|
on Business Economics |
| By: | Schmidt-Dengler, Philipp; Hünermund, Paul; Takahashi, Yuya |
| Abstract: | In many industries, the number of firms evolves non-monotonically over time. A phase of rapid entry is followed by an industry shakeout: a large number of firms exit within a short period. We present a simple timing game of entry and exit with an exogenous technological process governing firm effi- ciency. We calibrate our model to data from the post World War II penicillin industry. The equilibrium dynamics of the calibrated model closely match the patterns observed in many industries. In particular, our model gener- ates richer and more realistic dynamics than competitive models previously analyzed. The entry phase is characterized by preemption motives while the shakeout phase mimics a war of attrition. We show that dynamic strategic incentives accelerate early entry and trigger the shakeout by comparing a Markov Perfect Equilibrium to an Open-loop Equilibrium. |
| JEL: | L11 O10 L13 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112865&r=bec |
| By: | Rydzek, Benedikt; Egger, Peter; Riezman, Raymond |
| Abstract: | In this paper we develop a model to analyze the effects of (country-pair-specific) costs of creating, transferring and accessing intangible assets for multi-unit firms. These costs might vary with the cultural distance between countries, such as the difference in language, work ethics or other moral values. We argue that these costs are an important factor to explain why most firms are single unit firms, most multi-unit firms have only one affiliated unit and why multinational firms are only a tiny fraction of all firms in a country. Therefore, we develop a model with heterogeneous firms that produce differentiated goods in different firm units. The number of units depends on the costs of transferring intangible assets. If these costs are relatively high, most firms will be single unit firms. Furthermore, if costs of transferring intangible assets to an affiliated firm in a foreign country are even higher, only the most productive firms will be multinational firms. Additionally, multinational firms will be open more affiliated firms in countries that are culturally closer to their home country. These findings square with stylized facts and estimation results presented in the paper. |
| JEL: | F23 L11 L25 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112925&r=bec |
| By: | Voßwinkel, Jan; Birg, Laura |
| Abstract: | This paper studies the effect of non-compliance with a minimum quality standard on prices, quality, and welfare in a vertical differentiation model. Non-compliance with a minimum quality standard by a low-quality firm reduces quality levels of both firms, increases the price for the high-quality product, decreases the price for the low-quality product, and shifts demand from the low-quality to the high-quality firm. Under non-compliance, an increase in the standard increases the quality difference, increases the price difference, and shifts demand from the high-quality to the low-quality firm. Stricter government enforcement decreases the quality level of the low-quality firm, increases the price of the high-quality product and shifts demand from the low-quality firm to the high-quality firm. Non-compliance of the low quality firm increases profits for both firms, reduces consumer surplus and increases or decreases welfare depending on the market size, the effect of quality levels of the externality, the detection probability, and the minimum quality level. |
| JEL: | K42 L13 L50 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112883&r=bec |
| By: | Schmerer, Hans-Jörg; Capuano, Stella; Egger, Hartmut; Koch, Michael |
| Abstract: | We set up a model of offshoring with heterogeneous producers that captures two empirical regularities on offshoring firms: larger, more productive firms are more likely to make use of the offshoring opportunity; the fraction of firms that engages in offshoring is positive and smaller than one in any size or revenue category. These patterns generate an overlap of offshoring and non-offshoring firms, which is non-monotonic in the costs of offshoring. In an empirical exercise, we employ firm-level data from Germany to estimate key parameters of the model. We show that ignoring the overlap leads to a severe downward bias in the estimated gains from offshoring, which amounts to almost 60 percent in our model. |
| JEL: | F10 F16 F12 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113147&r=bec |
| By: | Schubert, Stefanie; Jost, Peter-J. |
| Abstract: | The recent development of 3D printing raises the issue of how to protect manufacturing firms from product piracy. In this paper, we are interested in potential regulatory requirements to protect firms from falling victim of product piracy and associated quality choices. We employ a game-theoretic model of duopoly competition. One firm offers a high-quality product facing quality-related costs. An imitator views the product and produces an imitation using a low-cost production method as 3D printing. Our results indicate that copy protection by the high-quality firm yields a higher quality than under patent protection. However, the chosen quality level of the high-quality firm is highest in duopoly without protection. Optimal patent protection crucially depends on the underlying objective function. It is only socially optimal if the regulatory authority maximises GDP. |
| JEL: | L13 L51 O31 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113045&r=bec |
| By: | Frimmel, Wolfgang; Horvath, Thomas; Schnalzenberger, Mario; Winter-Ebmer, Rudolf |
| Abstract: | In general, retirement is seen as a pure labor supply phenomenon, but firms can have strong incentives to send expensive older workers into retirement. Based on the seniority wage model developed by Lazear (1979), we discuss steep seniority wage profiles as incentives for firms to dismiss older workers before retirement. Conditional on individual retirement incentives, e.g. social security wealth or health status, and personal fixed effects, the steepness of the wage profile will have different incentives for workers as compared to firms when it comes to the retirement date. Using an instrumental variable approach to account for selection of workers in our firms and for reverse causality, we find that firms with higher labor costs for older workers are associated with lower job exit age. |
| JEL: | J26 J31 H55 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113163&r=bec |
| By: | Serafinelli, Michel |
| Abstract: | A consensus has emerged that agglomeration economies are an important factor explaining why firms cluster next to each other. Yet disagreement remains over the sources of these agglomeration effects, given non-trivial measurement challenges. This paper is the first to present direct evidence showing how localized knowledge spillovers arise from workers changing jobs within the same local labor market. Specifically, I as-sess the extent to which firm-to-firm labor mobility enhances the productivity of firms located near highly productive firms, using a unique dataset combining Social Security earnings records and balance sheet information for Veneto, a region of Italy with many successful industrial clusters. I first identify a set of highly productive firms, then show that hiring workers with experience at these firms significantly increases the productivity of other firms. To address identification threats, primarily due to unobservable firm-level productivity shocks correlated with hiring, I use a novel instrumental vari- able strategy, which exploits downsizing events at highly productive firms, in addition to control function methods in the spirit of the productivity literature. My findings from both approaches imply that worker flows can explain around 10 percent of the productivity gains experienced by other firms when new highly productive firms are added to a local labor market. |
| JEL: | R10 D24 J31 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113063&r=bec |
| By: | Bierbaumer-Polly, Jürgen; Huber, Peter; Huber, Petr |
| Abstract: | According to difference-in-difference estimates business cycle synchronization and similarity in sector structures between acceding and pre-existing regions reduced after Eastern Enlargement. Results for Northern enlargement are more ambiguous. In both enlargements, however, region pairs affected by enlargement with highly synchronized business cycles before enlargement experienced smaller increases in business cycle synchronization and weaker reductions of structural differences relative to similar unaffected region pairs than region pairs with less synchronized business cycles. Similarly, affected regions that were more similar in terms of sector structure before enlargement experienced larger reductions in structural differences and business cycle synchronization than similar unaffected region pairs. |
| JEL: | F15 E32 R11 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113154&r=bec |
| By: | Julian di Giovanni (Universitat Pompeu Fabra, Barcelona GSE, CREI and CEPR); Andrei A. Levchenko (University of Michigan, NBER, and CEPR); Isabelle Méjean (Ecole Polytechnique and CEPR) |
| Abstract: | This paper investigates the role of individual firms in international business cycle comovement using data covering the universe of French firm-level value added, bilateral imports and exports, and cross-border ownership over the period 1993-2007. At the micro level, controlling for firm and country effects, trade in goods with a particular foreign country is associated with a significantly higher correlation between a firm and that foreign country. In addition, foreign multinational affliates operating in France are significantly more correlated with the source economy. The impact of direct trade and multinational linkages on comovement at the micro level has significant macro implications. Because internationally connected firms are systematically larger than noninternationally connected firms, the firms directly linked to foreign countries represent only 8% of all firms, but 56% of all value added, and account for 75% of the observed aggregate comovement. Without those linkages the correlation between France and foreign countries would fall by about 0.091, or one-third of the observed average business cycle correlation of 0.29 in our sample of partner countries. These results are evidence of transmission of business cycle shocks through direct trade and multinational ownership linkages at the firm level. |
| Keywords: | Comovement, International Trade, Firm-Level Shocks, Large Firms |
| JEL: | F44 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:mie:wpaper:649&r=bec |
| By: | Neubäumer, Renate Ingrid; Müller, Steffen |
| Abstract: | We develop the hypotheses that the size of training firms affects long-run cumulated unemployment exposure, and that the access to large training firms depends on young workers ability and their luck to live in a region with many large and medium-sized training firms. We test these hypotheses empirically by using a large administrative data set and find corroborative evidence. |
| JEL: | D21 L25 L26 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112923&r=bec |
| By: | Balleer, Almut; Hristov, Nikolay; Kleemann, Michael; Menno, Dominik |
| Abstract: | This paper investigates how financial market imperfections and nominal rigidities interact. Based on new firm-level evidence for Germany, we document that financially constrained firms adjust prices more often than their unconstrained counterparts. In particular, financially constrained firms do not only increase prices, but also decrease prices more often. We show that these empirical patterns are consistent with a partial equilibrium menu-cost model with financial frictions. Our results suggest that tighter financial constraints are associated with higher nominal rigidities, higher prices and lower output. Furthermore, financial recessions may induce very different dynamics than normal recessions if the relative size of unexpected financial shocks is large relative to aggregate price shocks. |
| JEL: | E31 E44 E32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113054&r=bec |
| By: | Li, Chen |
| Abstract: | Using novel German district-level data from 1999-2011, this paper analyses whether the presence of immigrants in a particular location helps to attract inward FDI from the immigrants' country of origin. Results show that a one standard-deviation increase in the immigrant share is associated with a 3.3% rise in firm entry. This effect is stronger for an investor's first entry into Germany, and there is indication that firms from developing countries depend more on immigrants. A quasi-natural experiment exploiting the migration of ethnic Germans from the former Soviet Union in the 1990s (`Sp taussiedler') confirms the results. |
| JEL: | F14 F22 F23 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113130&r=bec |
| By: | Smolka, Marcel; Kohler, Wilhelm |
| Abstract: | This paper investigates the role of firm productivity in drawing firm boundaries in global sourcing. Our analysis focuses on how productivity affects the allocation of ownership rights between the headquarter of a firm and its intermediate input supplier (vertical integration vs. outsourcing), as well as the location of intermediate input production (offshore vs. domestic). Unlike previous work, we allow for a fully flexible productivity effect with varying magnitude and sign across different industries. Our estimation strategy is motivated by the canonical economic model of sourcing due to Antr s & Helpman (2004). This model invokes the property rights theory of the firm in order to pin down firm boundaries as the outcome of an interaction between firm heterogeneity and the industry's sourcing intensity (i.e. the importance of inputs sourced from suppliers relative to headquarter inputs). We demonstrate that, at the level of the firm, the model implies a productivity effect that varies not just in magnitude (and potentially non-monotonically), but also in sign with the sourcing intensity of the industry. To estimate the effects empirically, we use Spanish firm-level data from the Encuesta sobre Estrategias Empresariales (ESEE). We find a pattern of effects whereby productivity stimulates vertical integration in industries of low sourcing intensity, but favors outsourcing in industries of high sourcing intensity. Moreover, we find that productivity boosts offshoring throughout all industries, with the effect increasing monotonically in the sourcing intensity. Our results lend strong empirical support to the property rights view of the firm in the global economy. |
| JEL: | F12 F23 L22 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113012&r=bec |
| By: | Gampfer, Benjamin; Geishecker, Ingo |
| Abstract: | In this paper we analyse the manufacturing sector's capacity to mitigate increasing import competition from China. In our view, competition exposure is endogenous, i.e. influenced by firms' decisions which products are sold and what markets are served. We construct a counterfactual competition measure to assess the importance of different types of adaptation to increased competition: inter- and intra-industry reallocations, firm entry and exit, and product- and destination switching, among others. Combining Danish firm register data with transactional level trade statistics we are able to track product-level competition changes on the domestic as well as on each export market. Between 1997 and 2008 aggregated manufacturing level exposure to Chinese imports increased by 177 per cent but counterfactually would have increased by remarkable 283 per cent had the manufacturing sector not successfully adapted. The mitigation of sector level competition exposure works through all adaptation channels, notably firm entry and exit, and inter-industry reallocations. However, for surviving firms, product and destination switching are very relevant mechanisms to mitigate increased competitive pressure from China. |
| JEL: | F14 L60 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112996&r=bec |
| By: | Barth, Andreas |
| Abstract: | This paper analyzes the role of corporate culture in the financial industry. Theoretical literature emphasizes the role of corporate culture in the sorting process of workers into firms. We take this argument to the empirics and analyze whether banks that differ in their corporate culture use different compensation schemes in order to attract a specific type of workers. In a second step, we combine the role of corporate culture with the literature on CEO compensation and risk-taking and analyze empirically the impact of corporate culture on banks' risk-taking as well as on banks' performance. More precisely, we argue that the incentives arising from CEO compensation schemes are diluted once we control for the self-sorting mechanism of CEOs in firms with different corporate cultures. We find that CEOs of banks with a strong competition-oriented corporate culture have a larger share of variable payments in their total compensation. Moreover, we find that a more competition-oriented corporate culture is associated with a higher credit risk as well as with a higher buy-and-hold stock market return. |
| JEL: | G21 G34 M14 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112922&r=bec |
| By: | Belke, Ansgar; Oeking, Anne; Setzer, Ralph |
| Abstract: | We argue that, under certain conditions, firms consider exports as a substitute for domestic demand. Our econometric model for six euro area countries suggests domestic demand and capacity constraints as additional variables for export equations. We apply the exponential and logistic variant of a smooth transition regression model and find that domestic demand developments are relevant for short-run export dynamics particularly during more extreme stages of the business cycle. A substitutive relationship between domestic and foreign sales can most clearly be found for Spain, Portugal and Italy, providing evidence of the importance of sunk costs and hysteresis in international trade. |
| JEL: | F14 C22 F41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113228&r=bec |