Economics - Doctoral Theses

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    An analysis of firm dynamics and seedbed role
    (University College Cork, 2023) O'Leary, Daragh; Power, Bernadette; Doran, Justin; Irish Research Council
    Firm dynamics research can be considered an important area of study given the relationship between firm dynamics and economic growth. Firm births can increase economic growth and employment (Doran et al., 2016). Meanwhile firm deaths can reduce economic growth via increases in unemployment (Arcuri et al., 2019). However, firm deaths can also reallocate resources and create market room within the economy for other firms (Carree and Dejardin, 2020). Additionally, the post-entry growth of firms is an important aspect of firm dynamics for economic growth because most of the growth derived from entrepreneurship comes from a very small number of high-performing firms (Shane, 2009). As such, some have recommended the prioritising of investment into firms with fast-growth potential to achieve optimal economic growth (Du and Vanino, 2021). The importance of firm dynamics to economic growth is such that government organisations and policymakers look to promote entrepreneurship to achieve economic growth (BE, 2020; EU, 2021). Therefore, research concerning the birth, death, and performance of firms can be considered of interest to governments and policymakers as well as the academic literature. This Thesis looks to contribute to the small firm dynamics literature (Hopenhayn, 1992). Using Eurostat, OECD, and Irish Central Statistics Office data, econometric analysis is used to produce four empirical research papers which examine firm interrelationships, the regional determinants of firm births and deaths, and how the seedbed role influences the performance of new start-ups. This analysis provides several contributions to the literature. Firstly, the competition and multiplier effects set out by Johnson and Parker (1994) are examined and particular interest is paid to analysing these effects across different countries and over different periods of time. Secondly, the role of urbanisation and localisation economies as well as externalities related to regional diversification are examined in determining firm births and deaths across different countries while controlling for the mitigating effect of firm interrelationships. Thirdly, the role of relatedness is incorporated into firm interrelationships to see how competition and multiplier effects operate across different sectors (related and unrelated). Finally, a contribution is made to the literature concerning seedbed role, described by Beesley and Hamilton (1984), by analysing the influence of the seedbed process on the post-entry performance of new Irish firms. The findings of the analyses on firm interrelationships indicate that firm interrelationships can change across time and sectors. Evidence of the multiplier is observed over one year where firm births appear to increase firm births the following year. However, over two and three years, evidence for the competition effect is found whereby firm births can increase firm deaths in two- and three-years’ time and that firm deaths can increase firm births in two years’ time. Furthermore, multiplier effects appear more likely to occur between firms in related sectors and competition effects appear more likely to occur between firms in unrelated sectors. Significant variations in firm birth and death rates are also observed across countries. Findings regarding regional factors as determinants of firm births and deaths indicate that both urbanisation and localisation economies increase firm births and decrease firm deaths. Related variety appears to reduce firm births and increase firm deaths, while unrelated variety is found to increase firm births and decrease firm deaths. Finally, the seedbed process is shown to influence the growth of new Irish start-ups as firms set up by individuals who previously worked at firms which died are themselves more likely to die and more likely to have lower mean annual employment growth during their existence. However, they are also more likely to exhibit fast-firm growth at some point during their existence. Implications for policy and contributions for the literature are discussed in the Thesis.
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    The importance of non-bank lending to small businesses
    (University College Cork, 2023) McGeown, Eimear; Power, Bernadette; Shinnick, Edward
    This thesis investigates the role of non-bank debt in the SME finance ecosystem in Ireland. Non-bank debt is defined as external debt, contractually provided by formal institutions other than banks. An important source of funding to large firms, non-bank debt has more recently emerged as a significant source of SME finance, both nationally and internationally (CBI, 2021a; Gopal and Schnabl, 2022). This thesis examines the characteristic of SME lenders, borrowers and the impact of non-bank debt on firm performance. On the supply side novel data gathered through fieldwork with non-bank lenders is used to identify the characteristics on the non-bank lenders. On the demand side, secondary data from the Irish Central Statistics Office’s Access to Finance Survey is used to examine the characteristics of SME firms that use non-bank debt. In addition, secondary data from the Irish Department of Finance’s SME Credit Demand Survey is employed to examine the impact of the use of non-bank debt on SME firm performance. Despite its importance as a source of SME funding, there is little research on the SME non-bank lending sector. This is mainly due to the lack of data as the sector is not prudentially regulated. This thesis addresses this gap by gathering primary data in face-to-face interviews with 40 non-bank lenders from Q2, 2019 to Q1, 2020 to describe the characteristics of the non-bank lending market in Ireland. This study is the only supply-side study on SME non-bank debt. It generates a number of key findings. Specifically, it finds that (1) non-bank debt is reducing the funding gap for bank rejected borrowers; (2) non-bank lenders use both transaction and relationship lending technologies to screen and monitor borrower firms; (3) collateral is important to non-bank lenders in overcoming information asymmetry; and (4) non-bank lenders differ from bank lenders in their provision of more diverse and bespoke lending products. These features assist the non-bank lenders in closing the funding gap for small and medium SME firms but not for micro or young borrowers. On the demand-side the thesis contributes to the literature by examining the non-bank lending channel inclusive of all the non-bank debt lending technologies. The focus on non-bank debt reflects the SME preference for debt and the policy focus on reducing SME dependence on bank debt. Whilst banks are expected to continue as the dominant source of SME finance, the growth of non-bank lending, particularly for higher risk borrowers, appears to contradict the financial intermediation literature which asserts that banks are best able to monitor opaque firms through their lending relationships. However, it is reflective of the changing nature of the borrower-bank relationship and structural changes in the banking sector (consolidation and rationalisation) and developments in the use of transactional lending technologies, innovation and technology to screen and monitor borrowers. The thesis also examines the impact of non-bank debt on SME firm performance differentiating from previous studies examining the effect of fund sources on firm performance (Li et al., 2018; López-Gracia and Sogorb-Mira, 2008; Michaelas et al., 1999; Sogorb-Mira, 2005; Trinh et al., 2017) by differentiating between the bank and non-bank lending channel. This novel finding highlights the importance of controlling for credit risk when assessing the impact of capital structure on firm performance. This study highlights the negative impact of finance gaps on firm performance and the importance of a resilient debt sector for SME performance, allocative efficiency, and growth within an economy. Structural changes to the SME finance model were in response to the financial crisis. Given the importance of the SME sector and the challenges ahead including economic and environmental shocks, governments need to understand the non-bank sector and its impact on the supply and demand for funds to support business growth and the performance of small firms. Policy makers should consider addressing the micro enterprises funding gap using the credit union model. Governments need to engage with, and monitor, the non-bank debt sector to fully understand both the benefits and risks to the sector. In particular, the non-bank funding model should be reviewed for cyclicality and subsidised funding, particularly for SME investments in targeted areas such as greening supply chains and digitisation. SMEs need to be educated on the alternatives to bank finance and on financial literacy, so that they can signal their ability to repay and avail of non-bank funding products.
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    Motivations, incentives, and commitments: financial benefits and citizen participation in onshore wind energy in Ireland
    (University College Cork, 2023) le Maitre, Julia; Ryan, Geraldine; Power, Bernadette; Horizon 2020; Irish Research Council; Sustainable Energy Authority of Ireland
    Social acceptance of onshore wind energy is a fundamental constraint for the delivery of sustainable electricity supply (Wüstenhagen et al., 2007). For a country such as the Republic of Ireland, this is a significant impediment to the decarbonisation of the energy sector (Brennan et al., 2017; Hallan and González, 2020; Van Rensburg et al., 2015), since onshore wind energy is expected to increase from approximately a third of the electricity mix to 80% by 2030 (SEAI, 2023). In 2019, Ireland introduced the Renewable Electricity Support Scheme with the aim of quadrupling its supply of onshore wind energy. The policy introduced a variety of financial benefits directed towards local communities to facilitate social acceptance, including community benefit funding and incentives focused on households closest to the wind farm, in the form of ‘near-neighbour’ compensation (DECC, 2021). The scheme also opened consideration for a new mechanism to encourage citizen investment into wind farms (DCCAE, 2020). The novelty, scope, and value of these mechanisms underscore the need for detailed research to identify how they could be designed and implemented to enhance their fairness, benefit, and acceptance. This thesis asks how specific attributes of financial participation mechanisms aimed at enhancing social acceptance influence citizens' willingness to accept, or to invest in, wind farms in their community. This thesis is based on two specialised surveys to examine how Irish citizens trade-off between different features of wind farm developments and their associated financial benefits. The research provides detailed insights into the preferences of supporters, conditional supporters, and non-supporters for wind farm developments in the community and presents recommendations concerning distributive and procedural issues across each phase of project development. Firstly, the findings show that citizens’ preferences for the distribution of financial benefits from wind farms are affected by procedural factors over planning, construction, and operation. Community participation in the governance of the community benefit fund and in the ownership of the wind farm have particularly high relative importance for strong supporters of wind farms. In addition, the developer and the proximity of the wind farm strongly influence willingness to accept. Secondly, the thesis contributes new evidence towards the design of citizen wind energy investments, and reveals a strong relationship between community acceptance, the proximity of the wind farm, and citizen investment preferences. Overall, financial attributes including the level of risk and expected return on investment have the greatest influence on citizen investment. However, the structure of voting rights, ownership and administration of the investment are generally regarded as having a higher relative importance if the wind farm is within 2km of the community, or a respondent is supportive of wind energy development. Thirdly, familiarity with a wind farm, whether a result of its proximity or phase of development, is a significant determinant of residents’ willingness to accept further development in the community. Critical points for local support of wind farms are at the earliest pre-planning / planning phases of development, as well as for households within the 2km radius of a wind farm. Other latent factors, such as attitudes towards wind electricity, trust in information provided by a developer, or awareness of community energy initiatives significantly affect community acceptance. Lastly, a comparative case study analyses the design of financial benefits, citizen investment and near-neighbour incentives in Ireland with corresponding mechanisms introduced by Denmark, Germany, and the United Kingdom. Based on a critical assessment of the design and adaptation of policy mechanisms over time, the findings suggest that it is becoming more common for these governments to endorse the development of community trusts or municipality community benefit funds. It also suggests that community-led wind farms experience difficulties related to the competitive nature of the auction regime. The chapter recommends that when defining eligibility or boundaries on citizen financial participation, policymakers could use a phased approach, first prioritising residents closest to a wind farm, and then opening opportunities across a wider geography in the second instance. The research is relevant for policy and practice. It enhances the understanding of citizens’ preferences for financial participation mechanisms in onshore wind farms, which is conducive to social acceptance and fairer local energy transitions. It would be valuable for future studies to develop on this evidence in the context of offshore wind energy and demand-side response which are increasingly important for the Irish energy transition. The diffusion of these innovative technologies similarly depends on citizen participation, fairness, and ultimately social acceptance.
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    Urban sprawl: land-use, travel behaviours, and emissions in Ireland
    (University College Cork, 2023) O'Driscoll, Conor; Doran, Justin; Crowley, Frank; McCarthy, Noirin
    Land-use configurations determine the distribution and intensities of human activities across space while transport infrastructure determines the ability of goods, services, and people to travel across this space. Considering this relationship, it is important to understand how these mechanisms interact, but also how they can contribute to efforts to achieve sustainability in regional development while also positively benefitting local economies and social fabrics. By directly influencing regional time-space geographies, land-use configurations influence the efficiency with which finite resources, like land, are used while also defining local and regional connectivity, considerations which are directly related to economic, environmental, and social outcomes. In this regard, land-use developments in the Republic of Ireland have historically been characterised by urban sprawl, a developmental form which creates spatially segregated human settlements characterised by car-centric transport networks. Evidence suggests that these patterns inefficiently (and therefore unsustainably) use natural resources, like land, but also increase regional time-space geographies, characteristics known to influence economic, environmental, and social outcomes for individuals, households, and regions. Using Geographical Information Systems (GIS), econometric techniques, and network analysis methods, this research investigates the economic, social, and environmental dimensions of regional development across Ireland and Europe. Using refined built and social environment data, nationally comprehensive Census data, and highly disaggregated spatial scales, this thesis provides substantial contributions to regional science by undertaking six empirical analyses. These investigations focus on four principal research questions, namely: 1) How do land-use configurations contribute to efforts to achieve sustainability in regional development across Ireland and Europe? 2) Can the incorporation of opensource data improve our understanding of land-use configurations and their ability to contribute to sustainability efforts? 3) What is the relationship between built and social environments, individual socio-demographics, trip-specific concerns, and travel mode choices when commuting and during school-runs? 4) How do land-use configurations and transport infrastructure provision impact the environmental degradation attributable to travelling when shopping? From a land-use perspective, I show that regions which minimise time-space geographies and incorporate higher levels of land-use mixing utilise land, infrastructure, and natural resources, like space, more efficiently than alternative regions. This is because more people and human activities are accommodated within smaller spatial scales, thereby reducing the spatial extents of developments, and by extension, the levels of natural landscape destruction attributable to human settlements. In addition to this, more compact developmental forms face lower development costs, increased market/amenity accessibility, and strengthened social fabrics – producing positive economic and social outcomes. From a transport perspective, these areas reduce the implicit costs associated with regular public and active transport use by reducing required travel times and distances, heightening the competitiveness and convenience associated with these modes. I argue that these characteristics positively contribute to altering regional transport hierarchies away from excessive car-use, and therefore prompt reductions in travel-related environmental degradation. I conclude this research by highlighting how land-use and transport policies can be coordinated around environmental goals whilst not compromising economic and social objectives within regional development. In this regard, I provide specific policymaking recommendations surrounding the use of these instruments to increase the efficiency and sustainability of land-use configurations while also catalysing shifts away from excessive car-use in favour of more sustainable alternatives. Of these, the principal recommendation is that future developmental proposals should prioritise maximizing the efficiency of existing man-made settlements and infrastructure prior to outward expansion. In urban areas, this relates to prioritising greater land-use mixing and vertical expansion, while in rural areas, this more so relates to reducing time-space geographies through multi-modal transport investment, initiatives which may stimulate the emergence of polycentric developmental patterns. Similarly, initiatives which alter regional transport hierarchies by reducing the implicit costs of public and active transport relative to cars are recommended. I end by highlighting the limitations of this work while also providing directions for future research.
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    The competitiveness of the Irish dairy industry in the global market: farm to trade
    (University College Cork, 2023) Cele, Lungelo Prince; Hennessey, Thia; Eakins, John; Thorne, Fiona; Teagasc
    The removal of the EU milk quota in 2015 has increased the exposure of the Irish dairy industry to international competitors and has raised the question of how competitive is the Irish dairy industry in the global market. The purpose of this thesis was to measure Irish dairy sector –competitiveness by examining the interaction between the farming system and the trading system of processed dairy products in the global market. In the context of the removal of the EU milk quota in 2015, it examined the competitiveness trends and rankings of the Irish dairy sector at the farm and trade levels, relative to selected European Union (EU) Member States. In 2019, Ireland was the third-largest exporter of butter in the world butter market and Irish butter prices were more volatile than other Irish dairy products. Despite the significance of butter in the dairy industry, empirical research that examines the market price dynamics and international competitor behaviour in the butter market has remained scarce. The thesis contributed to the objectives of the Food Wise 2025 and the Food Vision 2030 policies by examining the dynamics between farm milk and butter prices (linking farm and trade levels) to ensure that there is a transfer of benefits from trade to farmers through price transparency. Competitiveness indicators including partial productivity measures and accountancy-based indicators were used for farm competitiveness, and net export market share and normalised revealed comparative advantage were used for export competitiveness. A stochastic meta-frontier approach was adopted for comparing Irish regional farm technical efficiencies (proxy for farm competitiveness). The vector error correction model was applied to test the extent to which changes in competitor prices and farm milk prices had an impact on Irish butter prices. It was also used to measure the competitiveness integration relationship between global butter competitors. Amongst the countries examined, Ireland had the highest growth in partial productivity indicators and was ranked first with the lowest total costs and cash costs per kg of milk solids post-quota amongst the main European competitor countries examined. The potential challenge for Irish dairy farmers is how to lessen the relatively high land and labour costs to come in line with the main European competitor countries, which can limit farm competitiveness in the long-run. Based on the Irish regional farm technical efficiencies, the findings suggested that policies aiming to promote labor use and soil quality improvement in the East region would be useful for improving efficiency in that region post-quota. The findings also suggested that policies that related to discussion groups and management of herd size in the South region would also be useful for improving efficiency in that region post-quota. Some farms expanded beyond their optimal scale leading to a reduction in efficiency levels, especially in a region like the South West. That pointed to the need to tailor farm advice and promote caution in relation to farm expansion decisions. The regional growth patterns and insights may be used for adapting the national policy frameworks to regions in policy dialogues, i.e. to achieve the Food Vision 2030 with ambitious targets set for expansion. While Irish dairy products, such as butter and powders, have demonstrated growth potential in competitiveness post-quota, other products, i.e. cheese and liquid milk have declined. Despite the growing competition in the global butter market, Ireland became the second most competitive country in the world and was advancing rapidly at the time of analysis. Irish butter was the only Irish dairy product that had maintained a comparative advantage. Irish butter prices were more responsive to shocks in New Zealand butter prices and Irish farm milk prices in the long-run with positive bidirectional causality effects. Based on the findings, Irish dairy farmers and processors were more susceptible to pricing decisions made by international butter processors. Irish butter exports were found to be less susceptible to competitiveness changes in Belgian butter exports and more sensitive to competitiveness changes in NZ butter exports. Consequently, the key players in the Irish dairy industry can now better position themselves in the global dairy market, recognising the competitiveness dynamics of the different dairy products and their competitors. The thesis policy recommendations and areas for future research were presented in the conclusion section.