New Economics Papers
on Efficiency and Productivity
Issue of 2007‒08‒18
six papers chosen by

  1. Technological Spillovers and Productivity in Italian Manufacturing Firms By Claudio A. Piga; Giuseppe Medda
  2. Cross-Border Acquisitons and Target Firms' Performance: Evidence from Japanese Firm-Level Data By Kyoji Fukao; Keiko Ito; Hyeg Ug Kwon; Miho Takizawa
  3. FDI and Technology Spillovers in China By Sea Jin Chang; Jaiho Chung; Dean Xu
  4. Plant Turnover and TFP Dynamics in Japanese Manufacturing By Kyoji Fukao; Young Gak Kim; Hyeog Ug Kwon
  5. Assessing the Impact of Labour Market Policies on Productivity: A Difference-in-Differences Approach By Andrea Bassanini
  6. Do CEOs matter? By Morten Bennedsen; Francisco Perez-Gonzalez; Daniel Wolfenzon

  1. By: Claudio A. Piga (Dept of Economics, Loughborough University); Giuseppe Medda (DEIR, University of Sassari, Italy.)
    Abstract: We study whether a firm’s total factor productivity dynamics is positively influenced by its own R&D activity and by the technological spillovers generated at the intra- and inter-sectorial level. Our approach corrects simultaneously for the endogeneity and the selectivity biases introduced by the use of a firm’s own R&D as a regressor. A firm’s involvement in R&D activities accounts for significant productivity gains. Firms also benefit from spillovers originating from their own industries, as well as from innovative upstream sectors.
    Keywords: R&D, TFP, selectivity, treatment effect
    JEL: C21 C80 D24 O30
    Date: 2007–07
  2. By: Kyoji Fukao; Keiko Ito; Hyeg Ug Kwon; Miho Takizawa
    Keywords: FDI, TFP, Acquisition, Selection bias, Propensity score matching, Average treatment effect abstract: Using Japanese firm-level data for the period from 1994-2002, this paper examines whether a firm is chosen as an acquisition target based on its productivity level, profitability and other characteristics and whether the performance of Japanese firms that were acquired by foreign firms improves after the acquisition. In our previous study for the Japanese manufacturing sector, we found that M&As by foreigners brought a larger and quicker improvement in total factor productivity (TFP) and profit rates than M&As by domestic firms. However, it may be argued that firms acquired by foreign firms showed better performance simply because foreign investors acquired more promising Japanese firms than Japanese investors did. In order to address this potential problem of selection bias problem, in this study we combine a difference-in-differences approach with propensity score matching. The basic idea of matching is that we look for firms that were not acquired by foreign firms but had similar characteristics to firms that were acquired by foreigners. Using these firms as control subjects and comparing the acquired firms and the control subjects, we examine whether firms acquired by foreigners show a greater improvement in performance than firms not acquired by foreigners. Both results from unmatched samples and matched samples show that foreign acquisitions improved target firms’ productivity and profitability significantly more and quicker than acquisitions by domestic firms. Moreover, we find that there is no positive impact on target firms’ profitability in the case of both within-group in-in acquisitions and in-in acquisitions by domestic outsiders. In fact, in the manufacturing sector, the return on assets even deteriorated one year and two years after within-group in-in acquisition, while the TFP growth rate was higher after within-group in-in acquisitions than after in-in acquisitions by outsiders. Our results imply that in the case of within-group in-in acquisitions, parent firms may be trying to quickly restructure acquired firms even at the cost of deteriorating profitability.
    JEL: C14 D24 F21 F23
    Date: 2007–02
  3. By: Sea Jin Chang; Jaiho Chung; Dean Xu
    Abstract: Using a database of Chinese firms, we examine the effects of technology spillovers not only between foreign entrants and local firms but also between “modernized” local firms to other local firms. Our results show that the increased presence of foreign multinationals within industries and in their upstream sectors positively affected the productivity of local firms. The positive intra-industry spillover effect from wholly owned subsidiaries becomes evident when the Chinese government’s restriction on foreign ownership was lifted. We also find strong spillover effects among local firms.
    Keywords: foreign direct investment, spillover effects, China
    JEL: F2 O2
    Date: 2007–07
  4. By: Kyoji Fukao; Young Gak Kim; Hyeog Ug Kwon
    Abstract: This study analyzes the cause of the slowdown in Japan’s TFP growth during the 1990s. Many preceding studies, examining the issue at the macro- or industry-level, have found that the slowdown was primarily due to the stagnation in TFP growth in the manufacturing sector. Using establishment level panel data covering the entire sector, we investigate the causes of the TFP slowdown and find that the reallocation of resources from less efficient to more efficient firms was very slow and limited. This “low metabolism” seems to be an important reason for the slowdown in Japan’s TFP growth.
    JEL: O4 O53
    Date: 2006–07
  5. By: Andrea Bassanini
    Abstract: The impact of four labour market policies – employment protection legislation, minimum wages, parental leave and unemployment benefits – on productivity is examined here, using annual cross-country aggregate data on these policies and industry-level data on productivity from 1979 to 2003. We use a "difference-in-differences" framework, which exploits likely differences in the productivity effect of policies in different industries. Our identifying assumption is that a specific policy influences worker or firm behaviour, and thereby productivity, more in industries where the policy in question is likely to be more binding than in other industries. The advantage of this approach is twofold. First, as in standard cross-country analysis, we can exploit the cross-country variation of policies. Second, in contrast with standard cross-country analysis, we can control for unobserved factors that, on average, are likely to have the same effect on productivity in both policy-binding and non-binding industries. <BR>Nous examinons l'impact de quatre politiques du marché du travail – la législation pour la protection de l'emploi, le salaire minimum, le congé parental et l'indemnisation du chômage – sur la productivité. Pour ces politiques, nous utilisons des données annuelles agrégées comparables entre pays ainsi que des données sectorielles sur la productivité de 1979 à 2003 sont utilisées. Nous analysons ces données sur la base d'une méthode de "différence de différences", qui exploite la variabilité des effets des politiques dans les différents secteurs. Notre stratégie d'identification se fonde sur l'hypothèse que les comportements des entreprises ou des salariés, et donc leur productivité, sont davantage influencés par une politique dans les secteurs d'activité où celle-ci est vraisemblablement plus contraignante. L'avantage de cette approche est double. D'une part, à l'instar des analyses agrégées concernant plusieurs pays, nous pouvons exploiter la variabilité des politiques entre les pays. D'autre part, contrairement à ces analyses, nous pouvons contrôler pour des facteurs inobservés qui, en moyenne, ont vraisemblablement le même effet sur la productivité dans les secteurs où les politiques sont contraignantes et dans les secteurs où elles ne le sont pas.
    JEL: J24 O47
    Date: 2007–06–15
  6. By: Morten Bennedsen; Francisco Perez-Gonzalez; Daniel Wolfenzon
    Abstract: Estimating the value of top managerial talent is a central topic of research that has attracted widespread attention from academics and practitioners. Yet, studying the impact of managers on firm performance is difficult because of endogeneity and omitted variables concerns. In this paper, we test for the impact of managers on firm performance in two ways. First, we examine whether top executive deaths have an impact on firm performance, focusing on the manager and firm characteristics that are associated to large manager-death effects. Second, we test for the interaction between the personal and professional activities of managers by examining the effect of deaths of immediate family members (spouses, parents, children, etc) on firm performance. Our main findings are three. First, CEO deaths are strongly correlated with declines in firms operating profitability, asset growth and sales growth. Second, the death of board members does not seem to affect firm prospects, indicating that not all senior managers are equally important for firms’ outcomes. Third, CEOs’ immediate family deaths are significantly negatively correlated to firm performance. This last result suggests a strong link between the personal and business roles that top management plays, a connection that is present even in large firms. Overall, our findings demonstrate CEOs are extremely important for firms’ prospects.
    Date: 2007–03

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