Executive human capital could be an important asset for companies navigating adverse shocks that impede their normal operations. Leveraging the U.S.-China trade war in 2018 as a plausibly exogenous source of negative trade shocks, this study examines how firms alter the composition of their executive team to manage adversity. We find that firms more affected by the trade shock hire more executives with overseas experience, especially those with both overseas background and marketing expertise, and those with European background. Consistent with greater demand for such human capital after the start of the trade war, we find that executives with overseas experience received greater compensation, particularly in the form of equity-based compensation, after the start of the trade war. Furthermore, we find that firms with more overseas experienced executives obtain relatively higher overseas revenue after the conflict, and the unexpected departure of executives with overseas experience was associated with a stronger negative stock market reaction, in the post-trade war period. Overall, we provide evidence that firms restructure executive composition to address adversity, by hiring executives with relevant experience.
Identifying supply chain risks and enhancing resilience have become central to strategic decision-making for modern companies. In this paper, we develop a novel index that quantifies firm-level supply chain risks (SCRs) by leveraging state-of-the-art natural language processing technique—zero-shot prompting of large language models (LLMs), applied to corporate annual and quarterly reports. We document a significant increase in SCRs since 2018. We validate our index through multiple methods, including comparing it with baseline measures and human-labeled data, visualizing and interpreting SCRs over time and across industries, analyzing the index's sensitivity to critical events like the U.S.-China trade wars, and highlighting the strong correlation between SCRs of suppliers and customers. Our empirical analysis reveals that firms tend to increase inventory levels and hold more cash when facing heightened SCRs. We also identify a key strategy U.S. firms use to manage high SCRs---hiring specialists with expertise in supply chain management. Our empirical results show that the stock of such human capital enhances supply chain resilience through geographic diversification and multi-sourcing of suppliers, while also reducing the need for large inventory buffers when firms face significant SCRs. The findings are robust to instrumenting supply chain human capital investment using firms’ exposure to universities’ supply of graduates in related fields.
Using data from the China Health and Nutrition Survey and the Chinese business registry, we document a significant rise in female entrepreneurship in response to stricter fertility restrictions under the one-child policy. Employing a stacked differencein-differences approach, our estimates indicate that a large increase in fertility penalties increases the probability of women becoming entrepreneurs by 3.8 percentage points, equivalent to 40.9% of the average entrepreneurship rate for women (9.3%), and leads to a 42% (0.35 log point) increase in the annual number of female-owned startups. In line with our expectations, the effects are particularly pronounced among women of childbearing age (20-40 years), those who already have children, and those from the majority ethnic community. Similarly, stronger effects are observed in urban areas and provinces with lower preference for male children. We find that when females are induced by fertility fines to become entrepreneurs, their ventures are not of a lower quality. This finding is consistent with a long-term career transition effect rather than a forced or temporary entrepreneurship response.
Being able to sell a business offers some value beyond what a firm can generate based on its own resources and capabilities. Thus, barriers to business transfers will affect not only the choice to sell but also whether to close or continue and, by induction, business entry. We test this using data on U.S. establishments in the context of judicial adoptions of product line exceptions that created such barriers. We find that after adoption, and relative to non-manufacturing establishments, exits of manufacturing establishments through acquisitions decrease, while exits through closure increase. Relative entry of manufacturing establishments declines. These effects are higher in capital-intensive industries. Interestingly, while the likelihood of acquisitions declines for older establishments, it increases for younger ones.
This paper studies the impacts of social insurance on the decisions of unemployed individuals to start businesses. Exploiting staggered changes in benefit generosity across U.S. states and over time, I find that higher unemployment insurance (UI) benefits both lower the probability that an unemployed person will become self-employed, and also extend the length of time that passes before they make such a transition. The negative effects of UI benefits are concentrated on the formation of unincorporated businesses. Unincorporated businesses created by unemployed people in higher-benefit state-periods tend to be more successful, as measured by profit and survival rate, suggesting that higher benefits mainly screen out the entry of less productive firms. The negative effects are smaller during non-recession periods and in states that offer a Self-Employment Assistance program.