nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2013‒08‒23
twenty-two papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. How Do Smaller Firms Select Foreign Markets? By Musso, Fabio; Francioni, Barbara
  2. Does Government Support for Private Innovation Matter? Firm Level Evidence from Turkey and Poland By Wojciech Grabowski; Krzysztof Szczygielski; M. Teoman Pamukçu; Sinan Tandogan
  3. Outward Foreign Direct Investment, Exporting and Firm-Level Performance in Sub-Saharan Africa By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  4. Servitization as a Productive Strategy of a Firm - Evidence from the Forest-Based Industries By Viitamo, Esa
  5. 'Is the Growth Effect of Financial Development Conditional on Technological Innovation?' By Arshad Ali Bhatti; M. Emranul Haque; Denise R. Osborn
  6. The Knowledge Economy, Economic Transformations and ICT: Regional Dynamics in the Deployment Phase. Case study: Southern and Eastern Ireland By Franck Barry
  7. Upstream product market regulations, ICT, R&D and productivity. By Cette, G.; Lopez, J.; Mairesse,J.
  8. Importing, Exporting and Performance in Sub-Saharan African Manufacturing Firms By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  9. Theory and Measurement of Competitiveness By Rantala, Olavi
  10. The Role of International Trade in Employment Growth in Micro- and Small Enterprises: Evidence from Developing Asia By Krüger, Jens
  11. The Financing and Growth of Firms in China and India: Evidence from Capital Markets By Sergio Schmukler; Tatiana Didier
  12. Business groups as hierarchies of firms: determinants of vertical integration and performance By Altomonte, Carlo; Rungi, Armando
  13. Aggregate productivity and the allocation of resources over the business cycle By Sophie Osotimehin
  14. Performance Effects of the Corporatisation of Port of Rotterdam Authority By Langen, P.W. de; Heij, C.
  15. Bank-firm relationships and the survival of non-financial firms during the financial crisis 2008-2009 By Abildgren, Kim; Vølund Buchholst, Birgitte; Staghøj, Jonas
  16. Drivers of firm-level productivity in Russia's manufacturing sector By Bogetic, Zeljko; Olusi, Olasupo
  17. Export Diversification: How Much Does the Choice of the Trading Partner Matter? By Julie Regolo
  18. Is small better ? a comparison of the effect of large and small dams on cropland productivity in South Africa By Blanc, Elodie; Strobl, Eric
  19. Measuring institutional competitiveness in Europe By Huemer, Stefan; Scheubel, Beatrice; Walch, Florian
  20. Corruption, Pricing of Public Services and Entrepreneurship in Economies with Leakage By Mukherjee, Vivekananda; Mitra, Siddhartha; Banerjee, Swapnendu
  21. Bank Efficiency during the Current Economic Crisis: An International Comparison By Adrian Babin
  22. Information and Communication Technology and Bank Performance in Nigeria: A Panel Data Analysis By Sani Ibrahim, Mr. Saifullahi; Muhammad, Mr. Abubakar

  1. By: Musso, Fabio; Francioni, Barbara
    Abstract: The purpose of this paper was to analyze the internationalization of small and medium-sized enterprises (SMEs) in relation to international market selection (IMS). To accomplish this, an investigation of the primary factors influencing SMEs’ choice when selecting international market in a systematic way was conducted. In addition we sought to understand whether there was a relationship between the systematic approach in IMS and the characteristics of SMEs. Results revealed that the majority of SMEs adopt a non-systematic IMS. However, in the case of SMEs following a systematic approach to IMS, the study pointed out that SMEs are influenced by firm-specific and host country factors, but not by entry barriers like geographic and cultural distance. In addition, results illustrated the existence of a relationship between systematic IMS and firm size.
    Keywords: International market selection, Small and medium-sized enterprises, International strategy, Systematic and non-systematic approaches
    JEL: D92 M16 M21 M31
    Date: 2012–09–25
  2. By: Wojciech Grabowski; Krzysztof Szczygielski; M. Teoman Pamukçu; Sinan Tandogan
    Abstract: Mediterranean and EU member countries consider enhancing innovation and R&D an important policy objective. In order to improve economic competitiveness and increase their citizens’ welfare, these countries have been formulating and implementing innovation policies. In recent years, the volume of resources allocated to such policies has considerably increased and the number of instruments used in this framework has widened. Nevertheless, a relatively limited number of studies have been conducted to assess the effectiveness of innovation policies in these countries and formulate proposals for those aspects of policies that are in contradiction with the aims.Creation-Date: 2012-09
    Keywords: Private Innovation
  3. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: This paper adds to the small but growing literature that considers a relationship between the way a firm serves foreign markets and its subsequent performance. The current paper is the first to consider this issue for a sample of sub-Saharan African countries and includes data on both manufacturing and services firms. Results from a number of parametric and non-parametric tests for manufacturing industries indicate that there is a clear productivity ordering with firms undertaking outward FDI performing best, followed by exporters with domestically oriented firms performing least well. The results for services firms are more nuanced and indicate that while exporters and firms undertaking outward FDI are more productive than domestically oriented firms, there is no significant difference in productivity between these two types of firms. Despite this, average productivity and point estimates from the regression analysis on services firms suggest that the productivity of exporting firms is larger than that for firms undertaking outward FDI.
    Keywords: exports, foreign direct investment, productivity, services firms
    JEL: F14 F21
    Date: 2013–03
  4. By: Viitamo, Esa
    Abstract: A central aspect of the industrial evolution in the advanced economies is the phenomenon called servitization. In general, the term servitization or product-service transition is used to highlight the change, where the tangible offering of a manufacturing firm is augmented with intangible services. In this paper, servitization is addressed broadly as a strategic reorientation by a manufacturing firm which entails adjustments in the firm business model as well. A useful framework to address the product-service transition is the socio-economic view of service productivity. On that basis, the paper shows how the productive strategy of the servitizing firm is linked with the business model that builds on service-dominant (S-D) logic. The resources and capabilities of the firm are central drivers in servitization. Via the empirical case study of the servitization strategies in the Finnish forest cluster, the paper extends the scope of analysis in the servitization research from the installed base -industries to the process industries. In a wider context, this paper contributes to the research collaboration between Aalto University (BIT) and Research Institute of the Finnish Economy, ETLA in the field of service research.
    Keywords: servitization, strategy, productivity, service-dominant logic, forest-based industries
    JEL: D24 L14 M11 M21
    Date: 2013–08–07
  5. By: Arshad Ali Bhatti; M. Emranul Haque; Denise R. Osborn
    Abstract: This paper argues that excessive financial development in combination with high levels of technological innovation or R&D activities may lead to the former being ineffective in generating economic growth. This hypothesis is examined through a dynamic panel analysis using two measures of financial development, in conjunction with R&D expenditure, for 36 OECD and non-OECD countries. Using a range of panel data estimators, our results show that the relationship between financial development and economic growth is not straightforward; rather, it is conditional upon the level of R&D. Further, we find that a high level of R&D is associated with a weak or negative effect of financial development on economic growth.
    Date: 2013
  6. By: Franck Barry (Trinity College Dublin)
    Abstract: Ireland has been one of the global economic success stories of the last 20 years. National income rose from less than 65% of the EU15 average in the mid 1980s to well above parity today. Ireland is also the most FDI-intensive economy in Europe. Section A of the present report provides an analysis of the rapid economic development of the “Celtic Tiger” era and how Ireland’s status as a successful export platform for foreign Multinational Corporations was achieved. Though the production structure of the economy is heavily weighted towards (largely foreign-owned) high-technology and ICT-using industries, the country lags behind in terms of personal ICT use. The remainder of Section A presents regional and national data on ICT production and diffusion across the economy. The main focus of the report in on the more advanced Southern and Eastern region of the two NUTS II regions into which the country is divided. The indigenous software sector, the emergence and growth of which is the subject of Section B, is very heavily clustered in this region. Section B charts the role played by the foreign-owned high-tech ICT-using sectors in seeding this ICT-producing cluster and provides details of the types of state interventions that emerged through a process of trial and error to support the cluster. The conclusions presented in Section C reflect on the implications of the case study for the roles that FDI and different types of knowledge spillovers can play in the emergence of a knowledge-intensive cluster and on the types of policies that can play a role in assisting its evolution.
    Keywords: ICT, Information and Communication Technologies, software, Ireland, Dublin
    JEL: D22 L52 L86 R12
    Date: 2013–08
  7. By: Cette, G.; Lopez, J.; Mairesse,J.
    Abstract: Our study aims at assessing the actual importance of the two main channels usually contemplated in the literature through which upstream sector anticompetitive regulations may impact productivity growth: business investments in R&D and in ICT. We thus precisely try to estimate what are the specific impacts of these two channels and their shares in total impact as against alternative channels of investments in other forms of intangible capital such as improvements in skills, management and organization. For this, we specify an extended production function relating productivity explicitly to R&D and ICT capital as well as to upstream regulations, and two factor demand functions relating R&D and ICT capital to upstream regulations. These relations are estimated on a panel of 14 OECD countries and 13 industries over the period 1987-2007. Our estimates confirm the results of previous similar studies finding that the impact of upstream regulations on total factor productivity can be sizeable, and they provide evidence that a good part of the total impact, though not a predominant one, goes through both investments in ICT and R&D, and particularly the latter.
    Keywords: Productivity, Growth, Regulations, Competition, Catch-up, R&D, ICT
    JEL: O43 L5 O33 O57 L16 C23
    Date: 2013
  8. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: This paper examines productivity differences between internationally trading and non-trading firms using data on a sample of firms from 19 sub-Saharan African countries. The paper provides the first evidence of whether exporters, importers and two-way traders perform better than non-traders, and whether there are differences in performance between different types of trading firms in sub-Saharan Africa. Our results indicate that exporters, importers and two-way traders perform better than non-exporters, non-importers and non two-way traders. We further find that two-way traders perform better than importers only or exporters only, results largely consistent with recent results for other countries and regions. Considering information on export starters, continuers and exiters we also present some evidence consistent with both self-selection and learning-by-exporting.
    Keywords: firm-level performance, importers, exporters
    JEL: D24 F10 M20 L10
    Date: 2013–03
  9. By: Rantala, Olavi
    Abstract: The study deals with the theory and measurement of competitiveness. The basic theory of firm implies that under constant returns to scale the unit cost of production can be used to measure the marginal cost of production and to model the impact of competitiveness on the market share of a firm. The competitiveness and the market share of a firm is the lower the higher its unit costs are compared to the average unit costs of all firms in the market. Empirical measurement of the unit costs of the Finnish industry is made with respect to Germany. It turns out that the unit costs of the Finnish industry have risen higher than the unit costs of the German industry since 2005, calculated without the effect of electronics industry. In addition to production costs the study deals with the theoretical and empirical impact of transportation costs on competitiveness in export markets. This is an important issue for Finland locating geographically far away from the main markets of the world. A major disadvantage for the future competitiveness of Finnish export industry will be the EU sulphur directive and the possible inclusion of shipping into the EU emissions trading scheme. The longer marine transportation distance from Finland means that Finland will lose competitiveness for example compared to Germany.
    Keywords: competitiveness, imperfect competition, production costs, transportation costs
    JEL: C67 D43 F12
    Date: 2013–08–14
  10. By: Krüger, Jens (Asian Development Bank)
    Abstract: This paper examines the role of international trade in employment growth in micro- and small enterprises using a representative sample of manufacturing firms in six Southeast Asian countries. After controlling for firm and individual characteristics as well as country and sector dummies, participation in international trade plays a significant role in explaining this growth, boosting firm-level growth by 3% per year on average. The fact that firms start exporting quickly after their foundation suggests that reverse causality is not an issue for our estimates. However, biases arising from unobserved heterogeneity cannot be ruled out. Therefore, we exploit the fact that firms were exposed to unexpected variation in real exchange rates between 2005 and 2008 to investigate the causal relationship between trade and employment growth. The results are not conclusive, but they do not suggest that the relationship is driven by unobserved heterogeneity.
    Keywords: MSE graduation; trade; employment growth
    JEL: D22 O12
    Date: 2013–08–01
  11. By: Sergio Schmukler (World Bank); Tatiana Didier (World Bank)
    Abstract: We study the extent to which firms from China and India use capital markets to obtain financing and grow. Using a unique data set on domestic and international capital raising activity and performance, we find that the expansion of financial market activity since the 1990s has been much more limited than the aggregate figures suggest. Relatively few firms raise capital and even fewer firms capture the bulk the financing. Moreover, firms that issue equity or bonds are different and behave differently from other publicly listed firms. Among other things, firms that raise capital are on average larger and grow faster. The differences between users and non-users exist before capital raisings, are associated with the probability of raising capital, and become more accentuated afterwards. The distribution of issuing firms shifts more over time than the distribution of those that do not issue, suggesting little convergence in firm size among listed firms.
    Date: 2013
  12. By: Altomonte, Carlo; Rungi, Armando
    Abstract: We explore the nature of Business Groups, that is network-like forms of hierarchical organization between legally autonomous …rms spanning both within and across national borders. Exploiting a unique dataset of 270,474 headquarters controlling more than 1,500,000 (domestic and foreign) a¢ liates in all countries worldwide, we …nd that business groups account for a signi…cant part of value-added generation in both developed and developing countries, with a prevalence in the lat- ter. In order to characterize their boundaries, we distinguish between an a¢ liate vs. a group-level index of vertical integration, as well as an entropy-like metric able to summarize the hierarchical complexity of a group and its trade-o¤ between exploitation of knowledge as an input across the hierarchy and the associated communication costs. We relate these metrics to host country institu- tional characteristics, as well as to the performance of a¢ liates across business groups. Conditional on institutional quality, a negative correlation exists between vertical integration and hierarchical complexity in de…ning the boundaries of business groups. We also …nd a robust (albeit non-linear) positive relationship between a group’s hierarchical complexity and productivity which dominates the already known correlation between vertical integration and productivity. Results are in line with the theoretical framework of knowledge-based hierarchies developed by the literature, in which intangible assets are a complementary input in the production processes. JEL Classification: L22, L23, F23, L25, D24, G34
    Keywords: …nancial develop- ment, business groups, contract enforcement, corporate ownership, hierarchies, organization of production, Production chains, productivity, property rights, vertical integration
    Date: 2013–06
  13. By: Sophie Osotimehin
    Abstract: RThis paper proposes a novel decomposition of aggregate productivity to evaluate the role of resource reallocation for the cyclical dynamics of aggregate productivity. The decomposition, which is derived from the aggregation of heterogeneous firm-level production functions, accounts for changes in allocative efficiency, as well as for changes in entry and exit. This approach thereby extends Solow (1957)’s growth accounting exercise to a framework with firm heterogeneity and frictions in the allocation of resources across firms. I apply the decomposition to a comprehensive dataset of French manufacturing and service firms and find that entry and exit contribute little to the year-on-year variability of aggregate productivity. Resource reallocation across incumbent firms, however, plays an important role in the dynamics of aggregate productivity. The efficiency of resource allocation improves during downturns and tend to reduce the volatility of aggregate productivity
    Keywords: aggregate productivity, aggregate fluctuations, resource allocation, entry and exit, cleansing
    JEL: E32 O47 D24
    Date: 2013–08
  14. By: Langen, P.W. de; Heij, C.
    Abstract: Port of Rotterdam Authority is a publicly owned but corporatized port development company. In 2004, this organisation was transformed from a municipal department to an independently operating company. The corporatisation intended to improve the overall performance of the port of Rotterdam. Relevant performance indicators to evaluate the effect of this corporatisation include market share, turnover, operating costs, profits, and investments. These indicators are evaluated for two periods, one prior to the corporatisation (1997-2003) and the other afterwards (2005-2011). The comparison of these two periods shows that corporatisation has led to significant performance improvements. This finding is relevant for the ongoing discussion on port governance models.
  15. By: Abildgren, Kim; Vølund Buchholst, Birgitte; Staghøj, Jonas
    Abstract: Utilising a unique data set with annual accounts from around 37,000 Danish non-financial firms spanning almost one and a half decade, we offer microeconometric evidence on bankfirm relationships and the survival of firms during the financial crisis 2008-9. Within the framework of accounting-based credit-scoring models we find that the probability of default during the crisis was significantly higher for firms with a “weak” bank than for comparable firms with a “sound” bank– even after controlling for differences in the credit quality of firms. We discuss how to interpret these results in relation to the real effects of financial crisis. JEL Classification: E44, G21, G33
    Keywords: bank-firm relationships, financial crisis, firm survival, probability of default
    Date: 2013–02
  16. By: Bogetic, Zeljko; Olusi, Olasupo
    Abstract: This note presents the results of an empirical analysis of firm-level productivity growth in Russia's manufacturing sector during the period 2003-08 using a rich Amadeus database as well as the recent EBRD/World Bank Business Enterprise and Performance surveys (BEEPs). The results show that productivity grew steadily between 2003 and 2008, with an annual growth rate averaging 4 percent over the period, showing no signs of a slowdown from the previous period after the 1998 crisis. Firm characteristics such as size, location, age, and the structure of firm ownership are important determinants of productivity, as evidenced by positive effects of scale economies (large firm effect), agglomeration (Moscow-city effect), private ownership, and a firm's industry dominance. Supplemental analysis of the quality of infrastructure -- water, electricity, transport, and the internet -- using BEEPS data show that infrastructure quality gaps reduce firm productivity with water supply gaps having the largest impact.
    Keywords: Transport Economics Policy&Planning,E-Business,Economic Theory&Research,Microfinance,Municipal Financial Management
    Date: 2013–08–01
  17. By: Julie Regolo
    Abstract: This paper studies how a country’s export diversification varies across destination markets. It develops an extension of the Romalis (2004) model which yields two testable predictions. According to the first, exports between similarly endowed countries (“South-South” and “North- North”) are more diversified than exports between differently endowed countries (“South-North” and “North-South”). The second implication is that, for given countries’ production patterns, low bilateral trade costs lead to greater export diversification. These predictions find empirical support in a panel of 102 trade partners and 4998 HS-6 industries over the period 1995-2007. Results show that similarities between trading partners in physical capital, land and human capital endowments per worker are associated with more diversified bilateral exports. Exports are also more diversified when bilateral trade costs are relatively low.
    Keywords: Export diversification, comparative advantage, trade costs, intra-industry trade, North- South trade
    Date: 2013–07
  18. By: Blanc, Elodie; Strobl, Eric
    Abstract: This study estimates and compares the effects of small and large irrigation dams on cropland productivity in South Africa. To this end, a panel data set of South African river basins is constructed. The econometric analysis reveals that although large dams increase cropland productivity downstream, they have a negative effect on cropland within the vicinity. However, their existence can enhance the relatively small positive impact of local small dams. Although a cost-benefit analysis of irrigation benefits shows that small dams may be more viable than large ones, large dams can play a potentially important role within a system of both types of dams.
    Keywords: River Basin Management,Dams and Reservoirs,Hydro Power,Water and Energy,Water Supply and Systems
    Date: 2013–08–01
  19. By: Huemer, Stefan; Scheubel, Beatrice; Walch, Florian
    Abstract: While there are many methods to measure the competitiveness of an economy, most of these concepts ignore the fact that competitiveness can change because of market processes like wage negotiation but also because of political decision-making. Governments that compete with others for factors of production face the incentive to adjust key policy variables to improve their competitive position. Disentangling market-induced and politics-induced changes in competitiveness is not easy, but strongly warranted given current discussions that some EMU Member States should improve their competitive position within the euro area by adjusting policy variables. Increasing country competitiveness is one of the key objectives currently discussed by policy makers in the context of creating an economic union in the euro area, to complement monetary union. We propose a new competitiveness index that captures the dimensions in which politics can influence competitiveness beyond factor price adjustments. Our index shows that the individual components of institutional competitiveness have developed heterogeneously among EMU Member States. To explain these divergent developments, the uneven integration within the EU Single Market may play a role. JEL Classification: E02, E44, F15, H11, N44
    Keywords: competitiveness, Fiscal Policy, institutional competitiveness index
    Date: 2013–06
  20. By: Mukherjee, Vivekananda; Mitra, Siddhartha; Banerjee, Swapnendu
    Abstract: The paper presents a theoretical model with bureaucratic corruption where bribe income can leak out of an economy. In such an economy given its perception about the extent of leakage the government sets the price of public services required for entrepreneurship by maximizing the welfare of the economy. We show that the corruption persists at the equilibrium. The government prices its services at a level higher than their unit cost of provision in high leakage economies. However, the price falls to unit cost level in more prosperous economies. We also find that the number of entrepreneurs starting business and the total income received as bribe are non-increasing functions of the prosperity level and the extent of leakage from the economy. The predictions of the model generate interesting policy implications: for example it clearly shows that in low prosperity economies the control of leakage may induce higher level of corruption, while the opposite is true in the high prosperity economies.
    Keywords: Corruption, Leakage, Entrepreneurship, Pricing of Public Services
    JEL: C72 D73 H57 O17
    Date: 2013–06
  21. By: Adrian Babin (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper uses a Latent Class Stochastic Frontier Approach to factor out the heterogeneity in the data and to provide evidence on the existence of different bank technologies in international banking with different response schedules to external shocks and diverse constraints. We use an unbalanced panel of 756 banks from 77 countries during 2005-2010 for this purpose. Using bank level structural variables we determine four different profit and cost banking technologies in the data. Further analysis indicates heterogeneity not only among the level of profit and cost efficiency, but also regarding the response of banks to the crisis. Interestingly, we find that banks from the same class but from different regions had a different efficiency evolution over the period. Moreover, we document the existence of banks that are more predisposed to be efficient in certain regions than in others. Finally, we document that banks have several potential options for rebalancing the balance sheet for improving the efficiency, albeit some of these strategies have opposite effects on the profit and cost efficiency.
    Keywords: efficiency, heterogeneity, crisis, latent classes
    JEL: G21 G28
    Date: 2013–07
  22. By: Sani Ibrahim, Mr. Saifullahi; Muhammad, Mr. Abubakar
    Abstract: This study examines the impact of Information and Communication Technology (ICT) on banks performance in Nigeria using annual panel data set over 2001 to 2011 periods. The data was analysed using panel unit root, panel cointegration, Fully Modified Ordinary Least Square (FMOLS) and Generalised Method of Moments (GMM) to reveals a positive impact of ICT on banks performance in the country. Therefore, the study concludes that cautious application of ICT apparatus will continue to enhance commercial banks performance in the country unless otherwise disrupted by externalities. The implication of this finding exposes the potentiality of cashless economy in Nigeria for strengthening the efficacy of financial system. Accordingly, the Central Bank of Nigeria’ cashless policy is an initiative at the right direction since it will help in minimising the cost of issuing currency in the fairly performing Nigerian economy. We recommend that there is the need for orienting the populace about the benefit of ICT product on banking operation in particular and the economy in general. In order to promote more patronage of ICT equipments on the one hand and enhance banking culture on the other hand, concerted efforts must be made to translate the ICT device language into the major local languages so that client can find it user-friendly at the midst of prevailing high rate of illiteracy in the country .
    Keywords: Bank, financial system panel data, information and communication technology
    JEL: C23 G21
    Date: 2013–06–10

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