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on Business Economics |
| By: | Hussinger, Katrin; Issah, Wunnam Basit |
| Abstract: | We investigate whether family ownership is associated with a preference for patents or trade secrets. Using a sample of S&P 500 firms, we show that family ownership is negatively associated with patenting and positively associated with the usage of trade secrets. We further show that both relationships are moderated by firm performance below the aspiration level, i.e. the performance benchmark level that an organization sets. These results can be explained with a mixed gambles behavioral agency framework. When family firms perform below their aspiration level, prospective financial gains become relatively more important as compared to current socioemotional wealth so that patents become more and trade secrets less attractive. |
| Keywords: | Family firms, patents, trade secrets, mixed gambles, aspiration gap |
| JEL: | O34 O32 G32 M14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:319899 |
| By: | Eleanor W. Dillon; Lisa B. Kahn; Joanna Venator; Michael Dalton |
| Abstract: | Most U.S. states have workforce development programs that offer firms grants to train their own workers. We create unique data linkages between participating firms, employment, and vacancies to explore the determinants and consequences of such programs. Training grants are more prevalent in markets where firms face greater employee poaching risk, suggesting these programs help overcome a market failure in updating worker skills. After training, firms experience prolonged employment growth and down-skilling in their job posts, relative to a matched control group. Training appears to help firms move toward optimal scale and expand opportunities for less skilled workers. |
| JEL: | J24 J42 J68 M53 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34012 |
| By: | Itzik Fadlon; Briana Sullivan; Vedant Vohra |
| Abstract: | We study the role of job transitions and firm pay policies in the Black-White earnings gap in the US. We use administrative data for the universe of employer-employee matches from 2005-2019 to analyze worker mobility in a general but tractable framework, which allows for firm effects that depend on workers’ job history. Using differences in average pay between origin and destination firms as the treatment intensity of a job move, we analyze transitions up and down the job ladder and estimate race-specific passthrough rates of average firm pay into a mover’s own earnings. First, we find race-specific asymmetry around the direction of the move, whereby losses experienced in downward transitions are meaningfully larger than gains from upward transitions with a similar treatment intensity. For a $1 earnings increase in transitions up the job ladder, earnings passthroughs in transitions down the job ladder impose an earnings loss of $1.25 among White workers and $1.50 among Black workers. Second, we uncover career setbacks as a novel pathway in the evolution of racial earnings gaps. In transitions down the job ladder, Black workers lose an additional $0.24 for every $1 decrease in White workers’ earnings, a finding which prevails across sex and age. This “racial penalty” is not driven by differential pay, as it is completely absent when Black and White workers move between the same firm pairs. Instead, the penalty is due to differential sorting following career setbacks, so that Black workers regain employment in “worse” jobs, with strong evidence for racial differences in access to short-run liquidity as a mechanism. Overall, our findings offer a robust and computationally simple framework for modeling earnings determination processes and have implications for safety-net policies in the American labor market. |
| JEL: | H53 J31 J62 J65 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34058 |
| By: | Stephan Heblich; Dávid Krisztián Nagy; Alex Trew; Yanos Zylberberg |
| Abstract: | Does industrial concentration shape the life and death of cities? We identify settlements from historical maps of England and Wales (1790–1820), isolate exogenous variation in their late 19th-century size and industrial concentration, and estimate the causal impact of size and concentration on later dynamics. Industrial concentration has a negative effect on long-run productivity—independent of industry trends and consistent with cross-industry Jacobs externalities. A spatial model quantifies the role of fundamentals, industry trends, and Jacobs externalities in shaping industry-city dynamics and isolates a new, dynamic trade-off in the design of place-based policies. |
| JEL: | F63 N93 O14 R13 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34029 |
| By: | Patrick Kline (University of California-Berkeley) |
| Abstract: | This chapter reviews the theory of monopsonistic wage setting, its empirical implications, and some puzzles the framework has struggled to explain. We begin by examining the fundamentals of monopsonistic wage determination. The core of the theory is a mapping from the distribution of worker outside options to wages. We study non-parametric shape restrictions that ensure this mapping is unique. Building on these results, we introduce a menu of tractable parametrizations of labor supply to the firm, some of which are shown to emerge naturally from equilibrium search models. Next, we review why wage markdowns do not necessarily signal inefficiency and discuss some criteria for assessing misallocation in a monopsony model with search frictions. Turning to the model’s empirical implications, we examine how the magnitude of productivity-wage passthrough depends on the super-elasticity of labor supply to the firm and establish that compensating differentials for firm amenities depend on the curvature of the outside option distribution. We show that firm-specific shifts in either productivity or amenities can be used as instruments to identify labor supply elasticities and review strategies for estimating non-constant elasticities. We then consider extensions of the basic model involving third-degree wage discrimination and examine their ability to rationalize patterns of worker-firm sorting. Monopsony models traditionally assume that firms commit to posted wages. Relaxing this assumption, we develop a connection between the first-order conditions of the monopsony model and models of bargaining with incomplete information. These models explain why bilateral inefficiencies may persist in the presence of negotiation, yield predictions about the response of within-firm wage dispersion to productivity shocks, and suggest reasons why some productivity shifters may not constitute excludable instruments. Next, we endogenize productivity by allowing for efficiency wages, non-constant returns to scale, and price-cost markups. Empirical monopsony estimates often suggest that firms enjoy implausibly large profit margins. We argue that allowing for non-constant labor supply elasticities and firm adjustment costs can potentially resolve this difficulty. Finally, we review why the strong passthrough of minimum wages to product prices presents a challenging puzzle for standard monopsony models and discuss potential reconciliations to this puzzle involving firm heterogeneity, quality upgrading, and lumpy price adjustment. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2536 |
| By: | Akcigit, Ufuk; Kilic, Furkan; Lall, Somik; Shpak, Solomiya |
| Abstract: | As Ukraine emerges from the devastation of war, it faces a historic opportunity to engineer its own Wirtschaftswunder—a productivity-driven economic transformation akin to post-war West Germany. While investment-led growth may offer quick wins, it is efficiency, innovation, and institutional reform that will determine Ukraine’s long-term economic trajectory. Drawing on rich micro-level firm data spanning 25 years, this paper uncovers deep structural distortions that have suppressed creative destruction and productivity in Ukraine. It finds that business dynamism is on the decline, alongside rising market concentration among incumbent businesses, including low productivity state owned enterprises. To inform priorities for reviving business dynamism, this study develops a model of creative destruction drawing on Acemoglu et al. (2018) and Akcigit et al. (2021). The quantitative assessment highlights that policies that discipline entrenched incumbents are the bedrock for reviving business dynamism and engineer Ukraine’s Wirtschaftswunder. Policies targeting specific types of firms have limited efficacy when incumbents run wild. |
| Date: | 2025–07–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11174 |
| By: | Daisuke TSURUTA |
| Abstract: | We investigate the differences in firm performance between non-defaulting firms and firms that have defaulted on their bank loan, and factors that determine these differences, using small business data. Many previous studies investigate the determinants of loan payment defaults by small businesses. However, few papers investigate small business activities and performance after they default. Using firm-level data from Japan, we show that bank borrowings, return on assets (ROA), and sales growth are all lower after such defaults. These negative effects last approximately 10 years after default if the firm survives, suggesting that the constraints associated with a default have negative effects on firm performance for extended periods. In addition, firms with weak financial statements before the default are unlikely to survive, but those that survive enjoy a high ROA. Next, asset growth, ROA, sales growth, younger management, and the existence of a successor have positive effects on firm survival after a default. These imply that real factors are important for firm survival after a default. Lastly, additional credit and reduction of interest payments have positive effects on sales growth after a default, but negative effects on ROA. This suggests that financial support from banks has a limited effect on the survival of defaulting small businesses. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25066 |
| By: | Craig A. Chikis; Benny Kleinman; Marta Prato |
| Abstract: | Most U.S. innovation output originates from firms that operate R&D facilities across multiple local markets. We study how this geographic structure influences aggregate innovation and growth, and whether it is socially optimal. First, we develop an endogenous growth model featuring multi-market innovative firms that generate knowledge spillovers to geographically proximate firms. In equilibrium, firms may operate in too few or too many local markets, depending on how sensitive are the local spillovers they generate to their local size. Second, to quantify these effects, we link the model to data on firms’ R&D locations, patents, and citation networks. Using an event-study design, we show that firms’ spatial expansion increases spillovers to other firms and estimate how these spillovers depend on a firm's local footprint. Our estimates imply that U.S. innovative firms operate in too few markets relative to the social optimum. Third, using quantitative counterfactuals, we find that policies promoting broader spatial scope yield larger welfare gains than standard R&D subsidies. Moreover, unlike R&D subsidies, such policies can also reduce regional inequality. |
| JEL: | E0 F0 L0 O0 R0 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34010 |
| By: | Joris Tielens (National Bank of Belgium, Research Department) |
| Abstract: | We study the interconnection between the productivity and pricing effects of financial shocks. Combining administrative records on firm-level output prices and quantities with quasi-experimental variation in credit supply, we show that a tightening of credit conditions has a persistent, yet delayed, negative effect on firms’ long-run physical productivity growth (TFPQ) but also induces firms to change their pricing policies. Commonly used revenue-based productivity measures (TFPR)—which conflate price and productivity—offer biased predictions regarding the consequences of financial shocks for firms’ productivity growth, underestimating the long-run elasticity of physical productivity to credit supply by half. We also show that the pricing adjustments themselves have productivity implications. Firms use low pricing as a source of internal financing, allowing them to avoid cutting expenditures on productivity-enhancing activities, thereby softening the impact of financial shocks. We incorporate these forces into a quantitative model of firm dynamics to quantify the importance of productivity and pricing dynamics (and their interplay) in driving the scarring effects of financial crises on aggregate productivity and welfare. |
| Keywords: | productivity, pricing, financial constraints, innovation |
| JEL: | D22 D24 E31 E44 G01 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202507-479 |
| By: | Romensen, Gert-Jan; Soetevent, Adriaan (University of Groningen) |
| Abstract: | An often-voiced concern with relative performance feedback is that it may not improve workplace productivity if workers become demotivated and see no way to improve. Targeting feedback at specific productivity measures over which workers have direct control may in such cases prevent demotivation and focus attention. Does targeting improve worker productivity? We partner with a large bus company and experimentally vary the nature and number of peer-comparison messages which 409 bus drivers receive in their monthly feedback report. Messages are targeted at concrete driving behaviors and aimed at improving comfort and fuel efficiency. Using over 800, 000 trip-level observations, we find that these targeted peercomparison messages do not improve aggregate (fuel economy) or disaggregate measures (such as acceleration) of driving behavior. Further analyses also reveal no temporal orheterogeneous effects of the targeted messages. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:gro:rugfeb:2025006-eef |
| By: | Christian Dustmann; Chiara Giannetto; Lorenzo Incoronato; Chiara Lacava; Vincenzo Pezone; Raffaele Saggio; Benjamin Schoefer |
| Abstract: | This paper presents micro-empirical evidence on the effects of wage-setting decentralization. Our setting is Italy, where employers are required to comply with occupation- and industry-specific wage floors set by national collective bargaining agreements. We show that opting out of these agreements reduces wages but increases workers’ employment and retention within firms. These effects are most pronounced in the more productive North, where the overall impact on workers’ earnings is slightly positive. In contrast, in the South, wage losses outweigh employment gains, leading to a net decline in earnings. We also find that increased wage-setting flexibility is associated with higher firm survival rates in both regions. The regional divergence in outcomes aligns with a monopsony framework in which productivity and labor supply elasticities vary spatially. |
| JEL: | E02 E24 J0 J3 J5 J6 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34076 |
| By: | Yoshiyuki ARATA; Hiroshi YOSHIKAWA; Shingo OKAMOTO |
| Abstract: | The fact that the distributions of firm sales and individual incomes have a Pareto tail is one of the important statistical regularities, and numerous theoretical models have been proposed to explain it. However, recent studies have pointed out a difficulty with these existing models: they predict that the time required for firms to become giants or individuals to be super-rich is excessively long compared to what is observed in empirical data. Furthermore, our empirical data show that Zipf's law holds within the size distributions of younger firms and younger individuals, contradicting existing models that predict that Zipf's law is primarily driven by older firms and older individuals. This paper provides an alternative explanation for Zipf's law to address the inconsistencies observed in empirical data. We focus on the heavy-tailed nature of the distribution of growth rates for firm sales and individual incomes, showing that their growth dynamics are characterized by rapid growth over short periods. We show that the emergence of giant firms and the super-rich results from this rapid growth, leading to the formation of Zipf's law. Zipf's law reflects the shared growth dynamics underlying firm sales and individual incomes. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25070 |
| By: | Kenneth R. Ahern |
| Abstract: | Multinational firms play a pivotal role in the global economy, yet economic and finance research has largely examined them in isolation. Economic theory focuses on trade and multinational activity but gives relatively little attention to cross-border mergers, while finance research emphasizes empirical studies of mergers but rarely integrates broader economic theories. This chapter aims to synthesize these two literatures into a unified framework for understanding multinational firms and cross-border mergers. The discussion is organized around the decision-making process of multinational firms, from choosing to operate internationally to selecting between greenfield investment and mergers. This framework reveals the theoretical and empirical evidence on the drivers of multinational production, including productivity gains, knowledge transfers, and market frictions. The findings highlight the commonality between the two literatures, but also suggests that greater integration between economic theory and finance research will generate a deeper understanding of the role of multinational firms in the global economy. |
| JEL: | F10 F12 F14 F23 G34 G41 L41 L44 O32 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34067 |
| By: | Xing Guo; Pablo Ottonello; Thomas Winberry; Toni Whited |
| Abstract: | We study the macroeconomic consequences of asymmetric information between firms and external investors. To do so, we develop a heterogeneous firm macro model in which firms have private information about their quality. Private information creates a lemons problem in the market for external finance, depressing investment relative to the full information benchmark. We measure the distribution of private information, and therefore the magnitude of this lemons problem, using high-frequency stock price changes when firms raise new funding (revealing their quality to the market). We find that changes in distribution of private information are a quantitatively important determinant of aggregate fluctuations. For example, a spike in private information accounts for 40% of the decline in aggregate investment during the 2007-2009 financial crisis and made monetary stimulus significantly less effective at that time. |
| JEL: | E22 E32 E52 G30 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34019 |
| By: | Kaoru HOSONO; Masaki HOTEI; Daisuke MIYAKAWA |
| Abstract: | Using tax filing data of Japanese business enterprises from 2014 to 2020, we investigate how the 2015-2018 tax reforms in Japan affected the average tax burden and whether the reforms benefited growing firms or not. We first calculate backward-looking effective tax rates (ETRs) and then estimate the sensitivity of the ETR and its components with respect to firm sales growth, R&D intensity, and other characteristics. Our findings are as follows. First, the average ETR increased after the reform. Second, compared with the average ETR, ETRs for growing and R&D-intensive firms initially decreased, but then began to increase. The reforms did not benefit growing firms in the long run due to the expansion of tax bases. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25072 |
| By: | Huixin Bi; Nicolas Petrosky-Nadeau; Nora Traum; Greg Woodward |
| Abstract: | We present new monthly U.S. city-level and national measures of worker and firm search from 1900 to 1938, derived from scanned images of U.S. newspapers. To our knowledge, we are the first to systematically use the “situations-wanted” advertisements placed by job seekers. We document fresh insights into early 20th-century labor market dynamics: (1) worker and firm search efforts are procyclical; (2) posting costs affect advertising behavior and labor search intensity; (3) the Beveridge curve is stable over the last 125 years, with similar shifts following the 1918 flu and Covid-19 pandemic; and (4) regional and gender heterogeneity exists. |
| Keywords: | job search; Great Depression |
| JEL: | J64 N32 E24 E32 C82 |
| Date: | 2025–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:101410 |
| By: | Xu Cheng (University of Pennsylvania); Frank Schorfheide (University of Pennsylvania); Peng Shao (Auburn University) |
| Abstract: | This paper studies the estimation of multi-dimensional heterogeneous parameters in a nonlinear panel data model with endogeneity. These heterogeneous parameters are modeled with group patterns. Through estimating multiple memberships for each unit, the proposed method is robust to limited information from a subset of clusters: either due to sparse interactions of characteristics or weak identification of some combinations of heterogeneous parameters. We estimate the memberships along with the group specific and common parameters in a nonlinear GMM framework and derive their large sample properties. Finally, we apply this approach to the estimation of heterogeneous firm-level production functions parameters which are converted into markup estimates. |
| Keywords: | Clustering, GMM, K-means, Panel Data, Production Function Estimation |
| JEL: | C13 C23 D22 D24 E23 |
| Date: | 2025–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:25-014 |
| By: | Erdinc Akyildirim (University of Nottingham); Gamze Ozturk Danisman (Istanbul Bilgi University); Steven Ongena (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)) |
| Abstract: | Using a panel of 929 U.S. publicly listed firms, this paper investigates the impact of artificial intelligence (AI) employment on the disclosure of political risk in corporate earnings calls. We utilize the firm-level AI employment measure developed by Babina et al. (2024), based on resume and job posting records. Furthermore, we supplement it with our newly generated AI disclosure indices at the firm level, created through textual analysis of earnings call transcripts. Our findings indicate that firms with greater AI employment are significantly less likely to disclose information about political risk during earnings calls. We propose a dual mechanism that underpins this association. First, AI enables narrative management: firms use AI tools to strategically alter the tone and wording of disclosures, avoiding phrases that may elicit unfavorable sentiment, leading to a reduction in reputational risk. Second, AI improves firms’ internal performance and risk management, hence reducing the need for voluntary political risk disclosures. Our findings add to the literature on voluntary disclosure and the economic implications of AI by indicating that AI, as a general-purpose technology, has unintended consequences for corporate transparency. |
| Keywords: | Artificial Intelligence (AI), political risk, voluntary disclosures, earnings calls, textual analysis, AI disclosure index |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2556 |
| By: | Cagatay Bircan (UCL); Guido Friebel (Goethe-University Frankfurt); Tristan Stahl (Goethe-University Frankfurt) |
| Abstract: | Using rich data on personnel records, work assignments, and performance in a financial institution, we uncover the mechanisms leading to promotion gaps in knowledge teamwork. We find a substantial promotion gap for women in early career stages. Analyzing over 10, 000 investment projects reveals that assignments to project team leaderships (a “promotable†task) are crucial in explaining the gaps in promotions and affect long-term careers. We find causal evidence that male supervisors favor male bankers, while women benefit from female supervisors. A survey among employees indicates that women perceive to be disadvantaged in the assignments of tasks, but they do not differ in aspirations and demand for these roles. When a new CEO entered the firm, much of the gap disappears. |
| Keywords: | Careers; gender gaps; visibility; leadership; internal labor market |
| JEL: | M51 J16 D22 J44 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2518 |
| By: | Zack Cooper; Stuart V. Craig; Aristotelis Epanomeritakis; Matthew Grennan; Joseph R. Martinez; Fiona Scott Morton; Ashley T. Swanson |
| Abstract: | This paper empirically analyzes the effects of mergers between complementary firms on competition and pricing. As these non-horizontal mergers have become more common, there is increasing interest in evaluating both potential efficiencies such as eliminating double marginalization and potential anticompetitive effects such as foreclosure and recapture. The mergers we study – hospital acquisitions of physician practices – have reshaped the $1 trillion US physician industry, nearly doubling the share of physicians working for hospitals between 2008 and 2016. We combine novel data and machine learning algorithms to identify a large number of integration events, spanning a wide range of markets with different competitive circumstances. We merge the integration events with claims data from a large national insurer to study their effects on prices. Focusing on childbirths, the most ubiquitous admission among the privately insured, we find that, on average, these mergers led to price increases for hospitals and physicians of 3.3% and 15.1%, respectively, with no discernible effects on quality measures. Using demand estimation to characterize substitution patterns for both physicians and hospitals, we construct tests that demonstrate price increases are larger among transactions with greater scope for foreclosure and recapture. Our estimates suggest that the costs of these mergers of hospitals and physicians have been substantial, and our mechanism tests offer guidance in predicting where the anticompetitive effects of non-horizontal mergers are likely to be strongest. |
| JEL: | D4 I11 L1 L4 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34039 |
| By: | Francesco Zanetti; Jesús Fernández-Villaverde; Yang Yu |
| Abstract: | Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction. This mechanism helps explain the simultaneous rise in R&D spending and decline in TFP growth in the US economy over recent decades. We develop a simple model highlighting the critical role of the inelastic supply of research labor in enabling this effect. Empirical evidence confirms that the research labor supply in the US is indeed inelastic and supports other model predictions: incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents lifespan. All these effects are amplified when ideas are harder to find. An extended version of the model quantifies these mechanisms implications for productivity, innovation, and policy. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:cnn:wpaper:25-016e |