Like milk or wine: Does firm performance improve with age?

Our empirical literature review shows that little is known about how firm performance changes with age, presumably because of the paucity of data on firm age. For Spanish manufacturing firms, we analyse the firm performance related to firm age between 1998 and 2006. We find evidence that firms improve with age, because ageing firms are observed to have steadily increasing levels of productivity, higher profits, larger size, lower debt ratios, and higher equity ratios. Furthermore, older firms are better able to convert sales growth into subsequent growth of profits and productivity. On the other hand, we also found evidence that firm performance deteriorates with age. Older firms have lower expected growth rates of sales, profits and productivity, they have lower profitability levels (when other variables such as size are controlled for), and also that they appear to be less capable to convert employment growth into growth of sales, profits and productivity. Keywords: firm age, firm growth, LAD, financial structure, vector autoregression JEL CODES: L25, L20

Workers cooperation within the firm: an analysis using small and medium size firms

We investigate the determinants of teamwork and workers cooperation within the firm. Up to now the literature has almost exclusively focused on workers incentives as the main determinants for workers cooperation. We take a broader look at the firm's organizational design and analyze the impact that different aspects of it might have on cooperation. In particular, we consider the way in which the degree of decentralization of decisions and the use of complementary HRM practices (what we call the .rm.s vertical organizational design) can affect workers'collaboration with each other. We test the model's predictions on a unique dataset on Spanish small and medium size firms containing a rich set of variables that allows us to use sensible proxies for workers cooperation. We find that the decentralization of labor decisions (and to a less extent that of task planning) has a positive impact on workers cooperation. Likewise, cooperation is positively correlated to many of the HRM practices that seem to favor workers'interaction the most. We also confirm the previous finding that collaborative efforts respond positively to pay incentives, and particularly, to group or company incentives.

Profitability, uncertainty and multi-product firm product proliferation: The Spanish car industry

This article studies how product introduction decisions relate to profitability and uncertainty in the context of multi-product firms and product differentiation. These two features, common to many modern industries, have not received much attention in the literature as compared to the classical problem of firm entry, even if the determinants of firm and product entry are quite different. The theoretical predictions about the sign of the impact of uncertainty on product entry are not conclusive. Therefore, an econometric model relating firms’ product introduction decisions with profitability and profit uncertainty is proposed. Firm’s estimated profits are obtained from a structural model of product demand and supply, and uncertainty is proxied by profits’ variance. The empirical analysis is carried out using data on the Spanish car industry for the period 1990-2000. The results show a positive relationship between product introduction and profitability, and a negative one with respect to profit variability. Interestingly, the degree of uncertainty appears to be a driving force of entry stronger than profitability, suggesting that the product proliferation process in the Spanish car market may have been mainly a consequence of lower uncertainty rather than the result of having a more profitable market. Keywords: Product introduction, entry, uncertainty, multiproduct firms, automobile JEL codes: L11, L13

Profitability, uncertainty and multi-product firm product proliferation: The Spanish car industry

This article studies how product introduction decisions relate to profitability and uncertainty in the context of multi-product firms and product differentiation. These two features, common to many modern industries, have not received much attention in the literature as compared to the classical problem of firm entry, even if the determinants of firm and product entry are quite different. The theoretical predictions about the sign of the impact of uncertainty on product entry are not conclusive. Therefore, an econometric model relating firms’ product introduction decisions with profitability and profit uncertainty is proposed. Firm’s estimated profits are obtained from a structural model of product demand and supply, and uncertainty is proxied by profits’ variance. The empirical analysis is carried out using data on the Spanish car industry for the period 1990-2000. The results show a positive relationship between product introduction and profitability, and a negative one with respect to profit variability. Interestingly, the degree of uncertainty appears to be a driving force of entry stronger than profitability, suggesting that the product proliferation process in the Spanish car market may have been mainly a consequence of lower uncertainty rather than the result of having a more profitable market

Regional Determinants of Firm Entry in a Developing Country

Regional policies aiming to attract new firms are largely based on evidence that originates from Europe, the USA and Japan. This may raise doubts about the usefulness of such policies when applied to developing economies. This paper addresses this issue by providing estimates of the determinants of firm entry in the Argentinean provinces. We find that most of the determinants used in previous studies analysing developed countries are still relevant. However, there is a need for additional explanatory variables that reflect the specificities of developing economies. Key words: firm entry, regional economics, Argentina. JEL: R12; R30; C33

Entrepreneur's Overconfidence, Private Benefits and the Market Performance of the Firm

Many firms around the world are managed and partially owned by entrepreneurs. These entrepreneurs hold under diversified portfolios and, therefore, bear idiosyncratic risk in addition to systematic risk. To compensate the additional risk borne, they extract private benefits. In this paper, we analyse how an entrepreneur's overconfidence affects the market performance of the firm, through the channel of private benefits. We show that two dimensions of overconfidence, namely overestimation of future cash-flows and underestimation of idiosyncratic risk (called miscalibration), have opposite effects on the private benefits extracted by the entrepreneur. As a consequence, firms managed and partially owned by overconfident entrepreneurs can deliver overperformance or underperformance, depending on the prevalence of overestimation or miscalibration of the beliefs of the entrepreneur.

Determinants of Decentralization within the Firm: Some Empirical Evidence from Spanish Small and Medium- Sized Enterprise

This paper examines empirically the determinants of decentralization of decision- making in the firm for small and medium-sized enterprises (SMEs) that tend to be highly centralized. By decentralization of decisions we mean the delegation of decision rights from the owner or manager to the plant supervisor or even to floor workers. Our findings show that the allocation of authority to basic workers or a team of workers depends on firm characteristics such as firm size, the use of internal networks or the number of workplaces, and workers characteristics, in particular, the composition of the laborforce in terms of education and seniority and whether or not workers receive pay incentives. External factors such as the intensity of competition and the firm s export intensity are also important determinants of the allocation of authority.

Innovation and firm growth: Does firm age play a role?

This paper explores the relationship between firm growth, innovation and firm age. We hypothesize that young firms undertake riskier innovation activities and are more oriented towards employment growth than towards harvesting returns in the form of sales growth. Using an extensive sample of Community Innovation Survey for the period 2004-2010, we apply quantile regressions and a Heckman sample selection technique to study the impact of R&D activities on firm growth according to firm age. Our results show that R&D intensity is positively associated with firm growth. However, for young firms R&D shows an increasing influence across the quantiles, while for old firms R&D shows a stable or perhaps decreasing effect over the quantiles. Firm age shows a significant negative impact among young firms, while for the sample of old firms the impact of firm age becomes non-significant. Our Heckman estimations show the evolution of the impact of the R&D on firm growth confirming a significant impact on sales and productivity growth, while the impact is negligible for employment growth. Keywords: firm age, firm growth, innovation, quantile regression. JEL CODES: L25, L20

Effects of Government Ownership on Firm Performance: Evidence from Finnish Companies

Tutkimuksen tarkoituksena on selvittää, miten valtionomistajuus vaikuttaa yrityksen suorituskykyyn suomalaisissa pörssinoteeratuissa valtionyhtiöissä, joissa valtio toimii pää- tai osaomistajana. Suorituskykyä tutkitaan kandella eri menetelmällä. Ensin tutkitaan osaketuottoja Jensenin alfan avulla, jonka jälkeen suoritetaan tilinpäätöstunnuslukujen toimialavertailu. Tutkimuksen teoriaosuudessa esitetään yksityistämisen tuottamia etuja yrityksen taloudelliseen suorituskykyyn, sekä myöskin valtionomistajuuden tuottamia etuja. Lisäksi teoriaosuudessa käsitellään aikaisempien empiiristen tutkimusten tuloksia valtionomistajuuden vaikutuksista. Tämän tutkimuksen empiirisessä osiossa käytettävä data on saatu osakedatan osalta Datastreamista ja tilinpäätöstunnuslukujen osalta Balance Consulting Oy:ltä. Kokonaisosakedataa koskeva tutkimus Jensenin alfalla ei osoittanut valtionyhtiöiden toimivan tehottomasti, vaan osoitti yritysten kyenneen tuottamaan epänormaaleja tuottoja riskitasoonsa nähden. Vuositasolle pilkotun datan analysointi sen sijaan tuotti useita negatiivisia alfoja yrityksille eli merkkejä tehottomuudesta tiettyinä vuosina. Lisäksi tilinpäätöstunnuslukujen analysointi osoitti osan valtionyhtiöistä olleen pääosin omaa toimialaansa tehottomampia, kun taas osa kykenipäihittämään toimialansa.

Regional determinants of firm entry in a developing country

We analyse the determinants of firm entry in developing countries using Argentina as an illustrative case. Our main finding is that although most of the regional determinants used in previous studies analysing developed countries are also relevant here, there is a need for additional explanatory variables that proxy for the specificities of developing economies (e.g., poverty, informal economy and idle capacity).We also find evidence of a core-periphery pattern in the spatial structure of entry that seems to be mostly driven by differences in agglomeration economies. Since regional policies aiming to attract new firms are largely based on evidence from developed countries, our results raise doubts about the usefulness of such policies when applied to developing economies. JEL classification: R12, R30, C33. Key words: Firm entry, Argentina, count data models.

Corporate political activity and firm outcomes: A meta-analysis

Using meta-analytic methods on a sample of 74 studies, we explore the links between CPA and public policy outcomes, and between CPA and firm outcomes. We find that CPA has at best a weak effect and that it appears to be better at maintaining public policy than changing them.

Incumbent audit firm-provided tax services and the clients with low financial reporting quality

This study investigates whether incumbent audit firm-provided tax services enhance or impair the likelihood of acknowledging client companies’ low financial reporting quality. In particular, we examine the association between tax-related fees and the likelihood of timely restatements, and internal control weakness disclosures among a sample of US companies that all have misstatements in financial information. The empirical findings indicate that companies paying higher tax-related fees are less likely to disclose SOX 404 internal control weakness disclosures, implying that underlying control problems are unacknowledged when incumbent audit firm provided tax-related fees are higher. However, the findings suggest that just providing both audit and tax-related services does not have an impact on audit quality per se, but rather it is the magnitude of the tax-related fees in particular that counts. We also find some evidence suggesting that companies paying higher tax-related fees have higher likelihood of restatement lags, whereas companies paying smaller tax-related fees to their audit firm restate financial statements in a timelier manner. Overall, the findings suggest that audit scrutiny of client companies with low quality financial reporting is weaker when the magnitude of tax-related fees is higher.

A firm-level analysis of ICT adoption in an emerging economy: evidence from the colombian manufacturing industries

This study examines ICT adoption among 3,759 Colombian manufacturing firms, and attempts to identify the factors that are conducive to the adoption and usage of ICT at the firm level. Our major findings are (i) that the adoption of a given information and communication technology is better facilitated when a firm is relatively large, has large human capital, engages in more innovative activities, and when a firm’s organizational structure is better aligned with the given technology; (ii) that positive associations between the key determinants and ICT adoptions are more pronounced for small and medium-sized firms than for large ones, and (iii) that information spillovers within industries is also a determinant of ICT adoptions by the firms.

Information externalities and export trade duration at the firm level

Recent empirical work emphasizes the importance of the extensive margin of trade (new exporters, new export activities) for long run export growth. In this context, understanding the determinants of duration of new exporters is key for underpinning the dynamics of exports growth. As new exporters tend to show low survival rates, identifying the determinants of export duration is highly relevant for academic and policy purposes. In this paper, we explore whether information externalities arising from different levels of spatial interaction allow new exporters to increase the duration of their trade activities. For this, we use transaction level data on Colombian exports between 2004 and 2011. Results show that export networks, understood as the agglomeration of exporting firms at different spatial levels, reduce the risk of dropping out from exporting and that this effect is stronger the more similar are export activities carried out by firms