|
on Business Economics |
| By: | John R. Graham; Campbell R. Harvey; Manju Puri |
| Abstract: | We survey more than 1,000 CEOs and CFOs to understand how capital is allocated, and decision-making authority is delegated, within firms. We find that CEOs are least likely to share or delegate decision-making authority in mergers and acquisitions, relative to delegation of capital structure, payout, investment, and capital allocation decisions. We also find that CEOs are more likely to delegate decision authority when the firm is large or complex. Delegation is less likely when the CEO is particularly knowledgeable about a project, when the CEO has an MBA degree or long tenure, and when the CEO's pay is tilted towards incentive compensation. We study capital allocation in detail and learn that most companies allocate funds across divisions using the net present value rule, the reputation of the divisional manager, the timing of a project‟s cash flows, and senior management's "gut feel." Corporate politics and corporate socialism are more important allocation criteria in foreign countries than in the U.S. |
| JEL: | G30 G32 G34 L20 L22 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17370&r=bec |
| By: | Depew, Briggs (University of Arizona); Sorensen, Todd (University of California, Riverside) |
| Abstract: | A body of recent empirical work has found strong evidence that the labor elasticity of supply to the firm is finite, implying that firms may have wage setting power. However, these studies capture only snapshots of the parameter. We study this parameter over a period that provides substantial variation in the business cycle. Using a rich employee level dataset from the inter-war period, we are able to estimate the elasticity of supply to the firm during several recessions and expansions. Our analysis suggests that the elasticity is indeed lower during recessions, consistent with the comparative statics from the Burdett-Mortensen search model. This differential wage setting power over the business cycle provides an alternative explanation of the pro-cyclicality of wages. |
| Keywords: | business cycles, labor market frictions, monopsony |
| JEL: | J42 J31 J64 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5928&r=bec |
| By: | Jens Hilscher (International Business School, Brandeis University); Elif Sisli-Ciamarra (International Business School, Brandeis University) |
| Abstract: | This paper investigates the effects on acquisitions of creditor-director presence on corporate boards. Using a hand-collected dataset for boards of large U.S. corporations, we find that companies with creditor-directors are more likely to engage in acquisitions with attributes that are unfavorable to shareholders and favorable to creditors (more diversifying and fewer cash-financed acquisitions). Consistent with these patterns, acquisition announcements are associated with lower shareholder value, higher creditor value, and lower overall firm value when a creditor is present. These results support the hypothesis that conflicts of interest between shareholders and creditors result in value-destroying acquisitions. In addition, commercial bankers with no lending relationship are not affected by conflicts of interest. Where appropriate, our estimation strategy takes into account that there may be self selection of bankers onto corporate boards. |
| Keywords: | Shareholder-Creditor Conflicts, Acquisitions, Board of Directors, Bankers on Boards, Corporate Governance, Credit Market Reaction |
| JEL: | G21 G34 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:brd:wpaper:34&r=bec |
| By: | KAWAKAMI Atsushi; MIYAGAWA Tsutomu; TAKIZAWA Miho |
| Abstract: | Following Foster, Haltiwanger, and Syverson (2008), we construct physical output based TFP (TFPQ) measures using data from the Census of Manufactures. We find that productivity differences among business establishments using TFPQ are larger than those using the traditional revenue-based TFP measures (TFPR). The negative correlation between physical output and output prices implies that establishments are facing a downward demand curve and the traditional measures of TFP are affected by idiosyncratic demand shocks. Probit estimations regarding exit behavior show that the combined effects of physical productivity improvement and higher prices through the increase in demand result in a lower probability of exit. Breaking down aggregate productivity growth using TFPQ, we find that the contribution of the net entry effects the largest factor to productivity improvement, in contrast to previous Japanese studies. Our results provide a more positive foundation for "creative destruction" policies than previous studies suggest. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:11064&r=bec |
| By: | John R. Graham; Si Li; Jiaping Qiu |
| Abstract: | We study the role of firm- and manager-specific heterogeneities in executive compensation. We decompose the variation in executive compensation and find that time invariant firm and especially manager fixed effects explain a majority of the variation in executive pay. We then show that in many settings, it is important to include fixed effects to mitigate potential omitted variable bias. Furthermore, we find that compensation fixed effects are significantly correlated with management styles (i.e., manager fixed effects in corporate policies). Finally, the method used in the paper has a number of potential applications in financial economics. |
| JEL: | C23 G22 G3 J24 J31 J33 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17368&r=bec |
| By: | Peter Bardsley; Nisvan Erkal; Nikos Nikiforakis; Tom Wilkening |
| Abstract: | This paper investigates the relationship between firm longevity and rat races in an environment where long-lived firms are operated by overlapping generations of short-lived players. We first present a complete information model in which workers in the young generation are offered employment contracts designed by the firms' owners who belong to the old generation. When old, employed workers are granted ownnership rights as long as the firm continues to operate. We test the theoretical predictions of the model in a laboratory experiment. In line with our model's predictions, as firm longevity increases, the recursive nature of the contracts leads to a rat race characterized by low wages, high effort levels, and rent dissipation |
| Keywords: | Overlapping-generations models; Recursive contracts; Rat races; Experiments |
| JEL: | C91 D02 D21 D86 D92 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1122&r=bec |
| By: | Leonard J. Mirman; Marc Santugini |
| Abstract: | We study the influence of the financial market on the decisions of firms in the real market. To that end, we present a model in which the shareholders’ portfolio selection of assets and the decisions of the publicly-traded firms are integrated through the market process. Financial access alters the objective function of the firms, and the market interaction of shareholders substantially influences firms’ behavior in the real sector. After characterizing the unique Nash equilibrium, we show that the financial sector integrates the preferences of all shareholders into the decisions for production and ownership structure. The participation from investors in the financial market also limits the firms’ ability to manipulate real prices, i.e., there is a loss of market power in the real sector. Note that, while the loss of market power changes expected profits, it is not detrimental to shareholders since the expected return of equity share depends on the variance (and not the mean) of profits. Indeed, any changes in expected profits are absorbed by the financial price. We also show that financial access increases production, thereby altering the distribution of profits. In particular, financial access induces firms to take on more risk. Finally, financial access renders the relationship between risk-aversion and risk-taking ambiguous. For example, it is possible that an increase in risk-aversion leads to more risk-taking, i.e., the variance of real profits increases. |
| Keywords: | Financial sector, Firm behavior, Market power, Monopoly, Nash equilibrium, Perfect competition, Publicly-traded firm, Shareholder behavior |
| JEL: | D21 D41 D42 D80 G32 L1 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:1124&r=bec |
| By: | Sergio Salgado I. |
| Abstract: | In this paper I study a new business cycle fact recently documented by Bachmann and Bayer (2011): the dispersion of the distribution of investment rates across firms is procyclical. Using data from German firm, the authors find a correlation coefficient between the standard deviation of investment distribution and the cyclical component of output of 0.45. They also report a correlation coefficient for US economy of 0.33. Using a model similar to Khan and Thomas's (2003), that is standard to heterogeneous firms literature, I obtain a correlation coefficient of 0.57. In the model I also consider a government sector that collects taxes on corporate profits. In such model, with a corporate tax of 23.5%, which corresponds to German economy, I obtain a correlation coefficient of 0.46 and when I consider a corporate tax rate of 18.79% that corresponds to US economy I find a correlation coefficient of 0.51. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:638&r=bec |
| By: | Cataldi, Alessandra (Sapienza University of Rome); Kampelmann, Stephan (University of Lille 1); Rycx, Francois (Free University of Brussels) |
| Abstract: | Using longitudinal matched employer-employee data for the period 1999-2006, we investigate the relationship between age, wage and productivity in the Belgian private sector. More precisely, we examine how changes in the proportions of young (16-29 years), middle-aged (30-49 years) and older (more than 49 years) workers affect the productivity of firms and test for the presence of productivity-wage gaps. Results (robust to various potential econometric issues, including unobserved firm heterogeneity, endogeneity and state dependence) suggest that workers older than 49 are significantly less productive than prime age and young workers. In contrast, the productivity of middle-age workers is not found to be significantly different compared to young workers. Findings further indicate that average hourly wages within firms increase significantly and monotonically with age. Overall, this leads to the conclusion that young workers are paid below their marginal productivity while older workers appear to be "overpaid" and lends empirical support to theories of deferred compensation over the life-cycle (Lazear, 1979). |
| Keywords: | wages, productivity, aging, matched panel data |
| JEL: | J14 J24 J31 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5938&r=bec |
| By: | Zucchini, Leon; Kretschmer, Tobias |
| Abstract: | Competitive dynamics research has focused primarily on interactions between dyads of firms. Drawing on the awareness-motivation-capability framework and strategic group theory we extend this by proposing that firms’ actions are influenced by perceived competitive pressure resulting from actions by several rivals. We predict that firms’ action magnitude is influenced by the total number of rival actions accumulating in the market, and that this effect is moderated by strategic group membership. We test this using data on the German mobile telephony market and find them supported: the magnitude of firm’s actions is influenced by a buildup of actions by multiple rivals, and firms react more strongly to strategically similar rivals. |
| Keywords: | Competitive rivalry; competitive dynamics; strategic groups; mobile telecommunications |
| JEL: | D83 M10 L11 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:msmdpa:12308&r=bec |
| By: | Carrillo-Tudela, Carlos (University of Essex); Kaas, Leo (University of Konstanz) |
| Abstract: | We consider a model of on-the-job search where firms offer long-term wage contracts to workers of different ability. Firms do not observe worker ability upon hiring but learn it gradually over time. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts designed to retain high-ability workers only. Low-ability workers have higher turnover rates, they are more often employed in low-wage firms and face an earnings distribution with a higher frictional component. Furthermore, positive sorting obtains in equilibrium. |
| Keywords: | adverse selection, on-the-job search, wage dispersion, sorting |
| JEL: | D82 J63 J64 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5936&r=bec |
| By: | Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Thulin, Per (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology) |
| Abstract: | Schumpeter claimed the entrepreneur to be instrumental for creative destruction and industrial dynamics. Entrepreneurial entry serves to transform and revitalize industries, thereby enhancing their competiveness. This paper investigates if entry of new firms influences productivity amongst incumbent firms, and the extent to which altered productivity can be attributed sector and time specific effects. Implementing a unique dataset we estimate a firm-level production function in which the productivity of incumbent firms is modeled as a function of firm attributes and regional entrepreneurship activity. The analysis finds support for positive productivity effects of entrepreneurship on incumbent firms, albeit the effect varies over time, what we refer to as a delayed entry effect. An immediate negative influence on productivity is followed by a positive effect several years after the initial entry. Moreover, the productivity of incumbent firms in services sectors appears to be more responsive to regional entrepreneurship, as compared to the productivity of manufacturing firms. |
| Keywords: | entrepreneurship; entry; business turbulence; incumbent firms; productivity; region; business dynamics |
| JEL: | D20 L10 L26 O31 R11 |
| Date: | 2011–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0256&r=bec |
| By: | Majumdar, Mukul (Cornell University); Yoo, Seung Han (Nanyang Technological University) |
| Abstract: | This paper analyzes "Influence Peddling" with interaction between human capital transfer and collusion-building aspects in a model, in which each government official regulates multiple firms simultaneously. We show that (i) there exists an "optimal" division rule for collusion between a sequence of "qualified" regulators and a firm; (ii) as the regulators increasingly benefit from the collusion, they strictly decrease regulation rates for the firm under collusion while strictly increasing regulation rates for a firm not under collusion; and (iii) post-government-employment restrictions are not "effective" policies, and an alternative policy can be suggested. |
| JEL: | D73 H83 L51 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:corcae:11-04&r=bec |
| By: | Marco Corsino; Roberto Gabriele; Sandro Trento |
| Abstract: | This paper empirically investigates gross job flows and the growth patterns of continuing limited liability companies in Italy over the period 1996-2004, using original data on work forces and other characteristics of the firm. The descriptive analysis reveals that the magnitude of gross job flows among small and medium-sized companies in Italy is lower than what observed in Anglo-Saxon countries, but it is consistent with evidence for the Euro area. Alongside, the magnitude of job flows significantly shrunk in the aftermath of the economic downturn in 2001: firms fared worse than in the late nineties and the labour market became less efficient in allocating job opportunities. The econometric analysis shows that size negatively affects firms. net employment growth, even though the negative correlation vanishes among companies with more than 24 employees. The impact of age on growth is complex: new ventures and firms that are at most 14 years old outperform the average firm in the sample. On the contrary, age does not have any bearing on the growth of units aged 15 years and more, and it even represents a burden among the oldest firms in the sample. |
| Keywords: | Gross job flows, firm growth, firm size, firm age |
| JEL: | J62 L25 L60 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:trt:disawp:1015&r=bec |
| By: | Raphael Anton Auer; Philip Ulrich Sauré |
| Abstract: | We develop a general equilibrium model of vertical innovation in which multiple firms compete monopolistically in the quality space. The model features many firms, each of which holds the monopoly to produce a unique quality level of an otherwise homogenous good, and consumers who are heterogeneous in their valuation of the good's quality. If the marginal cost of production is convex with respect to quality, multiple rms coexist, and their equilibrium markups are determined by the degree of convexity and the density of quality-competition. To endogenize the latter, we nest this industry setup in a Schumpeterian model of endogenous growth. Each firm enters the industry as the technology leader and successively transits through the product cycle as it is superseded by further innovations. The intrinsic reason that innovation happens in our economy is not one of displacing the incumbent; rather, innovation is a means to di-erentiate oneself from existing firms and target new consumers. Aggregate growth arises if, on the one hand, increasingly wealthy consumers are willing to pay for higher quality and, on the other hand, private firms' innovation generates income growth by enlarging the set of available technologies. Because the frequency of innovation determines the toughness of product market competition, in our framework, the relation between growth and competition is reversed compared to the standard Schumpeterian framework. Our setup does not feature business stealing in the sense that already marginal innovations grant non-negligible prots. Rather, innovators sell to a set of consumers that was served relatively poorly by pre-existing firms. Nevertheless, "creative destruction" prevails as new entrants make the set of available goods more di-erentiated, thereby exerting a pro-competitive e-ect on the entire industry. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2011-10&r=bec |
| By: | Amil Petrin; Jagadeesh Sivadasan |
| Abstract: | We propose a new measure of allocative efficiency based on unrealized increases in aggregate productivity growth. We show that the difference in the value of the marginal product of an input and its marginal cost at any plant - the plant-input "gap" - is exactly equal to the change in aggregate output that would occur if that plant changed that input's use by one unit. The mean absolute gap across plants for any input can then be interpreted as an approximation to the gain to society that would occur if every plant had a one-unit change in that input in the efficient direction, holding everything else constant. We show how to estimate this average gap using plant-level data for 1982-1994 from Chilean manufacturing, a sector largely viewed as being one of South America's least distorted. We find the gaps for blue and white collar labor are quite large in absolute value and imply that a one-unit move in the correct direction for blue collar would increase aggregate value added by almost 0.5%. We also find that the gaps for blue and white collar workers are increasing over time while the gaps for materials and electricity are not. The timing of the two separate increases in firing costs and the sharpest increases in the labor gaps is suggestive that the increases in average within-firm labor gaps may be related to the increases in severance pay. |
| JEL: | D24 J65 O47 O54 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17373&r=bec |
| By: | Pouliakas, Konstantinos (European Centre for the Development of Vocational Training (Cedefop)); Theodoropoulos, Nikolaos (University of Cyprus) |
| Abstract: | We estimate the effect of variable pay schemes on workplace absenteeism using two cross sections of British establishments. Private sector establishments that explicitly link pay with individual performance are found to have significantly lower absence rates. This effect is stronger for establishments that offer variable pay schemes to a greater share of their non-managerial workforce. Matched employer-employee data suggest that the effect is robust to a number of sensitivity tests. We also find that firms that tie a greater proportion of employees’ earnings to variable pay schemes are also found to experience lower absence rates. Further, quintile regression results suggest that variable pay schemes have a stronger effect on establishments with an absence rate that is higher than an average or “sustainable” level. Finally, panel data suggest that a feedback mechanism is present, whereby high absenteeism in the past is related to a greater future incidence of individual variable pay schemes, which, in turn, is correlated with lower absence rates. |
| Keywords: | performance-related pay, absenteeism, incentives, Britain |
| JEL: | J22 J33 C21 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5941&r=bec |
| By: | Stefan Mittnik; Sandra Paterlini; Tina Yener |
| Abstract: | With the advent of Basel II, risk–capital provisions need to also account for operational risk. The specification of dependence structures and the assessment of their effects on aggregate risk–capital are still open issues in modeling operational risk. In this paper, we investigate the potential consequences of adopting the restrictive Basel’s Loss Distribution Approach (LDA), as compared to strategies that take dependencies explicitly into account. Drawing on a real–world database, we fit alternative dependence structures, using parametric copulas and nonparametric tail–dependence coefficients, and discuss the implications on the estimation of aggregate risk capital. We find that risk–capital estimates may increase relative to that derived for the LDA when accounting explicitly for the presence of dependencies. This phenomenon is not only be due to the (fitted) characteristics of the data, but also arise from the specific Monte Carlo setup in simulation–based risk–capital analysis. |
| Keywords: | Copula, Nonparametric Tail Dependence, Basel II, Loss Distribution Approach, Value–at–Risk, Subadditivity |
| JEL: | C14 C15 G10 G21 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:mod:recent:071&r=bec |
| By: | Raymond Mataloni, Jr. |
| Abstract: | This paper examines whether the productivity of U.S. business establishments is related to the extent to which their parent firms are globally engaged--from being an exporter to being a fledgling multinational that has taken a few cautious forays into foreign markets to being a seasoned multinational with extensive foreign operations. Theory suggests that multinationals possess proprietary assets that confer a productivity advantage over their domestically-oriented rivals, and that this advantage is positively correlated with the global scope of a firm’s operations. That is, those firms with the greatest productivity advantage are able to absorb the costs and overcome the risks of operating in a wide range of foreign countries, from those where it is relatively riskfree and economical to operate, to those where it is risky, difficult, and costly. This connection between the multinational’s widening of its geographic scope of operations and its productivity can be self-reinforcing. Once a multinational has successfully operated in a risky environment, it may benefit from learning effects that can lower the cost and risk of further enlargement of geographic scope. The positive correlation between a firm’s global engagement and its level of productivity has already been demonstrated. This paper extends that research by testing whether the correlation holds up when productivity is measured at the level of the individual establishment, rather than at the level of the consolidated business enterprise. It also examines whether the correlation between global engagement and productivity exists in non-manufacturing industries. Finally, it examines whether linkages between the multinational’s domestic and foreign operations, in the form of imports of goods by the parent company from its foreign affiliates, enhance the productivity of the multinational’s domestic business establishments. The findings confirm the positive correlation between global scope and productivity and demonstrate that it holds for both manufacturing and non-manufacturing industries. The effect of imports of goods from foreign affiliates on the productivity of the establishments of their parent firm depend on the geographic location of the affiliates: Imports from affiliates in high-income countries tend to be associated with high productivity whereas those from affiliates in low-income countries tend to be associated with low productivity. The study was made possible by combining BEA enterprise-level data on the U.S. operations of U.S. multinational firms with data on all U.S. business establishments collected by the Census Bureau in the U.S. economic census covering 2002. |
| Keywords: | multinationals, exporting, productivity |
| JEL: | D24 F23 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:11-23&r=bec |
| By: | Chris Ross |
| Abstract: | This report analyzes labour productivity, multifactor productivity and input trends in Canadian food manufacturing since 1961, with a focus on the entire time period and developments since 2000. It is found that the subsector experienced labour productivity growth stronger than the business sector over both the long and short term, but has outperformed manufacturing only in the more recent period. Labour productivity growth is decomposed into capital intensity and multifactor productivity growth, which are found to have contributed to growth almost equally, and labour composition growth accounted for less than 15 per cent over the 1961-2007 period. Underlying drivers of growth are identified and trends in technology, capacity utilization, human capital, economies of scale, machinery and equipment, international trade, and regulation are explored. Policy implications for fostering labour productivity growth based on the drivers are outlined. Finally, a conclusion summarizes the key findings of the paper. |
| Keywords: | labour productivity, multifactor productivity, input trends, food manufacturing, capital intensity, multifactor productivity growth, labour composition |
| JEL: | O47 D24 J24 L66 Q18 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:1107&r=bec |
| By: | Paul Deng (Department of Economics, Copenhagen Business School); Gary Jefferson (Department of Economics, Brandeis University) |
| Abstract: | This paper investigates the conditions that may auger a reversal of China’s increasingly unequal levels of regional industrial productivity during China’s first two decades of economic reform. Using international and Chinese firm and industry data over the period 1995-2004, we estimate a productivity growth-technology gap reaction function. We find that as China’s coastal industry has closed the technology gap with the international frontier relative to interior regions, labor productivity growth in the coastal region has begun to slow in relation to the interior. This may serve as an early indicator of China’s initial movement toward reversing the widespread income inequality. |
| Keywords: | Inequality, Economic Growth, Productivity Convergence, Regional Disparity, Sustainability, China, International Comparison of Productivity (ICOP) |
| JEL: | O4 O18 O30 R11 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:brd:wpaper:32&r=bec |
| By: | Alexander Popov (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | I analyze output growth, volatility, and skewness as the joint outcomes of financial openness. Using an industry panel of 53 countries over 45 years, I find that financial openness increases simultaneously mean growth and the negative skewness of the growth process. The increase in output skewness appears to come from a more negatively skewed distribution of investment, TFP, and new business creation. The growth benefits of financial liberalization are augmented, and its costs associated with higher probability of rare large contractions are mitigated by deep credit markets and by strong institutions. The main result of the paper holds in aggregated data. JEL Classification: E32, F30, F36, F43, G15. |
| Keywords: | Financial openness, growth, volatility, skewness, development. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111368&r=bec |
| By: | David P.Byrne; Roger Ware |
| Abstract: | This paper studies the determinants of Edgeworth Cycles, price leadership and coordination in retail gasoline markets using daily station-level price data for 110 markets in Ontario, Canada for 2007-2008. We find an “inverse-U” relationship between markets’ propensity to exhibit price cycles and their size. More concentrated markets are less likely to exhibits cycles and we highlight regional clustering among cycling and non-cycling markets. Within cycling markets, we find brands’ stations (Esso, Shell,Petro-Canada, Sunoco) lead price jumps and coordinate market prices, while independents (Ultramar, Pioneer, Olco, MacEwen) aggressively undercut prices over the cycle. |
| Keywords: | Retail gasoline prices; Edgeworth Cycles; Price leadership; Coordination |
| JEL: | L11 L9 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1124&r=bec |
| By: | Brice Corgnet (Economic Science Institute, Chapman University); Roberto Hernán-González (Economic Science Institute, Chapman University); Stephen Rassenti (Economic Science Institute, Chapman University) |
| Abstract: | We propose a novel approach to the analysis of organizations by developing a computerized platform that reproduces relevant features of existing organizations such as real-effort tasks and real-leisure alternative activities (Internet). In this environment, we find strong incentives effects as organizations using individual incentives significantly outperform those relying on team incentives. Combining real-time peer monitoring with team incentives, we report striking evidence of positive peer effects as production increases by 50% and Internet usage decreases by 54% compared with organizations using team incentives alone. Peer monitoring allows virtual organizations using team incentives to perform as well as those using individual incentives. However, the positive effect of peer monitoring does not apply to low performers. |
| Keywords: | team incentives, free-riding, monitoring, peer pressure, virtual organization |
| JEL: | C9 D23 J0 J41 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:11-05&r=bec |
| By: | Wagner, Joachim (Leuphana University Lüneburg) |
| Abstract: | This paper documents the relationship between firm survival and three types of international trade activities - exports, imports and two-way trade. It uses unique new representative data for manufacturing enterprises from Germany, one of the leading actors on the world market for goods, that merge information from surveys performed by the Statistical Offices and administrative data collected by the Tax Authorities. It contributes to the literature by providing the first evidence on the role of imports and two-way trading for firm survival in a highly developed country. Descriptive statistics and regression analysis (with and without explicitly taking the rare events nature of firm exit into account) point to a strong positive link between firm survival on the one hand and imports and two-way trading on the other hand, while exporting alone does not play a role for exiting the market or not. |
| Keywords: | exports, imports, firm survival |
| JEL: | F14 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5924&r=bec |
| By: | Bourreau, Marc (Telecom ParisTech and CREST-LEI, Paris); Cambini, Carlo (Polytechnic University of Turin); Dogan, Pinar (Harvard University) |
| Abstract: | In this paper, we analyze the incentives of an incumbent and an entrant to migrate from an "old" technology to a "new" technology, and discuss how the terms of wholesale access affect this migration. We show that a higher access charge on the legacy network pushes the entrant firm to invest more, but has an ambiguous effect on the incumbent's investments, due to two conflicting effects: the wholesale revenue effect, and the business migration effect. If both the old and the new infrastructures are subject to ex-ante access regulation, we also find that the two access charges are positively correlated. |
| JEL: | L51 L96 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-029&r=bec |
| By: | John P. Weche Geluebcke (Institute of Economics, Leuphana University Lueneburg, Germany) |
| Abstract: | This study provides first comprehensive analyses of foreign-controlled enterprises in the German service sector based on new micro data from official statistics. Various performance measures were examined by comparing unconditional and conditional means and quantile regression techniques were applied. Results reveal persistently superior performance for foreign-controlled affiliates when compared to German-owned affiliates. In contrast, the relationship for profitability is exactly the opposite. Labor productivity becomes insignificant when the comparison group consists of domestically-owned affiliates with a high degree of internationalization. A breakdown by country of origin shows that European affiliates pay lower wages and export less compared to other foreign affiliates and that there is no productivity advantage in favor of US firms like in manufacturing. |
| Keywords: | foreign ownership, firm performance, inward FDI, service sector, multinational enterprise |
| JEL: | F15 F21 F23 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:213&r=bec |
| By: | Elias Albagli; Christian Hellwig; Aleh Tsyvinski |
| Date: | 2011–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000197&r=bec |
| By: | Westling, Tatu |
| Abstract: | This paper explores the effect of incentive pay on gender pay gaps in Finland, Norway and Sweden among professionals and managers within MNCs. Mercer 2009 Total Remuneration Survey data is utilised. Uniform job ladder, occupation, industry and wage definitions enable consistent cross-country comparisons. In addition to the between-country variation, the within-country variation of gender gap with respect to incentive pay is analysed. The results indicate that gender pay gaps differ among the Nordics and that occupation and industry controls have dissimilar effects across countries. Irrespective of wage element, Finland and Norway are characterised by higher gender gaps than Sweden. Incentives tend to accentuate gender pay gaps. In intention to alleviate the absence of job performance data, this study utilises a rudimentary, promotion-based measure for job performance. In Finland it does affect the gender gap. However, irrespective of gender, high-performers are penalised in Sweden but not in Finland or Norway. The Finnish data also allows the identification of low-performers. Low job performance is rewarded in Finland. Nonetheless, the job performance findings should be interpreted with cautions. |
| Keywords: | Wage differential; incentive pay; job ladder; gender; job performance |
| JEL: | J31 J70 |
| Date: | 2011–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33083&r=bec |
| By: | Kovacs, Balazs (University of Lugano); Hannan, Michael T. (Stanford University) |
| Abstract: | A general finding in economic and organizational sociology states that producers and products that span categories lose appeal to audiences. This paper argues that to assess the consequences of category spanning researchers need to take account of the relations among the categories spanned. We reason that the negative consequences of category spanning are more severe when the categories spanned are distant and have high-contrast. Because previous empirical strategies do not incorporate information on category distances, here we introduce novel measures to categorical distance and derive measures for grade-of-membership, category contrast and categorical niche width. Using the proposed measurement approach, we test our theory using data on online restaurant reviews, and find that the results confirm our predictions that organizations that span distant and high-contrast categories get lower evaluations from audiences. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:2081&r=bec |
| By: | Stephan K. S. Kampelmann; François Rycx |
| Abstract: | Labour economists typically assume that pay differences between occupations can be explained with variations in productivity. The empirical evidence on the validity of this assumption is surprisingly thin and subject to various potential biases. The authors use matched employer-employee panel data from Belgium for the years 1999-2006 to examine occupational productivity-wage gaps. They find that occupations play distinct roles for remuneration and productivity: while the estimations indicate a significant upward-sloping occupational wage-profile, the hypothesis of a flat productivity-profile cannot be rejected. The corresponding pattern of over- and underpayment stands up to a series of robustness tests. |
| Keywords: | Labour productivity; wages; occupations; production function; matched employer-employee data |
| JEL: | J24 J31 J44 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/96525&r=bec |
| By: | Cho, In Soo; Orazem, Peter |
| Abstract: | The link between measured risk aversion and the decision to become an entrepreneur is well established, but the link between risk preferences and entrepreneurial success is not. Standard theoretical models of occupational choice under uncertainty imply a positive correlation between an individual’s degree of risk aversion and the expected return from an entrepreneurial venture at the time of entry. Because the expected return is the risk neutral equivalent value, a higher expected return implies a higher survival probability, and so more risk averse entrepreneurs should survive more frequently than their less risk averse counterparts. We test that prediction using successive entry cohorts of young entrepreneurs in the National Longitudinal Survey of Youth 1979 (NLSY79). The empirical results soundly reject the prediction: the most successful entrepreneurs are the least risk averse. This surprising finding calls into question the interpretation of common measures of risk aversion as measures of taste for risk. Instead, measured risk attitudes perform as if they are indicators of entrepreneurial ability– the least risk averse are apparently those who can best assess and manage risks. Indeed, our interpretation is consistent with the work of recent experimental studies that find that the less risk averse have higher cognitive ability. |
| JEL: | J24 L24 M1 |
| Date: | 2011–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:34162&r=bec |