THE EFFICIENCY OF THE STATE‐OWNED FIRM AND SOCIAL WELFARE: A NOTE

We consider a mixed market where a state‐owned firm competes with private firms. If the number of firms is exogenous, then a deterioration of the efficiency of the state‐owned firm might improve social welfare. This situation occurs when the state‐owned firm is inefficient and private firms are efficient. However, if the number of firms is endogenous, then a deterioration of the efficiency of the state‐owned firm must reduce social welfare.     

THE RESPONSE OF STATE‐OWNED ENTERPRISES TO IMPORT COMPETITION: EVIDENCE FROM CHINESE MANUFACTURING FIRMS

We examine the wage and employment impact on Chinese firms of an increase in import competition associated with China's WTO accession in December 2001, with an emphasis on state‐owned enterprises (SOEs). We find that both wage and employment are negatively impacted by an increase in import competition, but firms with high state ownership cut employment less and reduce wages more than their private counterparts, suggesting that they prioritize the protection of employment over that of wages. This finding supports the notion that SOEs may have ‘multitask’ responsibilities in terms of protecting employment as well as achieving efficiency. We also find that firms with higher capital intensity reduce their wages less but cut employment more in response to intensified import competition. This provides empirical support for the efficiency wage theory.     

CROSS‐MARKET TRADING IN CHINA'S LARGE STATE‐OWNED COMMERCIAL BANKS, 2006–2011

This paper examines the differential between the share prices of China's large state‐owned commercial banks traded in Shanghai versus prices observed in Hong Kong. We find a significant role for investor sentiment, as reflected in relative price‐earnings ratios, in explaining these price differentials for all four banks. The share price in Shanghai tends to move ahead of the share price in Hong Kong when more positive sentiment in Shanghai makes local investors willing to pay more for the same predicted earnings. We also identify common trends in relative bank price‐earnings ratios and price differentials across the two markets. (JEL G14, G15)     

WAGE‐RISE CONTRACT AND QUANTITY COMPETITION WITH PROFIT‐MAXIMIZING AND LABOUR‐MANAGED FIRMS

This paper examines the behaviours of a profit‐maximizing firm and a labour‐managed profit‐per‐worker‐maximizing firm in a two‐stage quantity‐setting model with a wage‐rise contract as a strategic commitment. The paper then shows that there exists a unique equilibrium that coincides with the Stackelberg solution where the profit‐maximizing firm is the leader and the labour‐managed firm is the follower.     

THE EFFECTS OF FIRM BOUNDARY AND FINANCING CONSTRAINTS ON UTILITY COSTS: THE CASE OF MUNICIPALLY OWNED ELECTRICITY DISTRIBUTION UTILITIES

ABSTRACT: A number of studies have examined costs and potential for scale and scope economies in electricity distribution; however, few if any, have examined this area in terms of the unique constraints associated with municipal ownership or historical and regulatory constraints associated with former municipal ownership. This paper focuses on 19 distribution‐only municipally owned utilities for a ten‐year period (1988–97). Distortions from variable outputs but largely fixed inputs are minimized. The data used were collected specifically to assess productivity, cost, and efficiency performance and include value‐based capital inputs and service prices. Outputs include energy conveyed and number of connections; inputs include capital, system losses, labour, and materials. We examine the effect of using third‐party financing (e.g., connection charges), with its inherent principal‐agent problems, on utility costs, as well as the effect of shared services and multi‐utility output (e.g., electricity and water). A translog total cost function is estimated. Our findings suggest significant returns to scope but also significant increases in costs associated with the use of third‐party financing. The results also suggest scale diseconomies. Shared outputs, which have been greatly restricted or eliminated under restructuring, may have provided larger, and now lost, economies than the scale returns blindly pursued by some through restructuring or incented/forced mergers or divestitures. Finally, it is clear that third‐party financing can raise costs; such financing is widely used among utilities providing electricity, gas, water, and telecommunications, and should be closely scrutinized.     

CORPORATE GOVERNANCE AND CAPITAL ACCUMULATION: FIRM-LEVEL EVIDENCE FROM ITALY

This study investigates the impact of investor protection on firm ownership and capital growth in a model where investor protection is allowed to vary between firms. Using panel data for Italy, we construct firm-level variables to capture the degree of investor protection, which is observable to all shareholders. Empirical evidence indicates that the stronger the investor protection the lower the fraction of equity that is owned by insiders. Results show that higher insider equity ownership is linked to larger risk premiums and higher costs of capital. Implications suggest that the magnitude of capital stock distortions is particularly important when shareholder protection is weak and ownership concentration is high.     

STRATEGIC WITHHOLDING OF FIRM‐SPECIFIC SKILLS IN WAGE BARGAINING

The bargaining relationship between a firm and its incumbent worker who possesses firm‐specific human capital is examined. It is shown that the worker's ability to withhold his/her skills strategically increases his/her bargaining power. Multiple efficient as well as inefficient equilibria involving delays in negotiation are characterized. When the firm has outside options, the range of both efficient and inefficient equilibria shrinks; moreover, delays are shortened in inefficient equilibria. The model predicts that wages are procyclical.     

政策协同视角下的中央企业重组与国有资本配置效率*

基于深化国企改革的政策协同视角，本文系统地考察了中央企业重组对国有资本配置效率的影响及作用机制。研究发现，中央企业重组能够长期性地改善国有资本效益，并且这一结果在不同重组方式下存在差异。机制检验表明，中央企业重组是通过降低成本、提高效率而非加剧市场垄断来提高国有资本效益的。进一步检验表明，深化国企改革，尤其是国有企业分类改革和改组组建国有资本投资、运营公司试点能够对中央企业重组起到政策协同效应。最后，中央企业重组还能够通过退市清算、产权转让等形式促使国有资本淘汰落后产能、化解过剩产能，同时布局重要行业并聚焦主业。本文的研究结论不仅及时回应了国企重组特别是央企重组效果及必要性的重要关切，而且为深入推进国企改革提供了有益启示。     

THE EXTENDED GOVERNANCE OF COOPERATIVE FIRMS: INTER‐FIRM COORDINATION AND CONSISTENCY OF VALUES

This work aims at providing a framework for the analysis of governance in networks of cooperative firms. It builds on four bodies of literature: cooperation, transaction costs, monopoly capitalism, production networks. The framework associates the specific principles that define the identity of cooperative organizations (self‐help, member ownership, democratic control, financial participation, limited capital remuneration) alongside more general governance levels (embodied values, property rights, control, resource allocation). We then apply the same dimensions to production networks and propose a stylized networking model for cooperatives. We introduce market power, and identify two polarized types of networks: (1) heterarchical forms of coordination based on cooperation and mutual help, (2) hierarchical coordination based on exclusive direction. We compare both types with our normative framework providing examples and brief case studies for each network type. Recommendations to scholars and practitioners point at the opportunity to discriminate inter‐firm relations and production development strategy in terms of the values of cooperation, at all governance levels.     

FOREIGN ENTRY INTO U.S. SERVICE INDUSTRY BY TAKEOVERS AND THE CREATION OF NEW FIRMS

We study the relation between foreign entry in U.S. service sector industries and the revealed comparative advantage of the investing country using U.S. Bureau of Economic Analysis firm‐level data on all foreign takeovers and new foreign‐owned firms from 1998 to 2008. We find foreign acquisitions in the service sector are in industries of U.S. comparative advantage while new foreign firms are in industries of investing country's comparative advantage. This suggests that foreign acquisitions in the service sector are not directly related to foreign investors' competitiveness in the industry of investment. In contrast foreign investors in new service sector firms come from countries with a competitive edge in the industries of investment. We also find that foreign investors of new service sector firms are from Organization for Economic Co‐operation and Development (OECD) countries with a comparative disadvantage in royalties and trademarks. (JEL F21, F23, G34)     

Firm ownership and internal labour practices in a transition economy

One feature common to many post‐socialist transition economies is a relatively compressed wage structure in the state‐owned sector. We conjecture that this compressed wage structure creates weak incentives for work effort and worker skill acquisition and thus presents adverse consequences for the entire transition economy if a substantial portion of the labour force works in the state sector. We explore firm wage incentives and worker training, as well as other labour practices and outcomes, in a transition setting with matched firm and worker data collected in one of the largest provinces of Vietnam – Ho Chi Minh City. The Vietnamese state sector exhibits a compressed wage distribution in relation to privately owned firms with foreign ownership. State wage practices stress tenure over worker productivity and their wage policies result in flatter wage–experience profiles and lower returns to education. The state work force is in greater need of formal training, a need that is in part met through direct government financing. In spite of the opportunities for government financed training and at least partly due to inefficient worker incentives, state firms, by certain measures, exhibit lower levels of labour productivity. The private sector comparison group to state firms for all of these findings is foreign owned firms. The internal labour practices of foreign firms are more consistent with a view of profit‐maximizing firms operating with no political constraints. This is not the case for Vietnamese de novo private firms that exhibit much more idiosyncratic behaviour and whose labour practices are often indistinguishable from state firms. The exact reasons for this remain a topic of on‐going research yet we conjecture that various private sector constraints, including limited access to formal capital, play an important role.     

SHORT‐RUN AND LONG‐RUN IMPLICATIONS OF ENVIRONMENTAL REGULATION ON FINANCIAL PERFORMANCE

Opposing theoretical arguments exist regarding the effect of environmental regulation on financial performance. Some studies argue that environmental regulation constrains firms' abilities to exploit revenue‐enhancing or cost‐reducing opportunities. Other studies, representing the Porter hypothesis, argue that environmental regulation motivates firms to innovate, which ultimately improves financial performance. Although much of the debate focuses on long‐run effects, there are also important short‐run effects. This study provides empirical evidence regarding the short‐run and long‐run effects of Clean Water Act regulation on financial performance. To generate this evidence, we examine the effect of permitted wastewater discharge limits, on the return on sales, using panel data on publicly owned firms in the chemical manufacturing industries. We find that Clean Water Act regulation improves financial performance in both the short run and the long run with a stronger effect in the long run. These results suggest that some net benefits may be realized during a short‐run transition to comply with a tighter permitted discharge limit, with additional benefits accruing to the firm in the long run because the firm has more time to innovate. (JEL K23, L25, L51, L65, Q52)     

ARE COOPERATIVES MORE PRODUCTIVE THAN INVESTOR‐OWNED FIRMS? CROSS‐INDUSTRY EVIDENCE FROM PORTUGAL

We analyse empirically whether cooperatives and investor‐owned firms differ in terms of productive efficiency. Using rich Portuguese panel data covering a wide range of industries, we apply two different empirical approaches to estimate potential differences in productive efficiency. The results from our benchmark random‐effects model show that cooperatives are significantly less productive, on average, than investor‐owned firms, both at the aggregate level and for most of the industries considered. However, the results derived from a System‐GMM approach, which is our preferred empirical strategy, are much less conclusive, and we cannot conclude that cooperatives are generally less efficient that investor‐owned firms. With either approach, though, we find no evidence that cooperatives are more productive than investor‐owned firms in any industry.     

Market Size and the Survival of Foreign‐owned Firms*

We develop a general equilibrium model with heterogeneous firms and foreign direct investment cost uncertainty and investigate the survival of foreign‐owned firms. The survival probabilities of foreign‐owned firms depend on firm‐level characteristics, such as productivity, and host country characteristics, such as market size. We show that a foreign‐owned firm will be less likely to be shut down when its parent firm's productivity is higher and its indigenous competitors are less productive. Although a larger market size will always reduce the survival probability of indigenous firms, it can lead to a higher survival probability for foreign‐owned firms if their parent firms are sufficiently productive.     

The shadow of death model revisited with an application to French firms

This article provides an empirical model of the shadow of death in which the exit probability of a firm depends on the firm’s productive performance and the firm’s level of sunk costs, which are viewed as barriers to exit. The shadow of death effect is treated by assuming a relationship between the propensity to exit and both the contemporaneous and lagged values of efficiency and sunk costs. To estimate the unobserved productive efficiency, we use the Ackerberg et al. (2006) estimator extended by the addition of a correction for selection bias. We use an unbalanced sample of approximately 100 000 French firms over the period 1997 to 2002. Our results indicate that the probability of exit is negatively affected by unobserved individual efficiency and the level of sunk costs. The shadow of death effect applies mainly in manufacturing, where both productive efficiency and sunk costs decrease during several years before exit. In service sectors, the exit process seems to occur more suddenly.     

EXPERIMENTAL EVIDENCE OF A SUNK‐COST PARADOX: A STUDY OF PRICING BEHAVIOR IN BERTRAND–EDGEWORTH DUOPOLY*

We experimentally test the effect of sunk costs on decision making. In the experiment, subjects play the role of price‐setting duopolists. Both firms have identical costs, including an exogenous sunk cost that varies across sessions over six different values. We observe that the sunk cost has a U‐shaped effect: From low to medium levels, average prices decrease, but from medium to high levels, average prices increase. This effect, which is consistent with loss avoidance, develops quickly and persists throughout the game. A follow‐up experiment confirms the main results of the original experiment.     

Physical capital,knowledge capital,and the choice between FDI and outsourcing

Abstract There exist two approaches in the literature concerning the multinational firm’s mode choice for foreign production between an owned subsidiary and a licensing contract. One approach considers environments where the firm transfers primarily knowledge‐based assets and assumes that knowledge is non‐excludable. A more recent approach takes the property‐right view of the firm and assumes that physical capital is fully excludable. This paper combines both forms of capital assets in a single model. There are subtleties, and added structure is needed to establish what ex ante seems a straightforward testable hypothesis: relatively physical‐capital‐intensive firms choose outsourcing while relatively knowledge‐capital‐intensive firms choose FDI.     

Intra‐firm trade,exporting, importing,and firm performance

Abstract This paper examines firm heterogeneity in terms of size, wages, capital intensity, and productivity between domestic and foreign‐owned firms that engage in intra‐firm trade, firms that export and import, firms that import only, and firms that export only. As previously documented, heterogeneity between different groups of trading firms is substantial. Taking into account intra‐firm trade in addition to exporting and importing yields new insights into the productivity advantage previously established for exporting firms. The results presented here show that this premium accrues only to exporters that also import and to exporters that also engage in intra‐firm trade, but not to firms that export only. Using simultaneous quantile regressions, the paper illustrates that heterogeneity within different groups of trading firm is equally large. Some of this within‐group heterogeneity can be attributed to differences in trading partners.     

NON-WAGE LABOUR COSTS, POLICY UNCERTAINTY AND LABOUR DEMAND – A THEORETICAL ASSESSMENT

Labour costs in various European countries have reached a record high in recent years. The topic of non‐wage labour costs is therefore increasingly being discussed among and between the political parties because non‐wage labour costs are likely to have major negative effects on employment. We follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm's wage and non‐wage costs are stochastic and adjustment costs are sunk. Simulation exercises show that the interaction between hiring and firing costs, non‐wage labour costs and uncertainty can have important ramifications for employment dynamics.     

EXPORT‐MARKET DYNAMICS AND THE PROBABILITY OF FIRM CLOSURE: EVIDENCE FOR THE UNITED KINGDOM

This study presents the first empirical analysis of the determinants of firm closure in the United Kingdom with an emphasis on the role of export‐market dynamics, using panel data for a nationally representative group of firms operating in all‐market‐based sectors during 1997–2003. Our findings show that the probability of closure is (cet. par.) significantly lower for exporters, particularly those experiencing export‐market entry and exit. Having controlled for other attributes associated with productivity (such as size and export status), the following factors are found to increase the firm's survival prospects: higher capital intensity and TFP, foreign ownership, young age, displacement effects (through relatively high rates of entry of firms in each industry), and belonging to certain industries. Interestingly, increased import penetration (a proxy for lower trade costs) leads to a lower hazard rate for exporting entrants and continuous exporters, while inducing a higher hazard rate for domestic producers or those that quit exporting.