Firm-level Analysis Research Articles

Global value chain embedding and enterprise energy efficiency: A worldwide firm-level analysis

Global value chain embedding brings growth opportunities for small and medium-sized enterprises, despite their continuously controversial environmental effects. This study examines the impact of global value chain embedding on the energy efficiency of small and medium-sized enterprises using a worldwide firm-level micro data. Results support that global value chain embedding significantly improves enterprise energy efficiency, and this conclusion holds even after self-selection and endogeneity are considered. Global value chain embedding promotes enterprise innovation and labor productivity through market scale and induced learning effects and improves the energy efficiency. Moreover, the evidence only supports the lock-in effect of low value-added, while the lock-in hypothesis of pollution link and foreign technology is invalid. The positive impact of global value chain embedding on energy efficiency is greater for non-high-tech industries, mainly coming from export learning effect and innovation effect. Furthermore, there is no industry heterogeneity in the lock-in effect. Country heterogeneity in the effect of global value chain embedding on energy efficiency characteristics of regional embedding and industrialization, but not to economic development and human capital.

Globalisation and its impact on performance: an empirical study on selected firms using multimethod approach

PurposeGlobalisation has benefitted both developed and emerging markets. However, few recent studies have pointed out that globalisation has failed to deliver promising results. This research aims to examine the impact of globalisation on different performance aspects of an emerging market like India.Design/methodology/approachWe examined the impact of globalisation on different performance aspects of a country at the national, industry and firm levels. We have defined the performance dimensions for country-level analysis as GDP and unemployment. We have defined the performance dimensions as profitability for industry and firm-level analysis. The effects of globalisation on the critical economic performance aspects in the Indian setting are covered in the first part. In the second part, we used the panel regression approach to evaluate the impact of overseas revenue on the employability and profitability of select Indian auto firms. We have chosen the auto industry for industry analysis because of its extensive integration with other production fields. In the third section, we discussed how globalisation has improved the profitability of two Indian car companies.FindingsThis study finds that globalisation has benefitted nearly every aspect of the Indian economy's performance. India has gained from national, industry and firm globalisation.Originality/valueThis study is the first of its kind to examine the impact of globalisation on a country's performance across different levels, including national, industry and firm levels. We have studied the Indian context to develop a theory that globalisation still benefits emerging markets.

The green bonus of tax incentives: Evidence from China

Using a novel dataset covering over one million firm-level energy consumption entries from 2007-2016, we employ a difference-in-differences approach to estimate the causal effect of tax incentives on carbon emission intensity by exploiting China’s staggered implementation of accelerated depreciation policies for fixed assets in 2014 and 2015. We find that the accelerated depreciation policy leads to a significant 9.19% reduction in carbon emission intensity, equivalent to 0.11 tons of carbon emissions per 10,000 RMB of industrial value added. The policy effect is more pronounced for large firms, those with medium-term assets, and in regions with greater market integration and industrial agglomeration. Our firm-level analysis reveals that the policy reduces energy consumption, promotes a shift towards a cleaner energy portfolio and increases R&D investments in abatement technologies, as well as climate-friendly innovations. The above results show high consistency with verification at the aggregation level using satellite-based observations. Our findings highlight the potential of well-designed fiscal policies to contribute to global climate action efforts in developing economies.

Beyond terroir: a comparative analysis of Pinot Noir producers and business strategies in Burgundy, New Zealand and South Africa

PurposeThis paper aims to examine the convergence and divergence of business and production practices in the global wine industry, particularly focusing on Pinot Noir producers in Burgundy, New Zealand and South Africa (SA). This study explores the interplay between firm-specific factors and regional contexts to identify competitive advantage drivers among Pinot Noir producers.Design/methodology/approachThis research uses a comparative analysis approach, using data from a comprehensive winery level survey. This study applies methodologies akin to value chain analysis to unravel the configuration of productive and technology/knowledge creation activities within wineries across three regions.FindingsThis analysis reveals both convergence and divergence in business and production practices among Pinot Noir producers in Burgundy, New Zealand and South Africa. Although there is a degree of convergence in marketing, distribution and competition strategies, differences exist in production practices and firms’ capabilities. Burgundy emphasizes tradition and terroir expression, contrasting with the modernization and innovation focus observed in New Zealand and South Africa. However, all regions share a commitment to quality as a competitive advantage.Research limitations/implicationsThis study acknowledges limitations such as the focus on a specific grape variety and regions, the absence of performance impact analysis and the need for additional variables like environmental, institutional and cultural factors and consumer preferences to provide a comprehensive understanding of industry dynamics.Practical implicationsThe insights from this study offer practical implications for winemakers, industry stakeholders and policymakers. Producers can optimize production and marketing strategies based on regional contexts and market segments, whereas stakeholders can identify emerging trends and opportunities in the global wine market. Policymakers can develop targeted policies supporting innovation, sustainability and competitiveness.Originality/valueThis paper provides a unique contribution by conducting a comparative firm-level analysis across distinct wine-producing regions, shedding light on the nuanced interplay of factors shaping competitive advantage among Pinot Noir producers. This study’s comprehensive data set and methodological approach enhance understanding and offer valuable insights for industry stakeholders and policymakers.

Divergent trajectories on frontier innovations: A comparison of international venture capital-invested ventures between China and the United States

How do international venture capital (IVC)-invested ventures (IIVs) between the U.S. and China generate new knowledge differently and follow distinct growth trajectories? Given that venture capital (VC) is critical for financing frontier innovations among new ventures, comparing U.S. and Chinese IIVs is essential for informing national innovation policy. Based on the organizational ecology perspective, we propose that U.S. and Chinese new ventures have divergent trajectories in frontier innovations. We identify 1782 first-round IVC investments in U.S. and Chinese new ventures operating in the computer software, e-commerce, biotechnology, semiconductors, and artificial intelligence sectors between 2010 and 2020 along with their 2825 patents (317 Chinese patents and 2508 U.S. patents). Our findings indicate that Chinese IIVs exhibit greater variation in terms of technological distance, search scope, and knowledge coupling, compared to U.S. IIVs. However, Chinese IIVs’ frontier innovations have more divergent technological trajectories and attract fewer followers than U.S. IIVs, based on patent citations. In a firm-level analysis, we find that Chinese IIVs are less likely to receive a subsequent financing round. Further, IIVs with greater technological distance and search scope, and with higher impact patents, have more opportunities to receive the next round of funding.

A Firm-Level Analysis of “Indirect” FDI: The Case of the Global Network of Japanese MNEs

A Firm-Level Analysis of “Indirect” FDI: The Case of the Global Network of Japanese MNEs

On measuring climate risks using attention search and testing the clean energy-climate hypothesis

ABSTRACT We measure physical and regulatory climate risks as innovations in several attention to climate change indexes that we construct using search volume data in Google Trends. The intention is to use the constructed risk indexes to test the empirical validity of the clean energy-climate hypothesis, which posits that clean energy prices fall (rise) following a drop (rise) in attention to climate risks. We test the empirical validity of this hypothesis at the macro (market level) using regime switching models and at the micro (firm level) using time-series regressions across clean energy sub-sectors. The macro analysis reveals that our hypothesis is only valid for climate pledges and physical climate risks. When attention to climate pledges drops or when physical climate risks are low, investors become reluctant to hold clean energy assets and vice-versa. Climate policy and climate solution risks have no impact on the nonlinear dynamic behaviour of clean energy prices. These results mean that investors and the public believe that climate policies lack credibility and climate solutions are not effective. The firm-level analysis confirms the findings of the macro analysis and reveals the heterogeneity of climate risks across clean energy sub-sectors.

Do Free Trade Agreements Facilitate FDI Spillover Effects on Domestic Firms? Empirical Evidence from Oman

This paper underlines the significance of free trade agreements in attracting foreign direct investment and their impact on the operational capacities of local firms in host countries. It argues that free trade agreements do not only eliminate barriers to trade, but they also increase the size of the regional market and improve the business environment, making it more attractive to foreign direct investment, along with all the attributes and spillover effects associated with it. While determining the type of spillover effects of foreign direct investment associated with Oman’s trade agreements, this paper uses the Kruskal–Wallis H-test and 438 samples from companies surveyed between 1 August and 31 October 2023 to assess the impact of spillovers on the performance of the surveyed companies. The results reveal that technology transfer, knowledge transfer, labour productivity, product efficiency, capital investments, and job creation have positive effects on the firms’ operational capacities, with technology transfer having the highest impact (27%), followed by labour productivity and job creation (18%). The spillover effects are almost the same for company size and percentage of ownership. They also identified manufacturing and tourism as priority sectors and the availability of a skilled workforce as a major challenge. These findings make original contribution to the field as this is probably the first study to produce a firm-level analysis of spillover effects of foreign direct investment and trade agreements in the context of Oman and the wider Gulf region. The paper concludes with practical implications for policy makers when negotiating trade agreements and designing investment policies to optimize spillover effects on the performance of their domestic firms.

Transition versus physical climate risk pricing in European financial markets: a text-based approach

Under its climate regulation, the EU is expected to become the first continent with a net-zero emissions balance. We study the pricing of climate risks, physical and transition, within European markets. Using text-analysis, we construct two novel (daily) physical and transition risk indicators for the period 2005–2021 and two global climate risk vocabularies. Applying our climate risk indices to an asset pricing test framework, we document the emergence of economically significant transition and physical risk premia post-2015. From a firm-level analysis, using firms' GHG emissions, GHG emissions intensity, environmental, and ESG scores, we find that rises in transition (physical) risk are typically associated with an increase (decrease) in the return of green (brown) stocks. Firm-level information is used by investors to proxy firms' climate-risks exposure, especially for transition risk since 2015, whereas the sectoral classification appears to proxy firms' exposures to physical risk. From a country-level analysis emerges an intensified connection between European stock markets and climate risks post-2015, yet with some heterogeneity. Our results have important economic implications and show that investors demand compensation for their exposure to both climate risk types. Our novel climate risk vocabularies and indicators find several applications in identifying, measuring, and studying climate risks.

Environmental regulation and productivity growth in the euro area: Testing the porter hypothesis

This paper examines the impact of changes in the stringency of environmental regulations on productivity growth. We exploit several data sources, including the OECD Environmental Policy Stringency Index and balance sheet information from ORBIS and iBACH, to test the Porter hypothesis, according to which firms’ productivity can benefit from more stringent environmental policies. We estimate the regulatory impact over a five-year horizon using panel local projections. To identify the direction of the effects, we estimate CO2 equivalent emissions for all firms in our sample using a machine learning algorithm. As suggested by the country-level analysis and confirmed by the firm-level analysis, policy tightening negatively affects productivity growth of high-polluting firms and to a larger extent than that of their low-polluting peers. Hence, we do not find support for the Porter hypothesis in general. However, not all policies have the same impact – non-market based policies are the most detrimental to productivity growth – and not all highly polluting firms are affected in the same way – the negative impact is mitigated for large firms, which may benefit from easier access to finance and greater innovativeness.

COVID-19 and Seasonality in Monthly Returns: a Firm Level Analysis of PSX

Abstract The current study scrutinizes the calendar anomalies in the context of the local market by analyzing the Pakistan Stock Exchange (PSX). For this purpose, closing prices of KSE-100, KSE-30 and KSE-All share Index from January, 2009 to June, 2021 have been used as well as a thorough individual firm level analysis is done, taking average log-returns of selected sample firms returns using OLS regression, general GARCH (1,1), asymmetric TGARCH and PGARCH models. The results indicate monthly seasonality, with significant April, July, and September effect in PSX indices returns. The findings of the study reveal that weak form inefficiency exists in Pakistan Stock Market, which implies the possibility of earning abnormal returns by investors using timing strategies. Due to global pandemic conditions, investor psychology investors turned circumspect. Consequently, the individual firms’ trading has also reduced.

A firm-level analysis of Chinese commercial health insurance surrender.

Based on the unbalanced panel data of Chinese professional health insurance companies from 2011 to 2021, the paper constructs "PW+PCSE" model to empirically investigate the main factors affecting the commercial health insurance surrender in China from the company level. The results show that asset-liability ratio has a significant positive effect on health insurance surrender rate. The value preservation and appreciation rate of capital and R&D expenditure rate both have significant negative effects on health insurance surrender rate. These studies bring important enlightenment for domestic health insurance companies to avoid surrender risk.

Complementarities between product and process innovation and their effects on employment: a firm-level analysis of manufacturing firms in Colombia

ABSTRACT The introduction or adoption of innovations at the firm level has consequences for job creation that may differ across low-middle and high-income countries. Also, the type of innovation that firms introduce, such as process or product innovations, can affect employment through different channels. This paper aims to study the effects of innovation on employment growth at the firm level using a framework that considers the nature of innovation and the relative efficiency of the firms. The study uses a rich panel dataset that combines information from two different surveys in Colombia: the Annual Manufacturing Survey and the Survey on Development and Technological Innovation in the Manufacturing Sector. The article provides empirical evidence supporting the idea that the nature of innovation in the country involves complementarities between process and product innovations. The paper discusses how this result is related to the patterns of innovation in middle income countries, which need not only new technologies but also imitation of processes and products. Another novelty of this analysis is the study of displacement effects of process innovation through improvements in the relative efficiency of the firms. Findings show that some firms reduce employment from process innovations, reflecting high heterogeneity in efficiency among firms.

Self-generation and outage losses: A firm-level analysis for emerging and developing Asian countries

Access to reliable and affordable electricity is critical to economic development in emerging and developing Asia. However, many firms in these regions face challenges in obtaining consistent and affordable electricity from the grid, leading them to invest in self-generation technologies. This paper examines the strategic decision of firms to self-generate electricity and the economic losses incurred during power outages. Using survey data from the World Bank Enterprise Survey (WBES) of 5639 manufacturing firms in seven Asian countries, we identify factors driving the decision to self-generate and assess the impact of self-generation on mitigating economic losses during power outages. An endogenous switching regression model is employed to account for self-selection bias. The results show that firms experiencing more outages and higher electricity costs are more likely to invest in self-generation. Larger, older, and exporting firms also show a higher propensity to self-generate. In addition, the results indicate that firms that invested in self-generation would have experienced, on average, outage losses that were 88 percent higher than their actual losses if they had not invested. Conversely, firms without self-generation could have reduced their actual outage losses by on average 5 percent by implementing self-generation strategies. Overall, our results indicate that self-generating firms in Asian emerging and developing countries are particularly vulnerable to losses from power outages and underscore the importance of self-generation as a strategic choice for these firms.

Who Keeps Company with the Wolf will Learn to Howl: Does Local Corruption Culture Affect Financial Adviser Misconduct?

Motivated by the increasing economic significance of investment advisory industries and the prevalence of wrongdoing in financial planning services, we examine whether, and to what extent, employee misconduct is shaped by their local corruption culture. Using novel data of more than 4.7 million adviser-year observations of financial advisers and the Department of Justice’s data on corruption, we find that financial advisers and advisory firms located in areas with higher levels of corruption are more likely to commit misconduct. These results hold for both individual advisor and firm level analyses and are robust to the use of various fixed effects, model specifications, proxies for corruption and misconduct, and an instrumental variable approach. Using the passage of the Dodd-Frank Whistleblower Provision, which provides incentives for reporting corruption incidences and thereby reduces the incentives for fraud, we find that the relation between local corruption culture and adviser misconduct is attenuated after the provision enacted by the SEC. Overall, our study highlights the externalities of corruption culture on individual ethics and the essential role of whistleblowing laws in reducing corruption-prone norms.

The effect of external innovation on firm employment

ABSTRACT This paper analyses the effects of product innovations introduced by firms in upstream and downstream sectors and firms in the same sector on firm employment. To this end, we extend the Harrison et al. (2014. “Does Innovation Stimulate Employment? A Firm-Level Analysis Using Comparable Micro-Data from Four European Countries.” International Journal of Industrial Organization 35 (1): 29–43) model and analyse the relationship between firm innovation and employment to account for innovation in the same and related sectors. We employ panel data for the innovation activities of Spanish firms together with input–output data. The results show that product innovation by firms in the same sector harms the firm's employment. We also find a negative effect on employment for the introduction of new products in upstream sectors, which results in the reduction of labour in the focal firm. The type of labour that is negatively affected by innovations introduced by both same-sector and upstream firms is low-skilled. No significant effects are found for innovations introduced in downstream industries.

Collusion risk in corporate networks

Collusion among economic operators increases prices, reduces product quality, and hinders innovation. Structural links can affect the incentive and ability of firms to behave competitively by facilitating collusion. We use a network-based approach to study the relationship between ownership links and bidding behavior in procurement markets. We build temporal multiplex networks based on firms’ ownership and co-bidding ties to find network measures that may signal collusion risk. We test four network measures, two at market-level (density and average harmonic closeness centrality) and two at firm-level (degree centrality and harmonic closeness centrality). Using data on public procurement contracts awarded in Sweden from 2010 to 2015, we found higher incidence of single bidding in markets that are more closely related through ownership links. Missing bidders are also more likely in these markets. Single bidding and missing bidders may indicate the presence of collusive arrangements such as of bid suppression or rotation. For the firm-level analyses, our results showed a positive relationship between winning probability and centrality in the ownership network. A similar result was obtained for cut-point position, indicating that firms that are more closely connected to other firms through ownership links have a more important position in the co-bidding network and are also more likely to win contracts.

Complementarity between labor and energy: A firm-level analysis

This paper extends the literature on the potential negative employment effects of environmental policy by bringing to the fore a key factor that directly regulates its magnitude: the elasticity of substitution between labor and energy. Using firm-level data from the French manufacturing sector and addressing endogeneity concerns, we provide empirical estimates that point to strong complementarity between labor and energy. We then investigate the empirical relevance of the elasticity of substitution in studying firms’ response to changing energy prices. Our findings suggest that the negative employment effects of rising energy prices are largely driven by firms with limited substitution capacity.

Learning to Use Trade Preferences: A Firm and Transaction Level Analysis of the EU–South Korea FTA

Abstract This article examines imports by Swedish firms and the utilization of the tariff preferences offered by the EU–South Korea Free Trade Agreement. To benefit from tariff preferences, the importer must make a formal request to use the preferences and also document the origin of the imported products (with a certificate of origin provided by the foreign exporter). This may be costly, and some importers choose to pay import tariffs even when tariff preferences are available. Hence, the preferences are not fully utilized. Using a detailed firm–transaction level data set on Swedish imports from South Korea, we analyse the determinants of preference utilization and how firms learn to use preferences. The results show that preference utilization is strongly correlated with potential duty savings, which depend on the preference margin and the size of the import transaction. From a learning perspective, we find that preference utilization is closely related to the number of import transactions undertaken by the firm, suggesting a learning-by-doing mechanism. The length of time the firm has been involved in importing activities plays a smaller role.

Green inclusive leadership, green policy, and pursuit of sustainability in natural resources: A firm-level analysis in context of Ukraine-Russia war

China is one of the major trading partners of Russia and Ukraine. The country depends upon Russia and China to import a few of the key strategic products from the mining, agriculture, and energy sectors. This study explores the association between green inclusive leadership, green policy, and the pursuit of sustainability in the iron-ore mining industry in China, against the backdrop of the Ukraine-Russia war. This also examines the role of green policy robustness in the relationship between green inclusive leadership and the pursuit of sustainability. Further, our study determines the magnitude of green inclusive leadership in sustainability. We used the cross-sectional data of 102 firms from the Iron-Ore Mining sector of the People Republic of China. This study employed hierarchal regression for empirical analysis. Our findings of hierarchal regression analysis highlight that green inclusive leadership significantly impacts the sustainability of the iron-ore mining firms, whereas green policies positively reinforce those impacts on the sustainability of the firms. Our findings substantiate the significant moderating role of green policy in reinforcing the impacts of green inclusive leadership on the sustainability of the firms. Our findings suggest that the presence of well well-enacted green policy can help firms to augment the impacts of green innovation leadership on sustainability. In a nutshell, our research offers insights into how the iron ore mining industry can navigate the possibility of using green innovation leadership to achieve sustainable development.