Firm location decisions,regional grants and agglomeration externalities

We examine whether discretionary government grants influence where domestic and multinational firms locate new plants, and how the presence of agglomeration externalities interacts with these policy instruments. We find that a region's existing industrial structure has an effect on the location of new entrants. Grants do have a small effect in attracting plants to specific geographic areas, but importantly, we find that firms are less responsive to government subsidies in areas where there are fewer existing plants in their industry. This suggests that these subsidies are less effective in influencing firms' location decisions in the face of countervailing co-location benefits.     

The role of spillovers in research and development expenditure in Australian industries

Using administrative data from firms in Australia that conduct research and development (R&;D), we examine how R&;D activity of other firms and public institutions affect a firm's own R&;D expenditure. We distinguish between the impact of peers, suppliers and clients. We examine whether geographical proximity and industrial clustering affect R&;D spillovers. Overall, we detect positive effects on R&;D expenditure from spillovers from peers and clients to firms that are nearby; within 25 or 50?km. R&;D expenditure by academia, unlike by government bodies, has a positive influence on a firm's own R&;D expenditure within state boundaries. We fail to find any significant role for industrial clusters in augmenting spillover effects.     

Taxation of firms with unknown mobility

We analyze optimal business tax policy when some firms are able to escape taxation by moving abroad. In contrast to the existing literature, we assume that the true number of mobile firms is ex ante unknown. While the government may learn from the firms' location responses to past tax rate changes, firms may anticipate this and adjust their choices accordingly. We find that incomplete information on mobility substantially affects the properties and the implications of equilibrium policy choices. First, the government may find it optimal to set a tax rate that triggers partial firm migration but full revelation of the true number of mobile firms. Second, we show that, if the firms' outside option is attractive (i.e., relocation cost and foreign tax rates are low), expected tax rates and expected firm migration are higher if the degree of mobility is unknown. Third, there is a positive value of learning, i.e., commitment on future tax rates cannot increase the government's expected revenue. However, if the government can commit to a rule‐based learning mechanism, i.e., credibly tie its future tax policy to present policy outcomes, it may obtain a Pareto improvement.     

数字化转型助力企业外循环：影响机理和实现路径

在"十三五"的收官之年,基于当前和今后一个时期国内外环境变化,中央提出,要建立以国内大循环为主体,国际国内双循环相互促进的新发展格局,对开放水平和开放质量提出了更高要求.本文旨在考察数字化转型是否有助于促进企业外循环,并且提出其影响机理和实现路径.机制分析表明,数字化转型增强了企业的数据资本,数据资本赋能企业,降低参与国际分工的交易成本,助力企业打通外循环,提高企业外循环水平.经验研究证实,数字化转型能够助力企业打通外循环,提高企业外循环水平,对企业直接参与外循环的促进作用显著大于间接参与外循环.异质性分析表明,与小微型企业相比,数字化转型对大中型企业外循环的促进作用更大;对于大中型企业而言,数字化转型着力助推其直接参与外循环,对其间接参与外循环的促进作用不显著;与非主要商业城市相比,数字化转型对位于主要商业城市的企业直接参与外循环的促进作用更大;与主要商业城市相比,数字化转型对位于非主要商业城市的企业间接参与外循环的促进作用更大.     

THE IMPACT OF GOVERNMENT INVESTMENT ORGANIZATIONS IN MALAYSIA ON THE PERFORMANCE OF THEIR PORTFOLIO COMPANIES

Research into the impact of government ownership on the financial performance of listed companies typically assumes the government to be a monolithic entity and fails to consider that government ownership rights are administered by different types of government organizations. Exploring the financial performance of government controlled listed companies we find that in Malaysia the impact of government ownership varies depending on the type of organization which manages the government's ownership stakes. Taking into account golden Share provisions as well as the presence of senior civil servants and of politicians on boards of Directors, we find that firms controlled by investment organizations under federal government control tend to outperform firms controlled by regional governments’ investment organizations.     

Restrictions on Foreign Investments and the Relocation of Firms

We analyse why the Chinese government sets restrictions on foreign direct investment (FDI). We focus our analysis on the percentage of shares in relocated firms that the government allows to be foreign‐owned. The government's decision on this percentage depends on the entry cost, the number of firms that relocate and the weight of the consumer surplus in the objective function of the government. We show that by its choice of this percentage, the Chinese government may restrict or encourage FDI to its country. We also find that if the government may subsidise the fixed entry cost, it provides a subsidy only when the producer surplus has a greater weight than the consumer surplus in weighted welfare. In that case, the subsidy encourages relocation by both firms and permits the government to allow a lower percentage of shares to be foreign‐owned in relocated firms.     

Lack of commitment to future privatization policies may lead to worst welfare outcome

We investigate the welfare consequences of a lack of commitment to future privatization policies. The government implements a privatization policy after the competition structure is determined by the entry of private firms. We find that in an equilibrium, the government fully privatizes (nationalizes) a public firm if private firms expect that the government fully privatizes (nationalizes) the public firm. This is because an increase in the number of firms entering a market increases the government's incentive to privatize the public firm, which mitigates future competition and stimulates entries. The full-privatization equilibrium is the worst privatization policy among all possible (either equilibrium or non-equilibrium) privatization policies for welfare because it causes excessive market entry of private firms. Partial commitment of a minimal public ownership share may mitigate this problem.     

Corporate social responsibility,stock prices,and tax policy

We model a market in which some investors get utility from owning shares of firms that engage in corporate social responsibility (CSR). In equilibrium, investors' CSR considerations influence portfolio choices, stock prices, and CSR spending. We study tax policy designed to maximize total giving (individual and corporate) net of government tax breaks and find that its effectiveness is non‐monotonic in the proportion of altruistic investors: with few or many altruistic investors, it has little impact on giving, but, at intermediate levels, effective tax policy intuitively relates the corporate tax rebate rate on giving and the cap on allowable tax savings.     

A new rationale for industrial policy: developing the capabilities of the learning firm

Is government intervention justified in order to raise national competitiveness? Proponents of industrial policy have not, according to many economists, provided a convincing rationale for such efforts. The new rationale developed here builds on the insight that firms are capable of both organizational learning and behaving economically responsibly to society. Further, it draws on Japanese and USA experience with industrial policy, in particular the USA's success in the case of Harley Davidson, as well as the infant industry argument. The key questions are: can government interventions successfully influence the organizational learning of a nation's firms? And if so, under what circumstances?     

INTER AND INTRA FIRM DIFFUSION OF ICT IN THE UNITED KINGDOM (UK) AND SWITZERLAND (CH) AN INTERNATIONALLY COMPARATIVE STUDY BASED ON FIRM-LEVEL DATA

This paper examines the effect of participation in government-sponsored R&;D consortia on the R&;D productivity of firms in the case of robot technology in Japan. We attempt to provide a new empirical analysis and discussions on the issue of government project evaluation by investigating the impact of the evolution of government programs, and to compare government-sponsored R&;D consortia with collaborative R&;D among firms. Using indicators of the quality of patents, which enables us to provide an estimation of quality-adjusted research productivity, we find that participation in government programs has a positive impact on the research productivity of participating firms. Moreover, the impact of participation became much higher after the design of government programs in this field changed in the late 1990s. Also, we find that participation in government-sponsored consortia has a greater impact on research productivity than participation in collaborative R&;D among firms. This may support government involvement in R&;D as a coordinator of R&;D collaboration.     

Organisational form and the economic impacts of innovation: the case of patent grant announcements

This study investigates the impact of corporate diversification on the value creation of patent grants. We find that focussed firms experience significantly greater market reactions to patent announcements than diversified firms. Diversification into related industries has little effect on the wealth gains of granted patents, while diversification into unrelated industries significantly reduces the wealth gains. We further find that post-announcement operating performance is significantly associated with the degree of diversification. Overall, our findings suggest that the selection of diversification as a firm's organisational structure has a negative influence on the value creation of innovation, and this influence is exacerbated when this diversification involves unrelated industries.     

中国地区腐败对民营企业国有化的影响

本文使用1998-2007年中国工业企业数据库与省级腐败数据,通过一个简单的模型,证明了在腐败的制度环境下,国有股权可以帮助民营企业避免政府侵害,因此腐败越严重、民营企业越倾向于国有化;并且,盈利能力强的企业更容易受到腐败的侵害。本文发现无论是狭义国有化还是广义国有化都与企业所在地区的腐败率以及企业资产回报率显著正相关;此外,资产回报率越高的企业因腐败而国有化的概率越高。因此,“国有化”可能是中国民营企业面对政府侵害的应对措施。这对我们理解转型国家中民营企业的生存环境与政企关系具有重要意义。     

STRATEGIC BUDGET CONSTRAINTS IN A UNIONIZED MIXED OLIGOPOLY

This paper considers the budget‐constraint problem where the government decides whether or not to impose a budget constraint on the public firm, assuming the public firm is less efficient than private firms. We find that imposing budget constraints on the public firm is the preferred choice because of the welfare‐improving effect. Our model suggests that the wage levels of the public firm can be lower or higher than those of private firms depending upon the degree of inefficiency. These results differ from Ishida and Matsushima's findings that in a unionized mixed duopoly, tight budget constraints can enhance social welfare when the public firm is as efficient as private firms.     

Has liberalization affected profit margins in Indian Industry?

In this article, we analyse the determinants of firm‐level profit margins in Indian manufacturing. The model we estimate is rich in its dynamic characterization allowing as it does for lagged terms, trend movements, business cycle effects and a structural break in 1991. We hypothesize that the reforms undertaken by the government in 1991 constitute a structural break that influences a firm's independence to react to other firms as well as the extent of competition faced by these firms. Inserting this into the standard industrial organization model of profits, we obtain a dynamic market model. Estimating this model for 1980–98, we find that the 1991 reforms did have a significant impact on profit margins in Indian industry. The reforms have worked through their impact on a firm's behavioural variables – advertising, Research and Development (R&D), capital–output ratios and managerial remuneration – though the precise variables that were significant varied from sector to sector. We find that relatively inefficient firms make significantly lower profits than others both before and after the liberalization as expected.     

Loan guarantees and the cost of debt: evidence from China

In this article, we examine the potential influence of loan guarantees and the nature of ownership on a company’s cost of debt. Using data on Chinese A-share listed companies from 2007 to 2014, we find that guaranteeing another entity’s debt significantly increases the guarantor’s cost of its own debt. Regarding the nature of ownership, our results indicate that the cost of debt for state-owned enterprises (SOEs) is lower than that for non-SOEs. Among SOEs, firms controlled by the central government have lower cost of debt than firms controlled by local governments. We also find some evidence that local government ownership mitigates the effects of loan guarantees on the cost of a guarantor’s own debt.     

Does government R&D stimulate or crowd out firm R&D spending? Evidence from Chinese manufacturing industries

We examine whether receiving a government R&D grant stimulates or crowds out a firm’s own R&D spending in Chinese manufacturing industries. Using a database that spans the population of large and medium size privately owned Chinese manufacturing firms for the period from 2007 to 2011, a matching estimator and a matching and difference in‐differences estimator, we find a large firm R&D promoting effect of government R&D: receiving a government R&D grant led to a 4 to 9‐million‐yuan increase in a firm’s own R&D expenditures. This is a significant effect since the average R&D expenditures ranged from 5 to 9 million yuan in the year before receiving the grant. To understand the mechanisms behind this effect, we compare the before‐ and after‐treatment performance and behaviour of the treated and the control firms. We find that the government R&D receiving firms became more profitable following their receipt of the grant. We also find that receiving a government R&D grant increases the likelihood of a firm continuing its R&D performance after receiving the initial grant.     

Chinese overseas M&A performance and the Go Global policy1

It is well known that government plays an important role in the business activities of Chinese firms. Less certain is the effect this influence has on the wealth of those firms’ shareholders. We contribute to the literature by analysing stock market reactions to announcements by Chinese firms of overseas mergers and acquisitions (OMAs). OMAs are of particular interest because there can exist a conflict between the interests of the public sector in acquiring overseas assets, and the interests of the private sector in maximizing shareholder wealth. Our main dataset consists of 213 observations of 157 OMA events that occurred between 1994 and 2009, using share market returns from the Shanghai, Shenzhen, Hong Kong and US markets. The aggregation of share price data across multiple markets, and the listing of firms in multiple exchanges, raise econometric issues for the standard event‐study methodology. To address these, we use a new, feasible generalized least squares (GLS) procedure developed by Gu and Reed (2012) . On the basis of an analysis using both aggregated and disaggregated samples, and of daily and cumulative abnormal returns, we find consistent evidence that (i) Chinese OMAs have not lowered the wealth of shareholders of Chinese acquiring firms, and (ii) shareholders of Chinese acquiring firms have not fared worse under under China's ‘Go Global’ policy of encouraging outward investment by Chinese firms.     

产业政策对企业跨界经营行为的影响

基于2006—2015年中国A股上市公司的数据,研究了产业政策对企业跨界经营行为的影响。结果表明:产业政策会引导企业通过跨界经营进入政策支持行业;通过有关联跨界进入政策支持行业的企业的经营绩效会显著提高,而无关联跨界反而会降低企业价值;在产业政策的引导作用下,企业为了政策寻租而采取的无关联跨界行为,既不利于自身的长远发展,又会降低产业政策的效果。     

What Drives the Operating Performance of Privatised Firms?

Using a panel data analysis of Spanish privatised firms, we study how different factors influence the operating performance of divested companies. The results show that it is not privatisation per se but other factors that matter. After controlling for possible sample selection bias related to government timing of divestments, we find that the greater the relinquishment of State control and the smaller the percentage of ownership held by managers and/or employees, the better the firms’ post‐privatisation performance. Moreover, privatisations that are accompanied by liberalisation programmes and occur during buoyant economic cycles turn out to be more successful.     

R&D subsidy and output subsidy in a duopoly: The role of technology spillover and R&D budget

Technology spillover and research and development (R&D) budget are relevant on government subsidies that aim at improving social welfare through enhancing R&D incentives of firms. However, there has not been related literature considering these two factors. To fill this gap, this paper examines the effect of technology spillover and R&D budget on R&D competition of duopolistic firms and government subsidies by constructing a game-theoretic model. We find that while each firm's profit sometimes increases with R&D budget for low coefficient of technology spillover, this profit may decrease with R&D budget for high coefficient of technology spillover due to the intensified R&D competition. We show that when both R&D budget and the coefficient of technology spillover remain high, R&D subsidy leads to higher social welfare than output subsidy and otherwise R&D subsidy results in lower social welfare.