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on Business Economics |
| By: | Bartram, Sohnke M. (U of Warwick); Brown, Gregory W. (U of North Carolina at Chapel Hill); Stulz, Rene M. (Ohio State U and ECGI) |
| Abstract: | Average idiosyncratic volatility and firm idiosyncratic volatility increase with the number of listed firms. Average industry idiosyncratic volatility increases with the number of listed firms in the industry. We explain the relation between idiosyncratic volatility and the number of listed firms through Schumpeterian creative destruction. We show that Schumpeterian creative destruction increases as the number of listed firms increases. However, there is no consistent evidence of an incremental effect of the number of non-listed firms on idiosyncratic volatility either in the aggregate or at the industry level, suggesting that listed firms play a unique role in the dynamism of the economy. |
| JEL: | G10 G11 G12 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:ohidic:2024-09 |
| By: | Luca Macedoni; John Morrow; Vladimir Tyazhelnikov |
| Abstract: | Which products are potentially produced together? When demand for a product increases, which firms will supply it? Using multi-product production patterns within and across firms, we recover a continuous cost-based distance between firms and unproduced products. Higher product distance implies decreasing adoption frequency. When export demand induces domestic product adoption, closer firms provide this supply. Potential costs imply measures of Revenue and Competition Potential. These predict firm sales and scope growth. If all firms produced all products linked by co-production, consumer welfare could increase by 16-30% under constant markups, rising to 46-86% under variable markups. |
| Keywords: | multi-product firms, firm capabilities, product classification, product space, growth paths |
| JEL: | F10 D20 L10 L23 L25 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11398 |
| By: | Eeckhout, Jan (University of Pompeu Fabra); Kircher, Philipp (Université catholique de Louvain, LIDAM/CORE, Belgium); Lafuente, Cristina (University of Bath) |
| Abstract: | Skill-biased technological change has long been linked to rising wage inequality. New technologies also allow firms to expand their scope of their operation. We formalize such quantity-biased technological change and calibrate the model to German matched employeremployee data. The calibration attributes substantial changes in the firm size distribution and in wages to this channel. Quantity-biased technological change spreads out the firm size distribution with a moderating influence on wage inequality within blue and white collar occupations, yet it increases inequality between these occupations. The quantity-bias component in the blue collar occupations alone moderates inequality within and between occupations. |
| Keywords: | Quantity-bias ; scale-bias ; technological change ; skill-bias ; firm size distribution ; wage inequality |
| JEL: | J23 J32 O33 |
| Date: | 2024–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:cor:louvco:2024017 |
| By: | Lars Hornuf; Matthias Mattusch |
| Abstract: | Fintech startups have set out to revolutionize the financial world. However, little is known about how successful and innovative these firms actually are. This paper investigates firm failure, funding success, and innovation capacity using a hand-collected dataset of 892 German fintechs founded between 2000 and 2021. We find that founders with a business degree and entrepreneurial experience have a better chance of obtaining funding, while founder teams with science, technology, engineering, or mathematics backgrounds file more patents. Early third-party endorsements and foreign partnerships substantially increase firm survival. We also establish the following stylized facts: (1) fintechs focusing on business-to-business models and which position themselves as technical providers prove to be more effective; and (2) fintechs competing in segments traditionally reserved for banks are generally less successful and less innovative. These results have important implications for the early-stage success management of fintech firms and the investment decisions of venture capital funds and government startup programs. |
| Keywords: | Fintech industry, firm funding, firm failure, innovation capacity |
| JEL: | G24 M13 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11301 |
| By: | Kauhanen, Antti; DeVaro, Jed |
| Abstract: | Abstract This brief examines the economic impacts of skilled immigration on firms, innovation, and labour markets. Research shows that skilled immigration generally has positive effects on firm performance, productivity, and innovation. Immigrant inventors play a crucial role in innovation, with evidence showing they produce a disproportionate share of patents and have positive spillover effects on native collaborators. Contrary to common fears, most studies find that skilled immigration does not negatively impact native workers’ wages or employment on average. In fact, it can benefit natives with complementary skills. The availability of skilled immigrant labour also influences firms’ location decisions, with restrictions on immigration leading to increased offshoring of jobs. While the fiscal impacts of immigration are debated, traditional accounting methods suggest a positive fiscal impact for highly educated immigrants. However, these estimates often fail to account for indirect effects like productivity gains and innovation. Overall, the evidence indicates that skilled immigration is a valuable tool for addressing productivity challenges and innovation needs, particularly in countries facing declining working-age populations. |
| Keywords: | Productivity, Innovations |
| JEL: | J61 J31 D24 |
| Date: | 2024–10–28 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:140 |
| By: | Giovanni Favara; Camelia Minoiu; Amber Perez-Orive |
| Abstract: | We show that U.S. banks do not engage in zombie lending to firms of deteriorating profitability, irrespective of capital levels and exposure to such firms. In contrast, unregulated financial intermediaries do, originating more and cheaper loans to these firms. We establish these results using supervisory data on firm-bank relationships, syndicated lending data for banks and nonbanks, and an empirical setting with quasi-random shocks to firm profitability. Although credit migrates from banks to nonbanks, zombie firms file for bankruptcy at an elevated rate, suggesting that nonbanks’ zombie lending does not enhance the survival rate of distressed and unprofitable firms. |
| Keywords: | zombie lending; zombie firms; banks; nonbanks |
| JEL: | G21 G32 G33 |
| Date: | 2024–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:99033 |
| By: | Sanjit Dhami; Mengxing Wei |
| Abstract: | In a principal-agent model under moral hazard we examine the psychological and social motivations of the agent that influence the incentive compatibility condition (ICC) of the agent. Under “firm culture” firms emphasize that high effort is consistent with its culture. Under “industry-wide social norms” external to the firm, the social group emphasizes high effort levels. We only consider the case where the ICC is violated in the classical case. A significant fraction of the agents choose high effort. Firm culture backed by simple disapproval of low effort is more effective relative to our baseline under fixed wages. Strong social norms are as effective as firm culture under variable wages, but more effective under fixed wages. Firm culture dominates weak social norms. Variable wages induce high effort (incentive effects) but also crowd out intrinsic motivation in the form of (i) guilt aversion from not following firm culture and (ii) shame aversion from not following social norms. |
| Keywords: | incentive compatibility, insurance and incentives, firm culture, guilt-aversion, social norms, shame-aversion |
| JEL: | D01 D91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11371 |
| By: | Jason Brown; Dayton Lambert |
| Abstract: | We test the implications of Schumpeter’s theory of creative destruction on food manufacturer births and deaths using a dynamic, unobserved effects count model with correlated random effects. We find evidence of a creative destruction process via the interaction of previous firm birth and death, which is correlated with higher rates of contemporaneous firm birth and death in a given location. Results support Marshall’s notion of “something is in the air, ” as evidenced by the strong correlation between sources of unobserved heterogeneity in the birth and death processes. Consistent with overall declines in firm birth and death across the United States between 2001 and 2019, we find evidence of convergence in birth and death rates across counties. Our results provide insights into capital reallocation across locations. The convergence rate is higher in urban versus rural areas, which have become more static over time. |
| Keywords: | birth rates; death rates; creative destruction |
| JEL: | C35 D21 R12 R30 |
| Date: | 2024–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:99035 |
| By: | Lakemann, Tabea; Beber, Bernd; Lay, Jann; Priebe, Jan |
| Abstract: | In many developing countries, micro, small, and medium enterprises (MSMEs) employ more people than any other type of firm, so identifying ways to raise productivity, improve employment conditions, and formalize labor in these settings is of prime policy importance. However, due to the small number of workers per firm and the possibly long results chain linking management to employment, few MSME-targeted interventions and evaluations address job-related outcomes directly. We do so in a randomized controlled trial (RCT) of a support program for MSMEs in Côte d'Ivoire that included financial management and human resources (HR) components. Six and 18 months after the end of the program, we find muted impacts on business practices, access to finance, and firm performance. On the employment side we find positive and significant impacts on job quality, driven by the share of employees receiving at least the minimum wage and the share with written contracts. We find no significant effect on the number of staff. Taken together, our results underscore the difficulty of boosting firm performance and creating jobs with a low-intensity intervention on the one hand, and the feasibility and importance of improvements in employment quality in MSMEs in developing countries on the other. |
| Keywords: | Côte d'Ivoire, MSME support, employment quality, firm performance, randomized controlled trial |
| JEL: | O12 L26 M10 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:gigawp:305255 |
| By: | Mikko Silliman; Alexander Willén; Alexander L.P. Willén |
| Abstract: | This paper combines two of the most central features of modern labor markets —immigrants and unions —to examine the role of worker power in shaping immigrant sorting across firms, and how that subsequently influences the performance of firms and the careers of incumbent workers. First, unions push immigrants to enter lower-paying and lower-quality firms with weaker union representation. Second, these firms with weaker union representation are able to use the cheaper immigrant labor to scale up production, thereby out-competing firms with stronger union representation and capturing market share. Third, incumbent workers in firms with weaker union representation benefit by shifting into management positions and capturing some of the firm’s increased rents. Fourth, despite benefiting incumbent workers in firms with weaker union representation, these workers are more likely to become union members themselves in response to greater contact with new immigrants. Broadly, our results cut across nearly all sectors but are considerably more muted in competitive markets. |
| Keywords: | immigration, worker power, unions, firms |
| JEL: | J20 J30 J50 J60 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11281 |
| By: | Marco G. Palladino; Antoine Bertheau; Cesar Barreto; Dogan Gülümser; Alexander Hijzen; Anne Sophie Lassen; Balázs Muraközy; Oskar Nordström Skans |
| Abstract: | This paper contributes to a better understanding of the role of bargaining and discrimination in the gender wage gap in France and four other European countries using comprehensive linked employer-employee data. The role of bargaining and discrimination is analysed by focusing on systematic differences in wage-setting practices between men and women in the same firm through the estimation of gender-specific firm wage premia. The paper provides three key insights. First, bargaining and discrimination account for only a small part of the gender wage gap in France. Second, the component of the gender wage gap that can be attributed to bargaining and discrimination is higher in high-wage firms in all countries considered. Third, cross-country differences in the importance of bargaining and discrimination in the gender wage gap reflect both systematic differences in wage-setting practices within firms and imperfections in the product market that generate persistent rents. |
| Keywords: | gender wage gap, firm wage premium, bargaining, rent-sharing |
| JEL: | J16 J31 P52 |
| Date: | 2024–11–13 |
| URL: | https://d.repec.org/n?u=RePEc:oec:elsaab:315-en |