|
on Business Economics |
| By: | Peter J. Klenow; Huiyu Li |
| Abstract: | Over time and across states in the U.S., the number of firms is more closely tied to overall employment than to output per worker. In many models of firm dynamics, trade, and growth with a free entry condition, these facts imply that the costs of creating a new firm increase sharply with productivity growth. This increase in entry costs can stem from the rising cost of labor used in entry and weak or negative knowledge spillovers from prior entry. Our findings suggest that productivity-enhancing policies will not induce firm entry, thereby limiting the total impact of such policies on welfare. |
| JEL: | E23 O47 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-63 |
| By: | Jo, Karam (Korea Development Institute); Kim, Seula (Pennsylvania State University) |
| Abstract: | We study how frictions in learning others' technology, termed "imperfect technology spillovers, " impact firm innovation strategies and the aggregate economy through changes in innovation composition. We develop an endogenous growth model that generates strategic innovation decisions, where multi-product firms improve their products via own-innovation and enter new product markets through creative destruction under learning frictions. In our model, firms with technological advantages intensify own-innovation as learning frictions enable them to protect their markets from competitors, thereby reducing creative destruction of rivals. This pattern gets more pronounced when competitive pressure increases exogenously. Using U.S. administrative firm-level data, we provide regression results supporting the model predictions. |
| Keywords: | innovation, technology spillover, endogenous growth, competition |
| JEL: | L11 L25 O31 O33 O41 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17581 |
| By: | Görg, Holger; Jacobs, Anna; Meuchelböck, Saskia |
| Abstract: | In this paper, we use a novel firm level dataset for Germany to investigate the effect of sanctions on export behaviour and performance of German firms. More specifically, we study the sanctions imposed by the EU against Russia in 2014 in response to the annexation of Crimea and Russia’s countermeasures. We find a substantial negative effect on both the extensive and intensive margin of German exports. While the negative effects are strongest for firms exporting products subject to trade restrictions, we provide further evidence on the indirect effects of sanctions. Analysing the impact on broader measures of firm performance, we document that the cost of sanctions is heterogeneous across firms but overall modest. Our results reveal that the negative impact of the shock was concentrated primarily among a small number of firms that were highly dependent on Russia as an export market and those directly affected by the sanctions. |
| Keywords: | Sanctions, Foreign policy, Firm behaviour, Germany, Trade |
| JEL: | F1 F14 F51 L25 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:307099 |
| By: | Fernando Leibovici; David Wiczer |
| Abstract: | This paper studies the role of credit constraints in accounting for the dynamics of firm exit during the Great Recession. We present novel firm-level evidence on the role of credit constraints on exit behavior during the Great Recession. Firms in financial distress, with tighter access to credit, are more likely to default than firms with more access to credit. This difference widened substantially in the Great Recession while, in contrast, default rates did not vary much by size, age, or productivity. We identify conditions under which standard models of firms subject to financial frictions can be consistent with these facts. |
| Keywords: | firm exit; Great Recession; credit constraints; financial distress |
| JEL: | E32 G01 |
| Date: | 2024–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:99194 |
| By: | Jeronimo Carballo; Richard Mansfield; Kassandra McLean |
| Abstract: | We link U.S. job records with both firm-level business register and customs records to construct a novel set of summary statistics and descriptive regressions that highlight the central role played by the small set of multinational firms (denoted RP XM firms) who engage in both importing and exporting with related parties in translating international trade shocks to shifts in labor demand. We find that RP XM firms 1) dominate trade volumes; 2) account for very disproportionate shares of national employment and payroll; 3) employ greater shares of workers in higher pay deciles; 4) disproportionately poach other firms’ high paid workers; 5) offer higher raises to their existing workers. These hiring and pay patterns generally exist even among new RP XM firms, but strengthen with RP XM tenure, and continue to hold, albeit at smaller magnitudes, after conditioning on standard proxies for firm and worker productivity. Taken together, these findings reveal that RP XM status is a reliable proxy for the kind of firm that drives the initial labor market impacts of trade shocks, and that high paid workers are likely to be most directly exposed to such shocks. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-77 |
| By: | Okan Akarsu; Emrehan Aktug; Huzeyfe Torun |
| Abstract: | We explore the spillover impact of zombie firms in Türkiye by exploiting a rich administrative dataset that contains firm-level information on balance sheets, inter-firm sales, employment, and firm-bank level credit records. We document four key facts regarding zombie dynamics: (i) Leveraging matched firm-bank level credit registry data, we highlight the presence of an evergreening motive, leading to a misallocation of credit away from productive firms. At the same time, healthy firms in zombie-dense networks face reduced credit access. (ii) Zombie firms, which are on average less productive than nonzombie firms, impede investment and employment opportunities at healthier firms. Nonzombie firms operating in sectors with a high prevalence of zombie firms experience lower sales, assets, and productivity. (iii) Incorporating B2B sales data structured similarly to firm-level input-output data, our study reveals that firms with stronger upstream or downstream zombie connections tend to exhibit reduced sales, investment, and employment compared to firms without any zombie connections. (iv) A higher number of zombie connections leads to significant reductions in markups, value-added, productivity, and EBIT margins due to the cascading effects on production technology, shifting it toward lower value-added. Additionally, a higher share of zombies in the upstream sector reduces input costs for firms due to excess production. |
| Keywords: | Zombie firms, Firm dynamics, Evergreening, Credits |
| JEL: | E12 E24 E31 E52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2414 |
| By: | Sousso Bignandi (ULiège); Cédric Duprez (Economics and Research Department, National Bank of Belgium); Céline Piton (Economics and Research Department, National Bank of Belgium) |
| Abstract: | This paper investigates the effects of digitalisation on firm-level employment and workforce composition in Belgium from 2003 to 2019, using a novel dataset that merges ICT expense data with administrative employment records. We find that digitalised firms experienced higher employment growth relative to non-digitalised firms, driven by both increased hiring and higher retention rates. The effect is particularly pronounced in large firms and reflects both faster employment growth in expanding firms and slower declines in shrinking firms. Digitalisation also significantly altered workforce composition, leading to a decrease in the share of low-educated workers and an increase in the share of highly educated workers, alongside shifts in the age distribution towards middle-aged workers. Our analysis employs a long-difference regression approach, well suited to capturing the gradual nature of ICT investments. While endogeneity concerns prevent causal interpretation, we show robust correlations between digitalisation and employment growth. The study contributes to the literature by providing a granular measure of digitalisation at firm level, offering new insights into the dynamics of worker turnover and sectoral differences, and by shedding light on the heterogeneous impact of digitalisation across worker education levels and age groups. |
| Keywords: | Digitalisation, employment, firms |
| JEL: | D22 D25 J21 J24 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202410-463 |
| By: | Sotiris Blanas (University of Warwick); Maurizio Zanardi (University of Sussex) |
| Abstract: | Using a representative sample of firms in Belgian manufacturing over 2001Q1–2017Q4, we study the effects of their international sourcing activities and domestic wages on their domestic output prices, as well as the effects of international sourcing on (relative) domestic wages. Controlling for firm size and other factors, we find that higher shares of imported intermediates, especially when they originate from lower-income countries, result in lower domestic output prices. This is consistent with the cost- saving aspect of international sourcing. For high-tech products, however, we also find that higher shares of imported intermediates from high-or lower-income countries lead to higher domestic prices. This is consistent with the input quality-enhancing aspect of international sourcing, but also its cost- saving aspect allowing for the re-allocation of domestic resources towards innovation and technology-intensive activities. In addition, we find that the share of imported intermediates from high-income countries is differentially negatively associated with the wage bill share and relative wage for white- collar workers in high-tech firms. Taken together, we view these results as suggestive evidence of firms combining higher-quality foreign inputs and domestic labour—especially blue-collar workers—in order to service the domestic market with higher-quality outputs at higher prices. |
| Keywords: | International sourcing; importing; intermediates; wages; producer prices |
| JEL: | F10 F14 E31 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202411-470 |
| By: | Di Mauro, Filippo; Matani, Marco; Ottaviano, Gianmarco I. P. |
| Abstract: | Based on the sufficient statistics approach developed by Huang and Ottaviano (2024), we show how the state of technology of European industries relative to the rest of the world can be empirically assessed in a way that is simple in terms of computation, parsimonious in terms of data requirements, but still comprehensive in terms of information. The lack of systematic cross-industry correlation between export specialization and technological advantage suggests that standard measures of revealed comparative advantage only imperfectly capture a country's technological prowess due to the concurrent influences of factor prices, market size, markups, firm selection and market share reallocation. |
| Keywords: | comparative advantage, European cross-country data, firm heterogeneity, international trade, monopolistic competition, multi-product firms, productivity |
| JEL: | B17 C19 C51 C80 D21 D43 F02 F12 F14 F61 L13 L25 O49 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:308049 |
| By: | Giovanazzi, Carmen |
| Abstract: | We analyze the dynamics of mergers and acquisitions (M&A) in the United States (US) and Germany in the 2000s, drawing on the Varieties of Capitalism (VoC) framework and the concept of internal capitalist diversity. Using SDC Platinum transaction data from 2000 to 2023 and qualitative insights from semi-structured interviews with 28 M&A professionals, we investigate how firm characteristics and institutional frameworks drive M&A activity in both countries. We confirm VoC-based expectations regarding transaction volumes and industry patterns but also highlight the professionalization of M&A functions across large, listed firms, alongside an increasing role of financial acquirers in both markets. While the rise of private equity aligns with the exit-driven strategies of small and medium-sized enterprises (SMEs) in the US, it raises questions regarding family-owned SMEs in Germany, which prioritize continuity and legacy but increasingly face succession challenges. Our findings suggest a continued hybridization of Germany's stakeholder-oriented corporate governance, integrating shareholder-oriented practices beyond large, listed firms. |
| Keywords: | M&A, Varieties of Capitalism, Financialization, Germany, US |
| JEL: | G34 L2 P52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifsowp:308062 |
| By: | Mark Vancauteren (Universiteit Hasselt); Kevin Randy Chemo Dzukou (INRAE, Nantes); Michael Polder (Statistics Netherlands); Pierre Mohnen (Maastricht University); Javier Miranda (Halle Institute for Economic Research, Friedrich-Schiller University Jena) |
| Abstract: | We study the relationship between ICT, total factor productivity and export at the firm level in Belgium, France and the Netherlands. In particular, we look at whether ICT has both a direct effect on export and an indirect effect via productivity improvements. We allow for endogeneity, unobserved heterogeneity, dynamic feedback, initial conditions and correlations between the time-invariant random effects and between the idiosyncratic random effects. We find similarities but also differences in the effects of ICT on export between the three countries. |
| Keywords: | ICT, productivity, export, firm data, Panel Data, international comparison |
| JEL: | C23 D24 F14 O30 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202410-462 |