The Determinants of Inward Foreign Direct Investment in Business Services Across European Regions
Davide Castellani
Finanza e Statistica 104/2012,
2012
Abstract
The paper accounts for the determinants of inward foreign direct investment in business services across the EU-27 regions. Together with the traditional variables considered in the literature (market size, market quality, agglomeration economies, labour cost, technology, human capital), we focus on the role of forward linkages with manufacturing sectors and other service sectors as
attractors of business services FDI at the regional level. This hypothesis is based on the evidence that the growth of business services is mostly due to increasing intermediate demand by other services industries and by manufacturing industries and on the importance of geographical proximity for forward linkages in services.
To our knowledge, there are no studies investigating the role of forward linkages for the location of FDI. This paper aims therefore to fill this gap and add to the FDI literature by providing a picture of the specificities of the determinants of FDI in business services at the regional level. The empirical analysis draws upon the database fDi Markets, from which we selected projects having as a destination NUTS 2 European regions in the sectors of Business services over the period 2003-2008. Data on FDI have been matched with data drawn from the Eurostat Regio
database. Forward linkages have been constructed using the OECD Input/Output database. By estimating a negative binomial model, we find that regions specialised in those (manufacturing) sectors that are high potential users of business services attract more FDI than other regions. This confirms the role of forward linkages for the localisation of business service FDI, particularly in the case of manufacturing.
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Effects of Entrepreneurship Education at Universities
S. Laspita, H. Patzelt, Viktor Slavtchev
Jena Economic Research Papers,
No. 25,
2012
Abstract
This study analyzes the impact of entrepreneurship education at universities on the intentions of students to become entrepreneurs or self-employed in the short-term (immediately after graduation) and in the long-term (five years after graduation). A difference-in-differences approach is applied that relates changes in entrepreneurial intentions to changes in the attendance of entrepreneurship classes in the same period. To account for a potential bias due to self-selection into entrepreneurship classes, only individuals having no prior entrepreneurial intentions are analyzed. Our results indicate a stimulating effect of entrepreneurship education on students’ intentions to become entrepreneurs or self-employed in the long-term but a discouraging effect on their intentions in the short-term. These results support the conjecture that entrepreneurship education provides more realistic perspectives on what it takes to be an entrepreneur, resulting in ‘sorting’. Overall, the results indicate that entrepreneurship education may improve the quality of labor market matches, the allocation of resources and talent, and increase social welfare. Not distinguishing between short- and long-term intentions may lead to misleading conclusions regarding the economic and social impact of entrepreneurship education.
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The Impact of Firm and Industry Characteristics on Small Firms’ Capital Structure
Hans Degryse, Peter de Goeij, Peter Kappert
Small Business Economics,
No. 4,
2012
Abstract
We study the impact of firm and industry characteristics on small firms’ capital structure, employing a proprietary database containing financial statements of Dutch small and medium-sized enterprises (SMEs) from 2003 to 2005. The firm characteristics suggest that the capital structure decision is consistent with the pecking-order theory: Dutch SMEs use profits to reduce their debt level, and growing firms increase their debt position since they need more funds. We further document that profits reduce in particular short-term debt, whereas growth increases long-term debt. We also find that inter- and intra-industry effects are important in explaining small firms’ capital structure. Industries exhibit different average debt levels, which is in line with the trade-off theory. Furthermore, there is substantial intra-industry heterogeneity, showing that the degree of industry competition, the degree of agency conflicts, and the heterogeneity in employed technology are also important drivers of capital structure.
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Specialization versus Diversification: Perceived Benefits of Different Incubation Models
Michael Schwartz, Christoph Hornych
International Journal of Entrepreneurship and Innovation Management,
No. 3,
2012
Abstract
Business incubator initiatives are a widespread policy instrument for the promotion of entrepreneurship, innovation and the development of new technology-based firms. Recently, there has been an increasing tendency for the more traditional diversified incubators to be superseded by incubators focusing their support elements, processes and selection criteria on firms from one specific sector, and its particular needs. Despite the increasing importance of such specialized incubators in regional innovation strategies, the question of whether they are advantageous has neither been investigated empirically nor discussed theoretically in detail. Drawing on large-scale survey data from 161 firms incubated in either diversified or specialized incubators in Germany, we investigate the benefits to firms of being part of a specialized business incubator as opposed to being part of a generalized business incubator. The investigation of the value-added contribution of specialized incubators, in particular regarding hardware components, business assistance, networking and reputation gains, reveals considerable differences compared to the more diversified incubation model.
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The Internationalization of Science and Its Influence on Academic Entrepreneurship
S. Krabel, D. S. Siegel, Viktor Slavtchev
Journal of Technology Transfer,
No. 2,
2012
Abstract
We examine whether scientists employed in foreign countries and foreign-educated native researchers are more “entrepreneurial” than their “domestic” counterparts. We conjecture that foreign-born and foreign-educated scientists possess broader scientific skills and social capital, which increases their likelihood that they will start their own companies. To test this hypothesis we analyze comprehensive data from researchers at the Max Planck Society in Germany. Our findings provide strong support for the conjecture that academic entrepreneurship can be stimulated by facilitating the mobility of scientists across countries.
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Fiscal Policy and the Great Recession in the Euro Area
Mathias Trabandt, Günter Coenen, Roland Straub
American Economic Review: Papers and Proceedings,
No. 3,
2012
Abstract
How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result.
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Industrial Associations as a Channel of Business-Government Interactions in an Imperfect Institutional Environment: The Russian Case
A. Yakovlev, A. Govorun
IWH Discussion Papers,
No. 16,
2011
Abstract
International lessons from emerging economies suggest that business associations may provide an effective channel of communication between the government and the private sector. This function of business associations may become still more important in transition economies, where old mechanisms for coordinating enterprise activities have been destroyed, while the new ones have not been established yet. In this context, Russian experience is a matter of interest, because for a long time, Russia was regarded as a striking example of state failures and market failures. Consequently, the key point of our study was a description of the role and place of business associations in the presentday
Russian economy and their interaction with member companies and bodies of state
administration. Relying on the survey data of 957 manufacturing firms conducted in
2009, we found that business associations are more frequently joined by larger companies, firms located in regional capital cities, and firms active in investment and innovation. By contrast, business associations tend to be less frequently joined by business groups’ subsidiaries and firms that were non-responsive about their respective ownership structures. Our regression analysis has also confirmed that business associations are a component of what Frye (2002) calls an “elite exchange”– although only on regional and local levels. These “exchanges” imply that members of business associations, on the one hand, more actively assist regional and local authorities in social development of their regions, and on the other hand more often receive support from authorities. However, this effect is insignificant in terms of support from the federal government. In general, our results allow us to believe that at present, business associations (especially the
industry-wide and “leading” ones) consolidate the most active, advanced companies and act as collective representatives of their interests. For this reason, business associations can be regarded as interface units between the authorities and businesses and as a possible instrument for promotion of economic development.
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Stock Market Firm-Level Information and Real Economic Activity
Filippo di Mauro, Fabio Fornari, Dario Mannucci
ECB Working Paper,
No. 1366,
2011
Abstract
We provide evidence that changes in the equity price and volatility of individual firms (measures that approximate the definition of 'granular shock' given in Gabaix, 2010) are key to improve the predictability of aggregate business cycle fluctuations in a number of countries. Specifically, adding the return and the volatility of firm-level equity prices to aggregate financial information leads to a significant improvement in forecasting business cycle developments in four economic areas, at various horizons. Importantly, not only domestic firms but also foreign firms improve business cycle predictability for a given economic area. This is not immediately visible when one takes an unconditional standpoint (i.e. an average across the sample). However, conditioning on the business cycle position of the domestic economy, the relative importance of the two sets of firms - foreign and domestic - exhibits noticeable swings across time. Analogously, the sectoral classification of the firms that in a given month retain the highest predictive power for future IP changes also varies significantly over time as a function of the business cycle position of the domestic economy. Limited to the United States, predictive ability is found to be related to selected balance sheet items, suggesting that structural features differentiate the firms that can anticipate aggregate fluctuations from those that do not help to this aim. Beyond the purely forecasting application, this finding may enhance our understanding of the underlying origins of aggregate fluctuations. We also propose to use the cross sectional stock market information to macro-prudential aims through an economic Value at Risk.
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ICT Adoption and Heterogeneity in Production Technologies: Evidence for Chilean Retailers
Gaaitzen J. de Vries, Michael Koetter
Oxford Bulletin of Economics and Statistics,
No. 4,
2011
Abstract
The adoption of information and communication technology (ICT) can have far-reaching effects on the nature of production technologies. Because ICT adoption is incomplete, especially in developing countries, different groups of firms will have different production technologies. We estimate a latent class stochastic frontier model, which allows us to test for the existence of multiple production technologies across firms and consider the associated implications for efficiency measures. We use a unique data set of Chilean retailers, which includes detailed information on ICT adoption. We find three distinct production technologies. The probability of membership in a more productive group is positively related to ICT use.
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Works Councils and Firm Profits Revisited
Steffen Müller
British Journal of Industrial Relations,
No. 1,
2011
Abstract
As they are employee associations, it is typically presumed that works councils redistribute economic rents from firm owners to workers. And indeed, the empirical literature suggests that German works councils reduce profits. The studies on the profitability effect of works councils mainly use self-reported subjective profit evaluations of managers as the dependent variable. I argue that these are poor measures of real profits. Newly available information on firms' capital stock allows me to revisit the profit effect now using an objective profit measure. When utilizing the subjective measure I find the standard results; with the objective measure, however, the works council effect on profits is positive and significant.
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