nep-bec New Economics Papers
on Business Economics
Issue of 2023‒09‒11
eleven papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Information frictions and the two margins of trade: Evidence from Slovenian manufacturing By Zaurino, Elena; Polanec, Sašo
  2. The Impact of Digital Transformation on Productivity and Resource Reallocation within Firms (Japanese) By FUKAO Kyoji; INUI Tomohiko; KIM Young Gak; KWON Hyeog Ug; IKEUCHI Kenta
  3. Business groups, institutions, and firm performance By Cainelli, Giulio; Ganau, Roberto; Giunta, Anna
  4. Systematic Default and Return Predictability in the Stock and Bond Markets By Bao, Jack; Hou, Kewei; Zhang, Shaojun
  5. Occupational Reallocation Within and Across Firms: Implications for labor-market polarization By MUKOYAMA Toshihiko; TAKAYAMA Naoki; TANAKA Satoshi
  6. Regional incidence and persistence of high-growth firms: Testing ideas from the Entrepreneurial Ecosystems literature By Alex Coad; Clemens Domnick; Pietro Santoleri; Stjepan Srhoj
  7. Trade with Search Frictions: Identifying New Gains from Trade By ARA Tomohiro
  8. The Effect of Resource Reallocation within Business Groups on Macroeconomic Total Factor Productivity (Japanese) By FUKAO Kyoji; KIM YoungGak
  9. Digitalization: Productivity By Jeffrey Mollins; Temel Taskin
  10. Who Reports the Mood in German Boardrooms? Evidence from the ifo Business Survey By Jonas Hennrich; Stefan Sauer; Klaus Wohlrabe
  11. What drives university-industry collaboration? Research excellence or firm collaboration strategy? By Atta-Owusu, Kwadwo; Fitjar, Rune Dahl; Rodríguez-Pose, Andrés

  1. By: Zaurino, Elena (European Commission); Polanec, Sašo (University of Ljubljana)
    Abstract: We empirically investigate whether firms lower information frictions in foreign sourcing through prior exporting. Using a panel of Slovenian manufacturing firms in the period 1996-2011, we estimate the probability of import entry in a new market when the firm is already exporting to the same country and we find a positive and significant relation. To control for the endogeneity of the export decision, we implement an instrumental variable approach exploiting the notion of sequential exporting. Moreover, we rule out productivity growth as being the only predictor of entry in a foreign market through several falsification tests. These findings suggest information frictions play an important role for firms trading in international markets.
    Keywords: Sourcing, Import entry, Information Frictions, Sunk costs
    JEL: F14 L20 D22 D83
    Date: 2023–06
  2. By: FUKAO Kyoji; INUI Tomohiko; KIM Young Gak; KWON Hyeog Ug; IKEUCHI Kenta
    Abstract: Prior studies have pointed out that the Japanese economy has lagged behind in IT and has not fully enjoyed the productivity benefits of IT investments, which has led to a prolonged slump in productivity growth to some extent. The spread of COVID-19 is forcing the Japanese economy to undergo digital transformation (DX), but there has been insufficient prior research in Japan on the impact of DX on corporate performance. This study analyzed the relationship between DX and corporate performance using firm-level data. The main findings are as follows: (1) IT investment is positively correlated with firm productivity, with the main contribution coming from software; (2) the establishment of a concurrent Chief Information Officer (CIO) is positively correlated with firm productivity, but the complementary relationship between CIO and IT investment is not confirmed; (3) there is no direct relationship between the introduction of new devices such as smartphones and tablets into the workplace and firm productivity; (4) there is no significant relationship between the use of big data within a company and productivity improvement; and (5) sharing data with supplier companies is positively related to corporate productivity, while sharing with customers is negatively correlated with firm productivity; and (6) IT investment by the Japanese headquarters has a weak positive correlation with the profit margin of overseas subsidiaries. For this study, we connected and analyzed firm-level data from the "ICT Workplace Survey", the "Basic Survey of Japanese Business Structure and Activities" and the "Basic Survey on Overseas Business Activities" conducted by the Ministry of Economy, Trade and Industry (METI), the "Survey on Big Data Utilization and Innovation in Manufacturing" by RIETI and firm-level data provided by Tokyo Shoko Research (TSR)".
    Date: 2023–08
  3. By: Cainelli, Giulio; Ganau, Roberto; Giunta, Anna
    Abstract: The aim of this paper is twofold. First, we analyze whether firms affiliated to national and international business groups outperform independent firms. Second, we investigate whether any potential performance premium associated with national and international business group membership depends on the quality of sub-national, regional institutions. Using data on Italian and Spanish manufacturing firms, we find a short-run growth premium for international business group members - while not for national business group members - with respect to independent firms. We also find that the growth premium associated with international business group membership is detected in low-quality regional institutional environments only.
    JEL: D02 R12
    Date: 2022–01–31
  4. By: Bao, Jack (U of Delaware); Hou, Kewei (Ohio State U); Zhang, Shaojun (Ohio State U)
    Abstract: We construct a measure of systematic default defined as the probability that many firms default at the same time. We account for correlations in defaults between firms through exposures to common shocks. Systematic default spikes during recessions, is correlated with macroeconomic indicators, and predicts future realized defaults. More importantly, it predicts future equity and corporate bond index returns both in- and out-of-sample. Finally, we find that the cross-section of average stock returns is related to firm-level exposures to systematic default risk.
    JEL: E32 G12 G13 G17
    Date: 2023–05
  5. By: MUKOYAMA Toshihiko; TAKAYAMA Naoki; TANAKA Satoshi
    Abstract: This study analyzes how labor-market frictions interact with firms' decisions to reallocate workers across different occupations during labor-market polarization. We compare the patterns of occupational reallocation within and across firms in the United States and Germany in recent years. We find that within-firm reallocation contributes significantly to the decline in employment in routine occupations in Germany, but much less in the United States. We construct a general equilibrium model of firm dynamics and find that the model with different firing taxes can replicate the difference in firm-level adjustment patterns across these countries. We conduct two counterfactual experiments, highlighting the different roles played by the within-firm cost of reorganizing occupational mix and across-firm frictions created by firing taxes.
    Date: 2023–07
  6. By: Alex Coad (Waseda University); Clemens Domnick (European Commission - JRC); Pietro Santoleri (European Commission - JRC); Stjepan Srhoj (University of Split)
    Abstract: Policy-makers and scholars often assume that a higher incidence of high-growth firms (HGFs) is synonymous with vibrant regional economic dynamics, and that HGF shares are persistent over time as Entrepreneurial Ecosystems (EEs) have slowly-changing features. In this paper we test these hypotheses, which are deeply rooted in the EE literature. We draw upon Eurostat data for up to 20 countries over the period 2008-2020 and study HGF shares in NUTS-3 regions in Europe. Analysis of regional rankings yields the puzzling finding that the leading EEs in Europe, apparently, are in places such as southern Spain and southern Italy. These places would not normally be considered Europe’s foremost entrepreneurial hotspots. Additional results do not provide strong support for the hypothesis that more developed regions feature higher HGF shares. We do find evidence consistent with HGF shares displaying persistency over time. However, we show that more developed regions do not have higher persistence in their HGF shares, and that the strength in persistence does not increase across the HGFs distribution, which does not support path-dependency as the main mechanism behind the observed persistence. Overall, we call for a more nuanced interpretation of both regional HGF shares and the EEs literature.
    Keywords: Entrepreneurial Ecosystems, High-Growth Firms, Persistence, Firm Growth, Entrepreneurship Policy, Regional Policy
    Date: 2023–07
  7. By: ARA Tomohiro
    Abstract: This paper develops a dynamic industry model to study the effect of search frictions on industry structure and aggregate welfare. We consider a search-theoretic setting with two types of agents, firms and suppliers. To customize inputs, each firm needs to find a supplier but search is costly and does not always end in success. Matched firms use customized inputs obtained from matched suppliers to enhance production efficiency, while unmatched firms use generic inputs obtained from a competitive input market. In equilibrium the number of unmatched and matched firms is endogenous. We use this model to contrast the implications of two forms of economic integration: integration of final-good markets allowing firms to export varieties to another market, and integration of matching markets allowing firms to seek suppliers from another market. We show that the former form of integration can amplify the welfare gains from trade by improving firms’ matching frequency associated with resource reallocations from unmatched firms to matched firms. In contrast, the latter might cause welfare losses by hindering the resource-reallocation process of firms.
    Date: 2023–08
  8. By: FUKAO Kyoji; KIM YoungGak
    Abstract: Under Japanese employment practices, characterized by lifetime employment and seniority-based wages, the underdeveloped labor market for mid-career hiring and the difficulty of firing workers, especially regular employees in large firms, likely hinder the redistribution of labor across firms or between corporate groups. With employment essentially guaranteed for regular workers at large firms and labor mobility low, the intra-firm labor market plays a crucial role in Japan, and there is a strong possibility that human resource portfolios are reallocated, and that capital is lent or borrowed within corporate groups. Some of the inter-firm reallocation effects need to be viewed as results of business group decision-making rather than as a market selection mechanism. In this paper, by adding business-group factors to the approach of analyzing productivity dynamics suggested by Foster, Haltiwanger, and Krizan (2001), we decompose total factor productivity (TFP) growth into the within effects and the resource reallocation effects of independent firms and business group firms using microdata of the Basic Survey of Japanese Business Structure and Activities, conducted by the Ministry of Economy, Trade and Industry (METI), and measure the relative importance of these effects. We find that in the 2000-2010 period, business-group firms made the largest contribution to TFP growth. Specifically, reflecting large firms’ internationalization and relocation of production overseas, the revision of Japan’s Commercial Code, and deregulation of the worker dispatch business during this period, the within effects of business group firms, intra-group reallocation effects, and resource allocation effects due to changes in the market share of business groups through acquisitions accounted for the majority of the increase in TFP. On the other hand, in the 2010-2018 period, independent firms made the largest contribution to TFP growth, but overall growth was slower than in the 2000-2010 period. The main reasons for the slowdown were a substantial decrease in the resource reallocation effect of changes in the industry share of business groups whose ownership structure had changed, as well as a substantial decrease in the within effects of group firms and the reallocation effect within business groups. Selection through market competition is functioning among single firms, including small and medium-sized firms with low employment security. In contrast, reallocation between business groups and between independent firms and business groups has been very sluggish. In corporate groups, labor can be reallocated while guaranteeing employment through mergers and acquisitions.
    Date: 2023–07
  9. By: Jeffrey Mollins; Temel Taskin
    Abstract: We examine the relationship between digitalization and productivity, the factors that influence this relationship, and how digitalization’s effect on productivity could change firm behaviour.
    Keywords: Digitalization; Productivity
    JEL: E2 L11 O47 O51
    Date: 2023–08
  10. By: Jonas Hennrich; Stefan Sauer; Klaus Wohlrabe
    Abstract: The ifo Business Climate Index for Germany is considered as the most important leading indicator for the German economy. Media reports often refer to the mood in German boardrooms. Based on a survey conducted in May 2023, we show that most of the around 9, 000 respondents to the monthly ifo Business Survey are the owners or managers of the companies. The sentiment regarding the state of the German economy thus comes directly from the boardrooms of the companies.
    Keywords: ifo business Survey, firms, answering behaviour
    JEL: C80 C81 C83
    Date: 2023
  11. By: Atta-Owusu, Kwadwo; Fitjar, Rune Dahl; Rodríguez-Pose, Andrés
    Abstract: Research and innovation policy aims to boost research output and university-industry collaboration (UIC) in part to allow firms access to leading scientific knowledge. As part of their mission, universities in many countries are expected to contribute to innovation in their regions. However, the relationship between research output and UIC is unclear: research-intensive universities can produce frontier research, which is attractive to firms, but may simultaneously suffer from a gap between the research produced and the needs of local firms, as well as mission overload. This may hinder local firms’ ability to cooperate with universities altogether or force them to look beyond the region for other suitable universities to interact with. This paper investigates the relationship between the research output of local universities and firms’ participation in UICs across different geographical scales. It uses Community Innovation Survey (CIS) data for Norwegian firms and Scopus data on Norwegian universities’ research output across various disciplines. The results demonstrate that local university research intensity and quality are negatively associated with firm participation in UICs at the local level. Firm characteristics, in particular the firm's general strategy towards cooperation and its geography, turn out to be much more important than university characteristics in explaining UICs. Notably, firms’ cooperation with other external partners at the same scale is a strong predictor of UICs.
    Keywords: Firms; Norway; Research; Universities; University-industry collaboration; 209761
    JEL: R14 J01
    Date: 2021–12–01

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