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on Business Economics |
| By: | Bettina Bruggemann; Zachary L. Mahone; Thomas Palmer |
| Abstract: | Ownership changes are common across firms of all sizes, and they have meaningful impacts on firm performance. Using a panel of Canadian administrative data we document that sales are an important margin in the firm life cycle, larger than exit rates for employer firms. Applying an event-study framework, we find that (a) survival rates initially decline post sale, leveling off after three years and (b) conditional on survival, profits are permanently higher. Embedding ownership changes in a model of firm dynamics, we find that 4.5% of entrants survive due to the option value of sale and that, within ten years from birth, 13% of dispersion in firm size is attributable to realized ownership changes. Moreover, ownership changes are particularly important for high productivity firms, accounting for one quarter of revenue concentration among the top 1% of businesses. |
| Keywords: | Firm Dynamics; Ownership Changes; Firm Concentration |
| JEL: | E0 L25 D22 M13 G30 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:mcm:deptwp:2025-03 |
| By: | Okumu, Ibrahim Mike; Nathan, Sunday; Bbaale, Edward |
| Abstract: | This paper examines the moderating role of the business environment in the relationship between the gender of the top manager and firm performance (measured as sales per employee), and whether female-managed firms perform better the higher the proportion of female employees in the firm. The paper uses World Bank Enterprise Survey data of 14, 561 firms from 29 African countries collected between 2010 and 2016. The descriptive analysis reveals significant variation in the performance and experience of business environment constraints that disadvantage female-managed firms. Controlling for potential endogeneity POLICY BRIEF Gender and Firm Performance in Africa: Does the Business Environment Play a Moderating Role? Ibrahim Mike Okumu, Sunday Nathan and Edward Bbaale October 2023 / No.799 2 Policy Brief No.799 and country fixed effects, we show that female-managed firms are associated with lower performance compared to male-managed firms. Electricity outages, informal competition, and corruption account for the performance gap between female and male-managed firms. However, we show that large female-managed firms perform better than male-managed large firms. Overall, the results imply that strengthening Africas business environment is central to closing the performance gap between male and female managers. |
| Date: | 2024–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:0c596f70-cbbc-4b74-8c87-0fe515852400 |
| By: | Filippo Biondi (Düsseldorf Institute for Competition Economics); Sergio Inferrera (Queen Mary University of London, School of Economics and Finance); Matthias Mertens (Massachusetts Institute of Technology); Javier Miranda (Halle Institute for Economic Research (IWH), Friedrich-Schiller University, and CompNet) |
| Abstract: | We study changes in job reallocation in Europe after 2000 using novel micro-aggregated data that we collected for 19 European countries. In all countries, we document broad-based declines in job reallocation rates that concern most economic sectors and size classes. These declines are mainly driven by dynamics within sectors, size, and age classes rather than by compositional changes. Simultaneously, employment shares of young firms decline. Consistent with US evidence, firms’ employment has become less responsive to productivity shocks. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive and apply a firm-level framework that relates changes in firms’ market power, labor market imperfections, and production technology to firms’ responsiveness and job reallocation. Using German firm-level data, we find that changes in markups and labor output elasticities, rather than adjustment costs, are key in rationalizing declining responsiveness. |
| Keywords: | Business dynamism, job reallocation, productivity, responsiveness of labor demand, market power, technology, European cross-country data |
| JEL: | D24 D43 J21 J23 J42 L11 L25 |
| Date: | 2025–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2025-0004 |
| By: | Yoshiki Ando (Boston University); Emin Dinlersoz (Bureau of the Census); Jeremy Greenwood (University of Pennsylvania); Ruben Piazzesi (University of Pennsylvania) |
| Abstract: | Abstract The adoption of advanced technologies has important implications for employment and growth. The analysis of firm-level data from US Census Bureau indicates that firms with advanced technologies are disproportionately backed by venture capital (VC). While both advanced technology use and VC backing separately matter significantly for firm outcomes, VC backing has a larger effect on firms with advanced technology. A model of startups is constructed featuring decisions to use advanced technology and VC. The model is matched up with facts about firms' employment, technology use, and VC reliance. The implications of business taxation and subsidies are studied, and the significance of the availability of advanced technology and VC in the economy is quantified. |
| Keywords: | Advanced technology, banks, capital gains taxation, corporate income taxation, difference-in-difference analysis, employment, firm-level data, reallocation effect, startups, subsidies, synergy, venture capital, technology adoption, US Census data |
| JEL: | O30 O40 G20 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:eag:rereps:40 |
| By: | Sam Desiere (Ghent University); Tiziano Toniolo (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Gert Bijnens (National Bank of Belgium) |
| Abstract: | Policies supporting small businesses are popular among policymakers but often criticised by economists for their potential to distort the economy. This paper provides a comprehensive evaluation of a unique policy that subsidises the first employee. Empirically, we find that the policy led to a surge in the number of firms employing exactly one employee, without a noticeable effect on the number of firms with two or more employees. A simple frictionless general equilibrium model of occupational choices predicts the empirical facts remarkably well. Leveraging our model, we show that the general equilibrium effects on wages and aggregate output are likely to be small. However, the policy is expensive. Our findings support the traditional view that size-dependent subsidies distort the optimal allocation of resources. |
| Keywords: | size-dependent policies; firm entry; small firms; wage subsidies; payroll taxes |
| JEL: | D22 H25 J08 L25 L26 |
| Date: | 2025–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:ctl:louvir:2025005 |
| By: | Muhoza, Benjamin Kanze; Majune, Socrates Kraido |
| Abstract: | This study analyses the effect of political instability on firm performance in the Democratic Republic of Congo (DRC), one of the most unstable countries in sub-Saharan Africa. We use pooled panel data for three waves of the World Bank Enterprise Survey of the DRC (2006, 2010, and 2013) to analyse the effect of political instability on five measures of performance: employee growth, sales growth, productivity, investment, and export status. Results from the endogenous switching model reveal that political instability adversely affects firm performance in the DRC. In the presence of political instability, employee POLICY BRIEF Political Instability and Firm Performance in the Democratic Republic of Congo Benjamin Kanze Muhoza and Socrates Kraido Majune October 2023 / No.786 2 Policy Brief No.786 growth, sales growth, productivity, and investment growth significantly decline. Conversely, firms that do not experience political instability grow in terms of employee growth, sales growth, productivity, investment, and exporting activities. Our results are robust when we proxy political instability with losses due to theft, robbery, and vandalism. For purposes of policy, we recommend that political stability should be enhanced through political goodwill and legislation that advocates for peace. Firms can also push for this agenda through their business associations and platforms such as public-private partnerships that link them to the government. |
| Date: | 2024–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:a38292f3-622c-4e63-8076-14dc81a21bf4 |