production flexibility as a motive for multinationality this paper examines how uncertainty in future operating costs at the time of undertaking long lived and irreversible capital investment projects may provide an incentive for multinational production this incentive may be present even if firms are risk neutral as long as they face a downward sloping demand curve the lower the international correlation between marginal cost shocks and the lower the elasticity of demand the greater the benefit to establishing plants in different countries however even if cost fluctuations are perfectly correlated internationally there may still be gains from multinational production

operating flexibility global manufacturing and the option value of a multinational network the multinational corporation is a network of activities located in different countries the value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed we model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries a stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option the value of which is dependent upon the real exchange rate the model is extended to analyze hysteresis effects and within country growth options we show that the management of across border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing

operational hedging strategies and competitive exposure to exchange rates this paper investigates the impact of operational flexibility on firms economic exposure to currency fluctuations in the presence of global competition we consider a global firm who sells as a monopolist in the domestic market and also sells to a foreign market facing competition from a local competitor of certain capacity we compare the effects of two operational strategies of the global firm namely matching currency footprints natural hedge and the capacity pooling strategy with allocation flexibility for a two stage stochastic model we derive the optimal capacity and selling decisions for the global firm and from the comparative statics analysis of our model we infer useful managerial insights 1 we find that operational flexibility enables the global firm to exploit the possible high exchange rate i e devalued home currency realizations for profit improvement and thus increases in the long run the firm s expected profit 2 furthermore operational flexibility allows for downside risk control as the exchange rate becomes more volatile since the resource pooling option cleverly exercised minimizes the impact of unfavorable currency realizations 3 the global firm s operational flexibility increases its competitor s downside risk but may also benefit the competitor s expected profit since a flexible global firm may decide not to compete when the exchange rate is not favorable in conclusion our paper substantiates that natural hedge is not effective from a profit maximization perspective we clearly illustrate the robust profit maximizing performance and reasonable downside risk control of operational hedging approaches which rely on the clever exercising of operational flexibility options such as resource pooling and allocation in handling competitive exposure to fluctuating exchange rates

comparison of forecast performance for homogeneous heterogeneous and shrinkage estimators some empirical evidence from us electricity and natural gas consumption abstract maddala et al journal of business and economic statistics 15 1997 90 obtained short run and long run elasticities of energy demand for each of 49 us states over the period 1970 1990 they showed that heterogeneous time series estimates for each state yield inaccurate signs for the coefficients while panel data estimates are not valid because the hypothesis of homogeneity of the coefficients was rejected their preferred estimates are those obtained using the shrinkage estimator this paper contrasts the out of sample forecast performance of heterogeneous panel and shrinkage estimators using the maddala et al journal of business and economic statistics 15 1997 90 electricity and natural gas data sets our results show that the homogeneous panel data estimates give the best out of sample forecasts

on the integration of production and financial hedging decisions in global markets we study the integrated operational and financial hedging decisions faced by a global firm who sells to both home and foreign markets production occurs either at a single facility located in one of the markets or at two facilities one in each market the company has to invest in capacity before the selling season starts when the demand in both markets and the currency exchange rate are uncertain the currency exchange rate risk can be hedged by delaying allocation of the capacity to specific markets until both the currency and demand uncertainties are resolved and or by buying financial option contracts on the currency exchange rate when capacity commitment is made a mean variance utility function is used to model the firm s risk aversion in decision making we derive the joint optimal capacity and financial option decision and analyze the impact of the delayed allocation option and the financial options on capacity commitment and the firm s performance we show that the firm s financial hedging strategy ties closely to and can have both quantitative and qualitative impact on the firm s operational strategy the use or lack of use of financial hedges can go beyond affecting the magnitude of capacity levels by altering global supply chain structural choices such as the desired location and number of production facilities to be employed to meet global demand

bounds testing approach to analyzing the environment kuznets curve hypothesis with structural beaks the role of biomass energy consumption in the united states abstract this paper re examines the specification of the environmental kuznets curve ekc for the us economy by accounting for the presence of a major renewable energy source and trade openness over the period 1960 2016 biomass energy consumption and trade openness as well as oil prices are considered as additional determinants of economic growth and consequentially of co 2 emissions the bounds testing approach to cointegration is used to examine the long run relationship between the variables in the presence of structural breaks the causal relationship between the variables is investigated by applying the vecm granger causality test and accommodating structural breaks the results confirm the presence of cointegration between the variables moreover the relationship between economic growth and co 2 emissions is not only inverted u shaped but also n shaped in the presence of structural breaks and biomass biomass energy consumption lowers co 2 emissions exports imports and trade openness are also environment friendly the causality analysis underscores a feedback effect between biomass energy consumption and co 2 emissions economic growth still granger causes co 2 emissions in this new setup

the economic theory of clubs some clarifications abstract we provide a classification of club models and relate differences in implications to differences in assumptions then we address two main controversies one concerning the optimality of market provisions of public goods and their optimality and the other concerning the desirability of segregation

optimal dol degree of operating leverage with investment and production flexibility abstract the purpose of this paper is to derive the optimal dol degree of operating leverage of a company with flexibility in investment and production the choice of dol is a critical one because it impacts the company s risk level operating and financial performance and valuation however there is virtually no research on how a company should choose its dol we address this gap in the literature using a real option model that incorporates important managerial flexibilities such as investment flexibility to choose investment timing and capacity and production flexibility to change output level in response to demand side changes with a wide range of input parameter values our model generates optimal dol figures that are similar in magnitude to empirical estimates we also identify the important determinants of dol such as costs fixed cost variable cost and cost of capacity demand characteristics growth rate volatility and price sensitivity productivity of capital and interest rate how these inputs impact dol depends on whether investment timing is exogenously specified or endogenously determined by the firm finally capacity has been used in the literature as a measure of dol since capacity choice impacts dol via fixed cost however we show that a number of other factors also affect dol and the relationship between capacity and dol can be positive negative or non monotonic thus capacity is not a good proxy for dol

organizational design and technology choice under intrafirm bargaining comment the authors consider a wide number of applications of an intrafirm bargaining game within organizations where employees and the firm engage in wage negotiations under their presumption that contracts cannot bind employees to the organization the resulting stable wage and profit profiles give rise to an objective function for the firm that places weight on inframarginal profits in an economically significant manner the authors in turn employ this methodology to explore applications of organizational design hiring and capital decisions training and cross training the importance of labor and asset specificity managerial hierarchies preferences for unionization responses to competition and internal capital budgeting copyright 1996 by american economic association

make and buy balancing bargaining power abstract we analyze the optimal procurement of labor which can be supplied either internally based on wage negotiations or acquired at terms negotiated with an external subcontractor the novel feature of our model is that the subcontractor s bargaining power is a function of the proportion of output outsourced we demonstrate analytically how multiple sourcing emerges as an organizational mechanism to balance cost advantages associated with outsourcing against a subcontractor s increased bargaining power we find that the optimal proportion of outsourcing is lower with sequential negotiations than with simultaneous negotiations if the supplier to first negotiate can foreclose subsequent negotiations

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

multifirm unions and the incentive to adopt pattern bargaining in oligopoly abstract this paper develops a model of wage bargaining between an industry wide trade union and firms in an oligopoly and considers the circumstances under which the union prefers pattern bargaining that is negotiating contracts in a sequential manner to simultaneous bargaining with the firms the paper goes on to consider the importance of the bargaining order in pattern bargaining when the firms are asymmetric the analysis shows that the union gains by first targeting a firm which is in a relatively weak bargaining position i e impatient to settle or a firm with relatively large profits

analyzing the impact factors of energy related co2 emissions in china what can spatial panel regressions tell us abstract china produces a huge amount of co2 emissions that need to be reduced to comply with international commitments identifying the driving factors is critical for achieving mitigation targets and transiting toward a low carbon economy in china this study is one of the first few attempts to apply panel data and spatial econometrics models to analyze the spatial dependence of province level co2 emission intensity and the economic drivers of such emissions first we conducted a systematical review of the development of spatial econometrics second we generated a panel data set about energy and socioeconomic development of 30 provinces and municipalities in china from 2005 to 2012 next we chose the most appropriate model to explain the predominant factors of energy related co2 emissions based on a series of tests of the spatial econometrics models the results suggested that technology improvement adjustment of industrial and energy structures and environmentally friendly behaviors and patterns of consumption of habitants play an important role in co2 emissions mitigation the results also revealed that co2 emissions had strong spatial spillover effects which indicate that policies adopted in one province will affect policy making in neighboring provinces implying that provinces need take combined action to balance climate change mitigation and economic policy goals

investments to create bargaining power the case of franchising hybrid organizational forms such as franchise systems join two or more independent parties under a contract the ability of each party to achieve its goals depend upon the relative bargaining power in the relationship established by the contract using transaction cost economics and porter s 1980 characterization of sources of bargaining power this paper argues that the franchisor can make investments in activities such as tapered integration and buyer selection to increase its bargaining power and decrease conflict and litigation in a franchise system specifically tapered integration owning some units while franchising others selecting inexperienced franchisees and employing a long training program are predicted to increase the franchisor s bargaining power and the franchisee s compliance with franchisor standards an empirical analysis of litigation in restaurant franchise systems supports the theoretical hypotheses copyright 2000 john wiley sons ltd

regional green development level and its spatial relationship under the constraints of haze in china abstract this paper includes the new constraints of haze in the environmental efficiency research framework and the sbm undesirable and malmquist exponential models are used to measure and analyse the evolution characteristics and regional differences of regional green environmental efficiency of china and applied china s regional panel data and a spatial dubin model to deeply explore the impact of environmental regulation openness urbanisation industrial structure and technological innovation on regional green environmental efficiency the result show that under the constraints of smog the regional green environment efficiency of china is different with each area and shows strong spatial dependence and spatial differentiation the overall spatial distribution of the east middle northeast west gradient is decreasing environmental regulation had a major impact on the green environment efficiency of the region and demonstrated an inverted n type relationship the degree of openness urbanisation industrial structure and technological innovation play an active role in promoting regional green sustainable development economic growth corporate ownership structure fiscal policy and foreign investment dependence have hindered the progress of regional green sustainable development to a certain extent

unionised labour market and strategic production decision of a multinational i show that a foreign firm may sell the same product through both foreign direct investment fdi and export and this decision depends on the size of the product market it happens irrespective of whether the labour market in the domestic country or in the foreign country is unionised unlike the existing works focusing on risk diversification in presence of demand or cost uncertainty i explain the co existence of fdi and export in a world with certainty the endogenous determination of the wage rate plays an important role for my results my analysis shows the effects of the fixed cost of fdi and competition in the product market on the production strategy of the foreign firm

operational flexibility and market valuation of earnings this paper examines the association between the stock returns and accounting earnings of firms that have different levels of operational flexibility operational flexibility is a firm s ability to respond profitably to environmental fluctuations by shifting factors of production within a multinational network of subsidiaries the geographic breadth and depth of a firm s multinational network are used as indicators of operational flexibility we find a significantly greater coefficient relating stock returns and accounting earnings for multinational firms that operate in many countries but limit their concentration in any one foreign country than for other multinational firms or domestic firms this coefficient is significantly smaller for multinational firms whose foreign subsidiaries are highly concentrated in a few countries when all multinational firms are pooled together we find their earnings returns association does not differ from that of domestic firms copyright 1999 john wiley sons ltd

persistent trade effects of large exchange rate shocks this paper presents a theoretical basis for the argument that large exchange rate shocks such as the 1980s dollar cycle may have persistent effects on trade flows and the equilibrium exchange rate itself we begin with a partial equilibrium model in which large exchange rate fluctuations lead to entry or exit decisions that are not reversed when the currency returns to its previous level then we develop a simple model of the feedback from hysteresis in trade to the exchange rate itself here we see that a large capital inflow which leads to an initial appreciation can result in a persistent reduction in the exchange rate consistent with trade balance

an economic model for evaluating mining and manufacturing ventures with output yield uncertainty this paper develops an operational risk management model for evaluating production efforts in manufacturing and mining industries where the resource to be exploited is nonhomogenous using acontingent claims methodology now commonly encountered in financial applications we formulate a production control model in an environment characterized bymarket andprocess uncertainty in our analysis market risk is depicted by the output price while process uncertainty is captured by the random variability inherent in the output s yield in this light adjustments to the rate of production are viewed as a sequence of nested real options affording operating flexibility we account for an optimal sequence of production adjustments over a preestablished production horizon by taking the production rate as an adapted positive real valued process accordingly techniques of stochastic control theory and contingent claims analysis cca are employed to ensure value maximizing production policies are rendered in a manner consistent with an equilibrium price structure

subsidiary expansion contraction during times of economic crisis this paper compares two real options within country growth and across country operational flexibility to examine subsidiary expansion contraction during times of economic crisis specifically we examine how the real options orientations of individual subsidiaries interact with the general characteristics of multinational enterprise networks our main findings are that a economic crises can be detrimental for subsidiaries with stronger within country orientations and advantageous for those with stronger across country orientations and b network characteristics are not the sole determinants of subsidiary expansion contraction what really matters is how the real options orientations of individual subsidiaries mesh with the overall characteristics of the network they belong to

competitive equilibrium and the core in club economies with anonymous crowding in club economies with anonymous crowding competitive equilibrium states of the economy are efficient and coincide with the core when there is only one private good anonymous admission prices permit consumers with different tastes to share facilities consumers might do so when their demands for facility size and crowding coincide in which case sharing is efficient thus similarity of demands is the relevant consideration for efficiently grouping consumers with different tastes

the impact of order and mode of market entry on profitability and market share market share performance and profitability of overseas business activities has long been an important issue in international business in this study we explore the impact of order and mode of market entry into an overseas market we find that early entrants have significantly higher market shares and profitability than late followers we also find that equity joint ventures have a higher profitability than either wholly owned operations or contractual joint ventures a significant interaction exists between order and mode of market entry as expected firm efficiency and size affect the performance of firms these results are based on the business activities of a sample of 14 466 foreign firms in china in 1995

spatially variable property tax and optimal tax composition in congested monocentric cities george pigou ramsey and strotz unified abstract we explore the optimal spatial structure of the property tax in a monocentric city with transportation congestion to show how the availablity of revenue instruments impacts the properties of the optimal property tax we discuss three regimes with different combinations of a head tax congestion tolls and property tax in each regime the tax composition is optimally determined to finance a predetermined expenditure under the first regime with all the three taxes available the first best allocation is achievable only when the property tax is unused under the second regime where only head and property taxes are available a spatially variable property tax substitutes for the unavailable congestion tolls the head tax or subsidy fills the gap between the property tax revenue and the predetermined expenditure moreover property tax is negative positive close to the city center boundary under the third regime where only property tax is available the role of the property tax is twofold to substitute for the unavailable congestion tolls and to finance the predetermined expenditure in general for both roles the optimal tax rates are spatially variable furthermore if its role as a substitute for congestion tolls dominates its other role the property tax may be negative close to the boundary

estimation of short run and long run elasticities of energy demand from panel data using shrinkage estimators this article discusses the problem of obtaining short run and long run elasticities of energy demand for each of 49 states in the united states using data for 21 years estimation using the time series data by each state gave several wrong signs for the coefficients estimation using pooled data was not valid because the hypothesis of homogeneity of the coefficients was rejected shrinkage estimators gave more reasonable results the article presents in a unified framework the classical empirical bayes and bayes approaches for deriving these estimators

a general unconstrained model for transfer pricing in multinational supply chains multinational supply chains operate in more than one country or tax jurisdiction and face decision problems concerned with trade flows of resources products and services transfer prices and allocation of transport costs between their divisions these decisions must consider for the sake of optimality corporate and governmental parameters such as the payment of dividends and royalties ownership of and control over subsidiaries income taxes differentials duties and quotas etc in this paper we generalize and extend the theory of the multinational firm to the case of multinational supply chains we propose a model that is more general and comprehensive than the previous ones proposed in the literature to be more specific our model integrates many of the previous research factors and includes new ones such as transport costs and duty drawbacks which are critical for supply chains that operate under international trade regulations under the maximization of the repatriated earnings objective we study the optimality conditions of the corporate decision variables to derive managerial guidelines and to determine how decisions regarding trade quantities transfer prices and transport cost allocations affect the amount of taxes to be paid to host governments as well as the total after tax repatriated earnings of the corporation

rent shifting and the order of negotiations abstract when two sellers negotiate terms of trade with a common buyer the order in which the negotiations occur can affect the buyer s payoff this suggests that the buyer may have preferences over which seller to negotiate with first we find that when the efficient outcome calls for the buyer to purchase from only one seller the buyer weakly prefers to negotiate first with the inefficient seller and when the efficient outcome calls for the buyer to purchase from both sellers the buyer prefers to negotiate first with the seller that has less bargaining power or offers a smaller stand alone surplus all else being equal these conclusions hold whether or not penalty clauses are feasible

an intertemporal general equilibrium model of asset prices this paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices in this model asset prices and their stochastic properties are determined endogenously one principal result is a partial differential equation which asset prices must satisfy the solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy in this paper we develop a general equilibrium asset pricing model for use in applied research an important feature of the model is its integration of real and financial markets among other things the model endogenously determines the stochastic process followed by the equilibrium price of any financial asset and shows how this process depends on the underlying real variables the model is fully consistent with rational expectations and maximizing behavior on the part of all agents our framework is general enough to include many of the fundamental forces affecting asset markets yet it is tractable enough to be specialized easily to produce specific testable results furthermore the model can be extended in a number of straightforward ways consequently it is well suited to a wide variety of applications for example in a companion paper cox ingersoll and ross 7 we use the model to develop a theory of the term structure of interest rates many studies have been concerned with various aspects of asset pricing under uncertainty the most relevant to our work are the important papers on intertemporal asset pricing by merton 19 and lucas 16 working in a continuous time framework merton derives a relationship among the equilibrium expected rates of return on assets he shows that when investment opportunities are changing randomly over time this relationship will include effects which have no analogue in a static one period model lucas considers an economy with homogeneous individuals and a single consumption good which is produced by a number of processes the random output of these processes is exogenously determined and perishable assets are defined as claims to all or a part of the output of a process and the equilibrium determines the asset prices our theory draws on some elements of both of these papers like merton we formulate our model in continuous time and make full use of the analytical tractability that this affords the economic structure of our model is somewhat similar to that of lucas however we include both endogenous production and

coordinating investment production and subcontracting we value the option of subcontracting to improve financial performance and system coordination by analyzing a competitive stochastic investment game with recourse the manufacturer and subcontractor decide separately on their capacity investment levels then demand uncertainty is resolved and both parties have the option to subcontract when deciding on their production and sales we analyze and present outsourcing conditions for three contract types 1 price only contracts where an ex ante transfer price is set for each unit supplied by the subcontractor 2 incomplete contracts where both parties negotiate over the subcontracting transfer and 3 state dependent price only and incomplete contracts for which we show an equivalence result while subcontracting with these three contract types can coordinate production decisions in the supply system only state dependent contracts can eliminate all decentralization costs and coordinate capacity investment decisions the minimally sufficient price only contract that coordinates our supply chain specifies transfer prices for a small number 6 in our model of contingent scenarios our game theoretic model allows the analysis of the role of transfer prices and of the bargaining power of buyer and supplier we find that sometimes firms may be better off leaving some contract parameters unspecified ex ante and agreeing to negotiate ex post also a price focused strategy for managing subcontractors can backfire because a lower transfer price may decrease the manufacturer s profit finally as with financial options the option value of subcontracting increases as markets are more volatile or more negatively correlated

the integration of subsidiary political activities in multinational corporations just as the competitive activities of mnc subsidiaries exhibit differentiation as well as integration so might mnc political activities this paper combines the literatures on international business government interactions and on multinational corporations with resource dependence theory as a foundation we develop and test hypotheses on factors that might influence the degree to which subsidiary political activities are integrated with affiliated organizations we find that subsidiary strategic integration and the economic integration of the host country significantly influence integration of subsidiary political activities

real options theory in international business the last quarter century has witnessed substantial growth in applications of real options theory rot to international business ib research in this review we explicate the core rot concepts in the ib context and discuss the contributions of rot based research to three core ib issues timing and scale of market entry or exit entry mode and governance form and the role of multinational networks based on our review we propose a holistic rot view of the multinational enterprise that synthesizes the insights of existing studies finally to move the field forward we highlight key questions and challenges in current rot based work provide a more precise definition of exogenous and endogenous uncertainty suggest empirical designs to test unique rot predictions and explore areas where rot can be combined with other theoretical perspectives to better understand ib phenomena

timing of entry in international market an empirical study of u s fortune 500 firms in china this study attempts to explain the timing of entry of firms in international markets based on the existing literature we propose a framework that consists of firm specific factors industry market factors and host country factors empirical results based on the entry information of u s fortune 500 firms in china between 1979 and 1996 show that larger firms with greater level of internalization and scope economies are likely to enter this foreign market earlier in addition non equity modes competitors behavior in the product market and lower levels of country risk are significantly associated with early entry

the market provision of club goods in the presence of scale economies a natural club monopoly exists when economies of scale are so significant relative to population size that in the efficient allocation the entire population is included in a single club under these circumstances an uncontested monopolist will inefficiently exclude some individuals from the club if marginal congestion costs are sufficiently high when the entire population is included if admitting that the entire population is profit maximizing then the facility size chosen is also efficient a perfectly contestable monopoly is always efficient external economies of scale exist when the cost of each facility declines as more facilities are provided this externality leads a competitive market to provide too few clubs but a monopolist will provide an efficient allocation because it internalizes the cost externality copyright 1990 by the london school of economics and political science

the newsvendor problem in a global market optimal centralized and decentralized control policies for a two market stochastic inventory system the global markets of today offer to the style goods producer more selling opportunities and pose new challenges in production planning and coordination from a production management standpoint the opportunity to exploit the difference in timing of the selling season of geographically dispersed markets for style goods is important for improving the firm s profitability in this paper we examine the above issue with an insightful model of a producer of style goods selling the goods to two markets a primary and a secondary market with nonoverlapping selling seasons we refer to this problem as the global newsvendor problem for the above two market stochastic inventory systems we first develop optimal centralized control policies then we demonstrate the suboptimality of decentralized production control policies with the production centers at each market treated as independent profit centers and a constant transfer price being used to coordinate their production we propose as an effective alternative a decentralized production control structure with a nonlinear pricing scheme for production coordination among centers administered through an intermediate organizational unit in our modeling we explicitly consider the effects of exchange rate uncertainty on the production planning decisions

timing and eco nomic efficiency of climate friendly investments in supply chains abstract emission trading schemes such as the european union emissions trading system euets attempt to reconcile economic efficiency with ecological efficiency by creating financial incentives for companies to invest in climate friendly innovations using real options methodology we demonstrate that under uncertainty economic and ecological efficiency continue to be mutually exclusive this problem is even worse if a climate friendly project depends on investing in of a whole supply chain we model a sequential bargaining game in a supply chain where the parties negotiate over implementation of a carbon dioxide co2 saving investment project we show that the outcome of their bargaining is not economically efficient and even less ecologically efficient furthermore we show that a supply chain becomes less economically efficient and less ecologically efficient with every additional chain link finally we make recommendations for how managers or politicians can improve the situation and thereby increase economic as well as ecological efficiency and thus also the eco efficiency of supply chains

economic exposure and integrated risk management most corporate risk management research focuses on particular risk exposures to the exclusion of other interrelated exposures by contrast this study models corporate risk exposures using a multivariate approach integrating the distinct exposures of interest to finance international business and strategy researchers the paper addresses the implications of multivariate modeling for corporate risk management some key methodological issues arising in empirical estimation of corporate economic exposures and directions for research on integrated risk management 1998 john wiley sons ltd

a larger slice or a larger pie an empirical investigation of bargaining power in the distribution channel this research aims to provide insights into the determinants of channel profitability and the relative power in the channel by considering consumer demand and the interactions between manufacturers and retailers in an equilibrium model we use the nash bargaining solution to determine wholesale prices and thus how margins are split in the channel equilibrium margins are a function of demand primitives and of retailer and manufacturer bargaining power bargaining power is itself a function of exogenous retail and manufacturer characteristics the parties bargaining positions are determined endogenously from the estimated substitution patterns on the demand side the more they have to lose in a negotiation relative to an outside option the weaker the bargaining position we use the proposed bargaining model to investigate the role of the three main factors that have been blamed for the power shift from manufacturers to retailers in recent years firm size increases store brand introductions and service level differentiation in our empirical analysis of the german market for coffee we find that bargaining power varies among the different manufacturer retailer pairs this result suggests that bargaining power is not an inherent characteristic of a firm but rather depends on the negotiation partner we are able to confirm empirically previous theoretical findings that there can be cases where the slice of the pie that goes to one of the channel members may decrease but the overall pie increases and compensates for the smaller share of profits

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

clubs local public goods and transportation models a synthesis abstract clubs local public goods and transportation models are analyzed within a unified model the emphasis is on the derivation of optimal allocation pricing and the size of the sharing group we derive the conditions under which optimal prices will yield surplus or deficit as well as those under which competitive provision will be efficient given heterogeneous tastes we prove that segregation according to tastes is generally efficient although several cases where this result does not hold are also discussed we show that the existing literature is unnecessarily restrictive and that the unified approach suggested here considerably extends the existing analysis of clubs local public goods and the transportation problems

when is efficiency separable from distribution in the provision of club goods abstract using the homogeneous of degree zero inverse congestion quality function employed most frequently in the literature we characterise completely the families of utility functions which are then necessary and sufficient for break even utilitarian welfare maximising provision of club goods with self selection to be separable from distribution two types of separation involving alternatively a the price and quality b the price quality facility size and total utilisation are considered when separation is possible utility functions and optimal decisions take simple intuitive forms our results extend the scope of separation results previously obtained only for pure public goods journal of economic literature classification numbers d62 h23 h40

shaping the relationship between economic development and carbon dioxide emissions at the local level evidence from spatial econometric models the debate over the correlation between economic growth and environmental pollution has attracted a great deal of attention from academic researchers and policy makers in recent years there has been excessive use of spatial econometric models and too much emphasis on statistical procedures in empirical studies in this study we contribute to the existing literature by conducting a more rigorous analysis of the relationship between economic growth and hbox co 2 emissions in chinese cities using spatial durbin models our results show that hbox co 2 emissions increase monotonically in relation to economic growth at the city level and that the driving effects of economic growth are slightly smaller in central china than in eastern and western china in addition to economic growth industry s share of the economy is a major driver of hbox co 2 emissions while technological improvement measured by energy intensity per unit of gross domestic product gdp and the effectiveness of environmental governance flatten the shape of the environmental kuznets curve we provide evidence of local spillover effects of explanatory variables on hbox co 2 emissions economic competition as well as technological diffusion are found to exist in chinese cities in relation to hbox co 2 emissions we also find carbon leakage between cities only if the per capita gdp of a given city is less than 493 in 2010 constant dollars results hold when robustness checks are performed policy makers should carefully consider regional differences and the inherent spatial interactions between factors when formulating carbon reduction policies

decoupling analysis and environmental kuznets curve modelling of provincial level co2 emissions and economic growth in china a case study abstract guangdong is one of the most representative provinces of china in terms of reflecting how the provincial level co2 emissions dynamically evolve with economic development during the process of industrialisation and urbanisation the present study combines decoupling analysis with environmental kuznets curve ekc modelling to systematically explore the interactions between co2 emissions and economic growth in guangdong from the short to long terms aiming to provide the referential significance of low carbon development to other chinese provinces empirical results indicate that co2 economy interactions in guangdong dynamically changed with time performing an effect of expansive weak decoupling during 1995 2014 and having a potential to achieve a strong decoupling in the long run the decoupling states of various sectors and their contributions to the provincial overall decoupling differed greatly and varied by time and household and service sectors played increasingly important roles overall the decoupling effect of provincial co2 emissions is distinctly affected by the stage of industrialisation and urbanisation renewable energy utilisation as well as low carbon technical progress therefore promoting co2 economy decoupling at the provincial level should be specific to the feature and development reality of various provinces

strategic second sourcing by multinationals multinationals often serve foreign markets by exporting as well as by investing directly in foreign production facilities we argue that if the multinational competes in an oligopolistic market characterized by strategic complements then there are strategic reasons to use two production facilities committing to a second source allows the firm to keep average cost low while increasing its marginal cost the increase in marginal cost softens product market competition resulting in higher profits we argue that this theory also has implications for the make or buy literature in production management and the literature on second sourcing in industrial organization

the international control conundrum the case of hyperinflationary subsidiaries standard methods for financial controls of multinational corporations mncs foreign subsidiaries generally provide inadequate managerial support under conditions of extreme environmental turbulence resulting in a highly distortive performance evaluation system this article examines the specific conditions of monetary hyperinflation and how existing control systems should be upgraded or environmentalized in order to cope with such operating conditions a taxonomy of hyperinflationary environments and a control model based upon variance analysis aimed at smoothing excessive swings in the performance of foreign operations is developed thereby correcting for some of the dysfunctionalities in the traditional planning and control processes

on vertical relations and the timing of technology adoption we study the timing of new technology adoption in markets with input outsourcing and thus with vertical relations we find that technology adoption can take place earlier when firms engage in input outsourcing than when they produce the input in house hence the presence of vertical relations can accelerate the adoption of a new technology we also find that particular features of a vertically related market such as the distribution of bargaining power and the contract type through which trading is conducted can crucially affect the speed of technology adoption

a stochastic model for risk management in global supply chain networks abstract with the increasing emphasis on supply chain vulnerabilities effective mathematical tools for analyzing and understanding appropriate supply chain risk management are now attracting much attention this paper presents a stochastic model of the multi stage global supply chain network problem incorporating a set of related risks namely supply demand exchange and disruption we provide a new solution methodology using the moreau yosida regularization and design an algorithm for treating the multi stage global supply chain network problem with profit maximization and risk minimization objectives

union bargaining power subcontracting and innovation we show that if a firm can subcontract production to an informal sector an increase in union power may either increase or decrease innovation an increase in union power makes the firm worse off irrespective of its effect on innovation however in contrast to the usual belief an increase in union power may increase consumer surplus and decrease union utility by affecting innovation thus suggesting that a union may not want to be too powerful an increase in union power may create an ambiguous effect on social welfare our analysis provides new insights to the relation between union power and innovation

spatial effects of economic performance on the carbon intensity of human well being the environmental kuznets curve in chinese provinces abstract this study analyzes the interdependent relationship between economic development and environmental and human well being in china we evaluate panel data of the carbon intensity of human well being ciwb to measure environmental sustainability and human well being for 30 chinese provinces from 1995 to 2016 we then employ a spatial model to test the environmental kuznets curve the ciwb is an important indicator that incorporates the environmental social and economic dimensions of sustainability the coefficients of gdp squared gdp and cubic gdp are 1 043 0 123 and 0 0045 respectively indicating that the relationship between ciwb and economic growth is an inverted n shape in other words as gdp increases from low to high the ciwb first decreases then increases for a long period until it reaches a turning point and declines thereafter gdp per capita at the two turning points are 850 yuan and 110 000 yuan respectively in the long run economic growth is expected to have a positive effect on sustainable development however currently environmental policies are needed to offset unintended environmental harm analysis of spatial evolution and multiplier spatial effects show that spatial disparity and clustering exist simultaneously this suggests that overall planning for the big picture and cooperative development between adjacent provinces could help to handle regional environmental problems

spillover effects of economic globalization on co2 emissions a spatial panel approach abstract this paper investigates the spatial effects of economic globalization on co2 emissions in a panel of 83 countries over the period 1985 2013 we apply the spatial panel method to address the problems of spatial dependency and the spillover effect among neighboring countries first the estimation results verify the existence of the spatial correlations in co2 emissions across nations second we find that the indirect effect of economic globalization on co2 emissions is so significantly negative to overcome the positive direct effect which implies a negative and significant total effect so our results suggest that being surrounded by highly globalized countries has a positive effect on the environmental quality finally we also find strong evidence for the inverted u shaped ekc relationship between co2 emissions and income

wage fairness in a subcontracted labor market abstract labor market subcontracting is a global phenomenon this paper presents a theory of wage fairness in a subcontracted labor market where workers confront multi party employment relationships and deep wage inequities between regular and subcontractor mediated hires we show that subcontracting derives its appeal from a downward revision of workers fair wage demand when producers delegate employment decisions down the supply chain furthermore subcontracting creates a holdup problem resulting in wages that workers deem unfair along with adverse worker morale consequences in equilibrium these insights reveal the efficiency costs of subcontracting as an employer strategy to redress workers demand for fair wages

endogenous games and equilibrium adoption of social norms and ethical constraints abstract we consider a situation in which games are formed endogenously in two senses 1 there is a pregame in which agents choose to learn a subset of all feasible strategies and can then employ only these strategies in subsequent play and 2 agents choose their game partners through a costly search process we show that at any subgame perfect equilibrium agents will constrain their action sets in the pregame in such a way that a single social norm prevails thus all agents in a society will abide by the same ethical standard although what standard this will be cannot be predicted we also show that these are essentially the only spe outcomes we suggest that this provides at least a partial explanation for experimental observations that agents apparently choose strategies that do not maximize their payoffs

revisiting environmental kuznets curves through the energy price lens abstract the goal of this paper is to provide new insights to elucidate the inconclusive results from the environmental kuznets curve ekc empirical literature for the first time in empirical literature an econometric analysis includes the relative prices for several energy sources the paper provides strong evidence on the relevance of energy prices to co 2 emissions accordingly one reason for the lack of agreement in the ekc literature may be the absence of energy prices in empirical exercises the presence of relative energy price changes in the econometric specification confirms a monotonic and positive relationship between co 2 and gross domestic product gdp therefore we may conclude that there is a decoupling process but without reaching any turning point on that relationship the policy implications are straightforward direct climate action by policy makers is required to break the positive relationship between co 2 and gdp that conclusion has been reinforced by the reduction of energy prices since the middle of 2014 otherwise the trend in energy prices may reverse the relative decarbonisation processes accounted for in recent years in major developed countries

impact of sourcing flexibility on the outsourcing of services under demand uncertainty abstract this paper investigates the relationship between market conditions and the value and use of sourcing flexibility for service processes we develop and analyze a series of models and we derive expressions for the optimal switching decision the value of the option to outsource the value of the option to backsource and the probability and timing of switches between the alternative sources one contribution is the models and associated derivations which are largely new to the literature and may serve as a tool to support service sourcing plans and decisions the second contribution is a series of results with managerial implications 1 the probability of outsourcing is generally increasing in volatility for high skill process and decreasing in volatility for low skill processes earlier work has found that the hysteresis band is increasing in volatility which is interpreted as an indicator of increasing organizational inertia we also find that the hysteresis band is increasing in volatility but interestingly for the case of high skill processes organizational inertia tends to be decreasing in volatility 2 the option to backsource is generally more valuable for high skill processes than for low skill processes this result suggests that investments to make it easier to backsource should have a higher priority for high skill processes 3 the value of the option to backsource a high skill service process can be decreasing in volatility the result suggests that a rather nuanced consideration of volatility is in order when considering investments in the flexibility to backsource a high skill process

optimal operating policies for multiplant stochastic manufacturing systems in a changing environment this paper addresses the horizontal coordination between production units located in different countries within a supply chain in a changing environment the model incorporates 1 congestion and delay through uncertainties in demand and processing times 2 a changing production cost environment through uncertainty in an environmental state such as the exchange rate and 3 allowing production to stock the main contribution of the paper is to characterize the optimal production policy assuming no switchover cost as a barrier type control policy for a series of models for each plant there is a barrier function defined on the environmental state that gives the total worldwide stock level barrier this plant should be operated if and only if the stock level is below this barrier the authors also show that in a simple setting of two plants in different countries the barrier functions are not always monotone in the exchange rate even when the production costs are the authors present a condition under which the control barriers are shown to be monotone under this condition and with only two plants it is optimal to follow a primary secondary plant policy in which given a fixed environmental state it is optimal to operate both plants when stock is low only the primary plant when stock is moderate and neither when stock is high furthermore the roles of the plants switch as the environmental state passes through the equal production cost state in addition the firm seeks to carry the most stock as a hedge against future environmental state moves when one plant is significantly cheaper than the other the firm seeks to carry the least stock when both plants are equally costly to operate

the boundaries of the firm revisited why do firms exist what is their function and what determines their scope these remain the central questions in the economics of organization they are also central questions for business executives and corporate strategists the worldwide volume of corporate mergers and acquisitions exceeded 1 6 trillion in 1997 it is hard to imagine that so much time effort and investment bankers fees would be spent on adjusting firm boundaries unless there was some underlying economic gain indeed the exceptional levels of merger and acquisition activity over the past two decades are a strong indication that economically significant forces do determine organizational boundaries the study of firm boundaries originated with the famous essay by coase 1937 who raised the question of why we observe so much economic activity inside formal organizations if as economists commonly argue markets are such powerful and effective mechanisms for allocating scarce resources coase s answer was in terms of the costs of transacting in a world of imperfect information when the transaction costs of market exchange are high it may be less costly to coordinate production through a formal organization than through a market in large part thanks to the work of williamson 1975 1985 recent decades have seen a resurgence of interest in coase s fundamental insight that firm boundaries can be explained by efficiency considerations our understanding of firm boundaries has been sharpened by identifying more precisely the nature and sources of transaction costs in different circumstances in the process the focus of

do multinationals operate flexibly theory and evidence do multinational enterprises operate flexibly i e do they shift production in response to currency changes three theoretical perspectives are developed flexibility optimism premised on information and sunk cost advantages takes a macro efficiency perspective and predicts sizable responses flexibility pessimism premised on inertia and internal opportunism takes an organizational perspective and predicts sticky responses flexibility realism premised on the view that to be flexible in the current period multinational enterprises need to have planned and invested accordingly in previous periods predicts positive but relatively modest responses empirical analysis spanning the period 1977 1993 finds that multinational enterprises systematically exploit currency shifts but even in the face of large exchange rate changes their operational responses are relatively modest the results appear most consistent with flexibility realism and this hypothesis is selected over the alternatives considered

optimal investment in product flexible manufacturing capacity this paper presents a model and an analysis of the cost flexibility tradeoffs involved in investing in product flexible manufacturing capacity flexible capacity provides a firm with the ability to respond to a wide variety of future demand outcomes but at the expense of the increased cost of acquiring flexible manufacturing capacity as compared with dedicated or nonflexible capacity we formulate the product flexible manufacturing capacity investment decision as a two stage stochastic program in the first stage the firm must make its investment decision in manufacturing capacity before the resolution of uncertainty in product demand in the second stage after demand for products are known the firm implements its production decisions constrained by the first stage investments the main contributions of this paper are threefold first we develop a model of the firm s flexible manufacturing investment decision that conceptually captures some of the key characteristics of this complex decision probl

global facility network design in the presence of competition abstract we study the facility network design problem for a global firm that is a monopolist seller in its domestic market but faces local competition in its foreign market the global firm produces in the face of demand and exchange rate uncertainty but can postpone localization and distribution of the output until after uncertainties are resolved the competitor in the foreign market however enjoys the flexibility of postponing all production activities until after uncertainties are resolved the two firms engage in an ex post cournot competition in the foreign market we consider three potential network configurations for the global firm under a linear demand function we provide the necessary and sufficient condition that one of the three networks is the global firm s optimal choice and explore how the presence of foreign competition affects the sensitivity of the global firm s design to various cost parameters and market uncertainties

strategic commitment versus postponement in a two tier supply chain abstract in this paper the trade off between strategic commitment and operational flexibility is examined as it arises in a supply chain when a supplier offers competing buyers opportunities to make early purchase commitments for a product with a short life cycle traditionally the use of incentives for early purchase commitments for short life cycle products has been justified on the basis of a supplier s production lead times or capacity constraints an alternative explanation has been proposed by offering early purchasing opportunities a supplier can influence the form of competition in the downstream market using a single period model it has been shown that below a threshold level of demand uncertainty the supplier can benefit from providing adequate pricing incentives to entice downstream buyers to commit to purchase quantities before demand information is revealed moreover such early purchasing opportunities can benefit the supplier as well as the buyers even in the absence of production lead times or capacity constraints

the practice of econometrics classic and contemporary provides hands on experience of econometrics with estimation and inference each chapter begins with a discussion of economic theory underlying the application

exchange rates and the choice of ownership structure of production facilities the aim of this research is to study the effects of real exchange rates on the long term ownership strategies of production facilities of firms entering foreign markets among the strategies considered are exporting exp joint ventures with local partners jv and wholly owned production facilities wos in the foreign country our research takes a first step in modeling the influence of exchange rates on the choice and dynamic adjustment of such strategies the insights obtained from our modeling analysis are then translated into testable hypotheses and empirically verified with the use of firm level data from u s multinational corporations both at the firm and a more aggregate level an insightful result of our model is the identification of a hysteresis phenomenon that characterizes switching behavior between strategies in the presence of switchover cost the magnitude of the hysteresis band which is a measure of the inertia associated with keeping the current ownership structure is affected by a multiplicity of factors such as exchange rate volatility and market power of the entering firm analytical and numerical results on the effects of such factors on the hysteresis band are provided the four testable hypotheses generated from our modeling analysis are rigorously tested with the use of a multinomial logit model on data obtained from the harvard multinational enterprise database and a data set maintained by the bureau of economic analysis the u s department of commerce the empirical results strongly support our insights that relatively depreciated real exchange rates i e weak home currency favor a the jv over the wos and b exp mode over the wos or jv finally we summarize our results into useful guidelines for global production managers

models of the multinational enterprise flexibility is identified as the hallmark of recent modelling of the multinational enterprise the focus on flexibility is a response to the rationalization and restructuring of international business which has occurred since the end of the golden age of western economic growth flexibility has been south in factor markets intermediate product markets and markets for final products it has been sought by both governments and firms flexible firms are attracted to locations with flexible host governments this article contrasts the modern research agenda based on flexibility with the more traditional research agenda which predominates in the literature reviewed by caves 1996

partial outsourcing monitoring cost and market structure we investigate firms outsourcing decisions when production requires a large number of inputs the novelty of our approach is that it provides a testable framework to characterize the equilibrium fraction of outsourced inputs we demonstrate that intensified competition in a cournot market for the final good typically enlarges the set of outsourced components relative to those produced in house the proportions of outsourced inputs are found to be strategic substitutes independently of whether firms compete with respect to quantities or prices in the market for the final good jel classification d20 l22 sous traitance partielle cout de monitarisation et structure de marche l auteur examine les decisions de sous traitance des entreprises quand la production reclame un grand nombre d intrants la nouveaute de l approche proposee est qu elle fournit un cadre conceptuel testable pour definir en equilibre la fraction des intrants obtenue en sous traitance on montre qu une concurrence plus intense pour le produit final dans un marchea la cournot accroit l ensemble des intrants obtenus en sous traitance par rapport a l ensemble de ceux qui sont produit a l interne il s avere que les proportions des divers intrants obtenus en sous traitance sont des substituts que les firmes se concurrencent par les prix ou les quantites dans le marche du produit final

dodging bullets the heterogeneous effect of political violence on greenfield fdi the relationship between political violence and greenfield foreign direct investment is contingent on the type of violence characteristics of the investment receiving sector and extent to which the investing firm is geographically diversified this paper presents an analysis with a dynamic fixed effects model for a panel of 90 developing countries from 2003 to 2012 the analysis shows that nationwide political conflict is negatively associated with total and non resource related greenfield foreign direct investment but not with resource related greenfield foreign direct investment the insensitivity to political conflict of multinational firms in the resource sector is associated with the high profitability of natural resource extraction and the companies geographic constraints on location choice during the period of estimation in the non resource sector the less geographically diversified firms are most sensitive to the risk of conflict

the regional dimension of mnes foreign subsidiary localization this paper examines the regional effect of mnes foreign subsidiary localization we hypothesize that the number of subsequent foreign subsidiaries in a country is in part determined by a firm s prior foreign subsidiary activity at the regional level we test our hypotheses using data on 1076 japanese mnes that created 3466 foreign subsidiaries 1837 wholly owned fdis and 1629 joint ventures over the period 1996 2001 we use a multilevel negative binomial approach with three levels of analysis localization decisions in a country 49 countries in a region six regions and at the headquarters level in this way we test the regional effects controlling for country and corporate dimensions we also run separate models to differentiate wholly owned and joint venture localization decisions our results strongly support the semi globalization perspective in that the regional level effects are significant and different from the country level effects for all foreign subsidiaries for wholly owned subsidiaries and for jointly owned subsidiaries japanese mnes adopt a regional perspective that complements their decisions at the country and firm levels they seek regional agglomeration benefits and make arbitrage decisions between countries in the same region

real options and foreign affiliate divestments a portfolio perspective this paper develops a real options portfolio perspective on foreign affiliate divestments affiliates are less likely to be divested in response to adverse environmental change if they represent growth or switch option value to the multinational firm under conditions of macroeconomic uncertainty however the affiliate is partially redundant to the option value of the multinational firm s affiliate portfolio if the affiliate shares the manufacturing platform role in the host country with other affiliates or if macroeconomic conditions of the host country are highly correlated with those of other countries in which the multinational firm operates affiliates we find strong support for these arguments in tests on a comprehensive sample of 1078 asian manufacturing affiliates of japanese electronics multinationals

linear and nonlinear exchange rate exposure abstract this paper presents a new methodological approach to examine exchange rate exposure which takes account of the role of the market portfolio and macroeconomic variables in exposure regressions exchange rate regimes based on periods of depreciation and appreciation and nonlinear exposure within each regime we show that the stock market s own exposure to exchange rates should be taken into account before considering industry exposure in addition we adjust the exchange rate and the stock market for common economy wide factors that are unrelated to exchange rates within this framework we show that exposure to bilateral exchange rates is statistically and economically important and that industries with extensive international trade are more often exposed than industries with low levels of international trade the signs of exposure coefficients in each regime are consistent with the extent to which an industry exports we also show that nonlinear exposure is often statistically and economically significant interestingly there is little evidence that industries are exposed to a currency basket

optimizing an international network of partially owned plants under conditions of trade liberalization for the last four decades the preferred economic philosophy in much of latin america was that of import substituting industrialization as a result multinational corporations mncs approached different countries with the expectation that each plant would primarily serve its domestic market each of these plants was partially owned by the mnc beginning in the late 1980s latin america countries began decreasing barriers to cross border trade this made competition between the units belonging to a common network possible for the first time operations which had subsisted side by side in spite of differences in costs and quality of output and which were under the control of different owners now found themselves in competition with one another and having to rationalize their efforts in this paper we analyze the problem of operating a network of plants under conditions of free trade and exchange rate fluctuations when the firms that compose it are partially owned subsidiaries of an mnc a model of three subsidiaries and four countries is developed for one industry based on actual corporate and economic data we study the problem of coordinating the activities of the subsidiaries and allocating the gains arising from coordination

asymmetric corporate exposures to foreign exchange rate changes research examining firms economic exposures to exchange rate movements has not differentiated periods of foreign currency appreciation and depreciation when estimating exposure coefficients recent theoretical developments regarding real options and pricing to market suggest corporate exposures may be asymmetric i e the financial performance impact of a foreign currency appreciation may not be offset by the currency s depreciation our empirical analysis indicates that for the small percentage of u s manufacturing firms exposed to currency appreciations or depreciations their exposures are asymmetric 1998 john wiley sons ltd

a spatial panel data approach to estimating u s state level energy emissions we take advantage of a long panel data set to estimate the relationship between u s state level carbon dioxide co2 emissions economic activity and other factors we specify a reduced form energy demand model to account for energy consumption activities that drive energy related emissions we contribute to the literature by exploring several spatial panel data models to account for spatial dependence between states estimation results and rigorous diagnostic analysis suggest that 1 economic distance plays a role in intra and inter state co2 emissions and 2 there are statistically significant positive economic spillovers and negative price spillovers to state level emissions

the effects of information voids on capital flows in emerging markets information voids reflect a lack of publicly available information about a country s investment climate and represent the information problems associated with institutional voids we argue that foreign investors differ in their sensitivity to information voids based on their own private information and their flexibility in responding rapidly to change we predict that foreign banks will be least hampered by information voids due to their privileged access to private information about local conditions and ability to adapt quickly to new information portfolio investors while impeded by information voids due to their severely limited access to local private information are able to quickly respond to new information foreign direct investors have moderate access to local private information yet their inability to adapt quickly creates problems dealing with information voids using time series cross sectional data on local public information and capital flows to the thirty largest emerging markets from 1994 to 2012 we find preliminary support for our hypotheses regarding the sensitivity of different investors to information voids we find that direct investors are most sensitive to information voids and banks are least sensitive while portfolio investors are moderately sensitive

global plant capacity and product allocation with pricing decisions trade offs in global manufacturing decisions involve markets resource costs trade barriers currency exchange rates joint ventures and investments we develop a model that optimizes plant investment decisions while ensuring that the plant investment overhead is optimally absorbed by products produced from that plant the model also simultaneously determines prices by products and countries the special structure of the model is exploited to construct a fast solution procedure the model is used to study the implications of labor cost transportation cost demand and import tariff on production quantities investment and overhead absorption pattern implications of changes in other global parameters such as local content rule local taxes size of the market in a country and long term exchange rates are also studied

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

common stochastic trends in a system of exchange rates univariate tests reveal strong evidence for the presence of a unit root in the univariate time series representation for seven daily spot and forward exchange rate series furthermore all seven spot and forward rates appear to be cointegrated that is the forward premiums are stationary and one common unit root or stochastic trend is detectable in the multivariate time series models for the seven spot and forward rates respectively this is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates a general consensus has emerged in recent years that many macroeconomic time series such as gnp consumption expenditures disposable income etc can be characterized by a stochastic trend model in particular nelson and plosser 22 described this property as one of being difference stationary so that the first difference of a time series is stationary an alternative trend stationary model where a stationary component is added to a deterministic trend term has generally been found to be less appropriate 1 similarly it has long been recognized that many financial time series such as foreign exchange rates are nonstationary e g in meese and singleton 21 the issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates for instance many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals further there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate 2 some authors e g frenkel 11 12 have conducted tests in levels while geweke and feige 14