@article{IacovoneRauchWinters, author = {Iacovone, Leonardo and Rauch, Ferdinand and Winters, L Alan}, title = {Trade as an engine of creative destruction: Mexican experience with Chinese competition}, series = {Journal of International Economics}, volume = {89}, journal = {Journal of International Economics}, number = {2}, pages = {379 -- 392}, abstract = {This paper exploits the surge in Chinese exports from 1994 to 2004 to evaluate the effects of a competition shock from a low wage competitor for producers in an important middle-income country, Mexico. We find that this shock causes selection and reallocation at both firm and product levels and that its impact is highly heterogeneous at the intensive and extensive margins. Sales of smaller plants and more marginal products are compressed and are more likely to cease, whereas those of larger plants and core products seem relatively impervious to the shock. This implies a reallocation in terms of market shares within firms and between firms. We also show that the impact of expanded access to cheaper Chinese intermediate inputs has a similar effect, with larger plants benefiting more from the availability of cheaper imported inputs.}, language = {en} } @article{IacovoneJavorcikKelleretal., author = {Iacovone, Leonardo and Javorcik, Beata and Keller, Wolfgang and Tybout, James}, title = {Supplier responses to Walmart's invasion in Mexico}, series = {Journal of International Economics}, volume = {95}, journal = {Journal of International Economics}, number = {1}, doi = {10.1016/j.jinteco.2014.08.003}, pages = {1 -- 15}, abstract = {This paper examines the effect of Walmart's entry into Mexico on Mexican manufacturers of consumer goods. Guided by firm interviews that suggested substantial heterogeneity across firms in how they responded to Walmart's entry, we develop a dynamic industry model in which firms decide whether to sell their products through Walmex (short for Walmart de Mexico), or use traditional retailers. Walmex provides access to a larger market, but it puts continuous pressure on its suppliers to improve their product's appeal, and it forces them to accept relatively low prices relative to product appeal. Simulations of the model show that the arrival of Walmex separates potential suppliers into two groups. Those with relatively high-appeal products choose Walmex as their retailer, whereas those with lower appeal products do not. For the industry as a whole, the model predicts that the associated market share reallocations, adjustments in innovative effort, and exit patterns increase productivity and the rate of innovation. These predictions accord well with the results from our firm interviews. The model's predictions are also supported by establishment-level panel data that characterize Mexican producers' domestic sales, investments, and productivity gains in states with differing levels of Walmex presence during the years 1994 to 2002.}, language = {en} } @techreport{IacovoneJavorcikFitrani, type = {Working Paper}, author = {Iacovone, Leonardo and Javorcik, Beata and Fitrani, Fitria}, title = {Trade Integration, FDI, and Productivity}, publisher = {World Bank}, abstract = {Policy attitude towards trade integration and foreign direct investment (FDI) is often a controversial yet popular subject. This note presents evidences from recent policy researches that arguing that engaging in an open trade and investment regime have brought productivity gains which is key factor for sustaining increase in income per-capita. Evidence from Indonesia also suggests that foreign owned plants have become increasingly important, generating a significant share of exports and overall output, as well as more productive and more export intensive than domestic plants, and to spend more on RD and training. FDI also have positive impact on firms in the same sector, through competition and demonstration effects, and in upstream sectors, as suppliers to foreign-owned plants improve the quality of their own products to meet their clients more exacting needs. Evidence also suggests a positive impact from import competition in improving allocative efficiency across manufacturing plants which is a key element in driving productivity in manufacturing sector.}, language = {en} } @article{IacovoneZahlerMattoo, author = {Iacovone, Leonardo and Zahler, Andr{\´e}s and Mattoo, Aaditya}, title = {Trade and innovation in services: Evidence from a developing economy}, series = {The World Economy}, volume = {37}, journal = {The World Economy}, number = {7}, pages = {953 -- 979}, abstract = {Studies on innovation and international trade have traditionally focused on manufacturing because neither was seen as important for services. Moreover, the few existing studies on services focus only on industrial countries, although in many developing countries services are already the largest sector in the economy and an important determinant of overall productivity growth. Using a recent firm-level innovation survey for Chile to compare the manufacturing and "tradable" services sector, this paper reveals some novel patterns. First, although services firms have on average a much lower propensity to export than manufacturing firms, services exports are less dominated by large firms and tend to be more skill intensive than manufacturing exports. Second, services firms appear to be as innovative as -- and in some cases more innovative than -- manufacturing firms, in terms of both inputs and outputs of "technological" innovative activity, although services innovations more often take a "non-technological" form. Third, services exporters (like manufacturing exporters) tend to be significantly more innovative than non-exporters, with a wider gap for innovations close to the global technological frontier. These findings suggest that the growing faith in services as a source of both trade and innovative dynamism may not be misplaced.}, language = {en} } @techreport{IacovoneRamachandranSchmidt, type = {Working Paper}, author = {Iacovone, Leonardo and Ramachandran, Vijaya and Schmidt, Martin}, title = {Stunted growth: why don't African firms create more jobs?}, series = {Policy Research Working Papers}, journal = {Policy Research Working Papers}, edition = {6727}, publisher = {World Bank Group}, abstract = {Many countries in Africa suffer high rates of underemployment or low rates of productive employment; many also anticipate large numbers of people to enter the workforce in the near future. This paper asks the question: Are African firms creating fewer jobs than those located elsewhere? And, if so, why? One reason may be that weak business environments slow the growth of firms and distort the allocation of resources away from better-performing firms, hence reducing their potential for job creation. The paper uses data from 41,000 firms across 119 countries to examine the drivers of firm growth, with a special focus on African firms. African firms, at any age, tend to be 20-24 percent smaller than firms in other regions of the world. The poor business environment, driven by limited access to finance, and the lack of availability of electricity, land, and unskilled labor have some value in explaining this difference. Foreign ownership, the export status of the firm, and the size of the market are also significant determinants of firm size. However, even after controlling for the business environment and for characteristics of firms and markets, about 60 percent of the size gap between African and non-African firms remains unexplained.}, language = {en} } @techreport{IacovoneGonzalezSubhash, type = {Working Paper}, author = {Iacovone, Leonardo and Gonz{\´a}lez, Alvaro S. and Subhash, Hari}, title = {Russian volatility: Obstacle to firm survival and diversification}, series = {Policy Research Working Paper}, journal = {Policy Research Working Paper}, edition = {6605}, publisher = {World Bank Group}, address = {Washington, D. C.}, abstract = {The need for economic diversification receives a great deal of attention in Russia. This paper looks at a way to improve it that is essential but largely ignored: how to help diversifying firms better survive economic cycles. By definition, economic diversification means doing new things in new sectors and/or in new markets. The fate of emerging firms, therefore, should be of great concern to policy makers. This paper indicates that the ups and downs -- the volatility -- of Russian economic growth are key to that fate. Volatility of growth is higher in Russia than in comparable economies because its slumps are both longer and deeper. They go beyond the cleansing effects of eliminating the least efficient firms; relatively efficient ones get swept away as well. In fact, an incumbency advantage improves a firm's chances of weathering the ups and downs of the economy, regardless of a firm's relative efficiency. Finally, firms in sectors where competition is less intense are less likely to exit the market, regardless of their relative efficiency. Two policy conclusions emerge from these findings -- one macroeconomic and one microeconomic. First, the importance of countercyclical policies is heightened to include efficiency elements. Second, strengthening competition and other factors that support the survival of new, emerging and efficient firms will promote economic diversification. Efforts to help small and medium enterprises may be better spent on removing the obstacles that young, infant firms face as they attempt to enter, survive and grow.}, language = {en} } @article{IacovoneAteridoBeck, author = {Iacovone, Leonardo and Aterido, Reyes and Beck, Thorsten}, title = {Access to Finance in Sub-Saharan Africa: Is There a Gender Gap?}, series = {World Development}, volume = {47}, journal = {World Development}, doi = {10.1016/j.worlddev.2013.02.013}, pages = {102 -- 120}, abstract = {We show the existence of an unconditional gender gap in Sub-Saharan Africa. However, when key observable characteristics of the enterprises or individuals are taken into account the gender gap disappears. In the case of enterprises, we explain our finding with differences in key characteristics and a potential selection bias. In the case of individuals, the lower use of formal financial services by women can be explained by gender gaps in other dimensions related to the use of financial services, such as their lower level of income and education, and by their household and employment status.}, language = {en} } @techreport{IacovoneByiers, type = {Working Paper}, author = {Iacovone, Leonardo and Byiers, Bruce}, title = {An analysis of pre-crisis Madagascar firm performance: Firm growth and productivity}, abstract = {This paper uses firm-level data to examine the performance of developing country firms, focusing in particular on Madagascar during its pre-crisis period from 2004 to 2007. We use three different analyses: i) a cross-country comparison of firm performance across a selection of comparator countries; ii) a panel analysis of Malagasy firms using two years of survey data; and iii) an analysis of Malagasy micro and informal firms, using data from two additional surveys on micro-enterprises. These are intended to highlight structural factors thought relevant to understanding developing country firm performance, and particularly Malagasy firm performance. The three analyses lead to the following findings. Most firm employment growth is by medium and large firms and not micro and small firms as developed country studies would predict. Higher firm growth rates are positively associated with single proprietorships and firms that import inputs while, counter-intuitively, having a university-educated manager and a high share of skilled employees are associated with lower growth rates. In terms of labor productivity there is an apparent inverted-U relationship between firm performance and firm size: productivity increases up to a certain large size before stagnating or declining. As such, high productivity and firm growth relates to medium and large firms. Notable, productivity stagnates at a smaller firm size than growth rates, implying continuing growth without productivity growth. Our micro and informal sector firm analysis also suggests the presence of an inverted-U relation between size and productivity but at a vastly smaller scale. The evidence also suggests that informal firms have higher productivity than their formal counterparts. The results suggest two key policy messages. First, there is a need to tackle distortions and barriers to firm growth that hinder more productive firms from growing faster and unleashing their potential. Second, improvements in the business environment, in particular for micro and small firms will be fundamental to encouraging firms to operate in the formal sector and provide a basis for further firm expansion.}, language = {de} } @techreport{IacovoneKellerRauch, type = {Working Paper}, author = {Iacovone, Leonardo and Keller, Wolfgang and Rauch, Ferdinand}, title = {Innovation responses to import competition}, abstract = {How does trade liberalization that raises a country's import competition affect the innovative activity of its firms? We exploit the strong growth of Chinese exports resulting from China's entry into the World Trade Organization in 2001 as a competitive shock to, specifically, Mexican manufacturing firms. Innovation is captured through information on the adoption of detailed firm level production techniques such as just in time inventory methods, quality control measures, and job rotation among the Mexican firms. Our results indicate that China's rise in global trade did not affect by much Mexico's rate of innovation, which contrasts with the substantial gains that others have found in the case of bilateral iberalizations. At the same time, there is a striking heterogeneity in the responses across firms for different productivities, with productive firms innovating more and less productive firms innovating less, which leads to positive selection in that initial differences in firm performance are sharpened by the advent of new competition. We discuss the implications of these findings for theories of trade and innovation.}, language = {de} } @techreport{IacovoneFuchsJaeggietal., type = {Working Paper}, author = {Iacovone, Leonardo and Fuchs, Michael and Jaeggi, Thomas and Napier, Mark and Pearson, Roland and Pellegrini, Giulia and Villegas Sanchez, Carolina}, title = {Financing small and medium enterprises in the Republic of South Africa}, publisher = {World Bank}, abstract = {Numerous studies worldwide have highlighted the important contribution made by small and medium-sized enterprises (SMEs) to employment, income and economic growth. In a study of 76 developed and developing economies, Ayyagari and others (2007) found that SMEs account for more than 60 percent of total manufacturing employment and that SMEs contributed significant proportions of Gross Domestic Product (GDP). SME growth requires external financing, but constraints to accessing credit, consistently rated as some of the greatest barriers to the operation and growth of firms, affect SMEs more severely than large firms (Beck and Demirguc-Kunt 2006; Beck and others 2006). The purposes of this report are to: a) analyze the availability of bank finance to SMEs in South Africa and how availability might be enhanced in the context of the economic downturn; and b) offer concrete policy recommendations on how to lessen obstacles to bank SME financing and reduce the negative effects of the economic downturn (or of a similar downturn in future) on access to finance. The report is structured in 5 sections: section two provides a short overview of existing studies and data on SME finance in South Africa. Section three presents the main results of the surveys. Section four provides policy considerations. Section five concludes.}, language = {en} } @techreport{IacovoneKellerRauch, type = {Working Paper}, author = {Iacovone, Leonardo and Keller, Wolfgang and Rauch, Ferdinand}, title = {Innovation When The Market Is Shrinking: Firm-level Responses To Competition From China}, abstract = {How does trade liberalization that raises a country's import competition affect the innovative activity of its firms? We exploit the strong growth of Chinese exports resulting from China's entry into the World Trade Organization in 2001 as a competitive shock to, specifically, Mexican manufacturing firms. Innovation is captured through information on the adoption of specific production techniques such as just in time inventory methods, quality control, and job rotation. Our results indicate that China's rise in global trade did not affect by much Mexico's rate of innovation, which contrasts with the substantial gains that others have found in the case of bilateral liberalization. At the same time, there is a striking heterogeneity in the responses across firms: productive firms innovate more while less productive firms innovate less. This leads to positive selection in that initial differences in firm performance are sharpened by the advent of new competition. We discuss the implications of these findings for theories of trade and innovation.}, language = {en} } @article{IacovoneCrespi, author = {Iacovone, Leonardo and Crespi, Gustavo A}, title = {Catching up with the technological frontier: Micro-level evidence on growth and convergence}, series = {Industrial and Corporate Change}, volume = {10}, journal = {Industrial and Corporate Change}, number = {6}, doi = {10.1093/icc/dtq057}, pages = {2073 -- 2096}, abstract = {In this article, we study how firm heterogeneity influences productivity catching up using plant-level data from Mexico. The article addresses three issues: first, it evaluates the process of convergence towards the global versus the local technological frontier in a middle-income country such as Mexico. Second, it systematically evaluates the role of technological efforts in determining the speed of convergence towards each of these technological frontiers. Third, it assesses the role of openness and trade integration in determining the speed of convergence and presents a horse race between integration and technological effort in explaining the determinants of heterogeneity in influencing the process of convergence toward both the domestic and the global technological frontier. Our results suggest that building firm-level technological capabilities is important for catching up with the global frontier. A policy focused on trade alone will facilitate convergence towards the best technological practices available locally, but it will fall short of encouraging convergence with the global frontier.}, language = {en} } @techreport{IacovoneMaloneyTsivanidis, type = {Working Paper}, author = {Iacovone, Leonardo and Maloney, William F. and Tsivanidis, Nick}, title = {Family Firms and Contractual Institutions}, edition = {no. WPS 8803}, pages = {59}, abstract = {This paper offers new evidence on the relationship between contractual institutions, family management, and aggregate performance. The study creates a new firm-level database on management and ownership structures spanning 134 regions in 11 European countries. To guide the empirical analysis, it develops a model of industry equilibrium in which heterogeneous firms decide between family and professional management when the latter are subject to contracting frictions. The paper tests the model's predictions using regional variation in trust within countries. Consistent with the model, the finding show that there is sorting of firms across management modes, in which smaller firms and those in regions with worse contracting environments are more likely to be family managed. These firms are on average 25 percent less productive than professionally managed firms, and moving from the country with the least reliable contracting environment to the most increases total factor productivity by 21.6 percent. Family management rather than ownership drives these results.}, language = {en} } @techreport{IacovoneMaloneyMcKenzie, type = {Working Paper}, author = {Iacovone, Leonardo and Maloney, William F. and McKenzie, David John}, title = {Improving Management with Individual and Group-Based Consulting: Results from a Randomized Experiment in Colombia}, pages = {69}, abstract = {Differences in management quality are an important contributor to productivity differences across countries. A key question is then how to best improve poor management in developing countries. We test two different approaches to improving management in Colombian auto parts firms. The first uses intensive and expensive one-on-one consulting, while the second draws on agricultural extension approaches to provide consulting to small groups of firms at approximately one-third of the cost of the individual approach. Both approaches lead to improvements in management practices of a similar magnitude (8-10 percentage points), so that the new group-based approach dominates on a cost-benefit basis. Moreover, authors find some evidence that the group-based intervention led to increases in firm size over the next 1.5 years, including a statistically significant increase in employment, while the impacts on firm outcomes are smaller and statistically insignificant for the individual consulting. The results point to the potential of group-based approaches as a pathway to scaling up management improvements.}, language = {en} } @techreport{IacovoneMcKenzie, type = {Working Paper}, author = {Iacovone, Leonardo and McKenzie, David}, title = {Shortening Supply Chains : Experimental Evidence from Fruit and Vegetable Vendors in Bogota}, series = {World Bank Group: Policy Research Working Paper 8977}, journal = {World Bank Group: Policy Research Working Paper 8977}, pages = {49}, language = {en} } @techreport{IacovoneMaloneyMcKenzie, type = {Working Paper}, author = {Iacovone, Leonardo and Maloney, William and McKenzie, David}, title = {Improving Management in Colombian Firms Through Individual and Group Consulting}, series = {Finance \& PSD Impact}, volume = {53}, journal = {Finance \& PSD Impact}, number = {June 2019}, pages = {2}, language = {en} } @techreport{GroverIacovoneChakraborty, type = {Working Paper}, author = {Grover, Arti and Iacovone, Leonardo and Chakraborty, Pavel}, title = {Management Practices in Croatia : Drivers and Consequences for Firm Performance}, series = {World Bank Group: Policy Research Working Paper 9067}, journal = {World Bank Group: Policy Research Working Paper 9067}, pages = {33}, language = {en} } @techreport{IacovoneMaloneyMcKenzie, type = {Working Paper}, author = {Iacovone, Leonardo and Maloney, William and McKenzie, David}, title = {Improving Management with Individual and Group-Based Consulting Results from a Randomized Experiment in Colombia}, series = {World Bank Group: Policy Research Working Paper 8854}, journal = {World Bank Group: Policy Research Working Paper 8854}, pages = {72}, language = {en} } @techreport{CaliCantoreIacovoneetal., type = {Working Paper}, author = {Cali, Massimiliano and Cantore, Nicola and Iacovone, Leonardo and Pereira-L{\´o}pez, Mariana and Presidente, Giorgio}, title = {Too Much Energy The Perverse Effect of Low Fuel Prices on Firms}, pages = {47}, language = {en} } @techreport{IacovoneAteridoBeck, type = {Working Paper}, author = {Iacovone, Leonardo and Aterido, Reyes and Beck, Thorsten}, title = {Gender and finance in Sub-Saharan Africa : are women disadvantaged ?}, series = {World Bank Policy Research Working Paper}, volume = {5571}, journal = {World Bank Policy Research Working Paper}, pages = {48}, language = {en} } @techreport{MolinaBussoloIacovone, type = {Working Paper}, author = {Molina, Ana Cristina and Bussolo, Maurizio and Iacovone, Leonardo}, title = {The DR-CAFTA and the extensive margin : a firm-level analysis}, series = {World Bank Policy Research Working Paper}, volume = {5340}, journal = {World Bank Policy Research Working Paper}, pages = {33}, language = {en} }