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CES-WP-90-13

The Determinants of U.S. Intra-Industry Trade

F Scherer, Keun Huh

December 01, 1990

Responses from the Yale University survey of 650 research and development executives were linked to U.S. trade statistics at the four-digit SIC level for the years 1965-85 to test several hypotheses concerning intra-industry trade. A new index of intra-industry trade was developed to capture both the level and balance dimensions of import and export flows. Intra-industry trade is found to be more extensive, the higher industry R&D/sales ratios were, the more important economies of learning-by-doing were, and greater the relevance of academic engineering research was, and the more niche-filling strategies were emphasized in new product development. When firms oriented their R&D efforts toward meeting the specialized demands of individual customers, intra-industry trade was lower. The highest levels of intra-industry trade were found in loosely oligopolistic industries. International High-Technology Competition, Cambridge, Massachusetts: Harvard University Press (1992).

View Paper   26 Pages 40960 Bytes

CES-WP-90-12

THE RELATIONSHIPS AMONG ACQUIRING AND ACQUIRED FIRMS' PRODUCT LINES

Sang Nguyen, Robert Mcguckin, Stephen Andrews

September 01, 1990

This study develops detailed information on the relationships among the activities of acquiring and acquired firms at and near the time of merger for a sample of 94 takeovers undertaken between 1977-1982. We focus on takeovers for two reasons. First, takeovers are an important and controversial phenomenon. Second, takeovers allow us to look at marginal changes, admittedly large ones, in the firm's boundaries. Thus, they provide a useful way of examining relationships among activities of the firm without having to go into great detail regarding the historical decisions that generated the firm's current structure. While the individual establishment is our basic data unit, in this study we aggregate the activities of the firm to the line of business (LOB) level. Each LOB of an acquired firm is classified as to its relationship horizontal, vertical (upstream or downstream), and conglomerate to the LOBs of the acquiring firm. Using these categorizations we aggregate the LOB-level information to the firm level to investigate the degree to which our sample of mergers is specialized to particular types of relationships. While we find a significant group of unspecialized takeovers, most appear to fit a specific category. We also look at the pattern of closed operations immediately following the takeover. Closings are generally concentrated in operations involving horizontal relationships. Finally, we consider the pattern of relationships between hostile and friendly takeovers and whether takeover premiums vary by type of merger. Merger premiums are not related to the type of relationship between the acquiring and acquired firm, but they are tied to whether the takeover is friendly or hostile.

View Paper   52 Pages 95536 Bytes

CES-WP-90-11

Returns to Scale in Small and Large U.S. Manufacturing Establishments

Arnold Reznek, Sang Nguyen

September 01, 1990

The objective of this study is to assess the possibility of differences in the production technologies between large and small establishments in five selected 4-digit SIC manufacturing industries. We particularly focus on estimating returns to scale and then make interferences regarding the efficiency of small businesses relative to large businesses. Using cross-section data for two census years, 1977 and 1982, we estimate a transcendental logarithmic (translog) production model that provides direct estimates of economies of scale parameters for both small and large establishments. Our primary findings are: (i) there are significant differences in the production technologies between small and large establishments; and (ii) based on the scale parameter estimates, small establishments appear to be as efficient as large establishments under normal economic conditions, suggesting that large size is not a necessary condition for efficient production. However, small establishments seem to be unable to maintain constant returns to scale production during economic recession such as that in 1982. Small Business Economics, Number 3, pp. 197-214, (1991).

View Paper   38 Pages 131072 Bytes

CES-WP-90-9

Self-Employment Trends Among Mexican Americans

Timothy Bates

August 01, 1990

Minority businesses are commonly aggregated into groups of 1) black, 2) Hispanic, and 3) Asian-owned firms. These analytical groupings may, in fact, be useful if blacks, Hispanics and Asians exhibit intra-group similarities and intergroup differences in terms of business development patterns. The applicable similarities and differences do appear to typify the Asian and black groups of self-employed, but they do not typify Hispanic-owned small businesses. In other words, "Hispanic" does not appear to be a useful category for analysis. The Hispanic subset, Mexican American-owned firms, is judged to be suitable for analysis. Most minority-owned firms have traditionally been started with minimal financial capital inputs by owners who have not attended college. The resultant small scale firms have frequently oriented their operations toward serving a low income minority clientele. In this study, I investigate two closely interrelated broad hypotheses on minority business dynamics, utilizing a sample of Mexican American business establishments drawn from the Characteristics of Business Owners data base: Traditional firms - these firms tend to a) be small scale, b) have high failure rates, c) and generate few jobs because of their minimal owner inputs of financial and human capital. Emerging firms, in contrast, are most commonly started by better educated owners--many of whom have attended four or more years of college--and financial capital inputs are high relative to those observed in traditional lines of business. It is because of these larger financial and human capital inputs that emerging firms tend to be a) larger scale, b) have lower failure rates, and c) generate more jobs, relative to their traditional cohorts. Sociologists have used the term "protected market" to describe the culturally-based tastes of ethnic minorities that can only be served by co-ethnic businesses. Particularly in the early years of settlement, immigrants are assumed to patronize co-ethnic enterprises, and this pattern of patronage seems to typify Hispanic enclaves in areas such as Southern California. Whether or not the resultant protected market is an asset to Mexican American firms-- particularly those in traditional fields such as small-scale retailing--is investigated econometrically. The evidence indicates that the protected market provided by immigrants patronizing co-ethnic enterprises is an absolute hindrance to Mexican American business viability. The very low incomes of most recent immigrants constrain the attractiveness of this protected market. The state of the barrio business community reflects the economic circumstances of its clientele. Quarterly Review of Economics and Business, (1990).

View Paper   31 Pages 62464 Bytes

CES-WP-90-8

The Extent and Nature of Establishment Level Diversification in Sixteen U.S. Manufacturing Industries

Mary Streitwieser

August 01, 1990

This paper examines the heterogeneity of establishments in sixteen manufacturing industries. Basic statistical measures are used to decompose product diversification at the establishment level into industry, firm, and establishment effects. The industry effect is the weakest; nearly all the observed heterogeneity is establishment specific. Product diversification at the establishment level is idiosyncratic to the firm. Establishments within a firm exhibit a significant degree of homogeneity, although the grouping of products differ across firms. With few exceptions, economies of scope and scale in production appear to play a minor role in the establishment's mix of outputs. Journal of Law and Economics, Part 2, pp. 503-534 (1991).

View Paper   45 Pages 76800 Bytes

CES-WP-90-7

The Classification of Manufacturing Industries: an Input-Based Clustering of Activity

Thomas Abbott Iii, Stephen Andrews

August 01, 1990

The classification and aggregation of manufacturing data is vital for the analysis and reporting of economic activity. Most organizations and researchers use the Standard Industrial Classification (SIC) system for this purpose. This is, however, not the only option. Our paper examines an alternative classification based on clustering activity using production technologies. While this approach yields results which are similar to the SIC, there are important differences between the two classifications in terms of the specific industrial categories and the amount of information lost through aggregation. Proceedings, Census Bureau Annual Research Conference, pp. 26-45, (1990).

View Paper   52 Pages 108544 Bytes

CES-WP-90-2

An Analysis of Small Business Size and Rate of Discontinuance

Timothy Bates, Alfred Nucci

January 01, 1990

This study investigates small business failure rates in relation to several measures of firm size. Utilizing the new Characteristics of Business Owners ( CBO ) data base, a nationwide sample of firms is utilized that is representative of the small business universe. One subset--small business employers--is shown to have relatively low rates of failure, while another group--very small firms with no employees--exhibits relatively high rates of business discontinuance. The finding that the probability of firm failure is strongly (inversely) related to firm size is shown to hold up as well when the age of the business is controlled for. Journal of Small Business Management, pp. 1-7, (1990).

View Paper   21 Pages 31744 Bytes

CES-WP-90-1

Longitudinal Economic Data At The Census Bureau: A New Database Yields Fresh Insight On Some Old Issues

Robert Mcguckin

January 01, 1990

This paper has two goals. First, it illustrates the importance of panel data with examples taken from research in progress using the U.S. Census Bureau's Longitudinal Research Database ( LRD ). Although the LRD is not the result of a "true" longitudinal survey, it provides both balanced and unbalanced panel data sets for establishments, firms, and lines of business. The second goal is to integrate the results of recent research with the LRD and to draw conclusions about the importance of longitudinal microdata for econometric research and time series analysis. The advantages of panel data arise from both the micro and time series aspects of the observations. This also leads us to consider why panel data are necessary to understand and interpret the time series behavior of aggregate statistics produced in cross-section establishment surveys and censuses. We find that typical homogeneity assumptions are likely to be inappropriate in a wide variety of applications. In particular, the industry in which an establishment is located, the ownership of the establishment, and the existence of the establishment (births and deaths) are endogenous variables that cannot simply be taken as time invariant fixed effects in econometric modeling. Proceedings of the Statistics Canada Symposium on Analysis of Data in Time, pp. 243-253, (1990).

View Paper   39 Pages 72704 Bytes

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