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on Business Economics |
| By: | Baldwin, John R. Liu, Huju Wang, Weimin |
| Abstract: | This paper describes the patterns of firm entry and exit across provinces in Canada, the relationship of these patterns to differences in industrial structure and the response of firm entry and exit to changes in the economic environment. Firm entry and exit play an important role in shaping industrial structure and dynamics. Although entry and exit are ubiquitous, new firms are often associated with new ideas and the provision of innovative goods and services that enhance competition and force incumbents to become more innovative and efficient. Studies have shown the considerable role played by entry and exit in resource reallocation and productivity improvement. |
| Keywords: | Business performance and ownership, Entry, exit, mergers and growth |
| Date: | 2013–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp1e:2013030e&r=bec |
| By: | Lafrance, Amelie |
| Abstract: | The topic of firm size and performance continues to spark the interest of researchers and policy-makers. Small and medium-sized enterprises receive much of the attention, as they have the potential to grow significantly. However, compared with their larger counterparts, these firms are more likely to fail and are therefore riskier. Is risk important in explaining differences in profitability across firm size classes? This study uses a longitudinal firm-level dataset to examine determinants of profitability by firm size, with an emphasis on risk, or the volatility in rates of return. It builds on previous research that found firms with 10 to 20 employees tend to be the most profitable. |
| Keywords: | Business performance and ownership, Small and medium-sized businesses |
| Date: | 2013–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp5e:2013087e&r=bec |
| By: | Julieta Caunedo (Washington University in St. Louis) |
| Abstract: | This paper investigates how features of the business cycle interact with technological restrictions at the firm level to generate dispersion in marginal products of ex ante identical firms. The model is able to deliver a non-monotonic relationship between dispersion in marginal products, aggregate productivity and the features of the business cycle. When aggregate uncertainty is low and dispersion in marginal products is low, aggregate productivity is high. But when aggregate uncertainty is high, aggregate productivity is low, and the allocation can be consistent with low dispersion in marginal products. These two alternative economies differ in their underlying industry dynamic. Hence, dispersion is an imperfect statistic of aggregate productivity in the model. Allocations are typically non efficient due to imperfect competition and non-convexities in production. I study the properties of the optimal industrial policy. In general, the efficient allocation does not dictate equalization of capital labor ratios across all firms. Allocations are dynamically optimal so there is no room for further reallocation. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed013:1078&r=bec |
| By: | Navaretti , Giorgio Barba (Department of Economics, Management and Quantitative Methods, University of Milan, Italy); Castellani , Davide (Department of Economics, Finance and Statistics, University of Perugia, Centro Studi Luca d'Agliano, Milan, Italy Halle Institute for Economic Research (IWH), Halle, Germany CIRCLE, Lund University, Sweden); Pieri , Fabio (Depto. de Economia Aplicada II (Estructura Economica), Universitat de Valencia, Spain) |
| Abstract: | This paper provides new insights on the dependence of firm growth on age along the entire distribution of (positive and negative) growth rates, and conditional on survival. Using data from the EFIGE survey, and adopting a quantile regression approach, we uncover evidence for a sample of French, Italian and Spanish manufacturing firms with more than 10 employees in the period from 2001 to 2008. After controlling for several firms’ characteristics, country and sector specificities we find that: (i) young firms grow faster than old firms, especially in the highest growth quantiles; (ii) young firms face the same probability of declining than their older counterparts; (iii) results are robust to the inclusion of other firms’ characteristics such as labor productivity, capital intensity, and the financial structure; (iv) high growth is associated with younger CEOs and other attributes which capture the attitude of the firm toward growth and change. The effect of age on firm growth is rather similar across countries. |
| Keywords: | firm growth; age; quantile regression |
| JEL: | L21 L25 L26 L60 |
| Date: | 2013–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2013_041&r=bec |
| By: | Andreas Hildenbrand (University of Gießen); Mihael Duran (University of Tuebingen) |
| Abstract: | A monopolist is treated as a nexus of contracts with team production. It has one ownermanager. The owner-manager is the employer of two employees. A team production problem is present if the employer is a “managerial lemon”. If the team production problem is solved, the employer is a “managerial hotshot”. Both a managerial hotshot and a managerial lemon are found to make profit. Managerial slack can therefore exist in our monopoly market. In the case of a managerial lemon, the profit level is lower. However, the employees’ utility level is higher. Whereas the employer has an incentive to improve management capability in principle, the employees have an incentive to keep management capability low. Moreover, the cost of improving management capability may be prohibitively high. Managerial slack can therefore persist. The predicted behavior of the monopolist is grounded in individual behavior under the assumption of utility maximization. |
| Keywords: | firm organization, market structure, property rights |
| JEL: | C7 D2 D4 L1 L2 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201353&r=bec |
| By: | Malcolm Dunn |
| Abstract: | This book deals with the inner life of the capitalist firm. There we find numerous conflicts, the most important of which concerns the individual employment relationship which is understood as a principal-agent problem between the manager, the principal, who issues orders that are to be followed by the employee, the agent. Whereas economic theory traditionally analyses this relationship from a (normative) perspective of the firm in order to support the manager in finding ways to influence the behavior of the employees, such that the latter – ideally – act on behalf of their superior, this book takes a neutral stance. It focusses on explaining individual behavioral patterns and the resulting interactions between the actors in the firm by taking sociological, institutional, and above all, psychological research into consideration. In doing so, insights are gained which challenge many assertions economists take for granted. |
| Keywords: | Principal Agent Relation, Firm Behaviour, Evolutionary Economics, Transaction Costs, Conflict Management |
| JEL: | D21 D23 L2 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:pot:pestud:01&r=bec |
| By: | Le Pape, Nicolas; Zhao, Kai |
| Abstract: | Some path-breaking work on mergers takes efficiency gains for granted, or assumes that firms have perfect knowledge when taking merger decisions. In practice, firms and competition authorities cannot know exact future efficiency gains, prior to merger consummation. This paper analyzes horizontal mergers when the output decision-making process is sequential. A key assumption is that mergers create uncertainty on productivity and informational asymmetry between firms. The paper also studies whether the merged firm has interest to reveal the information about its own cost to competing firms. In terms of Merger Approval, the paper emphasizes the timing of regulatory intervention and distinguishes two different merger control interventions (ex ante or ex post enforcement). Since prudent competition authorities (using ex ante intervention) should take the restrictive policy, the framework illustrates why US Horizontal Merger Guidelines and EC Merger Regulation are biased in favor of the consumers' interests. -- |
| Keywords: | merger,competition authorities,uncertainty,asymmetric information |
| JEL: | D21 D80 L20 L40 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201362&r=bec |
| By: | Tavassoli, Sam (Industrial Economics, Blekinge Institute of Technology, Karlskrona, Sweden and CIRCLE, Lund University, Sweden) |
| Abstract: | This paper analyzes how the influence of firm-level innovation determinants varies over the industry life cycle. Two sets of determinants are distinguished: (1) determinants of a firm’s innovation propensity, i.e. the likelihood of being innovative and (2) determinants of its innovation intensity, i.e. innovation sales. By combining the literature emphasizing firms’ internal resources (micro level) with the research strand on the role of the industry context (meso-level), the paper develops hypotheses about the relative importance of firm-level innovation determinants over the industry life cycle. Estimation of a firm-level model of innovation in Sweden, while acknowledging the stage of the life cycle of the industry a firms belongs to, shows that the importance of the determinants of innovation propensity and intensity are not equal over the stages of an industry’s life cycle |
| Keywords: | Determinants of innovation; innovation intensity; innovation propensity; Industry Life Cycle (ILC); Community Innovation Survey (CIS4) |
| JEL: | F14 O31 O33 |
| Date: | 2013–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2013_042&r=bec |
| By: | Matthew Beacham; Bipasa Datta |
| Abstract: | It is well established in the empirical literature that venture capital (VC) plays an important role in the promotion of innovation at industry level and the professionalisation of firms at micro-level. Whilst the VC-to-success link has been well explored, the mechanism behind how and why certain venture-backed firms are apparently more successful is an important question that has been largely ignored within the majority of the literature. In this paper, we fill this gap by specifically analysing firms' pre- and post-VC investment decisions. By considering a two period, multi-stage game, we analyse whether VC spurs innovation (i) directly after being granted; (ii) indirectly by incentivising firms to increase initial research efforts to increase their chances of receiving VC funding and its associated benefits; or (iii) a combination of both. Our results show that VC has both direct and indirect effects on firms' innovation decisions regardless of whether the firm is successful in securing VC funding or not. Furthermore, we find that the commonly held assertion that venture capital spurs success is too simplistic: whilst venture capital spurs innovation amongst the lucky, chosen few, it unambiguously suppresses innovation of non-VC-backed firms, a result that has been overlooked in the empirical literature. The issue of `who becomes the winner' in the final product market however is ultimately dependent upon the extent of heterogeneity amongst firms. Further, we show that VC funding, equity stake and value-adding services all have impacts upon firms' incentives to invest in the first stage. |
| Keywords: | Venture capital, innovation, firm heterogeneity, investment and effort, strategic substitutes and complements |
| JEL: | G24 L13 L2 O31 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:13/33&r=bec |
| By: | Julie Bower; Howard Cox |
| Abstract: | We present an historic industry study of the consolidation of the UK alcoholic beverages firms to inform debates in organisation studies relating to co-evolution and the dynamics of internationalisation. We distinguish behavioural and structural co-evolutionary factors in firms’ strategic intent, mirroring the two types of remedies that competition authorities can impose on merging firms. We test this theoretical construct in an empirical investigation of the consolidating UK alcoholic beverages firms between 1985 and 2005. In this era Diageo was formed from the landmark merger of Grand Metropolitan and Guinness. Subsequently Diageo acquired the former international spirits empire of Seagram in partnership with a major competitor. Successful implementation of Diageo’s merger strategy owed much to an ability to navigate the evolving multijurisdictional co-ordinated oversight of cross-border mergers and acquisitions. The formation of novel deal structures as well as co-operation with competitors to circumvent policy intervention were significant co-evolutionary mechanisms that have featured more generally in subsequent international mergers as others have copied these deal structures to achieve similar regulatory outcomes. |
| Keywords: | Alcoholic beverages; Co-evolution; Competition policy; Merger regulation |
| JEL: | K21 L22 L66 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cgs:wpaper:48&r=bec |
| By: | Backman, Mikaela (Centre of Excellence for Science and Innovation Studies (CESIS), Jönköping International Business School, & Centre for Entrepreneurship and Spatial Economics (CEnSE)); Karlsson, Charlie (Centre of Excellence for Science and Innovation Studies (CESIS), Jönköping International Business School, & Centre for Entrepreneurship and Spatial Economics (CEnSE)) |
| Abstract: | Studies confirm a tendency where elder individuals are more prone to become entre¬preneurs. Their motives are numerous ranging from feeling social included to maintain the same income level. Interesting as such, this paper contributes to the existing literature by taking this one step further and examine the surviving of new and existing firms that are run by elder individuals (one-em¬ployee firms) or have a high share of elderly individuals. Elderly individuals are defined as those above the age of 55 or 64. The results show that the average marginal effect on the prob-ability of survival from individuals above 55 and 64 differs across firm size. Elderly individuals negatively influence the survival of smaller firms (below ten employees). For larger firms the negative effect from elderly individuals is smaller, zero or even positive. Exploring the data, we find that “elderly firms”, defined as firms that have a majority of employees above the age of 55 or above the age of 64, have a lower survival rate and lower average number of employees but a higher value added per employee. |
| Keywords: | ageing; firm survival; employer-employee matched data |
| JEL: | J14 L26 R12 R30 |
| Date: | 2013–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0339&r=bec |
| By: | Kvaløy, Ola; Nieken, Petra; Schöttner, Anja |
| Abstract: | We conducted a field experiment in a controlled work environment to investigate the effect of motivational talk and its interaction with monetary incentives. We find that motivational talk significantly improves performance only when accompanied by performance pay. Moreover, performance pay slightly reduces performance unless it is accompanied by motivational talk. These effects also carry over to the quality of work. Performance pay alone leads to more mistakes. Adding motivational talk makes the difference. In treatments with performance pay, motivational talk increases output by about 20 percent and reduces the ratio of mistakes by more than 40 percent. |
| Keywords: | Verbal Motivation; Performance Pay; Field Experiment |
| JEL: | C93 M52 J33 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:451&r=bec |
| By: | Steffen Elstner (Ifo Institute for Economic Research); Ruediger Bachmann (RWTH Aachen University) |
| Abstract: | Are firms' expectations biased? Does it matter? We use micro data on firms' production expectations from the German IFO Business Climate Survey and compare them to realization data from the same survey. We then construct series of quantitative firm-specific expectation errors. We find that depending on the exact definition at least 6 percent and at most 35 percent of firms consistently over- or underpredict their one-quarter-ahead upcoming production. In a simple frictionless neoclassical heterogeneous firm model these expectational biases lead to factor misallocations that cause welfare losses that in the worst case are comparable to conventional estimates of the welfare costs of business cycles fluctuations. In more conservative calibrations the welfare losses are even smaller. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed013:623&r=bec |