Business Economics http://lists.repec.org/mailman/listinfo/nep-bec Business Economics 2026-08-10 Acquisitions, Entrepreneurial Capital, and Firm Performance https://d.repec.org/n?u=RePEc:rif:report:179&r=&r=bec Abstract We examine how entrepreneurial capital—wealth, experience, skills, and networks—released through acquisitions is reallocated to new and existing firms. We combine Finnish administrative data on firm exits, owners, board members and executives, and financial statements. We identify acquisitions from worker flows and estimate the performance of destination firms using difference-in-differences and doubly robust augmented inverse probability weighting (AIPW) estimators. Entrepreneurs who sell their firms often continue in active ownership, board, and executive roles, especially in existing firms. Acquisition counterparties—acquirers and merger partners—experience substantially faster sales growth than control firms, but their labor productivity develops less favorably, particularly in the first post-acquisition years. Profitability improves relative to controls in the existing firms that former owners join. Newly founded destination firms have substantially higher sales than control firms. We find no evidence that reallocated entrepreneurial capital generates systematic productivity gains or increases the likelihood of equity financing relative to control firms. Pajarinen, Mika Ylhäinen, Ilkka Mergers and acquisitions, Entrepreneurial capital, Serial entrepreneurship, Firm dynamics, Firm Performance, Difference-in-differences 2026-08-03 Personality Traits of Entrepreneurs and the Size of Their Firms https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2173&r=&r=bec In this study, we examine the relationship between personality traits, captured by risk tolerance and the Big Five traits, and firm size, as measured by the number of employees. We show that the personality of entrepreneurs matters for the size of their firm they operate. We use a novel add-on to the German Socio-Economic Panel that includes a sub-sample of owner-managers running larger firms. High levels of risk tolerance – associated with an increased likelihood of firm exit in existing research – is positively associated with firm size for entrepreneurs in the market. High scores in extraversion are also associated with larger firms. However, a high level of openness for experience, a main driver of founding ventures, is negatively related to firm size. Overall, we show that running larger firms is associated with traits that are partially different from those that increase the likelihood of entrepreneurial entry or survival. Berfin Kardaslar Alexander S. Kritikos Lukas Menkhoff Entrepreneurship, risk tolerance, Big Five personality traits, firm size 2026 The micro and macro dynamics of capital flows https://d.repec.org/n?u=RePEc:ehl:lserod:137804&r=&r=bec We study empirically and theoretically the effects of international financial flows on resource allocation. Using the universe of firms in Hungary, we show that removing capital controls lowers firms’ cost of capital and increases household consumption, with the latter playing a dominant role. The consumption channel leads to reallocation of resources toward high ex penditure elasticity activities—such as services—promoting both the expansion of incumbents and firm entry. A multi-sector heterogeneous firm model replicates these dynamics. Our model shows that non-homotheticity in consumption can quantitatively account for the reallocation of resources towards services and successfully replicates the dynamics of aggregate productivity following episodes of financial openness. Saffie, Felipe Varela, Liliana Yi, Kei-Mu firm dynamics;financial liberalization;reallocation;capital flows;TFP;non-homothetic preferences 2026-07-08 The Effects of Immigration Enforcement (E-Verify) on Agricultural Firm Dynamics: Evidence from NETS https://d.repec.org/n?u=RePEc:ags:aaea26:404372&r=&r=bec This study investigates the effects of state-level mandatory E-Verify laws on firm performance in labor-dependent sectors, focusing primarily on U.S. agricultural firms. Using the National Establishment Time Series (NETS) dataset, which provides firm-level sales, employment, and geographic information, we analyze more than 14 million farm-year observations from 1990 to 2019 and exploit the staggered adoption of private-sector E-Verify mandates across seven states. Employing multiple causal identification strategies we find consistent evidence that E-Verify significantly reduces both farm sales and employment. On average, sales decline by about 5 percent and employment by about 3 percent after policy implementation, with effects emerging soon after adoption and persisting over time. The impacts are not uniform across firms: small farms and labor-intensive subsectors such as fruits, vegetables, nurseries, and farm labor contractors experience the largest losses, while larger farms appear more resilient, likely due to greater access to mechanization or alternative labor sources. Geographic results further show that farms located far from borders with non-mandating states face larger declines, suggesting that cross-border labor market access partly offsets enforcement effects. Extending the analysis beyond agriculture, we also document negative impacts in hospitality, food service, and construction industries, while placebo sectors such as finance, insurance, and utilities show little measurable effect. Overall, the findings indicate that E-Verify functions as a negative labor supply shock in sectors highly dependent on immigrant labor, reducing firm scale and productive capacity while disproportionately burdening smaller and labor-intensive businesses. Pathak Chalise, Prayash Kostandini, Gentian Mykerezi, Elton Agricultural and Food Policy 2026 Adoption and investment in AI across the euro area. Insights from harmonised firm-level data https://d.repec.org/n?u=RePEc:ecb:ecbops:2026395&r=&r=bec This paper explores the adoption of artificial intelligence (AI) technologies among euro area firms, using harmonised firm-level data from two dedicated modules of the Survey on the Access to Finance of Enterprises (SAFE) conducted in June and December 2025. Based on responses from around 6, 000 firms across 12 euro area countries, the study examines AI adoption rates, drivers, barriers and economic implications. The findings suggest that AI diffusion among euro area firms is progressing rapidly but unevenly, with significant variation across countries and firm characteristics. Approximately 70% of firms report some level of AI use, but only 7% classify their adoption as significant. Adoption is highest in the Netherlands, Finland and Austria, and lowest in Italy and Ireland. Larger and younger firms, particularly in technology-intensive sectors, are leading adopters. Firms identify expected improvements in business processes as the main driver of adoption, while key barriers include skill shortages, data privacy concerns and system incompatibilities. Current AI use and investment are primarily financed through internal funds, complemented by grants and subsidised bank loans. AI adoption is positively associated with firm productivity, turnover growth, fixed investment and own selling price expectations, particularly among intensive users. Survey data show no evidence yet of aggregate labour shedding; instead, AI adoption is positively associated with employment growth. However, firms’ inflation expectations appear largely unaffected by current AI use. JEL Classification: C93, D22, E31, L25, O33 Ferrando, Annalisa Lamboglia, Sara Rariga, Judit Schmidt, Maurice artificial intelligence, firm-level survey data, inflation expectations, productivity 2026-07 The Wages of Austerity: Executive Pay Caps and the Quiet Life https://d.repec.org/n?u=RePEc:cbt:econwp:26/05&r=&r=bec We study how binding executive pay compression affects managerial behavior and firm outcomes. Using China's 2015 executive pay-cap reform for state-owned enterprises, we compare SOEs with non-SOEs around a policy that sharply reduced executive compensation and limited common substitution channels. Treated firms exhibit lower work effort and CEO engagement, fewer unrelated acquisitions, less risk-related language in disclosure, lower investment, weaker investment efficiency, higher cash holdings, slower cash adjustment, and lower Tobin's Q and total factor productivity. We find little evidence that executives respond by increasing observable perks or tunneling. Instead, the results are more consistent with a passive “quiet life” response, in which weaker monetary incentives reduce managerial initiative and responsiveness. The effects are stronger for older CEOs and in more competitive industries, where performance incentives are likely more salient. CEO turnover rises, especially among high-performing executives, and pay-performance sensitivity declines, suggesting that selection effects and weaker formal incentives reinforce the behavioral response. Treated firms also increase ESG and CSR scores and employment, consistent with greater attention to politically salient outcomes. Overall, the evidence suggests that binding pay compression can generate real efficiency costs even when alternative career, reputational, and political incentives remain in place. Lihan Chen Shaojie Lai P. Raghavendra Rau Qing Sophie Wang Executive compensation, Pay regulation, Managerial incentives, Corporate investment, Firm performance 2026-06-01 Follow FDI: Production networks and the geography of globalization https://d.repec.org/n?u=RePEc:eti:dpaper:26055&r=&r=bec Follow FDI refers to the phenomenon whereby a supplier of a multinational firm establishes foreign affiliates in the same countries as their multinational customer, effectively replicating the supply chain abroad. Using novel Japanese data, we show that roughly one third of local affiliate sales (and purchases) are to other Japanese affiliates operating in the same country, indicating that a substantial share of multinational activity takes place within replicated domestic supply chains. Event studies confirm that when a firm starts selling to a multinational in Japan, the supplier is more likely to become a multinational itself. Our findings provide new micro-level evidence on how domestic value chains shape global value chains and the geography of globalization. The results highlight (i) the importance of domestic production networks in mediating access to international markets and (ii) a novel channel through which multinational activity spills over to domestic suppliers. These findings broaden and enhance our understanding of (i) why firms become multinationals, (ii) the dynamics of affiliate sales and (iii) the potential spillover effects of multinational activity. Andreas MOXNES Yukiko SAITO 2026-07 Automation, Workforce Age Structure, and Firm Productivity: Evidence from Austrian Linked Employer-Employee Data https://d.repec.org/n?u=RePEc:zbw:tuweco:342377&r=&r=bec The aim of this study is to estimate the age–productivity profile of Austrian firms using a linked employer–employee dataset for the years 2013–2022. The OLS and FE estimates indicate a highly significant relationship between workforce age structure and labour productivity. Across both estimation methods, we find an inverted U-shaped age–productivity profile. We also account for capital intensity and the share of automation-related assets (ADRA). The estimation results show that firms with greater capital intensity and higher levels of automation consistently exhibit higher productivity across the distribution. In addition, the marginal effect of the share of ADRA-related capital is greater than that of the agerelated variables. These findings have important implications for both firm strategy and public policy, highlighting the role of technology diffusion, education, and potentially organisational change in sustaining productivity in ageing societies. The empirical strategy is complemented by panel data methods and robustness checks to account for persistence, unobserved heterogeneity, and potential reverse causality. Mahlberg, Bernhard Mara, Isilda Prskawetz, Alexia Gerstner, Isabel Age-productivity profile, Labour productivity, Automation-related assets, Principal component analysis 2026 The Uneven Impact of Industrial Zones on Formal Job Creation in Vietnam https://d.repec.org/n?u=RePEc:nbr:nberwo:35446&r=&r=bec Industrial zones are a widely used industrial policy tool, yet their effects vary enormously. Matching the timing and location of zone establishment to firm-level data in Vietnam, we estimate that a new zone raises formal employment by 2, 000 workers within seven years. This average masks extreme skewness: a handful of zones generate the gains while the rest produce almost none. Zones near major trade hubs account for most of the effect, driven by export-oriented foreign manufacturers. Accounting for spillovers, domestic firms face agglomeration shadows nearby but gain farther out, while foreign manufacturers operate as enclaves, generating few local linkages. Brian McCaig Margaret S. McMillan Marina Mavungu Ngoma Anh T. Pham 2026-07 Mental health and firm pay premiums https://d.repec.org/n?u=RePEc:ese:iserwp:2026-03&r=&r=bec Determining the effect of income on mental health remains an important and open question. We provide new causal evidence using a theory-driven mover design: exploiting job-to-job moves in a continuous-treatment event study, we estimate the effect of changes in firm pay premiums on the use of anti-anxiety and anti-depressant medications. The analysis links Dutch employer–employee records to administrative prescription data over 2006–2022. For the bulk of workers, higher firm pay reduces medication use: five years after a move a 10% increase in firm pay premium reduces anti-depressant use by around 4% of mean us-age. This effect holds across gender and age, and among within-sector movers. However, among the subset of workers experiencing large pay declines, medication use rises before the move and falls afterwards, consistent with mental-health shocks having negative career effects. Effect sizes are larger than those documented for unearned transfers, suggesting that the income–mental-health channel depends on the source of income. Etheridge, Ben Yumoto, Hiromi 2026-08-04 Spreading Out Across Expanding Idea Space https://d.repec.org/n?u=RePEc:fip:fedpwp:103607&r=&r=bec Over nearly two centuries, U.S. inventions have become increasingly dissimilar: not just fewer head-to-head collisions between inventors, but growing distance between neighboring inventions. We document this secular decline in similarity using validated neural language models applied to the full text of claims in over 11 million U.S. patents (1836–2023), corroborated by a 98 percent decline in patent interference rates, a measure of independent simultaneous invention. Measuring this correctly requires validation, since different representations of the same patent text can yield opposite conclusions about whether inventions are converging or spreading out. Our validation framework, the first systematic comparison for patent text, selects among these locations in idea space. The model explains spreading out and connects it to several independently documented patterns — rising R&D investment per inventor, increasing patent values, weakening knowledge spillovers, and declining research productivity. The mechanism is spatial; as inventors spread out to capture new territory, inventions become more valuable but also more costly for others to absorb. In doing so, the model turns spillover intensity, innovation step size, and research productivity from fixed primitives into outcomes of inventor positioning. A calibrated decomposition attributes roughly 40 percent of the long-run decline in U.S. research productivity to these spatial forces, alongside traditional explanations such as fishing out and the burden of knowledge. Where inventors stand relative to each other in idea space matters as much for growth as how many of them there are. Ina Ganguli Jeffrey Lin Vitaly Meursault Nicholas Reynolds Idea Space; Knowledge Spillovers; Research Productivity; Endogenous Growth; Technological Distance; Patent Embeddings 2026-08-05 What Happens to Contractors After States Ban Affirmative Action? https://d.repec.org/n?u=RePEc:cen:wpaper:26-41&r=&r=bec Using restricted Census business records, I explore how banning affirmative action in state contracting affects minority- and women-owned business enterprises (MWBEs). I find that ending affirmative action led MWBE contractors to gradually downsize, with the most pronounced reductions in force experienced by Black-owned businesses and larger MWBEs. Despite these workforce changes, existing MWBEs were no more likely to shut down than other businesses. New MWBEs were relatively less common after a state’s ban, highlighting how bans can shift the demographic composition of new contractors. A calibrated model suggests bans are equivalent to considerable reductions in MWBE productivity and scrap values. Benjamin V. Rosa Affirmative action, public contracting, minority- and women-owned businesses 2026-07 Founder-CEO Presence and Post-IPO Outcomes: Evidence from junior stock markets in Japan https://d.repec.org/n?u=RePEc:eti:dpaper:26056&r=&r=bec This study examines the impact of founder-chief executive officer (CEO) presence on post-initial public offering (IPO) outcomes using a sample of IPOs listed on junior stock markets in Japan. We decompose this relationship into two effects: the founder-CEO tenure effect, capturing leadership continuity after an IPO, and the founder-CEO imprinting effect, reflecting founder-CEO contributions prior to an IPO. Our results reveal that founder-CEO-led firms do not exhibit statistically significant improvements in post-IPO financial performance, measured by Tobin’s q and return on assets (ROA), but the founder-CEO tenure effect is positive and statistically significant for employment and sales growth. These findings suggest that founder-CEOs tend to pursue growth-oriented strategies after an IPO. In contrast, the founder-CEO imprinting effect has no statistically significant impact on either financial performance or firm growth. Distinguishing between tenure and imprinting effects provides a better understanding of how founder-CEO presence shapes post-IPO outcomes. Yuji HONJO Yuya IKEDA 2026-07 Do Monetary Policy Rates Reach Borrowers? Evidence from Household and Firm Loans in 96 Countries https://d.repec.org/n?u=RePEc:nbr:nberwo:35439&r=&r=bec We harmonize survey data on interest rates paid by approximately 15, 000 small and medium enterprises across 125 firm surveys and 285, 000 households across 83 household surveys spanning developing and rich countries to study the relationship between monetary policy rates and borrowing costs faced by SMEs and households. Using within-country variation in policy rates over time, we find that pass-through to firm and household borrowing rates is stronger in richer countries than in poorer ones. Santosh Anagol Shing-Yi Wang 2026-07 AI and Productivity: What Firms Are Saying on Earnings Calls https://d.repec.org/n?u=RePEc:fip:l00001:103585&r=&r=bec The way firms discuss productivity improvements on earnings calls increasingly involves references to AI, even if its effects aren’t clear in aggregate data. Aakash Kalyani Serdar Ozkan Nicholas Sullivan artificial intelligence (AI); earnings calls; productivity 2026-07-31 More Competition, Better Buyouts? When Private Equity Sponsors Compete for Deals https://d.repec.org/n?u=RePEc:cam:camdae:2664&r=&r=bec This paper studies, both theoretically and empirically, how competition among private equity (PE) sponsors for leveraged buyout (LBO) targets shapes deal outcomes. Empirically, we document that sponsor competition and deal multiples have increased over time. We further show that greater competition is associated with a shift toward smaller but higher-quality targets, characterized by lower default risk, stronger operating performance, and lower leverage. In a search-and-matching model of the LBO market, we show that greater competition raises acquisition prices, making low-quality deals more costly to pursue and strengthening sponsors' incentives to screen targets. It also pushes sponsors toward less-contested pools of smaller firms, while encouraging greater specialization and more intensive post-buyout engagement. A calibrated version of the model quantifies how the rise in competition over recent decades has significantly reduced PE returns. Kim, Y. Mayer, S. Wang, T. Yannelis, C. 2026-07-31 Better the Devil You Know: Managers’ Networks and Their Influence on Hiring, Responsibilities, and Performance https://d.repec.org/n?u=RePEc:dpr:wpaper:1275r&r=&r=bec This paper investigates how managers leverage their professional networks (former employees) to influence three key dimensions: hiring, responsibilities, and performance. We use rich transactional data in professional football (soccer) in Europe: over 6k coaches, 80k players, and 100k movements. First, we find that managers rely heavily on their networks for hiring, particularly for non-star workers, and at a somewhat lower cost. Second, managers give network-hired workers more responsibilities, particularly in the first year. Third, network-recruited workers are significantly positively associated with performance. We conduct additional heterogeneity analyses and robustness tests, and discuss generalizability and implications for managers in other industries. Clochard Gwen-Jirō Carlos Gomez-Gonzalez Marco Henriques Pereira 2025-02 Worker Beliefs about Occupational Mobility https://d.repec.org/n?u=RePEc:sef:csefwp:792&r=&r=bec We study how employed workers perceive and respond to opportunities for occupational mobility. Using a large-scale survey of 4, 500 full-time workers in Germany, linked with administrative employment data, we measure workers’ beliefs about the transferability of their skills, the similarity of alternative occupations to theirs, the benefits— potential earnings—and costs—retraining and licensing requirements—of moving to other occupations. We also capture respondents’ beliefs about exposure of their own and alternative occupations to automation and AI. The results reveal that workers are imperfectly informed about opportunities in other occupations: they systematically underestimate task similarity and wages in alternative occupations while overestimating the need for retraining or licensing. These misperceptions are more severe for bluecollar workers and for workers in commercial and administrative occupations, and are strongly negatively correlated with intentions to seek jobs in other occupations. Randomized information treatments providing data on wages, retraining requirements, and displacement risk meaningfully alter workers’ beliefs and mobility intentions, even nine months after the intervention. Pascal Heß Armando Miano Occupational mobility, Information frictions, Job search, Beliefs, Automation, AI. 2026-07-28 Organizational Incentives and the Returns to Technology Adoption https://d.repec.org/n?u=RePEc:nbr:nberwo:35445&r=&r=bec Misaligned incentives within organizations may explain why firms fail to adopt or fully benefit from productive technologies. We conducted a randomized controlled trial in Indian garment factories in which units received an anonymous worker-management communication technology, this technology paired with incentives for HR managers to communicate effectively with workers, or neither (control). We find that the technology alone had no impacts relative to control. But pairing the technology with HR incentives increased productivity by 5%, reduced absenteeism by 13%, and raised worker earnings by 3%. Impacts were driven by greater HR responsiveness and increased worker reporting of production-related issues. Achyuta Adhvaryu Smit Gade Piyush Gandhi Teresa Molina Anant Nyshadham 2026-07 Domestic Value-added and Technological Independence in Chinese EVs https://d.repec.org/n?u=RePEc:ngi:dpaper:26-4&r=&r=bec This paper examines supply-chain localization, domestic value capture, and technological dependence in Chinese electric vehicles using product-level teardown evidence from two representative battery-electric models: the BYD Seal and the Tesla Model 3 manufactured in Shanghai. We identify Tier-1 suppliers, classify them by location and ownership, allocate bill-of-material costs across major subsystems, and adjust domestic content using sector-level value-added and import coefficients from China’s 2023 input-output table. The results show that the supply chains of both vehicles are highly localized in China: 90.8% of BYD Seal suppliers and 96.7% of Tesla Model 3 suppliers are located in China. The estimated domestic value-added share is 82.9%–90.4% for the BYD Seal and 51.3%–57.9% for the Tesla Model 3. Chinese firms dominate batteries and several core EV subsystems, but foreign suppliers remain dominant in advanced automotive semiconductors, especially computing, memory, sensor, and microcontroller chips. The findings highlight both the depth of China's EV supply-chain capability and its remaining technological bottlenecks. Yuqing Xing Peihao Yang Kun Cai Zhi Wang electric vehicles (EVs), global value chains (GVCs), value added, industrial policy, technological independence, China 2026-07