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on Business Economics |
| By: | Matthias Mertens; Bernardo Mottironi |
| Abstract: | Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework. |
| Keywords: | markups, markdowns, market power, firm size |
| Date: | 2023–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1945&r=bec |
| By: | Virginia Minni |
| Abstract: | Why do managers matter for firm performance? This paper provides evidence of the critical role of managers in matching workers to jobs within the firm using the universe of personnel records from a large multinational firm. The data covers 200, 000 white-collar workers and 30, 000 managers over 10 years in 100 countries. I identify good managers as the top 30% by their speed of promotion and leverage exogenous variation induced by the rotation of managers across teams. I find that good managers cause workers to reallocate within the firm through lateral and vertical transfers. This leads to large and persistent gains in workers' career progression and productivity. Seven years after the manager transition, workers earn 30% more and perform better on objective performance measures. In terms of aggregate firm productivity, doubling the share of good managers would increase output per worker by 61% at the establishment level. My results imply that the visible hands of managers match workers' specific skills to specialized jobs, leading to an improvement in the productivity of existing workers that outlasts the managers' time at the firm. |
| Keywords: | managers, career trajectories, internal labor markets, productivity |
| Date: | 2023–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1948&r=bec |
| By: | Roberto Alvarez; Miguel A. Gonzalez |
| Abstract: | In this paper, we explore the relevance of obstacles to green innovation in Chilean firms. We analyze differences in green innovation across firm size and industries and we explore which barriers have a greater impact on green innovators. We find that these innovators, in general, do face higher obstacles to innovation than similar but non-green firms. We conclude that, after controlling for other firm characteristics, the most relevant obstacles for green innovators are those associated with financial and knowledge aspects. This finding is relevant for the implementation of public policies aimed at enhancing green innovation in Chile. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:udc:wpaper:wp550&r=bec |
| By: | Suguru Otani; Takuma Matsuda |
| Abstract: | We construct a novel unified merger list in the global container shipping industry between 1966 (the beginning of the industry) and 2022. Combining the list with proprietary data, we construct a structural matching model to describe the historical transition of the importance of a firm's age, size, and geographical proximity on merger decisions. We find that, as a positive factor, a firm's size is more important than a firm's age by 9.974 times as a merger incentive between 1991 and 2005. However, between 2006 and 2022, as a negative factor, a firm's size is more important than a firm's age by 0.026-0.630 times, that is, a firm's size works as a disincentive. We also find that the distance between buyer and seller firms works as a disincentive for the whole period, but the importance has dwindled to economic insignificance in recent years. In counterfactual simulations, we observe that the prohibition of mergers between firms in the same country would affect the merger configuration of not only the firms involved in prohibited mergers but also those involved in permitted mergers. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.09938&r=bec |
| By: | Laura Bisio; Angelo Cuzzola; Marco Grazzi; Daniele Moschella |
| Abstract: | We investigate the impact of investment in automation-related goods on adopting and non- adopting firms in the Italian economy during 2011-2019. We integrate datasets on trade activities, firms’, and workers’ characteristics for the population of Italian importing firms and estimate the effects on adopters’ outcomes within a difference-indifferences design exploiting import lumpiness in product categories linked to automation and AI technologies. We find a positive average adoption effect on the adopters’ employment and on the value-added and average wage, whereas sales and productivity increase after an initial drop with a net positive effect five years after adoption. Crucially, the employment effect is heterogeneous across firms: a positive scale effect is predominant among small firms, whereas a negative displacement effect is predominant among medium and large firms. We complete the framework with a 5-digit sector-level analysis showing that adopting automation technologies has an overall negative effect on aggregate employment. |
| Keywords: | automation, employment, firm heterogeneity, imports, technology adoption |
| JEL: | D24 J23 L25 O33 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10697&r=bec |
| By: | Christoph Grimpe (CBS, DK - ZEW, DE); Katrin Hussinger (DEM, Université du Luxembourg); Wolfgang Sofka (CBS, DK - University of Liverpool, UK) |
| Abstract: | Access to unique knowledge of a target firm is the strategic rationale for many firm acquisitions with the expectation of improving the acquirer’s innovation performance. We argue that the ac- quisition price reflects opportunities for value creation through innovation and investigate whether acquirers pay not just for the target firm’s knowledge but also for the opportunity to access local- ized knowledge when targets are embedded in the knowledge flows of their region. Accordingly, we integrate embeddedness theory with literature on the expectations for knowledge-based value creation in M&A. We hypothesize that target firms that are highly embedded in local knowledge flows have higher acquisition prices. Using data on 520 technology-oriented firm acquisitions in Europe between 2001 and 2010, we find that the acquisition price increases with the target firm’s local embeddedness. The effects are weaker when an acquirer’s knowledge base is closely related to the localized knowledge and stronger when the target’s knowledge base is closely related to the localized knowledge, suggesting that local embeddedness conditions the ability of acquirer and |
| Keywords: | firm acquisitions, local embeddedness, localized knowledge, patents, knowledge relatedness. |
| JEL: | G34 O3 P48 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:23-01&r=bec |
| By: | Laura Bisio; Angelo Cuzzola; Marco Grazzi; Daniele Moschella |
| Abstract: | We investigate the impact of investment in automation-related goods on adopting and non-adopting firms in the Italian economy during 2011-2019. We integrate datasets on trade activities, firms', and workers' characteristics for the population of Italian importing firms and estimate the effects on adopters' outcomes within a difference-in-differences design exploiting import lumpiness in product categories linked to automation and AI technologies. We find a positive average adoption effect on the adopters' employment and on the value-added and average wage, whereas sales and productivity increase after an initial drop with a net positive effect five years after adoption. Crucially, the employment effect is heterogeneous across firms: a positive scale effect is predominant among small firms, whereas a negative displacement effect is predominant among medium and large firms. We complete the framework with a 5-digit sector-level analysis showing that adopting automation technologies has an overall negative effect on aggregate employment. |
| Keywords: | Automation; Employment; Firm heterogeneity; Imports; Technology adoption. |
| Date: | 2023–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2023/37&r=bec |
| By: | Mahabubur Rahman (ESC [Rennes] - ESC Rennes School of Business); Anisur Faroque (LUT University School of Business and Management); Georgia Sakka (University of Nicosia); Zafar Ahmed (VNU - Vietnam National University [Hanoï]) |
| Abstract: | Negative customer engagement (NCE) has received little research attention. The effect of NCE on market-based assets (i.e. brand equity) and firm performance remains a particularly underexplored topic despite the increasing rates of NCE with brands across a multitude of service industries. This study develops a comprehensive and parsimonious model of the causes and consequences of NCE. In this study, time-series cross-sectional data from the US airline industry and a simultaneous equation modelling technique were used to provide evidence for why some firms experience more NCE than others. The results indicate that airlines with a higher relative marketing capability (RMC) experience fewer NCE incidents in the form of customer complaints. A firm's relative marketing capability determines the extent to which its customers engage negatively with it. Furthermore, deviating from earlier studies which explored the direct and immediate relationships between the focal variables, this study theoretically argued and empirically demonstrated that brand equity mediates the nexus between NCE and financial performance. That is, the number of NCE incidents a firm experiences affects its brand equity, which in turn impacts its financial performance, as measured by Tobin's q and market value added (MVA). |
| Keywords: | Brand equity, Customer complaints, Firm performance, Relative marketing capability, Negative customer engagement |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03545814&r=bec |
| By: | Kristina McElheran; J. Frank Li; Erik Brynjolfsson; Zachary Kroff; Emin Dinlersoz; Lucia S. Foster; Nikolas Zolas |
| Abstract: | We study the early adoption and diffusion of five AI-related technologies (automated-guided vehicles, machine learning, machine vision, natural language processing, and voice recognition) as documented in the 2018 Annual Business Survey of 850, 000 firms across the United States. We find that fewer than 6% of firms used any of the AI-related technologies we measure, though most very large firms reported at least some AI use. Weighted by employment, average adoption was just over 18%. AI use in production, while varying considerably by industry, nevertheless was found in every sector of the economy and clustered with emerging technologies such as cloud computing and robotics. Among dynamic young firms, AI use was highest alongside more-educated, more-experienced, and younger owners, including owners motivated by bringing new ideas to market or helping the community. AI adoption was also more common alongside indicators of high-growth entrepreneurship, including venture capital funding, recent product and process innovation, and growth-oriented business strategies. Early adoption was far from evenly distributed: a handful of “superstar” cities and emerging hubs led startups’ adoption of AI. These patterns of early AI use foreshadow economic and social impacts far beyond this limited initial diffusion, with the possibility of a growing “AI divide” if early patterns persist. |
| JEL: | M15 O3 |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31788&r=bec |
| By: | Moez Kilani; André de Palma |
| Abstract: | We analyze spatial competition on a circle between firms that have multiple outlets and face quadratic transport costs. The equilibrium is a two-stage Nash game: first, firms decide on their locations and then set their prices. We are able to solve analytically simple multi-outlet cases, but for the general case, we require an algorithm to enumerate all non-isomorphic configurations. While price equilibria are explicit and unique, solving the full two-stage game requires numerical methods. In the location game, we consider two scenarios: either firms cannot jump one outlet over a competitors’ outlet, or firms have the flexibility to locate outlets anywhere on the circle. The solution involves a balance between cannibalization, market protection, and spatial monopoly power. We compare prices, profits, and transport costs for all possible configurations. With flexible locations, the firms’ market areas are contiguous. In this case, surprisingly, each firm acts as a spatial monopoly. If regulations enforce that each firm must set the same price for its outlets, head-to-head competition prevails, leading to decreased profits for the firms but to a better-off situation for consumers. |
| Keywords: | Spatial competition, circle, multi-product oligopoly, price-location equilibria, coin change problem. |
| JEL: | L13 R32 R53 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2023-33&r=bec |
| By: | Alexander Copestake; Melih Firat; Davide Furceri; Chris Redl |
| Abstract: | We estimate the impact of distinct types of slowdowns in China on countries and firms globally. First, we combine a structural vector autoregression framework with a broad-based measure of domestic economic activity in China to distinguish supply versus demand components of Chinese growth. We then use local projection models to assess the responses to such shocks of GDP growth (revenue) in other countries (firms). We find that: (i) both supply and demand slowdowns are associated with substantial declines in partner GDP and firm revenue; (ii) negative spillovers are larger in countries and firms with stronger trade links with China; and (iii) spillovers from Chinese supply shocks are stronger than spillovers from demand shocks, both at the aggregate- and firm-level. |
| Keywords: | Supply-Demand Decomposition; China Spillovers |
| Date: | 2023–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/206&r=bec |
| By: | Dirk Drechsel (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Heiner Mikosch (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Samad Sarferaz (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | In this paper, we investigate the transmission channels of oil price shocks using a factorial survey. We confront CEOs and CFOs of a representative sample of firms with a hypothetical vignette in which the oil price rises exogenously above managers’ baseline expectations. The managers then estimate the short- and medium-term cost, price, and output effects of the shock on their firms. We find that the managers expect the shock to have very different effects on their firms: the cross-sectional distributions of the responses are large, skewed, and have fat tails. Higher firm-specific energy input costs lead managers to expect greater output losses and sales price increases. Higher market power accelerates this input cost effect. Another important determinant is managers’ pre-shock uncertainty about business prospects. The importance of the three channels varies considerably across industries. |
| Keywords: | Oil price shocks, Transmission channel, firms, expectations, surveys, Vignette |
| JEL: | E31 E5 L11 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:22-507&r=bec |
| By: | Mesquita, José (Universidade Nova de Lisboa); Pereira dos Santos, João (Queen Mary University of London); Tavares, José (Universidade Nova de Lisboa) |
| Abstract: | This paper analyses the impact of European Union (EU) funds on the performance of private firms. In particular, we examine a quasi-natural experiment consisting of a redrawing of administrative areas that expanded regional eligibility and led to a sudden increase in accessibility to EU grants for firms located in 33 Portuguese municipalities. Using a comprehensive linked employer-employee administrative dataset that covers the universe of private firms between 2003 and 2010, our difference-in-differences estimates uncover a significant and positive causal effect of increased eligibility on firms' sales, labour productivity, and average wages, while employment is not significantly altered. While firms' sales in the non-tradable sectors are positively impacted, firms' sales in more competitive, tradable, sectors remain unaffected by increased access to EU funds. |
| Keywords: | grants, regional policy, private firm, municipalities, Portugal |
| JEL: | C21 R10 |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16526&r=bec |