Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis

Trade credit has been shown to be an important source of short-term finance for smaller firms but small firms are also suppliers of trade credit. There is little empirical evidence on the credit granting decisions of small firms. Previous empirical work (Petersen and Rajan, 1997; and Ng, Smith and Smith, 1999) has focused on credit granting and investment in accounts receivable in larger firms. In this paper we look at the influences on credit granting for the smallest firms, using a sample of firms with an average of 10 employees. As in previous studies we find that product and demand characteristics influence credit terms. Moreover, we find evidence that firm size affects credit extension choices directly by setting limits on the possibilities for economies of scale, but it also impacts indirectly by affecting the firm's access to finance and its bargaining strength vis-à-vis suppliers. The dominant position of larger customers in bargaining with small suppliers constrains the impact of other factors on the firm's choice of credit terms. Small firms are also under pressure to conform to industry norms, although lack of resources can be a limiting factor. Constrained firms may make use of two-part terms in an attempt to improve their cashflow.     

Strategic Research Partnerships: A Managerial Perspective

Private sector incentives to participate in research partnerships can be grouped roughly into two categories: cost-economizing incentives and strategic incentives. This paper summarizes the argument in two streams of thought that are often identified with these two sides: the transaction-cost/incomplete contracts approach and the strategic management approach. The paper recounts business motives to engage in research partnerships in each and points out that differentiating between more traditional economic perspectives (transaction costs, incomplete contracts) and strategic management/organizational theory perspectives (strategic networks, resource-dependent view, dynamic capabilities, knowledge-based view, organizational learning, options approach) may not be as sharp as one might suppose at first. The complementary nature of these perspectives should be encouraging for theoreticians looking for a more integrated model of collaboration.     

Comparative Advantage and the Gains from Financial Trade: A Reappraisal

Emerging market crises have suggested that a national benefit‐cost assessment of external financial liberalisation could well prove unfavourable. This paper re‐examines the principle of comparative advantage in its application to financial trade to seek guidance on measures that might permit a fuller realisation of the potential benefits involved. Drawing a parallel with Balasubramanyam's work on the gains from FDI and international migration we distinguish between those arising in financial trade from the net transfer of capital, and those deriving from the contemporaneous exchange of financial claims or services of equivalent value. In the first interpretation a country's comparative advantage is manifested by its role in ‘intertemporal’ trade (as a borrower or lender). Our alternative emphasis is on the contractual risk‐return characteristics of the financial claims exchanged. This perspective is applied firstly to portfolio diversification gains arising from further international stock market integration. Secondly, price risk management for developing countries in international primary commodity trade is discussed. Both applications imply the need for significant institutional development but could realise approximately contemporaneous gains reminiscent both of those involved in merchandise trade and in the skills and product (or service) flows that Balasubramanyam has emphasised in relation to FDI and international migration.     

Gibrat,Galton and Job Generation

The proportionate growth of a company decreases with increases in its initial size, in accordance with the Galton model of regression towards the mean. Gibrat's Law of proportionate effect does not hold within size classes or within industries. In job generation accounting, actual increases in employment are even more important than proportionate ones. In the UK small and medium sized companies had larger absolute and proportionate increases in employment than did large companies and were responsible for most of the increase in jobs 1989-93. In fact large companies tended to reduce the numbers they employed.     

LIFE STYLE-WORK GROUP STRUCTURE-TASK CONGRUENCE AND JOB SATISFACTION AND PERFORMANCE: A THREE-DIMENSIONAL CONTINGENCY MODEL

A Three -Dimensional contingency‘theory’of organizational behaviour was used to predict job satisfaction and performance in a sample of registered representatives of a national securities firm. Contingency variables composed of individual life style orientation, perceived work group structure and perceived job complexity did not predict a significant amount of variance in the dependent measures. Cautions concerning the assumed universal superiority of contingency predictors over simpler formulations are discussed.     

Schistosomiasis and development

This paper evaluates evidence relating to the belief, long held by tropical health workers, that schistosomiasis control would contribute significantly to economic development. The many attempts to estimate the macro benefits of control in terms of the ‘economic loss’ due to the disease are criticized for their emphasis on aggregate output benefits and for the unrealistic assumptions made in estimating the increment in, and marginal product of, efficiency labour units which might result from control. Micro research has so far failed to establish a clear empirical basis for the assumption that schistosomiasis seriously impairs labour productivity — but this may be attributable to sampling bias resulting in the exclusion of workers with severe disease.     

Stability of the World Trade Web over time – An extinction analysis

The World Trade Web (WTW) is a weighted network whose nodes correspond to countries while edge weights reflecting the value of imports and/or exports between countries. In this paper we introduce to this macroeconomic system the notion of extinction analysis, a technique often used in the analysis of ecosystems, for the purpose of investigating the robustness of this network. In particular, we subject the WTW to a principled set of in silico “knockout experiments,” akin to those carried out in the investigation of food webs, but suitably adapted to this macroeconomic network. Informed by results in network theory as well as studies of contagion in economic networks, we seek to understand the role of connectance in the robustness of the system. We interpret increasing connectance as one aspect of a move towards globalization and liberalized trade policy. Broadly, our experiments confirm two conjectures. First, that the WTWs are “robust yet fragile” networks — robust to random failures but fragile under targeted attack. Second, that growing connectance has both positive and negative impacts on robustness. More specifically, we find that increasing connectance corresponds to increasing robustness for small shocks but to decreasing robustness in the face of large, cascading shocks up to the system. This yields evidence in support of the view that globalization, as witnessed by increasing connectance, increases the ability of a system to absorb shock up until a certain size, whereupon the shock overwhelms the system and sparks a broader contagion. We anticipate that experiments and measures like these can play an important role in the evaluation of the stability of economic systems.     

Price and quantity adjustment in a dual character market The case of the Greek poultry sector

In this paper we set up, estimate and test a short-run model for the poultry sector in Greece. The model allows for the simultaneous existence of a monopolistically competitive and a competitive segment, and determines producer and consumer prices, and the quantity consumed. We provide evidence on steady-state parameters such as demand and supply elasticities, as well as on speeds of adjustment of prices and quantities. The evidence suggests that adjustment is very rapid, although quantities appear to be adjusting more quickly than prices. The model is used to examine the dynamics of adjustment to demand and supply-side disturbances.