Are Small Firms Really Less Productive?

Small and medium-sized establishments (SMEs) account for a large proportion of industrial employment and production in almost all countries. Moreover, the recent literature emphasizes the role SMEs play in nurturing entrepreneurship and generating new products and processes. Although SMEs could be a source of new ideas and innovations, there are substantial productivity differences between small and large establishments. In this paper, we analyze three sources of productivity differentials: technical efficiency, returns to scale, and technical change. Our analysis on the creation, survival, and growth of new establishments in Turkish manufacturing industries in the period 1987–1997 shows that all these three factors play a very important role in determining the survival probability and growth prospects of new establishments.     

How Good are Small Firms are Predicting Employment?

This paper utilises some data from an interview survey of very small firms in the North of England to examine the relationship between actual and forecast employment in small firms over a twelve month period. The paper first provides some summary statistics on actual and forecast employment for the survey firms over the reference period. It then looks at how successful the firms are in their short term forecasts, and finds that there is systematic over-estimation. The causes of the systematic forecast error are investigated. It is suggested, tentatively, that the firms may in some way be incorrectly interpreting the information embodied in their own employment figures when making their forecasts. The paper concludes with a brief review of the results and possible policy implications. Avenues for future work are also proposed.     

Do Small and Medium‐Sized IT Firms Form Service Partnerships with Nonlocal IT Firms? An Assessment of Facilitators

For small and medium‐sized information technology firms (IT SMEs), the service partnerships formed with other IT firms are strategic instruments to overcome their resource constraints, increase efficiency, and offer complementary services to their customers. Although these firms have a tendency to form local partnerships due to ease of trust building, few of them are engaged in nonlocal partnerships. This research aims to explore the facilitators of this divergent firm behavior. The findings suggest that a firm's alliance capabilities and organizational proximities between distant partners can substitute the lack of geographical proximity and enable IT SMEs' engagement in nonlocal service partnerships. More importantly, the type of IT service rendered through the partnership acts as a moderator and determines the extent of the organizational capabilities and proximities.     

What Do Malaysian Firms Seek in Vietnam?

The article investigates the motives undergirding the investment of Malaysian firms in Vietnam. It argues that a sizeable portion of Malaysian firms are market seekers exploiting Vietnam’s large, young, and growing domestic market, and natural resource seekers. The article also argues that some of the firms are strategic asset seekers as they collaborate with politically well-connected Vietnamese firms to further their long-term commercial interests. Only a small percentage of Malaysian firms identify themselves as efficiency seekers, which highlights the low organizational and technical abilities of Malaysia’s manufacturing sector.     

How Do Chinese Firms Deal with Inter-Organizational Conflict?

Based on social exchange and customer relationship marketing theory, this study examines how ethical leadership contributes to inter-organizational conflict management (task conflict (TC) and relationship conflict), and the moderating role of task interdependence in these relationships. Data was collected from 81 suppliers and 45 corresponding managers of a large group company in China. Results show that ethical leadership is negatively associated with the levels of inter-organizational conflict, whether task or relationship. Task interdependence significantly moderates the relationship between ethical leadership and TC. Managerial implication in terms of creating sound buyer–supplier relationship through an ethical perspective is discussed.     

When Do State-Owned Firms Crowd Out Private Investment?

This paper examines the conditions under which a state-owned firm with a political agenda strategically crowds out investment by a private firm. Employing reduced-form analysis, we show that strategic crowding out occurs if (i) the private firm regards investments as strategic substitutes, and (ii) private investment is undesirable from the state-owned firm’s perspective. We discuss how our analysis applies to real-world markets and argue that it provides an explanation for the ambivalent evidence on the effect of public on private investment: State ownership is neither necessary nor sufficient for crowding out to occur.     

Where Do Firms Export,How Much and Why?

The empirical finding that exporting firms are more productive on average than non‐exporters has provoked a large theoretical literature based on models such as Melitz ( 2003 ), where more productive firms are more likely to overcome costs associated with trade. This paper investigates how closely the productivity heterogeneity framework fits the data from a firm‐level survey that includes information on export destinations and firm characteristics such as productivity. We find a high degree of unpredictable idiosyncratic participation in export markets by firms and a relatively weak positive correlation between the extent of a firm's export market participation and its export sales. We find that a small number of standard gravity variables provide a close fit to the country‐level determinants of trade but that greater variation results in more difficulty in explaining firm‐specific factors driving exporting behaviour. We also illustrate some elements of the dynamics over time in firm exporting patterns by destination. We show that lagged exporting activity has a significant effect on a firm's current exporting profile.     

Why So Small? Explaining the Size of Firms in Latin America

On average, Latin American firms are small with respect to world patterns, both in terms of the quantity of assets they control and the amount of employment they generate. We examine data on firm size from developed and developing countries around the world to assess the influence of demand, supply and institutional factors on the size of the largest firms in each country. We find that, besides the size of the economy and the level of income per capita, the key determinants of the size of firms are trade openness, stock market capitalisation and physical infrastructure. Our simulations suggest that if the gaps with respect to the best Latin American performer were closed in each of these three areas, firm size in the countries of the region would – on average – reach world patterns.     

Do Firms Get the Financing They Want? Measuring Credit Rationing Experienced by Small Businesses in the U.S.

This paper measures the extent to which small businesses in the United States in the late 1980s were able to access the external credit finance they desired. We argue that a comprehensive definition of credit rationing must account for both (a) creditworthy firms that apply for and are denied financing, and (b) creditworthy firms that decide not to apply for desired external financing, given expectations about how long it may take to obtain financing and the evolution of investment opportunities.Data from a national survey of small businesses shows that only 2.14 percent of firms did not obtain the funding for which they applied in 1987–88. Another 2.17 percent may have faced some short-run constraints on investment: they were initially denied by lenders but received the credit for which they applied by the end of the sample period. Finally, an additional 4.22 percent of firms are estimated to have been discouraged from applying because of expected denial.Constrained firms are smaller, younger, and more likely to be owned by their founders than those firms that successfully applied for external finance. The total number of credit constrained firms seems quite small, particularly because we cannot distinguish empirically between creditworthy and noncreditworthy firms. Thus the extent of true credit rationing appears quite limited.     

Innovating for Good in Opportunistic Contexts: The Case for Firms’ Environmental Divergence

Journal of Business Ethics - Opportunistic behaviors are considered ethically and strategically troublesome since they disrupt otherwise mutually beneficial relationships. Previous literature has...     

Ethics Statements of Public Relations Firms: What Do They Say?

This study was designed to examine the prevalence of a code of ethics and to analyze its content among public relations agencies in the United States. Of the 1,562 public relations agencies reviewed, 605 (38.7%) provided an ethical statement. Among the ethical statements provided by these public relations agencies, ‹respect to clients,’ ‹service,’ ‹strategic,’ and ‹results’ were the values most frequently emphasized. On the other hand, ‹balance,’ ‹fairness,’ ‹honor,’ ‹social responsibility,’ and ‹independence’ were the least frequently mentioned in the ethical codes. Also, none of the sampled agencies included any sanctions regarding enforcement of their particular codes of ethics.     

Do Credible Firms Perform Better in Emerging Markets? Evidence from China

Prior research suggests that corporate credibility is associated with firm financial performance in developed countries. This article examines whether corporate credibility is related to firm performance using Economic Observer’s rating of corporate credibility in China, the largest emerging market in the world. Based on a four-stage valuation model, we find that more reputable and credible firms outperform those with low ratings by almost 20% in 3-year stock returns and have better 3-year net profit margins, return on equity, and sales growth. This study is the first to directly examine the relationship between corporate credibility and firm performance in emerging markets such as China, and our results confirm that firms with high credibility exhibit better financial and market performance at least in the following 3 years.     

Dynamics of Firm Profitability and Growth: Do Knowledge-Intensive (Business) Services Persistently Outperform?

This paper explores the persistence of profitability and growth for firms operating in the Greek service sector, paying special attention to knowledge-intensive services (KIS) and knowledge-intensive business services (KIBS). The generalized method of moments is used on a rich panel of firms over a recent nine-year period. Quantile regressions are complementarily applied for KIS and KIBS industries. The key results from both growth and profit dynamics suggest that firms in KIS and KIBS industries persistently outperform firms in less knowledge-intensive service industries, pointing to strategic advantages of the former. Importantly, KIS and KIBS seem to be able to sustain their growth and profitability persistent trends even in times of crisis. Further insight into these issues is provided by the quantile analysis, the exploration of the profitability and growth inter-linkages, and the investigation of differences among various size groups in KIS and KIBS.     

Financial Constraints and Small and Medium-Sized Firms’ Export Propensity: Evidence from Portuguese Manufacturing Firms

The internationalization of firms through exports is often crucial to their survival and growth in this era of globalization. This is particularly the case for small and medium-sized enterprises (SMEs) operating in small and saturated markets, as is the case in Portugal. However, firms face several barriers to exporting, and this study aims to verify whether financial constraints influence a firm’s export propensity. The empirical analysis is based on a sample of 12,732 Portuguese manufacturing SMEs during the period 2008–2012, and tests two different proxies of financial constraints: the liquidity and leverage ratios. The results indicate that the SMEs in less healthy financial positions are less likely to export than the others are, although the impact of financial constraints on these Portuguese firms appears to be relatively small.     

Do Mature Firms Gain Higher Economic Value from R&D Investment?

Despite the significance of economic value indicators in the measurement of firm value, not much attention has been dedicated to how research and development (R&D) influences firms’ economic value. This study examines the relationship between R&D investments and firms’ economic value and considers the moderating role of age in the relationship using a dataset from manufacturing and information and technology firms in China. The results show that R&D investments impact firms’ economic value positively. This suggests that firms that invest in R&D are rewarded with a monopoly, which increases their market shares, thereby increasing economic value. Again, we find that older firms increase their economic value more than younger ones when they both invest in R&D. Thus, younger firms in China suffer from the liability of newness when they invest in R&D. It is recommended that these younger firms should strive to shorten the time to reap the returns from R&D investments.

     

How Do Real Estate Firms Expand Nationwide？

China's real estate industry is undergoing rapid growth, and the market is becoming even more centralized with the new macro-control measures passed by the government. The battle among real estate companies is stiffening and big companies are swallowing up their smaller rivals. These days, real estate developers have been forced to expand inter-regionally due to rapid growth in the industry and bitter competition in the market.     

Why Do Firms in Customer–Supplier Relationships Hold More Cash?

A firm is in customer–supplier relationships when its business depends on a small number of major customers/suppliers. In this paper, we provide evidence that relationship‐specific investments undertaken by firms in customer–supplier relationships are associated with high cash holdings in these firms. The evidence is consistent with the prediction of Titman's stakeholder theory that a firm relying on relationship‐specific investments maintains a high cash reserve as a cushion to sustain its relationship‐specific investments when negative shocks occur. Our findings suggest that relationship‐specific investments are important determinants of the precautionary motive to hold cash.     

Do Leveraged Firms Underinvest in Corporate Social Responsibility? Evidence from Health and Safety Programs in U.S. Firms

The explosion of health-related costs in U.S. firms over more than a decade is a huge concern for managers. The initiation of Health and Safety (H&;S) programs at the firm level is an adequate Corporate Social Responsibility (CSR) initiative to contain this evolution. However, in spite of their documented efficiency, firms underinvest in those programs. This appears as a puzzle for health economists. In this paper, we uncover a strong negative relation of financial leverage to the implementation of H&;S programs. The negative impact of debt on investment and CSR activities is generally interpreted as an efficient disciplinary effect of debt on managers. H&;S are particularly well suited to revisit this evidence, given their strong profitability and homogeneity across firms. Very interestingly, the negative effect is stronger for firms with high free cash flows, for which debt is used to prevent overinvestment. This strongly suggests that debt, while disciplining managers, also discourages investments which are valuable both for firms and society.