The Dark Side of Shareholder Protection: Cross-country Evidence from Innovation Performance

Proponents of minority shareholder protection state that national legal institutions protecting small investors boost stock markets and, in turn, long-term countries’ performance. In this paper, we empirically challenge this argument. We perform three-stage least-square estimation on a sample of 48 countries over 1993-2006 and find that countries with stronger shareholder protection tend to have larger market capitalization but also lower innovation activity. We cope with stock market’s endogeneity and industry heterogeneity, and circumvent omitted variables bias, so that this finding is unlikely to be driven by misspecification problems. We interpret our estimation results arguing that stronger shareholder protection may depress, rather than encourage, the most valuable corporate productions, because it enables small and diversified shareholders to play opportunistic actions against undiversified stockholders, after specific investments are undertaken by the company; innovation activity, largely based on specific investing, is particularly exposed to this problem.shareholder protection, innovation, specific investments, inter-shareholder opportunism.

International economic assistance and migration: the case of Sub-Saharan countries

Development aid is commonly advocated as one of the most effective instruments to reduce international migration. Nevertheless, empirical evidence shows that push factors do not automatically result in massive migrations and that aid policies systematically fail to meet their stated objectives. Recently, several contributions have argued that an increase in sending countries’ wealth may lead to a rise in migration, rather than to a reduction, because it enables people to assume the costs and risks of migrating. However, despite the growing number of studies on this phenomenon, the role played by Official Development Assistance (ODA) has not received attention yet. This paper is aimed at providing empirical evidence on this specific issue. In particular, we investigate the relation between ODA and international migration rates of Sub-Saharan countries. We argue that ODA may have a positive effect on migration decisions for two reasons. First, ODA improves workers’ ability to cover the costs of migration, by providing new job opportunities and in turn increasing incomes in the recipient country. Second, ODA, that is often associated with development programs in education, communication services and business opportunities, may also stimulate mobility aspirations of potential migrants. We develop an econometric analysis in order to investigate this hypothesis. Specifically, we perform a three-stage least square estimation on a sample of 48 Sub-Saharan countries. We build a two-equation model, so as to allow for endogeneity of ODA, and find that ODA has a positive and statistically significant effect on migration outflows. Thus, as our main contribution, we argue that development aids are not substitute for migration and that the traditional aid policies (such as those of the European Union), aimed at curbing migration by providing international financial aids, might need to be reconsidered.international migration; official development assistance; Sub-Saharan countries

Partisan Liberalizations. A New Puzzle from OECD Network Industries?

We investigate the political determinants of liberalization in OECD network industries, performing a panel estimation over thirty years, through the largest and most updated sample available. Contrary to traditional ideological cleavages, we find that right-wing governments liberalize less than left-wing ones. This result is confirmed when controlling for the existing regulatory conditions that executives find when elected. Furthermore, governments’ heterogeneity, proportional electoral rules, and European Union membership all show positive and statistically significant effects on liberalization. Our findings suggest that, despite the conventional wisdom, the political-economic rationale behind liberalization paths in network industries is far from being assessedLiberalization – Network Industries – Government heterogeneity and Partisanship – Electoral systems - Panel data

Digging into the Technological Dimension of Environmental Productivity

We propose a mixture model approach to identify locally optimal technologies and to dissect environmental productivity (output produced per unit of emission) into a technological and a managerial component. For a large sample of plants covered by the EU ETS, we find that the share of plants adopting the frontier technology is about 21%. We also find that the average output gains that plants could reach by adopting optimal technologies and managerial practices are 75% and 80% respectively. These results remain qualitatively similar after addressing endogeneity of emissions. Finally, we match EU ETS data with balance-sheet data on parent companies and find that better environmental technologies tend to be adopted by larger, listed, multi-plant and international companies, while older firms and firms with higher intangibles assets intensity more commonly show improved environmental management. Our results suggest that existing technologies have large unexploited potentials and deliver important insights for policy

Corporate governance and innovation: an organizational perspective

Traditional economic studies of innovation, built on the contribution of Schumpeter, cannot explain why firms of the same size and market power can show largely different innovation performances. Contrastingly, the literature on corporate governance provides some useful insights for understanding corporate innovation activity, to the extent that such literature examines the economic consequences of different modes of coordination between firm participants. The process through which individuals integrate their human and physical resources within the firm is indeed central to the dynamic of corporate innovation. This paper provides the first survey of the literature on this issue. We start by discussing why a theory of the firm must be put at the base of an economic analysis of corporate innovation. We then describe three main channels – corporate ownership, corporate finance and labour – through which a system of corporate governance shapes firm innovation activity. Finally, we examine the recent literature on national structures of governance

Innovation in State-owned Enterprises: Reconsidering the Conventional Wisdom

A very well established economic literature maintains that State-owned enterprises (SOEs) are inefficient comparatively to privately-owned ones (POEs). In this paper we argue that SOEs' inefficiency is not due to the State ownership per se, rather it is caused by some conditions other than ownership which SOEs often, but not necessarily, relate to. In particular, we focus on dynamic efficiency - specifically, the production of technological innovation - of SOEs in manufacturing industries, where SOEs should contend with POEs in a competitive environment. We suggest that targeted measures aimed at increasing managers' commitment to long-term investment strategies and at reducing corruption and political interference, though being complex and difficult to implement, can be much more (positively) incisive on long-run technical progress than the simple privatization of companies. This leaves room for exploration and implementation of policies that might reconcile State ownership and market competition in industrial sectors

Innovation in State-owned Enterprises: Reconsidering the Conventional Wisdom

A very well established economic literature maintains that State-owned enterprises (SOEs) are inefficient comparatively to privately-owned ones (POEs). In this paper we argue that SOEs' inefficiency is not due to the State ownership per se, rather it is caused by some conditions other than ownership which SOEs often, but not necessarily, relate to. In particular, we focus on dynamic efficiency - specifically, the production of technological innovation - of SOEs in manufacturing industries, where SOEs should contend with POEs in a competitive environment. We suggest that targeted measures aimed at increasing managers' commitment to long-term investment strategies and at reducing corruption and political interference, though being complex and difficult to implement, can be much more (positively) incisive on long-run technical progress than the simple privatization of companies. This leaves room for exploration and implementation of policies that might reconcile State ownership and market competition in industrial sectors

International economic assistance and migration: the case of Sub-Saharan countries

Development aid is commonly advocated as one of the most effective instruments to reduce international migration. Nevertheless, empirical evidence shows that push factors do not automatically result in massive migrations and that aid policies systematically fail to meet their stated objectives. Recently, several contributions have argued that an increase in sending countries’ wealth may lead to a rise in migration, rather than to a reduction, because it enables people to assume the costs and risks of migrating. However, despite the growing number of studies on this phenomenon, the role played by Official Development Assistance (ODA) has not received attention yet. This paper is aimed at providing empirical evidence on this specific issue. In particular, we investigate the relation between ODA and international migration rates of Sub-Saharan countries. We argue that ODA may have a positive effect on migration decisions for two reasons. First, ODA improves workers’ ability to cover the costs of migration, by providing new job opportunities and in turn increasing incomes in the recipient country. Second, ODA, that is often associated with development programs in education, communication services and business opportunities, may also stimulate mobility aspirations of potential migrants. We develop an econometric analysis in order to investigate this hypothesis. Specifically, we perform a three-stage least square estimation on a sample of 48 Sub-Saharan countries. We build a two-equation model, so as to allow for endogeneity of ODA, and find that ODA has a positive and statistically significant effect on migration outflows. Thus, as our main contribution, we argue that development aids are not substitute for migration and that the traditional aid policies (such as those of the European Union), aimed at curbing migration by providing international financial aids, might need to be reconsidered

Advanced Technologies and Worker Voice

The interplay between labour institutions and firm-level adoption of new technologies such as robotics andother advanced digital tools remains poorly understood. Using a cross-sectional sample of more than 20,000European establishments, we document a positive association between shop-floor employee representation (ER)and utilization of emerging technologies. We explore mechanisms driving this correlation by exploiting richinformation on the role played by ER in relation to well-defined decision areas of management, such as workorganization, dismissals, training and working time. In addition, we conduct a quantitative case study usinga panel of Italian firms and exploiting size-contingent policy rules governing the operation of ER bodies inthe context of a local-randomization regression discontinuity design. The analysis suggests a positive effectof ER on investments in advanced technologies around the firm size cut-off, although results are sensitiveto type of technology and specification choices. We also document positive effects on training and processinnovation, and no evidence of changes in composition of employment. Our findings cast doubt on the ideathat ER discourages technology adoption. Rather, ER seems to influence workplace practices that enhance thecomplementarity between labour and new advanced technologies

Does Incentive Pay Substitute for Monitoring? The Role of Managerial Skills and Span of Control

We model the conditions under which firm agency issues are tackled through incentive pay as opposed to monitoring. The model shows that a larger span of control makes labor surveillance less effective as an effort extraction mechanism, whereas managerial skills increase the opportunity cost of monitoring. As a result, the use of pay-for-performance schemes is more likely in firms with a lower staff-to-managers ratio and more skilled managers. An empirical analysis on firm-level Italian data produces results coherent with our theoretical predictions. Taken together, our results help to explain the highly heterogeneous use of incentive contracts among firms