, but also makes it more difficult for small and newly established firms to obtain a loan.
    Keywords: banking, local competition, risk taking, firm behaviour
    JEL: G21 L11 L13
    Date: 2023
  15. By: Chatterjee, Rittwik; Kabiraj, Tarun
    Abstract: R&D decision of a firm involves various sources of incomplete information. The present paper introduces incomplete information about the success probability of R&D in a model of two firms interacting in R&D and production and discusses the choice between cooperative and non-cooperative research. We consider research joint venture as the form of R&D cooperation. While the choice depends on the constellation of parameters, the following results are derived, in general. First, the high type firm always has a larger incentive for both cooperative and non-cooperative R&D compared to the low type firm. Second, if the low type firm goes for non-cooperative research, then the high type firm must go for the same, and if the high type firm prefers cooperative research, the low type firm must also prefer cooperative R&D. However, if the high type firm prefers non-cooperative R&D, the low type firm may go for either form of research depending on the parameters. The paper derives conditions, in particular, for the case when the high type firm prefers non-cooperative research whereas the low type firm prefers cooperative research.
    Keywords: Cooperative research; Non-cooperative research; Probability of success; Incomplete information; Research joint venture.
    JEL: D43 D82 L13 O31
    Date: 2023–06–14
  16. By: Petković, Saša; Rastoka, Jelica; Radicic, Dragana
    Abstract: The relationship between firms’ exports and increases in productivity is generally regarded as positive. While the causal effects of process innovation are straightforward and positive, the effect of product innovation on productivity is ambiguous. However, there is a lack of empirical evidence on a joint effect that innovation and exports have on firms’ productivity. In our attempt to fill this gap, we explore individual and joint effects of innovation and exports on productivity by employing cross-sectional firm-level data. We use the sixth wave of the Business Environment and Enterprise Performance Survey (BEEPS VI: 2018–2020) conducted by the EBRD and the World Bank. Using a stratified random sampling, the data was collected from interviews with representatives of randomly chosen firms from 32 countries. The overall results suggest that exporting firms are more productive than non-exporters, while the impact of innovation is more heterogeneous. Whereas EU and high-income countries reap the productivity benefits, this effect is absent in other regions and countries with medium and low-income levels. Finally, our results indicate the absence of a joint effect of innovation and exports on productivity, across different geographical regions and countries of different income levels.
    Keywords: exports; innovation; labor productivity; learning-by-exporting (LBE)
    JEL: R14 J01
    Date: 2023–04–25
  17. By: Olivier Beaumais (LERN - Laboratoire d'Economie Rouen Normandie - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université, LISA - Lieux, Identités, eSpaces, Activités - UPP - Université Pascal Paoli - CNRS - Centre National de la Recherche Scientifique); Mireille Chiroleu-Assouline (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We explore differences in firms' attitudes toward corporate social responsibility (CSR). Using a unique dataset covering 8, 857 French firms, collected by the National Institute of Statistics and Economic Studies (INSEE), we identify firms conducting conscious CSR and others with effective but unaware CSR activities. We then construct three CSR pillar scores for each firm, using Mokken scale analysis, a form of non-parametric item response analysis. The CSR scores, along with responses to specific questions, allow us to characterize firms that implement conscious or unaware CSR. We then estimate simple probit and count data models to show that a significant share of firms are in fact significantly engaged in unaware CSR, with no monotonic size effect. Cooperation with external actors such as NGOs mitigates the effect of firm size on the likelihood of conducting unaware CSR, while the effect of NGO campaigns against large firms is mainly to increase the environmental score of small firms in the same industry.
    Keywords: Corporate social responsibility, Non-parametric item response theory, Scoring, Stakeholders, SME, France
    Date: 2023–02

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