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on Business Economics |
| By: | Colin Hottman; Stephen J. Redding; David E. Weinstein |
| Abstract: | We estimate a structural model of heterogeneous multiproduct firms to examine the sources of firm heterogeneity emphasized in the recent trade and macro literatures. Using Nielsen barcode data on prices and sales, we estimate elasticities of substitution within and between firms, and use the estimated model to recover unobserved qualities, marginal costs and markups. We find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales. Most firms are well approximated by the monopolistic competition benchmark of constant markups, but the largest firms that account for most of aggregate sales depart substantially from this benchmark. Although the output of multiproduct firms is differentiated, cannibalization is quantitatively important for the largest firms. This imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms. |
| JEL: | D24 F12 F14 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20436&r=bec |
| By: | Marin, Dalia; Schymik, Jan; Tarasov, Alexander |
| Abstract: | We incorporate trade in tasks à la Grossman and Rossi-Hansberg (2008) into a small open economy version of the theory of firm organization of Marin and Verdier (2012) to examine how offshoring affects the way firms organize. We show that the offshoring of production tasks leads firms to reorganize with a more decentralized management, improving the competitiveness of the offshoring firms. We show further that the offshoring of managerial tasks relaxes the constraint on managers but toughens competition, and thus has an ambiguous impact on the level of decentralized management and CEO wages of the offshoring firms. In sufficiently open economies, however, managerial offshoring unambiguously leads to more decentralized management and to larger CEO wages. We test the predictions of the model based on original firm level data we designed and collected of 660 Austrian and German multinational firms with 2200 subsidiaries in Eastern Europe. We find that offshoring firms are 33.4% more decentralized than non-offshoring firms. We find further that the average fraction of managers offshored reduces the level of decentralized management by 3.1%, but increases the level of decentralized management by 4% in industries with a level of openness above the 25th percentile of the openness distribution. Lastly, we find that one additional offshored manager lowers CEO wages relative to workers by 4.9%. |
| Keywords: | international trade with endogenous organizations; the rise of human capital; theory of the firm; multinational firms; CEO pay |
| JEL: | F12 F14 L22 D23 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:21741&r=bec |
| By: | TSENG, ERIC |
| Abstract: | This paper extends on work done in the heterogenous-firms trade literature by addressing both heterogeneity in trade costs at the firm level as well as the existence of financial constraints. These extensions to the heterogenous-firms models are also applied in the context of a developing country. Utilizing a framework that endogenizes technological choice, the analysis shows that falling trade costs and improving credit markets (or less financial constraints) improve firm performance. Also, firm-level trade costs are shown to impact a firm’s ability to enter the export market, implying heterogeneity in trade costs at the firm level. The current results show inconclusive evidence for the effect of industry-level trade costs and financial constraints on the ability to enter the export market, but future additions to the robustness of the data in this working paper will address this issue. |
| Keywords: | International Trade Financial Constraints Firm Performance Trade Costs Heterogenous Firms, Financial Economics, International Development, International Relations/Trade, Productivity Analysis, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea14:169786&r=bec |
| By: | Monarch, Ryan (Board of Governors of the Federal Reserve System (U.S.)); Park, Jooyoun (Kent State University); Sivadasan, Jagadeesh (University of Michigan) |
| Abstract: | We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to confidential data on U.S. firm operations. We exploit these data to assess how offshoring affects domestic firm-level aggregate employment, output, wages and productivity. Consistent with heterogenous firm models where offshoring involves a fixed cost, we find that the average offshoring firm is larger and more productive than the average non-offshorer. After initiating offshoring, firms experience large declines in employment (46.2 per cent), output (38.5 per cent) and capital (28.8 per cent) relative to their industry peers. We find no significant change in average wages or in total factor productivity measures for offshoring firms. These results are consistent across two separate difference-in-differences (DID) approaches, an instrumental variables approach, and a number of robustness checks. Thus, we find offshoring to be a strong substitute for domestic activity in this large sample of offshoring events. |
| Keywords: | Outsourcing; manufacturing; employment; trade; productivity; firm performance |
| JEL: | F14 F16 F23 |
| Date: | 2014–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1124&r=bec |
| By: | Rasel, Fabienne |
| Abstract: | This paper examines whether information technology (IT) and decentralized work organization are complementary only for large firms or also for smaller firms. Empirical evidence, which suggests complementarity between IT and decentralization, is mainly based on large firms. Using data from a sample of 3292 SMEs and of 598 larger firms from the manufacturing and service sector in Germany, I can observe firms' IT intensity in terms of enterprise software and computer use and whether firms have a decentralized work organization. I find that SMEs with decentralized work practices tend to use IT more intensively. Moreover, for the sample of SMEs, IT and decentralized work organization are individually associated with higher productivity but the combination of IT and decentralization does not yield a productivity premium. Contrarily, for the sample of larger firms, the results show that the productivity of IT depends positively on decentralization. The findings suggest that combining IT and decentralized work organization seems to be a successful strategy only for larger firms. |
| Keywords: | information technology,decentralized work organization,complementarity,productivity,enterprise software,firm-level data |
| JEL: | D22 D24 L20 O33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14071&r=bec |
| By: | Flabbi, Luca (Inter-American Development Bank); Macis, Mario (Johns Hopkins University); Moro, Andrea (Vanderbilt University); Schivardi, Fabiano (Bocconi University) |
| Abstract: | We analyze a matched employer-employee panel data set and find that female leadership has a positive effect on female wages at the top of the distribution, and a negative one at the bottom. Moreover, performance in firms with female leadership increases with the share of female workers. This evidence is consistent with a model where female executives are better equipped at interpreting signals of productivity from female workers. This suggests substantial costs of under-representation of women at the top: for example, if women became CEOs of firms with at least 20% female employment, sales per worker would increase 6.7%. |
| Keywords: | executives' gender, gender gap, firm performance, glass ceiling, statistical discrimination |
| JEL: | M5 M12 J7 J16 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8602&r=bec |
| By: | Verschelde, Marijn; Dumont, Michel; Rayp, Glenn; Merlevede, Bruno |
| Abstract: | In this paper a semiparametric stochastic metafrontier approach is used to obtain insight into firm-level competitiveness in Europe. We differ from standard TFP studies at the firm level as we simultaneously allow for inefficiency, noise and do not impose a functional form on the input-output relation. Using AMADEUS firm-level data covering 10 manufacturing sectors from seven EU15 countries, (i) we document substantial, persistent differences in competitiveness (with Belgium and Germany as benchmark countries and Spain lagging behind) and a wide technology gap, (ii) we confirm the absence of convergence in TFP between the seven selected countries, (iii) we confirm that the technology gap is more pronounced for smaller firms, (iv) we highlight the role of post-entry growth for competitiveness. JEL Classification: C14, D24, L25, M13, O33 |
| Keywords: | competitiveness, cross-country analysis, firm heterogeneity, post-entry growth, total factor productivity |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20141701&r=bec |
| By: | Yihui Pan; Tracy Yue Wang; Michael S. Weisbach |
| Abstract: | Uncertainty about management appears to affect firms’ cost of borrowing and financial policies. In a sample of S&P 1500 firms between 1987 and 2010, CDS spreads, loan spreads and bond yield spreads all decline over the first three years of CEO tenure, holding other macroeconomic, firm, and security level factors constant. This decline occurs regardless of the reason for the prior CEO’s departure. Similar but smaller declines occur following turnovers of CFOs. The spreads are more sensitive to CEO tenure when the prior uncertainty about the CEO’s ability is likely to be higher: when he is not an heir apparent, is an outsider, is younger, and when he does not have a prior relationship with the lender. The spread- tenure sensitivity is also higher when the firm has a higher default risk and when the debt claim is riskier. These patterns are consistent with the view that the decline in spreads in a manager’s first three years of tenure reflects the resolution of uncertainty about management. Firms adjust their propensities to issue external debt, precautionary cash holding, and reliance on internal funds in response to these short-term increases in borrowing costs early in their CEOs’ tenure. |
| JEL: | G32 G34 M12 M51 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20674&r=bec |
| By: | Smuda, Florian; Bougette, Patrice; Hüschelrath, Kai |
| Abstract: | The duration of appellate court proceedings is an important determinant of the efficiency of a court system. We use data of 234 firm groups that participated in 63 cartels convicted by the European Commission between 2000 and 2012 to investigate the determinants of the duration of the subsequent one- or two-stage appeals process. We find that while the speed of the firststage appellate court decision depends on the court's appeals-related workload, the complexity of the case, the degree of cooperation by the firms involved and the clarity of the applied rules and regulations, the second-stage appellate court proceedings appear to be largely unaffected by those drivers. We take our empirical results to derive conclusions for both firms that plan to file an appeal as well as public policy makers. |
| Keywords: | Law and economics,antitrust policy,cartels,appeals,European Union |
| JEL: | K21 K41 K42 L41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14062&r=bec |
| By: | Arias Ortiz E.; Crespi G.A.; Rasteletti A.; Vargas F. (UNU-MERIT) |
| Abstract: | This paper studies productivity in Latin America and the Caribbean, with an emphasis on the service sector. It shows that the low levels of productivity observed in the region are not only a consequence of low productivity at the firm level, but also of misallocation of workers across firms. These problems are more severe in services than in manufacturing. We also found that the determinants of productivity and employment growth at the firm level are different in manufacturing and services. Furthermore, results suggest that institutional factors might be important for determining productivity growth and resource allocation, as there are large differences across countries in the region in the effect of productivity on employment growth as well as on the speed at which less productive firms can close their productivity gaps. |
| Keywords: | Economic Growth and Aggregate Productivity: General; Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence; Economywide Country Studies: Latin America; Caribbean; |
| JEL: | O40 O47 O54 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2014056&r=bec |
| By: | Andries, Petra; Hünermund, Paul |
| Abstract: | Building on real options literature, this study shows that the use of a staged approach for the management of innovation projects affects the innovation output of firms differently depending on firm characteristics and ambitions. In particular, while staged project management increases the effect of inno- vation expenditures on new product sales for firms envisaging incremental or continuous innovations, this moderating effect is absent for firms aspiring radical innovations. In addition, while staged project management has a pos- itive moderating effect in firms with resource slack, this is not the case when firms are resource-constrained. We further investigate the underlying mecha- nisms to this latter finding by demonstrating that in resource-abundant firms staged project organization is associated with delaying projects until more information becomes available. Thereby these firms reap the waiting value inherent to real options reasoning. By contrast, resource-constrained firms using staged project management are shown to abandon a larger share of their innovation projects and to concentrate resources on fewer projects. It appears, however, that, due to budgetary pressure, they make the decision to abandon at a too early stage where uncertainty is insufficiently resolved. This can explain why there is no effect of staged project management on the sales of resource-constrained firms from new products. The paper contributes to theory development on when and why the staging of innovation projects affects the innovation output of firms and to the literature on real options reasoning in general. |
| Keywords: | staging of innovation projects,real options theory,new product development process,ressource allocation,innovation portfolios |
| JEL: | O32 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14091&r=bec |
| By: | René Bohnsack (University of Amsterdam Business School - University of Amsterdam Business School); Jonatan Pinkse (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Ans Kolk (Amsterdam Business School - University of Amsterdam) |
| Abstract: | Sustainable technologies challenge prevailing business practices, especially in industries that depend heavily on the use of fossil fuels. Firms are therefore in need of business models that transform the specific characteristics of sustainable technologies into new ways to create economic value and overcome the barriers that stand in the way of their market penetration. A key issue is the respective impact of incumbent and entrepreneurial firms' path-dependent behaviour on the development of such new business models. Embedded in the literature on business models, this paper explores how incumbent and entrepreneurial firms' path dependencies have affected the evolution of business models for electric vehicles. Based on a qualitative analysis of electric vehicle projects of key industry players over a five-year period (2006-2010), the paper identifies four business model archetypes and traces their evolution over time. Findings suggest that incumbent and entrepreneurial firms approach business model innovation in distinctive ways. Business model evolution shows a series of incremental changes that introduce service-based components, which were initially developed by entrepreneurial firms, to the product. Over time there seems to be some convergence in the business models of incumbents and entrepreneurs in the direction of delivering economy multi-purpose vehicles. |
| Keywords: | Sustainable technology; business models, evolution; path dependencies; electric vehicles |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00936886&r=bec |