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Artificial intelligence (AI) is often seen as a key technology for future economic growth. However, its concrete effects on the emergence of radical innovations and the associated socio-economic impacts, through increasing divergence between smaller and larger firms, have not yet been systematically researched. This paper addresses this by investigating the extent to which AI-related knowledge influences the emergence of radical innovations and differentiates between SMEs and large firms. Based on a unique dataset of European firms combining firm-level data with patent data, we find a nuanced influence from AI. While AI applications assert a positive influence, AI techniques negatively influence the emergence of radical innovations. Being an SME significantly moderates these effects. Larger firms gain from AI applications, whereas SMEs gain from AI techniques. Therefore, AI knowledge in itself is not a general answer to increase the likelihood of creating radical innovation. Instead, a more differentiated view on AI is needed. Plain English Summary: Possessing knowledge in AI techniques decreases the chance of creating radical knowledge in general, but SMEs benefit from such knowledge. Conversely, knowledge in AI applications is more beneficial for large firms. Artificial intelligence (AI) is often seen as a key technology for future economic growth. However, some firms may have an advantage in utilizing AI knowledge to create radical innovation. This paper investigates the influence of AI-related knowledge in firms on the emergence of radical innovations with a specific focus on the differences between SMEs and large firms. We find that application-related AI knowledge increases the likelihood for radical innovations, while technique-related AI knowledge decreases it. Nevertheless, SMEs have an advantage in utilizing AI techniques to generate radical innovations. Thus, the principal implication of this study is that SMEs should focus on AI techniques, allowing them to capture unseen technological opportunities which cannot be obtained in a formalized R&D process within a large firm. [ABSTRACT FROM AUTHOR]

Waste management is an essential tool for policymakers. We derive an efficient production function using a dual cost approach related to waste from the output. Since producers do not bear the cost of waste disposal, the demand for virgin material increases in the production process. Therefore, preserving exhaustible resources by imposing a tax on virgin materials and waste disposals is essential. This study compares the effect of tax on waste and the demand for virgin material. Our results suggest that (a) taxing waste or virgin material will induce recycling only for the polluting firms; (b) a tax on virgin material is highly effective for the polluting firms; however, the output will reduce; (c) a higher tax may lead cross-border trade of waste generated. We also focus on different markets, such as perfectly competitive markets and imperfectly competitive markets. We conclude as the number of firms increases under Cournot's oligopolistic setup, the effect on the profitability becomes negligible. The findings of this study have greater implications for the environment and climate policies. [ABSTRACT FROM AUTHOR]

This study sought to examine how institutions shape export performance using Kenyan data. The left-censored random-effects Tobit and the random-effects Generalized Least Squares (GLS) estimators were applied on panel data obtained from World Bank's Enterprise Surveys covering 2007, 2013, and 2018. Using a vector of institutional variables touching on the efficiency of the court system, access to trade finance, tax inspections, bribes during tax inspections, on-the-job trainings, customs regulations, quality certifications, informal competition, operating licenses, and trade permits, the results indicate that specific institutions on quality certification, trade finance, and on-the-job trainings are associated with improvement in export performance while bureaucratic tax inspections dampen prospects from export trade. The findings are robust as the coefficients from the Tobit estimator are reinforced by those from the GLS estimator. These findings constitute an original attempt to examine the interlink between institutions and export performance with specific focus on the Kenyan context. Pertaining the trade environment, the findings point towards a need to enhance institutional capacity, undertake reforms of export-related institutions, invest towards a national quality infrastructure, and entrench self-regulation not only in Kenya, but also among other developing countries. [ABSTRACT FROM AUTHOR]

As recorded widely in the extant literature, foreign‐invested firms with superior technology and managerial skills are likely to generate productivity spillovers that may be beneficial to local firms. We examine firm level productivity spillovers in the West African context. Four countries were sampled on the basis that they share institutional and similarities as British colonies and social economic similarities as West African countries. The Levinshon and Petrin methodology was fitted with firm level data sourced from the World Bank enterprise survey for the period 2006–2018 with the sampled countries having data for different years. Our results confirm that foreign direct investment has a significant and positive impact on the productivity of firms in West Africa. Controlling for other effects, Capital intensity has a significant but negative effect on firm productivity; changes in market concentration do not have any impact while firm size negatively affects productivity of firms in the region. The study recommends among other things that policy should be targeted towards removing all cumbersome access restrictions experienced by foreign investors. Improvement in the ease of doing business in these countries could be a major policy thrust which will clear up the path of direct investment inflow. [ABSTRACT FROM AUTHOR]

Numerous studies have investigated the consequences of auditor switching. This study contributes to the existing literature by examining the impact of industry specialization on audit quality using audit firm switches in China. We find that changing from a non‐specialist to a specialist at the auditor partner level rather than the audit firm level decreases discretionary accruals and increases value relevance and the likelihood of modified audit opinions and going‐concern opinions. These results suggest that upward partner‐level industry specialization improves audit quality for clients, which attenuates the negative impact of an audit switch. [ABSTRACT FROM AUTHOR]

This letter provides firm-level evidence that policy makers tailor trade policy to suit selected firms. It argues that firms with higher levels of specific assets find it more costly to reorganize production, and are hurt more by international competition. In response, policy makers grant more trade protection to firms with fixed assets. Since protectionism is costly, firms compete for it, which creates diffusion dynamics in which the protection granted to one firm affects the protection granted to others. This claim is tested utilizing the special role antidumping duties (ADDs) play in international trade, and combining petitions for ADDs with financial data on the firms filing them in a unique dataset. Using spatial autoregressive models, the authors find that firms with specific assets are granted more protection. However, diffusion dynamics differ within and between groups of firms producing the same good. This suggests that firms can partly shape their own level of trade protection. [ABSTRACT FROM AUTHOR]

Purpose – This paper aims to investigate the antecedents of process innovation to provide more alternates for Vietnamese firms as they are still struggling to find an appropriate innovation strategy. Design/methodology/approach – The research analyzes the separate impacts of each innovation strategy on process innovation using logistic regression models. Data were collected using a stratified random sampling method. Findings – The results show that having an innovation strategy is good for innovation, regardless of whether the strategy is internal or external. Internal and external strategies are proved not complements but substitutes. However, the internal strategy seems to be most beneficial. Weak institutional settings further strengthen the importance of internal strategies, whereas strong institutional settings favor external strategies. Originality/value – This paper analyzes the impact of different innovation strategies on process innovation in Vietnamese firms using firm-level data. The findings strongly recommend that in weak institutional settings such as Vietnam, firms should focus on an internal strategy because the emphasis on external innovation strategies might be a western bias stemming from research in mostly strong institutional contexts.

Corruption can impose a significant financial burden on firms. Such burden is magnified when firms are financially constrained. The paper applies this idea to the impact of corruption on employment growth. Using firm‐level survey data for 85 countries, we find that corruption hurts more when firms are financially constrained than when they are not. Baseline estimate suggests that a one percentage point increase in overall corruption lowers growth rate of employment by 0.45 percentage points for financially constrained firms but only by 0.08 percentage points for financially unconstrained firms. The result passes several robustness checks. [ABSTRACT FROM AUTHOR]

This study examines the impact of feed-in tariffs (FITs) on promoting investment in renewable energy (RE) in Southeast Asia. Using firm-level data from six Southeast Asian economies from 2012 to 2021, we find robust evidence that FITs substantially boosted firms' investment in RE. Moreover, the impact of FITs on RE investment in Southeast Asian economies varies across different RE technologies and firm characteristics. We find that the significant and positive impact of FITs on RE is largely driven by solar FITs on promoting investment in solar RE, but such effects are insignificant for other RE technologies including wind and biomass, geothermal, and hydro. Further, the impact of FITs on RE investments is more pronounced among younger and smaller firms than in older and larger firms. Our empirical evidence has implications for policy makers to design FITs in a cost-effective manner to promote more private sector investment in RE. • We use firm-level data from Southeast Asia 2012–2021 to study the impact of FIT; • FIT substantially boost firms' investments in RE; • FIT promote investments in solar; • Impacts are insignificant for wind and biomass, geothermal, and hydro; • FIT promotes investments by younger and smaller firms. [ABSTRACT FROM AUTHOR]

It is sometimes thought that regulation often creates opportunities for public officials to extract bribes. If this is true, deregulation offers a simple way of combating corruption. However, empirical evidence on the corruption and regulation nexus is limited. Further, the corruption indices used are based on experts' opinions, which may suffer from perception bias. The present paper attempts to address these shortcomings using firm-level survey data for 131 mostly developing countries on the actual experience of the firms with bribery and regulatory burden. The study examines the level of overall corruption and petty corruption. Exploiting variation in regulatory burden, both within-country and industry-level, a large positive effect of regulatory burden on corruption is found. For the baseline results, the bribery rate is higher by about 0.03 percentage points for each percentage point increase in the regulatory burden. The finding is robust to several controls and endogeneity checks. [ABSTRACT FROM AUTHOR]

In this paper, we test the contribution of foreign management to firm productivity. We use a novel data set on the careers of 115,505 managers employed in 10,238 firms in the UK from 2009–2017. We find that domestic manufacturing firms become, on average, 4.9% more productive and about 23.3% more capital intensive after hiring foreign managers. In particular, we find that prior industry-specific experience of foreign managers abroad allows spillover effects to domestic recruiting firms. On the other hand, we find no significant effect on foreign-owned firms after hiring foreign managers, possibly because technological spillovers have already occurred after takeovers by headquarters. The marginal productivity gain is twice as high when the new hires end up on all-British boards without a history of diversity. Our identification strategy combines matching techniques, difference-in-difference and pre-recruitment trends to challenge reverse causality. The results are robust to different specifications and sample composition effects. Ultimately, our results show how restrictions on the global mobility of managerial talent hamper the competitiveness of the domestic industry. [ABSTRACT FROM AUTHOR]

Mobile enterprise application (MEA) technology has been identified as a technology that could help organisations to improve productivity, reduce cost, and gain and sustain competitive advantages through enterprise-wide technology implementations. Despite its many potential benefits, the adoption of MEA has not been as extensive globally as anticipated. Research results indicate that perceived technology usefulness, ease of use, perceived competitive pressure, industry trends, information technology (IT) infrastructure, organisational policies processes and systems, employee knowledge and readiness, and organisational resources are important factors that shape the adoption intent of organisations towards MEA technology. Implications for practice and research are also discussed.

Oil and gas windfalls may lead to the Dutch disease, that is, the crowding out of the manufacturing sector due to rising wages when labor is drawn to the expanding sectors. In this paper, we exploit the fact that oil and gas discoveries contain an element of luck as well as oil price fluctuations to capture exogenous variation in oil and gas windfalls across Indonesia and identify their effects on manufacturing firms. We find that oil and gas windfalls on average cause wages as well as firms' labor productivity, output, and employment to increase, while product unit values and exit rates are unaffected. Heterogeneity analysis reveals that the least productive firms are more likely to exit, and surviving low-productivity firms see relatively large expansions in output and labor productivity, while high-productivity firms see relatively high expansions in employment. [ABSTRACT FROM AUTHOR]

The study is designed to identify the determinants of profitability in the insurance industry of Pakistan. The panel data set of 41 insurance companies (life, non-life, and takaful insurance) from 2007-2017 was employed. Hausman's specification and Breusch-Pagan Lagrange multiplier (LM) tests have selected the most appropriate test i.e. fixed effect and pooled OLS model for this study. The results of pooled OLS and fixed effect model reveal that insurancespecific and macroeconomic factor like leverage, business risk, and inflation rate are negative but significantly affect the profitability of the insurance sector. However, size and GDP rate has a positive and statistically significant influence on profitability. Liquidity and growth are insignificant determinants of the study. This is the first study that covers the entire insurance industry, which is also composed of the takaful industry, along with firm-specific and country-specific attributes and applies the most suitable models for the study. Thus, this study is very important for top-echelon and policy- makers of the insurance sector of Pakistan regarding the profitability of the firm and wealth of the shareholders.

Banks financing decisions remain an enigma, increasingly attracting the attention of banking regulators and corporate finance scholars alike. This article sought to establish whether banks seek to achieve a target capital structure in their financing decision making and if so at what speed of adjustment (SOA) do they gravitate towards this target? Utilising a sample of 16 South African banks for the period 2006-2015, we employed panel data techniques to determine whether banks have a target capital structure that they quest for. A partial adjustment model was estimated using the LSDV with Kiviet (1995) correction estimator which controls for cross-sectional dependence and to determine the speed of adjustment towards this target. Robustness checks were also conducted to establish whether the SOA is dependent on the source of financing used. The results documented that South African banks have a target capital structure which they quest for, and adjust to this target at a SOA of 44% or a half-life of 2.4 years which is relatively faster to that of non-financial firms. These findings relegate capital regulations to be of secondary importance in the determination of bank capital structure. At worst bank capital regulations might not be binding at all. [ABSTRACT FROM AUTHOR]

Using a database of 23,000 firms in 45 economies, we test the quantitative importance of access to finance and access to public and private credit for the determination of misallocation. We first derive measures of factor market and size distortions, and then use these measures within a regression framework to test the significance of self-declared access-to-finance obstacles as well as the effect of access to a credit line issued by either a government-owned or private bank. We find that access-to-finance obstacles and private credit increase the dispersion of distortions. Public credit has a very small effect. For firms that do not face financial obstacles, public credit increases the dispersion of distortions; for firms that face financial obstacles, it slightly decreases dispersion. Public credit does not appear to compensate for the distortions that exist in private credit markets. Quantitatively, however, financial variables explain a very small part of the dispersion of factor market and size distortions.

While extant business intelligence systems (BIS) adoption research focused mainly on adoption of BIS in large-sized organizations, our understanding about the adoption determinants and the process within small and medium enterprises (SME) is still limited. The aim of our research is to identify SME-specific determinants of BIS adoption at firm level that will guide the development and testing of a BIS adoption framework in the milieu of SMEs. By leveraging semi-structured interviews involving BIS experts and adopters, and blending them with comprehensive IT/IS adoption literature we identified instrumental determinant candidates for delving deeper into BIS adoption in SMEs.

This paper investigates the factors that determine capital structures of financial firms using two separate samples of banks and insurance companies and draws comparisons therefrom. It utilizes two samples of 16 South African banks and 26 South African insurance companies for the period 2006–2015. The relationship between leverage and firm-level determinants of capital structure is tested for each sample. The results show that the standard firm-level determinants of capital structure empirically observed on non-financial firms also apply for banks and insurers. Confirming the fundamental differences between banks and insurance companies, the study observed that the 2007–2009 global financial crisis (GFC) have a negative impact on capital structures of banks (meaning that they deleverage during crises). In contrast, the GFC was found to have a positive impact on capital structures of insurance companies (meaning, unlike banks, they leverage during crises). We find that banks and insurers have target capital structures. Banks adjust to this target at an adjustment speed of 44%, whereas insurers adjust at a lower rate of 21%. In conclusion, the paper finds both commonalities and fundamental differences between the capital structures of banks and insurers.

Urbanization and localization effects are known to boost the regional economy and its growth potential. The emergence of these effects is due to localized knowledge flows, the closeness to markets, but also due to the diversity of services and industries. All these effects have the potential to increase the productivity (and profitability) of firms. Whereas many studies have been conducted at the industry or the regional level, this paper adds to the existing literature by starting at the level of establishments and taking the interaction with the surrounding regions into account. This is possible by exploiting an exceptionally large establishment panel study and the employment statistics for Germany. The empirical analyses are carried out in two steps regressions in order to separate the characteristics of establishments from regional influences.

The study is designed to identify the determinants of profitability in the insurance industry of Pakistan. The panel data set of 41 insurance companies (life, non-life, and takaful insurance) from 2007-2017 was employed. Hausman's specification and Breusch-Pagan Lagrange multiplier (LM) tests have selected the most appropriate test i.e. fixed effect and pooled OLS model for this study. The results of pooled OLS and fixed effect model reveal that insurance specific and macroeconomic factor like leverage, business risk, and inflation rate are negative but significantly affect the profitability of the insurance sector. However, size and GDP rate has a positive and statistically significant influence on profitability. Liquidity and growth are insignificant determinants of the study. This is the first study that covers the entire insurance industry, which is also composed of the takaful industry, along with firm-specific and country-specific attributes and applies the most suitable models for the study. Thus, this study is very important for top-echelon and policy-makers of the insurance sector of Pakistan regarding the profitability of the firm and wealth of the shareholders. [ABSTRACT FROM AUTHOR]

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Abstract: The South African Revenue Service and National Treasury Firm‐Level Panel is an unbalanced panel data set created by merging several sources of administrative tax data received during 2015. The four data sources that constitute the panel are: (i) company income tax from registered firms who submit tax forms; (ii) employee data from employee income tax certificates submitted by employers; (iii) value‐added tax data from registered firms; and (iv) customs records from traders. These data sets constitute a significant and unique source for the study of firm‐level behaviour in post‐apartheid South Africa. We review the key data sources used to construct the panel, highlight some important questions that arise as a result of panel construction, discuss the biases in the resulting data, compare key aggregates in the panel to other data sources, and provide a descriptive overview of the tax records. [ABSTRACT FROM AUTHOR]

A lack of growth remains a major concern for Caribbean countries. Private sector development has been identified as vital in addressing this problem. Innovation, a necessary condition for competitiveness, is a key channel through which the private sector can help to stimulate growth. An analysis of innovation at the firm level for Caribbean manufacturing and services sectors shows that patent rights, the level of domestic sales, collaboration for innovation purposes, innovation intensity (that is, the efficiency with which innovation funds are managed), availability of technology, knowledge about new market trends, domestic sales, and the size of the workforce are critical to the innovation process in both sectors. Several differences also exist. Innovative service firms are older, in contrast to manufacturing firms, which tend to be younger; foreign ownership is key for service firms; and both types of firms face different obstacles to innovation. Policymakers should tailor policies that take such differences into account. [ABSTRACT FROM AUTHOR]