Competitive, but too small - productivity and entry-exit determinants in European business services

The paper investigates whether scale effects, market structure, and regulation determine the poor productivity performance of the European business services industry. We apply parametric and nonparametric methods to estimate the productivity frontier and subsequently explain the distance of firms to the productivity frontier by market characteristics, entry- and exit dynamics and national regulation. The frontier is assessed using detailed industry data panel for 13 EU countries. Our estimates suggest that most scale advantages are exhausted after reaching a size of 20 employees. This scale inefficiency is persistent over time and points to weak competitive selection. Market and regulation characteristics explain the persistence of X-inefficiency (sub-optimal productivity relative to the industry frontier). More entry and exit are favourable for productivity performance, while higher market concentration works out negatively. Regulatory differences also appear to explain part of the business services' productivity performance. In particular regulation-caused exit and labour reallocation costs have significant and large negative impacts on the process of competitive selection and hence on productivity performance. Overall we find that the most efficient scale in business services is close to 20 employees and that scale inefficiencies show a hump-shape pattern with strong potential scale economies for the smallest firms and diseconomies of scale for the largest firms. The smallest firms operate under competitive conditions, but they are too small to be efficient. And since this conclusion holds for about 95 out of every 100 European business services firms, this factor weighs heavily for the overall productivity performance of this industry

Small firms captive in a box like lobsters

The paper empirically investigates whether a lack of competition determines the poor productivity performance of the European business services. It uses detailed panel data for 13 EU countries over the period 2000-2005. We apply parametric and nonparametric methods to estimate the productivity frontier and subsequently explain the distance to the productivity frontier by market characteristics, entry and exit dynamics and national regulation. We find that the most efficient scale in business services is close to 20 employees. Scale inefficiencies show a hump-shape pattern with strong potential scale economies for the smallest firms. Nonetheless, some 95% of the firms operate at a scale below the minimal optimal scale. While they are competitive in the sense that their productivities are very similar, they have strong scale diseconomies compared to the larger firms. Their scale inefficiency is persistent over time, which points to growth obstacles that hamper the achievement of scale economies. Regulation characteristics explain this inefficiency; in particular, regulation-caused exit and labour reallocation costs are found to have a large negative impact on productivity performance.

Competitive, but too small - productivity and entry-exit determinants in European business services

The paper investigates whether scale effects, market structure, and regulation determine the poor productivity performance of the European business services industry. We apply parametric and nonparametric methods to estimate the productivity frontier and subsequently explain the distance of firms to the productivity frontier by market characteristics, entry- and exit dynamics and national regulation. The frontier is assessed using detailed industry data panel for 13 EU countries. Our estimates suggest that most scale advantages are exhausted after reaching a size of 20 employees. This scale inefficiency is persistent over time and points to weak competitive selection. Market and regulation characteristics explain the persistence of X-inefficiency (sub-optimal productivity relative to the industry frontier). More entry and exit are favourable for productivity performance, while higher market concentration works out negatively. Regulatory differences also appear to explain part of the business services' productivity performance. In particular regulation-caused exit and labour reallocation costs have significant and large negative impacts on the process of competitive selection and hence on productivity performance. Overall we find that the most efficient scale in business services is close to 20 employees and that scale inefficiencies show a hump-shape pattern with strong potential scale economies for the smallest firms and diseconomies of scale for the largest firms. The smallest firms operate under competitive conditions, but they are too small to be efficient. And since this conclusion holds for about 95 out of every 100 European business services firms, this factor weighs heavily for the overall productivity performance of this industry.productivity; frontier models; scale; industry dynamics; regulation; European Union; business services

Market structure, productivity and scale in European business services

Using data from 11 EU countries, the paper investigates the impact of scale economies on labour productivity in European business services. Moreover, it analyses whether the incidence of scale sub-optimality is related to characteristics of the market or to national regulation characteristics. The econometric analysis is based on a production function model in combination with a distance-to-the-frontier model. We find evidence for the existence of increasing returns to scale in business services firms. A result is that throughout the EU, business-services firms with less than 20 employed persons have a significantly lower level of labour productivity than the rest of the business-services industry. Two factors explain the scale inefficiencies. The first is the level of policy-caused firm-entry costs; higher start-up costs for new firms go along with more scale inefficiency. Secondly, business-services markets tend to be segmented by firm size: firms tend to compete predominantly with firms in their own size segment of the markets. Scale-related inefficiencies are to some extent compensated by more competition within a firm's own size segment. If a firm operates in a more “crowded” segment this has a significant and positive impact on its labour productivity. We derive some policy implications from our findings.EU, business services, scale efficiency, labour productivity, regulation, entry costs

Adaptive emotion regulation, academic performance and internalising problems in Flemish children with special educational needs : a pilot study

School readiness of children with special educational needs (SEN) is still understudied. The present study examined how the presumed bidirectional relationship between impaired academic performance (AP) and internalising problems (IP) could be favourably influenced. In this regard, it was assumed that children’s adaptive emotion regulation plays a crucial role, as it was shown to be independently related to improved AP and fewer IP. However, to gain stronger evidence for this assumption, it should be further clarified whether adaptive emotion regulation, AP and IP are also jointly associated and, if so, how this is reflected in children with SEN. To explore these issues, two different models were tested in a cross-sectional pilot including 61 Flemish elementary school children with SEN (39 boys and 22 girls, mean age = 10.0 years old). Teachers reported on adaptive emotion regulation, AP and IP. The results indicated that AP partially mediated the relationship between adaptive emotion regulation and IP (model 1), while IP fully mediated the relationship between adaptive emotion regulation and AP (model 2). Practical implications, strengths, and limitations were discussed

The effects of TIME-IN on emotion regulation, externalizing, and internalizing problems in promoting school readiness

Children’s readiness for school is often threatened by the occurrence of both externalizing and internalizing problems. Previous research has shown that Positive Behavioral Interventions and Supports (PBIS) is particularly effective for fostering children’s behavioral skills and reducing externalizing problems. However, whether PBIS can enhance children’s emotional skills and reduce internalizing problems is less clear. Therefore, TIME-IN was developed, which extends PBIS by also including emotional support systems. It was tested whether TIME-IN was effective for (a) improving emotion regulation and (b) reducing depressive symptoms. Furthermore, it was tentatively explored whether TIME-IN is accompanied by more than natural fluctuations in both children’s externalizing and internalizing problems. The effectiveness of TIME-IN was evaluated in a non-randomized study, in which an intervention group was compared with a matched control group. Both research questions were addressed in a sample consisting of 81 children between 8 and 12 years of age with special educational needs. Questionnaires for teachers (i.e., TRF), children (i.e., FEEL-KJ and CDI), and their parents (i.e., CBCL) were administered at the beginning (T0) and the end of the school year (T1) using multi-informant assessment. Only indicative evidence was found for the hypothesis that TIME-IN improved children’s emotion regulation. Practical implications, strengths, and limitations were discussed