Age and firm growth: evidence from three European countries

This article provides new insights into the dependence of firm growth on age along the entire distribution of growth rates, and conditional on survival. Using data from the European firms in a global economy survey, and adopting a quantile regression approach, we uncover evidence for a sample of French, Italian and Spanish manufacturing firms with more than ten employees in the period from 2001 to 2008. We find that: (1) young firms grow faster than old firms, especially in the highest growth quantiles; (2) young firms face the same probability of declining as their older counterparts; (3) results are robust to the inclusion of other firms’ characteristics such as labor productivity, capital intensity and the financial structure; (4) high growth is associated with younger chief executive officers and other attributes that capture the attitude of the firm toward growth and change. The effect of age on firm growth is rather similar across countries.

Taxes, corruption, and entry

Tax policies and corruption are important institutional considerations which can shape entrepreneurship. We investigate how tax rates, and the interaction between corruption and tax rates, influence variations in entry across a panel of 72 countries in the period 2005–2011. We use a series of panel estimations as well as several robustness checks to test these effects, using relevant controls for economic development, the size of the state, and other regulatory and tax policy measures. We find that higher tax rates consistently discourage entry. Further, we find that although the direct influence of corruption on entry is also consistently negative, the interaction influence of corruption and tax rate is positive. This indicates that corruption can offset the negative influence of high taxes on entry. We discuss the implications of our findings for policymakers and future research.

Institucionalização do ensino em administração de empresas na cidade de São Paulo: um estudo de caso sobre a Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo (FEA-USP)

O objetivo deste trabalho é entender o processo de institucionalização do curso de graduação em Administração de Empresas da Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo (FEA-USP), tendo como referencial teórico o modelo de Barley e Tolbert (1997). Explorando aspectos históricos para tentar explicar o “espírito do tempo” (Zeitgeist) e ilustrar o processo de surgimento de uma nova graduação para a USP, a metodologia do estudo de caso (YIN, 2001) foi a escolhida por permitir uma maior gama de recursos de pesquisa. Dessa forma, o trabalho analisou as Atas de Reunião da Congregação da época (1946-1965), entrevistas colhidas com quinze pessoas entre protagonistas e observadores da história desta instituição durante o período analisado, jornais publicados pelos próprios alunos da Faculdade e bibliografia sobre o assunto. Utilizando-se de conceitos presentes em Giddens (1979, 1986), Machado-da-Silva, Fonseca e Crubellate (2005), DiMaggio e Powell (1983), Hardy e Maguire (2008), Khurana (2007), entre outros autores que trabalham com a Teoria Institucional, o processo de institucionalização do curso de Administração de Empresas na FEA-USP é analisado, relacionando-se a literatura disponível com os fatos encontrados em documentos e depoimentos colhidos. Alguns acontecimentos chamam a atenção, como a demora em mais de uma década para a fundação da FEA dentro da USP, a ligação da cadeira de Ciência da Administração com o Instituto de Administração (IA), que teve sua gênese a partir do Departamento do Serviço Público (DSP), órgão ligado ao Governo do Estado de São Paulo. Singularidades à parte, houve pessoas e situações necessárias para que o curso surgisse na USP apenas a partir da década de 1960. Nesse sentido, os papéis desempenhados pelo Prof. Antônio Delfim Netto e pelo Prof. Ruy Aguiar da Silva Leme são explorados com maior detalhamento, tendo em vista o grande impacto que suas decisões tiveram no processo de criação e estabelecimento da carreira de administração. De fato, tem-se que as instituições, com ênfase nesta pesquisa sobre a FEA-USP, são locais propícios para o estudo da mudança e que os atores sociais através de suas ações empreendidas são capazes de gerar modificação ou reprodução do status quo dentro destes estabelecimentos. As instituições constituem possibilidades para aqueles que a compõem ao mesmo tempo em que constrangem ações e são necessárias na sociedade tal qual como é apresentada na modernidade.

EDI, facilitation and its impact on trade

On this issue of the Bulletin an attempt is made to illustrate how modern Trade Facilitation techniques, with an emphasis on EDI, affect different parts of the society such as business, commerce, transport, administration and government.

Science and the Climate Change Debacle

As I write this on the first business day of 2010, I find myself thinking about the importance of respecting alternative views --- not only alternative political views, but also alternative scientific views. Good science requires that we understand the limits of knowledge and continuously seek the truth through respectful questioning, replication and review. In the climate change debate, which recently culminated in a disappointing and largely ineffective conference in Copenhagen, these salient principles of science were grossly violated. Well respected climate scientists proceeded well beyond the limits of their knowledge and became policy advocates. They demeaned anyone who dared to disagree with their findings or to suggest that limiting CO2 emissions may not be the best policy choice at the present time. Disagreeing with the “experts” became disrespected professional behavior, even within the academic community. This approach has not served the interests of anyone very well.

Never Let a Crisis Go to Waste

The phrase, “never let a crisis go to waste” may take frugality to a whole new level! That’s the sentiment of Lynda Applegate, Professor of Business Administration at the Harvard Business School, in a recent on-line article, Building Businesses in Turbulent Times.

Things Fall Apart: Dictatorships, Development, and Democracy in Africa

Recent events in Africa provide evidence of the failure of dictatorships to meet the needs of citizens and serve to debunk a number of development theory assumptions: that democratization is culturally determined, that democratization will follow economic development, and that dictatorships tend to produce durable, stable development. Therefore, the attempt to achieve development without democratization is risky and potentially very costly. We argue that dictatorship in Africa serves a function akin to Myrdal's backwash effects, thwarting economic progress in a cumulative and circular way, and that democratization must become a necessary criterion of engagement with African countries.

Feminist Tigers and Patriarchal Lions: Rhetorical Strategies and Instrument Effects in the Struggle for Definition and Control over Development in Nepal

This article offers an analysis of a struggle for control of a women’s development project in Nepal. The story of this struggle is worth telling, for it is rife with the gender politics and neo-colonial context that underscore much of what goes on in contemporary Nepal. In particular, my analysis helps to unravel some of the powerful discourses, threads of interest, and yet unintended effects inevitable under a regime of development aid. The analysis demonstrates that the employment of already available discursive figures of the imperialist feminist and the patriarchal third world man are central to the rhetorical strategies taken in the conflict. I argue that the trans-discursive or “borderland” nature of development in general and women’s development in particular result in different constructions of “development” goals, means and actors based not only on divergent cultural categories but on historically specific cultural politics. I argue further that the apolitical discourse of development serves to cloak its inherently political project of social and economic transformation, making conflicts such as the one that occurred in this case not only likely to occur but also likely to be misunderstood.

Three essays on the concept of trust and its foundations

The present dissertation focuses on trust and comprises three empirical essays on the concept itself and its foundations. All three essays investigate trust as an expectation and rely on selfreport measures of trust. Whereas the first two chapters investigate social trust, the third chapter investigates political trust. Essentially, there are three related important debates to which the following chapters contribute. A first debate discusses problems with current selfreport measures. Scholars recently started to question whether standard trust questions really measure the same across countries and languages. Chapter 1 engages in this debate. Using data from Switzerland it studies whether different trust questions measure the same latent trust constructs across individuals belonging to three different culturallinguistic regions. The second debate concerns the socalled forms or dimensions of trust. Recently, scholars started investigating whether trust is a onedimensional construct, i.e. whether an individual's trust judgment differs for categories of trustees such as strangers, neighbors, family members and friends or not. Relying on confirmatory factor analysis Chapter 2 investigates whether individuals really do make a difference between different trustee categories and to what extent these judgments can be summarized into higherorder latent trust constructs. The third debate is concerned with causes of differences in trust across humans. Chapter 3 focuses on the role of laterlife experiences, more precisely victimization experiences and investigates their causal relationship with generalized social trust. Chapter 4 focuses on the impact of direct democratic institutions on the trust relationship between citizens and political authorities.

Corporate aging and investment decisions

Paper I: Corporate aging and internal resource allocation Abstract Various observers argue that established firms are at a disadvantage in pursuing new growth opportunities. In this paper, we provide systematic evidence that established firms allocate fewer resources to high-growth lines of business. However, we find no evidence of inefficient resource allocation in established firms. Redirecting resources from high-growth to low-growth lines of business does not result in lower profitability. Also, resource allocation towards new growth opportunities does not increase when managers of established firms are exposed to takeover and product market threats. Rather, it seems that conservative resource allocation strategies are driven by pressures to meet investors’ expectations. Our empirical evidence, thus, favors the hypothesis that established firms wisely choose to allocate fewer resources to new growth opportunities as external pressures force them to focus on efficiency rather than novelty (Holmström 1989). Paper II: Corporate aging and asset sales Abstract This paper asks whether divestitures are motivated by strategic considerations about the scope of the firm’s activities. Limited managerial capacity implies that exploiting core competences becomes comparatively more attractive than exploring new growth opportunities as firms mature. Divestitures help stablished firms free management time and increase the focus on core competences. The testable implication of this attention hypothesis is that established firms are the main sellers of assets, that their divestiture activity increases when managerial capacity is scarcer, that they sell non-core activities, and that they return the divestiture proceeds to the providers of capital instead of reinvesting them in the firm. We find strong empirical support for these predictions. Paper III: Corporate aging and lobbying expenditures Abstract Creative destruction forces constantly challenge established firms, especially in competitive markets. This paper asks whether corporate lobbying is a competitive weapon of established firms to counteract the decline in rents over time. We find a statistically and economically significant positive relation between firm age and lobbying expenditures. Moreover, the documented age-effect is weaker when firms have unique products or operate in concentrated product markets. To address endogeneity, we use industry distress as an exogenous nonlegislative shock to future rents and show that established firms are relatively more likely to lobby when in distress. Finally, we provide empirical evidence that corporate lobbying efforts by established firms forestall the creative destruction process. In sum, our findings suggest that corporate lobbying is a competitive weapon of established firms to retain profitability in competitive environments.

Three Essays on Age and Firm Performance

Old captains at the helm: Chairman age and firm performance Urs Waelchli and Jonas Zeller December, 2012 This paper examines whether the chairmen of the board (COBs) impose their life-cycles on the firms over which they preside. Using a large sample of unlisted firms we find a robust negative relation between COB age and firm performance. COBs age much like ‘ordinary’ people. Their cognitive abilities deteriorate and they experience significant shifts in motivation. Deteriorating cognitive abilities are the main driver of the performance effect that we observe. The results imply that succession planning problems in unlisted firms are real. Mandatory retirement age clauses cannot solve these problems. Corporate Aging around the World Jonas Zeller January, 2014 This paper examines whether firms internationally age as US firms do (Loderer, Stulz, and Wälchli, 2013). Using a large panel, I find that Tobin’s Q monotonically falls with firm Age across all nineteen countries in the sample. The decrease varies across countries but is generally extremely robust and economically significant. ROA, sales growth, and market share decrease over a firm’s lifetime in most countries as well. Furthermore, older firms reduce their capital expenditures and R&D outlays. Instead, they distribute more cash to their shareholders. Overall, the results suggest that corporate aging is not confined to the US but is a genuine phenomenon that affects listed firms worldwide. This evidence supports the hypothesis that corporate aging is driven by managers who optimally focus on managing their assets in place and neglect the development of growth opportunities. I finally ask whether the managers’ choice and with it the magnitude of the decline in Tobin’s Q is a function of country-level institutional settings. I find that most notably firms age faster in countries where employees are relatively well protected by labor regulation. Is employment protection the fountain of corporate youth? Claudio Loderer, Urs Wälchli, Jonas Zeller* September 2014 Acharya, Baghai, and Subramanian (2012, 2013) find that employment protection legislation (EPL) encourages innovation. We argue that this effect should be particularly strong in mature firms. We would therefore also expect EPL to boost growth opportunities. Using the natural Experiment created by the staggered passage of changes in EPL across seventeen countries, we find evidence that employment protection legislation does indeed stimulate Innovation efforts, especially in mature firms. The effect is stronger in countries in which patents are owned by the firm and in the context of regular contracts. Consistent with that, EPL encourages risk taking. Overall, however, there is Little evidence that the effect of EPL on innovation effort translates into higher firm value, not even in mature firms. EPL does motivate employees in those firms to put in a greater effort, as evidenced by stronger sales growth. Yet it also increases costs, reduces profitability, and depresses Tobin’s Q ratios in all firms, especially the mature ones, possibly because of the rigidities that characterize these firms [Loderer, Stulz, and Waelchli (2014)].

Bargaining for power and information : an experimental and theoretical analysis of the interaction between institutions, externalities and adverse selection

Bargaining is the building block of many economic interactions, ranging from bilateral to multilateral encounters and from situations in which the actors are individuals to negotiations between firms or countries. In all these settings, economists have been intrigued for a long time by the fact that some projects, trades or agreements are not realized even though they are mutually beneficial. On the one hand, this has been explained by incomplete information. A firm may not be willing to offer a wage that is acceptable to a qualified worker, because it knows that there are also unqualified workers and cannot distinguish between the two types. This phenomenon is known as adverse selection. On the other hand, it has been argued that even with complete information, the presence of externalities may impede efficient outcomes. To see this, consider the example of climate change. If a subset of countries agrees to curb emissions, non-participant regions benefit from the signatories’ efforts without incurring costs. These free riding opportunities give rise to incentives to strategically improve ones bargaining power that work against the formation of a global agreement. This thesis is concerned with extending our understanding of both factors, adverse selection and externalities. The findings are based on empirical evidence from original laboratory experiments as well as game theoretic modeling. On a very general note, it is demonstrated that the institutions through which agents interact matter to a large extent. Insights are provided about which institutions we should expect to perform better than others, at least in terms of aggregate welfare. Chapters 1 and 2 focus on the problem of adverse selection. Effective operation of markets and other institutions often depends on good information transmission properties. In terms of the example introduced above, a firm is only willing to offer high wages if it receives enough positive signals about the worker’s quality during the application and wage bargaining process. In Chapter 1, it will be shown that repeated interaction coupled with time costs facilitates information transmission. By making the wage bargaining process costly for the worker, the firm is able to obtain more accurate information about the worker’s type. The cost could be pure time cost from delaying agreement or cost of effort arising from a multi-step interviewing process. In Chapter 2, I abstract from time cost and show that communication can play a similar role. The simple fact that a worker states to be of high quality may be informative. In Chapter 3, the focus is on a different source of inefficiency. Agents strive for bargaining power and thus may be motivated by incentives that are at odds with the socially efficient outcome. I have already mentioned the example of climate change. Other examples are coalitions within committees that are formed to secure voting power to block outcomes or groups that commit to different technological standards although a single standard would be optimal (e.g. the format war between HD and BlueRay). It will be shown that such inefficiencies are directly linked to the presence of externalities and a certain degree of irreversibility in actions. I now discuss the three articles in more detail. In Chapter 1, Olivier Bochet and I study a simple bilateral bargaining institution that eliminates trade failures arising from incomplete information. In this setting, a buyer makes offers to a seller in order to acquire a good. Whenever an offer is rejected by the seller, the buyer may submit a further offer. Bargaining is costly, because both parties suffer a (small) time cost after any rejection. The difficulties arise, because the good can be of low or high quality and the quality of the good is only known to the seller. Indeed, without the possibility to make repeated offers, it is too risky for the buyer to offer prices that allow for trade of high quality goods. When allowing for repeated offers, however, at equilibrium both types of goods trade with probability one. We provide an experimental test of these predictions. Buyers gather information about sellers using specific price offers and rates of trade are high, much as the model’s qualitative predictions. We also observe a persistent over-delay before trade occurs, and this mitigates efficiency substantially. Possible channels for over-delay are identified in the form of two behavioral assumptions missing from the standard model, loss aversion (buyers) and haggling (sellers), which reconcile the data with the theoretical predictions. Chapter 2 also studies adverse selection, but interaction between buyers and sellers now takes place within a market rather than isolated pairs. Remarkably, in a market it suffices to let agents communicate in a very simple manner to mitigate trade failures. The key insight is that better informed agents (sellers) are willing to truthfully reveal their private information, because by doing so they are able to reduce search frictions and attract more buyers. Behavior observed in the experimental sessions closely follows the theoretical predictions. As a consequence, costless and non-binding communication (cheap talk) significantly raises rates of trade and welfare. Previous experiments have documented that cheap talk alleviates inefficiencies due to asymmetric information. These findings are explained by pro-social preferences and lie aversion. I use appropriate control treatments to show that such consideration play only a minor role in our market. Instead, the experiment highlights the ability to organize markets as a new channel through which communication can facilitate trade in the presence of private information. In Chapter 3, I theoretically explore coalition formation via multilateral bargaining under complete information. The environment studied is extremely rich in the sense that the model allows for all kinds of externalities. This is achieved by using so-called partition functions, which pin down a coalitional worth for each possible coalition in each possible coalition structure. It is found that although binding agreements can be written, efficiency is not guaranteed, because the negotiation process is inherently non-cooperative. The prospects of cooperation are shown to crucially depend on i) the degree to which players can renegotiate and gradually build up agreements and ii) the absence of a certain type of externalities that can loosely be described as incentives to free ride. Moreover, the willingness to concede bargaining power is identified as a novel reason for gradualism. Another key contribution of the study is that it identifies a strong connection between the Core, one of the most important concepts in cooperative game theory, and the set of environments for which efficiency is attained even without renegotiation.

Perspectivas em exercício: Uma investigação sobre a lógica administrativa e o engajamento subjetivo no trabalho

Esta pesquisa tem como tema os discursos que circulam e estruturam o ambiente de trabalho nas empresas. De forma geral, busca-se compreender a lógica administrativa que, no limite, exerce uma condução da subjetividade dos trabalhadores. Temos por objetivos: 1) identificar como nas escolas do pensamento administrativo do século XX o engajamento do trabalho é requerido dos trabalhadores; 2) pretendemos discutir uma possível caracterização do discurso e dos usos da administração, como campo de conhecimento sobre o trabalho, dentro das organizações. Para tanto, estabelecemos como panorama teórico-metodológico nas ideias centrais de Michel Foucault em suas análises sobre a funcionalidade do poder e seus dispositivos. Propusemos uma perspectiva arqueogenealógica para a estudar o tema trabalho por meio da lógica da administração e do engajamento. Para estruturar esta análise, selecionamos disciplinas oferecidas e examinamos ementas e referências de leituras nos cursos de graduação da Escola de Administração de Empresas de São Paulo da Fundação Getúlio Vargas (EAESP-FGV) e do curso de Administração da Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo (FEA-USP). Diante do contato com a discursividade administrativa pudemos formular algumas reflexões. A Administração de Empresas é a ciência da demonstração, pautada na dominação da realidade por uma dita eficiência. É o que se faz produtivo da realidade ou o que se produz nela que se torna científico. Não há discussão, nos registros aqui investigados, de um questionamento sobre o discurso de eficiência, de melhores práticas e da localização das organizações como construções historicamente produzidas, apenas como produtoras de determinações. Não parece haver a possibilidade de desnaturalizar a empresa. A administração parece estar pautada em uma duplicação da dominação como a profissão que é moldada ao moldar o trabalho. Partimos também da análise do que se nomeia engajamento para compreender o que é requerido do trabalhador para além do contrato de trabalho e de sua produtividade material. Neste sentido, o trabalho torna-se uma experiência de educação em contínua e ininterrupta vigilância pedagógica. O efeito moral das técnicas e das provas nas correntes de pensamento da administração permite uma condução técnica e do modo de viver dos trabalhadores. Nesse sentido, a administração, propõe o aperfeiçoamento do cuidado de si no trabalho e para o trabalho. As disciplinas então se duplicam: pelo exterior, por meio da regra pautada na estrutura formal da autoridade da fábrica/empresa com o governo dos corpos; e pelo interior por meio de uma sujeição por identidade, pela estilização da vida