Effect of international activity on firm performance

Wagner, Joachim

doi:10.15185/izawol.47

“…This paper argues that this is largely a consequence of firm under-performance. Evidence shows that better performing firms tend to enter international markets and that internationally active firms are larger, more productive, and pay higher wages than other firms in the same industry that are active only in their home market and vice versa (Wagner, 2014).…”

Section: Low Firm Performance and Weak International Connectionsmentioning

confidence: 99%

“…This has been highlighted repeatedly both in the media (headlines like "New Zealanders get low wages" -Rosenberg, 2011; and "David Clark: The PM's cleaner deserves more pay" -New Zealand Herald, 2012a) and in academic studies (Healy, 2003;Department of Labour, 2006 57 Better Performing Firms ENGAGE in international activities. Wagner (2014) cited many empirical studies, written since the early 1990s, showing a positive association between firm performance and international market engagement. He suggested that because of the additional costs of participating in the foreign market, higher performing firms tend to self-select into international activities (i.e.…”

Section: Low Firm Performance and Weak International Connectionsmentioning

confidence: 99%

“…In most cases production that is relocated is no longer profitable in the home country and the employees would lose their jobs when firms shutdown whether or not they moved elsewhere. Nonetheless, the message is clear: high performing firms can expand and prosper abroad, while low performing firms cannot (Wagner, 2014).…”

Section: Low Firm Performance and Weak International Connectionsmentioning

confidence: 99%

“…; OECD, 2007 58 ; also see ANNEX 2 for CEO and Average Male and Female Income Comparison). In sum, firms in NZ are generally smaller, less productive, and pay lower wages (characteristics of poor firm performance -seeWagner, 2014) than other firms in the same industry of the average OECD countries. One should note that larger firms in NZ are also poor performers (see Box 2 on page 99) and hence it is not simply a matter of firm size.…”

mentioning

confidence: 99%

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The New Zealand productivity puzzle: A paradox or an issue of 'firm governance'

Tong¹

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<p>New Zealand’s productivity under-performance, despite its good quality institutions, has remained a puzzling phenomenon. This topic has generated spirited debates among academia and public policy experts seeking to provide an answer to this age-old paradox. Solving ‘The New Zealand Productivity Puzzle’ is not a straightforward proposition. Previous studies in this area attempted to pin down the main determinants behind the extent to which New Zealand’s actual GDP per capita growth has undershot its predicted rates based on policy settings (Barnes et al., 2013). The recent New Zealand Productivity Commission (2014a) report shows the three key determinants accounting for such a gap are New Zealand’s weak international connections, low innovation and low managerial quality. This paper seeks to go further than merely highlighting the determinants (symptoms) of poor productivity performance in New Zealand, to the cause(s) of the problem by asking ‘why’ these key determinants (symptoms) of poor productivity performance occur. The analytical process of piecing together key results and findings (from available data, literature, and empirical studies) enables one to build a richer picture of New Zealand’s relatively poor productivity performance, to better understand the mechanism behind this puzzling phenomenon. The findings unraveled in this paper verify that this phenomenon is not paradoxical but simply an issue of firm/corporate governance. The sort of issues uncovered here is neither one of poor corporate governance in a conventional manner or an issue of managerial competency alone. Rather problems arise largely as a consequence of inappropriate incentives unintentionally generated by a certain ownership structure. This paper discusses how high ownership concentration associated with lower firm performance in New Zealand negatively affects managerial effectiveness by exacerbating the agency costs associated with managerial entrenchment. The paper shows that together New Zealand’s relatively lower managerial competency and managerial effectiveness associated with lower firm performance, can account for New Zealand’s lack of international connections, low innovation and low managerial quality, and thus potentially explain ‘The New Zealand Productivity Puzzle’.</p>

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“…This paper argues that this is largely a consequence of firm under-performance. Evidence shows that better performing firms tend to enter international markets and that internationally active firms are larger, more productive, and pay higher wages than other firms in the same industry that are active only in their home market and vice versa (Wagner, 2014).…”

Section: Low Firm Performance and Weak International Connectionsmentioning

confidence: 99%

The New Zealand productivity puzzle: A paradox or an issue of 'firm governance'

Tong¹

0

View full text Add to dashboard Cite

<p>New Zealand’s productivity under-performance, despite its good quality institutions, has remained a puzzling phenomenon. This topic has generated spirited debates among academia and public policy experts seeking to provide an answer to this age-old paradox. Solving ‘The New Zealand Productivity Puzzle’ is not a straightforward proposition. Previous studies in this area attempted to pin down the main determinants behind the extent to which New Zealand’s actual GDP per capita growth has undershot its predicted rates based on policy settings (Barnes et al., 2013). The recent New Zealand Productivity Commission (2014a) report shows the three key determinants accounting for such a gap are New Zealand’s weak international connections, low innovation and low managerial quality. This paper seeks to go further than merely highlighting the determinants (symptoms) of poor productivity performance in New Zealand, to the cause(s) of the problem by asking ‘why’ these key determinants (symptoms) of poor productivity performance occur. The analytical process of piecing together key results and findings (from available data, literature, and empirical studies) enables one to build a richer picture of New Zealand’s relatively poor productivity performance, to better understand the mechanism behind this puzzling phenomenon. The findings unraveled in this paper verify that this phenomenon is not paradoxical but simply an issue of firm/corporate governance. The sort of issues uncovered here is neither one of poor corporate governance in a conventional manner or an issue of managerial competency alone. Rather problems arise largely as a consequence of inappropriate incentives unintentionally generated by a certain ownership structure. This paper discusses how high ownership concentration associated with lower firm performance in New Zealand negatively affects managerial effectiveness by exacerbating the agency costs associated with managerial entrenchment. The paper shows that together New Zealand’s relatively lower managerial competency and managerial effectiveness associated with lower firm performance, can account for New Zealand’s lack of international connections, low innovation and low managerial quality, and thus potentially explain ‘The New Zealand Productivity Puzzle’.</p>

show abstract