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on Business Economics |
| By: | A. Kerem Coşar (The University of Chicago Booth School of Business); Nezih Guner (ICREA-MOVE, Universitat Autònoma de Barcelona and Barcelona GSE); James Tybout (Pennsylvania State University and NBER) |
| Abstract: | This paper explores the effects of tariffs, trade costs, and firing costs on firm dynamics and labor markets outcomes. The analysis is based on a general equilibrium model with labor market search frictions, wage bargaining, firing costs, firm-specific productivity shocks, and endogenous entry/exit decisions. Firing costs reduce firms' profits and discourage them from quickly adjusting their employment levels in response to idiosyncratic shocks. Tariffs and other trade costs reduce rents for efficient firms and increase rents for inefficient firms, as in Melitz (2003). These well-known effects interact with idiosyncratic productivity shocks and with scale economies in hiring costs to determine the equilibrium size distribution of firms, entry/exit rates, job turnover rates, rate of informality, and cross-firm wage distributions. |
| Date: | 2011–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:imd:wpaper:wp2011-06&r=bec |
| By: | Schlicht, Ekkehart (University of Munich) |
| Abstract: | Internal organization relies heavily on psychological consistency requirements. This thought has been emphasized in modern compensation theory, but has not been extended to organization theory. The perspective sheds new light on several topics in the theory of the firm, like the boundaries of the firm, the importance of fairness concerns within firms, the attenuation of incentives, or the role of routines and incentives. It implies a perceptional theory of the firm that is realistic in the sense advocated by Ronald Coase (1937). |
| Keywords: | theory of the firm, hierarchy, evolutionary theory of the firm, perceptional theory of the firm, consistency, small numbers, centralization paradox, Williamson’s puzzle, compensation, boundaries of the firm, fairness, idiosyncratic exchange, entitlements, obligations, routines, framing, Simon, employment relationship, fairness, ownership effect, skunkworks, disruptive technologies, Tayloristic organization, holistic organization |
| JEL: | B52 D02 L2 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5644&r=bec |
| By: | Xu, Zhiwei; Fan, Haichao |
| Abstract: | Our structural VAR shows that the new business formation in U.S. data has similar positive co-movement pattern as common aggregate variables in response to a favorable anticipated shock about technology. However, incorporating firm dynamics into Jaimovich and Rebelo's (Jaimovich and Rebelo, 2009, American Economic Review) model cannot explain our empirical fi nding. Even worse, the model predicts an aggregate recession instead of a boom. Then, we show that this problem can be resolved with a minor modification by introducing endogenous survival rate of the new entrants. |
| Keywords: | Firm Dynamics; Aggregate Co-movement; Expectation Driven Business Cycle; News Shocks |
| JEL: | E32 E22 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:30203&r=bec |
| By: | Katsuya Takii (Osaka School of International Public Policy, Osaka University) |
| Abstract: | We construct a dynamic assignment model that explains persistent productivity differences between firms. Large expected organization capital (firm-specific knowledge) attracts skilled workers, who help to accumulate organization capital. Accumulated large organization capital leads to good performances, which, in turn, confirm high expectations. It is shown that the sluggish movement of expected productivity that occurs through this positive feedback can play a role similar to an unobserved fixed effect in the productivity dynamics. Our calibration exercises suggest that the proposed feedback accompanied by amplification mechanisms inherent in the assignment model can explain a major part of the observed persistence and disparity in productivity. |
| Keywords: | Organization Capital, Assignment, Productivity, Disparity, Persistence |
| JEL: | J24 L25 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:osp:wpaper:11e004&r=bec |
| By: | Dieter Kuhn (University of Basel) |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:bsl:wpaper:02/11&r=bec |
| By: | Keiichi Hori (Faculty of Economics, Ritsumeikan University); Hiroshi Osano (Institute of Economic Research, Kyoto University) |
| Abstract: | Given an owner's noncommitment timing strategy and a manager's hidden action, we consider how the optimal compensation contract for the manager is designed and how the corresponding timing decisions to launch the project and replace the manager are determined. Using a real options approach, we show that in comparison with the firstbest case, the higher (lower)-quality project is launched later (at the same time as the first-best case), whereas the incumbent manager is replaced earlier. We also indicate that compared with the case of the owner’s commitment timing strategy and the manager's hidden action, the higher (lower)-quality project is launched later (at the same time as the first-best case), whereas the incumbent manager is (is not necessarily) replaced later if the hidden-action problem is severe enough (is not severe enough). Unlike the folklore result of the standard moral hazard model, severance pay may serve to minimize the compensation for the manager's loss of his option value caused by loss of corporate control by committing the owner to delaying replacement of the manager if the hidden-action problem is not too severe. |
| Keywords: | CEO turnover, executive compensation, noncommitment, real options, severance pay. |
| JEL: | D82 G30 G34 M51 M52 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:768&r=bec |
| By: | Giordano Mion; Luca David Opromolla |
| Abstract: | This paper investigates whether the arrival of managers with export experience, i.e. experience acquired through participation in the export activity of previous employers, is related to firms’ international trade status and to what extent this relationship is of a causal nature. We construct a worker-firm matched panel dataset which enables us to track managers across different firms over time and observe firms’ trading stance as well as a large set of workers’ and firms’ characteristics. Contrary to blue and white collars, we find that managers are paid a sizeable premium for export experience which has both a level and a trend component. Conditioning for the firm past trade status, we find that a one standard deviation increase in the firm’s share of managers’ with export experience corresponds to about 35% more chances of starting to export. The impact is stronger for larger firms and is roughly of the same order of magnitude of the firm productivity effect. On the contrary, export experience acquired by managers from previous employers positively affects the capacity to keep exporting in small firms only. To give a causality flavor to our findings, we use in a final step an IV strategy that mimics a random matching between managers with export experience and firms. IV estimations indicate that export experience matters even more for entry while it has no effect on exit. |
| JEL: | F10 L25 J31 J60 M50 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201104&r=bec |
| By: | Stéphane Dées (European Central Bank, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.); Nico Zorell (University of Tübingen.) |
| Abstract: | Drawing on a large sample of countries, this paper explores whether closer economic ties between countries foster business cycle synchronisation and disentangles the role of the various channels, including trade and financial linkages as well as the similarity in sectoral specialisation. Overall, our results confirm that trade integration fosters business cycle synchronisation. Similar patterns of sectoral specialisation also lead to closer business cycle co-movement. By contrast, it remains difficult to find a direct relationship between bilateral financial linkages and output correlation. However, our results suggest that financial integration affects business cycle synchronisation indirectly by raising the similarity in sectoral specialisation. Through this indirect link, financial integration tends to raise business cycle comovement between countries. JEL Classification: E32, F41, E44. |
| Keywords: | International transmission of shocks, Financial integration, International business cycle. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111322&r=bec |
| By: | Vojislav Maksimovic; Gordon Phillips; Nagpurnanand Prabhala |
| Abstract: | We examine how firms redraw their boundaries after acquisitions using plant-level data. We find that there is extensive restructuring in a short period following mergers and full-firm acquisitions. Acquirers of full firms sell 27% and close 19% of the plants of target firms within three years of the acquisition. Acquirers with skill in running their peripheral divisions tend to retain more acquired plants. Retained plants increase in productivity whereas sold plants do not. These results suggest that acquirers restructure targets in ways that exploit their comparative advantage. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:11-11&r=bec |
| By: | Etienne Billette de Villemeur (Toulouse School of Economics, IDEI & GREMAQ, 21 allée de Brienne, 31000 Toulouse, France); Richard Ruble (EMLYON Business School, Ecully, F-69134, France); Bruno Versaevel (EMLYON Business School & CNRS, GATE, 69134 Ecully cedex France) |
| Abstract: | In a real option model, we show that the standard analysis of vertical relationships transposes directly to investment timing. Thus, when a firm undertaking a project requires an outside supplier (e.g., an equipment manufacturer) to provide it with a discrete input to serve a growing but incertain demand, and if the supplier has market power, investment occurs too late from an industry standpoint. The distortion in firm decisions is characterized by a lerner-type index, and we show how market growth rate and volatility affect the extent of the distortion. If the initial market demand is high, greater volatility increases the effective investment cost and results in lower value for both firms. Vertical restraints can restore efficiency. For instance, the upstream firm can induce entry at the correct investment threshold by selling a call option on the input. Otherwise, if two downstream firms are engaged in a preemption race, the upstream firm sells the input to the first investor at a discount which is chosen in such a way that the race to preempt exactly offsets the vertical distortion, and this leader invests at the optimal time. |
| Keywords: | investment timing – preemption – real options – vertical relations |
| JEL: | C73 D43 D92 L13 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1118&r=bec |
| By: | Ariel Burstein; Marc J. Melitz |
| Abstract: | In this paper, we analyze the transition dynamics associated with an economy's response to trade liberalization. We start by reviewing the recent literature that incorporates firm dynamics into models of international trade. We then build upon that literature to characterize the role of firm dynamics, export-market selection, firm-level innovation, and firms' expectations regarding the time path of liberalization in generating those transition dynamics following trade liberalization. These modeling ingredients generate substantial aggregate transition dynamics as they shift and shape the endogenous distribution of firms over time. Our results show how the responses of trade volumes, innovation, and aggregate output can vary greatly over time depending on those modeling ingredients. This has important consequences for many issues in international economics that rely on predictions for the effects of globalization over time on those key aggregate outcomes. |
| JEL: | F1 F4 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16960&r=bec |
| By: | Etienne Billette De Villemeur (GREMAQ - Groupe de recherche en économie mathématique et quantitative - CNRS : UMR5604 - Université des Sciences Sociales - Toulouse I - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - INRA : UMR); Richard Ruble (EMLyon Business School - EMLYON Business School); Bruno Versaevel (EMLyon Business School - EMLYON Business School) |
| Abstract: | In a real option model, we show that the standard analysis of vertical relationships transposes directly to investment timing. Thus, when a firm undertaking a project requires an outside supplier (e.g., an equipment manufacturer) to provide it with a discrete input to serve a growing but incertain demand, and if the supplier has market power, investment occurs too late from an industry standpoint. The distortion in firm decisions is characterized by a lerner-type index, and we show how market growth rate and volatility affect the extent of the distortion. If the initial market demand is high, greater volatility increases the effective investment cost and results in lower value for both firms. Vertical restraints can restore efficiency. For instance, the upstream firm can induce entry at the correct investment threshold by selling a call option on the input. Otherwise, if two downstream firms are engaged in a preemption race, the upstream firm sells the input to the first investor at a discount which is chosen in such a way that the race to preempt exactly offsets the vertical distortion, and this leader invests at the optimal time. |
| Keywords: | investment timing; preemption; real options; vertical relations |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00585557&r=bec |
| By: | Hanglberger, Dominik (Leuphana University Lüneburg); Merz, Joachim (Leuphana University Lüneburg) |
| Abstract: | Empirical analyses using cross-sectional and panel data found significantly higher levels of job satisfaction for self-employed than for employees. We argue that those estimates in previous studies might be biased by neglecting anticipation and adaptation effects. For testing we specify several models accounting for anticipation and adaptation to self-employment and job changes. Based on data from the German Socio-Economic Panel Survey (SOEP) we find that becoming self-employed is associated with large negative anticipation effects. In contrast to recent literature we find no specific long term effect of self-employment on job satisfaction. Accounting for anticipation and adaptation to job changes in general, which includes changes between employee jobs, reduces the effect of self-employment on job satisfaction by 70%. When controlling for anticipation and adaptation to job changes, we find no further anticipation effect of self-employment and a weak positive but not significant effect of self-employment on job satisfaction for three years. Thus adaptation wipes out higher satisfaction within the first three years being self-employed. According to our results previous studies at least overestimated possible positive effects of self-employment on job satisfaction. |
| Keywords: | job satisfaction, self-employment, hedonic treadmill model, adaptation, anticipation, fixed-effects panel estimations, German Socio-Economic Panel (SOEP) |
| JEL: | J23 J28 J81 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5629&r=bec |
| By: | Tomaso Duso (Duesseldorf Institute for Competition Economics (DICE)); Klaus Gugler (Vienna University of Economics and Business); Burcin B. Yurtoglu (WHU - Otto Beisheim School of Management) |
| Abstract: | This paper applies an intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990-2002 to assess the effectiveness of European merger control. The basic idea is to relate announcement and decision abnormal returns. Under a set of four maintained assumptions, merger control might be interpreted to be effective if rents accruing due to the increased market power observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. To clearly identify the events’ competitive effects, we explicitly control for the market expectation about the outcome of the merger control procedure and run several robustness checks to assess the role of our maintained assumptions. We find that only outright prohibitions completely reverse the rents measured around a merger’s announcement. On average, remedies seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be more effective when applied during the first rather than the second investigation phase and in subsamples where our assumptions are more likely to hold. Moreover, the European Commission appears to learn over time. |
| Keywords: | Merger Control, Remedies, European Commission, Event Studies |
| JEL: | L4 K21 G34 C2 L2 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:354&r=bec |
| By: | Cristini, Annalise (Department of Economics, University of Bergamo); Eriksson, Tor (Department of Economics, Aarhus School of Business); Pozzoli, Dario (Department of Economics, Aarhus School of Business) |
| Abstract: | High-performance work practices are frequently considered to have positive eects on corporate performance, but what do they do for employees? After showing that organizational innovation is indeed positively associated with rm performance, we investigate whether high-involvement work practices are associ- ated with higher wages, changes in wage inequality and workforce composition, using data from a survey directed at Danish private sector rms matched with linked employer-employee data. We also examine whether the relationship be- tween high-involvement work practices and employee outcomes is aected by the industrial relations context |
| Keywords: | Workplace practices; wage inequality; workforce composition; hierarchy |
| JEL: | C33 J41 J53 L20 |
| Date: | 2011–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:aareco:2011_001&r=bec |
| By: | Didier Laussel; Ngo Van Long |
| Abstract: | In a model where a monopolistic downstream firm (assembler) negotiates simultaneously with each of its intermediate-input suppliers the prices of the complementary components which enter its product, we analyze the process by which the assembler separates from its suppliers as a Markov Perfect equilibrium. Due to a negative strategic effect (the prices and profits of independent suppliers decrease when their number increases), the assembler's marginal return from keeping an upstream subsidiary is lower than its market value as an independent supplier. Separation is immediate when the downstream firm's initial number of upstream subsidiaries is below a critical level. It is progressive in the reverse case and eventually leads to a mixed strategy whereby it keeps all the remaining subsidiaries with some probability, and sells all them off in one go with the complementary probability. <P>Nous étudions le processus de séparation entre une firme à l’aval et des firmes à l’amont qui lui fournissent des inputs complémentaires. À cause d’un effet stratégique négatif, le profit marginal de la firme à l’aval de garder une firme à l’amont comme filiale est moins élevé que la valeur de cette dernière au marché des bourses. La séparation est immédiate si le nombre de filiales à l’amont est inférieur à un certain niveau critique. La séparation est graduelle dans le cas inverse et demande une stratégie mixte éventuelle. |
| Keywords: | Vertical disintegration, vertical structure, Markov perfect equilibrium, dynamic games. , Séparation verticale, structure verticale, équilibre Markov-parfait, jeux dynamiques |
| Date: | 2011–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2011s-41&r=bec |
| By: | Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav |
| Abstract: | This paper describes a unique cross-country database that presents consistent and comparable information on the contribution of the small and medium enterprises sector to total employment, job creation, and growth in 99 countries. The authors compare and contrast the importance of small and medium enterprises to that of young firms across different economies. They find that small firms (in particular, firms with less than 100 employees) and mature firms (in particular, firms older than 10 years) have the largest shares of total employment and job creation. Small firms and young firms have higher job creation rates than large and mature firms. However, large firms and young firms have higher productivity growth. This suggests that while small firms employ a large share of workers and create most jobs in developing economies their contribution to productivity growth is not as high as that of large firms. |
| Keywords: | Labor Markets,Microfinance,Small Scale Enterprise,Labor Policies,Emerging Markets |
| Date: | 2011–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5631&r=bec |
| By: | Elmar Lukas (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Andreas Welling (Economics Institute, Brandenburg University of Technology, Cottbus) |
| Abstract: | Using a dynamic real options approach we show that in a sequential bargaining framework managerial flexibility is strengthening the first-mover advantage by undermining the bargaining power of the second mover. Furthermore we compare the results of the sequential framework with the results of cooperative bargaining. |
| Keywords: | real option, game theory, sale, negotiation, flexibility, ultimatum game |
| JEL: | G3 D81 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:110008&r=bec |
| By: | Charles Amélie (Audencia Nantes, School of Management, 8 route de la Jonelière, 44312 Nantes Cedex 3, France.); Darné Olivier (EMNA, University of Nantes, IEMN–IAE, Chemin de la Censive du Tertre, BP 52231, 44322 Nantes, France.); Claude Diebolt (BETA/CNRS, Université de Strasbourg, France.) |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:afc:wpaper:11-01&r=bec |
| By: | Delmar, Frédéric (Research Institute of Industrial Economics and Center for Research in New Venture Creation and Growth); Wennberg, Karl (The Ratio Institute and Stockholm School of Economics); Hellerstedt, Karin (Jönköping International Business School) |
| Abstract: | Endogenous growth theory is based on the notion that technological knowledge stimulates growth, yet the micro foundations of this process are rarely investigated and remain obscure. Knowledge spillover theory posits that growth is contingent on the technology dependence of industries, forming the landscape for technology entrepreneurs to launch and grow new ventures. We investigate these theoretical contingencies of endogenous growth with two research questions at two levels of analysis: First, do industries with a greater need for new technology-based entrepreneurship grow disproportionately faster than other industries? Second, do the knowledge spillover effects foster the growth of new technology based firms contingent on certain industry structures? These questions are examined empirically, using a comprehensive employee-employer data set on the science and technology labor force in Sweden from 1995 to 2002. |
| Keywords: | Endogenous Growth; Entrepreneurship; Industry Evolution |
| JEL: | D24 L11 L26 M13 |
| Date: | 2011–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0165&r=bec |