pragmatic collaborations advancing knowledge while controlling opportunism this paper starts from the observation that firms are increasingly engaging in collaborations with their suppliers even as they are reducing the extent to which they are vertically integrated with those suppliers this fact seems incompatible with traditional theories of the firm which argue that integration is necessary to avoid the potential for hold ups created when non contractible investments are made our view is that pragmatist mechanisms such as benchmarking simultaneous engineering and root cause error detection and correction make possible learning by monitoring a relationship in which firms and their collaborators continuously improve their joint products and processes without the need for a clear division of property rights we argue that pragmatic collaborations based on learning by monitoring both advance knowledge and control opportunism and thus align interests between the collaborators copyright 2000 by oxford university press

industrial evolution through complementary convergence the case of it security the article addresses the dynamics through which product markets become derailed from early product life cycle plc tracks and engaged in complementary convergence with other product markets or industries we compare and contrast the theories that can explain respectively the plc and the derailing of this cycle into a process of complementary convergence the article challenges the standard industry conception and proposes a distinction between the emergent industrial sector the emergent product market or niche and the industry as a more well established entity based on empirical evidence from the it security sector two trajectories of complementary convergence are identified lower order integration the integration of different product markets in a sectoral context and higher end integration the integration of product markets into the offerings of established industries while young ventures dominate lower order integration incumbents in established industries dominate higher order integration for both trajectories mergers and acquisitions represent a central means for realizing convergence copyright 2011 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

the locational determinants of direct investments among industrialized countries abstract market size and growth rate as well as tariff barriers have already been shown to influence u s direct investments in the eec the present paper enlarges the field of observation to all bilateral flows of direct investments among six industrialized countries the united states germany france the united kingdom the netherlands and belgium over the years 1969 1982 it also tests the impact of two other would be locational determinants of foreign direct investments namely unit labour costs and export flows moreover a new and alternative specification is put forward and tested which assumes that in the investment decision process foreign locations are in competition not only with each other but also with the home country of the investor

exchange rate exchange rate volatility and foreign direct investment in the light of the importance of foreign direct investment fdi for the promotion of economic development this paper examines the impact of the changes in the real exchange rate and its volatility on fdi examining japan s fdi by industries we found that the depreciation of the currency of the host country attracted fdi while the high volatility of the exchange rate discouraged fdi our results suggest the need to avoid over valuation of the exchange rate and to maintain stable but flexible exchange rate in order to attract fdi

modularity in technology and organization this paper is an attempt to raid both the literature on modular design and the literature on property rights to create the outlines of a modularity theory of the firm such a theory will look at firms and other organizations in terms of the partitioning of rights understood as protected spheres of authority among cooperating parties and it will assert that organizations reflect nonmodular structures that is structures in which decision rights rights of alienation and residual claims to income do not all reside in the same hands 2002 elsevier science b v all rights reserved

accounting for change in national systems of innovation a friendly critique based on the u s case abstract this paper advances a friendly critique of the national systems of innovation approach and offers some suggestions for its future development i argue that the approach has difficulty accounting for bounded change in national systems i review three recent changes in the u s innovation system the internet boom and bust of the late 1990s and early 2000s the response to the terrorist attacks of september 11 2001 and the acceleration of productivity growth since the mid 1990s in order to assess the strengths and weaknesses of the framework in this respect future research might be enriched at least in the case of large national innovation systems by absorbing concepts developed in other strands of institutionalist literature such as intercurrence and embeddedness

fragmenting global business processes a protection for proprietary information this study shows that when sourcing business services in foreign countries the fragmentation of processes across production units acts as an operational level adjustment variable for firms to adapt their information protection approach to the regulative environment of the host country they have selected and to the possibility to use internal controls over the activities performed abroad we hypothesize that when the above mechanisms are not available firms are more likely to fragment processes across multiple foreign production units instead of collocating all process tasks in the same unit thanks to it enabled integration capabilities firms can exploit the complementarities between the dispersed fragments of a process while reducing the misappropriation hazard of individual fragments empirical results and robustness tests are strongly congruent with these hypotheses we find also that the propensity to turn to the process fragmentation protection mechanism increases with firm host country specific experience and with the alternative value of the proprietary information involved in the activity sourced abroad

the impact of banking deregulation on inbound foreign direct investment transaction level evidence from the united states abstract we evaluate the effects of state level banking deregulation that resulted in improved access to cheaper local finance on foreign firms investing in the u s we provide direct micro level evidence from u s inbound foreign direct investment transactions showing that interstate banking but not intrastate branching deregulation increased the number of transactions reduced the average transaction value and boosted overall investment by foreign multinationals we also show that lower cost of local credit and greater local bank competition in each state following the interstate banking deregulation are potential mechanisms that stimulated fdi activity finally we demonstrate that after the adoption of the interstate banking deregulation both the number and the average value of transactions increased in industries that are more dependent on external finance relative to industries that are less dependent

the rise of the chicago packers and the origins of meat inspection and antitrust the meat inspection act of 1891 and the sherman act of 1890 are closely tied this link makes clearer congress intent in enacting the legislation both laws were products of economic conditions after 1880 and reflected in part widespread concern about the market power of chicago meat packers the concerns of local slaughterhouses which were being displaced by new low cost refrigerated beef and of farmers who sold livestock to the large chicago packers were echoed elsewhere by other small businesses and farmers who feared for their livelihood during a time of structural change in the economy i introduction in the few years between 1887 and 1891 the legislative basis was established for major intervention by the federal government into the american economy the interstate commerce act of 1887 the sherman act of 1890 and the meat inspection act of 1891 1 with these laws the federal government became directly involved in the regulation of railroad rates antitrust enforcement and the inspection and certification of food quality for consumers representing a significant break from what had previously been considered an appropriate role for the federal government this legislation provided a new and permanent mandate for government regulation in the market economy despite the importance of these laws the link between the economic and political environment in the united states in the late nineteenth century on the one hand and the legislative histories of the laws on the other has not been thoroughly explored as a result the motives of congress for enacting these laws remain both unclear and controversial consider meat inspection and antitrust although most attention in the literature is focused on the 1906 meat inspection act made popular by the publication of upton sinclair s the jungle the initial legislation the meat inspection act of 1891 came fifteen years earlier and it addressed the production and consumption of fresh beef but as reported in this paper there is no evidence of a major health crisis regarding the consumption of beef at the time something else appears to have been on the mind of congress when it passed the legislation in 1891 the objectives of congress in enacting the sherman act are even more controversial because of the prominence of the law debate revolves around whether the sherman act was designed to promote competition and consumer welfare or to limit competition and protect special interests 2 this paper argues that to gain a better understanding of the origins of this important legislation and its early economic effects the laws must be placed into the context of the extraordinary changes taking place in the american economy in the late nineteenth century the linkages among the laws help to identify the underlying political and economic forces behind the legislation three broad characteristics of the economy must be kept in mind in analyzing this period first the post civil war period was a time of general deflation between 1864 and 1900 the consumer price index fell by 47 percent u s department of commerce 1975 211 in general prices for farm products followed the overall pattern but prices for cattle fell in real terms after the mid 1880s fluctuations in farm prices also appear to have coincided with periods of agrarian unrest 3 second as described by higgs 1971 and chandler 1977 the period after 1880 was a time of major structural change in the economy the economy was becoming more industrial and biased technological change economies of scale in production distribution and marketing as well as the lowering of transportation costs were fundamentally altering production methods and products this affected the competitive positions of many firms creating winners and losers james 1983 burns 1983 atack 1985 emerging large firms expanded from local to national and international markets and existing small firms found their local markets threatened by new competitors

exchange rate and chinese outward fdi abstractdid the exchange rate er regime change that was announced by the chinese government in 2005 lead to an increased sensitivity of chinese multinational companies mncs to er fluctuations to answer this question our article considers the effect of er level volatility and expectation on the chinese outward foreign direct investment ofdi activities in 119 countries for a period of 2003 2013 we find striking evidence that chinese renminbi appreciation has a negative impact on chinese outward fdi flows and both higher er volatility and expected depreciation encourage chinese outward fdi flows we introduce two complementary effects that explain these findings repatriation effect and mercantilist effect in view of the recent debate about the growing importance of chinese renminbi in the international transactions we believe that our research results shed light on the possible impact of er policies on chinese mncs behaviour and global fdi distribution

a long run perspective on saving historical estimates of long run gross savings rates are provided for 11 countries which represent about 48 per cent of world product in real terms and close to half of world savings even though savings rates declined over the past decade in nine of the 11 countries present rates are usually well above their prewar levels factors which influence savings rates are also examined

kingpins bottlenecks and value dynamics along a sector this paper explores the dynamics of value distribution within a sector using data on the u s computer industry as an illustration it provides exploratory quantitative evidence for the way in which conditions within the segments of a sector s value chain affect the profitability of those segments compared with the sector as a whole to consider how value shifts from one part of the sector such as computer assemblers to another such as software and microprocessor makers we look at how conditions within a segment such as software developers affect changes in the value share of that segment compared with the entire sector in terms of market capitalization we find that the presence of what we call kingpins firms with superior capabilities modeled in our study as having superior market capitalization and as being disproportionately important in terms of research and development r d is correlated with a higher share of total sector value suggesting that kingpins can help a segment to become a bottleneck sales concentration and the level of r d expenditure are not always reliable predictors kingpins exert a positive externality on their direct competitors yet their segments display increasing internal inequality over time making the presence of kingpins a double edged sword for their peers our findings extend recent work on industry architectures highlighting the interconnectedness of different segments within a sector they also provide a structure to help study the dynamics of value migration which has not yet attracted much academic scrutiny

the economic impacts of climate change evidence from agricultural output and random fluctuations in weather fisher et al 2012 hereafter fhrs have uncovered coding and data errors in our paper deschenes and greenstone 2007 hereafter dg we acknowledge and are embarrassed by these mistakes we are grateful to fhrs for uncovering them we hope that this reply will also contribute to advancing the literature on the vital question of the impact of climate change on the us agricultural sector fhrs main critiques of dg are as follows i there are errors in the weather data and climate change projections used by dg ii the climate change projections are based on the hadley 2 model and scenarios rather than the more recent hadley 3 model and scenarios iii standard errors are biased due to spatial correlation iv the inclusion of state by year fixed effects does not leave enough weather variation to obtain meaningful estimates of the relationship between agriculture profits and weather v storage and inventory adjustment in response to yield shocks invalidate the use of annual profit data and vi fhrs argue that a better specified hedonic model produces robust estimates unlike the results reported in dg four of these critiques have little basis and we respond to them here in the introduction specifically with respect to ii the more recent daily climate predictions were not available when we wrote dg nevertheless the most important issue is providing the reliable estimates of climate change and in this note we report estimates based on the climate model we used in dg and a more recent one that we gained access to in the meantime iii in the primary table on agricultural profits dg reports two sets of standard errors with the first clustered at the county level and the second based on a variance covariance matrix that accounts for spatial correlation using the method proposed in conley 1999 thus the claim of fhrs 2012 seems overblown nevertheless to ease comparisons of papers in this literature this note will adopt the fhrs convention of reporting estimated standard errors clustered at the county and state levels we find that inference is largely unaffected by the choice between these different assumptions about the variance covariance matrix

exchange rates and fdi goods versus capital market frictions changes in exchange rates affect countries through their impact on cross border activities such as trade and foreign direct investment fdi with increasing activities of multinational firms the fdi channel is likely to gain in importance economic theory provides two main explanations why changes in exchange rates can affect fdi according to the first explanation fdi reacts to exchange rate changes if there are information frictions on capital markets and if investment depends on firms net worth capital market friction hypothesis according to the second explanation fdi reacts to exchange rate changes if output and factor markets are segmented and if firm specific assets are important goods market friction hypothesis we provide a unified theoretical framework of these two explanations we analyse the implications of the model empirically using a dataset based on detailed german firm level data we find greater support for the goods market than for the capital market friction hypothesis

foreign direct investment and factor demand elasticities abstract this paper argues that the liberalisation of foreign direct investment fdi has made labour costs more important to domestic investment and long run labour demand it provides evidence from british and german data that is consistent with this view first high unit labour costs increase fdi outflows and lower fdi inflows second the effect of unit labour costs on domestic manufacturing investment was more negative in the high fdi 1980s than in the low fdi 1970s and this change was concentrated in high fdi industries the estimates suggest that the long run labour demand elasticity may have risen substantially

host market government corruption and the equity based foreign entry strategies of multinational enterprises while extant theory suggests that the pervasiveness of host market government corruption should influence the equity ownership decisions of foreign investing multinational enterprises mnes empirical research has produced inconclusive results we leverage insights from transaction cost economics to advance an uncertainty oriented framework which can be used to explain the impact of host market government corruption on the equity based entry strategies of mnes we disaggregate government corruption into two distinct components grand corruption and petty corruption we propose that grand and petty corruption precipitate different types of uncertainty environmental and behavioral which motivate mnes to vary their equity based foreign entry strategies entry mode and partnering hypotheses pertaining to the entry strategies of mnes under conditions of more pervasive grand and petty corruption are developed and tested with a sample of 643 japanese investments in 30 countries between 2004 and 2007 we find that the main effect of grand corruption and the interaction between grand and petty corruption significantly impact a mne s entry mode further while more pervasive grand corruption increases the likelihood that a mne will engage in a joint venture investment with a host country partner we find that an increase in petty corruption heightens a mne s preference to invest with a home country partner

analysing the determinants of us direct investment in mexico in this paper a simple model of foreign direct investment is developed and tested on investment flows from the usa to mexico between 1967 and 1994 using cointegration analysis domestic demand and relative factor costs are found to influence direct investment flows suggesting support for both the cheap labour and market size hypotheses the short run dynamics of the model indicate that exchange rate movements have an effect on the timing of the investment decision

the determinants of cross border equity flows abstract we explore a new panel data set on bilateral gross cross border equity flows between 14 countries 1989 1996 we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions gross transaction flows depend on market size in source and destination country as well as trading costs in which both information and the transaction technology play a role distance proxies some information costs and other variables explicitly represent information transmission an information asymmetry between domestic and foreign investors and the efficiency of transactions the geography of information is the main determinant of the pattern of international transactions while there is weak support in our data for the diversification motive once we control for the informational friction we broaden the scope of our results by presenting some evidence linking the results on equity transactions to equity holdings

the effects of wrongful discharge protection on foreign multinationals evidence from transaction level data using detailed micro level data from 1977 to 1994 we analyze the impact of employment protection measures adopted across us states on the number and the value of new inbound foreign direct investment fdi transactions completed by foreign owned companies our findings point to a robust negative association between the implementation of employment protection laws and both the extensive and the intensive margins of fdi in the us when states adopt regulations that increase employers firing costs fdi transactions by foreign multinational companies become less frequent and decrease in value with stronger negative impacts in more labour intensive industries there is also some evidence of diversion and spillover effects from the adoption of these measures by neighbouring states

what lies between market and hierarchy insights from internalization theory and global value chain theory in this paper we suggest that internalization theory might be extended by incorporating complementary insights from gvc theory more specifically we argue that internalization theory can explain why lead firms might wish to externalize selected activities but that it is largely silent on the mechanisms by which those lead firms might exercise control over the resultant externalized relationships with their gvc partners we advance an explanation linking the choice of control mechanism to two factors power asymmetries between the lead firms and their gvc partners and the degree of codifiability of the information to be exchanged in the relationship

the trap of continual ownership change in international equity joint ventures this article examines how multiple ownership changes unfold in international equity joint venture iejv evolution and how such repeated changes impact short term performance and long term survival by theorizing a new concept the trap of continual change in the iejv context we challenge the adaptive viewpoint assumed in alliance dynamics research we propose that partners sometimes respond to an initial dissatisfaction with the venture result with a dysfunctional repetition of rearranging the ownership control structure this continual change locks the organization into bad choices and sends it into a downward spiral acknowledging the mixed motive nature of inter partner relationships we incorporate cooperative versus competitive dynamics manifested in shared control arrangements we propose that shared ownership control lends stability to the iejv until the initial iejv agreement is renegotiated this stability is a result of the cooperative forces of mutual interdependence and mutual forbearance between the partners however when the power balance breaks down the potential for inter partner conflict increases when the ownership control structure of the iejv is restructured especially multiple times shared control arrangements become increasingly unstable as behavioral cultural and managerial differences are amplified

the power of integrality linkages between product architecture innovation and industry structure abstract a substantial literature stream suggests that many products are becoming more modular over time and that this development is often associated with a change in industry structure towards higher degrees of specialization these developments can have strong implications for an industry s competition as the history of the pc industry illustrates to add to our understanding of the linkages between product architecture innovation and industry structure we develop detailed product architecture measurements based on a previously proposed method fixson s k 2005 product architecture assessment a tool to link product process and supply chain design decisions journal of operations management 23 3 4 345 369 and study an unusual case in which a firm through decreasing its product modularity turned its formerly competitive industry into a near monopoly using this case study we explore how existing theories on modularity explain the observed phenomenon and show that most consider technological change in rather long term dimensions and tend to focus on efficiency related arguments to explain the resulting forces on competition we add three critical aspects to the theory that connects technological change and industry dynamics first we suggest integrating as a new design operator to explain product architecture genesis second we argue that a finer grained analysis of the product architecture shows the existence of multiple linkages between product architecture and industry structure and that these different linkages help explain the observed intra industry heterogeneity across firms third we propose that the firm boundary choice can also be a pre condition of the origin of architectural innovation not only an outcome of efficiency considerations

closed or open innovation problem solving and the governance choice scholars have recently highlighted the promise of open innovation in this paper we treat open innovation in it s different forms and manifestations as well as internal or closed innovation as unique governance forms with different benefits and costs we discuss how each governance form whether open or closed is composed of a set of instruments that access a different types of communication channels for knowledge sharing b different types of incentives and c different types of property rights for appropriating value from innovation we focus on the innovation problem as the central unit of analysis arguing for a match between problem types and governance forms which vary from open to closed and which support alternative forms of solution search in all the goal of this paper is to provide a comparative framework for managing innovation where we delineate and discuss four categories of open innovation governance forms markets partnerships contests and tournaments and user or community innovation and compare them with each other and with two internal or closed forms of innovation governance authority and consensus based hierarchy

an evolutionary approach to understanding international business activity the co evolution of mnes and the institutional environment this paper examines the co evolution of mne activities and institutions external and internal to the firm we develop a theoretical framework for this analysis that draws on the more recent writings of douglass north on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness and of richard nelson on the co evolution of technology and institutions we link historical changes in the character of mne activities to changes in the institutional environment and highlight the scope for firm level creativity and institutional entrepreneurship that may lead to co evolution with the environment we argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of mne subsidiaries thus mne agency derives from more decentralized forms of experimentation in international corporate networks which competence creating nodes of new initiatives can co evolve with local institutions unlike most other streams of related literature our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms this form of co evolutionary analysis is increasingly important to understanding the interrelationships between mne activities and public policy

troubled banks impaired foreign direct investment the role of relative access to credit during the 1980 s theories were developed to explain the striking correlation between real exchange rates and foreign direct investment fdi however this relationship broke down for japanese fdi in the 1990 s as the real exchange rate appreciated while fdi plummeted we propose the relative access to credit hypothesis and show that unequal access to credit by japanese firms contributes to the explanation of declining japanese fdi using bank level and firm level data sets we find that financial difficulties at banks were economically and statistically important in reducing the number of fdi projects by japanese firms into the united states jel g21 f36

alfred chandler and knowledge management within the firm this essay examines the role of knowledge management defined as the management of processes affecting the creation communication distribution and exploitation of knowledge concerning corporate strategy markets product and process technologies and management practices within the corporation in alfred d chandler s work on the modern corporation along with efforts to avoid transaction cost problems the management of firm specific information and knowledge was central to the 19th century transformation of us corporate structure that chandler examined in the visible hand knowledge management also played a key role in the creation of intrafirm organizations for managing the creation of knowledge management of innovation and acquisition of technologies from external sources industrial r d and the product diversification that emerged from the in house r d facilities of many of these firms contributed to the development of the so called m form corporation examined by chandler in strategy and structure in which corporate management and strategy formulation were organizationally differentiated and separated from functional management finally chandler s last work on the success and failure of united states japanese and western european firms in the modern electronics pharmaceuticals and chemicals industries emphasized the role of the integrated learning base within these firms and the varying degrees of success with which established firms were able to sustain these learning bases and or apply them to new markets and technologies copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

new horizons or a strategic mirage artist led distribution versus alliance strategy in the video game industry abstract in this paper we contribute to the debate between researchers who argue that the emergence of online distribution allows content producers in the creative industries to bypass powerful publishers and distributors and other researchers who argue that this strategy cannot succeed without the complementary assets that these intermediaries provide we use a case study of the dutch video game developer dvgd bringing to market an identical game using two different but comparable distribution channels as a quasi experiment in the first release dvgd used online distribution to reach consumers directly whereas in the second it used an alliance with an established video game publisher we find that while the alliance required dvgd to share with the publisher a substantial fraction of the value appropriated by the game the alliance strategy resulted in greater absolute financial performance and relative market performance compared to the self publishing strategy we conclude that the differences in performance can be traced back to specialized complementary assets required for successful commercialization

the dynamo and the computer an historical perspective on the modern productivity paradox the dynamo and the computer an historical perspective on the modern productivity paradox author s paul a david source the american economic review vol 80 no 2 papers and proceedings of the hundred and second annual meeting of the american economic association may 1990 pp 355 361 published by american economic association stable url http www jstor org stable 2006600 accessed 08 12 2010 01 40

the effects of real wages and labor productivity on foreign direct investment the volume of foreign direct investment fdi both into and out of the united states has grown rapidly in the past several decades theoretically labor costs in both source and host countries could be important determinants of these flows but thus far no consistently significant effects have been reported for fdi flows between the u s and other industrialized countries in this paper i estimate equations for u s fdi flows to and from five other industrialized countries the explanatory variables include both source and host country real wages and labor productivity but to put my work in perspective i shall first in section ii discuss recent literature in the area then section iii briefly discusses a theoretical model to highlight the possible effects of the labor variables the empirical procedure and results are presented in section iv and a summary in section v

management innovation in supply chain appreciating chandler in the twenty first century alfred chandler attributed the rise of the vertically integrated corporation in the twentieth century to improvements in transportation and communication in contrast many have argued that further advances in transportation and communication have made vertical integration obsolete in recent years replacing it with modularity outsourcing and networking this article unpacks this apparent puzzle by regarding technological improvements in transportation and communication as theoretically neutral with respect to the degree of vertical integration we argue that the key concepts and issues in supply chain management that chandler highlighted remain highly relevant today we integrate chandler s detailed historical perspective on the evolution of the visible hand of managerial governance with more recent theories from organization economics and from engineering yielding the following insights first aligning incentives of buyers and suppliers is important in achieving throughput and assured supply but asset ownership is neither necessary nor sufficient for this second vertical integration and disintegration decisions affect the internal operation of the firm and its future path third firms need to design their value chains in such a way as to achieve coordination without information overload the article demonstrates the continuing power of these insights in three phases over the last century in the first phase with the rise of mass production chandler himself noted a subtle array of make and buy decisions in the second phase with the rise of lean production several varieties of non integration e g exit vs voice persisted because of the specific ways in which firms combined incentive alignment and information flow in the third new economy phase management of information and material flows through the supply chain remains an important source of competitive advantage in particular disintermediation as a form of vertical integration and successful outsourcing require investment in technical expertise over a wide range of technological fields and coordination of knowledge to manage suppliers see for example brusoni and prencipe 2001 brusoni 2003 clark and fujimoto 1991 by noting that neither externalization through outsourcing nor flattening of managerial hierarchy is the same as decentralization the article provides theoretical and empirical bases for the continuing importance of chandler s principles in managing supply chains

contestable markets an uprising in the theory of industry structure presents a transcript of the presidential address delivered at the 94th meeting of the american economic association on december 29 1981 discussion of developments in the theory of industry structure welfare attributes of contestable markets behavior characteristics of oligopoly equilibrium intertemporal vulnerability to inefficient entry ebsco

temperature and income reconciling new cross sectional and panel estimates this paper presents novel evidence and analysis of the relationship between temperature and income first using sub national data from 12 countries in the americas we provide new evidence that the negative cross country relationship between temperature and income also exists within countries and even within states second we provide a theoretical framework for reconciling the substantial negative association between temperature and income in the cross section with the even stronger short run effects of temperature estimated by panel models the theoretical framework suggests that half of the negative short term effects of temperature may be offset in the long run through adaptation this abstract was borrowed from another version of this item

buying big into biotech scale financing and the industrial dynamics of uk biotech 1980 2009 this article explores how the uk s biotech firms have evolved in response to their financial environment as investors expectations about the potential of biotech have changed funding options have opened up and closed down leading firms to develop new business models and routes of technology development after a favorable period new constraints on stock market funding have forced uk biotech firms to compress their life cycles constraining their ability to generate the late stage drug candidates sought by large pharmaceutical firms these changes are analyzed within a neo chandlerian framework in the context of a selection environment where rather than firms of varying inefficiencies being selected by an efficient market we find entrepreneurs submitting themselves to an inefficient investment selection process at the intersection of industries attempting to achieve their own scale economies the article highlights the importance of the scale of investment at the firm and industry level and suggests that decline in the size of the industry can have adverse consequences for investment and firm performance in this setting

volatility employment and the patterns of fdi in emerging markets abstract the purpose of this paper is to explore the implications of the deepening presence of multinationals in emerging markets on the cost of macroeconomic volatility there we find that macroeconomic volatility has a potentially large impact on employment and investment decisions of multinationals producing intermediate inputs in developing countries this is the case even for risk neutral multinationals as their profit function is non linear due to price and productivity effects for industries with costly capacity the multinationals would tend to invest in the more stable emerging market s higher volatility of productivity shocks in an emerging market producing the intermediate inputs reduces the multinationals expected profits high enough instability in such a market would induce the multinationals to diversify intermediate input production investing in several emerging markets this effect is stronger in lower margin industries we identify circumstances where this diversification is costly to emerging markets such a diversification increases the responsiveness of the multinationals employment in each country to productivity shocks channeling the average employment from the more to the less volatile location and reducing the multinationals total expected employment in emerging markets

explaining deindustrialization globalization failure or success although sociologists have expressed growing interest in globalization they have devoted little sustained empirical attention to the many claims made in its name i focus on the link that has been drawn between globalization and the deindustrialization of the advanced industrial societies to examine this i employ a pooled time series of cross sections data set that combines observations on 18 oecd nations across the 1968 1992 period fixed effects regression models that control for unmeasured country specific effects reveal support for arguments that implicate foreign direct investment and north south trade in the declining percentage of the labor force employed in manufacturing in the oecd countries regression results also show that deindustrialization across this period is largely explained by a model that combines an attention to the post golden age troubles of northern manufacturing with classic generalizations of the process of development interpretation of the empirical findings is tempered by an exercise in counterfactual history which reveals that deindustrialization would have been considerable in these countries even if the upswings in direct investment and southern imports had not occurred or if the performance of the manufacturing sector had been stronger

making sense of institutions as a factor shaping economic performance abstract there has recently been a resurgence of interest in how institutions affect economic performance a review of this literature reveals that the concept of an institution means different things to different scholars both within economics and across the social sciences we discuss what factors unify the different definitions of institutions and develop a concept of institutions useful for the analysis of economic performance and economic growth in particular specifically we develop the notion of institutions as standard social technologies economic growth results from the co evolution of physical and social technologies

a man on the inside unlocking communities as complementary assets abstract since teece s seminal paper explaining who were the gainers from technological innovation increased globalization and the information and communication technology revolution have brought new ways for firms to organize and appropriate from innovation a new more open model of innovation suggests that firms can benefit from sources of innovation that stem from outside the firm the central theme of this paper is how firms try to unlock communities as complementary assets these communities exist outside firm boundaries beyond ownership or hierarchical control because of practices developed by communities to protect their work firms need to assign individuals to work in these communities in order to gain access to developments and to an extent influence the direction of the community using network analysis we show that some software firms sponsor individuals to act strategically within a free and open source software foss community firm sponsored individuals interact with more individuals than interact with them and also they seek to interact with central individuals in the community however we can see differences in how individuals interact depending on whether their affiliation is with a dedicated foss firm or an incumbent in the software industry apparently some firm managers believe they need a man on the inside to be able to gain access to communities

foreign direct investment in the uk evidence from a disaggregated panel of the uk food sector most empirical studies of foreign direct investment fdi typically use either a cross sectional capturing ownership specific and industry determinants or time series capturing the determinants of fdi over time approach panel data techniques however have the advantage of combining both aspects of the data using disaggregated panel data for the uk food sector a leading recipient of fdi in the uk the results in this paper highlight the predominance of ownership specific and industry characteristics in determining the presence of foreign owned firms in this sector while macro economic factors have a more marginal effect

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

toward a theory of induced institutional innovation in this paper we elaborate a theory of institutional innovation in which changes in the demand for institutional innovation are induced by changes in relative resource endowments and by technical change we illustrate from agricultural history how changes in resource endowments and technical change have induced changes in private property rights and in the development of non market institutions we also consider the impact of advances in social science knowledge and of cultural endowments on the supply of institutional change in a final section we present the elements of a model of institutional innovation that maps the relationships among resource endowments cultural endowments technology and institutions

greenfield versus merger acquisition fdi same wine different bottles relying on a large foreign direct investment fdi transaction level dataset unique both in terms of disaggregation and time and country coverage this paper examines patterns in greenfield gf versus merger acquisition ma investment although both are found to seek out large markets with low international barriers important differences emerge ma is more affected by geographic and cultural barriers and exhibits opportunistic behaviours as it is more sensitive to short run changes such as a currency crisis on the other hand gf is relatively driven by long run factors such as origincountry technological and institutional development or comparative advantage these empirical facts are consistent with the conceptual distinction made between these two modes i e ma involves transfer of ownership for integration or arbitrage reasons while gf relies on firms own capacities which are linked to the origin countries attributes they also suggest that gf and ma are likely to respond differently to policies intended to attract fdi

organizational capabilities and the economic history of the industrial enterprise in my book scale and scope 1990 i focused on the history of the modern industrial firm from the 1880s when such firms first appeared through world war ii i did so by comparing the fortunes of more than 600 enterprises the 200 largest industrial firms at three points in time world war i 1929 and world war ii in each of the three major industrial economies those of the united states britain and germany in this paper i first describe the similarities in the historical beginnings and continuing evolution of these enterprises and then outline my explanation for these similarities next i relate my explanation of these empirical regularities to four major economic theories relating to the firm the neoclassical the principal agent the transaction cost and the evolutionary finally i suggest the value of the transactions cost and evolutionary theories to historians and economists who are attempting to explain the beginnings and growth of modern industrial enterprises

does trade cause capital to flow evidence from historical rainfall abstract we use a historical quasi experiment to estimate the causal effect of trade on capital flows we argue that fluctuations in regional rainfall within the ottoman empire capture the exogenous variation in exports from the empire to germany france and the u k during the period of 1859 1913 the identification is based on the following historical facts first only surplus production was allowed to be exported from the empire provisionistic policy second different products grown in different regions were subject to variation in regional rainfall third different bundles of products were exported to germany france and the u k by the empire using the export bundle weighted regional rainfall as an instrument for ottoman exports to each country our instrumental variable regression suggests the following when a given region of the empire received more rainfall than others the resulting surplus production was exported more to countries that historically imported more of those products and this leads to higher foreign investment by those countries in the empire our findings support theories predicting complementarity between trade and finance in which causality runs from trade to capital flows

the impact of exchange rate deviations from relative ppp equilibrium on the u s demand for foreign equities abstract applying fixed effects panel data this study investigates the impact of u s dollar exchange rate movements during different exchange rate states overvaluation and undervaluation on the monthly real gross and real net purchases of foreign equities by u s residents over the post plaza accord period the foreign equities come from 22 developed and 25 developing countries previous research has posited two alternative hypotheses regarding the relationship between exchange rates and foreign investment these are the wealth effect and the profit oriented effect the evidence herein suggests that these two hypotheses coexist we find robust evidence for a negative relationship between the exchange rate movements of an undervalued u s dollar and the demand for foreign equities for developed countries the wealth effect dominates the profit oriented effect when the u s dollar is overvalued while for developing countries the profit oriented effect dominates the wealth effect the results emphasize the importance of considering exchange rate states derived from a relative ppp equilibrium when analyzing u s allocations to foreign equities the findings with respect to the macroeconomic control variables are mainly in agreement with the predictions of international financial theory some of the results however disappear or become inconclusive for the period after the bankruptcy of lehman brothers this may be explained by the increased uncertainty in international financial markets following this unprecedented event the findings are robust with respect to different constructed equilibrium exchange rates

a simple and flexible dynamic approach to foreign direct investment growth the canada united states relationship in the context of free trade in the post war period the world economy has seen the rise and expansion of regional trading blocs and regional economic integration 1 the prime example has been the evolution of the european union since the early 1950s also significant has been the creation of the asia pacific economic cooperation area in 1989 and development of the north american free trade area dating also from 1989 this paper will focus on the canada united states relationship while the intentions of the partners to a free trade agreement are clear in the case of trade the effect on foreign direct investment fdi is ambiguous the question this paper addresses is that of how the north american free trade agreements have affected us foreign investment behaviour in canada

the geography of trade in goods and asset holdings gravity models have been widely used to describe bilateral trade in goods portes and rey portes r rey h 2005 the determinants of cross border equity flows journal of international economics 65 2 269 296 applied this framework to cross border equity flows and found that distance which proxies information asymmetries is a surprisingly very large barrier to cross border asset trade we adopt a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings in a simultaneous gravity equations framework providing different instruments for both endogenous variables we show that a 10 increase in bilateral trade raises bilateral asset holdings by 6 to 7 the reverse causality is also significant albeit smaller controlling for trade the impact of distance on asset holdings is drastically reduced keywords gravity models international finance international trade simultaneous equations

trade and capital flows a financial frictions perspective the classical heckscher ohlin mundell paradigm states that trade and capital mobility are substitutes in the sense that trade integration reduces the incentives for capital to ow to capital scarce countries in this paper we show that in a world with heterogeneous nancial development the classic conclusion does not hold in particular in less nancially developed economies south trade and capital mobility are complements within a dynamic framework the complementarity carries over to nancial capital ows this interaction implies that deepening trade integration in south raises net capital in ows or reduces net capital out ows it also implies that at the global level protectionism may back re if the goal is to rebalance capital ows when these are already heading from south to north our perspective also has

real exchange rate risk expectations and the level of direct investment four models of direct investment are analyzed assuming various relationships between foreign and domestic production the direct effect of risk adjusted expected real foreign currency appreciation is to lower foreign capital cost thus stimulating direct investment however when costs of other inputs are also affected induced productivity changes or output price changes may offset the direct effect reducing direct investment pooled estimation results for u s annual bilateral direct investment flows to five industrialized countries show significant reductions associated with expected appreciation of real foreign currency and significant increases associated with risk these results are consistent with the model where in response to risk the multinational firm reduces exports to the foreign country but offsets this somewhat by increasing foreign capital input and production

on strategic vertical foreign investment we investigate the strategic incentives for vertical foreign direct investment by oligopolistic firms under exchange rate uncertainty domestic final good firms meet their input requirements either by investing abroad and producing directly through a subsidiary intra firm trade or by buying from an oligopolistic market abroad inter firm trade firms undertaking vertical investment can bid up the input price faced by their rivals through strategic purchase we demonstrate the possibility of vertical foreclosure multiple equilibria complementarity and bunching of investment decisions increase in the variability of exchange rate has positive effects on foreign direct investment and trade in the intermediate good an appreciation of investor s currency has similar effects

design complexity vertical disintegration and knowledge organization in the semiconductor industry this article examines the advantages and drawbacks of internal knowledge integration versus collaborative outsourcing as two polar modes of governance in the design of application specific integrated circuits asics increasing technological complexity miniaturization and the generalization of markets for technology have induced higher integration constraints for designers the pace of innovation and frequent changes in design rules require a tightly controlled design process as a consequence knowledge integrators must develop expertise beyond the scope of their domain of activity if they are to ascertain the overall efficiency of systems we find that although internalization of knowledge integration reduces coordination and agency related costs the involvement of partner firms in upstream design phases facilitates knowledge sharing and improves the coordination of innovation in modules the analysis of the evolution of the asics industry shows that while large system integrators remain the dominant players specialist firms are gaining market shares and do not hesitate to embark on the design of leading edge systems this result may simply reveal the increasing value of component knowledge in a disaggregated value chain however relying on a comparative case study of two similar development processes one with each of the knowledge integration approaches we confirm the strength of decentralized modes of governance on the condition that partner firms engage in a long term relationship copyright 2007 oxford university press

the process of direct foreign investment a considerable amount of the economic literature concerning direct foreign investment dfi has been devoted to the question of why firms choose to become multinational this question has occupied both theorists of multinational enterprises mne s 1 6 7 9 11 and those who have done statistical studies of mne s 2 3 8 certainly a firm s decision to invest directly abroad rather than export goods produced at a single location is a central question in the analysis of mne s as the number of mne s continues to rise though it becomes increasingly useful to investigate the behavior of firms that are already multinational is it true for example that the factors that initially make a firm more likely to become a multinational also cause the firm to increase the size of its foreign investment kogut has argued that t here is a fallacy of explanation of genesis in failing to distinguish between the initial investment decision and the subsequent incremental investment flows 10 38 he argues that dfi should be analyzed as a flow and that the mne engages in this flow of foreign investment in order to capitalize on the flexibility inherent in the firm s multinationality thus dfi should be studied as a process and not as a onetime decision this paper formally develops this idea in the context of a model of international trade developed by helpman that incorporates mne s 6 the rest of this paper is organized as follows section ii contains a brief summary of the model that helpman has developed as an extension of helpman the model is used to develop the distinction between the decision to become multinational and the decision to add incremental flows to the direct foreign investment section iii discusses a method for testing whether there is a distinction between the decision to become a multinational and the decision to continue flows of incremental investment section iv presents the results of such a test using a sample of u s multinational firms conclusions are presented in section v

a structural decomposition analysis of technological opportunity corporate survival and leadership this article considers corporate technological leadership and survival in the face of changing technological opportunities over the period 1930 1990 for firms selected from three broad industrial groups by using us patent data in a novel application of structural decomposition analysis it considers the extent to which selected firms positions of technological leadership benefited from a favorable change in the structure of their technological environment relative to changes caused through firm level choices copyright 2007 oxford university press

transaction cost economics in real time this paper attempts to place the theq of the boundaries of thejirm within the context of the passage of time more precisely it resurrects and places in a modem frame some of the insights of the chsical and marshallian theories of organization the modem reinterpretation of those theories centers around the capabilities view of the jirm taken together with governance costs the capabilities ofjirm and market determine the boundaries of the jirm in the short run ovw time capabilities change as firms and markets learn which implies a kind of information or knowledge cost the cost of trandewing the firm s capability to the market w vice versa these dynamic governance costs are the costs of persuading negotiating and coordinating with and teaching others they arise in the face of change notably txchnological and organizational innovation in fit they are the costs of not having the capabilities you need when you need them dynamic transaction costs provide an explanation for vertical integration that is arguably more general than those dominant in the literature in the face of uncertainty and divwgent views ofthe future common ownership of multiple stages of production is a supwior institutional arrangement for coordinating systemic change asset specrfity is neither necessary nor suffient for this to be true dynamic governance costs may also affit internal organization it may sometimes be costly in 3 terms of persuasion negotiation and teaching to create within the firm capabilities readily available on the market indeed in cases in which systemic coordination is not 4 the issue the market may turn out to be the superior institution of coordination in e 2 genwal the capabilities view of the jirm suggests that we look atfim2 and market as alternative and sometimes overlapping institutions of learning 1 transaction costs in the long rzln and the short 9 x classical and neoclassical perspectives

determinants of foreign direct investment a tale of nine theoretical models abstract this paper presents a review of nine theoretical models of foreign direct investment fdi discussed are early studies of determinants of fdi 1 as well as determinants of fdi based on the neoclassical trade theory 2 ownership advantages 3 aggregate variables 4 the ownership location and internalization advantage framework 5 horizontal and vertical fdi models 6 the knowledge capital model 7 diversified fdi and risk diversification models 8 and policy variables 9 from each of the nine theories the relevant determinants of fdi are derived empirical studies indicate the importance of these determinants in the real world the paper shows that there is not one single theory of fdi but a variety of theoretical models attempting to explain fdi and the location decision of multinational firms therefore any analysis of determinants of fdi should not be based on a single theoretical model instead fdi should be explained more broadly by a combination of factors from a variety of theoretical models such as ownership advantages or agglomeration economics market size and characteristics cost factors transport costs protection risk factors and policy variables

us food aid and civil conflict we study the effect of us food aid on conflict in recipient countries our analysis exploits time variation in food aid shipments due to changes in us wheat production and cross sectional variation in a country s tendency to receive any us food aid according to our estimates an increase in us food aid increases the incidence and duration of civil conflicts but has no robust effect on interstate conflicts or the onset of civil conflicts we also provide suggestive evidence that the effects are most pronounced in countries with a recent history of civil conflict jel d74 f35 o17 o19 q11 q18 we are unable to determine whether our aid helps or hinders one or more parties to the conflict it is clear that the losses particularly looted assets constitutes a serious barrier to the efficient and effective provision of assistance and can contribute to the war economy this raises a serious challenge for the humanitarian community can humanitarians be accused of fueling or prolonging the conflict in these two countries medecins sans frontieres amsterdam 1

networks and innovation in a modular system lessons from the microcomputer and stereo component industries in this paper we examine theoretically and through case studies the phenomenon of the modular system which we distinguish from a product conceived of as a prepackaged entity or appliance we argue that such systems offer benefits on both the demand side and the supply side supply side benefits include the potential for autonomous innovation which is driven by the division of labor and provides the opportunity for rapid trial and error learning demand side benefits include the ability to fine tune the product to consumer needs and therefore blanket the product space more completely both of our case studies suggest that innovation in a modular system can lead to vertical and horizontal disintegration as firms can often best appropriate the rents of innovation by opening their technology to an outside network of competing and cooperating firms we conclude by speculating on the increased importance of modular systems in the future since flexible manufacturing and rising incomes are likely to increase the driving requisites of modular systems low economies of scale in assembly and sophisticated consumer tastes

business groups and the natural state abstract recent revisionist accounts of corporate governance in both business history and finance are challenging the tradition narrative associated with berle and means 1932 and chandler 1977 in which the american model of diffuse ownership and coherent diversification is both an inevitable outcome of economic development and perhaps a normative standard for the world to follow this essay is an attempt to rethink that narrative in light of the continued significance of the pyramidal business group as a governance structure around the world i argue that business groups arise in response both to inadequacies in arm s length markets and to the needs of what north et al 2009 call the natural state in this view the quality of markets and the demands of the state are tightly interconnected phenomena such a perspective explains the emergence of business groups in developing countries as well as their persistence even in wealthy and sophisticated polities apart from the u s and the u k in the end moreover i endorse the view that the much discussed and oft misunderstood exceptionalism of the u s in corporate governance arises not only from the sophistication of american markets but also importantly from government policies toward corporate taxation and securities regulation policies that arose from the unique public choice problem posed by the differential effect on the u s of the collapse of globalization during the middle years of the twentieth century

the chandlerian corporation and the theory of innovative enterprise through the synthesis of business history into a coherent and powerful analytical framework alfred chandler made an enduring intellectual contribution to the social sciences this essay outlines the implications of chandler s perspective for the theory of innovative enterprise embeds that theory in the social conditions of innovative enterprise analytical framework demonstrates the illogic of the neoclassical monopoly model and contends that the analysis of the dynamics and performance of industrial capitalism requires a methodology that integrates theory and history

the vanishing hand the changing dynamics of industrial capitalism alfred chandler s portrayal of the managerial revolution of the late nineteenth and early twentieth centuries does not extend well into the late twentieth century when widespread vertical disintegration began replacing the classical multi unit managerial enterprise this paper attempts to explain the new economy in a manner consistent with chandler by providing an enlarged theoretical account of industrial evolution in this account clusters of chandlerian firms appeared as a temporary episode within a larger smithian process of the division of labor

exchange rates and competition for fdi in asia this paper argues that relative exchange rates between the host countries of foreign direct investment affect their competition for fdi specifically if the host country currency appreciates against the source country s currency more than that of its rival fdi inflows of the host country will decrease while fdi inflows increase in the rival country using the data of japanese fdi in nine asian manufacturing sectors from 1981 to 2002 the paper examines the hypothesis in the context of the competition between china and asean 4 indonesia malaysia the philippines and thailand empirical results show that the relative exchange rate is a statistically significant factor that determines the relative inflows of japanese fdi for manufacturing as a whole and for such sub sectors as textiles food electronics transportation equipment and others exchange rate policies of china and asean 4 played a critical role in dynamically reshaping the geographic distribution of japanese fdi in asia

persistence of integration in the face of specialization how firms navigated the winds of disintegration and shaped the architecture of the semiconductor industry although the stylized model of industry evolution suggests that firms transform from vertical integration to specialization over time many industries still exhibit a continued persistence of integrated firms in exploring this puzzle i draw on detailed firm level data from the semiconductor industry to analyze how integrated incumbents beyond shifting to the specialized mode reconfigured in the face of industry s vertical disintegration so as to coexist with the specialized firms i propose and find that the incumbents who persist with vertical integration increase their emphasis on systemic innovations and transact with specialized firms in both upstream and intermediate markets the value creating opportunities associated with integrated incumbents leveraging a their relative superiority in developing systemic innovations and b markets to pursue a broader menu of transactional choices may offset their costs of staying integrated these firm level factors also determine the pattern of industry s vertical disintegration and the extent of coexistence between integrated and specialized firms

cross border mergers and acquisitions does the exchange rate matter some evidence for canada theoretical and empirical studies investigating the relationship between the exchange rate and fdi have generated mixed results using bilateral canadian u s industry level count data on cross border mergers and acquisitions m as and conditioning on industry tariff rates value added share of industries industry m a trend activity and the number of establishments we find evidence that a real dollar depreciation of the home currency leads to an increase in the probability of foreign m as but only in high r d industries these empirical results are consistent with blonigen s asset acquisition hypothesis results on european m as of canadian firms also lean towards this result les etudes theoriques et empiriques de la relation entre taux de change et investissement direct a l etranger donnent des resultats mixtes a l aide de donnees bilaterales canado americaines au niveau de l industrie pour les fusions et acquisitions f a transfrontalieres et de certaines conditions imposees aux tarifs douaniers au niveau industriel a la part de la valeur ajoutee des industries a la tendance des f a au niveau industriel et au nombre des etablissements on montre qu une depreciation de la devise nationale en termes de dollars reels entraine un accroissement de la probabilite de f a etrangeres mais seulement dans les industries a forte intensite de r d ces resultats empiriques sont compatibles avec l hypothese d acquisition d actifs de blonigen les resultats quant aux f a europeennes de firmes canadiennes tendent a supporter ce resultat