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on Business Economics |
| By: | Yasuhiro Arai; Noriaki Matsushima |
| Abstract: | We consider a downstream duopoly model with a monopolistic common supplier and mutual outsourcing between the two symmetric downstream firms. The market structure captures the recent procurement environment in the smartphone industry. We also incorporate managerial delegations into the duopoly model because deciding on organizational forms within a firm is critical to achieving better performance in almost all industries. There is an equilibrium in which only one of the firms delegates its downstream production to its sales manager. A delegating firm becomes less aggressive. The profits when both firms delegate can be higher than those when no firm delegates. The total surplus when both firms delegate is smaller than that when no firm delegates. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1155&r= |
| By: | Åslund, Olof (IFAU - Institute for Evaluation of Labour Market and Education Policy); Bratu, Cristina (Aalto University); Lombardi, Stefano (VATT Institute for Economic Research); Thoresson, Anna (IFAU - Institute for Evaluation of Labour Market and Education Policy) |
| Abstract: | We study the role of firm productivity in explaining earnings disparities between immigrants and natives using population-wide matched employer-employee data from Sweden. We find substantial earnings returns to working in firms with higher persistent productivity, with greater gains for immigrants from non-Western countries. Moreover, the pass-through of within-firm productivity variation to earnings is stronger for immigrants in low-productive, immigrant-dense firms. But immigrant workers are underrepresented in high-productive firms and less likely to move up the productivity distribution. Thus, sorting into less productive firms decreases earnings in poor-performing immigrant groups that would gain the most from working in high-productive firms. |
| Keywords: | Firm productivity; Immigrant-native earnings gaps; Wage inequality |
| JEL: | J15 J31 J62 |
| Date: | 2021–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2021_018&r= |
| By: | Schröpf, Benedikt |
| Abstract: | Although wage inequality is a prominent and widely studied issue, the literature is vastly silent on the relationship between firm entry and exit and the wage dispersion between firms. Using a 50% random administrative sample of West German establishments over the period 1976-2017, I study wage dispersion dynamics between and within the groups of entering, exiting and incumbent establishments by examining the distribution of average wages across establishments. The results show that entering establishments became increasingly unequal over time, thereby contributing to the rise in the wage dispersion between establishments. However, stronger exit dynamism of young and low-wage establishments has dampened this effect. These findings suggest taking the consequences for wage inequality into consideration when designing and assessing policy instruments for firm entry and exit. |
| Keywords: | Firm entry,Firm exit,Wage dispersion,Firm Dynamics,Germany |
| JEL: | L26 M13 J31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:faulre:120&r= |
| By: | Lacava, Chiara |
| Abstract: | I measure the effects of workers' mobility across regions of different productivity through the lens of a search and matching model with heterogeneous workers and firms estimated with administrative data. In an application to Italy, I find that reallocation of workers to the most productive region boosts productivity at the country level but amplifies differentials across regions. Employment rates decline as migrants foster job competition, and inequality between workers doubles in less productive areas since displacement is particularly severe for low-skill workers. Migration does affect mismatch: mobility favors co-location of agents with similar productivity but within-region rank correlation declines in the most productive region. I show that worker-firm complementarities in production account for 33% of the productivity gains. Place-based programs directed to firms, like incentives for hiring unemployed or creating high productivity jobs, raise employment rates and reduce the gaps in productivity across regions. In contrast, subsidies to attract high-skill workers in the South have limited effects. |
| Keywords: | cross-regional mobility,mismatch,search-matching,sorting,productivity differentials |
| JEL: | J61 J64 R13 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:icirwp:4421&r= |
| By: | Hoch, Felix; Seyberth, Lilo |
| Abstract: | Research investigating the relationship between firm performance and gender diversity has so far reported conflicting evidence: Some studies find firm performance to benefit from gender diversity, others find negative results or no effect at all. Taking this inconclusive evidence as a sign for moderators influencing the effect of gender diversity on firm performance, we investigate the moderating influence of institutions on this relationship. Using data on 7,661 firms in 71 countries, we employ a multilevel linear regression with fixed effects to examine the moderating effect of formal as well as informal institutional characteristics. We find that institutions indeed moderate the relationship between gender diversity and firm performance. In particular, informal institutions seem to moderate the effect of diversity on market valuation (Tobin's Q), while formal institutions moderate the effect of gender diversity on firm financial performance (ROA). These results have important theoretical implications for the academic debate on gender diversity and firm performance as well as practical implications for both businesses and lawmakers. |
| JEL: | J16 J71 L25 M12 M14 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:umiodp:112021&r= |
| By: | Engbom, Niklas (New York University); Moser, Christian (Columbia University); Sauermann, Jan (IFAU - Institute for Evaluation of Labour Market and Education Policy) |
| Abstract: | We study the nature of firm pay dynamics. To this end, we propose a statistical model that extends the seminal framework by Abowd, Kramarz, and Margolis (1999a) to allow for idiosyncratically time-varying firm pay policies. We estimate the model using linked employer-employee data for Sweden from 1985 to 2015. By drawing on detailed firm financials data, we show that firms that become more productive and accumulate capital raise pay, whereas firms lower pay as they add workers. A secular increase in firm-year pay dispersion in Sweden since 1985 is accounted for by greater persistence of firm pay among incumbent firms as well as greater dispersion in firm pay among entrant firms, as opposed to more volatile firm pay. |
| Keywords: | Earnings Inequality; Worker and Firm Heterogeneity; Linked Employer-Employee Data; AKM; Two-Way Fixed Effects Model; Firm Dynamics |
| JEL: | D22 D31 E24 J31 M13 |
| Date: | 2021–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2021_021&r= |
| By: | Martin, Simon; Schmal, W. Benedikt |
| Abstract: | Sophisticated collusive compensation schemes such as assigning future market shares or direct transfers are frequently observed in detected cartels. We show formally why these schemes are useful for dampening deviation incentives when colluding firms are temporary asymmetric. The relative attractiveness of each of these schemes is shaped by firms' ability to predict future market conditions, possibly aided by algorithms. Prices and profits are inverse u-shaped in prediction ability. Assigning future market shares is optimal when prediction ability is intermediate, and otherwise direct transfers are optimal. Competition authority's limited resources should be utilized to respond to these changing market conditions. |
| Keywords: | algorithmic collusion,market forecasting,prediction ability,firm asymmetry,compensation schemes |
| JEL: | D21 L41 L51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:375&r= |
| By: | Bonhomme, Stéphane (University of Chicago); Holzheu, Kerstin (Sciences Po); Lamadon, Thibaut (University of Chicago); Manresa, Elena (New York University); Mogstad, Magne (IFAU - Institute for Evaluation of Labour Market and Education Policy); Setzler, Bradley (University of Chicago) |
| Abstract: | Many studies use matched employer-employee data to estimate a statistical model of earnings determination where log-earnings are expressed as the sum of worker effects, firm effects, covariates, and idiosyncratic error terms. Estimates based on this model have produced two influential yet controversial conclusions. First, firm effects typically explain around 20% of the variance of log-earnings, pointing to the importance of firm-specific wage-setting for earnings inequality. Second, the correlation between firm and worker effects is often small and sometimes negative, indicating little if any sorting of high-wage workers to high-paying firms. The objective of this paper is to assess the sensitivity of these conclusions to the biases that arise because of limited mobility of workers across firms. We use employer-employee data from the US and several European countries while taking advantage of both fixed-effects and random-effects methods for bias-correction. We find that limited mobility bias is severe and that bias-correction is important. Once one corrects for limited mobility bias, firm effects dispersion matters less for earnings inequality and worker sorting becomes always positive and typically strong. |
| Keywords: | earnings inequality; firm effects; worker sorting; bias correction; fixed effects; random effects; matched employer employee data |
| JEL: | C23 J31 J62 |
| Date: | 2021–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2021_020&r= |
| By: | Baktash, Mehrzad B. (University of Trier); Heywood, John S. (University of Wisconsin, Milwaukee); Jirjahn, Uwe (University of Trier) |
| Abstract: | While performance pay can benefit firms and workers by increasing productivity and wages, it has also been associated with a deterioration of worker health. The transmission mechanisms for this deterioration remain in doubt. We examine the hypothesis that increased stress is one transmission mechanism. Using unique survey data from the German Socio-Economic Panel, we find performance pay consistently and importantly associates with greater stress even controlling for a long list of economic, social and personality characteristics. It also holds in instrumental variable estimations accounting for the potential endogeneity of performance pay. Moreover, we show that risk tolerance moderates the relationship between performance pay and stress. The risk tolerant receiving performance pay suffer less stress than the risk averse. |
| Keywords: | performance pay, worker health, stress, risk tolerance |
| JEL: | J33 I31 J32 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14939&r= |
| By: | Kabinet Kaba (CERDI, University Clermont Auvergne); Mahamat Moustapha (Paris Dauphine University-PSL) |
| Abstract: | Sub-Saharan African firms face enormous obstacles to their development. The main constraints to business performance identified are poor access to finance and a weak domestic market. In this paper, we examine how international remittances affect firms’ performance. Specifically, we investigate the role of remittances on capital accumulation, sales, and employment in 34,010 f irms operating in 42 Sub-Saharan African countries between 2006 and 2020. Using a fixed-effect instrumental variable approach to control for the endogeneity of remittances, we find that international remittances positively affect the share of capital held by nationals in manufacturing firms. Moreover, international remittances positively affect sales in non-manufacturing firms, while a negative effect on the sales of manufacturing firms is observed. Regarding the effect of remittances on employment, we find a positive impact on both manufacturing and non-manufacturing f irms. Heterogeneity tests suggest that the effect of remittances on firms’ performance is larger in less financially developed and non-resource-rich countries. As for the negative impact of remittances on sales in manufacturing firms, the results show that it is entirely due to small firms. Finally, using remittances per capita instead of remittances relative to GDP, similar result are found. |
| Keywords: | Remittances, Firm Performance, Entrepreneurship, Saving and Capital Investment, Firm Employment, Africa |
| JEL: | F24 L25 L26 M51 O16 O55 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt202107&r= |
| By: | Michael Ewens; Joan Farre-Mensa |
| Abstract: | The U.S. entrepreneurial finance market has changed dramatically over the last two decades. Entrepreneurs raising their first round of venture capital retain 30% more equity in their firm and are more likely to control their board of directors. Late-stage startups are raising larger amounts of capital in the private markets from a growing pool of traditional and new investors. These private market changes have coincided with a sharp decline in the number of firms going public—and when firms do go public, they are older and have raised more private capital. To understand these facts, we provide a systematic description of the differences between private and public firms. Next, we review several regulatory, technological, and competitive changes affecting both startups and investors that help explain how the trade-offs between going public and staying private have changed. We conclude by listing several open research questions. |
| JEL: | G23 G24 G28 G34 G38 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29532&r= |
| By: | Freel, Mark; Gordon, Ian |
| Abstract: | Recent contributions to the literature on small firm growth have been marked by a growing sense of frustration with the state-of-the-art and what it implicates in both theory and policy. In short, while growth events appear relatively common, a tiny proportion of firms sustain growth and ‘scale’; calling into question the very basis of policies seeking to target high growth firms (HGFs). We argue that understanding the frequency of growth events and the rarity of sustained growth requires a better understanding of growth consequences. To this end, we report case study evidence from ambitious entrepreneurs whose firms had experienced an episode of high growth followed by longer periods of mixed performance. Our goal is to shed light on how the experience of growing affects further growth. Our data provide initial insights into the mechanisms linking past growth to growth motivations and into the ways in which past growth lays the foundations for future performance. |
| Keywords: | firm growth, growth intention, ambidexterity, income, barriers |
| JEL: | L21 L25 L26 |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111200&r= |
| By: | Baktash, Mehrzad B.; Heywood, John S.; Jirjahn, Uwe |
| Abstract: | While performance pay can benefit firms and workers by increasing productivity and wages, it has also been associated with a deterioration of worker health. The transmission mechanisms for this deterioration remain in doubt. We examine the hypothesis that increased stress is one transmission mechanism. Using unique survey data from the German Socio-Economic Panel, we find performance pay consistently and importantly associates with greater stress even controlling for a long list of economic, social and personality characteristics. It also holds in instrumental variable estimations accounting for the potential endogeneity of performance pay. Moreover, we show that risk tolerance moderates the relationship between performance pay and stress. The risk tolerant receiving performance pay suffer less stress than the risk averse. |
| Keywords: | Performance Pay,Worker Health,Stress,Risk Tolerance |
| JEL: | J33 I31 J32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1000&r= |
| By: | Ohnishi, Kazuhiro |
| Abstract: | This paper considers a Cournot oligopoly model with a concave demand function where socially concerned firms can offer lifetime employment as a strategic commitment device. Each socially concerned firm maximizes its own profit plus a share of consumer surplus. The paper presents the reaction functions of socially concerned firms in the Cournot oligopoly model. |
| Keywords: | Cournot oligopoly model; Lifetime employment; Reaction functions; Socially concerned firms |
| JEL: | C72 D21 L20 |
| Date: | 2021–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110867&r= |