Anna Gumpert, Henrike Steimer, Manfred Antoni, 24 October 2019

Distance and other geographic frictions between firms’ headquarters and their establishments have a negative effect on performance. This column shows that hiring middle managers helps firms mitigate the impact of geographic frictions, by improving the efficiency of management resources. Factors affecting the efficiency of a local establishment have knock-on effects for the whole firm, regardless of distance.

Gábor Békés, Peter Harasztosi, 30 September 2019

In less developed countries, upgrading production technologies by importing machinery is an important source of growth. Using new firm-level data from Hungary for the period 1992-2003, this column finds that firms are more likely to import a particular piece of sector-specific machinery when other local firms previously imported the same machine. A similar pattern holds regarding the choice of the machine’s source country. These benefits are concentrated in large and foreign-owned companies, while small and domestically owned firms may actually be adversely affected.

Ufuk Akcigit, Emin Dinlersoz, Jeremy Greenwood, Veronika Penciakova, 24 September 2019

Differences between the majority of mediocre firms and the exceptional, innovative ones range from the founders’ backgrounds to their paths of innovation. This column assesses the impact of venture capital funding on the growth trajectories firms take. Employment and patenting data show venture capital-backed firms are likely to achieve greater success and contribute more significantly to the aggregate economy. The absence of venture capital funding would lower aggregate growth by 28%.

James Bessen, 12 September 2019

Do industries shed or create jobs when they adopt new labour-saving technologies? This column shows that manufacturing employment grew along with productivity for a century or more, and only later decreased. It argues that the changing nature of demand was behind this pattern, which led to market saturation. This implies that the main impact of automation in the near future may be a major reallocation of jobs, not necessarily massive job losses.

Yukiko Asai, 05 September 2019

One factor exacerbating gender gaps in employment is the cost of affording maternity and parental leave to women as primary caregivers. This column analyses the relationship between the costs of providing parental leave and labour demand for childbearing-age women. As evidenced by a series of reforms in Japan in the last two decades, reducing the burden of parental leave costs from firms to social insurance systems increases both labour demand and starting wages for such workers.

Lene Kromann, Anders Sørensen, 15 July 2019

The automation of production processes is an important topic on the policy agenda in high-wage countries, but evidence of the economic effects of automation at the firm level is limited. This column presents insights on automation from new survey data for Denmark. The findings reveal that variation in the adoption of automation technologies is high, the change in adoption over time is slow, and almost half of Danish manufacturing firms relied greatly on manual production processes in 2010. Increasing international competition from China is a driver for investments in automation.

Toshimori Otazawa, Yuki Ohira, Jos van Ommeren, 09 July 2019

Relationship-based distance has become as important a determinant of firm interactions as physical distance in recent years. This column presents evidence to support the claim that firms physically locate closer to others that proximate in their transaction networks, though this effect varies across industries and by age of firms.

Fariha Kamal, 07 July 2019

‘Factoryless’ goods producing entities outsource physical transformation activities while retaining ownership of the intellectual property and control of sales to customers. Using 2012 data from the US Census Bureau, this column provides a new conceptual definition of factoryless activity. It also compares factoryless goods producer firms to service providers outside the manufacturing sector, and hybrid manufacturers to traditional manufacturers within the manufacturing sector. The analysis reveals several meaningful correlations between factoryless status at the firm level and conceptual variables such as employment mix, innovation, and importing activities.

Ufuk Akcigit, Sina T. Ates, 04 July 2019

The US economy has witnessed a number of striking trends that indicate rising market concentration and a slowdown in business dynamism in recent decades. This column uses a micro-founded model of endogenous firm dynamics to show that a decline in the intensity of knowledge diffusion from frontier firms to laggard ones plays a key role in the observed shifts. It presents new evidence on higher concentration of patenting in the hands of firms with the largest stock that corroborates declining knowledge diffusion in the economy. 

Katharina Erhardt, Simon Haenni, 27 May 2019

Firm entry is widely viewed as a central driver of economic growth, so understanding the role of culture in explaining differences in entrepreneurial activity is important. Using Swiss data on individuals’ cultural origins going back to the 18th century, this column compares the entrepreneurial activity of individuals who live in the same municipalities but who have their cultural origins on different sides of the language border. It finds that individuals with ancestry from the German-speaking side founded 20% more firms than those with ancestry from the French-speaking side. Yet, the cultural origin of the founder does not affect firm-level outcomes such as bankruptcy or revenues.  

Tadashi Ito, Yukiko Saito, 16 April 2019

Small and medium-sized firms can enjoy the benefits of trade liberalisation by exporting their goods or importing inputs through intermediaries. Using firm-level data from Japan, this column finds that firms in regional areas are smaller than those in metropolitan areas and are less likely to participate in indirect or direct trade. Direct and indirect exports and imports represent a large share of regional economies, and indirect exporters in regional areas are likely to become direct exporters. In addition, both newly started direct export/import firms and newly started indirect export/import firms tend to grow faster.

Anil Kashyap, Natalia Kovrijnykh, Jian Li, Anna Pavlova, 18 February 2019

A well-known puzzle in economics is that when stocks are added to the S&P 500 index, their prices rise. Using a theoretical framework and empirical evidence, this column shows that this ‘benchmark inclusion subsidy’ arises because asset managers have incentives to hold some of the equity of firms in the benchmark regardless of the risk characteristics of these firms. As a result, asset managers effectively subsidise investments by benchmark firms. As the asset management industry continues to grow, the benchmark inclusion subsidy will only get bigger. 

Philipp-Bastian Brutscher, Pauline Ravillard, 14 February 2019

Promoting investment in energy efficiency has become increasingly important over the past decade, but not much is known about effective ways to promote firm-level investments in energy efficiency. Using new experimental data on EU firms’ stated willingness to invest in hypothetical energy-efficiency projects with varying offers of financing and technical assistance, this column demonstrates how a favourable financing offer can increase the likelihood that firms are willing to invest in energy efficiency by as much as 33%. 

Emmanuel Dhyne, Jozef Konings, Jeroen Van den bosch, Stijn Vanormelingen, 07 January 2019

Although information technology has reshaped the way businesses operate, measuring IT capital in firms is challenging. Using an exceptionally rich firm-level dataset from Belgium, this column finds that large firms benefit more from IT than small firms, and that IT explains about 10% of the productivity dispersion. IT has contributed to Belgian GDP and productivity growth prior to the Global Crisis, but the recession seems to have led firms to forgo investment in IT. Achieving optimal IT investment levels could reinvigorate productivity growth.

Sharmin Sazedj, João Amador, José Tavares, 24 December 2018

When appointing a CEO, firms can choose a newcomer or someone who has been at the firm for a long time. Using data on Portuguese firms in the wake of the Global Crisis, this column finds no performance gap between newcomers and experienced CEOs in the period prior to the crisis. During the crisis, however, firms run by newcomer CEOs outperformed those run by experienced insiders. Newcomers attain higher productivity by making different decisions regarding personnel, expenditure, investment, and international trade. 

Meghana Ayyagari, Thorsten Beck, Maria Soledad Martinez Peria, 11 December 2018

Macroprudential tools have been implemented widely following the Global Crisis. Using data from 900,000 firms in 49 countries, this column finds that such policies are associated with lower credit growth during the period 2003-2011. The effects are especially significant for micro, small and medium-sized enterprises and young firms that are more financially constrained and bank dependent. The results imply a trade-off between financial stability and inclusion.

Alessandra Bonfiglioli, Rosario Crinò, Gino Gancia, 10 June 2018

To date there has been little systematic evidence on the role of firms in explaining country performance. This column explores how the products of firms from all over the globe fare in competition in the US market. Results show that the countries that capture larger market shares have more exporters, producing higher-quality products, with a more dispersed distribution of firm attributes. Larger and richer markets are characterised by a more dispersed distribution of sales and quality, and a higher incidence of superstar firms.

Daisuke Fujii, Yukiko Saito, Tatsuro Senga, 10 February 2018

Firms develop inter-firm networks throughout their lifecycles, continually adding and dropping trading partners. This column examines the role that the dynamics of these networks play in firm growth. The findings point to the importance of searching for potential trading partners and learning match-specific productivity for younger firms. Surviving older firms, in contrast, tend to enjoy a stable set of customers and suppliers to keep their operations.

Atsushi Ohyama, 14 December 2017

The length of time industries prosper varies significantly. This column examines why some industries grow and prosper for a long period of time through the lens of submarket creation and destruction. Using data from the Japanese Census of Manufacture, it shows that the creation and the destruction of products allow an industry to continue attracting new entrants, that start-up and spinoff firms are more likely to enter a newly created submarket than incumbent firms, and that new entry is encouraged when unrealised business opportunities are reallocated smoothly.

Mariassunta Giannetti, Xiaoyun Yu, 30 October 2017

One of Chinese President Xi Jinping’s defining policies has been in the fight against corruption, which hinders innovation and growth by creating privileges for established firms. This column shows that extensive corruption in China may indeed have hampered the process of firm progress, and that the anti-corruption campaign has been a good move towards favouring an efficient allocation of resources and, ultimately, sustained growth.

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