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on Business Economics |
| By: | Masashige Hamano (School of Political Science and Economics, Waseda University) |
| Abstract: | This paper examines how heterogeneity in product-level tastes and firm-level technologies shapes macroeconomic fluctuations. We develop a general equilibrium model with multiproduct firms and endogenous entry, where firms adjust their product mix in response to aggregate shocks. Calibrated to U.S. data, the model replicates key business cycle moments and shows that low taste dispersion amplifies aggregate volatility by limiting per-product profit adjustments, whereas high dispersion dampens fluctuations. While firm-level productivity granularity also affects volatility, its impact is comparatively minor. A simplified analytical model reinforces these findings, highlighting the critical role of aggregate shock propagation to firm- and product-level fixed costs, as well as heterogeneity in tastes and technologies, in determining macroeconomic volatility. |
| Keywords: | Firm Heterogeneity, Multi-Product Firms, Business Cycles, Product Quality |
| JEL: | D24 E23 E32 L11 L60 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2502 |
| By: | André Diegmann; Laura Pohlan; Andrea Weber |
| Abstract: | We study how connections to German federal parliamentarians affect firm dynamics by constructing a novel dataset linking politicians and election candidates to the universe of firms. To identify the causal effect of access to political power, we exploit (i) new appointments to the company leadership team and (ii) discontinuities around the marginal seat of party election lists. Our results reveal that connections lead to reductions in firm exits, gradual increases in employment growth without improvements in productivity. Adding information on credit ratings, subsidies and procurement contracts allows us to distinguish between mechanisms driving the effects over the politician’s career. |
| Keywords: | politicians, firm performance, identification, political connections |
| JEL: | O43 L25 D72 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11691 |
| By: | Anja Sebbesen (WIFO); Birgit Meyer (WIFO) |
| Abstract: | Does interaction between firms lead to a streamlining of expectations? We test for the existence of a so-far ignored channel of expectation formation and diffusion by matching a regular Austrian business survey on firm expectations with the schedule and confirmed exhibitors at trade fairs. We find that in the month after a firm has exhibited at a trade fair, its production expectations react stronger to consensus expectations than in other months. We thus provide first micro-level evidence suggesting that firms' beliefs are shaped by information from other firms with whom they meet and potentially trade. |
| Keywords: | Expectations, survey data, incomplete information |
| Date: | 2025–04–30 |
| URL: | https://d.repec.org/n?u=RePEc:wfo:wpaper:y:2025:i:704 |
| By: | Michael Gechter; Namrata Kala |
| Abstract: | Firm location decisions are a key managerial choice, usually optimized over factors like proximity to customers or suppliers. These decisions may also impose externalities on the environment, and on other firms due to competitive or agglomerative forces. The inherent endogeneity of location decisions makes estimating the impact of firm presence difficult. In this paper, we study an environmental place-based policy that randomly moved over 20, 000 small firms in New Delhi to industrial areas outside the city over several years. We find that a reduction in firm presence improves air quality, reducing industrial pollution by 8% for the average neighborhood. However, industrial relocation is costly for firms, significantly increasing the probability of firm exit. We combine the exogenous assignment of firms to industrial plots with a model of firms playing a game of incomplete information to estimate the effect of neighborhood composition on firm survival through Marshallian agglomeration forces. We find that proximity to neighboring firms with input-output linkages increases the likelihood of firm survival, and taking these into account while determining firm placement in industrial areas would have halved the costs imposed on firms by the policy. These results provide causal evidence on the trade-offs between firm presence and environmental quality, and show that firm spillovers can be a useful force to minimize the costs on regulated firms. |
| JEL: | D22 L20 O10 Q52 Q53 Q56 Q58 R38 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33707 |
| By: | Domnisoru, Ciprian (Aalto University); Miller, Robert A. (Carnegie Mellon University) |
| Abstract: | Sons succeed their exiting CEO parents more often than daughters. How do entrepreneurial families reach this gender imbalance, and how does it affect the prospects of their firms and their offspring? Using Finnish administrative data on firms linked to population register data on shareholders and their extended families, we trace the steps leading to the succession decision, and its outcomes. We examine fertility patterns, finding evidence of son preference in natural births and adoptions by entrepreneurs. In families that appear to follow son-biased fertility stopping rules, we also find noticeable differences in human capital accumulation between sons and daughters. The transmission of human capital is also mediated by the extent to which women are employed in the industry of the entrepreneur parent. Gaps in income, board membership, and share ownership between sons and daughters of exiting CEOs emerge well before succession. Turning to firm outcomes, we find evidence that other family members, but not the children of exiting CEOs, appear to diminish firm performance relative to the results of professional CEOs. Overall, our results show family succession is a protracted process that begins with the birth of the first child. |
| Keywords: | gender differences, CEO transition, son preference, family firms, human capital |
| JEL: | G32 L25 J13 J24 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17800 |
| By: | Elisabeth Kempf; Mancy Luo; Margarita Tsoutsoura |
| Abstract: | We examine how the political ideology of corporate leaders shapes cross-border firm networks. Exploiting changes in ideological alignment between U.S. firm CEOs and foreign governments around close foreign elections, we show that U.S. firms are more likely to terminate trade relationships with countries led by governments whose ideology becomes more distant from that of their CEOs. The impact is concentrated among CEOs holding strong political views, and is particularly pronounced for shorter trade relationships, suggesting ideological alignment is more relevant in more flexible and substitutable connections. Our findings highlight the role of ideology in shaping the formation and persistence of international firm networks. |
| JEL: | F1 G41 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33712 |
| By: | Matano, Alessia (University of Barcelona); Naticchioni, Paolo (Roma Tre University) |
| Abstract: | This paper investigates the relationship between China’s import competition and the innovation strategies of domestic firms. Using firm level data from Italy spanning 2005-2010 and employing IV fixed effects estimation techniques, we find that the impact of China’s import competition on innovation varies depending on the type of goods imported (intermediate vs. final). Specifically, imports of final goods boost both product and process innovation, while imports of intermediate goods reduce both. Additionally, we extend the analysis to consider the role of unions in moderating these responses. We find that, in unionized firms, imports' impact on innovation is mitigated, specifically to protect workers' employment prospects. |
| Keywords: | unions, product and process innovation, final and intermediate goods, China’s import competition, IV fixed effects estimations |
| JEL: | C33 L25 F14 F60 O30 J50 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17764 |
| By: | Aggarwal, Reena (Georgetown U and ECGI); Briscoe-Tran, Hoa (U of Alberta); Erel, Isil (Ohio State U and ECGI); Starks, Laura T. (U of Texas at Austin and ECGI) |
| Abstract: | Employing a novel approach with unique data on public sentiment and a new metric on shareholder concerns, we establish an association between shareholder actions and public sentiment about a firm. The number of shareholder proposals effectively captures investor dissatisfaction, particularly since it includes firms with no shareholder proposals. We find that negative public sentiment about financial, governance, environmental or social issues is associated with more shareholder proposals, and we establish causality through a creative instrumental variable approach. Further, shareholder actions have real consequences as a larger number of shareholder proposals appears to result in higher turnover for CEOs and directors. |
| JEL: | G32 G34 G38 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:ohidic:2024-26 |
| By: | Roxana Mihet (Swiss Finance Institute - HEC Lausanne); Kumar Rishabh (University of Lausanne - Faculty of Business and Economics (HEC Lausanne); University of Basel, Faculty of Business and Economics); Orlando Gomes (Lisbon Polytechnic Institute - Lisbon Accounting and Business School) |
| Abstract: | Artificial intelligence (AI) is transforming productivity and market structure, yet the roots of firm dominance in the modern economy remain unclear. Is market power driven by AI capabilities, access to data, or the interaction between them? We develop a dynamic model in which firms learn from data using AI, but face informational entropy: without sufficient AI, raw data has diminishing or even negative returns. The model predicts two key dynamics: (1) improvements in AI disproportionately benefit data-rich firms, reinforcing concentration; and (2) access to processed data substitutes for compute, allowing low-AI firms to compete and reducing concentration. We test these predictions using novel data from 2000–2023 and two exogenous shocks—the 2006 launch of Amazon Web Services (AWS) and the 2017 introduction of transformer-based architectures. The results confirm both mechanisms: compute access enhances the advantage of data-intensive firms, while access to processed data closes the performance gap between AI leaders and laggards. Our findings suggest that regulating data usability—not just AI models—is essential to preserving competition in the modern economy. |
| JEL: | L13 L41 O33 D83 E22 L86 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2537 |