industry and country effects on managers perceptions of environmental uncertainties international management research highlights political government policy and macroeconomic uncertainties strategy studies focus on input supply product market and competitive uncertainties this study develops and tests the reliability of an instrument for measuring managers uncertainly perceptions data analyses using an international sample provide insights into the relative importance of country and industry factors for explaining managers perceptions of different environmental uncertainties

the household response to persistent natural disasters evidence from bangladesh we examine the short run economic impacts of recurrent flooding on bangladeshi households surveyed in 2000 2005 and 2010 in 2010 household income and expenditure survey hies households answered a set of questions on whether they were affected by flood and its likely impacts we identify two treatment affected groups by using the self reported data and historical rainfall data based flood risk index we estimate a difference indifference did model to quantify the impacts on income expenditure asset and labour market outcomes and further extend our analysis to different income and expenditure brackets overall we find robust evidence of negative impacts on agricultural income and expenditure intriguingly the extreme poor i e the bottom 15th quintile experience significant positive impacts on agricultural income in the self reported treatment case

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

the impact of climate change on incomes and convergence in africa abstract climate change is projected to detrimentally affect african countries economic development while income inequalities across economies is among the highest on the planet however it is projected that income levels would converge on the continent hitherto there is limited evidence on how climate change could affect projected income convergence accelerating slowing down or even reversing this process here we analyze convergence considering climate change damages by employing an economic model embedding the three dimensions of risks at the country level exposure vulnerability and hazards the results show 1 with historical mean climate induced losses between 10 and 15 percent of gdp per capita growth the majority of african economies are poorly adapted to their current climatic conditions 2 western and eastern african countries are projected to be the most affected countries on the continent and 3 as a consequence of these heightened impacts on a number of countries inequalities between countries are projected to widen in the high warming scenario compared to inequalities in the low and without warming scenarios to mitigate the impacts of economic development and inequalities across countries we stress 1 the importance of mitigation ambition and africa s leadership in keeping global mean temperature increase below 1 5 c 2 the need to address the current adaptation deficit as soon as possible 3 the necessity to integrate quantitatively climate risks in economic and development planning and finally 4 we advocate for the generalization of a special treatment for the most vulnerable countries to access climate related finance the analysis raises issues on the ability of african countries to reach their sdgs targets and the potential increasing risk of instability migration across african countries of decreased trade and economic cooperation opportunities as a consequence of climate change exacerbating its negative consequences

efficient adaptation in long term contracts take or pay provisions for natural gas to mitigate the inflexibility of long term contracting for natural gas parties will look for terms that minimize the need for costly adjudication while maintaining incentives for appropriate adaptation the authors examine the incident of take or pay provisions in contracts between natural gas producers and pipelines from this perspective they argue that take obligations can be viewed as a mechanism for effecting appropriate incentives for contractual performance and show that efficient breach considerations define an optimal take percentage as a function of characteristics of the transaction these incentives are distorted by regulated price ceilings which cause the adoption of take obligations in excess of optimal levels the findings refute the common perception that take or pay provisions are just an artifact of wellhead price regulation and serve no useful purpose in the absence of regulation 20 references 1 figure 1 table

cost value and foreign market entry mode the transaction and the firm this paper compares and contrasts the mode of foreign market entry decision from the transaction cost internalization and organizational capability perspectives each of these perspectives operates at a different level of analysis respectively the transaction and the firm and consequently differs in the primary arena of attention namely transaction characteristics and the capabilities of firms in making the comparison a key distinction is made between the cost and the value aspects in the management of know how based on which issues pertaining to the transfer of knowledge within and across firm boundaries and the exploitation and enhancement of competitive advantage are closely examined the main purpose of this paper is to demonstrate the implications of a shift in frame from cost to value in the analysis of decisions related to firm boundaries entry into foreign markets is used primarily as a vehicle for the accomplishment of this purpose the paper shows how the value based framework of the organizational capability perspective radically and fundamentally shifts the approach towards the governance of firm boundaries and argues that even though tc internalization theory raises some valid concerns the organizational capability framework may be more in tune with today s business context some of the assumptions of the tc internalization perspective both direct opportunism exploitation of existing advantage and indirect preservation of the value of know how across locational contexts asymmetry between bounded rationality for transaction and production purposes are critically examined and questioned implications of a shift from a cost to a value based framework are discussed and the need for a shift in research focus is emphasized

flooded with debt this study explores if natural disasters are able to trigger a sovereign debt default natural disasters make the debt of a country less sustainable as they worsen the public finances of a country the main findings from our empirical analysis clearly indicate that large scale natural disasters increase significantly the onset probability of a sovereign debt default by about three percentage points it turns out that particularly major earthquakes and storms raise the likelihood of a default as they create the most widespread damage reported worldwide this will limit the debt servicing opportunities of a country in the future

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

international technology licensing monopoly rents transaction costs and exclusive rights as firms increasingly use licensing to exploit knowledge based assets in global technology markets appropriate structuring of these agreements has become an important line of research inquiry one area that has received less attention is the nature of rights granted in inter firm licensing relationships although it is an important clause that has implications for profit generation from licensing of proprietary assets conceptualizing licensing rights in terms of number of licenses granted and exclusivity rights given to a licensee in a foreign market this paper examines the determinants of these rights based on monopoly rents and transaction costs associated with different types of licensing contracts hypotheses are empirically tested through two studies one based on large us manufacturing firms and the other on a cross national sample of medium sized firms actively involved in international technology licensing results from both studies show a greater propensity to use non exclusive multiple licensing when the licensed technology has greater potential to produce differentiated products or when there is greater threat of substitutive technologies entering the market on the other hand innovative technologies and a higher degree of asset specific investments required of the licensee for the technology are related to the use of single exclusive licensing agreements

catastrophic natural disasters and economic growth this paper examines the short and long run average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies the counterfactual of the cases studied is assessed by constructing synthetic control groups taking advantage of the fact that the timing of large sudden natural disasters is an exogenous event it is found that only extremely large disasters have a negative effect on output both in the short and long run however this result appears in two events where radical political revolutions followed the natural disasters once these political changes are controlled for even extremely large disasters do not display any significant effect on economic growth it is also found that smaller but still very large natural disasters have no discernible effect on output

foreign direct investment and investment under uncertainty we show that in uncertain environments ownership and internalization advantages may be negatively rather than positively associated with fdi this reversal from extant theory occurs because ownership advantages often serve to make fdi delayable while internalization advantages often serve to make it less reversible when fdi becomes either more delayable or less reversible it is less likely to occur at a point in time our approach enriches the who where and why explanations offered by current fdi theory to incorporate the question of when

renegotiation design with unverifiable information this paper considers a buyer seller relationship with observable but unverifiable investments and or random utility parameters in such situations it is known that contract renegotiation may prevent the implementation of first best outcomes in this paper we show however that efficient investments and optimal risk sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process specifically we focus on the following two features of renegotiation design first default options in case renegotiation breaks down second the allocation of all bargaining power to either contracting party moreover we show that these two features can be obtained in standard rubinstein bargaining games through contractual provisions such as specific performance clauses and penalties for delay or equivalently financial hostages refundable without interest

inflation targeting as a shock absorber abstract we study the characteristics of inflation targeting as a shock absorber using quarterly data for a large panel of countries to overcome an endogeneity problem between monetary regimes and the likelihood of crises we propose to study large natural disasters we find that inflation targeting improves macroeconomic performance following such exogenous shocks it lowers inflation raises output growth and reduces inflation variability compared to alternative monetary regimes this performance is mostly due to a different response of monetary policy and fiscal policy under inflation targeting finally we show that only hard but not soft targeting reaps the rewards deeds not words matter for successful monetary stabilization

co specific investments hold up and self enforcing contracts abstract this paper offers a general model of the hold up problem when investments are co specific agents are risk neutral and there are no information asymmetries nash bargaining with outside options determines the division of the surplus arising from exchange the model formally demonstrates that reciprocal exposure to specific assets achieved via the partial redistribution of specific investment costs to the potentially opportunistic party serves as a credible commitment to mutually advantageous exchange

compensation in international licensing agreements this study examines licensing agreements between independent firms based on their compensation structures we first suggest that a licensor s ability to monitor and influence foreign licensees is related to the type of compensation used in structuring the relationship next we identify a set of factors related to host country conditions where the technology is licensed stage in the technology life cycle and licensor firm characteristics that impact the choice between different compensation structures empirical findings based on a survey of u s firms generally support the hypotheses proposed in this study

contract duration and relationship specific investments empirical evidence from coal markets this paper examines the importance of specific relationship investments in determining the duration of coal contracts negotiated between coal suppliers and electric utilities data for 277 coal contracts are used to perform the analysis the results provide strong support for the view that buyers and sellers make longer commitments to the terms of future trade at the contract execution stage and rely less on repeated bargaining when relationship specific investments are more important

deep impact geo simulations as a policy toolkit for natural disasters adverse post natural disaster outcomes in low income regions like elevated internal migration levels and low consumption levels are the result of market failures poor mechanisms for stabilizing income and missing insurance markets which force the affected population to respond and adapt to the shock they face in a spatial environment with multiple locations with independent but inter connected markets these transitions quickly become complex and highly non linear due to the feedback loops between the micro individual level decisions and the meso location wise market decisions to capture these continuously evolving micro meso interactions this paper presents a spatially explicit bottom up agent based model to analyze natural disaster like shocks to low income regions the aim of the model is to temporally and spatially track how population distributions income and consumption levels evolve in order to identify low income workers that are food insecure the model is applied to the 2005 earthquake in northern pakistan which faced catastrophic losses and high levels of displacement in a short time span and with market disruptions resulted in high levels of food insecurity the model is calibrated to pre crisis trends and shocked using distance based output and labor loss functions to replicate the earthquake impact model results show how various factors like existing income and saving levels distance from the fault line and connectivity to other locations can give insights into the spatial and temporal emergence of vulnerabilities the simulation framework presented here leaps beyond existing modeling efforts which usually deals with macro long term loss estimates and allows policy makers to come up with informed short term policies in an environment where data is non existent policy response is time dependent and resources are limited

analyzing foreign market entry strategies extending the internalization approach a new fully integrated analysis of the foreign market entry decision is presented encompassing the choice between exporting licensing joint venturing and wholly owned foreign investment the choice between acquisition and greenfield investment is examined and so too are options based on subcontracting and franchising the model extends the insights of internalization theory and draws on concepts from the economics of industrial organization a special feature of the model is the distinction between investment in production facilities and investment in distribution facilities an important practical distinction that has been overlooked in much of the international business literature the strength of competition from indigenous rivals is emphasized as a determinant of entry strategy into both production and distribution

supplier performance in vertical alliances the effects of self enforcing agreements and enforceable contracts the paper examines the significance of enforceability and adaptability in governing vertical alliances and their performance ramifications for suppliers literature on supplier relations suggests that suppliers are skeptical of close ties with their buyers helper 1991 helper and sako 1995 such skepticism persists in spite of the fact that buyers are writing longer enforceable contracts with fewer suppliers in this context the paper develops a transaction cost economics tce based model that distinguishes between the verifiable and nonverifiable aspects of governance attributes of safeguards incentive intensity and adaptability in explaining supplier performance variations the paper argues that the following factors prove valuable for suppliers 1 the adaptive and collaborative orientation fostered by the original equipment manufacturer s oem s credible commitment to the exchange and by information sharing on the part of the supplier 2 the presence of certain nonverifiable safeguards and 3 the incentives inherent in target pricing these assertions have been tested using data from the home appliance industry results indicate that information sharing together with 1 oem dependence and 2 target pricing does indeed enhance supplier performance also results suggest that while nonverifiable safeguards can help verifiable safeguards do not have a positive association with supplier interests under certain conditions then suppliers can venture into closer relationships with buyers and benefit

efficient dynamic pollution taxation in an uncertain environment this paper analyzes efficient pollution taxation within a stochastic model of endogenous growth pollution is a by product of production and causes disutility furthermore the productivity which results from environmental quality is uncertain this reflects e g uncertain capital depreciation induced by natural disasters like hurricanes or floods this uncertainty is shown to raise an ambiguous impact on the optimal pollution level as well as on optimal environmental taxation market equilibrium turns out to be suboptimal since the households mis perceive their individual impact on pollution conditions for welfare maximizing pollution taxation are stated and it is shown that a direct pollution tax is not appropriate to yield pareto optimal growth instead a linear capital income tax together with a linear abatement subsidy build an efficient tax scheme if secondarily the governmental budget is balanced moreover an increase in the riskiness of environmental productivity may even lead to an increase in the optimal pollution level and to a decrease in optimal environmental taxation depending predominantly on the preference parameters

the shocking origins of political transitions evidence from earthquakes do earthquakes trigger political transitions using a rich panel dataset of 160 countries observed over 1950 2007 we find that earthquake shocks measured in terms of the effect of ground motion amplitude on death toll have two contradicting effects on political change on the one hand earthquakes drive transitions into democracy due to an affective shock which we interpret to be the reaction of citizens by which they hold the incumbent government responsible for earthquake damages on the other hand earthquakes indirectly hasten transitions into a less democratic regime because they increase the income level contemporaneously possibly due to short term emergency response and recovery expenditures and thus raising the opportunity cost of contesting the incumbent government overall we show that while not leading to a full fledged regime transition earthquake shocks open a new democratic window of opportunity but this window is narrowed by improved economic conditions

incomplete contracts and the product cycle the incomplete nature of contracts governing international transactions limits the extent to which the production process can be fragmented across borders in a dynamic general equilibrium ricardian model of north south trade the incompleteness of international contracts is shown to lead to the emergence of product cycles because of contractual frictions goods are initially manufactured in the north where product development takes place as the good matures and becomes more standardized the manufacturing stage of production is shifted to the south to benefit from lower wages following the property rights approach to the theory of the firm the same force that creates product cycles i e incomplete contracts opens the door to a parallel analysis of the determinants of the mode of organization the model gives rise to a new version of the product cycle in which manufacturing is shifted to the south first within firm boundaries and only at a later stage to independent firms in the south relative to a world with only arm s length transacting allowing for intrafirm production transfer by multinational fi rms is shown to accelerate the shift of production towards the south while having an ambiguous effect on relative wages the model delivers macroeconomic implications that complement the work of krugman 1979 as well as microeconomic implications consistent with the findings of the empirical literature on the product cycle

are external shocks responsible for the instability of output in low income countries external shocks such as commodity price fluctuations natural disasters and the role of the international economy are often blamed for the poor economic performance of low income countries the author quantifies the impact of these different external shocks using a panel vector autoregression var approach and compares their relative contributions to output volatility in low income countries vis a vis internal factors he finds that external shocks can only explain a small fraction of the output variance of a typical low income country internal factors are the main source of fluctuations from a quantitative perspective the output effect of external shocks is typically small in absolute terms but significant relative to the historic performance of these countries

control modes in international service operations the propensity to franchise what determines a service firm s organizational choice between equity based control and franchising this question which has elicited some theoretical answers and a few empirical tests in a domestic setting has never been addressed in an international context before this study explains the mode of control chosen in terms of a theoretical framework which borrows from agency theory and transaction cost analysis the propensity to franchise internationally was found to be directly related to i monitoring costs associated with geographical and cultural distance between the principal franchisor and its foreign agents franchisees ii the principal s international experience and iii the degree of host countries contextual uncertainty but inversely related to the service firm level of brand name asset specificity

the price impact of extreme weather in developing countries we examine the impact of extreme weather on consumer prices in developing countries by constructing a monthly data set of potential hurricane and flood destruction indices and linking these with consumer price data for 15 caribbean islands our econometric model shows that the price impact of extreme weather events can be large to illustrate potential welfare losses due to these price effects we combine our estimates with price elasticities obtained from a demand system and with event probabilities for jamaica our results show that while expected monthly losses are small rare events can cause large falls in monthly welfare due to price increases

natural disasters in a two sector model of endogenous growth using an endogenous growth model with physical and human capital accumulation this paper considers the sustainability of economic growth when the use of a polluting input e g fossil fuels intensifies the risk of capital destruction through natural disasters we find that growth is sustainable only if the tax rate on the polluting input increases over time the long term rate of economic growth follows an inverted v shaped curve relative to the growth rate of the environmental tax and it is maximized by the least aggressive tax policy of those that asymptotically eliminate the use of polluting inputs unavailability of insurance can accelerate or decelerate the growth maximizing speed of the tax increase depending on the relative significance of the risk premium and precautionary savings effects welfare is maximized under a milder environmental tax policy especially when the pollutants accumulate gradually

mitigating contractual hazards unilateral options and contract length in this article we consider the ways in which the desire for efficient low cost adaptation to change influences the tradeoff between the design and duration of long term contractual relationships we examine the distortions in contract terms occasioned by nonprice competition for natural gas in the presence of wellhead price regulation deviations from optimal contract incentives significantly raise the cost of being bound to long term agreements and shorten the duration of contracts the approach we adopt suggests a method for empirically assessing the efficiency of alternative contracting practices and legal standards

is dunning s eclectic framework descriptive or normative can dunning s oli ownership location internalization framework be used to predict the best performing international entry modes or merely the most commonly selected modes using data from german and dutch firms investing in central and eastern europe we investigate the relationship between dunning s oli variables entry mode selection and managerial satisfaction with firm performance we found empirical support for dunning s framework as both a descriptive and a normative model

policy uncertainty and the sequence of entry by japanese firms 1980 1998 we extend the stages model of internationalization to incorporate a sophisticated consideration of temporal and cross national variation in the uncertainty of the policy environment using a sample of 6465 international expansions of 665 japanese manufacturing firms in 49 countries we develop arguments from internationalization and bargaining power perspectives to show how japanese firms manage policy uncertainty in host country environments through the within country sequencing of investments although a distribution to manufacturing entry sequence tends to prevail in countries with low levels of policy uncertainty as uncertainty in the policy environment increases initial entry by distribution is increasingly likely to be eschewed in favor of an initial entry by a joint venture manufacturing plant we suggest that this change in investment sequence occurs as firms shift from an emphasis on developing knowledge about local markets and consumers in low hazards markets to an international expansion strategy in uncertain policy environments that places knowledge development of the policy environment at the forefront of a firm s strategy

mnes and market valuation of firms a cross sectional study of indian electrical and electronic goods manufacturing firms this paper argues that inter firm differences in the direction of change in market valuation will depend mainly on the salience and unique risk characteristics of the firms these characteristics are largely influenced by mulinational enterprise mne affiliation the sample for the study consists of electrical and electronic manufacturing firms in india for 1994 1996 maximum likelihood estimates of the probit model show that even during a downswing in the stock market mne affiliates were able to hold their own and increase their market valuation these results hold good for a wide variety of products produced in this sector where both mnes and local firms compete the results have implications for theories relating to mnes stock market valuation and also for policy makers

why economic dynamics matter in assessing climate change damages illustration on extreme events extreme events are one of the main channels through which climate and socioeconomic systems interact and it is likely that climate change will modify the probability distribution of the losses they generate the long term growth models used in climate change assessments however cannot capture the eects of such shortterm shocks to investigate this issue a non equilibrium dynamic model nedym is used to assess the macroeconomic consequences of extreme events this exercise allowed us to dene the economic amplic ation ratio as the ratio of the overall production loss due to an event to its direct costs this ratio could be used to improve the cost benet analysis of prevention measures we found also that unlike a solow like model nedym exhibits a bifurcation in gdp losses for each value of the capacity to fund reconstruction gdp losses remain moderate if the intensity and frequency of extremes remain under a threshold value beyond which gdp losses increase sharply this bifurcation may partly explain why some poor countries that experience repeated natural disasters cannot develop applied to the specic issue of climate change this model suggests that changes in the distribution of extremes may entail signican t gdp losses in absence of specic adaptation it suggests therefore that to avoid inaccurately low assessments of damages researchers must take into account the distribution of extremes instead of their average cost and make explicit assumptions on the organization of future economies

choosing between direct investment and licensing theoretical considerations and empirical tests this paper focuses on the conditions under which an international firm would expand overseas via the transfer of technology and rights to its own controlled equity affiliates as opposed to resorting to the market by selling its technology to independent foreign licensees the relative propensity of u s firms to use licensing versus equity investment is then examined statistically in regression models using data of the department of commerce a second paper in this series forthcoming in the summer 1985 issue will examine strategic and negotiation issues involved in combining equity investment licensing and intra firm trade into one agreement

natural disaster situations and growth a macroeconomic model for sudden disaster impacts the aim of this paper is to examine the relation between a natural disaster situation and its potential effects on the growth rate of output by means of a simple macroeconomic model which is later applied as a demonstration to a sample of countries affected by major natural disasters in the last two decades this quantitative application appears to support the model the main conclusions are that capital loss is unlikely to have an important effect on growth and that a very moderate response expenditure may be sufficient to prevent the growth rate of output from falling a general derived conclusion is that foreign and public disaster response may be better used to help actual victims and affected activities directly than to proceed on the rather unsound prima facie belief that the economy will be heavily affected by the disaster

the macroeconomic consequences of disasters abstract natural disasters have a statistically observable adverse impact on the macro economy in the short run and costlier events lead to more pronounced slowdowns in production yet interestingly developing countries and smaller economies face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies a close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns countries with a higher literacy rate better institutions higher per capita income higher degree of openness to trade and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro economy these all suggest an increased ability to mobilize resources for reconstruction financial conditions also seem to be of importance countries with more foreign exchange reserves and higher levels of domestic credit but with less open capital accounts appear more robust and better able to endure natural disasters with less adverse spillover into domestic production

natural disasters and countries exports new insights from a new and an old database this paper is the first to uncover in details the impact of different families of disasters on exports from 1979 to 2000 storms floods earthquakes and changes in temperatures besides our paper is the first to compare in a quasi systematic way the results across the two data sets at hand the standard em dat data and geomet data a newly available data set based on geophysical and meteorological data european economic review 2013 58 18 journal of development economics 2014 111 92 we run series of regressions while accounting progressively for the characteristics of products all traded goods v s agriculture ones the characteristics of the country size level of development and the intensity of the catastrophes when pooling all countries and all types of disasters we do not find any statistical impact on exports but when focusing on each of them separately and on agricultural goods the occurrence of an earthquake appears to reduce exports of about 3 regardless of its location a windstorm shock even when it happens to be very severe has hardly any impact a flood on its side is estimated to reduce export flows of a small country by nearly 3 the effect of changes in temperatures is ambiguous all in all except for temperature related disasters the results are consistent across both data sets em dat and geomet although they appear to be slightly more in line with our expectations in the case of geomet

foreign direct investment by japanese electronics firms in the united states and canada modelling the timing of entry this paper examines the relationship between attributes of japanese electronics firms and the sequence of their investments in the u s and canada it is argued that a useful way to model foreign direct investment fdi decisions is to recognize explicitly the uncertainties involved in them a probabilistic model of fdi is specified the following hypotheses are incorporated in the model 1 the higher the risk adjusted expected net benefits from foreign direct investment ceteris paribus the higher the probability of making an investment at any particular moment and thus the probability of investing earlier 2 risk adjusted expected net benefits from fdi by a firm are a function of its possession of certain types of intangible transportable assets 3 the uncertainties involved with fdi may be reduced with the passage of time and with increased experience with foreign operations 4 parent company attributes that facilitate market intelligence capabilities permit early recognition of investment opportunities and 5 timing of entry may reflect strategic considerations such as responding to growing foreign market opportunities the need to ensure market access and the presence of opportunities to obtain abnormal profits due to market concentration the models are estimated using cox s proportional hazards regression model results generally confirm the hypotheses that size and financial capabilities as well as possession of some knowledge based firm specific strategic assets are significantly related to early fdi they also confirm that timing of entry is affected by market opportunities and in some cases by the need to ensure market access we did not find evidence in this sector that differences in market concentration significantly affected the timing of fdi analyses are also provided of inter period changes in the importance of different types of intangible assets in explaining earlier fdi as well as changes that reflect differences in host country environments

natural disasters and macroeconomic performance recent empirical research has shown that output and gdp per capita in the aftermath of natural disasters are not necessarily lower than before the event in many cases both are not significantly affected and surprisingly sometimes they are found to respond positively to natural disasters here we propose a novel economic theory that explains these observations specifically we show that gdp is driven above its pre shock level when natural disasters destroy predominantly durable consumption goods cars furniture etc disasters destroying mainly productive capital in contrast are predicted to reduce gdp insignificant responses of gdp can be expected when disasters destroy both durable goods and productive capital we extend the model by a residential housing sector and show that disasters may also have an insignificant impact on gdp when they destroy residential houses and durable goods we show that disasters irrespective of whether their impact on gdp is positive negative or insignificant entail considerable losses of aggregate welfare

signalling and renegotiation in contractual relationships this paper examines how the possibility of renegotiation affects contractual outcomes in signaling games when an infinite number of rounds of renegotiations are allowed before contracts are executed the main results of the paper are 1 contracts may still contain distortions 2 the popular efficient separating equilibrium outcome is never an equilibrium outcome with renegotiation 3 incentive compatibility constraints can be generalized to incorporate renegotiation 4 equilibrium outcomes can be separating and nevertheless depend on the uninformed player s prior and 5 renegotiation in signaling games may lead to outcomes similar to equilibrium outcomes of screening games in which multiple contract purchases are allowed copyright 1993 by the econometric society

economic development and losses due to natural disasters the role of hazard exposure abstract our contribution is to show that the relationship between wealth and disasters is mainly formed by the exposure to disaster hazard we first build a simple analytical model that demonstrates how countries that face a low hazard of disasters are likely to see first increasing losses and then decreasing ones with increasing economic development at the same time countries that face a high hazard of disasters are likely to experience first decreasing losses and then increasing ones with increasing economic development we then use a cross country panel dataset in conjunction with a hazard exposure index to investigate whether the data is consistent with the predictions from the model in line with our model we find that the relationship of losses with wealth crucially depends on the level of hazard of natural disasters faced by countries

can natural disasters have positive consequences investigating the role of embodied technical change it has been suggested that disasters might have positive economic consequences through the accelerated replacement of capital this possibility is referred to as the productivity effect this effect is investigated using a model with embodied technical change in this framework disasters can influence the production level but cannot influence the growth rate in the same way than the saving ratio in a solow like model depending on reconstruction quality indeed accounting for embodied technical change can either decrease or increase disaster costs but is never able to turn disasters into positive events moreover a better but slower reconstruction amplifies the short term consequences of disasters but pays off over the long term regardless the productivity effect cannot prevent the existence of a bifurcation when disaster damages exceed the reconstruction capacity potentially leading to poverty traps c 2008 elsevier b v all rights reserved

building resilience to natural disasters an application to small developing states abstract we present a dynamic small open economy model to explore the macroeconomic impact of a major natural disaster in addition to permanent damages to public and private capital the disaster causes temporary losses of productivity inefficiencies during the reconstruction process and damages to the sovereign s creditworthiness we use the model to study the debt sustainability concerns that arise from the need to fully rebuild public infrastructure over the medium term and analyze the feasibility of ex ante policies such as building adaptation infrastructure and fiscal buffers and contrast these policies with the post disaster support provided by donors investing in resilient infrastructure may prove useful in particular if it is viewed as complementary to standard infrastructure because it raises the marginal product of private capital crowding in private investment while helping withstand the impact of the natural disaster in an application to vanuatu we find that donors should provide an additional 50 of pre cyclone gdp in grants to be spent over the following 15 years to ensure public debt remains sustainable following cyclone pam helping the government build resilience on the other hand reduces the risk of debt distress and at lower cost for donors

a duration model of irreversible oil investment theory and empirical evidence the aim of this paper is to analyse the implications of the theory of irreversible investment under uncertainty for investment in oil fields on the united kingdom continental shelf ukcs we consider the problem of an operator who owns a licence to develop and extract oil from a field of known capacity an intertemporal optimization model in discrete time is developed to derive decision rules for the timing of the irreversible development investment and for the optimal rate of extraction model simulation is then used to describe the properties of the numerical solutions the predictions of the theory on the determinants of the irreversible investment decision are then examined using statistical duration analysis data on the length of the time period between discovery and development are available for individual fields on the ukcs we measure the duration of the irreversible investment gestation lag for each field and test the model by assessing the significance of the theoretical variables in explaining the significance of such a lag both our theoretical model and our empirical results suggest the importance of a nonlinear interaction of the level of oil prices and the volatility of oil prices in determining the development lag the simulation of our theoretical model shows a nonlinear impact of oil price volatility on the trigger level of oil prices our empirical results suggest that the effect of price volatility is a function of the expected price level with increased price volatility having a positive impact on the duration of investment appraisal when expected prices are low and a negative impact when they are high

economic development and the impacts of natural disasters abstract we use disaster impact data over time to examine the degree to which the human and economic losses from natural disasters are reduced as economies develop we find that countries with higher income higher educational attainment greater openness more complete financial systems and smaller government experience fewer losses

the growth aftermath of natural disasters this paper provides a description of the macroeconomic aftermath of natural disasters it traces the yearly response of gross domestic product growth both aggregated and disaggregated into its agricultural and non agricultural components to four types of natural disasters droughts floods earthquakes and storms the paper uses a methodological approach based on pooling the experiences of various countries over time it consists of vector auto regressions in the presence of endogenous variables and exogenous shocks varx applied to a panel of cross country and time series data the analysis finds heterogeneous effects on a variety of dimensions first the effects of natural disasters are stronger for better or worse on developing than on rich countries second while the impact of some natural disasters can be beneficial when they are of moderate intensity severe disasters never have positive effects third not all natural disasters are alike in terms of the growth response they induce and perhaps surprisingly some can entail benefits regarding economic growth thus droughts have a negative effect on both agricultural and non agricultural growth in contrast floods tend to have a positive effect on economic growth in both major sectors earthquakes have a negative effect on agricultural growth but a positive one on non agricultural growth storms tend to have a negative effect on gross domestic product growth but the effect is short lived and small future research should concentrate on exploring the mechanisms behind these heterogeneous impacts

natural disasters and the effect of trade on income a new panel iv approach natural disasters affect bilateral trade we use this fact to generalize the instrumental variables strategy of frankel and romer 1999 to a panel setup this allows revisiting an old question does openness cause per capita gdp we work with a modified gravity framework in which we interact foreign natural disasters with geography predicting the exogenous component of bilateral trade flows and aggregating over trade partners we obtain a time varying instrument for multilateral openness of a country controlling for constant determinants of income history geography by means of fixed effects we find a robust positive effect of trade on income averaging 0 74 the estimated elasticity is substantially smaller than the one obtained in the cross section poor or non oecd countries feature a larger elasticity

exchange market mayhem the antecedents and aftermath of speculative attacks exchange market mayhem the antecedents and aftermath of speculative attacks this paper evaluates the causes and consequences of episodes of turbulence in foreign exchange markets using data from 1959 through 1993 for twenty oecd countries we consider the antecedents and aftermath of devaluations and revaluations flotations fixings and speculative attacks which may not be successful we find that realignments of fixed exchange rates are alike devaluations are preceded by political instability budget and current account deficits and fast growth of money and prices revaluations are mirror images of devaluations speculative attacks resemble devaluations but money growth and inflation are more endemic and there is no last minute attempt to tighten monetary policy in contrast few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables transitions between exchange rate regimes are largely idiosyncratic and are neither consistently provoked ex ante by systematic imbalances nor typically justified ex post by subsequent changes in policy we conclude that there are no clear early warning signals of many speculative attacks and no easy solutions for policy makers barry eichengreen andrew k rose and charles wyplosz

real options in multinational corporations organizational challenges and risk implications in this study we investigate how multinationality affects firms risk levels our investigation builds on the idea from real options theory that international operations offer switching options to multinational corporations yet we also emphasize different sources of coordination costs that can mitigate the benefits of operational flexibility the findings from tobit models accounting for self selection underscore the importance of unobserved heterogeneity in the relationships between international investments and risk levels consistent with the coordination costs surrounding international operations we find that the relationship between multinationality and downside risk is curvilinear risk first declines and then increases as a firm s portfolio of international investments becomes extensive in addition downside risk is an increasing function of the average cultural distance between a firm s home base and the host countries in which its foreign subsidiaries operate

licensing duration in foreign markets a real options perspective licensing can be considered an initial trial of a foreign market before a firm fully commits to it through other investment modes the length of trial has great importance because licensing duration represents part of the licensing agreement when it is too short the firm may not acquire the necessary experience and knowledge of the foreign market but if it is too long the firm misses optimal expansion timing arguing that licensing can be considered as a european style real option with a fixed holding period we develop and test a model of the determinants of licensing duration in foreign markets empirical results based on a sample of firms in various countries show that uncertainty and threat of competitive pre emption in the foreign market are related to shorter duration of the technology licensing agreements we also find that irreversibility of the impending investment moderates the relationships between uncertainty and duration specifically market and technology uncertainties in the foreign market induce shorter contracts under low levels of irreversibility

key characteristics in the choice of international technology transfer mode the choice between licensing and direct investment as a vehicle for international technology transfer is hypothesized to be related to characteristics of the individual technology parent corporation and the host country involved in the transfer a set of hypotheses regarding these relationships are developed and tested in a logit statistical model for a sample of 1 226 technology transfers we find that hypotheses regarding the effects of technology and parents characteristics are strongly supported by this analysis hypotheses regarding the effect of host country characteristics on transfer patterns receive mixed support

patent protection and the industrial composition of multinational activity evidence from u s multinational firms using data on u s firms technology licensing to local agents in developing countries this paper examines the impact of patent protection on internal and arms length technology transfer the effects of protection vary across products according to their complexity consistent with theories of internalization we find that patent reforms enable local firms to attract more arms length technology transfer especially of simple products which are relatively easy to imitate affiliated licensing also rises among simple products but falls among complex products the results withstand several robustness checks including controlling for endogeneity by using colonial origin as an instrument and are equally strong whether patent protection is measured by its intensity or by the timing of reforms the results have significance for patent policy in the developing world where access to knowledge is critical through arms length technology contracts proprietary knowledge diffuses beyond firm boundaries enabling local agents to access not only the protected technology but also know how

naturally negative the growth effects of natural disasters abstract growth theory predicts that natural disasters should on impact lower gdp per capita however the empirical literature does not offer conclusive evidence most existing studies use disaster data drawn from damage records of insurance companies we argue that this may lead to estimation bias as damage data and the selection into the database may correlate with gdp we build a comprehensive database of disaster events and their intensities from primary geophysical and meteorological information in contrast to insurance data our geomet data reveal a substantial negative and robust average impact effect of disasters on growth the worst 5 disaster years come with a growth damage of at least 0 46 percentage points that average effect is driven mainly by very large earthquakes and some meteorological disasters poor countries are more strongly affected by geophysical disasters rich more by meteorological events international openness and democratic institutions reduce the adverse effect of disasters

modes of foreign entry a transaction cost analysis and propositions a frontier issue in international marketing is the appropriate choice of entry mode in foreign markets the objective of this paper is to offer a transaction cost framework for investigating the entry mode decision this framework provides 1 a theoretical basis for systematically interrelating the literature into propositions 2 propositions about interactions which resolve the apparently contradictory arguments advanced to date specifically the paper illustrates the feasibility of clustering 17 entry modes into the degree of control the mode provides the entrant proposes that the most appropriate i e most efficient entry mode is a function of the tradeoff between control and the cost of resource commitment advances testable propositions delimiting the circumstances under which each mode maximizes long term efficiency

the cleansing effect of recessions the authors investigate industry response to cyclical variations in demand production units that embody the newest process and product innovations are continuously being created and outdated units are being destroyed although outdated units are the most likely to turn unprofitable and be scrapped in a recession they can be insulated from the fall in demand by a reduction in creation the structure of adjustment costs plays a determinant role in the responsiveness of those two margins the calibrated model matches the relative volatilities of the observed manufacturing job creation and destruction series and their asymmetries over the cycle copyright 1994 by american economic association

the hierarchical model of market entry modes in this study we propose and test a hierarchical model of market entry modes entry modes can first be viewed as equity based versus non equity based within equity based modes the choice is between wholly owned operations and equity joint ventures while within non equity based modes the choice is between contractual agreements and export empirically we demonstrate that there are factors that exert substantial influences at the equity versus non equity level but rather weak influences at the lower level of choice hierarchy the empirical results are based on a sample of over 10 000 foreign entry activities into china between 1979 to 1998 the findings provide supportive evidence for the hierarchical model of market entry modes

diaspora ownership and international technology licensing by emerging market firms abstract the liability of origin makes participation in international technology licensing challenging for emerging market firms we draw on signaling theory to propose that diaspora ownership diaspora members equity investments in their homeland firms constitutes a reliable third party signal of emerging market firms trustworthiness which facilitates the access of these firms to international technology licensing we further hypothesize that the efficacy of diaspora ownership as a third party signal varies with the firm s subnational context specifically the relevance of diaspora ownership signal increases with the degree of homogeneity of the within industry r d effort in the firm s sub national location this is because under these conditions additional signals are required to differentiate between local firms operating in the same industry in contrast the diaspora ownership signal has a smaller effect in dysfunctional institutional contexts due to their prohibitive transaction costs we test our arguments on a matched sample of 597 indian firms operating between 2006 and 2015 and find general support for the predicted relationships our study advances research on the liability of origin of emerging market firms the work on subnational dimension of international business and the literature on the benefits diasporans bring to their homelands and resident countries