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on Business Economics |
| By: | Salomé Baslandze |
| Abstract: | Firm-level productivity differences are big and largely ascribed to ex-ante heterogeneity in the entrepreneurs’ growth potential at birth. Where do these ex-ante differences come from, and what can the policy do to encourage the entry of high-growth entrepreneurs? I study empirically and by means of a quantitative growth model the spinout firms: the firms founded by former employees of the incumbent firms. By focusing on innovating spinouts identified through the inventor mobility in the patent data, I document that spinout entrants significantly outperform regular entrants throughout their life. Firms with a bigger technological lead spawn more successful spinouts. Building on these observations, I build a structural model of innovation and firm dynamics, where firm heterogeneity arises from endogenous decisions of innovation workers to become entrepreneurs and create spinouts. The spinout dynamics affect productivity growth through four main channels: direct entry, incumbents’ disincentive effect, knowledge diffusion, and the firm composition channel. Growth decompositions show that accounting for spinout dynamics is quantitatively important for our understanding of the growth process. I analyze the role of noncompete laws affecting employee entrepreneurship for aggregate innovation and growth. |
| Keywords: | innovation; spinouts; entrepreneurship; noncompete laws; firm dynamics |
| JEL: | O30 O43 |
| Date: | 2022–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:95062&r=bec |
| By: | Masashige Hamano (Waseda University); Francesco Zanetti (University of Oxford) |
| Abstract: | This study provides new insights on the allocative effect of monetary policy. It shows that contractionary monetary policy exerts an important reallocation effect by cleansing unproductive firms and enhancing aggregate productivity. At the same time, however, reallocation involves a reduction in the number of product variety that is central to consumer preferences and hurts welfare. A contractionary policy prevents the entry of new firms and insulates incumbent firms from competition, reducing aggregate productivity. Under demand uncertainty, the gain of the optimal monetary policy diminishes in firm heterogeneity and increases in the preference for product variety. We provide empirical evidence on US data that corroborates the relevance of monetary policy for product variety resulting from firm entry and exit. |
| Keywords: | Monetary policy; firm heterogeneity; product variety; reallocation |
| JEL: | E32 E52 L51 O47 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2102&r=bec |
| By: | Andrew B. Bernard; Yuan Zi |
| Abstract: | Firm-to-firm connections in domestic and international production networks play a fundamental role in economic outcomes. Firm heterogeneity and the sparse nature of firm-to-firm connections implicitly discipline network structure. We find that a large group of well-established statistical relationships are not useful in improving our understanding of production networks. We propose an "elementary" model for production networks based on random matching and firm heterogeneity and characterize the families of statistics and data generating processes that may raise underidentification concerns in more complex models. The elementary model is a useful benchmark in developing "instructive" statistics and informing model construction and selection. |
| Keywords: | firm-to-firm networks, model selection, balls-and-bins, buyer-seller matching, underidentification |
| Date: | 2022–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1879&r=bec |
| By: | Chao Huang |
| Abstract: | A firm-worker hypergraph consists of edges in which each edge joins a firm and its possible staff. We show that a stable matching exists in both discrete many-to-one matching and many-to-one matching with continuous transfers and quasilinear utilities when the firm-worker hypergraph is balanced. Firms' preferences satisfying this condition arise in a problem of matching specialized firms with specialists. |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2211.06887&r=bec |
| By: | Anna Maria Mayda; Gianluca Orefice; Gianluca Santoni |
| Abstract: | This paper analyses the impact of skilled migrants on the innovation (patenting) activity of French firms between 1995 and 2010, and investigates the underlying mechanism. We present district-level and firm-level estimates and address endogeneity using a modified version of the shift-share instrument. Skilled migrants increase the number of patents at both the district and firm level. Large, high-productivity and capital-intensive firms benefit the most, in terms of innovation activity, from skilled immigrant workers. Importantly, we provide evidence that one channel through which the effect works is task specialization (as in Peri and Sparber, 2009). The arrival of skilled immigrants drives French skilled workers towards language-intensive, managerial tasks while foreign skilled workers specialize in technical, research-oriented tasks. This mechanism manifests itself in the estimated increase in the share of foreign inventors in patenting teams as a consequence of skilled migration. Through this channel, greater innovation is the result of productivity gains from specialization. |
| Keywords: | Skilled Immigration;Innovation;Patents |
| JEL: | F22 J61 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2022-11&r=bec |
| By: | Teruel, Mercedes; Amaral-Garcia, Sofia; Bauer, Péter; Coad, Alexander; Domnick, Clemens; Harasztosi, Péter; Pál, Rozália |
| Abstract: | We analyse how the COVID-19 crisis impacted firms' employment levels and digitalisation efforts differently depending on their pre-crisis productivity, digitalisation and growth performance. We match the EIB Investment Survey with firm-level financial statements from the ORBIS database for 27 EU Member States and the United Kingdom. Following the sales decline during the crisis, we show that: (1) Higher productivity firms are less prone to reduce the number of employees both in the short and in the long term; (2) High-growth enterprises are also less prone to reduce the number of employees in the long term; (3) Firms in highly digitalised sectors are less likely to reduce the number of employees; (4) Firms are more likely to increase their use of digital technologies, especially those that were already more digitalised before the crisis. |
| Keywords: | HGE,labour productivity,digitalisation,COVID-19,Mercedes Teruel,Sofia Amaral-Garcia,Peter Bauer,Alex Coad,Clemens Domnick,Péter Harasztosi,Rozália Pál |
| JEL: | L22 O47 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eibwps:202213&r=bec |
| By: | Todd A. Gormley; Vishal K. Gupta; David A. Matsa; Sandra C. Mortal; Lukai Yang |
| Abstract: | In 2017, “The Big Three” institutional investors launched campaigns to increase gender diversity on corporate boards. We estimate that their campaigns led American corporations to add at least 2.5 times as many female directors in 2019 as they had in 2016. Firms increased diversity by identifying candidates beyond managers’ existing networks and by placing less emphasis on candidates’ executive experience. Firms also promoted more female directors to key board positions, indicating firms’ responses went beyond tokenism. Our results highlight index investors’ ability to effectuate broad-based governance changes and the important impact of investor buy-in in increasing corporate-leadership diversity. |
| JEL: | G34 J71 M12 M14 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30657&r=bec |
| By: | Dzhamilya Nigmatulina |
| Abstract: | Using a unique natural experiment of staggered firm-level sanctions against Russia in 2014-2020 and the data on over 900,000 Russian firms, I estimate the effect of sanctions on targeted firms and on the aggregate economy. Surprisingly, sanctioned firms on average gained 38% more capital inputs after sanctions relative to the industry trends. The effect is in part driven by sanctioned state-owned firms, getting 60% more capital relative to non-sanctioned firms. Using additional data on subsidies and government contracts, I find that this result is explained by the government protection of targeted firms, that more than compensated for a negative sanctions shock. However, the sanctioned firms were already too large and had too much capital prior to sanctions. I use a heterogeneous firm framework to show that the distortions between sanctioned and non-sanctioned firms, which existed before the sanctions, got exacerbated after the joint effect of sanctions and government protection. I combine the causal estimates with the quantitative frame-work and estimate that on the aggregate, the Russian TFP dropped at least by 0.33% reaching 3% in relevant sectors. |
| Keywords: | misallocation, macro development, state-ownership, political connections, SOEs, sanctions, Russia |
| Date: | 2022–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1886&r=bec |
| By: | Utku U. Acikalin; Tolga Caskurlu; Gerard Hoberg; Gordon M. Phillips |
| Abstract: | We examine the impact of lost intellectual property protection on innovation, competition, acquisitions, lawsuits and employment agreements. We consider firms whose ability to protect intellectual property (IP) using patents is weakened following the Alice Corp. vs. CLS Bank International Supreme Court decision. This decision has impacted patents in multiple areas including business methods, software, and bioinformatics. We use state-of-the-art machine learning techniques to identify firms’ existing patent portfolios’ potential exposure to the Alice decision. While all affected firms decrease patenting post-Alice, we find an unequal impact of decreased patent protection. Large affected firms benefit as their sales and market valuations increase, and their exposure to lawsuits decreases. They also acquire fewer firms post-Alice. Small affected firms lose as they face increased competition, product-market encroachment, and lower profits and valuations. They increase R&D and have their employees sign more nondisclosure agreements. |
| JEL: | D43 G34 O31 O33 O34 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30671&r=bec |
| By: | Urata, Shujiro (Asian Development Bank Institute); Baek, Youngmin (Asian Development Bank Institute) |
| Abstract: | We examine the foreign direct investment (FDI) spillover effects in developing countries and investigate the importance of the absorptive capacity of a firm and a country in realizing and facilitating FDI spillover. We use data obtained from the World Bank’s Enterprise Surveys for 107 countries from 2007 to 2020. We find that firms in developing countries do not benefit from horizontal FDI but benefit from forward and backward vertical FDI. We also find that firms can benefit from horizontal, forward, and backward FDI by improving the absorptive capacity of firms and host countries. Based on these findings, we present several recommendations to help firms benefit from FDI spillover. |
| Keywords: | foreign direct investment; technology transfer; absorptive capacity |
| JEL: | D22 F21 O30 R10 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:1323&r=bec |
| By: | Niall Reddy; Joel Rabinovich |
| Abstract: | It’s widely argued that shareholder value orientation (SVO) causes firms to adopt a financialized business model, in which short-run share prices are prioritized over the firm’s long-run growth. Financialized business models entail a “downsizing and distributing” allocation regime – the channeling of resources to shareholder payouts over reinvestment – and other changes that undermine firm’s ability to innovate, reduce costs and retain market share, harming its competitiveness. We test this theory by examining how increased shareholder power and realigned managerial preferences – two underlying ‘mechanisms’ of SVO – affect two sets of outcomes: allocation regime (fixed investment, R&D expenditure and payouts) and real performance (productivity, market share and profitability). We allow for the fact that institutional shareholders likely vary in their preferences for governance, meaning that broad objective of maximizing shareholder profit may conduce highly varying business strategies. Our findings suggest that short-termism is not an outcome common to shareholder primacy in general, but rather governance directed to certain kinds of shareholders – in particular low-turnover, non-passive institutional investors. Moreover it is much more likely to occur when those investors are empowered within the firm rather than reliant solely on managerial reincentivization. This suggests short-termism is a more contingent feature of NFC financialization than commonly supposed. |
| Keywords: | financialization, corporate governance, firm strategy, short-termism |
| JEL: | G30 L20 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2227&r=bec |
| By: | Antonin Bergeaud; Julia Schmidt; Riccardo Zago |
| Abstract: | When a technology becomes the new standard, the firms that are leaders in producing this technology have a competitive advantage. Matching the semantic content of patents to standards and exploiting the exogenous timing of standardization, we show that firms closer to the new technological frontier increase their market share and sales. In addition, if they operate in a very competitive market, these firms also increase their R&D expenses and investment. Yet, these effects are temporary since standardization creates a common technological basis for everyone, which allows followers to catch up and the economy to grow. |
| Keywords: | standardization, patents, competition, innovation, text mining |
| Date: | 2022–10–24 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1881&r=bec |