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on Business Economics |
| By: | Cronqvist, Henrik (The Ohio State University); Low, Angie (The Ohio State Unversity); Nilsson, Mattias (Worcester Polytechnic Institute) |
| Abstract: | Economic theories suggest that a firm's corporate culture matters for its policy choices. We construct a parent-spinoff firm panel dataset that allows us to identify culture effects in firm policies from behavior that is inherited by a spinoff firm from its parent after the firms split up. We find positive and significant relations between spinoff firms' and their parents' choices of investment, financial, and operational policies. Consistent with predictions from economic theories of corporate culture, we find that the culture effects are long-term and stronger for internally grown business units and older firms. Our evidence also suggests that firms preserve their cultures by selecting managers who fit into their cultures. Finally, we find a strong relation between spinoff firms' and their parents' profitability, suggesting that corporate culture ultimately also affects economic performance. These results are robust to a series of robustness checks, and cannot be explained by alternatives such as governance or product market links. The contribution of this paper is to introduce the notion of corporate culture in a formal empirical analysis of firm policies and performance. |
| Keywords: | Economics of corporate culture; firm policies; firm performance |
| JEL: | G32 G34 G35 L22 L25 Z10 |
| Date: | 2007–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sifrwp:0048&r=bec |
| By: | Smeets, Valérie (Department of Economics, Aarhus School of Business); Warzynski, Frederic (Department of Economics, Aarhus School of Business) |
| Abstract: | In this paper, we test implications from various theories of hierarchies in organizations, in particular the assignment model (Rosen, 1982), the incentives model (Rosen, 1986), the supervision model (Qian, 1994) and the knowledge- <p> based hierarchy model (Garicano, 2000; Garicano and Rossi-Hansberg, 2006). <p> We use a unique dataset providing personnel records from a large European <p> firm in an high tech manufacturing industry from January 1997 to May 2004. <p> An unusually rare feature of this dataset is that relationships within the hierarchy are reported and we can therefore identify the chain of command. <p> Some of our results are in line with the Garicano and Rossi-Hansberg (2006) <p> model of hierarchies when communication costs are decreasing: we observe <p> an increase in the span, an increase in wage inequality between job levels, and <p> the introduction of a new hierarchical level. However, we also find evidence <p> of learning and reallocation of talent within and across job levels, a finding <p> that can not be explained by a static model of knowledge based hierarchy <p> but rather by dynamic models of careers in organizations (e.g. Gibbons and <p> Waldman, 1999). We then propose a new model of hierarchies where individuals accumulate general and managerial human capital on the job, and firms <p> learn gradually about individuals' managerial ability and allocate managers <p> to span according to their expected effective ability. This theory explains our <p> empirical findings and provides a richer theory of careers in hierarchie |
| Keywords: | hierarchy; span of control; wage determination; promotions; careers |
| JEL: | J24 J31 |
| Date: | 2006–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:aareco:2006_010&r=bec |
| By: | CASAMATTA, Catherine; GUEMBEL, Alexander |
| JEL: | D82 G30 J33 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:6747&r=bec |
| By: | Chhaochharia, Vidhi; Laeven, Luc |
| Abstract: | We evaluate the impact of firm-level corporate governance provisions on the valuation of firms in a large cross-section of countries. Unlike previous work, we distinguish between governance provisions that are set at the country-level and those that are adopted at the firm-level. We find that governance provisions adopted by firms beyond those imposed by regulations and common practices among firms in the country have a strong, positive effect on firm valuation. Our results indicate that, despite the costs associated with improving corporate governance at the firm level, many firms choose to adopt governance provisions beyond what can be considered the norm in the country, and these improvements in corporate governance have a positive effect on firm valuation. These findings contribute to the current debate on the extent to which corporate governance reform can be left to the “invisible hand” of the market or requires government interference. |
| Keywords: | corporate governance; firm valuation; government policy; laissez faire |
| JEL: | G3 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6256&r=bec |
| By: | John M. Abowd (Cornell University, U.S. Census Bureau, CREST, NBER and IZA); John Haltiwanger (University of Maryland, U.S. Census Bureau, NBER and IZA); Julia Lane (NORC, University of Chicago and IZA); Kevin L. McKinney (LEHD, U.S. Census Bureau); Kristin Sandusky (LEHD, U.S. Census Bureau) |
| Abstract: | We estimate the effects of technology investments on the demand for skilled workers using longitudinally integrated employer-employee data from the U.S. Census Bureau’s Longitudinal Employer-Household Dynamics Program infrastructure files spanning two Economic Censuses (1992 and 1997). We estimate the distribution of human capital and its observable and unobservable components within each business for each year from 1992 to 1997. We measure technology using variables from the Annual Survey of Manufactures and the Business Expenditures Survey (services, wholesale and retail trade), both administered during the 1992 Economic Census. Static and partial adjustment models are fit. There is a strong positive empirical relationship between advanced technology and skill in a crosssectional analysis of businesses in both sectors. The more comprehensive measures of skill reveal that advanced technology interacts with each component of skill quite differently: firms that use advanced technology are more likely to use high-ability workers, but less likely to use high-experience workers. These results hold even when we control for unobservable heterogeneity by means of a selection correction and by using a partial adjustment specification. |
| Keywords: | technology, demand for skill, matched employer-employee data, older workers |
| JEL: | J21 J23 L23 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2707&r=bec |
| By: | Kostel Gerndorf (School of Economics and Business Administration, Tallinn University of Technology) |
| Abstract: | One of the most popular topic in the organisation and management during the last 15 years has been the subject of business processes. The present paper presents fundamentals of the theory of procedural analysis. Procedural analysis is an organisation improvement method elaborated at Tallinn University of Technology in 1972–1974, the main content of which is the modelling and improvement of the organisational processes. Procedural analysis is a general methodology, theory and methods for a systematic treatment of processes in all organisations. The method is based on the general system theory and functional approach. It means that organisation’s performance is discussed as a system of functions and business processes are discussed in relationship with organisation’s functions. An outcome of using the method is a system of procedural rules, which is a graphic-verbal model of organisation’s performance. Discussion of organisational processes with the method of procedural analysis is a part of the organisation theory. Without analysing processes it is not possible to have a complete organisation theory. |
| Keywords: | system, function, organisation’s performance, business process, modelling, procedure, procedural rule, process parameters, organisation theory |
| JEL: | L15 L20 L23 M10 M11 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ttu:wpaper:143&r=bec |
| By: | John M. Abowd; John Haltiwanger; Julia Lane; Kevin L. McKinney; Kristin Sandusky |
| Abstract: | We estimate the effects of technology investments on the demand for skilled workers using longitudinally integrated employer-employee data from the U.S. Census Bureau's Longitudinal Employer-Household Dynamics Program infrastructure files spanning two Economic Censuses (1992 and 1997). We estimate the distribution of human capital and its observable and unobservable components within each business for each year from 1992 to 1997. We measure technology using variables from the Annual Survey of Manufactures and the Business Expenditures Survey (services, wholesale and retail trade), both administered during the 1992 Economic Census. Static and partial adjustment models are fit. There is a strong positive empirical relationship between advanced technology and skill in a cross-sectional analysis of businesses in both sectors. The more comprehensive measures of skill reveal that advanced technology interacts with each component of skill quite differently: firms that use advanced technology are more likely to use high-ability workers, but less likely to use high-experience workers. These results hold even when we control for unobservable heterogeneity by means of a selection correction and by using a partial adjustment specification. |
| JEL: | J23 J24 O33 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13043&r=bec |
| By: | Hugo Ñopo (Inter-American Development Bank and IZA); Patricio Valenzuela (Inter-American Development Bank) |
| Abstract: | Using the 1996-2001 Chilean CASEN Panel Survey, this paper analyzes the impact on income of the switch from salaried employment to entrepreneurship (self-employment and leadership of micro-enterprises). By means of a difference-in-differences non-parametric matching estimator the paper alleviates problems of selection bias (on observable and unobservable traits) and creates the appropriate counterfactuals of interest. The results indicate that the income gains associated with the switch from salaried employment to entrepreneurship are positive, statistically significant and financially substantial. Even more, the results are qualitatively the same using mean and medians, suggesting that the impacts are not influenced by the presence of few "superstar winners." Additionally, the income changes associated with the reverse switches (from self-employment to salaried jobs) are negative. The results also suggest interesting gender differences, as females show higher gains than males on the switch from salaried jobs to entrepreneurship and lower losses on the reverse switch. |
| Keywords: | difference-in-differences, non-parametric matching, micro-enterprises |
| JEL: | J16 J31 J41 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2716&r=bec |
| By: | Smeets, Valérie (Department of Economics, Aarhus School of Business); Ierulli, Kathryn (Graduate School of Business); Gibbs, Michael (Graduate School of Business) |
| Abstract: | We examine the organizational dynamics of integration post merger. Our basic question is whether <p> there is evidence of conflict between employees from the two merging firms. Such conflict can arise <p> for several reasons, including firm-specific human capital, corporate culture, power, or favoritism. <p> We examine this issue using a sample of Danish mergers. The results are consistent with the basic <p> hypothesis. Controlling for other effects, employees from the acquirer fare better than employees <p> from the acquired firm, suggesting that they have greater power in the newly merged hierarchy. As <p> a separate effect, the more that either firm dominates the other in terms of number of employees, <p> the better do its employees fare compared to employees from the other firm. This suggests that majority <p> / minority status is also important to assimilation of workers, much as in ethnic conflicts. Finally, <p> greater overlap of operations decreases turnover. This finding is inconsistent with the view <p> that workers of the two firms may be better substitutes for each other. However, the result and our <p> other findings are consistent with the view that more similar workers (in terms of either firm- or <p> industry-specific human capital) are easier to integrate post merger |
| Keywords: | Mergers; internal organization; conflicts; personnel economics |
| JEL: | G34 J63 M14 |
| Date: | 2006–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:aareco:2006_008&r=bec |
| By: | Fox, Jeremy T. (University of Chicago); Smeets, Valérie (Department of Economics, Aarhus School of Business) |
| Abstract: | Firms in the same industry can differ in measured total factor productivity (TFP) by multiples of 3. Griliches <p> (1957) suggests one explanation: the quality of inputs differs across firms. Labor inputs are traditionally <p> measured only as the number of workers. We investigate whether adjusting for the quality of labor inputs <p> substantially decreases measured TFP dispersion. We add labor market history variables such as experience <p> and firm and industry tenure, as well as general human capital measures such as schooling and sex. We also <p> investigate whether an innovative structural estimator for productivity due to Olley and Pakes (1996) substantially <p> decreases measured residual TFP. Combining labor quality and structural estimates of productivity, the <p> one standard deviation difference in residual TFPs in manufacturing drops from 0.70 to 0.67 multiples. Neither <p> the structural productivity measure nor detailed input quality measures explain the very large measured <p> residual TFP dispersion, despite statistically precise coefficient estimates |
| Keywords: | production function estimation; total factor productivity; input quality; structural estimates of productivity |
| JEL: | D24 L23 M11 |
| Date: | 2007–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:aareco:2007_002&r=bec |
| By: | Mike Peng; Yi Jiang |
| Abstract: | There is a major debate regarding the role of concentrated family ownership and control in large firms, with three positions suggesting that such concentration is (1) good, (2) bad, or (3) irrelevant for firm performance. This article reports two studies to shed further light on this debate. Study 1 uses 744 publicly listed large firms in eight Asian countries to test competing hypotheses on the impact of the combination of family ownership and control on firm performance. On a country-by-country basis, our findings support all three positions. On an aggregate, pooled sample basis, the results support the “irrelevant” position. Study 2, based on a sample of 688 firms from the same eight Asian countries, endeavors to answer why Study 1 obtains different results for different countries. We theorize and document that Study 1 findings may be systematically associated with the level of shareholder protection embodied in legal and regulatory institutions. Study 2 thus sketches the contours of a cross-country, institution-based theory of corporate governance. Overall, our two studies lead to a finer-grained and more cumulative understanding of the crucial debate on family ownership and control in large firms. |
| Keywords: | corporate governance, family firm, ownership, Asia Pacific |
| JEL: | M1 |
| Date: | 2006–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2006-840&r=bec |
| By: | Manfred Königstein (University of Erfurt and IZA); Gabriele K. Ruchala (ELSE, University College London) |
| Abstract: | Within a laboratory experiment we investigate a principal-agent game in which agents may, first, self-select into a group task (GT) or an individual task (IT) and, second, choose work effort. In their choices of task and effort the agents have to consider pay contracts for both tasks as offered by the principal. The rational solution of the game implies that contract design may not induce agents to select GT and provide positive effort in GT. Furthermore it predicts equal behavior of agents with different productivities. In contrast, considerations of trust, reciprocity and cooperation - the social-emotional model of behavior - suggest that contract design can influence the agents’ willingness to join groups and provide effort. We analyze the data by applying a two-step regression model (multinomial logit and tobit) and find that counter to the rational solution, contract design does influence both, task selection and effort choice. The principal can increase participation in work groups and can positively influence group performance. Larger payment increases the share of socially motivated agents in work groups. The selection effect is larger than the motivation effect. |
| Keywords: | principal-agent, experiment, work group, selection, motivation |
| JEL: | M5 J3 C7 C9 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2697&r=bec |
| By: | Erkki Koskela (University of Helsinki and IZA); Rune Stenbacka (Göteborg University and Swedish School of Economics, Helsinki) |
| Abstract: | We evaluate the effects of outsourcing and wage solidarity on wage formation and equilibrium unemployment in a heterogeneous labour market, where wages are determined by a monopoly labour union. We find that outsourcing promotes the wage dispersion between the high-skilled and low-skilled workers. When the labour union adopts a solidaristic wage policy, it will magnify, and not dampen, this tendency. Further, higher outsourcing will increase equilibrium unemployment among the high-skilled workers, whereas it will reduce it among the low-skilled workers. Overall, outsourcing will reduce economy-wide equilibrium unemployment under the reasonable condition that the proportion of high-skilled workers is sufficiently low. |
| Keywords: | outsourcing, wage solidarity, labour market imperfections, equilibrium unemployment |
| JEL: | E23 E24 J31 J51 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2733&r=bec |
| By: | Francesca Lotti (Bank of Italy); Enrico Santarelli (University of Bologna, Max Planck Institute of Economics Jena and ENCORE Amsterdam); Marco Vivarelli (Università Cattolica del Sacro Cuore, CSGR Warwick, Max Planck Institute of Economics Jena and IZA) |
| Abstract: | According to Gibrat’s Law of Proportionate Effect, the growth rate of a given firm is independent of its size at the beginning of the period examined. While earlier studies tended to confirm the Law, more recent research generally rejects it. This paper reconciles these two streams of literature, taking into account the role of market selection and learning in reshaping a given population of firms through time. Consistently with previous studies, we found that Gibrat’s Law has to be rejected ex ante, since smaller firms tend to grow faster than their larger counterparts. However, a significant convergence towards Gibrat-like behavior can be detected ex post. This finding is an indication that market selection "cleans" the original population of firms, so that the resulting industrial "core" does not depart from a Gibrat-like pattern of growth. From a theoretical point of view, this result is consistent with those models based on passive and active learning, and can be seen as a defense of the validity of the Law in the long-run. |
| Keywords: | Gibrat’s Law, firm size, firm age, firm survival, firm growth |
| JEL: | L11 L26 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2744&r=bec |
| By: | Andrea Bassanini (OECD, CEPN, University of Paris 13 and ERMES, University of Paris 2); Giorgio Brunello (University of Padova, KIER Kyoto, CESifo and IZA) |
| Abstract: | We develop a theoretical and empirical analysis of the impact of barriers to entry on workplace training. Our theoretical model yields ambiguous predictions on the sign of this relationship. On the one hand, given the number of firms, a deregulation reduces profits per unit of output, and thereby reduces training. On the other hand, the number of firms increases, and so does the output gain from training, which facilitates the investment in training. Our numerical simulation shows that for reasonable values of the parameters a negative relationship prevails. We use repeated cross section data from the European Labour Force Survey to investigate empirically the relationship between product market regulation and training incidence in a sample of 15 European countries and 13 industrial sectors, which we follow for about 7 years. Our empirical results are unambiguous and show that an increase in product market deregulation generates a sizeable increase in training incidence. |
| Keywords: | training, product market competition, Europe |
| JEL: | J24 L11 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2746&r=bec |
| By: | Thomas Cornelißen (University of Hannover); Olaf Hübler (University of Hannover, IAB and IZA) |
| Abstract: | We estimate wage and job tenure functions that include individual and firm effects capturing time-invariant unobserved worker and firm heterogeneity using German linked employeremployee data (LIAB data set). We find that both types of heterogeneity are correlated to the observed characteristics and that it is therefore warranted to include individual and firm fixed effects in both the wage and the job tenure equation. We look into the correlation of the unobserved heterogeneity components with each other. We find that high-wage workers tend to be low-tenure workers, i.e. higher unobserved ability seems to be associated with higher job mobility. At firm level, there seems to be a trade-off between wages and job stability: High-wage firms tend to be low-tenure firms, which suggests that low job stability may be compensated by higher wages. High-wage workers seem to sort into low-wage/high-tenure firms. They seem to forgo some of their earnings potential in favour of higher job stability. |
| Keywords: | linked employer-employee data, unobserved worker and firm heterogeneity, tenure, wages |
| JEL: | C23 J31 J62 J63 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2741&r=bec |
| By: | MITRAILLE, Sébastien; MOREAUX, Michel |
| JEL: | L13 D43 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:6601&r=bec |
| By: | PATHAK, Parag; TIROLE, Jean |
| JEL: | D82 F33 F34 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:2360&r=bec |
| By: | Lutz Bellmann (IAB Nuremberg, University of Hannover and IZA); Martin Brussig (IAQ, University of Duisburg-Essen) |
| Abstract: | In the demographic change, a prolongation of individual employment and thus of beginning a new employment in later stages of the work life is of growing importance. On the base of microeconomic data (establishment panel of the IAB), this paper analyses firms’ characteristics correlating with their recruitment behaviour towards the elderly (age 50 and more). Special consideration is given to the labour supply, which is here observed as the existence of an application from job seekers of age 50 and more, and which is a condition for recruiting of older employees. The results show that about 75% of the firms did not have an application of older job seekers. Of the remaining firms, which reported to have applications from older job seekers, about half of the firms recruited older job seekers, and the other half did not so. However, there are remarkable differences between firms which received applications from older job seekers and firms which are willing to recruit older job candidates. Possible explanations point to the search behaviour of job seekers as well as to the signalling of firms on the labour market towards the elderly. |
| Keywords: | economics for the elderly, labour supply, labour demand, vacancies |
| JEL: | J14 J22 J23 J63 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2721&r=bec |
| By: | Alexandra Spitz-Oener (Humboldt University Berlin and IZA) |
| Abstract: | The increased diffusion of computers is one of the fundamental changes at workplaces in recent decades. While the majority of workers now spend a substantial fraction of their working day with a computer, research on the wage effect of computer use effectively came to a halt after DiNardo and Pischke [1997] found that wages were also positively associated with pencil use, calling into question the ability to distinguish the effect of computers from other confounding factors. Using the same data set as DiNardo and Pischke, but a more recent wave, this paper revitalizes the discussion by showing that the pencil effect disappeared in 1998/99, whereas the computer effect is still present. Computer users - but not pencil users - have experienced a pronounced shift towards analytical and interactive tasks, for which they are rewarded in the workplace. |
| Keywords: | computer wage differential, pencil wage differentials, changing skill requirements |
| JEL: | J31 C13 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2729&r=bec |
| By: | Ramón Faulí-Oller (Universidad de Alicante); Joel Sandonís (Universidad de Alicante); Juana Santamaria-Garcia (Universidad de Alicante) |
| Abstract: | In this paper, we show that downstream mergers increase the incentives of an up-stream firm to invest in cost-reducing R&D. The upstream firm revenues increase with industry profits, which in turn increase with concentration downstream and this explains the positive link between concentration and investment. This effect is so important that it outweights the negative effect on prices due to lower competition. Therefore, in our context, horizontal mergers are pro-competitive. |
| Keywords: | downstream mergers, upstream innovation, competition |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2007-11&r=bec |