nep-bec New Economics Papers
on Business Economics
Issue of 2024‒01‒08
eleven papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Privatization and Licensing under Public Budget Constraint By Madhuri H.Shastry; Uday Bhanu Sinha
  2. CEO Age, Firm Exit and Zombification amidst the COVID-19 Pandemic By Kongphop WONGKAEW; SAITO Yukiko
  3. Labor flexibility and innovation: the importance of firms’ heterogeneity By Marco Augliera; Gabriella Berloffa; Fabio Pieri
  4. Shadow Economy: What Factors Matter in the French Case? By Lionel Fontagné; Philippe Martin; Gianluca Orefice
  5. Robotizing to Compete? Firm-level Evidence By Paulo Bastos; Lisandra Flach; Klaus Keller
  6. Are Immigrants More Innovative? Evidence from Entrepreneurs By Kyung Min Lee; Mee Jung Kim; J. David Brown; John S. Earle; Zhen Liu
  7. Female Board Representation and Corporate Performance: A Review and New Estimates for Australia By Bayly, Nicholas; Breunig, Robert; Wokker, Chris
  8. Does Knowledge in Management Foster Firm Creation and Performance? By Catherine Laffineur; Maria Minniti; Benjamin Montmartin
  9. To acquire or not to acquire? Duration of due diligence in technology acquisitions By Huma Javaid; Xavier Castaner; Panos Desyllas; Orietta Marsili
  10. Rethinking revealed comparative advantage with micro and macro data By Hanwei Huang; Gianmarco I. P. Ottaviano
  11. Multibrand price dispersion By Armstrong, Mark; John, Vickers

  1. By: Madhuri H.Shastry (Department of Economics, Delhi School of Economics); Uday Bhanu Sinha (Department of Economics, Delhi School of Economics)
    Abstract: We analyse the interplay of privatization and technology licensing under a public budget constraint, where a cost-disadvantaged public firm has to generate profits to pay for the license. In a mixed duopoly, we consider the licensing of a cost-reducing technology by an outsider innovator. The innovator chooses to license smaller sizes of innovation to both firms, whereas, larger innovation is licensed exclusively to the private firm. The public firm alone never gets the license. Thus, the public firm can never “catch up” with its more efficient private rival. We find the possibility of both partial and full privatization in our model. Additionally, from a social planner’s perspective, it is always optimal to allocate licenses to both firms.
    Keywords: mixed duopoly; technology licensing; privatization; budget constraint; welfare. JEL codes: L32, L33, H42, O33, O38
    Date: 2023–12
  2. By: Kongphop WONGKAEW; SAITO Yukiko
    Abstract: This study investigates the impact of the COVID-19 pandemic on zombification, firm exit, and chief executive officer (CEO) succession, and examines how CEO age moderates these effects. Using Japanese firm-level data from 2013 to 2021, we discover that the prevalence of zombification increased during the COVID-19 pandemic, as firm performance deteriorated and financial leverage increased. However, the pandemic had a limited impact on firm exit. We also find that the impact of the pandemic on firms varied depending on the age of their CEOs. Firms led by younger CEOs were more likely to increase their long-term borrowing and less likely to exit the market. Conversely, firms led by older CEOs were more likely to exit voluntarily or experience CEO turnover, and this was true especially for family-owned firms and those in peripheral prefectures.
    Date: 2023–11
  3. By: Marco Augliera (University of Trento); Gabriella Berloffa (University of Trento); Fabio Pieri (University of Trento)
    Abstract: This work investigates the relationship between the numerical flexibility of a firm’s workforce and its innovative performance, taking into account the heterogeneity of firms and labor contracts. Using longitudinal data on Italian firms, we find that the share of temporary employees has a positive and significant effect on innovation for small and micro firms in low-tech and less knowledge-intensive sectors and a negative effect for medium and large firms in high-tech and knowledge-intensive sectors. These results suggest that managers and entrepreneurs may use temporary employment as an effective human resource practice to foster innovation in those firms whose technology or knowledge do not require vast and firm- specific investments. They also highlight possible unintended consequences of changes in the employment protection legislation for firms’ innovative performance. Functional flexibility (training policies) and wage flexibility (second-level wage bargaining scheme) are neither substitutes nor complements to numerical flexibility, suggesting that firms use numerical, functional, and wage flexibility in different combinations.
    Keywords: Numerical flexibility; labor contracts; firm innovation; industrial relations
    JEL: D22 L23 M54 M55 J41
    Date: 2022–12–12
  4. By: Lionel Fontagné; Philippe Martin; Gianluca Orefice
    Abstract: Based on firm level data in the French manufacturing sector, we find that firms adapt quickly, strongly and through multiple channels to energy shocks, even though electricity and gas bills represent a small share of their total costs. Over the period 1996-2019, faced with an idiosyncratic energy price increase, firms reduce their energy demand, improve their energy efficiency, increase intermediate inputs imports and optimize energy use across plants. Firms are also able to pass-through the cost shock fully into their export prices. Their production, exports and employment fall. A consequence of these multiple adjustment mechanisms is that the fall in profits is either non-significant, small or specific to only the most energy intensive firms. We also find that the impact of electricity shocks has weakened over time, suggesting that only firms able to adapt their production process to energy cost shocks have survived. Importantly, when faced with large electricity and gas price increases, firms are less able to reduce their consumption. These results shed light on the mechanisms of resilience of the European manufacturing sector in the context of the present energy crisis.
    Keywords: Energy Crisis, Employment, Production, Competitiveness, Electricity, Gas
    JEL: L6 Q41 Q43
    Date: 2023
  5. By: Paulo Bastos (World Bank); Lisandra Flach (LMU Munich, ifo Institue); Klaus Keller (LMU Munich, Max-Planck Institute for Competition and Innovation)
    Abstract: We investigate the impact of product market competition on firms’ automation investments. We use a rich combination of micro-data on Portuguese exporters and exploit a novel source of variation in the degree of competition they face – a tariff liberalization between the European Union and Central and Eastern European countries in the 1990s. We find that firms facing greater competition in export markets tend to reduce investments in automation technologies. These average negative effects are driven by the least productive firms, while the most efficient exporters in industries that are more prone to automation tend to robotize in order to compete. These findings suggest that an increase in the degree of product market competition widens disparities between firms.
    Keywords: automation; product market competition; firm heterogeneity; trade liberalization; workers; multi-product firms;
    JEL: D22 F16 J23 L25 O33
    Date: 2023–11–28
  6. By: Kyung Min Lee; Mee Jung Kim; J. David Brown; John S. Earle; Zhen Liu
    Abstract: We evaluate the contributions of immigrant entrepreneurs to innovation in the U.S. using linked survey-administrative data on 199, 000 firms with a rich set of innovation measures and other firm and owner characteristics. We find that not only are immigrants more likely than natives to own businesses, but on average their firms display more innovation activities and outcomes. Immigrant owned firms are particularly more likely to create completely new products, improve previous products, use new processes, and engage in both basic and applied R&D, and their efforts are reflected in substantially higher levels of patents and productivity. Immigrant owners are slightly less likely than natives to imitate products of others and to hire more employees. Delving into potential explanations of the immigrant-native differences, we study other characteristics of entrepreneurs, access to finance, choice of industry, immigrant self-selection, and effects of diversity. We find that the immigrant innovation advantage is robust to controlling for detailed characteristics of firms and owners, it holds in both high-tech and non-high-tech industries and, with the exception of productivity, it tends to be even stronger in firms owned by diverse immigrant-native teams and by diverse immigrants from different countries. The evidence from nearly all measures that immigrants tend to operate more innovative and productive firms, together with the higher share of business ownership by immigrants, implies large contributions to U.S. innovation and growth.
    Date: 2023–11
  7. By: Bayly, Nicholas (Australian National University); Breunig, Robert (Australian National University); Wokker, Chris (Australian National University)
    Abstract: Despite a conventional wisdom that female board members positively impact firm performance, a thorough examination of the research to date reveals no consensus that female board members have either a positive or negative effect on firm performance. We build the largest dataset of Australian board appointments assembled to date. We use our data to demonstrate how difficult it is to replicate existing research, with one example from Australia and one from the US. Using event studies and regression analyses we demonstrate that there is little evidence that female board representation affects firm financial performance.
    Keywords: firm performance, board of directors, gender representation, female directors
    JEL: J16 N20 G32
    Date: 2023–11
  8. By: Catherine Laffineur (Université Côte d'Azur; GREDEG CNRS); Maria Minniti (Syracuse University, New-York); Benjamin Montmartin (SKEMA Business School)
    Abstract: Most individuals accumulate work experience before starting a venture. Does the knowledge gained from the worker’s occupation influential of the decision to become self-employed? Does it make a difference for the business? Data on the career history of individuals are used to identify whether being employed in an occupation requiring high managerial knowledge matter for the processes by which individuals move into and perform in all kinds of self-employment. We find that higher knowledge in management increases the likelihood to start a business and improves business performance. We also find that workers with higher knowledge in management perform better when they start an incorporated business.
    Keywords: Entrepreneurship, Self-Employment, Occupational Choice, Firm Performance
    JEL: J62 L25 L26
    Date: 2023–12
  9. By: Huma Javaid (Manchester Institute of Innovation Research, The University of Manchester); Xavier Castaner (Department of Strategy, Globalisation and Society, The University of Lausanne); Panos Desyllas (School of Management, The University of Bath); Orietta Marsili (School of Management, The University of Bath)
    Abstract: Based on information economics and organizational learning literatures, we investigate how information asymmetry and uncertainty regarding the value of technological resources of target firms influence the due diligence process after an acquisition announcement is made by the acquirer. We study how information asymmetry between the acquirer and target firm captured by the technological distance between the two firms’ patent portfolio extends the due diligence process. Additionally, we study how uncertainty about target firms’ technological resources explained by the pending patent applications of target firms tends to prolong the duration of due diligence. Further, we argue that business similarity reduces information asymmetry between the acquirer and target firm and shortens the duration of due diligence. We test the predictions on a sample of acquisitions of privately held technology firms in the UK and find a significantly positive effect of targets’ pending patent applications on due diligence duration that is amplified by technological distance but reduced by business similarity. The findings of the study contribute to the M&A literature that higher information asymmetry and uncertainty lengthen the due diligence process of the acquirers when evaluating prospective target firms.
    Keywords: Mergers and Acquisitions (M&A), Due diligence, Information asymmetry, Uncertainty
    Date: 2023–03
  10. By: Hanwei Huang; Gianmarco I. P. Ottaviano
    Abstract: The Balassa's index of revealed comparative advantage does not necessarily reveal Ricardian comparative advantage. We propose an alternative sufficient statistics approach based on a quantitative standard trade model incorporating firm and product selection. We show that the model's micro foundations do not necessarily imply that the relevant data for the proposed sufficient statistics must include micro information, but its micro structure is needed to understand how only macro information can be used instead. Applying our approach to Chinese micro data and cross-country macro data, we find that firm behavior has far-reaching implications for understanding aggregate productivity and revealed comparative advantage.
    Keywords: revealed comparative advantage, sufficient statistics, firm heterogeneity, multi-product firms
    Date: 2023–11–28
  11. By: Armstrong, Mark; John, Vickers
    Abstract: We study a market in which several firms potentially each supply a number of "brands" of fundamentally the same product. In fashion, for example, a single firm might retail similar items under different labels and different prices. Consumers differ in which products they consider for their purchase, and firms compete using (multi-dimensional) mixed pricing strategies for their brands. Using relative elasticity conditions, we discuss when firms choose to offer uniform pricing across their brands, and when they use segmented pricing so that one "discount" brand is always priced below another. We solve duopoly models in which equilibria can be derived for all parameters. We discuss the impact of introducing a new brand, of imposing a requirement to set uniform prices across a firm's brands, and of mergers between single-brand firms.
    Keywords: Price competition, consideration sets, multiproduct firms, multibranding, price discrimination, price dispersion, brand proliferation
    JEL: C72 D42 D43 L13 M31
    Date: 2023–11

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