This study investigates whether incorporating Information and Communication Technology (ICT) into production processes enhances the productivity of unorganized sector Micro, Small, and Medium Enterprises (MSMEs) in India and fosters their participation in international trade. Using data from the National Sample Survey's 73rd round (2015-16) on unincorporated non-agricultural enterprises, encompassing approximately 269,000 firms, three key findings emerge. First, digital infrastructure usage positively impacts firm productivity, a result robust to endogeneity concerns and alternative measures. Second, this relationship varies across sectors (manufacturing versus services), firms with different productivity levels (using the Quantile Regression Method), and industries within the services sector. Finally, a Probit Regression Model demonstrates that increased adoption of digital infrastructure and improved productivity facilitate entry into international markets. The study highlights the importance of a 'bottom-up approach' in policy measures aimed at promoting digital transformation and enhancing productivity in unorganized sector MSMEs, thereby enabling their global competitiveness.
Improving capacity utilization represents an important approach to optimizing enterprise operations. This paper regards the National Industrial Transformation and Upgrading Demonstration Zone (ITUDZ) policy as a quasi-natural experiment to examine how industrial upgrading policy affects enterprises' capacity utilization (CU). Using a difference-in-differences (DID) model and data on Chinese listed manufacturing firms from 2010 to 2019, we find that the ITUDZ policy significantly improves enterprises' capacity utilization. Heterogeneity analysis indicates that the policy exerts a more pronounced effect on capacity utilization in energy-intensive cities, energy-intensive enterprises, non-state-owned enterprises, and enterprises located in eastern and central China. Furthermore, the ITUDZ policy functions primarily by promoting firms' technological progress and strengthening environmental regulation. This study provides policy implications and empirical evidence for advancing industrial upgrading and enhancing capacity utilization in China and other developing countries.
This paper explores fuel smuggling and tax evasion by analyzing discrepancies in fuel imports and identifying the factors influencing them. The study analyzes data from 28 European Union member countries and 7 candidate countries over the period 1996-2022, conducting a comparative analysis. The research methodology employs panel data estimation models. The empirical findings suggest that fuel smuggling is positively correlated with the shadow economy index, the nominal tax rate and the tax revenue from excise duties, while negatively correlated with the gap between nominal and effective tax rates, as well as GDP per capita in most specifications. A literature review reveals that no previous study has examined fuel smuggling in relation to crude oil imports while simultaneously integrating the impact of institutional informality. Furthermore, this study serves as a valuable resource for policymakers by providing insights to help reduce fuel smuggling, combat associated tax evasion and ultimately increase tax revenues.
Labour regulations are often cited as a key constraint on firms' ability to optimise size, with implications for productivity and profitability. This study examines how labour regulations influence firm transition in India's manufacturing, focusing on legislative amendments (de jure) and firms' perceived regulatory constraints (de facto). Using World Bank Enterprise Survey data for 2014 and 2022, the article analyses firm transition across size categories. Findings show upward mobility for medium and large firms in states with flexible labour regulations, while firms in heavily regulated states tend to remain in their initial size categories. Fixed effects and difference-in-differences results reveal nuanced and modest effects of labour regulations on firm transition. Although de jure reforms contribute to employment growth, firms are more likely to stay in the same size category than to expand, highlighting the need for stronger enforcement and compliance to improve firm mobility and productivity.
This study investigates the impact of rookie CEOs on corporate environmental investment using panel data from Chinese listed firms between 2008 and 2023. The results show that rookie CEOs significantly reduce firms' environmental spending. Mechanism analysis reveals two underlying channels: increased media attention amplifies external monitoring and reputational pressure, prompting rookie CEOs to cut long-horizon projects such as environmental investment; and rookie CEOs reinforce managerial myopia by prioritising short-term investments, thereby crowding out long-term sustainability projects. Heterogeneity analysis further shows that this effect is more pronounced in firms without vertical interlock, in male-dominated executive teams and in firms with older top management, whereas the effect weakens in firms with younger management teams. Overall, the findings highlight the importance of executive characteristics in shaping sustainable strategies and provide new insights into firms' environmental investment behaviour.
Temporary employment may facilitate the food industry in adjusting operational activities in response to volatile demand and supply. However, the peripheral tasks assigned to temporary workers, limited training, and the lack of firm-specific skills impede productivity. This study explores the impact of temporary employment and its gender composition on productivity. The findings indicate that firms with temporary employees are less productive. When temporary employees are predominantly female, productivity is even lower. This study provides reasons explaining low productivity in the global food industry and offers managerial recommendations for food companies and policy implications for policymakers. Key suggestions include initiatives that empower women through skill training and development, managerial education, and access to technological knowledge can enhance women's participation and contributions in the food industry.
Generic drug sellers are relied on to challenge brand drug patents, but invalidation allows other sellers to enter. The 180-day exclusivity period, awarded to the first challenger of a brand drug's patent(s), was created to address this potential free-rider problem. The exclusivity period incentivizes challenges but also delays entry by later-filing firms so could harm competition overall. This paper examines whether a drug's market life (time between brand and generic entry) is longer when the value of the exclusivity period is diminished, which happens when it is shared (by firms filing simultaneously) or forfeited. Among 141 drugs with a new molecule experiencing generic entry during 2015-2025, the average market life was over three years shorter when the exclusivity period was shared and unrelated to forfeiture, even after controlling for drug and patent characteristics. These results challenge the notion that a lucrative exclusivity period is necessary to encourage drug patent challenges.
This study investigates how firm-specific political risk influences corporate cash holdings, focusing on its moderating role in the cash flow-cash relationship. Using panel data from U.S. publicly listed firms (2012-2021), we distinguish between expected and unexpected components of political risk and examine their differential effects on cash flow sensitivity. The empirical strategy employs heteroskedasticity-robust FGLS panel regressions supplemented by robustness checks using EPU measures, firm size subsamples, GMM, and instrumental variables. Findings reveal that while political risk increases cash holdings, it reduces cash flow sensitivity. Unexpected political risk notably amplifies this sensitivity, reflecting precautionary behavior under uncertainty. In contrast, expected political risk dampens it, indicating firms' ability to plan for anticipated events. Effects are particularly pronounced among financially constrained firms. The study offers valuable implications for managers, regulators and investors. By highlighting contrasting effects of expected versus unexpected political risk, this research provides novel insights into corporate liquidity management determinants.Areas of InterestCorporate Governance and CSR (Corporate Social Responsibility)Finance and Risk ManagementEmerging Markets FinanceSustainable Finance and Environmental Performance
National high-tech enterprise certification is a crucial policy aimed at encouraging corporate innovation in China. However, it is unclear whether high-tech certification provides extra benefits to Chinese firms besides tax and subsidy advantages. In this study, I investigate the influence of high-tech enterprise certification on financial constraints and firms' R&D performance. High-tech enterprise certification is typically regarded as a signal that alleviates information problems, facilitates external financing, and motivates firms to allocate more financial resources to value-enhancing R&D projects. Using a sample of Chinese small and medium-sized enterprises (SMEs) during the period 2007-2024, this study shows that (1) information asymmetry and financing problems are mitigated due to high-tech certification, and (2) R&D input and output are significantly enhanced, and R&D spending makes a greater contribution to firm performance after SMEs attain high-tech status. This study suggests a new effect of government policy, namely, the signal effect, on SME R&D performance.
This study examines the impact of corporate social responsibility (CSR) on stock returns by analyzing the cumulative abnormal returns (CAR) surrounding foreign direct investment (FDI) announcements. Using a sample of 20,275 FDI deals by 2,488 firms from 48 home countries investing in 121 host countries, we find that CSR is positively correlated with CAR when the stock market reacts negatively to FDI announcements and negatively correlated with CAR when the stock market responds positively to FDI announcements. These results suggest that CSR attenuates share price increases caused by positive events and mitigates share price decreases caused by negative events. CSR is negatively correlated with stock return volatility, proxied by squared CAR around FDI announcements. Therefore, we propose that CSR modulates stock return changes asymmetrically. Our results suggest that CSR engagement might be viewed as an implicit swap between a firm and its social stakeholders.
Happiness is an important global goal, and a central social-economic indicator. The business sector is gradually, if only partially, adopting the pursuit of happiness as a value, as stakeholders' awareness of its importance increases. However, the role of the business sector in promoting Gross National Happiness (GNH) remains unclear, despite its central role in society. Furthermore, a corporation's choice to increase happiness may have a negative impact on its short-term financial profit, thereby decreasing its propensity to invest in happiness. We construct a theoretical model to present the concept of Corporate Happiness Responsibility (CHR) as a framework for promoting happiness in the business sector. The model illustrates the contradictions between profit maximization and contribution to GNH and proposes using tax benefits as an incentive to close the gap. Our theoretical framework makes a significant contribution to the advancement of happiness by supporting the business sector's increased responsibility for national happiness.
Corporate political activity (CPA), lobbying and political contributions intended to influence the policy environment may either complement or crowd out real investment. This study examines when CPA is investment-enhancing by combining firm- and year-fixed effects, Dynamic System-GMM for mean-level endogeneity, and fixed-effects quantile and IV-quantile regressions to recover distribution-varying effects with endogenous CPA. Using firm-year data for Fortune World's Most Admired Companies (2016-2022), results show that CPA is associated with higher investment at lower quantiles, consistent with uncertainty-buffering and financing-access channels, but attenuates and can turn negative at upper quantiles, consistent with diversion at high CPA intensity; the overall pattern is inverted-V. Two firm-level boundary conditions are introduced: Corporate Governance and Ethical Leadership. Both moderators amplify the positive CPA-Investment association in the lower tail and temper adverse upper-tail effects. Findings are robust to alternative investment proxies (CAPEX/Assets, asset growth, R&D intensity), CPA scaling, timing placebos, balanced subsamples, and instrument choices.
We examine the consequences of spatial proximity on the performance of a distinct type of social enterprise - microfinance institutions (MFIs). Specifically, by using seemingly unrelated regressions, we evaluate how spatial proximity relates simultaneously to three dimensions of performance within a cross-border spillovers framework. We find that while the outreach to the poor by neighboring countries' MFIs is positively related to the outreach of an MFI, their financial performance is negatively related. The results indicate that the outreach to clients within the region is improved with similar financial services. However, the cost of better outreach differs across countries in line with the literature showing tradeoffs between client outreach and financial sustainability. Country-level economic and institutional factors are identified as channels through which spatial spillovers are observed. The policy implications of our findings suggest that regional economic development and knowledge sharing professional communities have a bigger role to play when it comes to spatial spillovers in microfinance.
This study provides the first empirically-grounded assessment of how fossil fuel subsidies constrain renewable energy generation in Saudi Arabia. Leveraging an autoregressive distributed lag (ARDL) model with structural break testing (Zivot-Andrews) on 1995-2023 data-encompassing both the 2016 and 2018 subsidy reform waves-we quantify the dynamic interplay between fossil fuel subsidies and renewable energy generation. The current undertaking has unearthed that a 1% reduction in fossil fuel subsidies increases renewable energy generation by 6.45% in the short run and 9.94% in the long run, with economic diversification emerging as a statistically robust accelerant. These findings empirically validate that suppressing fossil fuel subsidies and reallocating investments via economic diversification are pivotal to unlocking Saudi Arabia's renewable energy potential. The results we gleaned could prove substantially important to policymakers and stakeholders seeking to maximize fossil fuel subsidy reform benefits and strategically redirect resulting revenues to jump-start the renewable energy industry.
While studies have analyzed the sectoral reallocation of micro and small enterprises (MSEs), the literature often overlooks their influence on regional productive structures. This study addresses the critical role of MSEs in economic sophistication within a developing country context. Utilizing panel data from Brazil's industrial sector, we employ econometric models, including Fixed Effects (FE) and the Driscoll-Kraay (DK) estimator, to analyze 558 microregions from 2003 to 2015. The impact of within-sector dynamics on productive sophistication, measured by economic complexity, is examined. Robustness tests are conducted using instrumental variable models, such as Limited Information Maximum Likelihood (LIML), Two-Stage Least Squares (2SLS), and Generalized Method of Moments with Continuously Updating Estimates (GMM-CUE). Our findings demonstrate that a higher intensity of firm reallocation between micro and small size categories, measured by a within-sector turbulence index, has a positive and statistically significant impact on regional productive sophistication. This underscores the importance of policies aimed at fostering a dynamic business environment that facilitates market selection and resource reallocation.
This study analyzes the impact of R&D outsourcing, R&D cooperation and their interaction on firms' technical efficiency, distinguishing between those with high and low absorptive capacity. The empirical evidence is drawn from the 2016 Technological Innovation Panel (PITEC), which provides information on Spanish manufacturing firms. To estimate coefficients and test complementarity, we employ stochastic frontier analysis with a Heckman correction to control for sample selection bias, restricting the sample to innovative firms and applying the complementarity approach. The results indicate that R&D cooperation and absorptive capacity exert positive and significant effects on efficiency, while outsourcing has a negative but insignificant influence. Moreover, the joint reliance on external knowledge sources reduces efficiency among firms with high absorptive capacity but has no effect on those with low capacity. These findings yield relevant implications for managers and policymakers, showing that external knowledge sources perform specialized functions, thereby guiding strategic decisions on R&D management.
This study investigates the complex interrelationships among promoter ownership, banking relationships, and firm value in the Indian context. Drawing on a panel dataset of publicly listed manufacturing firms spanning the period 2011 to 2022; we employ a dynamic panel estimation approach using the system GMM methodology to address potential endogeneity and firm-level heterogeneity. The analysis uncovers significant nonlinearities in the relationship between promoter ownership and firm value, as well as between banking relationships and firm value. In particular, the former is inverted U-shaped, whereas the latter exhibits a U-shaped relationship. These effects are particularly pronounced when distinguishing between domestic and foreign promoters, suggesting that the source of promoter control plays a pivotal role in shaping firm-bank dynamics and valuation outcomes. To deepen our understanding, we undertake a two-tiered disaggregation of the banking relationship. First, we differentiate firms based on whether their primary banking partner is a state-owned or private-sector institution. Second, we examine the extent of board-level and equity-based interlocks between banks and firms. The results indicate that the observed patterns are largely driven by relationships with state-owned banks, where promoter ownership tends to be higher among firms with stronger institutional ties. From a policy standpoint, these findings underscore calibrated governance reforms by reinforcing disclosure requirements and minority shareholder protections, especially in firms with concentrated promoter control.
With the prominent role of semiconductors in many digital products and the wider digitisation of the supply chain, the investigation carried out aims to capture the macroeconomic significance of the semiconductor sector on economic growth. Semiconductor manufacturing output is treated as a sector-specific driver with potential spillover effects on aggregate economic performance. The analysis specifies an Autoregressive Distributed Lag (ARDL) model to examine (1) the long-run and short-run impact of semiconductor production on GDP and (2) to quantify the structural antecedents of semiconductor production itself. The findings indicate that an 1% increase in manufacturing semiconductors is associated with a 0.05% increase in output in the long run and 0.01% rise in the short run. In addition, an 1% investment in the software sector (e.g. fabless) stimulates the production of semiconductor foundries by 2.89%. A contraction of workforce in the sector has been also identified.
