international institutional lending arrangements to sovereign borrowers abstract recent financial crises in east asia and elsewhere have illustrated the problems that plague emergency liquidity arrangements and the lender of last resort role of the international monetary fund and other international institutions in particular these act under conditions of extreme uncertainty where potential sovereign borrowers as well as private financial institutions are kept in the dark regarding the intentions of the emergency lenders and the amounts and terms of emergency liquidity that can be tapped from april 1999 longer term credit lines are being offered by the imf designed to be awarded to healthy countries before they experience contagion or distress the paper evaluates the advantages of this form of imf lending and this new trend in imf operations it is argued that provision of imf financing through such long term lending facilities is better in some senses than shorter term lending long term contracts reduce the uncertainty with respect to imf intentions moral hazard problems are reduced for the borrowing country and financial markets know the future level and terms of imf support another advantage is that long term loan contracts improve the allocation of resources within the borrowing country much as private sector facility lending is the dominant mode of finance in many markets so facility lending has efficiency advantages when it is provided by the imf this efficiency advantage is derived formally it is shown that sovereign borrowers are actually better off when utilizing these as backup lines of credit instead of emergency borrowing that is conducted after distress occurs facility lending by international institutions can lead to a welfare improvement and superior resource allocation for sovereign borrowers the intuition for this is that when financial distress drives these borrowers to increase their debt risk premia in borrowing rates would not rise at least up to the limits established by the size of the facility

the differential regional effects of monetary policy this paper examines whether monetary policy has similar effects across regions in the united states impulse response functions from an estimated structural vector autoregression reveal a core of regions new england mideast plains southeast and the far west that respond to monetary policy changes in ways that closely approximate the u s average response of the three noncore regions one great lakes is noticeably more sensitive to monetary policy changes and two southwest and rocky mountains are found to be much less sensitive a state level version of the model is estimated and used to provide evidence on the channels for monetary policy

an institution based view of international business strategy a focus on emerging economies leveraging the recent research interest in emerging economies this perspective paper argues that an institution based view of international business ib strategy has emerged it is positioned as one leg that helps sustain the strategy tripod the other two legs consisting of the industry and resource based views we then review four diverse areas of substantive research 1 antidumping as entry barriers 2 competing in and out of india 3 growing the firm in china and 4 governing the corporation in emerging economies overall we argue that an institution based view of ib strategy in combination with industry and resource based views will not only help sustain a strategy tripod but also shed significant light on the most fundamental questions confronting ib such as what drives firm strategy and performance in ib

credit lines and credit utilization while much is known about the characteristics of consumers or businesses that obtain credit lines relatively little is known empirically about credit line utilization after origination this study fills that gap by testing two interrelated hypotheses concerning borrower credit quality and credit line utilization the empirical analysis confirms that borrowers with higher expectations of future credit quality deterioration originate credit lines to preserve financial flexibility furthermore we estimate a competing risks model that confirms our predictions concerning changes in borrower credit line utilization in response to borrower credit quality shocks

product market imperfections and loan commitments i show in a model of competitive banks that the characteristics of loan contracts are affected by product market imperfections in the borrower s industry a bank loan commitment increases the value of a borrower firm operating in an imperfectly competitive industry and thus dominates a simple loan even in the absence of risk sharing considerations and informational asymmetries between the borrower and the bank while it is individually rational for a firm to obtain a loan commitment all the firms in that industry taken together are made worse off by the existence of loan commitments a loan commitment is a contract guaranteeing future availability of credit to a borrower at a prespecified fixed or stochastic interest rate although bank loan commitments are an important financial instrument and there exists an extensive literature analyzing them the rationale for their existence is still a matter of research this paper provides an explanation for the existence of bank loan commitments to borrowers from industries in which there is imperfect competition in the product market it is shown that in such industries the option to acquire financing at predetermined rates enhances the borrower s strategic power and thus creates value for the individual borrower consider an industry with imperfect competition where firms face the problem of noncooperatively exploiting a product market opportunity the optimal product market strategy of a firm depends on the output of its rivals a firm with access to resources at a lower marginal cost than its competitors has a strategic advantage that it can exploit to gain a larger market share and profits it is shown here that a firm that does not have such a strategic advantage can create it by purchasing for a fixed initial fee an option to acquire a factor of production such as financing at favorable terms specifically by initially negotiating a bank loan commitment the firm can finance an expansion of output to meet a strategic contingency at more favorable terms than would be possible if the expansion had to be financed in the spot market the ability to exercise the commitment enables the firm to threaten its rivals strategically and moves the industry to an equilibrium more favorable to that firm thus creating value for the borrower it is shown below that it is optimal for all firms to acquire bank loan commitments altering the industry equilibrium in the process

bank credit rationing and the customer relation abstract this paper investigates the theory that preference in situations of bank rationing is given to those customers with the strongest customer relation it has shown that within a certainty model where competitive pressure among banks requires full compensation for other bank relationships neither deposit levels nor intertemporal demand would produce the preferential treatment claimed it has also been shown that the prime borrowers would be unable to bargain effectively for credit line protection from such occasions of credit restriction

overcoming the liability of outsidership for emerging market mnes a capability building perspective this paper develops and discusses a model describing how multinational enterprises from emerging economies emnes overcome the liability of outsidership in their internationalization from a capability building perspective our aim is to celebrate the important intellectual contribution of johanson and vahlne j int bus stud 40 9 1411 1431 2009 who introduced the liability of outsidership concept we first discuss learning from the local environment that can reduce outsidership and then explain how greater absorptive capacity can translate into better performance internationally finally we elaborate on how the institutional environment further conditions the process and the outcomes of learning we conclude with some suggestions for future research from five theoretical perspectives learning social network theory institutional theory resource dependence theory and mne structure and design

an economic rationale for the pricing structure of bank loan commitments abstract an economic rationale is provided for the competitive equilibrium deployment of commitment and usage fees in loan commitment pricing it is shown that under perfect information assessing both fees rather than just one permits optimal risk sharing when the borrower is privately informed about its probability of future commitment utilization commitment and usage fees can be used to induce borrowers to identify themselves by self selection through contract choice the equilibrium characterized here is dissipative and thus raises the usual existence questions which are addressed in the paper

foreign entry cultural barriers and learning this paper examines the longevity of foreign entries hypotheses are developed on the mode start ups vs acquisitions and ownership structure wholly owned vs joint ventures in relation to cultural distance the hypotheses are tested within a framework of organizational learning using data on 225 entries that 13 dutch firms carried out from 1966 onwards results show that the presence of cultural barriers punctuates an organization s learning cultural distance is a prominent factor in foreign entry whenever this involves another firm requiring the firm to engage in double layered acculturation we also identify locational paths of learning the longevity of acquisitions is positively influenced by prior entries of the firm in the same country similarly the longevity of foreign entries in which the firm has a majority stake improves whenever the expanding firm engaged in prior entries in the same country and in other countries in the same cultural block

firm value illiquidity risk and liquidity insurance abstract our interest here concerns liquidity supply to firms we first examine the relation between firm value and access to liquidity supply and then we investigate the existence conditions and efficiency properties of financial contracts with a liquidity covenant in a continuous time infinite horizon stochastic model of a repeated firm investors relationship where the key problem is the mutual commitment between the two parties to model this problem we consider liquidity supply as a stochastic regulator mechanism that prevents the firm s ability to pay from falling below a predefined threshold here the market fixed coupon and we then apply recent developments in dynamic programming techniques for regulated processes to obtain a close form solution for the firm s value our main finding is that efficient i e actuarially fair and renegotiation proof contracts emerge in the absence of perfect commitment as the firm and the investor can exert mutual threat of termination

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

beyond cultural distance switching to a friction lens in the study of cultural differences my 2001 article provided a critical review of one of the most popular constructs in international business and in the management and business literature as a whole namely cultural distance it listed various illusions implicit yet unsubstantiated and refutable assumptions that underpinned a construct set to capture the essence of cultural differences the paper questioned the validity of the measure the resultant findings obtained in such international business applications as foreign direct investment patterns sequence entry mode and performance and ultimately the wisdom of continuing the use of the measure and its underlying construct in this retrospective i review subsequent work that tested some of the original observations the impact the article has had and in particular how we can redirect research away from the static cultural distance paradigm toward the dynamic interaction of the actual entities that come into contact in international business

what have macroeconomists learned about business cycles from the study of seasonal cycles this paper argues that analysis of seasonal fluctuations can shed light on the nature of business cycle fluctuations the fundamental reason is that in many instances identifying restrictions about seasonal fluctuations are more believable than analogous restrictions about nonseasonal fluctuations the authors show that seasonal fluctuations provide good examples of preference shifts and synergistic equilibria they also find evidence against production smoothing and in favor of unmeasured variation in labor and capital utilization in some industries capacity constraints appear to bind copyright 1996 by mit press

monopoly and product quality abstract this paper points out that without restrictions on the cost function distribution of consumer types and on the extent of market coverage the standard parameterization of preferences cannot by itself guarantee that a monopolist would choose a separating menu moreover there may not be any quality distortion

whole country of origin network development abroad the support that networks offer during the internationalization process is well documented in the international business literature however this work has primarily focused on firm level networks while underappreciating the cooperative behaviors that may emerge among organizations in the pursuit of common network level goals to better understand these concerted and coordinated actions we engaged in a qualitative examination of two clusters of italian organizations abroad we observed that goal directed and governed networks emerged in these clusters bounded by their common desire to support italian firms internationalization this insight underlies our contributions to the international business and whole network literatures we offer a process model outlining the emergence of a particular type of whole network the country of origin network this process is much more distributed emergent and context dependent than previously theorized our model illustrates that network development involves the active and coordinated efforts of diverse actors working to create infrastructure that can be accessed by and shared between new and existing organizations our finding that both networks were governed utilizing a distinct but context appropriate governance structure provides new insight into how networks support internationalization furthermore it illustrates that whole network level support is distinct from but complementary to the firm to firm support highlighted in previous studies

the valuation of multiple claim insurance contracts this paper provides a closed form solution for the value of a multiple claim insurance contract that is subject to a deductible amount and or an upper limit on claims the solution is a time integral of european option prices the model provides three important insights first systematic risk in insurance policies is altered in the presence of deductibles and maximum indemnity levels second idiosyncratic risk affects policy valuation and the required rates of return on underwriting portfolios finally contrary to traditional actuarial intuition changes in the risk free interest rate may either increase or reduce policy values

bank credit commitments credit rationing and monetary policy when loan needs are uncertain and bankruptcy is costly contracts resembling bank credit commitments dominate ordinary debt contracts the fees charged on commitments reduce bankruptcy risk by smoothing out borrowers loan payments reduced bankruptcy risk entitles borrowers to larger loans thereby reducing the risk of quantity rationing even if commitments reduce rationing risk monetary policy is not necessarily weaker under commitment finance a rise in lenders cost of funds perhaps reflecting a monetary contraction can reduce the expected value of a project more under a commitment than under an ordinary debt contract copyright 1994 by ohio state university press

from the editors can i trust your findings ruling out alternative explanations in international business research the complex nature of international business research with its cross country and multilevel nature complicates the empirical identification of relationships among theoretical constructs the objective of this editorial is to provide guidance to help international business scholars navigate this complexity and ensure that readers can trust their findings we provide suggestions for how to rule out alternative explanations explaining key considerations not only in empirical analyses but also in theory building and in research design our discussion covers both qualitative and quantitative studies because we believe that it is imperative to understand how trustworthiness is established in both traditions even for international business researchers who self identify with only one this enables scholars to have a broader scope of knowledge when interpreting past research in the field and to be more adept at explaining their design choices to a diverse audience

relaxing the cash in advance constraint at a fixed cost are simple trigger target portfolio rules optimal this paper studies the microeconomic foundations of trigger target rules of portfolio demand such as the demand for money it allows an agent to relax her cash in advance constraint by paying a fixed transactions cost to move between money and the interest bearing asset an example is generated where the potential of being liquidity constrained in order to avoid incurring the transactions cost can cause excessive nonconcavities of the value function in a dynamic program such that simple trigger target rules of money demand are suboptimal

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

forecasting us real house price returns over 1831 2013 evidence from copula models given the existence of nonnormality and nonlinearity in the data generating process of real house price returns over the period of 1831 2013 this article compares the ability of various univariate copula models relative to standard benchmarks naive and autoregressive models in forecasting real us house price over the annual out of sample period of 1874 2013 based on an in sample of 1831 1873 overall our results provide overwhelming evidence in favour of the copula models normal student s t clayton frank gumbel joe and ali mikhail huq relative to linear benchmarks and especially for the student s t copula which outperforms all other models both in terms of in sample and out of sample predictability results our results highlight the importance of accounting for nonnormality and nonlinearity in the data generating process of real house price returns for the us economy for nearly two centuries of data

distance without direction restoring credibility to a much loved construct in this commentary we build on shenkar s 2001 award winning critique of cultural distance arguing that most distance constructs in fact suffer the same flaws because they oversimplify the relationship between countries overlook their subjective and context specific nature and pay insufficient attention to the mechanisms through which distance operates the idea of distance however has intrinsic value moreover its considerable appeal and undeniable effectiveness have made it a well entrenched construct therefore we see merit in redressing its weaknesses and offer several suggestions for doing so these include allowing for the influence of firm level characteristics that either moderate the effects of distance or render distance at least in part subjective with varying consequences for different mnes maintaining directionality by distinguishing between distance and the tendency toward a particular characteristic and acknowledging asymmetry and conceptualizing the effects of distance and the mechanisms through which it operates more carefully by drawing on concepts and measures from a variety of disciplines by offering ways to strengthen both its theoretical foundations and measurement we hope to enhance the usefulness of one of international business theory s most central constructs

credible commitments contract enforcement problems and banks intermediation as credibility assurance abstract we consider contract enforceability problems in credit transactions and justify a bank as an organizational solution to market breakdown due to unenforceable contracts specifically we explain i why loan commitments exist and ii why banks exist to sell such commitments a loan commitment resolves moral hazard more efficiently than any combination of inside equity and spot credit however the market breaks down if commitment sellers are individuals because their promises to honor contracts are not credible with a large bank a perfect sequential equilibrium is obtained in which credibility is restored

loan commitments and monetary policy abstract in this paper we examine the impact of loan commitment agreements on the way in which monetary policy affects the economy we estimate a vector autoregressive var model and find evidence of a smaller impact of monetary policy on loans made under commitment agreements than on loans not made under commitment our conclusion is that loan commitments effectively protect borrowers from quantity credit rationing and thus force monetary policy to work mainly through interest rate channels

transactions costs and portfolio choice in a discrete continuous time setting abstract this paper makes the following observation concerning a new formulation of the consumption and portfolio choice model of merton 1971 with transaction costs suppose an investor observes his or her current wealth only when making a transaction that transactions are costly and that decisions to transact can be made at any time based on all current information if at each transaction the agent is charged a fixed fraction of current portfolio value an optimal policy exists and the optimal interval of time between transactions is fixed independent of time and current wealth

loan commitment contracts terms of lending and credit allocation this paper analyzes the structure of loan commitment contracts and the interrelationships among their component parameters lenders offer borrowers a set of loan packages from which the latter may choose that package found to be most appealing borrowers may trade off changes in any loan parameter in exchange for other adjustments the borrower at this time may purchase a larger credit ration for a price supporting empirical evidence is presented recently researchers have begun to study the determinants of loan commitment or line of credit contracts such contracts play an extremely important role in bank credit allocation according to the federal reserve bulletin over 70 of u s commercial and industrial loans are made under loan commitment contracts given the central importance of the institution it is not surprising that it is the subject of a growing literature loan commitment contracts have importance both at the micro level in terms of the bank customer relationship and at the marco level in terms of the channels of operation of monetary policy in this paper we seek to present and test empirically an analytic model of loan commitment contracts our paper differs from most previous work in that we include empirical analysis of credit allocation moreover most previous theoretical work on the subject has concentrated on the specific issue of pricing of the contracts often using an approach based on option theory and not on the quantity allocation of credit and its determinants we are particularly interested in the determinants of the quantitative allocation of credit to bank customers and in the composition of and trade offs among the various parameters comprising such a loan commitment package our model helps explain how contract terms are established in the market and will illuminate the institutional framework of commercial lending a view of the credit contract as a package of loan terms has been implied recently in connection with the credit rationing problem studies by azzi and cox 21 arzac schwartz and whitcomb 11 and koskela 81 show that the

housing investment in the united states a supply determined model of housing investment is estimated from quarterly data over the 1963 83 period the model is built on dynamic marginal cost pricing considerations and allows short and long run supply elasticities to differ these are estimated as 1 0 and 3 0 respectively but most of the long run response occurs within 1 year rapid adjustment speed and the sizable long run elasticity of supply are important factors in understanding the volatility of housing investment the data also suggest some anomalies in the expected present value theory of asset pricing for housing capital

asset specificity and foreign market entry mode choice of small and medium sized enterprises the moderating influence of knowledge safeguards and institutional safeguards according to transaction cost economics tce reasoning firms choose equity as opposed to non equity foreign market entry modes to safeguard specific assets the present paper contextualizes the well researched relationship between asset specificity and foreign market entry mode choice by introducing knowledge safeguards international experience host country networks and imitation and institutional safeguards property rights protection and cultural proximity as alternative mechanisms for securing a firm s specific assets testing our hypotheses on a sample of 206 small and medium sized enterprises we find that knowledge safeguards and institutional safeguards weaken the effect of asset specificity on the choice of equity foreign market entry modes contextualizing the relationship between asset specificity and foreign market entry mode choice helps to enhance our understanding of the scope conditions of tce based entry mode studies and beyond

competition risk neutrality and loan commitments abstract we rationalize fixed rate loan commitments forward credit contracting with options in a competitive credit market with universal risk neutrality future interest rates are random but there are no transactions costs borrowers finance projects with bank loans and choose ex post unobservable actions that affect project payoffs credit contract design by the bank is the outcome of a non cooperative nash game between the bank and the borrower the initial formal analysis is basically in two steps first we show that the only spot credit market nash equilibria that exist are inefficient in the sense that they result in welfare losses for borrowers due to the bank s informational handicap second we show that loan commitments because of their ability to weaken the link between the offering bank s expected profit and the loan interest rate enable the complete elimination of informationally induced welfare losses and thus produce an outcome that strictly pareto dominates any spot market equilibrium perhaps our most surprising result is that if the borrower has some initial liquidity it is better for the borrower to use it now to pay a commitment fee and buy a loan commitment that entitles it to borrow in the future rather than save it for use as inside equity in conjunction with spot borrowing

core or periphery the effects of country of origin agglomerations on the within country expansion of mnes we show how the initial subnational entry location of foreign multinational enterprises mnes in china influences their subsequent within country location choices and expansion speed we distinguish between mnes that establish their first subsidiary in co ethnic cores dense agglomerations of other firms from the same country of origin and mnes that locate their first subsidiary in the periphery i e outside of these co ethnic cores to identify co ethnic cores in china we employ a geo visualization methodology which draws the boundaries of cores organically and dynamically over time we contrast our findings with the prevailing approach of using static administrative boundaries for identifying agglomerations our results provide evidence of path dependency in that a entry through subnational locations with strong co ethnic communities is followed by expansion into other locations where co ethnic communities are present and that b entry through co ethnic communities accelerates the pace at which mnes establish additional subsidiaries in china we also find that co ethnic community effects continue to influence within country mne activities over time despite a host of economic institutional and investment developments

loan commitments investment decisions and the signalling equilibrium abstract this paper analyzes the use of loan commitments to finance future risky investment projects when the capital market is informed of a firm s project quality having a loan commitment would lead the firm to overinvest if banks are competitively rational the cost of this overinvestment would be borne by the firm making the loan commitment contract unattractive when the project quality is private information firms will signal their project qualities through purchasing loan commitments this signal is credible because purchasing a loan commitment poses overinvestment cost to the firm this paper establishes and characterizes this dissipative signalling equilibrium

trade credit use as firms approach default using a sample of firms matched with their suppliers we study the use of trade credit as firms approach a default event we show that in the extensive margin around one third of suppliers exit the relationship well ahead of default but the rest continue the relationship relationships are more likely to continue when suppliers sell differentiated goods are located close to their distressed clients sell large proportions to the distressed clients or when the distressed client is in a concentrated market suggesting that dependent suppliers are held up in distressed relationships firms with suppliers that continue the relationship continue purchasing the same amounts from their suppliers and have larger increases in accounts payable suggesting that held up suppliers trade off the potential benefits of granting concessions to their clients during bad times with the risk of increasing their exposure to a distressed firm

forecasting house prices for the four census regions and the aggregate us economy in a data rich environment this article considers the ability of large scale involving 145 fundamental variables time series models estimated by dynamic factor analysis and bayesian shrinkage to forecast real house price growth rates of the four us census regions and the aggregate us economy besides the standard minnesota prior we also use additional priors that constrain the sum of coefficients of the var models we compare 1 to 24 months ahead forecasts of the large scale models over an out of sample horizon of 1995 01 2009 03 based on an in sample of 1968 02 1994 12 relative to a random walk model a small scale var model comprising just the five real house price growth rates and a medium scale var model containing 36 of the 145 fundamental variables besides the five real house price growth rates in addition to the forecast comparison exercise across small medium and large scale models we also look at the ability of the optimal model i e the model that produces the minimum average mean squared forecast error f

industrial clusters knowledge integration and performance abstract scholars examining the phenomenon of industrial clusters have begun to regard them as social communities specializing in efficient knowledge creation and transfer in addition to neo classical arguments focusing on the advantages of localization we seek to contribute to this body of work by developing the argument that both the degree of knowledge integration between an industrial cluster s agents and the scope of their economic activities are key dimensions behind their economic performance we present a model that incorporates a hypothesized relationship between these three dimensions and argue that a formal test of this hypothesis constitutes a promising area of future empirical research in this field

diplomatic and corporate networks bridges to foreign locations firms and governments operate in broad networks in which the home government and its diplomatic service are a critical node or a referral point between firms and potential partners in foreign locations thus diplomatic relations between countries matter for the choice of foreign investment location using a network perspective we argue that the extent to which good diplomatic relations induce firms to invest in friendly host countries depends on their political connections to home governments those with stronger ties to home governments can better access and leverage intergovernmental diplomatic connections thus benefiting potentially from enhanced access to information reduced political risks and increased legitimacy such ability of politically connected firms is more useful where weak institutional impartiality in the host country inhibits neutral treatment of foreign investors empirically using overseas investment location decisions by chinese firms we find that the types of home government ties i e whether they are organizational or personal and whether those relationships are with central or local goverments and the impartiality of host institutions are both important contingencies affecting firms utilization of diplomatic relations we discuss the implications of our study to research on network theory political ties and internationalization of emerging market firms

a theory of channel price promotions manufacturers can stimulate sales by a temporary wholesale price reduction for the retailer a rebate directed toward consumers or a combination of both the trade offs between these price promotions are analyzed providing insights about their roles profitability and welfare properties retailers rebates are also studied while price discrimination is a common explanation for rebates to consumers when a product is sold through a distribution channel the manufacturer may also use rebates to motivate retail participation in the promotion this explains why rebates may be offered even when all consumers use them and price discrimination does not occur copyright 1991 by american economic association

the effect of cultural distance on entry mode choice international diversification and mne performance a meta analysis although a growing literature indicates that cultural distance that is differences between national cultures is an important determinant of organizational actions and performance both empirical and theoretical concerns abound in this study the relationships of cultural distance with entry mode choice international diversification and mne performance are examined by meta analyzing data from 66 independent samples with cumulative sample sizes ranging from 2 255 to 24 152 regression results failed to provide statistical evidence of significant relationships between cultural distance and entry mode choice international diversification and mne performance the examination of moderator effects however yielded important results we found a strong negative association between cultural distance and entry mode choice for us based mnes the cultural distance international diversification relationship was negative for high technology industries while it was positive for other industries cultural distance also had a strong positive effect on mne performance for developed country investments a similar strong positive relationship was found between cultural distance and international diversification in studies with more recent samples results of this study indicate that substantial additional research is needed before the role of cultural distance is fully understood

investment opportunities and corporate demand for lines of credit abstract the behavior of a risk neutral corporation in selection of a line of credit is modeled in a new framework where demand for credit lines by a firm arises from the stochastic arrival in continuous time of short lived opportunities to capture investment projects the firm needs speed and secrecy to capture projects before competitors the firm chooses a credit line that balances its up front commitment cost against the expected extra cost of borrowing in the spot market upon exhaustion of its credit line the firm s demanded credit line depends upon both relative pricing within the contract and the nature of the firm s growth opportunities interestingly while credit line demand is positively related to business growth prospects it is potentially negatively related to uncertainty in those prospects

the use of bank lines of credit in corporate liquidity management a review of empirical evidence abstract this paper reviews empirical evidence on the use of bank lines of credit as a source of corporate liquidity traditional explanation for lines of credit is that they provide insurance against liquidity shocks in much the same as way hoarding cash does however recent empirical research suggests that access to lines of credit is contingent on the credit quality of the borrower as well as the financial condition of the lender these findings suggest that lines of credit are an imperfect substitute for cash as a source of corporate liquidity

when is price discrimination profitable we consider a general model of monopoly price discrimination and characterize the conditions under which price discrimination is and is not profitable we show that an important condition for profitable price discrimination is that the percentage change in surplus i e consumers total willingness to pay less the firm s costs associated with a product upgrade is increasing in consumers willingness to pay we refer to this as an increasing percentage differences condition and relate it to many known results in the marketing economics and operations management literatures

how institutions matter for international business institutional distance effects vs institutional profile effects extant institutional research has failed to make a distinction between the effects of institutional profile and institutional distance on mnes the problem stems from the fact that due to the use of a single reference country variation in institutional distance between the reference country and partner countries is essentially equal to variation in the institutional profiles of these partner countries making institutional distance and institutional profile effects indistinguishable this research begins by demonstrating that the problem of profile distance conflation is relevant for virtually all possible countries as reference points and then showing how this problem is mitigated by using more than one country as reference points from which to calculate institutional distance we conclude that current institutional research in international business is unable to explain how institutions matter for mnes and that a more careful theoretical and empirical distinction between the effects of institutions and institutional distance on cross border business activities is essential for pushing the institutional perspective in international business studies forward multiple reference point research designs are required to achieve this

social ties and foreign market entry the social dynamics which precede international exchange are considered in light of data collected on 133 foreign market entries from a sample of highly internationalized manufacturing firms consistent with research done in the social network field the findings support the hypothesis that knowledge of foreign market opportunities is commonly acquired via existing inter personal links rather than collected systematically via market research this study thus contributes towards an understanding of those antecedent conditions that lead to the formation of export exchange relationships

the economics of loan commitment contracts credit pricing and utilization abstract our purpose is to examine the circumstances under which enduring customer relationships such as revolving credit agreements will become predominant we compare loan commitment contracts under which borrowers may take down funds at fixed marginal mark up to spot lending under which funds are priced in consideration of customers leverage under the first arrangement insurance against default risk is priced as a fixed front end fee under the second arrangement it is priced under a rising leverage specific markup schedule we show that when default risk is independent of take down the loan commitment contract will always dominate spot loans when default risk increases with credit use spot loans may become dominant

a geographic relational perspective on the internationalization of emerging market firms the growth of outward foreign direct investment from emerging markets has led to increased scholarly attention on the internationalization of emerging market firms emfs we break from the recent strategic approach on internationalizing emfs to develop a problematization approach which permits us to introduce a geographic relational perspective we use this perspective to highlight process thinking complex social realities and relational practice as means by which to better develop theory on the internationalization of emfs our emergent approach emphasizes the need to view emf internationalization as deeply situated in multifaceted contextual influences as influenced by path dependence and as manifested in practice these three relational tenets contextuality path dependence and practice are central to our geographic relational approach s ability to generate new challenging research questions for understanding emf internationalization consequently we add novelty to the international business domain by bringing space and process to the forefront of the emf research agenda

advance purchase discounts and monopoly allocation of capacity optimal pricing by a monopoly airline that faces capacity constraints during the peak demand period is studied the existence of capacity constraints means that in order to expand output the airline must divert demand from the peak period to the off peak period a particular advance purchase discount policy is shown to be the profit maximizing method of selling tickets if the advance purchase requirement were infeasible output and total surplus would both be lower jel l12 substantial discounts for air travel are generally available to travelers who are willing to purchase tickets a week or more in advance of the departure date this paper demonstrates why the imposition of an advance purchase requirement may be a profit maximizing strategy for a monopoly airline facing capacity constraints during times of peak demand 1 the practice of imposing an advance purchase requirement on discount tickets is also placed in a favorable light in terms of its impact on social

extending the internationalization process model increases and decreases of mne commitment in emerging economies the internationalization process model suggests that firms internationalize by building positions in foreign markets and networks following iterative cycles of learning and changes in commitment however as subsidiaries evolve commitments may be decreased as well as increased a phenomenon that has rarely been studied moreover it remains an open question why strategic intentions at the outset of an investment project differ from the actual operations established we address these questions by extending the model and combining it with mintzberg and waters framework of strategy formation specifically we suggest that commitment decisions correspond to statements of intended strategy while network positions correspond to realized strategies the processes of learning opportunity creation and trust building triggered by commitment decisions are however moderated by institutional influences that lead to divergences between realized and intended strategies we test propositions derived from this framework on a survey data set of subsidiaries of multinational enterprises in hungary lithuania and poland and find that institutional voids and institutional uncertainty affect subsidiary strategy implementation but in opposing directions under high institutional uncertainty investors prefer low commitment but flexible modes that enable later commitment increases whereas institutional voids increase up front information search and adaptation costs that reduce the likelihood of early post entry adjustments our analysis reinforces the need for more differentiated theoretical analyses of how institutions affect business strategies over time

the equilibrium valuation of risky discrete cash flows in continuous time this paper values a contingent claim to discrete stochastic cash flows generated by a poisson arrival process with a randomly varying intensity parameter in the most general case both the size and the arrival intensity of cash flows may correlate wih state variables in a continuous time economy assuming the conditions of an intertemporal capital aset pricing model solutions for the value of the contingent claim can be found using various techniques the paper suggests immediate applications to the valuation of insurance contracts the decision to build a firm with unknown future investment opportunities and the pricing of mortgage backed securities

bayesian methods for dynamic multivariate models if dynamic multivariate models are to be used to guide decisionmaking it is important that probability assessments of forecasts or policy projections be provided when identified bayesian vector autoregression var models are presented with error bands in the existing literature both conceptual and numerical problems have not been dealt with in an internally consistent way in this paper the authors develop methods to introduce prior information in both reduced form and structural var models without introducing substantial new computational burdens their approach makes it feasible to use a single large dynamic framework for example twenty variable models for tasks of policy projections copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

bridging history and reductionism a key role for longitudinal qualitative research longitudinal qualitative research combining grounded theorizing and insights from modern historical methods can generate novel conceptual frameworks that establish theoretical bridges between historical narratives and reductionist quantitative models to capitalize fully on this potential theory bridging role qualitative scholars should seek to study social systems characterized by complexity and nonlinear causation effectively serving this theory bridging role provides a basis for securing a distinctive place for qualitative research in the social sciences in general and for international business research in particular

a note on the revisited uppsala internationalization process model the implications of business networks and entrepreneurship in their article from 2009 johanson and vahlne suggest a reformulation of the uppsala internationalization process model by incorporating business network theory and entrepreneurship theory into the model the present paper makes a critical examination of this reformulation the overall conclusion is that several issues have to be addressed regarding the relationship between business networks and firms internationalization the meaning of entrepreneurship as well as the possibility to combine business network theory and entrepreneurship theory in the uppsala model before the full potential of such an incorporation can be realized

corporate cash holdings and credit line usage we investigate the factors driving the unprecedented rise in corporate liquidities since the 1970s we find that an economy wide reduction in the cost of holding liquidities and an increase in risk best explain the rise in cash holdings and the widespread use of credit lines the structural estimation results shed light on two widely acknowledged motives for holding cash the precautionary motive and the liquidity motive translate risk exposure into cash holdings our results however do not suggest that firms have become more prudent over time it is higher liquidity needs that has forced firms to hold more cash and use more credit lines abstract from author

loan availability and investment can innovative companies better cope with loan denials this study examines the consequences of loan denials for the investment performance of small and medium sized german enterprises as a consequence of a loan denial innovative companies experience a smaller drop in the share of actual to planned investment than noninnovative companies the nonrandomness of loan denials is controlled for with a selection equation employing the intensity of banking competition at the district level as an exclusion restriction we can explain the better performance of innovative companies by their ability to increase the use of external equity financing such as venture capital or mezzanine capital when facing a loan denial

fiscal year ends and nonlinear incentive contracts the effect on business seasonality salesperson and executive compensation contracts typically specify a nonlinear relationship between firm revenues and pay these agents therefore have incentive to manipulate prices influence the timing of customer purchases and vary effort over their firms fiscal years this paper empirically establishes results consistent with agents focusing on performance over the fiscal year most notably in addition to varying with the calendar business cycle manufacturing firms sales are higher at the end of the fiscal year and lower at the beginning than they are in the middle further evidence is found in fiscal year price movements and patterns in the industry variation of fiscal year effects

do financial variables help forecasting inflation and real activity in the euro area abstract this paper uses a large data set consisting of 447 monthly macroeconomic time series concerning the main countries of the euro area to simulate out of sample predictions of the euro area industrial production and the harmonized inflation index and to evaluate the role of financial variables in forecasting we considered two models which allow forecasting based on large panels of time series forni et al rev econom statist 82 2000 540 mimeo 2001b and stock and watson mimeo 1999 performance of both models were compared to that of a simple univariate ar model results show that multivariate methods outperform univariate methods for forecasting inflation at one three six and twelve months and industrial production at one and three months we find that financial variables do help forecasting inflation but do not help forecasting industrial production

macroeconomic forecasting using diffusion indexes this article studies forecasting a macroeconomic time series variable using a large number of predictors the predictors are summarized using a small number of indexes constructed by principal component analysis an approximate dynamic factor model serves as the statistical framework for the estimation of the indexes and construction of the forecasts the method is used to construct 6 12 and 24 monthahead forecasts for eight monthly u s macroeconomic time series using 215 predictors in simulated real time from 1970 through 1998 during this sample period these new forecasts outperformed univariate autoregressions small vector autoregressions and leading indicator models

quality distortion by a discriminating monopolist the standard model of monopolistic imperfect quality discrimination involving consumer self selection has shown that no distortion occurs at the highest quality level while all lower quality levels are degraded in order to maintain profitable market segmentation this result flows from the assumption that consumers with a higher total utility of quality also have a higher marginal utility of quality the paper develops a reasonable model in which the standard assumption is not satisfied and this alternative model yields vastly different conclusions regarding the form of quality distortion in particular quality may be enhanced not degraded to maintain profitable market segmentation copyright 1989 by american economic association

the out of sample forecasting performance of nonlinear models of regional housing prices in the us this article provides out of sample forecasts of linear and nonlinear models of us and four census subregions housing prices the forecasts include the traditional point forecasts but also include interval and density forecasts of the housing price distributions the nonlinear smooth transition autoregressive model outperforms the linear autoregressive model in point forecasts at longer horizons but the linear autoregressive and nonlinear smooth transition autoregressive models perform equally at short horizons in addition we generally do not find major differences in performance for the interval and density forecasts between the linear and nonlinear models finally in a dynamic 25 step ex ante and interval forecasting design we once again do not find major differences between the linear and nonlinear models in sum we conclude that when forecasting regional housing prices in the united states generally the additional costs associated with nonlinear forecasts outweigh the benefits for forecast

risk taking spillovers of u s monetary policy in the global market for u s dollar corporate loans abstract we study the effects of u s interest rates and other factors on risk taking in the global market for u s dollar syndicated term loans we find that before the global financial crisis both u s and non u s lenders originated ex ante riskier loans to non u s borrowers in response to a decline in short term u s interest rates and after the crisis in response to a decline in longer term u s interest rates after the crisis this behavior was more prominent for shadow banks and less prominent for banks with relatively low capital separately before the crisis lenders originated less risky loans in response to u s dollar appreciation across the periods the responses to risk appetite and economic uncertainty varied to the extent that the federal reserve affects u s interest rates we provide evidence of global risk taking spillovers of u s monetary policy which are important but not dominant factors for risk taking in the market

conceptualizing and measuring distance in international business research recurring questions and best practice guidelines distance is a central concept in international business research yet there is debate about the construct as well as its operationalization in this editorial we address three of the most important recurring questions posed by authors editors and reviewers by examining the theory methods and data of distance research we discuss 1 how to theorize on distance and 2 what method and 3 what data to use when constructing a distance index we develop practical recommendations grounded in theory illustrating and supporting them by calculating cross country distance indices for all available country pairs and two of the most used distance indices cultural and institutional we show that whereas a specific method to calculate distance may matter to some extent the choice for a specific cultural or institutional framework to measure cultural or institutional distance has a major impact on country pair distances overall this editorial highlights the importance of matching data and method to the theoretical argument

an institution based view of global ipr history leveraging the use of history to advance international business research this article focuses on the crucial debate over intellectual property rights ipr between the united states and china ironically during the 19th century the united states was not a leading ipr advocate as it is today but was a leading ipr violator developing an institution based view of ipr history we identify three underlying theoretical mechanisms that help to explain ipr in the two countries path dependence long term processes and institutional transitions we argue that both the us refusal to protect foreign ipr in the 19th century and the current chinese lack of enthusiasm to meet us ipr demands embody rational responses to their respective situations however given long term processes with intensifying isomorphic pressures institutional transitions in favor of better ipr protection are quite possible finally going above and beyond these two countries we draw on the ipr history in over ten other countries to develop a more globally generalizable framework which in turn contributes to the key question of how history matters

loans on sale credit market seasonality borrower need and lender rents abstract the market for corporate credit is characterized by significant seasonal variation both in interest rates and the volume of new lending firms borrowing from banks during seasonal sales in late spring and fall issue at 19 basis points cheaper than winter and summer borrowers issuers during cheap seasons appear to have less immediate needs but are enticed by low rates to engage in precautionary borrowing high interest rate periods capture borrowers with unanticipated non deferrable investment needs consistent with models of intertemporal price discrimination seasonality is strongly associated with market concentration among a few large banks with repeated interactions

the uppsala internationalization process model revisited from liability of foreignness to liability of outsidership the uppsala internationalization process model is revisited in the light of changes in business practices and theoretical advances that have been made since 1977 now the business environment is viewed as a web of relationships a network rather than as a neoclassical market with many independent suppliers and customers outsidership in relation to the relevant network more than psychic distance is the root of uncertainty the change mechanisms in the revised model are essentially the same as those in the original version although we add trust building and knowledge creation the latter to recognize the fact that new knowledge is developed in relationships

theoretical foundations of emerging economy business research in probing theoretically into central and eastern europe transactions resources and institutions we outlined the contributions of research in central and eastern europe cee to theoretical debates in business research in this retrospective we reflect upon the evolution of the field over the past decade with the fading impact of cee s distinct shared history we suggest that cee best be analyzed as emerging economies rather than as a distinct geographic entity emerging economy business research is converging on common themes and shared theoretical ideas while identifying critical variations that constrain generalizations among and beyond emerging economies this research thus highlights the need to develop a better understanding of the boundary conditions of scholarly theories of business knowledge over the past decade the institution based view has emerged from distinct intellectual traditions in institutional economics organizational theory and the analysis of business government bargaining research in these converging lines of theorizing places contextual variations at the center of explanations of business phenomena around the world we suggest that the institution based view is evolving toward a paradigm and offer suggestions on how to advance this research agenda further in particular by exploring how firms engage with different sets of potentially conflicting institutions at multiple levels and locations

damaged durable goods i analyze a durable goods monopolist s incentives to introduce a damaged good a stripped down version of the original good in an infinite horizon framework the damaged good helps the monopolist to mitigate the coasian time inconsistency problem however it may lead to a welfare reduction low valuation buyers are induced to purchase the low quality damaged good early rather than buy the high quality original good later and when the players are patient the surplus loss from quality reduction outweighs the gain from earlier consumptions this welfare result contrasts with the previous literature based on a static framework

reduced cross border lending and financing costs of smes abstract this paper investigates how the withdrawal of banks from their cross border business impacted the borrowing costs of european firms since the crisis we combine aggregate information on total and cross border credit with firm level survey data for the period 2010 2014 we find that the decline in cross border lending led to a deterioration in the borrowing conditions of small firms in countries with more pronounced reductions in cross border credit inflows the likelihood of a rise in firms external financing costs increased this result is mainly driven by the interbank channel which plays a crucial role in transmitting shocks to the real sector across borders