Firm Productivity,Innovation, and Financial Development

How do firm‐specific actions—in particular, innovation—affect firm productivity? What is the role of the financial sector in facilitating higher productivity? Using a rich firm‐level data set, we find that innovation is crucial for firm performance as it directly and measurably increases productivity. The impact of innovation on productivity is larger in less‐developed countries. Evidence of financial sector development influencing the innovation‐productivity link is weak, but the effect is difficult to identify due to correlation between indicators of a country's financial and nonfinancial development. Furthermore, we find evidence that the innovation effect on productivity is more significant for high‐tech firms than for low‐tech firms.     

Environmental regulation,firm heterogeneity,and intra-industry reallocation

We describe a model with firm heterogeneity and endogenous pollution abatement to show how emission intensity and exit/entry selections vary across firms. Using Chinese firm-level emission and production data, we find evidence that low productivity firms have higher emission intensity. The emission intensity of firms with productivity below 10 percentile is 5.26 times larger than firms with productivity above 90 percentile. Combining the Annual Survey of Chinese Industrial Enterprises (CIE) data, and applying a triple-difference research design, we find that firms with high emission intensity or low productivity have a higher probability of exit when exposed to strict environmental policy. We also find the exit of unproductive firms contributes to aggregate productivity and strict environmental policy can help to reduce misallocation.     

The impact of tariff reductions on firm dynamics and productivity in China: Does market-oriented transition matter?

This paper investigates the impact of trade liberalization on firm dynamics and productivity in the context of dramatic tariff reductions after China's accession to the WTO, and how this impact varies across regions with different marketization levels. Our results show that (a) on average, output tariff reductions tend to reduce firm entry rate and increase firm exit rate, while input tariff reductions help to increase both firm entry rate and exit rate, furthermore, regional marketization strengthens the impact of trade liberalization on firm dynamics; (b) trade liberalization exerts greater impact on the likelihood of exit for the least productive firms while it tends to reduce the probability of exit for the more productive firms, with regional marketization strengthening such a reallocation process of trade liberalization; (c) firm dynamics effect contributes approximately 43% of the growth of productivity, and it (especially the firm exit effect) is an important channel through which trade liberalization fosters productivity growth, and domestic market reform is found to strengthen such an impact.     

IT,enterprise reform,and productivity in Chinese manufacturing firms

This paper is a first attempt at examining the impact that Information Technology (IT) and enterprise reform have on the productivity of Chinese manufacturing firms by using large-scale firm level datasets from 1995 to 2002. It is found that enterprise reforms captured by the entry and exit of firms have had a positive impact on aggregated productivity growth. In addition, IT plays a relatively important role in the productivity performance of post-reform enterprises, as opposed to enterprises which are not affected by major restructuring in the course of Chinese state-owned enterprise reforms.     

PRODUCTIVITY AND FIRM DYNAMICS: CREATIVE DESTRUCTION IN INDONESIAN MANUFACTURING, 1994–2000

This paper examines the entry and exit, and the labour productivity, of Indonesian manufacturing firms with 20 workers or more, using a firm-level panel dataset constructed for the years 1994–2000. Overall change in manufacturing labour productivity reached 27.2%—an average growth of 3.5% per annum—between 1994 and 2000, a period that includes the 1997–98 Asian financial crisis, which hit Indonesia hard. Vibrant firm dynamics characterised this period, in which about 10% of manufacturing enterprises were renewed in any one year. By 2000, one-third of all enterprises in existence in 1994 had closed, but the number of enterprises that closed was lower than the number that entered and survived up to the year 2000. The replacement of exiting firms with newly entering firms contributed significantly to increases in overall labour productivity. Regulatory reform in support of this process should lead to gains in productive employment for Indonesian workers.     

R&D Subsidies,Spillovers, and Privatization in Mixed Markets

We examine the use of subsidies to research and development (R&D) in a mixed and a private duopoly market. We show that the socially optimal R&D subsidy is increasing in the degree of spillovers, but it is lower in the private duopoly. The optimal R&D subsidy leads to an increase in total R&D and production; however, it does not lead to the equalization of per firm output and therefore to an efficient distribution of production costs. We also find that privatization of the public firm reduces R&D activity and welfare in the duopoly market. This result stands even when optimal R&D subsidies are provided.     

Effects of presidents’ characteristics on internationalization of small and medium firms in Japan

Recent heterogeneous-firm models of international trade suggest that productivity determines whether firms engage in export activity and foreign direct investment. In practice, however, many productive firms are not internationalized, whereas many unproductive firms are, which suggests that there are factors other than productivity that influence firms’ internationalization. This study uses a unique panel data set for Japanese small and medium enterprises (SMEs) to examine whether the personal characteristics of a firm’s president are factors in firm internationalization. We find that SMEs with a risk-tolerant, forward-looking president are more likely to be internationalized. These effects are large in magnitude, as is the productivity effect, which provides a partial explanation as to why many productive firms are not internationalized. In addition, we find that productivity has an insignificant effect on firms exiting export markets, whereas presidential myopia increases the probability of exit. The evidence further suggests that a firm’s initial export costs become sunk following its entry into export markets, which explains why many unproductive firms are internationalized.     

Do domestic and foreign exporters differ in learning by exporting? Evidence from China

In view of the importance of intra-firm trade and export-platform FDI conducted by multinationals, we investigate how domestic firms and foreign affiliates exhibited differential impacts of export entry and exit on productivity changes. Using a comprehensive dataset from China's manufacturing industries, we employ the Olley–Pakes method to estimate firm-level TFP and the matching techniques to isolate the impacts of export participation on firm productivity. Robust evidence is obtained that domestic firms displayed significant productivity gains (losses) upon export entry (exit), whereas foreign affiliates showed no evident TFP changes. Moreover, the productivity gains for domestic export starters were more pronounced in high- and medium-technology industries than in low-technology ones. We explain our findings from the perspective of the technology gap theory after considering processing trade and the fragmentation of production stages in the era of globalization.     

美、德不同的金融系统对风险投资影响的比较

通过比较美国与德国风险投资业的发展，本文从企业的目的和文化、获得和利用信息、投资机构组织、金融人才和退出机制分析了不同的金融体制对风险投资业的影响，表明对于风险投资业，市场主导型的金融系统比银行主导型的金融系统更有效率，这对发展我国的风险投资业具有借鉴意义。     

上市公司对外直接投资的自我选择效应和学习效应

本文使用广东省上市公司2008-2012年面板数据来研究企业对外直接投资与全要素生产率之间的关系。结果显示上市公司在进行对外直接投资时不存在自我选择效应,甚至存在一定的生产率悖论。企业规模,利润,人力资本,所有制结构都是影响企业进行对外直接投资的重要因素。企业进行对外直接投资存在显著的学习效应,学习效应的发挥受到母公司人力资本和当地金融发展水平的影响。     

An open economy general equilibrium model with heterogeneous producers, a homothetic utility function and endogenous elasticity

Recent monopolistic competition models have identified three main sources of the gains from trade: (1) the introduction of new varieties for consumers, (2) an improvement in efficiency through the exit of low-productivity firms, and (3) a reduction in firms’ markups through import competition. In this paper, we extend Feenstra (Economics Letters, 78(1):79–86, 2003) to develop a model with producers heterogeneous in productivity to capture these gains. Here, firm markups are decreasing with market share, and trade introduces new varieties to consumers and reduces the market share of domestic firms. This reduces markups and profits and forces low-productivity firms to exit. This pro-competitive effect on the distribution of productivity contrasts with the conventional export-driven mechanism in a constant elasticity setup. We can usefully extend this model for further study because of the homotheticity of the utility function and the tractability of the model.     

Globalisation,multinationals and productivity in Japan’s lost decade

This paper studies the process of plant exit and productivity growth in Japan during the ‘lost decade’. A productivity decomposition shows the low rate of productivity growth at the aggregate level to be due to slow within plant productivity growth and a small contribution from the entry and exit components. We find the causes of plant exit to be similar to results in other country contexts except we find no effect from import competition. Our results suggest that the low productivity growth is attributable to high entry barriers and little to the shutting of productive plants by MNEs.     

Wages,Productivity and Aging

In this article, we estimate age-based wage and productivity differentials using Canadian linked employer-employee data from the Workplace and Employee Survey 1999–2005. We use data at the workplace level to estimate production functions, taking into account the age profile of its workforce. Data on workers is used to estimate wage equations that also depend on age. Results show concave age-wage and age-productivity profiles. On average, we find that wages do not deviate significantly from productivity. For certain sub-groups, our results suggest some discrepancies between wages and productivity. This is the case for older workers with at least an undergraduate degree for whom productivity appears to be lower than their wages, while the reverse seems true for younger men. However, even in those cases, productivity differentials are too imprecise to draw any firm conclusions.     

Blockholder Exit Threats and Financial Reporting Quality

Recent theoretical and empirical studies suggest that blockholders (shareholders with ownership ≥ 5 percent) exert governance through the threat of exit. Blockholders have strong incentives to gather private information and sell their shares when managers are perceived to underperform. To prevent blockholders from selling their shares and the firm from suffering a stock price decline, managers align their actions with the interests of shareholders. As a result of the greater manager‐shareholder alignment, managers' actions are more likely to be in shareholders' best interest, and consequently there is less need for managers to manipulate earnings. Consistent with these predictions from economic theory, we find evidence that as exit threat increases, firms have higher financial reporting quality. Theory also predicts that the impact of blockholders' exit threat on financial reporting quality (FRQ) should increase as the manager's wealth is tied more closely to the stock price, and this is what we find. Our study contributes to the research on the impact of shareholders on FRQ and to an emerging literature on the impact of blockholders in financial markets. Blockholders play an important role in managers' reporting outcomes through their actions as informed investors.     

Exports, FDI, and Productivity: Dynamic Evidence from Japanese Firms

This paper examines the relationship between exports, foreign direct investment, and firm productivity. Using longitudinal panel data on Japanese firms, it is found that the most productive firms engage in exports and foreign direct investment, medium productive firms engage in either exports or foreign direct investment, and the least productive firms focus only on the domestic market. Moreover, exports and foreign direct investment appear to improve firm productivity once the productivity convergence effect is controlled for. Firms that retain a presence in foreign markets, either by exports or foreign direct investment, show the highest productivity growth, which contributes to improvements in national productivity. JEL no. F10, F20, D21     

Mixed oligopoly,endogenous timing and mergers

The present paper discusses endogenous timing in a mixed oligopoly model, comprising one public firm and two private firms, assuming both a merger between the two private firms and between one private and one public firm. The paper proves that although a merger between the two private firms does not change the timing of the game, a merger between the public firm and the private firm into a mixed firm could change the market structure from Stackelberg to Cournot competition.     

Business reforms and total factor productivity in Vietnamese manufacturing

Vietnam implemented reforms in the 2000s to ease start-up of new businesses with dramatic effect on firm entry and market competition. This study examines firm level data for the period 2000–2010 to analyze total factor productivity (TFP) in connection with the reforms, adopting a semi-parametric technique developed by Wooldridge (2009) and Petrin and Levinsohn (2012) to measure TFP. Intensified competition is hypothesized to have driven convergence of TFP within industrial sectors as technologies best suited to Vietnamese market conditions became more widely implemented. The evidence strongly supports this hypothesis with convergence found for 16 of the 17 sectors analyzed. Further, comparison of TFP growth rates between the first and second half of the decade shows mixed results by sector and region. More often than not, TFP growth is seen to have slowed over time. This suggests that competition acted not only to push low TFP firms to exit the market or raise productivity, it also discouraged use of technologies that may have been overly advanced and not cost efficient for Vietnam.     

Bribery and firm performance in India: A political economy perspective

This study examines how corruption affects firm performance in India using data from the World Bank Enterprise Survey for 2013-14. A set of testable hypotheses is formulated with regard to the interaction between bribery and the political environment to capture the nuances of the effect of corruption on firm performance. To overcome endogeneity between bribery and firm performance, the study employs two-stage least squares instrumental variables estimation. The foremost finding is that bribery has significantly negative effects on firm profitability and labor productivity. This finding confirms the hypothesis that in India bribery “sands the wheels” of business. A further finding is that the negative effect of bribery on productivity is stronger in states run by right leaning parties, although there is no significant effect of party orientation on the relationship between bribery and profitability. This finding supports the hypothesis that tighter connections between business and government facilitate rent seeking that undermines productivity even as profitability is unencumbered. Finally, bribery is found to have more harmful effects on smaller and older firms than on larger and younger ones.     

Pollution control and foreign firms’ exit behavior in China

China faces a common dilemma of how to maintain rapid economic growth while also reducing the pollution that has accompanied growth. Will stricter pollution controls drive away the foreign firms that have helped spur growth in China? This paper studies the effects of the Two-Control-Zone (TCZ) pollution control policy on foreign firms’ exit behavior in China. Based on firm-level data from 1998 to 2009, we find that foreign firms’ responses are not significantly different from domestic firms on average once environmental regulations impose an added cost of business. However, foreign firms’ responses to stricter pollution controls tend to differ based on various firm characteristics. Our estimation indicates that larger size, higher productivity and exporting all make foreign firms less likely to exit than similar domestic firms in regions with stricter pollution control.