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on Business Economics |
| By: | Benjamin Lochner (University of Erlangen-Nuremberg and Institute for Employment Research (IAB)); Bastian Schulz (Department of Economics and Business Economics, the Dale T. Mortensen Centre, Aarhus University and CESifo) |
| Abstract: | We study the link between firms’ productivity and the wages firms pay. Guided by labor market sorting theory, we infer firm productivity from estimating firm-level production functions, taking into account that worker ability and firm productivity may interact at the match level. Using German data, we find that high wages are not necessarily a reflection of high firm productivity. Observed worker transitions towards higher wages are sometimes directed downwards on the firm-productivity ladder. Worker sorting into high-productivity firms is thus less pronounced than sorting into high-wage firms. Consequently, an implication of increasing wage sorting could be decreasing allocative efficiency. |
| Keywords: | Assortative Matching, Labor Market Sorting, Wage Inequality, Job Mobility, Unobserved Heterogeneity, Firm Productivity, Production Function Estimation |
| JEL: | J24 J31 J40 J62 J64 L25 |
| Date: | 2021–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2021-04&r=all |
| By: | Joshy Easaw; Christian Grimme |
| Abstract: | We analyse the extent to which firm-level uncertainty is affected by aggregate uncertainty. Firm-level uncertainty is constructed from a large and monthly panel dataset of manufacturing firms. We find that aggregate uncertainty has a positive and robust impact on firm-level uncertainty. This effect holds across different types of domestic and international measures of aggregate uncertainty. However, the size of the impact is heterogeneous and depends on certain firm characteristics and the state of the business cycle. For example, the widely used economic policy uncertainty index matters to all firms’ uncertainty only in recessionary periods, while it is relevant over the entire business cycle only to large firms’ uncertainty. |
| Keywords: | firm-level uncertainty, aggregate uncertainty, survey data |
| JEL: | C23 E32 E01 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8934&r=all |
| By: | Stefan Lautenbacher |
| Abstract: | Based on a new survey question in a large and representative panel of German firms, this paper introduces a novel measure of managers’ subjective uncertainty. I compare this measure of business uncertainty to respondents’ business expectations and document a strong negative relationship. However, the link is much weaker in bad times, since uncertainty is then persistently high – even when expectations are favorable. I continue by investigating the relative importance of uncertainty and expectations for corporate decisions. Exploiting information on firms’ investment and labor reactions to the COVID-19 crisis, I do not find evidence that uncertainty induced “wait and see” behavior. However, a deterioration in managers’ expectations and in their assessment of their firms’ business situation predicts investment deferral and a reduction in employment. |
| Keywords: | Subjective uncertainty, expectations, firms, survey data, corporate decisions, business cycles |
| JEL: | C83 D22 D84 E32 E71 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ifowps:_349&r=all |
| By: | Joonkyu Choi; Nathan Goldschlag; John C. Haltiwanger; J. Daniel Kim |
| Abstract: | We explore the role of founding teams in accounting for the post-entry dynamics of startups. While the entrepreneurship literature has largely focused on business founders, we broaden this view by considering founding teams as both the founders and early joiners. We investigate the idea that the success of a startup may derive from the organizational capital that is created at firm formation and is inalienable from the founding team itself. To test this hypothesis, we exploit premature deaths to identify the causal impact of losing a founding team member on startup performance. We find that the exogenous separation of a founding team member due to premature death has a persistently large, negative, and statistically significant impact on post-entry size, survival, and productivity of startups. Consistent with our organizational capital hypothesis, effects are stronger for firms with small founding teams and those operating in business-to-business (B2B) oriented sectors. Moreover, while we find that the loss of a founder has an especially large adverse effect, the loss of an early joiner nonetheless exhibits a significant negative effect, lending support to our inclusive definition of founding teams. |
| JEL: | J24 L23 L26 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28417&r=all |
| By: | Paul Mizen; Frank Packer; Eli Remolona; Serafeim Tsoukas |
| Abstract: | In this paper, we focus on the surprising phenomenon in which firms face difficulty issuing in domestic currency even in the home market, especially in emerging markets. Could this be due to "original sin" which has been familiar to sovereign bond issuance? In its new incarnation, original sin refers to the difficulty firms in many emerging markets have in borrowing domestically long-term, even in the local currency. We infer the nature of original sin from 5,901 financing decisions by firms in seven Asian emerging markets over a period of 20 years. Our sample period covers an episode when bond issuers had a choice between a less developed but growing onshore market, which varied across countries in the level of development, and a deep and liquid offshore market. We find that even in countries with onshore markets, it is often easier for unseasoned firms to issue offshore (in foreign currency) than to issue onshore, but changes in market development reverses this effect. In addition, once such a firm becomes a seasoned issuer, it is absolved from domestic original sin and is then able to act opportunistically and go to the market favored by interest differentials. |
| Keywords: | bond financing, offshore markets, emerging markets, market depth, global credit |
| JEL: | C23 E44 F32 F34 G32 O16 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2021_03&r=all |
| By: | Federico Innocenti; Domenico Menicucci |
| Abstract: | This paper examines the issue of product compatibility in an oligopoly with three multi-product firms. Whereas most of the existing literature focuses on the extreme cases of full compatibility or full incompatibility, we look at asymmetric settings in which some firms make their products compatible with a standard technology and others do not. Our analysis reveals each firm’s individual incentive to adopt the standard, and allows to study a two-stage game in which first each firm chooses its technological regime (compatibility or incompatibility), then price competition occurs given the regime each firm has selected at stage one. When firms are ex ante symmetric, we find that for each firm, compatibility weakly dominates incompatibility. In a setting in which a firm’s products have higher quality than its rivals’ products, individual incentives to make products incompatible emerge, first for the firm with higher quality products, then also for the other firms, as the quality difference increases. This paper sheds lights on markets in which some firms adopt the standard technology but other firms use proprietary systems. |
| Keywords: | Compatibility, Spatial competition, Vertical differentiation, Asymmetric equilibrium, Competitive Bundling |
| JEL: | D43 L13 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_278&r=all |
| By: | Ahmad, Issam Abdo (Lebanese American University); Fakih, Ali (Lebanese American University) |
| Abstract: | This paper attempts to study the relationship between firm legal form and firm performance in the Middle East and North Africa Region (MENA) using the World Bank Enterprise Survey (WBES) database. Our analysis shows that open shareholding, closed shareholding, partnership, and limited partnership companies demonstrate an advantage in terms of annual sales and annual productivity growth rates over sole proprietorship firms, and that medium-sized and large-sized firms also demonstrate an advantage over small ones. Our analysis also shows that foreign ownership, exporting activities, the usage of the web in communication with clients and suppliers, and the presence of full-time workers positively affect firm performance. These findings are robust when running the analysis for firms with female participation in ownership. This paper provides directions for strategists targeting at improving the performance of firms. |
| Keywords: | legal form, firm performance, MENA region |
| JEL: | C10 G30 L25 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14207&r=all |
| By: | Ahmad; Issam Abdo; Fakih, Ali |
| Abstract: | This paper attempts to study the relationship between firm legal form and firm performance in the Middle East and North Africa Region (MENA) using the World Bank Enterprise Survey (WBES) database. Our analysis shows that open shareholding, closed shareholding, partnership, and limited partnership companies demonstrate an advantage in terms of annual sales and annual productivity growth rates over sole proprietorship firms, and that medium-sized and large-sized firms also demonstrate an advantage over small ones. Our analysis also shows that foreign ownership, exporting activities, the usage of the web in communication with clients and suppliers, and the presence of full-time workers positively affect firm performance. These findings are robust when running the analysis for firms with female participation in ownership. This paper provides directions for strategists targeting at improving the performance of firms. |
| Keywords: | Legal form,Firm performance,MENA region |
| JEL: | C10 G30 L25 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:801&r=all |
| By: | Sandeep Yadav (Indian Institute of Management Kozhikode); Rajesh Srivinas Upadhyayula (Indian Institute of Management Kozhikode) |
| Abstract: | The literature on the importance of time in the internationalization process of entrepreneurial firms has pulled the attention of international business researchers in the last two decades. The phenomenon of internationalization speed as a time-based dimension is studied both in the context of young entrepreneurial firms and large multinationals. Yet, the theoretical foundations and synthesis of empirical literature remain absent, thus call for a critical assessment and review of the literature. We examine 67 articles in 34 scholarly journals from 2000 to the current period. We use an inductive approach and qualitative content analysis for a comprehensive and critical assessment of literature. First, we define the concept of internationalization speed and highlighted its multidimensionality. We provide a synthesis of literature based on antecedents and outcomes of internationalization speed to identify ambiguity in the empirical literature. Further, we discuss the issues of conceptualization and operationalization of speed along with methodological issues in the empirical literature. Finally, we provide future research agendas based on the gaps in the theoretical literature. |
| Keywords: | Rapid internationalization; early internationalization; international new ventures; born-global firms; SME exporters; speed |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:403&r=all |
| By: | Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer; Stephen J. Terry |
| Abstract: | We incorporate diagnostic expectations, a psychologically founded model of overreaction to news, into a workhorse business cycle model with heterogeneous firms and risky debt. A realistic degree of diagnosticity, estimated from the forecast errors of managers of US listed firms, creates financial fragility during good times. This mechanism produces countercyclical credit spreads and yields two key features of observed credit cycles. First, it generates boom-bust dynamics at the firm and aggregate levels: cheap credit predicts future increases in spreads, low bond returns, and investment drops. Second, it produces the spike in spreads observed in 2008-9 from modest negative TFP shocks. Diagnostic expectations offer a parsimonious mechanism generating realistic financial reversals in conventional business cycle models. |
| JEL: | E03 E32 E44 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28416&r=all |
| By: | Matilde Bombardini (UBC Vancouver School of Economics); Keith Head (UBC Sauder School of Business); Maria D. Tito (Federal Reserve Board); Ruoying Wang (UBC Vancouver School of Economics) |
| Abstract: | This paper examines the relationship between a manufacturing firm's import behavior and its performance. The focus is on two aspects of imports, input variety and the dynamics of import relationships. Using identification conditions borrowed from the production function estimation literature, we show that firms importing more products from a larger set of suppliers tend to be larger, more productive, and more successful in export markets. Not only the number, but also the duration of supply relationships matter. Firms maintaining a higher share of continuous supply relationships also benefit from size and productivity effects. These results suggest that the breadth and depth of the import network are relevant factors for the performance of Canadian manufacturers, underscoring the importance of pursuing trade liberalizations with new partners and trade facilitation with established sources of suppliers. |
| Keywords: | Buyer-supplier relationships, input variety, continuous relationships. |
| JEL: | F14 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2020_2011&r=all |
| By: | Holger Breinlich; Harald Fadinger; Volker Nocke; Nicolas Schutz |
| Abstract: | We evaluate the consequences of oligopolistic behavior for the estimation of gravity equations for trade flows. With oligopolistic competition, firm-level gravity equations based on a standard CES demand framework need to be augmented by markup terms that are functions of firms' market shares. At the aggregate level, the additional term takes the form of the exporting country's market share in the destination country multiplied by an exporter-destination-specific Herfindahl-Hirschman index. For both cases, we show how to construct appropriate correction terms that can be used to avoid problems of omitted variable bias. We illustrate the quantitative importance of our results for combined French and Chinese firm-level export data as well as for a sample of product-level imports by European countries. Our results show that correcting for oligopoly bias can lead to substantial changes in the coefficients on standard gravity regressors such as distance or the impact of currency unions. |
| Keywords: | gravity equation, oligopoly, CES demand, aggregative game |
| JEL: | F12 F14 L13 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1752&r=all |
| By: | Sandeep Yadav (Indian Institute of Management Kozhikode); M.K. Nandakumar (Indian Institute of Management Kozhikode) |
| Abstract: | A large number of studies have examined the antecedents of post-M&A performance especially in the case of cross-border acquisitions. However the literature on post-M&A innovation is very limited. Furthermore, not many studies examining M&As in the Indian context have been published in leading journals. We try to fill this gap by conducting an empirical study on postM&A innovation. We analyzed a sample of 85 domestic M&As by Indian firms during the period between 2000 and 2015. We found a positive relationship between relative absorptive capacity of the acquirer and post-M&A innovation performance. Size of the firm positively moderated the relationship between relative absorptive capacity and post-merger innovation performance. The M&A activities between firms in the same industry increased post-merger innovation performance. |
| Keywords: | Post M&A innovations, Indian firms |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:370&r=all |
| By: | Barbaro, Bianca; Tirelli, Patrizio |
| Abstract: | We build a business cycle model characterized by endogenous firms dynamics, where banks may prefer debt renegotiation, i.e. non-performing exposures, to outright borrowers default. We find that debt renegotiations only do not have adverse effects in the event of financial crisis episodes, but a large share of non-performing firms is associated with a sharp deterioration of economic activity in two cases. First, if there are congestion effects in banks ability to monitor non-performing loans. Second, if such loans adversely affect the commercial banks’ moral hazard problem due to their opacity. Aggressive interest rate reductions and quantitative easing limit defaults and the output contraction caused by a financial crisis, without ad- verse effects on the entry of new, more productive firms. The model shows that the observed long-run trend in the share of non-performing loans might be caused by the persistent reduction in technological advancements which drive firm entry rates and firms turnover. JEL Classification: E32, E44, E50, E58 |
| Keywords: | DSGE model, financial frictions, firms entry, non-performing loans, quantitative easing |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212531&r=all |
| By: | Aleksandra Draganić; Nazmul Arefin |
| Abstract: | Over the last decades, the ready-made garment (RMG) industry in Bangladesh has expe-rienced a remarkable economic growth becoming the backbone of the country’s econ-omy. Nevertheless, the industry is still faced with unsustainable business practices that threaten to hinder the sector’s progress in the future. Among others, these include long working hours, unhealthy work environment, restricted ability of workers to organize, gender-based discrimination and shortage of skilled workforce, in particular mid-level managers. Hence, improvement of managerial knowledge and skills is seen as a necessity for the development of Bangladeshi RMG firms and introduction of sustainable business practices. According to available research, general obstacles like expat hiring, discrepancy in sup-ply and demand between the educational and industrial sectors, stark male to female occupational segregation and limited training opportunities impede the position of mid-level managers in the Bangladesh RMG sector. In addition to this, our findings indicate that mid-level managers in the Bangladesh RMG sector lack strategic knowledge of social sustainability issues. Furthermore, we perceived that mid-level managers possess underdeveloped soft skills, lack a deeper understanding of gender-related topics and specific needs of the female workers. Lastly, there is a lack of incentives from the side of the top-level management and factory owners in terms of providing mid-level managers further training to acquire the skills necessary for better performance. To improve conditions, mid-level managers in the Bangladesh RMG sector need training programmes to address the specific challenges that they are facing, depending whether they work in the administration side or production sector. Furthermore, we propose to change the perception that “compliance is the need of the buyer, not a need of factory†, to foster a female-friendly work environment and enhance the representation of women in mid-level management positions, recognize social dialogue as the enabler of healthy industrial relations climate, arrange regular sustainability training for the managers and reduce over-dependency on the donors for training arrangements and undertake long-term industry-education partnership strategies for developing local semi-mid-level and mid-level managers. |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:ajy:icddwp:28&r=all |