Trade,Geography, and Industry Growth in U.S. Manufacturing

Much of the recent empirical literature examining the New Economic Geography has focused on how access to markets impacts wages. In this article, we consider an alternative aspect of the theory by examining how access to markets affects industry growth. We develop a model relating the growth of two key measures of market size—market access and supplier access—to growth in industry employment and the real value of industry shipments. We estimate the model using data on U.S. manufacturing industries between 1984 and 1996. We find strong evidence to suggest that access to markets positively affects industry growth.     

The Life Cycle of the U.S. Tire Industry

We introduce a new theory of industry evolution. According to our model, the nonmonotonicity in firm numbers found in many young industries is a consequence of the gradual decline in unit costs. Early stages of the industry life cycle, when unit costs and profit margins are high, display positive net entry rates. In later stages, declining unit costs and increasing competition limit the market room for (fringe) firms accumulating in a shakeout. The model explains paths of output, price level, and firm numbers using a recursive system of equations. We apply the model to the U.S. tire industry.     

Pharmaceutical Patents: Incentives for Research and Development or Marketing?

We analyze how a patent‐holding pharmaceutical firm may strategically use advertising of existing drugs to affect research and development (R&D) investments in new (differentiated) drugs, and thereby affect the probability distribution of future market structures in the industry. Within a fairly general model framework, we derive exact conditions for advertising and R&D being substitute strategies for the incumbent firm and show that it may overinvest in advertising to reduce the incentive for an entrant to invest in R&D, thereby reducing the probability of a new product on the market. In a more specific setting of informative advertising, we show that such overinvestment incentives are always present and that more generous patent protection implies that a larger share of the patent rent is spent on marketing, relative to R&D.     

The Price of Being Foreign: Stock Market Penalties Associated with Accounting Irregularities for U.S.-Listed Foreign Firms

We examine the stock market consequences of disclosing accounting irregularities for U.S.-listed foreign firms. After controlling for the severity of the irregularity and other firm characteristics, we find that foreign firms experience significantly more negative short-window stock market reactions following irregularity announcements than do U.S. firms. Moreover, for a subsample of 64 irregularities of foreign firms that are listed on both a U.S. and home country stock exchange, we find evidence that restating firms' U.S. investors react more negatively to the same irregularity than their home country investors. This differential market reaction appears related to firm-specific information risks that are greater for foreign firms than U.S. firms. Collectively, consistent with the reputational bonding hypothesis in prior literature, our results suggest that accounting irregularities cause U.S. investors to reassess the information risk associated with foreign firms.     

Location: A Neglected Determinant of Firm Growth

This paper links the performance of new technology firms, measured in terms of employment growth, to geographic location. We introduce a model of firm growth that is specific to characteristics of the location as well as the firm and industry. The model is estimated using a unique data set identifying the growth performance of small technology-based firms in Germany. We find that firm performance, as measured by employment growth, does appear to be influenced by locational characteristics as well as characteristics specific to the firm and the industry. In particular, the empirical evidence suggests that being located in an agglomeration rich in knowledge resources is more conducive to firm growth than being located in a region that is less endowed with knowledge resources. These results suggest the economic value of location as a conduit for accessing external knowledge resources, which in turn, manifests itself in higher rates of growth. JEL no. L10, R11, O12, O30     

中小企业知识产权强度影响因素的实证研究——基于长三角制造业企业问卷调查分析

文章在长三角地区制造业企业调查问卷的样本基础上,以计量分析方法考察了企业规模、企业市场结构、企业年龄、企业集群和企业所处行业等因素对企业知识产权强度的影响。研究发现：企业规模与知识产权强度之间存在着联系,中小企业比大企业有更高的知识产权强度且更注重对知识产权制度的使用;市场力量、企业年龄与知识产权强度之间都呈现倒U型函数关系;拥有集群特征的企业拥有较高的知识产权强度。     

Audit‐Firm Tenure and the Quality of Financial Reports*

This study examines whether the length of the relationship between a company and an audit firm (audit‐firm tenure) is associated with financial‐reporting quality. Using two proxies for financial‐reporting quality and a sample of Big 6 clients matched on industry and size, we find that relative to medium audit‐firm tenures of four to eight years, short audit‐firm tenures of two to three years are associated with lower‐quality financial reports. In contrast, we find no evidence of reduced financial‐reporting quality for longer audit‐firm tenures of nine or more years. Overall, our results provide empirical evidence pertinent to the recurring debate regarding mandatory audit‐firm rotation — a debate that has, to date, relied on anecdotal evidence and isolated cases.     

全球化背景下的美国纺织服装产业与进口产品:竞争还是合作?

传统观点将进口产品的涌入单纯视为美国纺织服装产业生存和发展的负面冲击因素。然而,全球化背景下,美国纺织服装产业事实上实施了多项产业转型策略,产业运行与进口产品之间的关系也随之发生了较大变化。本文首先从理论角度对转型后的美国纺织服装产业与进口产品之间的关系进行了系统分析。研究发现,由于产业自身特点和美国特定的生产要素禀赋,美国纺织产业和服装产业选择了截然不同的转型路径,转型后的美国纺织产业与进口产品依然偏向竞争性关系,美国服装产业与进口产品则形成了合作性关系。     

Corporate Taxes and Financing Methods for Taxable Acquisitions*

We examine the influence of corporate taxes on U.S. firms' financing methods for taxable acquisitions of 100 percent of a target corporation's stock. We conduct tests of acquirer firms' use of debt or internal funds as the funding source for these acquisitions over the period 1987‐97. Our results provide the first empirical evidence that U.S. firms' use of debt to fund acquisitions significantly declines as foreign tax credit limitations reduce the marginal tax benefits received from borrowing. This finding is consistent with earlier speculation that U.S. foreign tax credit provisions could materially affect the capital costs of U.S. companies in debt‐financed acquisitions. We also find that these firms are generally high‐tax‐rate corporations whose financing choices are not significantly influenced by whether they acquire target‐firm tax loss carryovers. Our findings contribute to the accounting literature on the influence of taxes on the structure and financing of corporate acquisitions.     

A case study of the industrial organization theory of direct foreign investment

Conclusion This paper examines the industrial organization theory of DFI by means of a case study of the electronic calculator industry. The investigation is done by examining the relevant product, firm and industry characteristics. We began by focusing on and identifying the technological advances in electronic calculators and the firms responsible for those advances, to determine whether DFI coincided with technological superiority. The evidence presented shows that U.S. foreign investment in electronic calculators became significant during the third phase, when the U.S. firms gained technological leadership in electronic calculator production. The firms which enjoyed this technological leadership are the ones that initiated DFI. Foreign investment activities in electronic calculators were facilitated by a gradual trend toward a concentration of the industry structure in favor of the investors. In some cases, investors were large international firms to begin with. Thus, we can conclude that the industrial organization theory of DFI is supported by the experience of the electronic calculator industry. The fact that the investors themselves generally de-emphasized the cost consideration and emphasized the market potential as motivating factors in initiating DFI ventures provides further credence to this finding. Since the investors had something unique to offer and enjoyed sufficient market power to assume the risk of initiating foreign production to exploit this unique advantage in a potentially large market, they were least concerned about the cost of production. However, the cost factor played an important role behind the DFI in developing countries.     

Honor Among Thieves: Open Internal Reporting and Managerial Collusion

Firms have increasingly adopted open work environments. Although openness is thought to have benefits, it could also expose firms to an unanticipated cost. An open (closed) internal reporting environment makes it more (less) likely that managers will observe a colleague's communications with senior executives. This increase in what one manager knows about another manager's communication to senior executives could facilitate employee collusion to extract resources from the firm. To test whether internal reporting openness results in more collusion, we conduct an experiment in which two managers each make separate reports to the firm about cost information they know in common but that remains unknown by the firm. Because both managers face the same truth‐inducing contract, conventional economic theory predicts that they will not collude to misreport costs regardless of reporting openness. However, using behavioral theory involving trust and reciprocity, we predict and find that managers honor their nonbinding collusive agreements and successfully collude more often in an open versus closed internal reporting environment, leading to lower firm welfare in the open environment. These results suggest that firms should consider how the cost of collusion compares to the benefits of openness.     

Multimarket and multiproject collusion

Summary If firms meet in a number of markets, they may respond to an action in one market by reacting in another market. Fear for such retaliation may induce multimarket firms to collude across markets. The paper assesses available theoretical and empirical evidence on the multimarket collusion theory. Moreover, the paper suggests that the theory can be fruitfully applied in the context of European integration. The focus is on collusion by firms which meet in product markets as well as in joint R&D projects. A model develops three propositions, which shed light on the subsequently provided (tentative) evidence on multidimensional contact in an integrating Europe. The discussion may serve as a framework for future research into both the theoretical and the empirical domain with applications to the issue of European integration.We gratefully acknowledge John Hagedoorn for providing access to the MERIT/CATI database, and two referees for their comments. Of course, the usual disclaimer applies     

Why Do Large Firms' Prices Anticipate Earnings Earlier than Small Firms' Prices?*

This paper presents evidence that the positive association between firm size and price leads of earnings is not solely a function of private search incentives for firm‐specific information. Specifically, we find that small‐firm prices also lag large‐firm prices with respect to industry‐wide information. Our empirical analysis extends Collins, Kothari, and Rayburn 1987 and Freeman 1987, who document that security‐price leads of earnings are positively associated with market capitalization. In particular, we examine the association between firm size and the timing of security returns for two components of annual earnings changes: the average change for a firm's industry and the firm's idiosyncratic change. We find that large firms' prices have a longer lead than small firms' prices with respect to both components. Large firms' early lead on industry‐wide earnings suggests that returns of large firms predict returns of same‐industry small firms. To test this implication, we construct a portfolio of long (short) positions in small firms when the prior month's returns of large firms in their industry are above (below) average for large firms in other industries. This zero investment portfolio earns 4.5 percent over 12 months.     

Field Experiment Tests for Discrimination against Hispanics in the U.S. Rental Housing Market

This article tests for discrimination against Hispanics in the U.S. rental housing market using e‐mail correspondence with landlords advertising units online. We divide Hispanics into two groups: those that appear assimilated into American culture and recent immigrants. We find little difference in the treatment of assimilated Hispanics and whites; however, Hispanics we portray as recent immigrants receive less favorable treatment with margins of net discrimination as large as 6.89% of landlords. We also find discrimination varies significantly at the region level and by the ethnic composition of neighborhoods.     

Higher productivity in importing German manufacturing firms: self-selection, learning from importing, or both?

This paper uses a newly available comprehensive panel data set for manufacturing enterprises from 2001 to 2005 to document the first empirical results on the relationship between imports and productivity for Germany, a leading actor on the world market for goods. Furthermore, for the first time the direction of causality in this relationship is investigated systematically by testing for self-selection of more productive firms into importing, and for productivity-enhancing effects of imports (‘learning-by-importing’). We find a positive link between importing and productivity. From an empirical model with fixed enterprise effects that controls for firm size, industry, and unobservable firm heterogeneity we see that the premia for trading internationally are about the same in West and East Germany. Compared to firms that do not trade at all two-way traders do have the highest premia, followed by firms that only export, while firms that only import have the smallest estimated premia. We find evidence for a positive impact of productivity on importing, pointing to self-selection of more productive enterprises into imports, but no clear evidence for the effect of importing on productivity due to learning-by-importing.     

The Riskiness of Large Audit Firm Client Portfolios and Changes in Audit Liability Regimes: Evidence from the U.S. Audit Market*

We investigate whether the financial riskiness of large U.S. audit firm clienteles varied with the changing audit litigation liability environment during the period 1975‐99. Partitioning the period of study into four distinct periods (a benchmark period (1975‐84), a period of increasing concerns about litigation liability (1985‐89), a period of lobbying for reform (1990‐94), and a post‐relief period (1995‐99)), we find some evidence of risk decreases during 1985‐89, strong evidence of risk decreases during 1990‐94, and strong evidence of risk increases during 1995‐99. However, we also find that over the period of our study, a time during which Big 6 market shares grew appreciably, the proportion of litigious‐industry clients in Big 6 client portfolios grew at about the same rate as the proportion of such clients in the population. Moreover, the Big 6 share of the financially riskiest clients in the economy did not grow as fast as the overall Big 6 market share. In sum, although our evidence is consistent with the hypothesis that the riskiness of Big 6 client portfolios responded to changes in the audit litigation liability environment, we find no systematic evidence of a "race to the bottom" or "bottom fishing" by these firms in a bid to increase their market shares.     

Poverty, Place or Race: Causes of the Retail Gap in Smaller U.S. Cities

In this study we explore the possibility that any or all of three dimensions of the U.S. inner city, central location, relatively low income, and a relatively high percentage of minority residents, correlate with a relative lack of neighborhood retail services, the so-called retail gap. Our empirical analysis is based on zip code level data for 39 U.S. cities with populations from 50 to 225 thousand people. After specifying an empirical model based on hypotheses drawn from the urban economics, urban studies, and urban development literature, we test access to retail services using both geographical density and per capita retail measures. While several results from this study are worthy of discussion, our primary empirical finding is that neighborhoods with high percentages of African-Americans are systematically under-served by retail, all else equal, while Latino, low income, or otherwise centrally located neighborhoods are not. We then test a selection of product categories for retail density, finding some differing results by product category but verifying our more general conclusions for most products. Finally, we find that grocery stores have significantly smaller scale in African-American communities, a finding that provides partial support for the urban “food desert” hypothesis. These findings suggest that the inner city retail gap may be more of a racial than geographic issue, and that increased emphasis on racial composition is warranted in the retail development policies applied to smaller U.S. cities.     

后危机时代美国财政可持续性研究

美国国债绝对额已跃居世界首位,美国财政可持续性受到世界各国的广泛关注。通过构建财政可持续性分析框架,结合经验数据实证分析,结果表明,尽管美国财政现阶段仍然处于可持续水平,但已经出现偏离稳态的迹象。进一步研究发现,未来美国债务货币化程度将不断加深,由此促使未来国债利率负担不断攀升,同时债务高位运行将导致经济增速回落,财政偏离可持续性水平的现象难以改变,如果美国没有调整财政政策,那么财政发生危机的概率极高。     

Market structure and minority presence: Black-owned firms in manufacturing

This study uses a market structure framework to analyze the presence of black-owned businesses in manufacturing sectors of the U.S. economy in 1972. Tobit analysis reveals that black-owned firms tend to be concentrated in those industries with a relatively large small-business presence. High advertising expenditures are a significant barrier to black presence in a given industry. The amount of government purchases from an industry is found to have no significant relationship to black presence.     

Speculative Bubbles in U.K. House Prices: Some New Evidence

In this article, we test the view, widely held among both academics and practitioners, that speculative bubbles have characterized the time series behavior of U.K. house prices in recent times. We motivate our empirical analysis using a stylized overlapping-generations model which generates a housing demand function of the form assumed by a large literature, illustrating how rational bubbles may arise as a solution to the house price determination equation. Employing two recently developed econometric techniques specifically designed to test for rational bubbles, we then provide empirical evidence for the existence of bubbles in U.K. house prices over the sample period 1983-2002.