Uncovering asset stripping during China's privatization

This paper empirically studies the occurrence and extent of asset stripping via undervaluing public assets during the mass privatization of state-owned and collectively owned enterprises in China. Using three waves of a national survey of private firms, we provide evidence that state-owned and collectively owned assets were substantially underpriced, indicating the presence of corruption during privatization. Further analysis shows that the extent of underpricing is more severe in regions with less market competition or weaker property rights protection, and more pronounced for intangible assets such as intellectual property rights and land use rights. When comparing firm efficiency between privatized firms and de novo private firms, we find that the former group continues to enjoy considerable preferential treatments, yet significantly underperforms the latter, possibly due to continued government control and intervention. Finally, we provide evidence that insider privatization is an important source of corruption during the privatization process.     

Globalization and firm‐level cost structure

In this study, we draw on economic theories of cost structure and the effects of international trade on firms' productivity to assess firm‐level cost behavior in the context of globalization. We investigate why and how trade openness affects firms' cost structure by examining the changes of fixed inputs along with those in capacity levels. Using a sample consisting of 25 countries from 2000 to 2014, we find that trade openness does significantly affect firms fixed and variable cost inputs, which indicate that production uncertainty along with international trade is essential to the cost structure decision in terms of cost rigidity. Furthermore, larger firms are more likely to adopt a rigid cost structure with higher fixed costs and lower variable costs because they are more involved in the international economy and more exposed to associated uncertainties.     

Trade, inequality, and the political economy of institutions

This paper investigates the relationship between international trade and the quality of economic institutions. We model institutions as fixed costs of entry, in a framework that has two key features. First, preferences over entry costs differ across firms and depend on firm size. Larger firms prefer to set higher costs of entry, in order to reduce competition. Second, these costs are endogenously determined in a political economy equilibrium. Trade opening can lead to higher entry costs when it changes the political power in favor of a small elite of large exporters, who in turn prefer to install high entry barriers.     

The Private Benefits of Corporate Control:Evidence from China

By analyzing block share transfers in China during 1999-2006,this study provides estimates of the private benefits of corporate control in China.We find that those controlling blocks are usually priced at a significant positive premium compared to those comparable non-controlling blocks.The benefits of corporate control vary with shareholders structure,firm characteristics and institutional variables.In particular,targets with a high intangible asset ratio have less benefits of control,cross-listing in B or H shares curbs the extract of private benefits and companies acquired by private firms are associated with higher private benefits.Moreover,it is found that benefits of control are negatively associated with market economy and factor market development index.We argue that firms with higher private benefits experience more tunneling activities by their controlling shareholders.     

Intra-good trade in Germany: a first look at the evidence

This article contributes to the literature by using newly released comprehensive transaction-level data on all exports and imports to document facts about the amount of intra-good trade – the simultaneous export and import of identical goods by one firm – in Germany. Combined data for trade transactions and for characteristics of a representative large sample of trading firms are then used to report differences between firms that export and import different goods only (inter-good traders) and firms that engage in the simultaneous export and import of identical goods (intra-good traders). We find that the share of intra-good trade in total trade was some 17% in Germany in 2012. Intra-good trade matters. This share differs widely between broadly defined groups of goods and between industries. Controlling for detailed industry affiliation, intra-good traders differ significantly from inter-good traders – they are larger, more human capital intensive, more productive, have a higher R&D intensity and are more profitable. The data, however, are not rich enough to reveal the direction of causality between intra-good trade and firm performance and to investigate empirically the reasons why some firms engage in intra-good trade.     

Patent assertion entities: do they impede innovation and technology commercialisation?

This article focuses on addressing a primary charge levelled against patent assertion entities (PAEs): that they impede innovation and technology commercialisation activities of US firms. The paper utilises an intellectual property (IP) strategy framework within the construct of a firm business model to delineate PAE typologies, and then evaluates how they ‘fit’ with either a framework for the protection of IP assets or the exploitation of IP assets. The PAE business model operates under neither an IP asset protection nor IP asset exploitation strategy, but its own IP monetisation strategy. Moreover, a review of recent research on the proliferation and economic impact of PAEs is undertaken, with the overwhelming empirical evidence showing that PAEs are having an adverse impact on innovation and technology commercialisation activities of US firms. Potential patent policy reforms and emerging marketplace options are identified for enhancing a business environment conducive to successful technology innovation and commercialisation.     

Strategic managerial dishonesty and financial distress

This paper analyzes the effect of stricter sanctions against fraudulent disclosure in an economy where commercial lenders have only an imperfect information about the type of the firm they trade with. In the hybrid Bayesian equilibrium, some managers running fragile firms claim that their firm is solid only to benefit of better commercial credit terms. The default premium charged by the supplier over the normal cost can be interpreted here as an indirect bankruptcy cost. When the sanction gets heavier, both the default premium and the frequency of defaulting firms go up. Under given circumstances, these perverse effects might be offset by a decline in direct bankruptcy costs.     

The Location of Firms in Unionized Countries*

This paper develops a two‐country economic geography model with Cournot competition, where the labor markets are unionized so that trade unions bargain efficiently with each firm over wages and employment. Agglomeration forces are present due to wage premia obtained by the trade unions. It is shown that if the bargaining power of unions differs across countries then, as trade costs are reduced, the country with relatively weak unions gradually acquires all firms. However, for a range of trade costs, it is also a locally stable equilibrium for all firms to locate in the country with strong unions.     

TRADE POLICY AND MARKET POWER: FIRM‐LEVEL EVIDENCE

This article identifies the effect of trade policy on market power through new data and a new identification strategy. We identify market power by observing how exporting firms price discriminate across markets following variations in bilateral exchange rates. Pricing‐to‐market is prevalent in all countries in our sample, even among small firms, although it is increasing in firm size. More importantly, we find that the effect of nontariff measures (NTMs) is not isomorphic to that of tariffs. Whereas tariffs reduce the market power of foreign firms through rent‐shifting effects, NTMs reinforce the market power of nonexiting firms, domestic and foreign alike.     

On the macroeconomic effects of establishing tradability in weak property rights

The New Economy is closely associated with computing & communications technology, notably the Internet. We discuss property rights to, and trade in, the difficult-to-define intangible assets increasingly dominating the New Economy, and the possibility of under-investment in these assets. For a realistic analysis we introduce a Schumpeterian market environment (the experimentally organized economy). Weak property rights prevail when the rights to access, use, andtrade in intangible assets cannot be fully exercised. The trade-off between the benefits of open access on the Internet, and the incentive effects of strengthened property rights, depend both on the particular strategy a firm employs to secure property rights, and the protection offered by law. Economic property rights can be strengthened if the originator can find innovative ways to charge for the intangible assets. The extreme complexity of the New Economy and the large number of possible innovative private contract arrangements make it more important to facilitate the use and enforcement of private individualized contracts to protect intellectual property than to rely only on standard patent and copyright law. Enabling law is one proposed solution. Current patent legislation in the US has led to costly litigation processes weakening the position of small firms and individuals in patent disputes. The property rights of such firms and individuals could be strengthened with insurance or arbitration procedures.JEL Classification: D21, D23, D52, D82, H54, K11, K22, K41, L11, L23, M13, O14, O33An earlier version of this paper was presented at the 9th Congress of the International Joseph A. Schumpeter Society (ISS), Gainesville, Florida, USA, March 28-30, 2002. The paper is part of the Nödfor project on Schumpeterian Creative Destruction, notably the exit and bankruptcy process, based at the Ratio Institute, Stockholm.     

企业改制模式和改制绩效——基于企业数据调查的经验分析

本文以上世纪90年代后半期的企业调查数据为基础,通过建立经济计量模型来研究公有企业的改制绩效,通过相应的技术处理消除企业的各种先天因素或改制前固有的优势,试图测试改制是否能够确实激发出显著的效率效应。分析发现,向私有产权方向改制的企业效率得到显著提高;不同的改制模式是改制绩效的重要决定因素,经营者持大股从效率上来讲是最优的改制方式,而平均分配的股份合作制的改制方式则具有较差的业绩效果。我们还讨论了其原因,以及为什么中国现阶段特定制度环境下最优的公司治理结构是大股东控股。我们认为给定当前制度背景下,最佳的改革方案之一是股权向经营者集中,股权合理定价。因为只有市场的初次分配是有效率的,才能得到收入再分配的源泉。在此基础上,国家可通过各种税收设计,进行较为公平合理的收入再分配。     

Dragon CEOs and Firm Value

This article investigates a traditional belief of the Chinese zodiac that individuals born in the dragon year are superior and perform better. Using a sample of listed firms in China, supporting evidence is found for this pervasive superstition that CEOs born in dragon years are positively associated with firm value as measured by Tobin's Q and return on assets. This positive relationship becomes even stronger when the exact birth date of CEOs is known. Finally, the Dragon Survivors Hypothesis and the CEO Self‐fulfillment Hypothesis are examined to explain why dragon CEOs matter to firm value.     

Diversification and tunneling: Evidence from Indian business groups

We provide evidence suggesting an important yet largely unexplored motive for the diversified structure of emerging economy business groups is to facilitate expropriation of minority shareholders by controlling insiders through tunneling. Using firm level panel data from India, and defining the core firm of a group as the one with the largest asset base, we find that the relatedness of the activity of a group affiliate to the activity of the core firm is correlated with the wedge between control and cash flow rights of insiders as well as with the opacity in insider ownership. Firms with ownership-control wedge lower and ownership opacity higher relative to a group’s core firm are more likely to be in activities unrelated to that of the core firm. Our findings are strengthened by evidence of tunneling in the same direction, from affiliates with wedge equal to or higher than that of the core firm to affiliates with wedge lower than that of the core firm. Taken together this suggests an expropriation motive for diversification: affiliate firms are located away from a business group’s core firm to serve as destination points for funds tunneled from the group’s core.     

Are functional assets or knowledge assets the basis of new product development performance?

According to a recent survey, a major focus of new product development research links peformance to mainly contextual, product-specific and internal organzzational factors. Interestingly, and despite the development of models of appropriability little of this research has assessed the impact of complementary assets and knowledge on peformance. The research reported in this paper, using a sample of a 128 UK manufacturing firms examines the role that knowledge and other complementary assets play in achieving new product success. Data from firms in different technological environments relating to strengths and weaknesses were combined into conceptual groupings,first on the basis of complementary assets embodying functional activities, and second on the basis of tangible and intangible assets and technical and non-technical knowledge. Although the functional assets grouping provided a better explanation of performance as regards new product development, the knowledge asset grouping provided a significant explanation, with intangible assets providing a more significant explanation than knowledge assets. In addition, peformance in new product development was not positively related to size. Both the functional and knowledge-based conceptual groupings provided additional explanatory power over traditional explanations of success in new product development. Thus, asset complementarity was demonstrated, with the functional asset taxonomy providing the superior classifcation for the analysis of complementay assets.     

Teams, Firms and the Evolution of Profit Seeking Behavior

Even as advances in information theory over the last quarter century have cast increasing doubt on the proposition that firms successfully maximize profits, the objective of profit maximization continues to be an axiomatic feature of the neoclassical theory of the firm. This paper attempts to improve our understanding firms by treating the objective function as an open question. Specifically, an ontogenetic thought experiment is undertaken to address the question of what differentiates production teams from firms by asking why team members would sell their control rights to a principal, thereby transforming the team into a firm. What results is an account of the emergence of the objective of profit seeking. Profit seeking emerges endogenously as a more fit alternative than the objective of value maximization, which is less capable of coping with uncertainty through purposive adaptation.     

Political economy of cross-border income shifting: A protection racket approach

Multinational firms often shift their incomes to low-tax jurisdictions, thus robbing host states of tax revenue. I offer a new theory to explain why some firms do this while others do not. I argue that firms that are more vulnerable to government expropriation are, counterintuitively, less likely to shift income offshore, since complying fully with tax law gives the government a greater stake in their survival. Analyzing a registry-based panel data on multinational firms, their tax burdens, and a cross-sectional information of the firms’ connections to tax havens, l find that, other things equal, firms with more concentrated fixed assets are less likely to use havens. These results challenge existing theories of the political economy of development. Whereas the “Pillars of Prosperity” theory suggests that successful states simultaneously develop protection of property rights and fiscal capacity, my results show that perfect property rights protection can actually undermine the state’s ability to tax.     

Skill‐biased heterogeneous firms,trade liberalization and the skill premium

We propose a theory that rising globalization and rising wage inequality are related because trade liberalization raises the demand facing highly competitive skill‐intensive firms. In our model, only the lowest‐cost firms participate in the global economy exactly along the lines of Melitz ( 2003 ). In addition to differing in their productivity, firms differ in their skill intensity. We model skill‐biased technology as a correlation between skill intensity and technological acumen, and we estimate this correlation to be large using firm‐level data from Chile in 1995. A fall in trade costs leads to both greater trade volumes and an increase in the relative demand for skill, as the lowest‐cost/most‐skilled firms expand to serve the export market while less skill‐intensive non‐exporters retrench in the face of increased import competition. This mechanism works regardless of factor endowment differences, so we provide an explanation for why globalization and wage inequality move together in both skill‐abundant and skill‐scarce countries. In our model countries are net exporters of the services of their abundant factor, but there are no Stolper‐Samuelson effects because import competition affects all domestic firms equally.     

Does R&D spending boost tangible investment? An analysis on European firms

This article investigates the relationship between firm’s R&D intensity, expressed as R&D expenditure over sales, and investment intensity in tangible assets. It is commonly acknowledged that R&D requires additional physical investment to be implemented. R&D increases a firm’s productivity and return to tangible investments, thus, providing to the firm incentives to bear high tangible capital costs and to invest more. This represents a crucial issue for a firm’s growth, particularly considering the strong interaction between physical capital accumulation and technological progress. The analysis is based on a large sample of manufacturing firms across seven European countries in the period 2007–2009. Since the sub-sample of firms performing R&D might not be random, there may potentially be an endogeneity issue. The analysis also considers that firms may decide to spend on R&D and investment in physical capital simultaneously. The questions of both endogeneity and simultaneity are dealt with by employing an instrumental variable two-step procedure. We find a positive and significant impact of R&D intensity on firms’ tangible investment intensity. The econometric results highlight the importance of financial factors, particularly with respect to firms’ internal resources. Exposure to international trade has a negative impact on investment, possibly depending on the time-span of the sample used.

Abbreviations: Technological Innovation and R&D; Investment Capital; Industry Studies; Firm Behavior; Empirical Analysis     

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.     

银行风险偏好对企业发展影响的实证研究

从行业层面和企业层面实证研究了银行信贷选择对行业和企业发展的影响。结果发现:在行业层面,银行偏好于固定资产比率较高的行业,因此在信贷资源较为紧张的地区,固定资产比率较高的行业会发展得较好,可见长期内银行选择会影响一个地区的产业结构;在公司层面,银行偏好于行业中固定资产比率较高的企业,而企业为了获得信贷资源也会调整其发展策略,倾向于积累固定资产。指出:中国应该大力发展非银行融资渠道,减弱金融系统对经济发展的扭曲。