Growing through the merger and acquisition

The paper studies with an endogenous growth model how the merger and acquisition (M&A) affects the aggregate growth rate. We model the M&A as a capital reallocation process, which can increase both productivity and growth rates of firms. The model is tractable and greatly consistent with patterns observed in the M&A at the micro level. Matching our model to the data, we find that prohibiting the M&A would lead to the reduction of the aggregate growth rate of US economy by 0.1% and the reduction of the aggregate TFP by 5%.     

Problems with (dis)aggregating productivity,and another productivity paradox

Using a standard definition of productivity growth, it is shown that a country may have higher productivity growth than another country in each sector, but may have a lower productivity growth rate overall. Also, it is shown that popular methods for aggregating firm/industry estimates of productivity growth have a serious problem in that productivity of all firms/industries can go up, but aggregate productivity can fall. This is not necessarily due to changes in the reallocation of resources across firms/industries. Hence, there are problems for the interpretation of previously published articles which use these methods. There can be inappropriate assessments of the cyclical properties of productivity, and the productivity impact of industry dynamics, micro-economic reforms and regulatory change. Index-number methods that avoid these aggregation problems are introduced.     

FOREIGN DIRECT INVESTMENT AND REGIONAL PRODUCTIVITY SPILLOVERS IN US MANUFACTURING

This research examines how inward foreign direct investment (FDI) impacts manufacturing productivity in select industries across US regions. Although some evidence has documented the phenomenon of knowledge spillovers to national economies, little is known about how the regional penetration of foreign investment affects the productivity performance of local firms. The analysis proceeds in a novel fashion by adjusting aggregate data on industry operating statistics to "net out" the contaminating influence of foreign firms producing in each of the host regional economies. A cross section of state-by-industry observations is used to estimate labor productivity, controlling for FDI penetration both by region and by industry. In general, the results demonstrate that domestic firms do not reap productivity gains as a result of a larger presence of foreign affiliates. Related research efforts, although not specifically concerned with the regional transmission of FDI spillovers, offer corroborative support for these findings.     

Firm turnover and productivity differentials in Ethiopian manufacturing

Are the forces of market selection at work in Africa? How successful are markets in these economies in sorting out firms on an efficiency basis following the sequence of reforms to liberalize and particularly to transform some of the previous command economies to market oriented ones? What is the pattern of entry and exit in the manufacturing sector and how does it affect industry productivity growth? This study examines these issues using firm-level industrial census data from the Ethiopian manufacturing sector. It is the first attempt to analyze firm turnover and productivity differentials using industrial census data in sub-Saharan Africa. The Ethiopian manufacturing sector exhibits a high firm turnover rate that declines with size. Exit is particularly high among new entrants; 60% exit within the first 3 years in business. Our study consistently shows a significant difference in productivity across different groups of firms, which is reflected in a turnover pattern where the less productive exit while firms with better productivity survive. We also found higher aggregate productivity growth over the sample period, mainly driven by firm turnover.     

Material And Value-Adding Inputs In Manufacturing Enterprises

Because of the nature of assembly-line operations, one would expect technologies in manufacturing firms to differ in systematic ways from those in many other types of firms. Identifying such differences can therefore be useful in the formulation and testing of restrictions to flexible functional forms. In the present paper, I characterize a multiproduct manufacturing firm and use the characterization to formulate testable hypotheses about the firm's technology, cost function, and profit function. I argue that manufacturing enterprises exhibit a form of almost nonjointness in input quantities and prices in which the individual sub-technologies have quasi-fixed proportions. Substitution across product lines is responsible for the substitutability between material and value-adding inputs that we often observe in aggregate data. Neglecting the special structure of manufacturing technology can seriously bias estimates of aggregate productivity growth rates.     

Sustainable product attributes and firm performance: The moderating role of marketing resource intensity

This paper aims to study the performance implications of sustainable product attributes (SPA) of US manufacturing firms. Specifically, it analyzes the influence of aggregate and disaggregated SPA on firm profitability. The study further explores the moderating influence of marketing resource intensity on aggregate and disaggregated SPA and firm profitability relationships. The fixed-effect regression analysis of 433 US manufacturing firms' panel dataset reveals that aggregate and disaggregated SPA positively influence the firm profitability. The moderation analysis also confirms the positive influence of marketing resource intensity on aggregate and disaggregated SPA and firm profitability relationship. The current paper contributes to the triple-bottom-line and theory-of-the-firm literature streams by empirically studying the influence of aggregate and disaggregated SPA on firm profitability. Furthermore, this study uses the resource-based view to complement theory-of-the-firm model of SPA and empirically study the moderating role of marketing resource intensity between aggregate and disaggregated SPA and firm profitability. Finally, the findings inform the managers of the increased firm profitability by aggregate and disaggregated SPA, and the pivotal role of marketing resource intensity in strengthening the positive influence of aggregate and disaggregated SPA on US manufacturing firms' profitability.     

Productivity and Trade Orientation in UK Manufacturing*

We show that improvements in aggregate productivity in UK manufacturing during the first years after the implementation of the Euro, by the UK's main trading partners in Europe, are determined by both market share reallocation and within‐company productivity growth. Furthermore, we outline a structural methodology for estimating parameters of a production function linking the unobservable productivity to endogenous company‐level trade orientation, investment and exit decisions. This allows us to back out consistent and unbiased estimates of productivity dynamics by trade orientation of companies within four‐digit UK manufacturing industries using FAME data over the period 1994–2001. Our estimates of productivity dynamics indicate that improvements in aggregate productivity were mainly driven by market share reallocations away from inefficient and towards efficient exporting companies alongside productivity improvements within non‐exporting companies.     

On the spatial economic impact of global warming

We propose a dynamic spatial theory to analyze the geographic impact of climate change. Agricultural and manufacturing firms locate on a hemisphere. Trade is costly, firms innovate, and technology diffuses over space. Emissions from energy used in production contribute to the atmospheric stock of carbon, which increases temperature. Warming differs across latitudes and its effect on productivity varies across sectors. We calibrate the model to analyze how climate change affects the spatial distribution of economic activity, trade, migration, growth, and welfare. We assess quantitatively the impact of migration and trade restrictions, energy taxes, and innovation subsidies.     

Exploring reallocation’s apparent weak contribution to growth

Two recent meta-analyses use variants of the Baily et al. (Brookings Papers Econ Act Microecon 1:187–267, 1992) (BHC) decompositions to ask whether recent robust growth in aggregate labor productivity (ALP) across 25 countries is due to lower barriers to input reallocation. They find weak gains from measured reallocation and strong within-plant productivity gains. We show these findings may be because BHC indices decompose ALP growth using plant-level output-per-labor (OL) as a proxy for the marginal product of labor and changes in OL as a proxy for changes in plant-level productivity. We provide simple examples to show that (1) reallocation growth from labor should track marginal changes in labor weighted by the marginal product of labor, (2) BHC reallocation growth can be positively correlated, negatively correlated, or uncorrelated with actual growth arising from the reallocation of inputs, and that (3) BHC indices can mistake growth from reallocation as growth from productivity, principally because OL is neither a perfect index of marginal products nor plant-level productivity. We then turn to micro-level data from Chile, Colombia, and Slovenia, and we find for the first two that BHC indices report weak or negative growth from labor reallocation. Using the reallocation definition based on marginal products we find a positive and robust role for labor reallocation in all three countries and a reduced role of plant-level technical efficiency in growth. We close by exploring potential corrections to the BHC decompositions but here we have limited success.     

Do manufacturing entrepreneurs in Australia have (or develop) a productivity advantage?

Journal of Productivity Analysis - Young firms are integral to productivity enhancing resources reallocation. However, manufacturing entrepreneurs in Australia are quite unproductive upon entry....     

Reallocation and productivity growth in Japan: revisiting the lost decade of the 1990s

Hayashi and Prescott (Rev Econ Dyn 5(1):206–235, 2002) argue that the ‘lost decade’ of the 1990s in Japan is explained by the slowdown in exogenous TFP growth rates. At the same time, other research suggests that Japanese banks’ support for inefficient firms prolonged recessions by reducing productivity through misallocation of resources. Using the data on large manufacturing firms between 1969 and 1996, the paper attempts to disentangle the factors behind the slowdown in productivity growth during the 1990s. The main results show that there was a significant drop in within-firm productivity, the component that is not affected by reallocation of input and output shares across firms over time, during the 1990s. Although we find that misallocation among large continuing firms represents a substantial drag to overall TFP growth for these firms throughout the sample period, the negative impact of misallocation was least visible during the 1990s. The significant reduction in within-firm productivity growth suggests that, as the Japanese economy has matured, a policy which fosters technological innovations via greater competition, R&D, and fast technological adoption may have become increasingly important in promoting economic growth.

Aggregate productivity losses from factor misallocation across Chinese manufacturing firms

Aggregate productivity can be largely determined by how efficiently production factors are allocated across heterogeneous establishments. This paper estimates aggregate productivity losses from factor misallocation using a large sample of Chinese manufacturing firms. We analyze the institutional background and provide some stylized facts on factor misallocation of capital and labor in China. Using an approximation method based on the estimation of input gaps, we find that aggregate productivity losses reach an average rate of 11.18 percentage points per year. On average, capital and labor misallocation account for 6.73 and 4.45 percentage points, respectively. State ownership plays an important role in generating factor misallocation and productivity losses. Our results imply that factor misallocation have become a major obstacle preventing China from moving to a more efficient economy.     

Analysis of regional productivity with capital as a quasi-fixed factor

Most existing studies of regional productivity growth do not incorporate the effect of variations in capacity utilization on changes in output. By failing to do so, their factor productivity estimates are biased. To overcome this shortcoming, we adjust multifactor productivity growth measure for changes in capacity utilization. Our technique recognizes that capital is a quasi-fixed factor which implies that capital in the short run can be either under- or over-utilized by a firm. Our results from 1974 to 1978 show that capacity adjusted multifactor productivity growth measure exceeds capacity unadjusted multifactor productivity growth measure for the nine census divisions. The bias in the capacity unadjusted measure of multifactor productivity growth is approximately 8 percent in East North Central and over 33 percent in Mountain. We find that the aggregate factor productivity growth is slowest in the traditional manufacturing belt (Middle Atlantic and East North Central divisions). The level of aggregate factor productivity in the manufacturing belt, however, is almost 33 percent higher than in regions in the south.     

The Reallocation of Labour and the Lifecycle of Firms

This paper uses a unique US panel dataset of firms and workers toinvestigate the relationship between the firm's lifecycle and the reallocation of labour. We distinguish labour reallocation associated with job reallocation, and reallocation of workers over a fixed configuration of jobs. We find that firms at the beginning and end of their lifecycles contribute disproportionately to labour market lows, with sorting between firms particularly important among young firms, whereas sorting within firms is moreimportant among mature firms. We also find that high churning lows are associated with a lower probability of a young firm surviving.     

IT Outsourcing—A Source of Innovation? Microeconometric Evidence for Germany

Does IT outsourcing really influence firms' process innovativeness? We investigate this question with a distinguished view on manufacturing and service sectors. Previous studies suggest firms sourcing out IT services to external service providers are generally more process innovative. Based on a firm‐level data set comprising 1452 firms from the German manufacturing and services sectors, the econometric analysis confirms a positive and significant relationship between IT outsourcing and process innovation activity on an aggregate level. As proposed by our framework of differences between manufacturing and service firms, a more detailed analysis reveals that this positive relationship only holds for services firms. Copyright © 2016 John Wiley & Sons, Ltd.     

Firms' relative sensitivity to aggregate shocks and the dynamics of gross job flows

We propose the coefficient of variation as a measure of the cyclical volatility of gross job flows that is immune to trends in net job creation. In addition, we show that this measure is intrinsically related to the importance of aggregate shocks for fluctuations in job flows at the firm level. Using data for the Portuguese economy, we conclude that the coefficient of variation is a more robust measure for the underlying volatility of gross job flows. We also find that large and old firms exhibit higher relative sensitivity to aggregate shocks than small and young firms, and have a disproportional influence over the dynamics of aggregate job reallocation. In particular, since large and old firms tend to reallocate jobs less procyclically than small and young firms, job reallocation is less procyclical than if all firm classes were equally sensitive to aggregate shocks.     

Labour productivity and employment in Australian manufacturing SMEs

This paper examines the relationship between labour productivity and employment in Australian manufacturing small and medium enterprises (SMEs). The results indicate that labour productivity of SMEs varies substantially between industries within the manufacturing sector, but on average labour productivity for manufacturing SMEs increased at a faster rate than that of large manufacturing enterprises across all industries. All manufacturing industries except one recorded employment growth during the period under study. However like labour productivity growth, employment growth also varies across industries within the manufacturing sector. Yet the study could not establish any definite relationship between labour productivity growth and employment. This finding is consistent with some previous studies.     

Costly external finance and labor market dynamics

We study the role of agency frictions and costly external finance in cyclical labor market dynamics, with a focus on how credit-market frictions may amplify aggregate TFP shocks. The main result is that aggregate TFP shocks lead to large fluctuations of labor market quantities if the model is calibrated to the empirically observed countercyclicality of the finance premium. A financial accelerator mechanism thus amplifies labor market fluctuations by rendering rigidity in real wage dynamics. In contrast, if the finance premium is procyclical, which the model can be parameterized to accommodate, amplification is absent, and labor-market fluctuations display the Shimer (2005) puzzle.     

Digital finance and misallocation of resources among firms: Evidence from China

The resources misallocation among firms is serious in China, our calculation shows it has resulted in the total factor productivity (hereafter, TFP) loss of over 200% and has been gradually increasing in recent years, based on the firm-level data from National Tax Survey database from 2007 to 2016. This paper further investigates empirically the impact of digital finance on resources misallocation, by measuring resources misallocation with firm’s capital deviation and labor deviation, as well as measuring digital finance with the number of searches for fintech keywords on Baidu's webpage. Results suggest that digital finance can significantly mitigate resources misallocation among firms to improve the aggregate TFP by redistributing resources from over-resourced firms to under-resourced firms, although it cannot improve the TFP within a representative firm. The findings remain robust after addressing the endogeneity and using alterative variables of digital finance and value of labor output elasticity. Moreover, digital finance can rectify the credit-market discrimination, where its mitigating effect on resources misallocation prefers to non-state-owned firms and small and medium-sized firms. However, traditional finance, as measured by the number of offline bank branches, can also optimize resources allocation, but this effect is gradually diminishing and it also fails to rectify the credit discrimination.     

融资约束对企业生产率的影响——基于系统GMM方法的国企与民企差异检验

本文基于2003～2009年中国制造业上市公司面板数据,运用附加融资约束变量的增广生产函数和系统广义矩估计方法,研究国企和民企资金可获得性在影响生产率方面的差异。结果发现,上市公司生产率从总体上看不受制于内源融资,但按所有制分类后,只有民企存在融资约束并显著影响生产率,生产率高的民企通常拥有丰裕的内源资金;进一步按流动性与负债状况分类后仍不改变结论,而且流动性差、负债率高的民企所受约束更加严重。