nep-bec New Economics Papers
on Business Economics
Issue of 2023‒12‒11
ten papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Widening or closing the gap? The relationship between artificial intelligence, firm-level productivity and regional clusters By Nils Grashof; Alexander Kopka
  2. Digitalization: the edge of first movers By Cátia Cerqueira; Fernando Alexandre; Miguel Portela
  3. Power, Scrutiny, and Congressmen’s Favoritism for Friends’ Firms By Quoc-Anh Do; Yen-Teik Lee; Bang D. Nguyen; Kieu-Trang Nguyen
  4. Low-wage jobs, foreign-born workers, and firm performance By Amuedo Dorantes, Catalina; Arenas-Arroyo, Esther; Mahajan, Parag; Schmidpeter, Bernhard
  5. Firms and inequality By Jan De Loecker; Tim Obermeier; John Van Reenen
  6. Rent sharing, wage floors, and development By Joshua Budlender; Ihsaan Bassier
  7. FDI and superstar spillovers: evidence from firm-to-firm transactions By Mary Amiti; Cedric Duprez; Jozef Konings; John Van Reenen
  8. Regional Favoritism and Access to Credit. By Francis OSEI-TUTU; Laurent WEILL
  9. Quantifying the Role of Firms in Intergenerational Mobility By Caue Dobbin; Tom Zohar
  10. There are different shades of green: heterogeneous environmental innovations and their effects on firm performance By Gianluca Biggi; Andrea Mina; Federico Tamagni

  1. By: Nils Grashof; Alexander Kopka
    Abstract: Artificial intelligence (AI) is seen as a key technology for economic growth. However, the impact of AI on firm productivity has been under researched – particularly through the lens of inequality and clusters. Based on a unique sample of German firms, filling at least one patent between 2013 and 2019, we find evidence for a positive influence of AI on firm productivity. Moreover, our analysis shows that while AI knowledge does not contribute to productivity divergences in general, it increases the productivity gap between laggard and all other firms. Nevertheless, this effect is reduced through the localisation in clusters.
    Keywords: Artificial intelligence, Inequality, Productivity, Clusters, Patents, Firm-level
    JEL: O18 O30 R10
    Date: 2023–11
  2. By: Cátia Cerqueira (NIPE/Center for Research in Economics and Management, University of Minho, Portugal); Fernando Alexandre (NIPE/Center for Research in Economics and Management, University of Minho, Portugal); Miguel Portela (NIPE/Center for Research in Economics and Management, University of Minho, Portugal; and IZA, Bonn)
    Abstract: This paper examines firms’ characteristics and the impact on firm performance of being a first mover in the adoption of cloud computing and big data digital technologies, relative to followers and non-adopters. Our results show that firms with higher levels of education both for managers and workers, and shorter managerial tenure are more likely to be digital adopters. First movers in the adoption of big data show distinct characteristics from followers, namely they are younger and have a larger share of higher education workers. Regarding the impact on firm performance, we find that first movers in cloud computing experience significant performance gains, namely in gross value added and productivity, compared to non-adopters, but no gains relative to followers. Interestingly, first movers in big data exhibit a productivity edge over followers and non-adopters. Furthermore, we find that higher levels of education and shorter managerial tenure amplify the positive effects of big data adoption on firm performance.
    Keywords: cloud computing, big data, management, digitalization, productivity, ICT
    JEL: D24 M10 E22 E23 J24 O33 L20
    Date: 2023
  3. By: Quoc-Anh Do; Yen-Teik Lee; Bang D. Nguyen; Kieu-Trang Nguyen
    Abstract: Does higher office always lead to more favoritism? We argue that firms may lose their benefit from a connected politicians ascent to higher office, if it entails stricter scrutiny that may reduce favoritism. Around close Congress elections, we find RDD-based evidence of this adverse effect that a politicians win reduces his former classmates firms stock value by 3.2% after a week. Exploiting the entry of Craigslist across the U.S., we find that state-level scrutiny drives this effect. It further varies with politicians power, firm size and governance, and connection strength, and diminishes as a politicians career concern fades over time.
    Keywords: favoritism, power, scrutiny, political connection, congressmen, close election, RDD
    JEL: D72 D73 D85 G14 G32
    Date: 2023
  4. By: Amuedo Dorantes, Catalina; Arenas-Arroyo, Esther; Mahajan, Parag; Schmidpeter, Bernhard
    Abstract: We examine how migrant workers impact firm performance using administrative data from the United States. Exploiting an unexpected change in firms' likelihood of securing low-wage workers through the H-2B visa program, we find limited crowd-out of other forms of employment and no impact on average pay at the firm. Yet, access to H-2B workers raises firms' annual revenues and survival likelihood. Our results are consistent with the notion that guest worker programs can help address labor shortages without inflicting large losses on incumbent workers.
    Keywords: Guest workers, migrants, employment, firm dynamics, H-2B visa
    JEL: J23 F22 J61
    Date: 2023
  5. By: Jan De Loecker; Tim Obermeier; John Van Reenen
    Abstract: In the last few decades, dramatic changes have been documented in the US business landscape. These include rising productivity and pay dispersion between firms, higher aggregate markups (of price over variable costs), growing dominance of big companies ("superstar firms"), a fall in the labour share of GDP and a decline in business dynamism. We review the existing literature and present a new analysis using comprehensive firm level panel data, to show that qualitatively, these trends are also apparent in the UK. This similarity suggests that common trends in technology (or globalisation) have been the driving force behind these changes, rather than country-specific institutions (such as weaker US antitrust enforcement). Since (at least) the mid-1990s, there has been a large increase in UK firm-level inequality (especially in the upper tails) of productivity, wages, markups, and labour shares. Of course, inequality between firms is much less of a concern than inequality between people. However, it can signal economic problems, such as a slowdown in the diffusion of ideas between leading and laggard firms and can foster higher wage inequality. Indeed, there has been little aggregate UK productivity growth since the Global Financial Crisis, and this has been a serious drag on median and mean real wages. We suggest a simple theoretical framework for understanding some of these trends and quantitatively analyse why, despite increasing markups, the, the UK labour share has not fallen as sharply as that in the US. Finally, we suggest some policy options in response to these worrying trends, include modernising competition rules to deal with the growth of superstar firms and strengthening worker bargaining power.
    Keywords: firms inequality, financial crisis
    Date: 2022–03–09
  6. By: Joshua Budlender; Ihsaan Bassier
    Abstract: Faced with more favourable demand conditions, many firms raise wages. However, we show that firms with labour market power, lower productivity, and binding wage floors will absorb these positive revenue productivity shocks as excess profits instead of increasing wages or employment. Our prediction follows from a simple but novel theoretical insight under a standard framework of monopsonistic competition, and we empirically test this theory in South Africa using firm-level administrative data.
    Keywords: Rent-sharing, Monopsony, Minimum wage, Firm productivity
    Date: 2023
  7. By: Mary Amiti; Cedric Duprez; Jozef Konings; John Van Reenen
    Abstract: Using firm-to-firm transactions, we show that starting to supply a "superstar" firm (large domestic firms, exporters and multinationals) boosts productivity by 8% in the medium-run. Placebos on starting relationships with smaller firms and novel identification strategies support a causal interpretation of "superstar spillovers". Consistent with a model of technology transfer, we find falls in markups and bigger treatment effects from technology-intensive superstars. We also show that the increase in new buyers is particularly strong within the superstar firm's network, a "dating agency" effect. This suggests an important role for raising productivity through superstars' supply chains regardless of their multinational status.
    Keywords: productivity, FDI, spillovers
    Date: 2023–04–21
  8. By: Francis OSEI-TUTU (Paris School of Business (PSB)); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: We examine the effect of regional favoritism on the access of firms to credit. Using firm-level data on a large sample of 29, 000 firms covering 47 countries, we investigate the hypothesis that firms in the birth regions of national political leaders have better access to credit. Our evidence suggests that firms located in birth regions of political leaders are less likely to be credit constrained. The effect takes place through the demand channel: firms in leader regions feel less discouraged in applying for loans. We find no evidence, however, of preferential lending from banks to firms in leader regions. Thus, regional favoritism affects access to credit through differences in perceptions of firm managers, not deliberate changes in the allocation of resources by political leaders.
    Keywords: regional favoritism, access to credit, borrower discouragement.
    JEL: D72 G21
    Date: 2023
  9. By: Caue Dobbin; Tom Zohar
    Abstract: We investigate the role of firms in intergenerational mobility by decomposing the intergenerational elasticity of earnings (IGE) into firm-IGE and individual-IGE using a two-way fixed effects framework. Using data from Israel, we find that the firm component is responsible for 22% of the overall IGE. We then explore potential mechanisms and find that education differences explain a large share of the individual-IGE, while place of residence and demographics are more important for the firm-IGE. Guided by these empirical patterns, we develop a novel method to estimate the role of skill-based sorting and find that it accounts for approximately half of the firm-IGE. Our results provide evidence that the intergenerational transmission of earnings encompasses more than just human capital, and highlight the importance of promoting equal access to high-paying firms and reducing labor market segregation in efforts to enhance equality of opportunity.
    Keywords: intergenerational mobility, firm wage premium, assortative matching, skill-based sorting
    JEL: J62 J31 J60
    Date: 2023
  10. By: Gianluca Biggi; Andrea Mina; Federico Tamagni
    Abstract: Using a firm-level dataset from the Spanish Technological Innovation Panel (2003-2016), this study explores the characteristics of environmentally innovative firms and quantifies the effects of pursuing different types of environmental innovation strategies (resource-saving, pollution-reducing, and regulation-driven innovations) on sales, employment, and productivity dynamics. The results indicate, first, that environmental innovations tend to be highly correlated with firms’ technological capabilities, although to varying degrees across types of environmental innovation, whereas structural characteristics are less significant. Second, we observe heterogeneous effects of different types of environmental innovation on performance outcomes. We find no evidence that any type of environmental innovation fosters sales growth while pollution-reducing and regulation-driven innovations boost employment growth. Moreover, both resource-saving and pollution-reducing innovations bring about productivity advantage.
    Keywords: Environmental Innovation; Green Investments, Resource-saving, Pollution-reduction, Envi- ronmental compliance; Firm performance.
    Date: 2023–11–20

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