Large Firms Research Articles

Growing up in the modern world: how does artificial intelligence enhance firm growth?

PurposeThis paper examines the relationship between Artificial Intelligence (AI) technology development and firm growth. Specifically, it aims to explore how the availability of AI influences firm growth and whether larger firms benefit more from AI-driven technological advancements compared to smaller firms.Design/methodology/approachUsing a dataset from CRSP-Compustat covering public firms from 1975 to 2023, this study employs price per memory (PPM) as a proxy for AI technology accessibility to assess its impact on firm growth. The analysis focuses on three key growth metrics: total assets, tangible assets and market capitalization. By examining how data processing capacity influences these growth rates, the study compares the performance of large firms to small firms. A panel data regression is conducted, controlling for macroeconomic trends and industry-specific effects on firm growth. Additionally, the study investigates the heterogeneous impacts of AI technology accessibility across firms of different sizes.FindingsThe findings reveal that PPM, as a proxy for AI technology availability, significantly affects firm growth. Specifically, larger firms experience faster growth, especially in recent years, as AI technology becomes more accessible and cost-effective. These results suggest that large firms gain the most substantial benefits from AI advancements, further widening the growth gap between large and small firms.Originality/valueThis research extends prior studies on the impact of AI on firm growth by introducing PPM as a novel proxy for AI availability. It provides new insights into how AI technologies disproportionately benefit larger firms and offers important policy implications regarding firm financing and information regulation. This study also highlights areas for future empirical research on the role of AI in the financial industry.

El apoyo de la banca de desarrollo a las micro, pequeñas y medianas empresas

Micro, Small and Medium Enterprises (MSMEs) are a fundamental part of economy as a source of employment and suppliers of goods and services. However, they do not have the same opportunities to access financing services as large firms. In this sense, Development Bank is responsible for supporting them. The aim of this research is to analyze the support of the Development Bank to MSMEs in Mexico and locally, during the economic crisis derived from the COVID-19 pandemic (2019-2021). The methodology employed in this study was qualitative, longitudinal, documentary and explanatory, data were collected through documentary and field research. This study begins with the definition of Development Bank and its the historical context in Mexico. Subsequently, the situation of MSMEs during the pandemic is analyzed, furthermore, the participation of the Development Bank with its countercyclical policy in the country and, moreover, the effect of this crisis on the smaller enterprises in a municipality in the southeast of Mexico. The results indicate that companies know the commercial bank more than the Development Bank. Additionally, services such as factoring and leasing are not used by micro and small enterprises, despite the benefits they provide for financing working capital and the acquisition of fixed asset. It is concluded that the intervention of the Development Bank in the credit market is crucial to address the failures associated with the asymmetry of information presented by MSMEs.

Research on policy guidance and risk prevention and control in the digital transformation of sports industry

Background: Digital transformation in the sports industry has become increasingly crucial for sustainable development, yet comprehensive empirical evidence on policy effectiveness and risk management remains limited. Purpose: This study investigates the impact of policy support and risk factors on digital transformation in sports companies, examining heterogeneous effects across different firm characteristics and regional contexts. Methods: Using panel data from 168 sports companies listed on China’s A-shares markets and the New Third Board from 2019 to 2023, this study employs multiple regression analyses, including baseline models, instrumental variables estimation, and robustness tests. The digital transformation level is measured through a composite index incorporating digital infrastructure, capability, and innovation dimensions. Results: The findings reveal that policy support significantly enhances digital transformation levels (coefficient = 0.238, p < 0.01), while financial risks demonstrate the strongest negative impact (−0.162, p < 0.01). Large firms and state-owned enterprises show stronger responses to policy support (0.312 and 0.278, respectively, p < 0.01). Regional development levels significantly moderate the effectiveness of policy implementation. Conclusions: The study provides empirical evidence for the differential effects of policy support and risk factors on digital transformation across various firm characteristics. The findings suggest the need for differentiated policy approaches considering firm size, ownership structure, and regional development levels. Implications: Policy makers should develop targeted support mechanisms addressing specific challenges faced by different types of firms, while considering regional disparities in digital transformation capabilities.

Mandatory CSR disclosure regulation and stock price synchronicity: evidence from a quasi-natural experiment

Using the mandatory CSR disclosure policy enacted in China as a quasi-natural experiment, this study provides causal evidence that mandatory CSR disclosure regulation increases stock price synchronicity. Drawing upon signaling theory and behavioral finance perspective, I argue that mandatory CSR disclosure regulation as a market level signal may affect investors’ category-learning behavior, which can further have a positive impact on stock price synchronicity. I further show that this positive impact can be attenuated when firms are followed by more analysts, when more following analysts are affiliated with large brokerage firms, and when firms have better corporate governance. This study not only provides new evidence that mandatory CSR disclosure regulation can positively affect stock price synchronicity but also suggests that analysts’ capabilities to extract and understand CSR information and better corporate governance can alleviate such an effect.

Use of Clinical Trial Characteristics to Estimate Costs of New Drug Development

Despite their importance to patients, health, and industry, the magnitude of investments in drug research and development (R&D) remain nebulous. New policies require more granular and transparent R&D cost estimates to better balance incentives for innovation and returns to developers. To estimate per-drug R&D costs using a novel, reproduceable approach and to describe firm-level R&D costs per discrete unit of R&D activity (1 patient-month). This economic evaluation used cross-sectional data to estimate 2014 to 2019 costs per patient-month. Costs per patient-month were calculated using data from 268 US publicly traded drug developers, contributing 1311 firm-year observations, that were highest ranked by assets or market capitalization, after exclusions. Per-drug costs were calculated from all R&D activity through approval for a cohort of 38 new drugs approved by the US Food and Drug Administration in 2019. Data were analyzed from January 2022 to July 2024. R&D activity, measured in terms of clinical trial patient-months. This study used a 2-step approach to estimate R&D costs, first allocating firm-year-level total R&D spending across similarly aggregated patient-months, and then aggregating these incremental costs to estimate drug-level R&D costs per new drug. Among 268 developers assessed, 20 large firms accounted for 80.8% of all patient-months and had 27.4% lower mean and 26.7% lower median costs per patient-month compared with other firms. Each 1% increase in patient-months was associated with a 0.9% increase in R&D costs. R&D costs per new drug were highly skewed, with a lower median (IQR), at $708 million ($247 million to $1.42 billion) than mean (SD), at $1.31 ($1.92) billion, after adjusting for the cost of capital and discontinued products. Without these adjustments, direct costs per new drug were a median (IQR) of $150 ($67.6-$453) million and a mean (SD) $369 of ($684) million. While estimated R&D costs varied in sensitivity analyses, mean costs were always substantially greater than median costs. This economic evaluation found median per-drug R&D costs toward the lower end of the range from prior studies, with a mean closer to the middle of the existing range despite the broad scope of included costs. These findings suggest parallel development across indications, adjustment for discontinued products, and a small number of expensive development programs are particularly important drivers of R&D costs.

The Long-Run Labour Market Effects of the Canada-U.S. Free Trade Agreement

Abstract This article assesses the long-run effects of the 1989 Canada-U.S. Free Trade Agreement on the Canadian labour market using matched longitudinal administrative data for the years 1984–2004. We simultaneously examine the labour market effects of increased export expansion and import competition, generally finding adverse effects of Canadian tariff cuts and favourable effects of U.S. cuts, though both effects are small. Workers initially employed in industries that experienced larger Canadian tariff concessions exhibit a heightened probability of layoffs at large firms, but little impact on long-run cumulative earnings. Lower earnings and years worked at the initial employer are offset by gains in other manufacturing industries, construction, and services. Canadian workers quickly transitioned out of industries facing import competition, with the bilateral nature of the FTA providing import-competing workers employment options in alternative manufacturing industries benefiting from larger U.S. tariff cuts.

Green Credit Policy and Firms' Green Total Factor Productivity: The Mediating Role of Financial Constraints

In recent years, environmental pollution has emerged as a critical global challenge, prompting increasing attention toward the Green Credit Policy as a tool for environmental regulation. These policies aim to align financial systems with sustainability objectives, yet their impact on corporate development remains controversial. This study adopts the Propensity Score Matching-Difference-in-Differences (PSM-DID) method to analyze the effects of the Green Credit Policy on the green total factor productivity (GTFP) of Chinese listed companies over the period 2007–2022. The results reveal that while the Green Credit Policy is designed to enhance environmental performance, they have exacerbated financing constraints for enterprises, leading to a significant decline in GTFP. This negative impact is particularly pronounced in large enterprises and firms in eastern China, regions often subject to stricter environmental regulations. In contrast, the ownership type - whether state-owned or non-state-owned - does not significantly influence the outcomes, suggesting the pervasiveness of financing constraints across firms. The findings underscore the critical need for policymakers to design targeted green credit strategies that account for regional and enterprise-specific characteristics. For example, tailoring green finance mechanisms to address the challenges larger enterprises or firms face in economically developed regions could mitigate unintended consequences. Moreover, the study highlights the importance of integrating financial support mechanisms, such as tax incentives, subsidies, or green innovation funds, into the future Green Credit Policy. Such measures can promote investment in green technologies by alleviating financial pressures and fostering environmental and economic goals. Ultimately, this study advocates for a balanced, context-sensitive approach to green finance, ensuring sustainable development without compromising firms' productivity.

Bad loan build-up in India: A reflection of soft budget constraints

This paper analyses the non-performing assets (NPA) crisis in the Indian banking system from the perspective of soft budget constraints. Using a panel dataset of 105 publicly listed firms, it explores the relationship between NPAs and bank lending behaviour, particularly examining credit rationing regarding firm size and risk level. The findings indicate that Indian banks favour large firms over smaller ones, while credit rationing is not adequately aligned with borrower riskiness. However, the Asset Quality Review (AQR) by the Reserve Bank of India and the introduction of the Insolvency and Bankruptcy Code (IBC) seem to have enforced risk-based lending to some extent. These results shed light on the systemic issues that drive NPAs, linking them to governance weaknesses and the prevalence of soft budget constraints.

Nexus between corporate sustainable practices and sustainable development goals: Indian evidence

Purpose The purpose of this study is to explore the disclosure of sustainable development goals (SDGs) by Indian firms and to examine the association between sustainable business practices and the disclosure of SDGs. Design/methodology/approach The study is based on large Indian non-financial firms listed in Bombay Stock Exchange 200 for six years from 2016–2017 to 2021–2022. Sustainable business practices are measured using four important indicators - the quality of sustainability discourse, compliance with Global Reporting Initiative guidelines, adoption of the guidelines of the International Integrated Reporting Council and external assurance of published reports. Content analysis is used to compute the disclosure score of SDGs and corporate sustainability performance. The authors have used a fixed effects regression model followed by Tobit model and two-stage least square model to examine the association between sustainable business practices and the disclosure of SDGs. Findings The results indicate an increasing trend of disclosure of SDGs by Indian firms. The empirical findings suggest a positive impact of sustainable business practices on the SDGs disclosure after controlling for firm-specific and corporate governance variables. Among the components of corporate sustainability, social and environmental factors positively influence the SDGs. Originality/value The study is a noble attempt to enrich the extant literature by providing empirical evidence on the association between sustainable business practices and disclosure of SDGs considering four important indicators of sustainable practices. The findings are useful for theoretical and practical implications.

The Extent and Efficiency of Credit Reallocation During Economic Downturns

The theoretical literature on credit reallocation has yielded conflicting predictions on both the extent and the efficiency of reallocations during economic downturns. We borrowed the methodology of measuring job reallocation to measure credit reallocation and examine which predictions are consistent with the data. We reported the following findings: (1) the extent of credit reallocation is smaller in recessions than in expansions, which is attributable to the decreasing extent of credit creation; (2) this tendency was more pronounced during the Lost Decade of the 1990s; (3) credit reallocation generally is efficiency-enhancing, but at a lower rate in recessions and turns to efficiency-reducing during the Lost Decade, possibly due to financial assistance by banks to large but low-quality firms (e.g., through zombie lending). These findings indicate that the inefficient credit reallocation during the Lost Decade was characterized by efficiency-reducing reallocation to large firms.

The impact of firm size on the relationship between leverage and firm performance: evidence from Saudi Arabia

Capital structure and its relationship with firm performance is one of the most debatable topics in corporate finance among both scholars and policy-makers. Using a panel threshold regression model, this study investigates the impact of firm size on the nonlinear relationship between the leverage and performance of Saudi listed firms from 2010 to 2019. The results reveal that firm size is critical in determining the nonlinear relationship between leverage and firm performance. A single threshold level divides the sample into two regimes of small and large firms. Leverage negatively affects performance in both regimes with different debt maturities. However, the negative impact is more pronounced among small firms, especially when long-term debt is employed. This study adds to the evolving literature because the unique setting of the Saudi market is characterized by its illiquid and underdeveloped bond market. Additionally, Saudi firms are not subject to income tax; instead, they are subject to zakat, which is levied at 2.5%. These characteristics impact the relationship between leverage and Saudi firm performance at different firm sizes. This study is important for financial managers, regulators, researchers, and investors to understand how leverage with different maturities affects performance and the role of firm size in this relationship.

Total factor productivity growth decomposition and its determinants in Ethiopian manufacturing sector

The objective of this study is to examine the performance of the manufacturing firms in terms of productivity growth by accounting for the determining factors. The findings revealed that growth in TFP has an average rate of 4.87% per year and showed significant improvement over the three policy periods (1996–2003, 2004–2010, and 2011–2015), respectively 3.6%, 4.7%, and 6.5%. Total factor productivity has been decomposed into contributing sources of technical progress (1%), scale change (− 0.14%), and technical efficiency change (4.01%). Twelve factors are identified from the literature as determinants of TFP growth. Eight of them are found to statistically affect this growth. The periods from 2004 to 2010 (high economic growth period) and from 2011 to 2015 (GTP I) have a higher TFP growth rate relative to the base period (1996–2003) and similar private ownership. In addition, labor input growth, capital intensity, and growth in average wage contributed positively to TFP growth. Importers of raw material inputs have higher TFP growth rates compared with non-importers. Tone can conclude from this finding that Ethiopian large and medium-scale manufacturing firms are low in terms of TFP growth. There are factors that enhance productivity, and there are also others that hinder improvements. Thus, strategically designed, coordinated with the firms themselves, and focused interventions are required in order to raise the real sales and value added using the existing state-of-the art technology and input combination, along with advancing the technical know-how, improving labor quality, updating, and renovating the capital input.

The Rise of Scientific Research in Corporate America

It is widely believed that university and corporate research are complementary: companies invest in research in part to develop the capacity to absorb the knowledge emerging from universities. However, as we show in this paper, corporate research in the United States emerged when American universities were behind the world frontier in scientific research. Why, then, did for-profit businesses choose to invest in creating new knowledge, much of which could spill over to rivals, and whose conduct presented many managerial challenges? We argue that corporate research in America arose in the 1920s to compensate for weak university research, not to complement it. Using newly assembled firm-level data from the 1920s and 1930s, we find that companies invested in research because inventions increasingly relied on science but American universities were unable to meet their needs. Large firms close to the technological frontier and operating in concentrated industries were likely to invest in research, especially in scientific disciplines where American universities lagged behind the scientific frontier. Corporate science seems to have paid off, resulting in novel patents and high market valuations for firms engaged in research. Funding: A. Arora, S. Belenzon, and J. Suh acknowledge support from the Fuqua School of Business, Duke University. S. Belenzon and Y. Yafeh gratefully acknowledge financial support from the Israel Science Foundation [Grant No. 963-2020]. K. Kosenko is grateful for support from the Bank of Israel. Y. Yafeh acknowledges support from the Krueger Center at the Hebrew University of Jerusalem School of Business. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.18053 .

Adapting Management Control Systems to Organizational Contingency Factors: A Study of Moroccan Industrial Companies

This study investigates how organizational contingency factors, namely company size, environmental uncertainty, technological capacity, and organizational structure, affect the design and effectiveness of management control systems (MCS) in Moroccan industrial companies. Drawing on contingency theory, which emphasizes the alignment of organizational systems with contextual factors, this research applies quantitative methods to a sample of 190 industrial firms in Morocco, achieving a 76% response rate to the distributed surveys. The data are analyzed using correlation and linear regression techniques to explore these relationships. The findings reveal that larger firms, those operating in dynamic and uncertain environments, and those with advanced technological systems tend to implement more sophisticated, integrated, and participative MCS. Furthermore, flexible and decentralized organizational structures significantly enhance the adoption of adaptive control systems. These results underscore the importance of tailoring MCS to organizational characteristics and environmental conditions, particularly in emerging market contexts. This study’s novel contribution lies in its application of contingency theory to a non-Western industrial context, addressing a gap in the literature by demonstrating how specific regional factors influence MCS practices. This research offers practical insights for Moroccan industrial firms seeking to improve their operational efficiency, adaptability, and strategic decision making in volatile markets.

Interplay Between Financial Markets, Environmental Stewardship, Gender Diversity, and Firm Size in Emission‐Intensive Sectors of Emerging Asian Economies: A Board‐Level Perspective

ABSTRACTExisting research on board gender diversity often overlooks the role of firm size. It lacks a comprehensive evaluation of financial market and environmental performance, particularly in emerging markets with high gender bias. Addressing these gaps, we investigate the moderated mediation between board gender diversity, environmental stewardship, firm size, and market performance in emission‐intensive sectors of emerging Asian economies with significant gender disparity. We perform FE 2‐SLS regressions on a panel of 1012 firm‐year observations from 96 firms (2013–2023) and test Hayes Process Macro‐Model 7 on cross‐sectional data from 929 firms in 2023. Results robust to alternative measures and endogeneity concerns suggest that women board directorships enhance financial market performance directly and via improved environmental stewardship. The environmental benefits, however, diminish in larger firms. Notably, gender diversity in executive roles does not affect environmental stewardship but increases financial market performance. The study introduces a novel measure of environmental stewardship and offers new insights into corporate governance, environment management, and financial markets literature, with significant implications for regulators, investors, and managers.

Earnings Management Detection, from Second Digit Frequencies to Discretionary Accruals: Evidence from the Alternative Market of the Bucharest Stock Exchange

ABSTRACT In this study, two techniques are applied (Benford’s Law and the magnitude of discretionary accruals) to identify possible manipulations in the reported incomes of Romanian firms listed on the alternative market of the Bucharest Stock Exchange (BSE), for the period 2010–2022. The main results show an increasing trend of the analyzed firms to round up their reported net income. The differences in frequencies appear to be more important for large firms, audited by auditors affiliated to international networks, with a male chief financial officer (CFO) and less profitable. These results are generally confirmed by the discretionary accruals analysis.

Peranan Kekuatan Pasar dalam Penetapan Harga dan Kemajuan Teknologi

Market power refers to a company's ability to influence the price of goods or services in the market. In a perfectly competitive market, both buyers and sellers have set prices, therefore businesses can set their prices without affecting the market price. In contrast, in less pure market structures such as oligopoly or monopoly, businesses can set prices and influence the market. When businesses with strong market power outperform new competitors, it constrains consumer purchasing power and allows businesses to set prices and improve product quality. In addition, technology plays an important role in production efficiency, as innovation can lower costs and create new products that meet consumer needs. The purpose of this study is to analyze the role of market forces in pricing and technological advances and provide important implications for producers to determine the price of goods and services. This research uses a qualitative approach combined with a literature review approach to analyze data related to the main topic of research. The data comes from secondary literature, which includes books, scientific journals, and articles. The study found that high market concentration, where a few large firms dominate, often leads to less competition and increased market power for those firms. This can lead to higher prices, lower quality, and less innovation.

Dampak Integrasi, Merger dan Konglomerasi Terhadap Risiko Persaingan dan Stabilitas Perekonomian

This article analyzes the impact of integration, mergers, and conglomeration on competition risk and economic stability using a literature review approach. The background of this research highlights the increasing prevalence of corporate mergers that may lead to unhealthy competition risks and economic instability. The study aims to identify the characteristics, impacts, and implications of integration, mergers, and conglomeration strategies within the context of market structure, corporate behavior, and performance. The research method employs a qualitative approach by collecting secondary data from journals, e-books, and relevant documents. Data analysis is conducted descriptively-qualitatively by examining the relationship between market structure, corporate behavior, and economic performance through the Structure-Conduct-Performance (SCP) analytical framework. Findings indicate that integration, mergers, and conglomeration have complex effects on business competition. The merging process can reduce the number of competitors, increase the dominance of large firms, and potentially create monopolistic practices. The SCP analysis reveals that changes in market structure through corporate consolidation significantly affect economic behavior and performance. The article emphasizes the need for effective regulation and oversight to minimize negative impacts, protect healthy competition, and maintain economic stability. The conclusion offers deep insights into the dynamics of business integration and its implications for market structure, behavior, and performance.

Nurturing sustainability practices: a qualitative inquiry into environmental innovations as a catalyst in manufacturing enterprises in an emerging economy

PurposeThis study explores how medium and large manufacturing firms integrate environmental innovations to foster sustainability practices. It seeks to uncover the specific challenges these firms face and the strategies they employ to effectively implement sustainable initiatives in response to growing environmental pressures.Design/methodology/approachUsing a qualitative phenomenological approach, the study analyzes twelve detailed case studies, engaging in conversational interviews to capture the lived experiences of key stakeholders. Through direct quotations and thematic analysis, the research offers in-depth insights into the practical implementation of sustainability practices driven by environmental innovations.FindingsThe study identifies those environmental innovations – both in products and processes – are critical drivers for addressing specific sustainability challenges. Firms that successfully implement these innovations do so by leveraging internal resources and external collaborations, which enable them to navigate environmental regulations, reduce waste and enhance operational efficiency. However, the findings also highlight significant barriers such as financial constraints and resistance to change within traditional manufacturing systems.Research limitations/implicationsThe study is limited by the use of a convenience sampling method and potential biases in interview responses. Future research should adopt more robust sampling techniques and explore longitudinal impacts to mitigate subjectivity and enhance generalizability.Practical implicationsThe findings offer practical insights for manufacturing firms seeking to implement sustainability practices. By understanding the mechanisms through which environmental innovations can be integrated into their operations, firms can develop more effective strategies for enhancing environmental performance.Originality/valueThis study contributes original insights into the strategic application of environmental innovations within the manufacturing sub-sector. It highlights the role of innovations in overcoming sustainability challenges, offering a nuanced understanding of how firms can align operational goals with environmental imperatives.

A Decade of Enforcement: Traditional Theories of Harm and the Challenges Posed by Digital Mergers

Abstract Many commentators have expressed concerns about the current state of merger enforcement in the digital sector. Some point to the fact that numerous acquisitions by large digital firms have not undergone sufficient scrutiny, while others propose fundamentally new theories of harm relating to data, privacy or so-called ecosystem effects. The debate remains active, with recent cases like Amazon/iRobot and Booking/eTraveli adding fuel to the fire. In this article, we examine merger decisions related to the digital sector published by Europe’s leading authorities over the last decade. Through our review of 55 cases, involving acquisitions by GAFAM and other firms, we find that these authorities have not rushed to expand their analytical toolkit, generally relying on traditional tools and well-established theories of harm. However, we also observe that these tools have been applied more broadly or in novel ways, especially in recent years.