The Impact of Firm and Industry Characteristics on Small Firms’ Capital Structure
Hans Degryse, Peter de Goeij, Peter Kappert
Small Business Economics,
Nr. 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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Foreword: Competing: Important Stimuli for Knowledge Cities to Become Prosperous
Peter Franz
T. Yigitcanlar, K. Metaxiotis, J. Carrillo (eds), Building Prosperous Knowledge Cities. Policies, Plans and Metrics,
2012
Abstract
The author discusses the role of competitions in urban development strategies based on the cooperation of higher education institutions. The experience with similar strategies in regional policy and in innovation policy is reflected upon. After the presentation of some cases, the advantages and disadvantages of development strategies based on competitions are compared.
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Intellectual Property Rights Policy, Competition and Innovation
Daron Acemoglu, Ufuk Akcigit
Journal of the European Economic Association,
Nr. 1,
2012
Abstract
To what extent and in what form should the intellectual property rights (IPR) of innovators be protected? Should a company with a large technology lead over its rivals receive the same IPR protection as a company with a more limited advantage? In this paper, we develop a dynamic framework for the study of the interactions between IPR and competition, in particular to understand the impact of such policies on future incentives. The economy consists of many industries and firms engaged in cumulative (step-by-step) innovation. IPR policy regulates whether followers in an industry can copy the technology of the leader. We prove the existence of a steady-state equilibrium and characterize some of its properties. We then quantitatively investigate the implications of different types of IPR policy on the equilibrium growth rate and welfare. The most important result from this exercise is that full patent protection is not optimal; instead, optimal policy involves state-dependent IPR protection, providing greater protection to technology leaders that are further ahead than those that are close to their followers. This is because of a trickle-down effect: providing greater protection to firms that are further ahead of their followers than a certain threshold increases the R&D incentives also for all technology leaders that are less advanced than this threshold.
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Competition, Risk-shifting, and Public Bail-out Policies
Reint E. Gropp, H. Hakenes, Isabel Schnabel
Review of Financial Studies,
Nr. 6,
2011
Abstract
This article empirically investigates the competitive effects of government bail-out policies. We construct a measure of bail-out perceptions by using rating information. From there, we construct the market shares of insured competitor banks for any given bank, and analyze the impact of this variable on banks' risk-taking behavior, using a large sample of banks from OECD countries. Our results suggest that government guarantees strongly increase the risk-taking of competitor banks. In contrast, there is no evidence that public guarantees increase the protected banks' risk-taking, except for banks that have outright public ownership. These results have important implications for the effects of the recent wave of bank bail-outs on banks' risk-taking behavior.
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Regional Entrepreneurial Opportunities in the Biotech Industry: Exploring the Transition from Award-winning Nascent Entrepreneurs to Real Start-ups
H. Wolf, Claus Michelsen, Michael Schwartz
Abstract
Knowledge of factors that determine the transition from nascent entrepreneurship into real entrepreneurship is of major importance for policies aiming to effectively stimulate start-ups. Whereas scholars concentrated on person-specific factors to explain transition probabilities, environmental characteristics have been fairly neglected. Given that entrepreneurship is a strongly localized phenomenon, this paper argues that regional entrepreneurial opportunities are a driving force behind the transition from nascent entrepreneurship to new venture creation. Based on unique data on 103 nascent entrepreneurs in the German biotechnology industry, we empirically assess the importance of regional entrepreneurial opportunities on transition probabilities. Further, we introduce a new
approach to measure nascent entrepreneurship by capturing individuals that actively participate in start-up competitions and have won at least one competition. Controlling for technology and individual characteristics, we find strong support for our hypotheses relating to the significant impact of general regional opportunities, specific regional opportunities and the entrepreneurial environment for the probability of transition from award-winning nascent entrepreneurs to real start-ups.
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Lending Technology, Bank Organization and Competition
Hans Degryse, Steven Ongena, Günseli Tümer-Alkan
Journal of Financial Transformation,
2009
Abstract
This paper reviews recent theoretical and empirical studies investigating how both bank technology and organization shape bank-borrower interactions. We refer to two related concepts for bank technology. First, the technologies banks employ in loan granting decisions and second, the advances in information technology linked to the bank's lending technology. We also summarize and interpret the theoretical and empirical work on bank organization and its influence on lending technologies. We show that the choice of lending technology and bank organization depend heavily on the availability of information, the technological progress in the collection of information, as well as the banking market structure and the legal environment. We draw important policy conclusions from the literature. Competition authorities and supervisors have to remain alert to the consequences of the introduction of any new technology because: (1) advances in technology do not necessarily lead to more intense banking competition, and (2) the impact of technological and financial innovation on financial efficiency and stability depends on the incentives of the entire „loan production chain.‟
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Investment (FDI) Policy for Azerbaijan, Final report
Jutta Günther, Björn Jindra
Einzelveröffentlichungen,
Nr. 4,
2009
Abstract
The report has been prepared on behalf of the Association for Technical Cooperation (GTZ) as integral part of the “Private Sector Development Program” run by the GTZ in Azerbaijan. A comprehensive investment policy is outlined with particular focus on the possibilities to attract foreign direct investment (FDI) in Azerbaijan’s manufacturing industry (non-oil sector). The report makes particular reference to the experiences with investment policy development in Central and East European transition economies. It touches legal and institutional framework conditions in Azerbaijan as well as possible investment incentives schemes including investment promotion. Major recommendations refer to trade integration within the region, introduction of tax incentives as well as further improvements in business climate. Furthermore, the importance of complementary policies, such as competition and education policy, is stressed.
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Deeper, Wider and More Competitive? Monetary Integration, Eastern Enlargement and Competitiveness in the European Union
Gianmarco Ottaviano, Daria Taglioni, Filippo di Mauro
ECB Working Paper,
Nr. 847,
2008
Abstract
What determines a country’s ability to compete in international markets? What fosters the global competitiveness of its firms? And in the European context, have key elements of the EU strategy such as EMU and enlargement helped or hindered domestic firms’ competitiveness in local and global markets? We address these questions by calibrating and simulating a conceptual framework that, based on Melitz and Ottaviano (2005), predicts that tougher and more transparent international competition forces less productive firms out the market, thereby increasing average productivity as well as reducing average prices and mark-ups. The model also predicts a parallel reduction of price dispersion within sectors. Our conceptual framework allows us to disentangle the effects of technology and freeness of entry from those of accessibility. On the one hand, by controlling for the impact of trade frictions, we are able to construct an index of ‘revealed competitiveness’, which would drive the relative performance of countries in an ideal world in which all faced the same barriers to international transactions. On the other hand, by focusing on the role of accessibility while keeping ‘revealed competitiveness’ as given, we are able to evaluate the impacts of EMU and enlargement on the competitiveness of European firms. We find that EMU positively affects the competitiveness of firms located in participating economies. Enlargement has, instead, two contrasting effects. It improves the accessibility of EU members but it also increases substantially the relative importance of unproductive competitors from Eastern Europe. JEL Classification: F12, R13.
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FDI and Domestic Investment: An Industry-level View
Claudia M. Buch
CEPR. Discussion Paper No. 6464,
2007
Abstract
Previous empirical work on the link between domestic and foreign investment provides mixed results which partly depend on the level of aggregation of the data. We argue that the aggregated home country implications of foreign direct investment (FDI) cannot be gauged using firm-level data. Aggregated data, in turn, miss channels through which domestic and foreign activities interact. Instead, industry-level data provide useful information on the link between domestic and foreign investment. We theoretically show that the effects of FDI on the domestic capital stock depend on the structure of industries and the relative importance of domestic and multinational firms. Our model allows distinguishing intra-sector competition from inter-sector linkage effects. We test the model using data on German FDI. Using panel cointegration methods, we find evidence for a positive long-run impact of FDI on the domestic capital stock and on the stock of inward FDI. Effects of FDI on the domestic capital stock are driven mainly by intra-sector effects. For inward FDI, inter-sector linkages matter as well.
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Globalisation and Euro Area Trade: Interactions and Challenges
Filippo di Mauro, Ursel Baumann
ECB Occasional Paper,
Nr. 55,
2007
Abstract
As a major player in world trade, the euro area is strongly influenced by globalisation, but is far from being a passive spectator. The paper analyses how the euro area's trade specialization has changed in response to stronger international competition and the emergence of new global players, evaluating results and possible challenges ahead. The message remains mixed. On the positive side, the export specialisation of the euro area is increasing in some medium-high or high-tech sectors where productivity growth is strong and demand robust, such as pharmaceuticals, also by a more intensive recourse to importing intermediate goods from low-cost countries. On the other hand, in comparison to other industrialised economies, the euro area has been somewhat slower in moving towards research-intensive goods and away from labour-intensive sectors. While this could reflect data classification issues, it may also be a sign of structural rigidities in the euro area, which hinder adjustment processes.
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