REGULATIONS AND STRATEGY: EVIDENCE ON ADVERTISING

This article evaluates the impact of the introduction of incentive regulation on firms’ advertising spending among the population of local exchange carriers in the United States telecommunications industry between 1988 and 2001. The results show that the hybrid rate of return method and other intermediate incentive schemes have a negative relationship with advertising spending. Conversely, the introduction of pure price caps schemes has had a positive and significant impact on firms’ advertising spending. These results highlight the importance of incentive compatible mechanism design in motivating firms to be market oriented and strive for superior performance.     

PRICING REGULATIONS AND NETWORK TECHNOLOGY INVESTMENTS: A RETROSPECTIVE EVALUATION

This article evaluates the impact of the introduction of incentive regulation on technology deployment, as evaluated using two technology deployment metrics, among the population of local exchange carriers in the USA between 1988 and 2001. The regulatory schemes are disaggregated into five categories, permitting examination of heterogeneity among regulatory schemes. The results show that the rate of return method and the other intermediate incentive schemes implemented have had a negative impact on technology deployment. Conversely, the introduction of pure price caps schemes had a positive and significant impact on firms’ technology deployment. These results highlight the importance of appropriate incentive compatible mechanism design in motivating firms to adopt the new and important technologies that have been developed.     

The impact of new goods and service products on firm growth: evidence from Austrian-linked firm-level data

Using a matched innovation survey and structural business statistics, we investigate the impact of the introduction of new service products and other types of technological innovations on firm growth measured as subsequent two-year employment growth. Results, based on median and robust regression methods for manufacturing firms, show that, on average, both the introduction of new goods and process innovations have a significant and positive impact on subsequent firm growth. In contrast, the introduction of new services does not, on average, have a significant impact on firm growth for both manufacturing and service firms. However, quantile regressions show that the introduction of new service products has a significant and positive impact on firm growth for high-growth service firms. Finally, in manufacturing, the introduction of product innovations has a positive impact on firm growth at both the lower and higher ends of distribution (i.e. for both high-growth and shrinking firms).     

Cartels in the unidirectional Hotelling model

We study the impact of space on perfect collusion sustainability within the unidirectional Hotelling model where the firms are constrained to move to the left. We obtain that when the firm that located to the left of the Hotelling segment has the greater incentive to deviate, the distance between the firms has a negative impact on the capability of the firms to sustain the collusion in equilibrium. On the other hand, when the firm that located to the right has the greater incentive to deviate, greater spatial distance makes the collusion easier to sustain in equilibrium. These results substantially differ from the bidirectional Hotelling model.     

外部知识获取影响企业创新绩效的作用机理

从外部知识需要通过企业内部实践才能加以利用这一思路出发,基于中国489家大中型企业的调查数据,运用SPSS21.0软件实证探讨了内部沟通和创新激励对外部知识向创新绩效转化的影响机理。层级回归结果显示:外部知识获取对企业创新绩效的提升具有显著作用,内部沟通和创新激励在上述关系中起部分中介作用。     

How effective are level-based R&D tax credits? Evidence from the Netherlands

This article examines the impact of the R&D fiscal incentive programme on R&D by Dutch firms. Taking a factor demand approach, we measure the elasticity of firm R&D capital accumulation to its user cost. Econometric models are estimated using a rich unbalanced panel of firm data covering the period 1996 to 2004 with firm specific R&D user costs varying with tax incentives. Using the estimated user cost elasticity, we perform a cost–benefit analysis of the R&D incentive programme. We find some evidence of additionality suggesting that the level based programme of R&D incentives in the Netherlands is effective in stimulating firms’ investment in R&D. However, the hypothesis of crowding out can be rejected only for small firms. The analysis also indicates that the level based nature of the fiscal incentive scheme leads to a substantial social deadweight loss.     

The Determinants of Firm’s Growth in the Telecommunication Services Industry: Empirical Evidence from India

The growth and evolution of the industry has an important bearing on the economic development of a country. The extant literature on firm growth provides valuable insights into firm behavior and factors influencing the evolution of the industry over time. The topic becomes even more relevant in the context of the telecommunication industry because of its positive impact on economic growth and productivity, which has been well documented in both the developed and developing country context. Based on the firm-growth literature, this study analyzes the factors influencing the growth of the Indian telecommunication industry using an unbalanced panel of 204 firms across two decades from 2000 to 2020. Dynamic Panel estimation technique (System GMM) is used to take care of endogeneity issues caused by the dynamic nature of firm growth models. Results indicate that the growth of firms in the Indian telecom services industry is explained by systematic factors like size, age, profitability, financial leverage, and trade orientation. The study finds that the larger firms grow at a decreasing rate compared to small firms. The firm's age negatively impacts the growth rate of firms, i.e., younger firms have a faster growth rate than the older ones supporting the case of convergence of firm growth in the Indian telecom services sector. Factors such as lagged R&D intensity, financial leverage, and profitability negatively impact the firms’ growth rate. Export intensity is found to have a negative and significant impact on the growth rate of the firms. The findings have important policy implications in the context of the growth of the telecommunication industry in India, which has witnessed intense competition, steep decline in profitability, and high debt structure over a period of time.

     

Firm value and the diversification choice: international evidence from global and industrial diversification

Our study examines the nature of industrial and global diversification for a sample of more than 12?000 firms across 35 emerging and developed countries during the period 1991–2006. Consistent with previous studies, we find that industrial diversification, either alone or combined with global diversification, results in a reduction of firm excess value. Global diversification alone, however, does not exert a significant impact on excess value. In an analysis of the decision to diversify, we find that firms in civil law countries or less developed nations are more likely to diversify, suggesting the greater utility of internal capital markets in economies where it is difficult to raise external capital. We observe that high leverage, larger size, lower levels of growth, R&D, free cash flow, profitability and Tobin's q encourage firms to diversify industrially. Higher values of q, firm size, R&D expenditures, free cash flow and liquidity, but reduced growth rates and profitability are associated with global diversification.     

Does the Effectiveness of Employment Incentive Programs Vary by Firm Size?

This article examines the impact of national employment incentive programs on employment growth of individual firms in the original fifteen member states of the European Union (EU-15). We investigate whether this impact differs among firms of different size classes, and whether the effectiveness of employment incentive programs depends on the business cycle. We find that expenditures on employment incentives have a positive impact on employment growth for firms of all sizes. However, this impact is significantly reduced for smaller firms, suggesting that employment incentive programs are less effective for small firms. We also find that the employment impact of incentive programs is stronger during recessionary periods, but only for firms without any employees (i.e., own-account workers).     

Regulation,Local Monopolies and Spatial Competition

Many regulated industries involve an oligopoly market structure. We examine optimal incentive regulation for a duopoly model of spatial competition when firms have private cost information. Market structure is endogenous as regulation determines market segments for firms and output distribution across consumers in each firm's market. By varying the assignment of consumers to firms, a relatively more efficient firm can be rewarded with a larger market, thus reducing quantity incentive distortions. We derive the optimal policy, assess the impact of asymmetric information relative to full information, and examine extensions to allow for ex ante asymmetries in firm structure.     

REGULATION AND JOB CREATION: AN ANALYSIS OF INSTITUTIONAL CHANGE AND ITS CONSEQUENCES

The study evaluates the impact of changes in price regulation, an important institutional feature of firms’ environments, on average human resource deployment levels among the United States local exchange telecommunications companies using contemporary historical data between 1988 and 2001. The data permit a natural experiment approach for the evaluation. Firms regulated via rate of return approaches have employed significantly less staff. These employment levels have been 15 percent lower than that of firms regulated via incentive regulation. The study is a direct test of a principal dynamic capabilities idea that firms reconfigure resources in the face of environmental changes to retain their competitive advantages. These results signify the importance of designing regulations possessing requisite incentive properties in enhancing firm level employment and support the key premises of the dynamic capabilities perspective.     

Green technological diversification of European ICT firms: a patent-based analysis

ABSTRACT

This paper investigates whether and how diversified firms in the Information and Communication Technology (ICT) sector innovate in green technologies and assess the potential impact of these innovations on firm performance. The analysis relies on a balanced panel dataset of European ICT firms in the period 2009–2013. The results suggest an inverted u-shaped relationship between the extent of technological diversification and the likelihood to develop green technologies. Technological diversification generally increases the likelihood of green innovations, but too high a dispersion of resources across a large variety of different technologies decreases the intensity of green innovations. The results show also that the development of green technologies is positively associated with firm performance: ICT firms involved in green patenting activity perform better than ICT firms with no green patents.     

Employment,job turnover,and trade in producer services: UK firm‐level evidence

Abstract We provide the first firm‐level evidence of the impact of the trade in producer services (‘offshoring’) on the labour market. Using a new data set from the UK that measures trade in services at the firm level, we find no evidence that importing intermediate services is associated with job losses or greater worker turnover. Using regression to control for observable differences between firms that import service inputs and those that do not, we show that firms that start importing intermediate services experience faster employment growth than equivalent firms that do not. This seems likely to be the result of positive demand shocks, which cause a simultaneous increase in employment, output, and use of imported service inputs.     

Strategic delegation under quality competition

This paper examines strategic manipulations of incentive contracts in a model where firms compete in quality as well as in price. Compensation schemes for managers are based on a linear combination of profits and sales. For a given level of quality, a firm desires to reduce the manager's compensation when product sales increase; this serves as the firm's commitment to raise prices. Nevertheless, in general, a manager has a stronger incentive to produce goods of higher quality if he is compensated according to sales. Therefore, a compensation scheme that penalizes a manager when sales increase may result in products that are inferior to those of its rival. We show that, depending on the nature of quality, a positive weight on sales may be desirable when firms compete in quality and price. Welfare implications are also explored.     

SHORT‐RUN POLICY COMMITMENT WHEN INVESTMENT TIMING IS ENDOGENOUS: ‘MORE HARM THAN GOOD?’

In our model, firms choose when to set cost‐reducing investment and the government, which only has short‐run commitment power, sets an output subsidy. We show that firms that delay investment without government intervention have an incentive to invest early under policy activism, strategically underinvesting or overinvesting to obtain larger subsidies. The policy scheme thus creates a new, potentially more harmful, distortion. Under oligopoly, a firm has a weaker incentive to manipulate policy than under monopoly, which makes policy intervention less harmful. We investigate when the government may do better by adhering to laissez‐faire than by engaging in active policy intervention.     

Swimming upstream throughout the turmoil: Evidence on firm growth during the great recession

Economic downturns significantly impact on industry and firm dynamics. During a slowdown, increased competitive pressure makes less efficient firms more likely to exit (the cleansing hypothesis). However, evidence on Italian manufacturing firms during the Great Recession contrasts with this view. In fact, a not negligible subset of firms grew considerably during the crisis, increasing intra-industry heterogeneity. In this paper, we study these swimming upstream firms (SUFs) and we obtain two results. First, SUFs exhibit a high capability accumulation profile (innovation, intangibles investments and internationalization). Second, the impact of endogenous capability accumulation does not vanish after controlling for exogenous factors.     

Do price-earnings ratios explain investment decisions better than Tobin’s q? Evidence from German firm-level data

This article tests the additional information content of price-earnings ratios, with respect to Tobin’s q, in explaining firms’ investment behaviour. While Tobin’s q describes the expected future earnings related to those projected by the book value, the price-earnings ratio compares future growth of earnings based on the projection of current earnings. In other words, a high price-earnings ratio might indicate that investors are willing to rely on future earnings growth, even though current earnings are low. By using an unbalanced panel of about 500 listed firms from Germany over the period 1987–2007, we find that including the price-earnings ratio in the investment equation does not change the explanatory power of Tobin’s q. Most notably, the price-earnings ratio exerts a positive and significant impact on investment. These results are robust to the inclusion of a measure of the firm’s internal funds and of fixed effects and also to the use of different estimators.     

Firm size and the incentive to differentiate

The conjectural variation is treated as a choice variable capturing the behavioral impact of product differentiation. By this means it is shown that firms have a profit incentive to differentiate, large firms more than small ones, and a differentiating firm more than its rivals.     

The returns to exporting: evidence from UK firms

Abstract The question of learning versus self‐selection has dominated the micro‐econometric literature on firm export decisions without leading to any firm conclusions. In part this reflects the limited information content of the data typically used. In this paper we use survey data on UK firms to offer some new insights into this debate. We find that the majority of firms report benefits to exporting across a wide range of performance measures, including size, profitability, and the introduction of new products. These effects do not decline as the number of years of exporting rises if the export intensity of the firm rises.     

Network externality and incentive to invest in network security

Breaches of network security can result in substantial losses for businesses. A game theory-based model is developed to investigate in the short run how network externality influences the optimal strategy of competing online firms producing homogenous services to invest in NS. A firm's self-protect rate and survival probability against NS security incidents differ depending on its related investment decisions. The incentive of a firm to invest in NS is derived, and the impact of the survival probability and the effect of the number of firms investing in NS on a firm's incentive to invest in NS are also analyzed. Policy implications drawn from the study are provided at the end the work.