Giorgio Ricchiuti

Size, innovation and internationalization: a survival analysis of Italian firms

Firms’ survival is often seen as crucial for economic growth and competitiveness. This article focuses on business demography of Italian firms, using an original database, obtained by matching and merging to gain the intersection of three firm level datasets. This database allows us to simultaneously consider the effect of size, technology, trade, FDIs and innovation on firms’ survival probability. We show that size and technological level positively affect the likelihood of survival. Internationalized firms show higher failure risk: on average competition is stronger in international markets, forcing firms to be more efficient. However, large internationalized firms are more likely to ‘survive’. An Italian internationalized firm to be successful and to survive, should be high-tech, large and innovative.

Exchange Market Pressure: Some Caveats In Empirical Applications

The Exchange Market Pressure (EMP) index, developed by Eichengreen et al. (1994), is widely used as a tool to signal whether pressure on a currency is softened or warded off through monetary authorities’ interventions or, rather, a currency crisis has originated. In this article we show how the index is sensitive to some assumptions behind the aggregation of the information available (exchange rates, interest rates and reserves), especially when emerging countries are involved. Specifically, we address the way exchange rate variations are computed and the impact of different definitions of the reserves, and we question the constancy of the weights adopted. These issues compound with the choice of a fixed threshold when crisis episodes are identified through the EMP index. As a result, one should exert caution in subsequent econometric analyses where a dependent binary variable is built to identify crisis periods.

Complex dynamics in a monopoly with a rule of thumb

In this paper, we analyze the equilibrium effects of a monopolist with bounded rationality. Assuming that the entire (monotonic) demand function is unknown, she employs a rule of thumb to produce a quantity that guarantees the largest profits. The steady state of the map is equal to the level of price that maximizes profits, as can be seen in the classical microeconomic theories. However, complex dynamics can arise, especially when the reaction coefficient to variation in profits is high.

Heterogeneous Fundamentalists and Imitative Processes

Developing a model with a switching mechanism, we show how complex dynamics can be generated even though heterogeneity arises among agents with the same trading rules (fundamentalists). We assume that there are two experts which are imitated by other operators. We show that (i) market instability and periodic, or even, chaotic price fluctuations can be generated; (ii) conditions exist under which an expert can drive another expert out of the market; (iii) two experts can survive when the dynamic system either generates a period doubling bifurcation around an attractor or when an homoclinic bifurcation leads to the merging of the two attractors (i.e. Dieci et al., 2001); (iv) a central role is played by the reaction to misalignment of both market makers and agents.

Heterogeneity in managerial strategies and internationalization of firms: the case of Italy

The recent empirical literature on firm performance has highlighted the multidimensional concept of managerial strategies. The paper analyzes the nexus between these strategies and performance based on specific entrepreneurs’ characteristics, corporate strategies, organizational capabilities and firms’ approaches to internationalization. Using a dataset obtained by matching and merging Capitalia, ICE-Reprint and AIDA surveys we investigate the possible non-linear impact of managerial strategies on firm performance in Italy. While the specific entrepreneurs’ characteristics do not seem to have a significant impact on firm performance, the mode of internationalization plays an important role. Important non-linearities arise when we singled out the role of skilled workers and managers in determining a firm’s success in highly competitive markets.

Studying heterogeneity among fundamentalists in financial markets: A note

In this note, developing a model with agents that act as fundamentalists, we show that adding simple stochastic components, a greater set of parameters can lead to complex dynamics. Moreover, we identify periods of financial distress between bubbles and crashes detected by Kindleberger [C.P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crisis, fourth ed., John Wiley, New York, 2000] from a series of famous speculative bubbles and crashes in world history.

The Effects of FDI on Growth and Inequality

North-South capital flows are likely to allow countries in the South to grow independently from their (low) domestic saving rate, thereby reducing possible financial constraints to growth. They allow the financing of balance-of-payments deficits in the early stages of development, so that a country can import intermediate and capital-intensive goods, which are essential for productive capacity. They improve the allocation of domestic and foreign capital and facilitate the transfer of technology and know-how. Hence, private capital flows have the potential to boost growth and to contribute to improvements in the standard of living in developing countries. This potential does not seem to have been fully exploited yet, especially in African countries.1

The Heterogeneity of Foreign Direct Investors: Linking Affiliates to Parent Productivity

We investigate the heterogeneity within the group of foreign direct investors and the relation between affiliates characteristics and parent productivity. Using data on Italian firms, we show that foreign direct investors differ in their productivity level according to their characteristics and their investment decisions. Larger parents by employment or sales tend to be more productive, to have more affiliates and to invest in a higher number of destinations. Focusing on manufacturing firms, we show econometrically that having more and larger affiliates in rich countries leads to higher ex-post productivity. In particular, investing in high income countries or both in high and low income countries is associated with a subsequent productivity premium \textit{vis-\`a-vis} low income countries investors, especially for larger parents. Low income countries investors are found to be relatively more productive when operating in low technology sectors, while the opposite applies to high income countries investors.