|
on Business Economics |
| By: | Cavallari, Lilia |
| Abstract: | This paper provides a theory of the international business cycle grounded on firms' entry and sticky prices. It shows that under simple monetary rules pro-cyclical entry and counter-cyclical markups can generate fluctuations in macroeconomic aggregates and trade variables as large as those observed in the data while at the same time providing positive international comovements. Both firms' entry and sticky prices are essential for reproducing the synchronization of the business cycles found in the data. |
| Keywords: | firm entry; international business cycle; international comovements; variable markup; Taylor rule; exchange rate regimes |
| JEL: | E32 E52 F41 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:41876&r=bec |
| By: | B. SINGH GILL |
| Abstract: | This paper empirically examines whether the generally accepted finding that the firm’s accounts receivable tends to be industry-specific is valid for private mature Belgian firms between 2001 and 2008.The average accounts receivable of the firm’s industry in 2001 is not an important determinant in explaining the future accounts receivable of mature private Belgian firms. On the contrary we find that the accounts receivable of the firm in year 2001 is the most important variable in explaining the future accounts receivable of mature private Belgian firms. These results imply that the firm’s accounts receivable is only firm-specific. We also provide evidence on the importance of the variables used in many previous studies on accounts receivable in capturing the variability in the firm’s accounts receivable. The importance of the traditional variables in capturing the variability in accounts receivable is negligible. Our findings are robust for other European countries such as Sweden, The United Kingdom, France, Italy and Portugal. A tentative explanation for these findings is provided. |
| Keywords: | trade credit receivable, firm heterogeneity |
| JEL: | G30 G31 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:12/784&r=bec |
| By: | di Giovanni, Julian; Levchenko, Andrei A.; Mejean, Isabelle |
| Abstract: | This paper provides a forensic account of the role of individual firms in generating aggregate fluctuations using data covering the universe of French firms for the period 1990–2007. We derive a theoretically-founded set of estimating equations that decompose firms’ annual sales growth rate into different components. The firm-specific component contributes substantially to aggregate sales volatility, mattering about as much as the components capturing shocks that are common across firms within a sector or country. We then decompose the firm-specific component to provide evidence on two mechanisms that generate aggregate fluctuations from microeconomic shocks: (i) when the firm size distribution is fat-tailed, idiosyncratic shocks to large firms contribute to aggregate fluctuations (Gabaix, 2011), and (ii) sizable aggregate volatility can arise from idiosyncratic shocks due to input-output linkages across the economy (Acemoglu et al., 2012). We find that firm linkages are approximately twice as important as granularity in driving aggregate fluctuations. |
| Keywords: | Aggregate Volatility; Firm-Level Shocks; Large Firms; Linkages |
| JEL: | E32 F12 F41 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9168&r=bec |
| By: | Hildenbrand, Andreas |
| Abstract: | Industrial organization is mainly concerned with the behavior of large firms, especially when it comes to oligopoly theory. Experimental industrial organization therefore faces a problem: How can firms be brought into the laboratory? The main approach relies on framing: Call individuals firms! This experimental approach is not in line with modern industrial organization, according to which a firm's market behavior is also determined by its organizational structure. In this paper, a Stackelberg experiment is considered in order to answer the question whether framing individual decision making as organizational decision making or implementing an organizational structure is more effective in generating profit-maximizing behavior. Firms are either represented by individuals or by teams. Teams are organized according to Alchian and Demsetz's (1972) contractual view of the firm. I find that teams' quantity choices are more in line with the assumption of profit maximization than individuals' choices. Compared to individuals, teams appear to be less inequality averse. -- |
| Keywords: | industrial organization,Stackelberg game,individual behaviour,team behaviour,framing,experimental economics |
| JEL: | C72 C91 C92 D43 L13 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201253&r=bec |
| By: | Martijn A. Han; ; ; |
| Abstract: | Fershtman and Judd (1987) and Sklivas (1987) show that strategic delegation reduces firm profits in the one-shot Cournot game. Allowing for infinitely repeated interaction, strategic delegation can increase firm profits as it improves cartel stability. |
| Keywords: | strategic delegation, collusion, cartel stability |
| JEL: | D43 L13 L20 L41 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2012-056&r=bec |
| By: | de Mel, Suresh (University of Peradeniya); McKenzie, David (World Bank); Woodruff, Christopher (University of Warwick) |
| Abstract: | We conduct a randomized experiment in Sri Lanka to measure the impact of the most commonly used business training course in developing countries, the Start-and-Improve Your Business (SIYB) program. In contrast to existing business training evaluations which are restricted to microfinance clients, we consider two more representative groups: a random sample of women operating subsistence enterprises, and a random sample of women who are out of the labor force but interested in starting a business. Both samples are randomized into three groups: a control group, a group invited to attend training, and a group invited to receive training and who receive a cash grant conditional on completing training. We track impacts over four rounds of follow-up surveys taken over two years and find that the short- and medium-term impacts differ. For women already in business, we find that although training alone leads to some changes in business practices, it has no impact on business profits, sales or capital stock. In contrast the combination of training and a grant leads to large and significant improvements in business profitability in the first eight months, but this impact dissipates in the second year. For women interested in starting enterprises, we find that business training speeds up the process of opening a business, and changes the selection of who operates a business by making the entrants less analytically skilled, but leads to no increase in net business ownership by our final survey round. Receiving a grant results in poorer women opening businesses, but again does not increase net business ownership. Training appears to have increased the profitability and business practices of the businesses started up, suggesting it may be more effective for new owners than for enhancing existing businesses. |
| Keywords: | business training, female self-employment, randomized experiment, business start-up, trajectory of treatment effects |
| JEL: | O12 J16 L26 M53 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6896&r=bec |
| By: | Ishita Chatterjee (Business School, University of Western Australia) |
| Abstract: | This paper examines the regulatory authority’s decision, following a report from the legal firm, on monitoring commercial piracy in a market characterised by asymmetric product differentiation. I show that with ex-post monitoring the government will monitor piracy under both price and quantity competition if the legal firm’s political influence is sufficiently high. The study also finds that there exists a unique level of the relative cross-price impact of the pirate’s price on the legal firm’s output, above which monitoring will be higher under quantity competition, and below which monitoring will be higher under price competition. Moreover, I show that when the government can credibly commit to monitor piracy the legal firm’s investment on innovation is higher under quantity competition than under price competition. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:uwa:wpaper:12-21&r=bec |
| By: | Guido Ascari (Università di Pavia); Giorgio Fagiolo (Sant'Anna School of Advanced Studies, Pisa); Andrea Roventini (Department of Economics (University of Verona)) |
| Abstract: | Recent empirical findings suggest that macroeconomic variables are seldom normally distributed. For example, the distributions of aggregate output growth-rate time series of many OECD countries are well approximated by symmetric exponential-power (EP) densities, with Laplace fat tails. In this work, we assess whether Real Business Cycle (RBC) and standard medium-scale New-Keynesian (NK) models are able to replicate this statistical regularity. We simulate both models drawing Gaussian- vs Laplace-distributed shocks and we explore the statistical properties of simulated time series. Our results cast doubts on whether RBC and NK models are able to provide a satisfactory representation of the transmission mechanisms linking exogenous shocks to macroeconomic dynamics. |
| Keywords: | Growth-Rate Distributions, Normality, Fat Tails, Time Series, Exponential-Power Distributions, Laplace Distributions, DSGE Models, RBC Model |
| JEL: | C1 E3 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:02/2012&r=bec |
| By: | Andrea Ajello |
| Abstract: | I use micro data to quantify key features of U.S. firm financing. In particular, I establish that a substantial 35% of firms' investment is funded using financial markets. I then construct a dynamic equilibrium model that matches these features and fit the model to business cycle data using Bayesian methods. In the model, stylized banks enable trades of financial assets, directing funds towards investment opportunities, and charge an intermediation spread to cover their costs. According to the model estimation, exogenous shocks to the intermediation spread explain 35% of GDP and 60% of investment volatility. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2012-67&r=bec |
| By: | Pussep, Anton; Schief, Markus; Buxmann, Peter |
| Abstract: | The goal of the German Software Industry Survey is to investigate the current state of the German software industry on a yearly basis. Conclusions are made based on grounded data and empirical findings. We hope that this type of research will contribute to the work of both, practitioners and researchers. As a public research institution we keep our respondent’s data strictly confidential. We conduct the German Software Industry Survey in the context of the Software- Cluster2, which is funded by the German Federal Ministry of Education and Research3under grant “01IC10S05”. The authors take the responsibility for the contents. Two topics have been the main focus of this year’s survey: business models and competitive strategies of software firms. We collected and analyzed more than 500 responses which lead us to the following main conclusions: (1) German firms have a very positive outlook on the next five years, expecting to grow by almost 30% per year; (2) The nature of business models in the German software industry is multifaceted; (3) The German software sector is highly competitive. |
| Keywords: | software industry survey, software industry, software firm, business model, strategy, value chain |
| Date: | 2012–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:59358&r=bec |
| By: | Dräger, Vanessa (IZA); Marx, Paul (University of Southern Denmark) |
| Abstract: | Although the negative economic effects of temporary employment are widely discussed, cross-country research on firms’ demand for temporary employment is rare. National studies indicate that workload fluctuations are one major motive for firms to employ temporary workers. By studying a novel data set of 18,500 firms from 20 countries, we show that workload fluctuations increase the probability of hiring temporary workers by eight percentage points in rigid labour markets, but no such effect is observed in flexible labour markets. This conditioning effect of employment protection is in line with a recently developed search-and-matching model. Our results are robust to subgroups, subsamples and alternative estimation strategies. |
| Keywords: | temporary employment, employment protection, labour demand, firm-level data |
| JEL: | J23 J28 J21 J63 J68 J82 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6894&r=bec |
| By: | Hugo D. Kantis; Juan S. Federico; Luis A. Trajtenberg |
| Abstract: | Based on a cross-country comparison of dynamic new firms, this paper attempts to characterize Latin American middle-class entrepreneurs and their firms. In general, Latin American middle-class entrepreneurs tend to face more difficult conditions in terms of resources and skills acquisition than those belonging to more affluent social strata. They tend to have earlier exposure to business experience since they generally belong to families in which their fathers’ occupation allowed for such exposure, and the universities where they studied are sounder platforms for developing abilities and contacts. Likewise, compared to middle-class entrepreneurs from more developed regions, Latin American middle- class entrepreneurs tend to be less exposed to the business world and entrepreneurial role models. Additionally, they are more likely to rely on a less qualified and less business-specific support network, and initial financing is less accessible to them. The paper summarizes several key policy implications and recommendations derived from the analysis. |
| JEL: | L26 M13 O54 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:4800&r=bec |
| By: | Andrew B. BERNARD (Tuck School of Business at Dartmouth, Hanover and NBER); Emily J. BLANCHARD (Tuck School of Business at Dartmouth, Hanover); Ilke VAN BEVEREN (KU Leuven, Lessius Department of Business Studies); Hylke Y. VANDENBUSSCHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | Large multi-product firms dominate international trade flows. This paper documents new facts about multi-product manufacturing exporters that are not easily reconciled with existing multi-product models. Using novel linked production and export data at the firm-product level, we find that the overwhelming majority of manufacturing firms export products that they do not produce. Three quarters of the exported products and thirty percent of export value from Belgian manufacturers are in goods that are not produced by the firm, so-called Carry-Along Trade (CAT). The number of CAT products is strongly increasing in firm productivity while the number of produced products that are exported is weakly increasing in firm productivity. We propose a general model of production and sourcing at multi-product firms. While the baseline model fails to reconcile the relationships between firm productivity and the numbers of exported products observed in the data, several demand and supply-side extensions to the model are more successful. Looking at export price data, we find support for a novel theoretical extension based on demand-scope complementarities |
| JEL: | F12 F13 F14 L11 |
| Date: | 2012–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2012020&r=bec |
| By: | Echeverría, Manuel (Department of Economics, Lund University) |
| Abstract: | This paper gives a game-theoretical treatment of the institutional homogenization of value-oriented firms. It explains why intrinsically motivated, value-oriented firms like non-profits may become similar to for-profit firms in terms of organization and norms. It highlights and explains the pairs: value-oriented and flat organizations in contrast to value-neutral managers and hierarchical organizations. We consider a major donor like the government who delegates a project to an organization without endowments under asymmetric information. The non-profit is able to adapt its organization by establishing a hierarchy with an intrinsically motivated manager. The donor can in turn react by employing institutions in order to cope with information asymmetries regarding the mission of the organization and the unverifiable values of the manager. Two main cases are examined, one without competition and a competitive case. The equilibrium in the first case is a flat organization or alternatively highly altruistic hierarchy. The second competitive case is characterized by a value neutral hierarchy. |
| Keywords: | Institutional change; Governance; Nonprofit; Hierarchy; Culture |
| JEL: | L30 L31 L33 M12 M14 |
| Date: | 2012–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2012_025&r=bec |
| By: | Brandt, Loren; Van Biesebroeck, Johannes; Wang, Luhang; Zhang, Yifan |
| Abstract: | China’s policy-makers argued that WTO accession and the accompanying trade liberalization would have a beneficial impact on the domestic economy. China’s import tariffs differed tremendously across industry in the earlier years, but converged to an almost uniform low level after WTO entry. We exploit sectoral variation in the extent of tariff reduction to identify the impact of increased import competition on firm performance and its contribution to the significant productivity growth over the 1995–2007 period. We find evidence of strong downward pressure on prices and mark-ups, but limited evidence that imports took away market share from domestic firms. Furthermore, much of the effects on sectoral productivity come from changes at the extensive margin. Sectors that liberalized most tend to attract especially productive entrants, private firms in particular, which can be rationalized by an increase in the minimum productivity threshold needed to survive in these sectors. |
| Keywords: | China; Productivity; Tariff; Trade liberalization |
| JEL: | F13 F14 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9166&r=bec |
| By: | Jason DeBacker; Bradley Heim; Vasia Panousi; Shanthi Ramnath; Ivan Vidangos |
| Abstract: | Our paper represents the first attempt in the literature to estimate the properties of business income risk from privately held businesses in the US. Using a new, large, and confidential panel of US income tax returns for the period 1987-2009, we extensively document the empirical stylized facts about the evolution of various business income risk measures over time. We find that business income is much riskier than labor income, not only because of the probability of business exit, but also because of higher income fluctuations, conditional on no exit. We show that business income is less persistent, but is also characterized by higher probabilities of extreme upward transition, compared to labor income. Furthermore, the distribution of percent changes for business income is more dispersed than that for labor income, and it also indicates that business income faces substantially higher tail risks. Our results suggest that the high-income households are more likely to bear both the big positive and the big negative business income percent changes. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2012-69&r=bec |
| By: | Glandon, PJ (Department of Economics, Colgate University); Jaremski, Matthew (Department of Economics, Colgate University) |
| Abstract: | Temporary price reductions or “sales†have become increasingly important in the evolution of the price level. We present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices. Using a six year panel of weekly observations from a grocery chain, we find that individual stores employ more sales as the distance to Wal-Mart falls. Moreover, the increase in the frequency of sales was concentrated on the most popular products, suggesting the use of a loss-leader strategy. |
| Keywords: | Wal-Mart, Retail Prices, Price Competition, Temporary Sales Prices |
| JEL: | E30 L11 L13 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:cgt:wpaper:2012-03&r=bec |
| By: | Hanna Halaburda (Strategy Unit, Harvard Business School); Yaron Yehezkel (Faculty of Management, Tel-Aviv University) |
| Abstract: | This paper considers platform competition in a two-sided market that includes buyers and sellers. One of the platforms benefits from a favorable coordination bias in the market, in that the two sides are more likely to join the advantaged platform. We find that the degree of the coordination bias affects the platform's decision regarding the business model (i.e., whether to subsidize buyers or sellers), the access fees and the size of the platform. A slight increase in the coordination bias may induce the advantaged platform to switch from subsidizing sellers to subsidizing buyers, or induce the disadvantaged platform to switch from subsidizing buyers to subsidizing sellers. Moreover, in the former case the advantaged platform switches from oversupplying to undersupplying sellers, while in the latter case the disadvantaged platform switches from undersupplying to oversupplying sellers. |
| Keywords: | platform competition, two-sided markets, coordination bias |
| JEL: | L11 L14 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1203&r=bec |
| By: | McKenzie, David (World Bank); Woodruff, Christopher (University of Warwick) |
| Abstract: | Business training programs are a popular policy option to try to improve the performance of enterprises around the world. The last few years have seen rapid growth in the number of evaluations of these programs in developing countries. We undertake a critical review of these studies with the goal of synthesizing the emerging lessons and understanding the limitations of the existing research and the areas in which more work is needed. We find that there is substantial heterogeneity in the length, content, and types of firms participating in the training programs evaluated. Many evaluations suffer from low statistical power, measure impacts only within a year of training, and experience problems with survey attrition and measurement of firm profits and revenues. Over these short time horizons, there are relatively modest impacts of training on survivorship of existing firms, but stronger evidence that training programs help prospective owners launch new businesses more quickly. Most studies find that existing firm owners implement some of the practices taught in training, but the magnitudes of these improvements in practices are often relatively modest. Few studies find significant impacts on profits or sales, although a couple of the studies with more statistical power have done so. Some studies have also found benefits to microfinance organizations of offering training. To date there is little evidence to help guide policymakers as to whether any impacts found come from trained firms competing away sales from other businesses versus through productivity improvements, and little evidence to guide the development of the provision of training at market prices. We conclude by summarizing some directions and key questions for future studies. |
| Keywords: | business training, consulting, randomized experiments, firm productivity |
| JEL: | O12 J16 L26 M53 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6895&r=bec |
| By: | Erik Fjærli and Diana Iancu (Statistics Norway) |
| Abstract: | Are investments by new firms constrained by access to financing? If so, are the constraints persistent or do firms overcome their financing problems during the first years of operation? We examine the role of capital constraints by estimating the relation between founders’ initial wealth and firm size during the first years of operation. Similar to previous studies, we find a positive impact of entrepreneurs’ wealth prior to start-up on the start-up size of entrepreneurial firms, but this effect decreases during the first five years of operation. We also document a high degree of economic mobility among entrepreneurial firms during the first years of operation. This is primarily driven by a disproportional increase in debt financing among the smallest firms, indicating that capital constraints for entrepreneurs are transitory. |
| Keywords: | Entrepreneurship; borrowing constraints; growth |
| JEL: | L11 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:707&r=bec |
| By: | Vogel , Alexander (Leuphana University Lueneburg); Wagner, Joachim (Leuphana University Lueneburg and IZA, Bonn) |
| Abstract: | This paper contributes to the literature by providing the first evidence on the link between innovation activities (measured by the share of engineers and scientists in the workforce) and exports of German business services firms based on a large representative longitudinal sample of enterprises. The data combine for the first time information at the firm-level that is taken from data produced by the Statistical Offices and by the Federal Labour Agency. We document that R&D activities are positively linked with exports, and that this link is present when observed firm characteristics (including firm size, productivity, and human capital intensity) and unobserved time-invariant firm characteristics are controlled for. From an economical point of view the effect is, however, rather small. Furthermore, we find some evidence for self-selection of innovative services firms on export markets. We have to admit, however, that the panel is too short, and that the number of firms that start to export and start to perform R&D during the period under investigation is too small, for any convincing attempt to investigate the direction of the causal link between exports and innovation activities. |
| Keywords: | Innovation; export; business services; Germany |
| JEL: | F14 |
| Date: | 2012–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0285&r=bec |
| By: | ADITYA BHATTACHARJEA (Department of Economics, Delhi School of Economics, Delhi, India); UDAY BHANU SINHA (Department of Economics, Delhi School of Economics, Delhi, India) |
| Abstract: | This paper develops a supergame model of collusion between price-setting oligopolists located in different markets separated by trade costs. The firms produce a homogenous good and sustain collusion based on territorial allocation of markets. We first show, in a more general framework than some earlier literature, that a reduction in trade costs can paradoxically increase the sustainability of collusion. Then we prove a new paradox where the scope for collusion may be enhanced by an increase in the number of firms. We discuss several implications for trade and antitrust policy in this context. |
| Keywords: | Multimarket contact, collusion, trade costs, territorial allocation, cartels |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:217&r=bec |
| By: | KONDO Masanori |
| Abstract: | Despite growing appreciation for the potential of the Indian market, competitors often experience greater success penetrating it than do Japanese companies. This paper addresses possible reasons for Japanese reticence in addition to strategies that Japanese companies have started and would do well to continue to adopt. Among these are: 1) large-scale initial investment, 2) joint ventures, 3) central decision making, 4) adaptation of products to the Indian market, 5) large-scale advertisement campaigns, 6) alternative corporate culture models, and 7) human resource relations. In order to make suitable comparisons, the cases of Korean companies are often applied. Nevertheless, the long-term future of Japanese corporate interests in India may not remain at a disadvantage given the Comprehensive Economic Partnership Agreement (CEPA) between Japan and India, which only took effect in August 2011, and the considerable demand for infrastructure in India; an area where Japanese expertise might surpass that of South Korea. |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:12064&r=bec |
| By: | Jose Anchorena; Lucas Ronconi |
| Abstract: | This paper uses datasets from six surveys to describe entrepreneurship in Argentina. While the quantity of entrepreneurship in Argentina is high, its quality is low, given the high proportion of informal and necessity entrepreneurs. Income is found to play a greater role in determining probability of becoming an entrepreneur than parental wealth; entrepreneurship is, however, transmitted inter- generationally. Although it is found that Argentina promotes entrepreneurial values more than most Latin American countries, entrepreneurs face several obstacles. Finally, using panel data based on household surveys, the paper estimates the short and long-run effects of an increase in public employment on entrepreneurship, finding the effects to be negative and strong. Overall, the evidence suggests that changes in public policies and other areas are needed for Argentina to become an entrepreneurial economy. |
| JEL: | L26 L5 O17 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:4798&r=bec |
| By: | Amy Wang (MsM, Doctoral Candidate); Stephanie Jones (Associate Professor of Organizational Behavior, MsM); Weihua Huang (KPMG China Practice in Belgium) |
| Abstract: | Research by our co-author Weihua Huang suggests that according to the Hurun Wealth Report 2010, in China there are at least 875,000 USD millionaires, 1900 RMB billionaires (with over EUR 110 million), and 140 Chinese have made over RMB 10 billion. Many of these are comparatively young – between 25 and 30 years of age. There is a great deal of hidden wealth in the Chinese economy, with a significant number of low-key billionaires keeping their heads below the parapet – and this includes some of the youngest.The average age of China’s most wealthy inhabitants is only 39 years of age. On average, they are 15 years younger than their counterparts outside of China, and their wealth is growing more rapidly.The male to female ratio is 7:3, which is also very different from many other countries. Beijing is home to more of China’s rich than anywhere else, with 151,000 millionaires. Guangdong occupies the second position, and Shanghai is third.They made their money primarily as entrepreneurs in private business from the service, property and manufacturing sectors (in that order) and they are confident about China’s economic outlook, despite the world economic downturn and soft-landing of China’s long economic growth-spurt. These young entrepreneurs represent a privileged class of young wealthy shopaholics. How do they spend their money? The consumption habits of China’s young wealthy have been evolving and changing in recent times. They enjoy collecting luxury items and being connoisseurs… Chinese classical art, cars and watches… on average they own three cars and 4.4 luxury watches each.Travel, golf and swimming are their leisure activities of choice, and they take an average of 16 days’ holiday a year.With regard to lifestyle, swimming is the preferred hobby of Tier 1 millionaires and tea tasting for Tier 2/3. In Tier 1 Chinese millionaires prefer collecting cars and watches while in Tier 2/3 the preference is for traditional Chinese paintings. The favoured fashion brands of Chinese millionaires in Tier 1 cities are Giorgio Armani, and Gucci and Boss in Tier 2/3. Chinese millionaires identify Cartier as the most preferred jewellery brand but among Tier 1 millionaires.Bulgari is also well liked and Montblanc is popular with Tier 2/3 city millionaires. A research report from UBS AG showed that by the end of 2015, China's domestic consumption is expected to account for 15.6 percent of the world's total spending, jumping from 5.4 percent in 2011, with the result that China is becoming the world's second largest consumer market following the US.China’s middle class (also exceptionally young compared with other countries) currently accounts for roughly 23% of the whole population, to reach 40% in 2020.According to Euro-monitor International, by 2020, China’s middle class will expand to 700 million (the middle class in China is defined as households with an annual income between RMB 60,000 and RMB 500,000, divisible by around 10 to create approximations in USD, GBP and Euros). Many of these middle-class consumers are young, and are accumulating their wealth now, in real time. This paper will also consider how Western businesses are cashing-in on these trends, looking at risks and opportunities in the China market, based on another co-author’s recently published book, The BRICS and Beyond. The third co-author has added her insights from her doctoral studies on the development of Chinese multinationals and Chinese brands. Primarily, the contribution of this paper is the provision of a literature review of recent articles – primarily from the Emerald database and supplemented with material published by audit and consulting firm KPMG, blue chip consultants McKinsey and the research-based Economist Intelligence Unit. This paper is basically a summary of the literature on young, wealthy Chinese entrepreneurs and the way they spend their wealth, and what others can learn from this. |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:msm:wpaper:2012/25&r=bec |
| By: | Bar Ifrach (Management Science and Engineering, Stanford University); Costis Maglaras (Columbia Business School, Columbia University); Marco Scarsini (Dipartimento di Economia e Finanza, LUISS) |
| Abstract: | A monopolist offers a product to a market of consumers with heterogeneous quality preferences. Although initially uninformed about the product quality, they learn by observing past purchase decisions and reviews of other consumers. Our goal is to analyze the social learning mechanism and its effect on the seller's pricing decision. Consumers follow an intuitive non-Bayesian decision rule and, under some conditions, eventually learn the product's quality. We show how the learning trajectory can be approximated in settings with high demand intensity via a mean-field approximation that highlights the dynamics of this learning process, its dependence on the price, and the market heterogeneity with respect to quality preferences. Two pricing policies are studied: a static price, and one with a single price change. Finally, numerical experiments suggest that pricing policies that account for social learning may increase revenues considerably relative to policies that do not. |
| Keywords: | learning, information aggregation, bounded rationality, pricing, optimal pricing |
| JEL: | D49 D83 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1201&r=bec |
| By: | Chris Doyle; Martijn A. Han; ; |
| Abstract: | Retailers may enjoy stable cartel rents in their output market through the formation of a buyer group in their input market. A buyer group allows retailers to credibly commit to increased input prices, which serve to reduce combined final output to the monopoly level; increased input costs are then refunded from suppliers to retailers through slotting allowances or rebates. The stability of such an “implied cartel” depends on the retailers’ incentives to secretly source from a supplier outside of the buyer group arrangement at lower input prices. Cheating is limited if retailers sign exclusive dealing or minimum purchase provisions. We discuss the relevancy of our findings for antitrust policy. |
| Keywords: | buyer groups, collusion, exclusive dealing, minimum purchase clauses, rebates |
| JEL: | K21 L13 L41 L42 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2012-059&r=bec |
| By: | Nathalie FERREIRA; Sophie BOUTILLIER (Laboratoire de Recherche sur l'Industrie et l'Innovation. ULCO) |
| Abstract: | L'objectif des entreprises de l'économie sociale et solidaire est théoriquement de contribuer à l'amélioration du bien-être social. Dans les faits, nous constatons cependant que leur comportement réside dans la recherche du profit et la conquête de nouveaux marchés. Dans une économie basée sur la concurrence, le comportement des firmes a des points communs : faire des profits, stratégies de croissance et innovation. L'étude de Montragon et d'Euresa est riche d'enseignements. La théorie de la firme apporte des outils d'analyse. Si certains économistes ont fortement critiqué la théorie néo-classique de la firme en montrant que les firmes n'avaient pas un seul objectif (maximiser leur profit), ils n'ont pas cependant affirmé que l'entreprise ne pouvait pas ne pas faire de profit. Theoretically, the objective of non-profit (or social) enterprises is to contribute to the social welfare. Nevertheless, in the facts, we observe that they have to achieve profit and to conquest new markets. In an economy based on competition, the behaviours of the enterprises have common traits: making profit, strategies of growth and of innovation. We can draw several lessons from the study of Mondragon and Euresa cases. The theory of the firm gives analyzing tools. If some economists have criticized the neo-classical theory of the firm, to show that firms not only have one goal (to maximize their profit), they also explain that firms can't exist without making profits. |
| Keywords: | histoire entrepreneur, économie sociale et solidaire, théorie de la firme |
| JEL: | B19 D21 L2 L26 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:rii:riidoc:245&r=bec |
| By: | Dimitri Paolini; J.D. Tena |
| Abstract: | This paper analyzes the relation between resource inputs and managerial effort in firms. The discussion is motivated by a theoretical model that suggests that firms use managerial effort as a substitute of capital resources in the production process. In this framework, different levels of effort are always optimal decisions given its relative cost. Thus, the relatively higher effort exerted by small (compared to big) firms is not a consequence of hidden information or incentive problems in the organization but it is a optimal decision of small firms to offset capital market restrictions. Managers in big firms, on the other hand, are not obliged to offer their maximum personal effort given that it can be more easily substituted by capital resources in the production process. |
| Keywords: | managerial effort; organizational diseconomies of scale; small firms |
| JEL: | L83 M50 J44 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:201223&r=bec |
| By: | Nestor Gandelman; Virginia Robano |
| Abstract: | This paper estimates the relationship between parents’ educational attainment and income and children’s schooling in Uruguay between 1982 and 2010. This relationship is interpreted as a measure of intergenerational social mobility, and the paper reports evidence that it has decreased over time. The paper finds that the probability that the children of the more educated remain among the more educated has grown, with analogous results for the less educated. As a result, the improvements in education of the 1980s and 1990s were unevenly distributed, with a bias against the disadvantaged. The paper also finds that while entrepreneurship status and belonging to the middle class matter in terms of social mobility as measured by compulsory education, i. e. , primary school and the first three years of secondary school, they do not have a notable effect on non- compulsory education, i. e. , the last three years of secondary school and higher. |
| JEL: | I24 J62 L26 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:4794&r=bec |
| By: | M. BERNAERT; D. VAN DEN POEL |
| Abstract: | Enterprise architecture (EA) is used as a holistic approach to keep things aligned in a company. Some emphasize the use of EA to align IT with the business, others see it broader and use it to also keep the processes aligned with the strategy. Enterprise architecture management (EAM) enables companies to keep up with a rapidly changing business environment. Although a lot of research is being done on EA and EAM, still hardly anything is known about their use in the context of a small and medium sized enterprise (SME). Because of some specific characteristics of SMEs, it is interesting to look how EA and its management can be applied in a SME. In this paper, the authors present an approach for EA and EAM for SMEs, which combines four dimensions to get a holistic overview, while keeping things aligned. The approach is developed with special attention towards the characteristics of SMEs. A case study in a Belgian SME is used to ground and apply the presented approach. With this case study, the authors show how EA can be applied and managed in a SME. A tool is presented which can be used to implement the approach. The tool enables the EA model to be developed, to be kept up-to-date, and to be used to make analyses. |
| Keywords: | Enterprise architecture management Small and medium sized enterprises Business architecture CHOOSE |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:12/789&r=bec |