Palash Deb and Vipin Sreekumar
The authors investigate whether firms in learning-intensive industries are more prone to bankruptcy and how this shapes a firm's financing choices.
Abstract
Purpose
The authors investigate whether firms in learning-intensive industries are more prone to bankruptcy and how this shapes a firm's financing choices.
Design/methodology/approach
Industry learning estimates based on US manufacturing firms are obtained from the study of Balasubramanian and Lieberman (2010; 2011), who collected these estimates from the US Census Bureau. Merging the learning estimates with data from Compustat gives us a final sample of 6,138 publicly-traded US manufacturing firms (56,930 firm-years) between 1973 and 2000. The authors use both OLS and IV estimation approaches to test the hypotheses.
Findings
The findings confirm that firms operating in learning-intensive industries have a higher threat of bankruptcy. The authors also find that a debt-intensive capital structure exacerbates the threat of bankruptcy; therefore, firms in such industries have a significantly lower reliance on debt financing.
Practical implications
In the current turbulent business environment, managers operating in learning-intensive industries need to be more careful while making financing choices between debt and equity, and they can explore sources of financing that go beyond the capital markets.
Originality/value
No study so far has examined how industry learning intensity, a key industry characteristic, makes firms more prone to bankruptcy, and how this threat of bankruptcy results in more conservative financing choices. By integrating the theoretical perspectives from the structure–conduct–performance (SCP), transaction cost economics (TCE) and threat rigidity paradigms, this paper contributes to the literature by adding the industry learning environment as a novel determinant of firm financing choices and the threat of bankruptcy.
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Sandeep Kumar Gupta, Shivam Gupta and Pavitra Dhamija
It is essential to track the development of resource and pollution intensive industries such as textile, leather, pharmaceutical, etc., under burgeoning pressure of environmental…
Abstract
Purpose
It is essential to track the development of resource and pollution intensive industries such as textile, leather, pharmaceutical, etc., under burgeoning pressure of environmental compliance. Therefore, the purpose of this paper is to analyze the progress of Indian leather industry in terms of individual factors and total factor productivity.
Design/methodology/approach
This study applies and examines the various concepts of productivity such as labor productivity, capital productivity, material productivity and energy productivity. Further, it assesses and compares the performance of Indian leather industry in Tamil Nadu (TN), West Bengal (WB) and Uttar Pradesh (UP) based on productivity analysis, spatial variations determinants in productivity and technology closeness ratio.
Findings
The findings suggest that as per the productivity analysis, WB leather clusters have performed remarkably better in terms of partial factor productivity and technical efficiency (TE), followed by TN and UP. This can be attributed to shifting of leather cluster of WB to a state-of art leather complex with many avenues for resource conservation. Further, the findings reveal that the firm size and partial factor productivities have significant positive correlation with TE which supports technological theory of the firm.
Practical implications
The results of this study can be useful for the policy makers associated with the Indian leather industry especially to design interventions to support capacity building at individual firm level as well as cluster level to enhance the efficiency and productivity of overall industry.
Social implications
The findings also support the resource dependence theory of firm according to which the larger size firms should reflect on resource conservation practices, for instance the concept of prevention is better than cure based upon 3R (reduce, recycle and reuse) principles.
Originality/value
The paper gives an explanation of the productivity in the leather industry in terms of its factor productivity and TE.