financial markets and growth the last five years have witnessed a resurgence of interest in the relationship between financial intermediation and economic growth this issue had been extensively studied nearly two decades earlier by goldsmith 1969 mckinnon 1973 shaw 1973 and others who produced considerable evidence that financial development correlates with growth but their work though insightful lacked analytical foundations in traditional growth theory financial intermediation could be related to the level of the capital stock per worker or to the level of productivity but not to their respective growth rates the latter were ascribed to exogenous technical progress the recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of endogenous growth models which have shown that there can be self sustaining growth without exogenous technical progress and that the growth rate can be related to preferences technology income distribution and institutional arrangements this provides the theoretical underpinning that early contributors lacked tinancial intermediation can be shown to have not only level effects but also growth effects the resulting models have offered important insights into the effect of financial development on growth and vice versa they have also provided new impetus to empirical research on these issues this paper reviews the ground covered so far on the theoretical and empirical front and points to some still unresolved issues

the limits of explanation testing the internalization theory of the multinationial enterprise the paper explores the difficulties of testing the internalization approach in the modern theory of the multinational enterprise the structure of the theory is elaborated and the conclusion drawn that testing cannot occur at the most general theoretical level but that the theory requires careful restricting assumptions to be placed on it to allow rigorous testing several empirical circumstances would constitute refutation if they could be shown to hold however the use of unconventional cases or outliers does not constitute disproof more rigour is required in formulating and testing the theory but the current verdict on the theory must be not disproven

a managerial decision model of international cooperative venture formation this paper develops a model of international cooperative venture formation that is centered on the decisionmaking process of mne executives central issues for managerial decisions are developed from the organizational studies literature a framework delineating the sequence and criteria used in the decision to form international cooperative ventures is developed from these defined issues and from existing models propositions pertaining to the venture formation decision process are outlined

foreign direct investment theories entry barriers and reverse investments in u s manufacturing industries this paper investigates empirically whether industrial organization oriented fdi theories explain the recent phenomenon of reverse foreign direct investment in the u s based on the distribution of fdi in two digit sic manufacturing industries we find that capital and advertising intensities act as entry barriers to foreign investments in the u s we also observe that foreign multinationals are attracted by the u s market size and that they invest heavily in industries with intensive r d combined with marketing efforts

government policies market imperfections and foreign direct investment the internalization eclectic theory of foreign direct investment includes the important insight that government policies create market imperfections which make foreign direct investment an economically rational strategic alternative for firms this paper reexamines the effects of government policies on market imperfections and foreign direct investment fdi it broadens and refines the analysis of the impact of government policies by developing the following arguments 1 there is a wide range of government policies that affect firms fdi decisions via their effects on market imperfections 2 there are numerous dimensions of variability in government policies that need to be identified in order to understand fully the effects of government policies on market imperfections and hence fdi flows 3 some of the effects of government policies on market imperfections and fdi are the opposite of those previously noted in the fdi literature 4 the effects of government policies vary across the several individual components of fdi flows the paper thus examines the following variables and relationships more extensively and precisely than has the previous literature government policy variables as causal factors affecting fdi market imperfection variables as intervening factors in the causal connections between government policies and fdi and the multiple indicators of the various dimensions of fdi as dependent variables

illicit drug use among arrestees prices and policy abstract prior studies by relying on nationally representative surveys have overlooked the important fact that use of addictive substances is not uniformly distributed subgroups of hardcore users account for most of the drug consumption this study employs the arrestee drug abuse monitoring system to analyze the demand for cocaine and heroin by urban arrestees employing objective indicators of use based on urinalysis the data are repeated city cross sections and panel data methodology is employed to account for endogeneity cocaine and heroin prices have a negative effect on the probability of use even among this group of heavy users results indicate that subjective self reported measures of participation are likely to be under reported which may impart bias to estimates of the price elasticity the own price cocaine participation elasticity is about 0 15 and the own price heroin participation elasticity is about 0 10 for arrestees this contemporaneous elasticity understates the full effect and the long run price elasticity is about twice the magnitude the magnitude of the price response is substantially smaller relative to the estimates in the prior literature and calculations suggest that further enforcement and interdiction driven increases in drug prices may not be cost effective

the mechanics of commercial banking liberalization and growth abstract this paper formalizes the effects of liberalization across the border of deposit taking and lending activities on the regime of competition in the banking market and on the rate of growth of the economy we extend two economy based deidda 2006 s banking model in which originally each economy hosts at least one operating bank we introduce two gats defined modes of commercial banking liberalization namely the commercial presence mode and the cross border mode additionally we introduce the possibility of strategic behavior by competing banks in equilibrium the extended model provides a causal link between the cost structure of the banking industry the regime of competition in the liberalized banking sector and the rate of growth of the economy under alternative modes of liberalization in particular we show a threshold effect in terms of economic development above certain economic development the banking sector operates competitively and supports an accelerating rate of growth generating a bidirectional self reinforcing link between commercial banking liberalization and growth the pace of growth is further increased with respect to a scenario where such behavior is not present by the presence of strategic behavior by competing banks in equilibrium

the eclectic paradigm of international production a restatement and some possible extensions this article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade and restates its main tenets the second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to mne activity as well

setting the record straight hymer internationalization theory and transaction cost economics along with the rise and development of transaction cost economics stephen h hymer s works have recently become a matter of some controversy this note clarifies the main issues in the controversy and explores the contributions of hymer s theory of the mne a review of hymer s works reveals that he had incorporated a coasian theory of firms and markets in his theory as early as 1968 this note suggests that the genesis of transaction costs as applied to the mne can be traced to hymer

stephen hymer s contribution to international business scholarship an assessment and extension we assess stephen hymer s contribution to the theory of the multinational enterprise and to international business ib scholarship we focus on hymer s evolving analytical framework and assess it in terms of its internal consistency and in the light of the shifting global landscape and scholarly thinking we also extend hymer s framework revisit his predictions and conclude by questioning his canonical status within the ib profession

taxing the multinational enterprise on the forced redesign of global value chains and other inefficiencies the taxation of the multinational enterprise mne has been a continuing concern for policymakers we argue that the changing nature of the mobile mne e g its improved ability to fine slice the value chain and disperse it geographically makes it increasingly important to rethink current tax policies first there should be more focus on the inefficiencies that arise when taxation leads to the inefficient location of mne activities thus mnes may shift activities to low tax jurisdictions that offer lucrative pecuniary and non pecuniary incentives but do not enable their investments to maximize their contribution to global value creation second international tax regimes should ensure that mnes pay for their consumption of local public goods and public finance scholars have long known that the taxation based distortions are minimized when the tax objects are immobile however the bulk of current tax policies are aimed at corporate profits that are both poor proxies for the consumption of local public goods as well as extremely mobile integrating theory from international business public finance and economic geography our analysis demonstrates that moving the incidence of taxation from corporate profits to dividends and consumption would unambiguously improve both wealth creation and efficiency

ex ante implications of sovereign default i study how the possibility of default on external debts affects other capital allocation decisions in a small open economy in the model default has an option value derived from the randomization over ex post default regimes which depends on country specific productivity shocks this feature of default reduces incentives for ex ante diversification which would reduce exposure to the productivity shock as a result if the economys debt to capital ratio is allowed to cross a fixed threshold identified in the model the unique equilibrium exhibits an allocation of capital that is less productive in expectation and more volatile than in a benchmark model without default the model therefore captures a number of salient features of emerging and less developed countries where low levels of international risk sharing have gone hand in hand with frequent and recurring default events

some antecedents of internalization theory this article reviews the main antecedents to buckley and casson s seminal volume the future of the multinational enterprise 1976 in particular it considers and evaluates two main approaches to understanding the nature and function of firms viz the exchange approach and the value added approach

internalization and the mne a note on the spread of ideas this paper examines the reasons for the impact of buckley and casson s the future of the multinational enterprise 1976 on research in international business ib earlier work concentrated on ownership specific advantages or locational determinants rather than the central concept of internalization the few exceptions were incomplete or not well known internalization as applied to the mne spread rapidly because of the appeal to ib researchers of an analytically powerful idea that was based on institutional economics and involved an accessible methodology the spread was also helped by the parallel growth of transaction costs in the domestic theory of the firm and the publication activity of the authors and their associates

a new database on the structure and development of the financial sector this article introduces a new database of indicators of financial structure and financial development across countries and over time the database is unique in that it combines a wide variety of indicators that measure the size activity and efficiency of financial intermediaries and markets it improves on previous efforts by presenting data on the public share of commercial banks introducing indicators of the size and activity of nonbank financial institutions and constructing measures of the size of bond and primary equity markets this article introduces a new database the first to provide comprehensive measures of the development structure and performance of the financial sector this database is the first to define and construct indicators of the size and activity of nonbank financial intermediaries such as insurance companies pension funds and non deposit money banks it is also the first to include indicators of the size of primary equity markets and primary and secondary bond markets in constructing the database authors carefully deflate measures and match stock and flow variables

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

transactions cost economics and the multinational enterprise an assessment abstract this paper applies transactions cost principles to the multinational enterprise in order to ascertain its distinctive properties as a mode of economic organization the analysis helps identify just when and where contractual alternatives to the multinational firm are likely to be viable this turns out to depend upon the nature of the technology the regime of appropriability within which the firm operates and the characteristics of the markets in question transactions cost analysis is also extended to the multinational enterprise host country relationship implications for management and public policy are derived

the effect of drug prohibition on drug prices evidence from the markets for cocaine and heroin this paper examines the effect of drug prohibition on the black market prices of cocaine and heroin the paper examines the ratio of retail to farmgate price for cocaine heroin and several legal goods and it compares legal versus black market prices for cocaine and heroin the results suggest that cocaine and heroin are substantially more expensive than they would be in a legalized market but to a lesser degree than suggested in previous research

interaction between economic and financial development this paper presents a model of financial and economic development which assumes the consumption of real resources by the financial sector financial development occurs endogenously as the economy reaches a critical threshold of economic development compared to financial autarky financial intermediaries allocate savings net of their costs of operation to more productive investments whenever the technology financed by intermediaries is more capital intensive than that operated in financial autarky the growth effect of financial development is ambiguous as a result financial development may be unsustainable however when financial development is sustainable the credit market becomes more competitive and more efficient over time and this could eventually contribute to economic growth nonetheless given monopolistic competition in the financial sector the level of entry into the credit market is generally inefficient for instance with diminishing returns to specialisation entrants might be too few at the early stages of economic development and too many later on

restoring banking stability beyond supervised capital requirements emerging economies have been particularly prone to financial sector crises reflecting marked information asymmetries and political interference as well as the substantial volatility in underlying economic conditions and the vulnerability of banking and finance when structural economic changes create a new and uncharted operating environment the standard regulatory paradigm relies mainly on supervised capital adequacy but it may not be enough other measures to improve the incentive structure for bankers regulators and other market participants could effectively increase the number of concerned skilled and watchful eyes intermittent application of supplementary blunt instruments could also be useful

is full banking integration desirable abstract we analyze the links between banking integration and economic development for a sample of oecd countries we measure banking integration considering indicators that merge not only openness but also connectedness with other banking systems we plug these indicators into income regressions also controlling for other relevant variables considered by the literature in contrast to previous initiatives this second stage explicitly takes into account the differing levels of economic development of the countries in our sample since the benefits of enhanced banking integration might not be generalizable to this end we implement quantile regression also considering the presence of endogenous regressors results show that bank connectedness is more important for economic development than bank openness but the combined effect i e banking integration overall is positive and significant the quantile regression models used in the second stage show that the effects are stronger for the poorest economies

a memoir and reflection knowledge and an evolutionary theory of the multinational firm 10 years later the production of the 1993 article awarded the jibs decade award was written during a time when ideas regarding knowledge and the international expansion of the firm confronted a hostile audience the sources of these ideas were directly related in winter s and roger s prior work but also to a broader literature on category errors and technology transfer the theory of the firm as a social community is a distinctly sociological theory and though sharing many key ideas with the resource based view that developed at the same time is deeply opposed to engineering conceptions of firms as legomodular pieces that can be easily shifted bought and sold we describe our individual biographies and the subsequent intellectual development of the

the influence of hymer s dissertation on the theory of foreign derect investment the great contribution of stephen hymer s seminal dissertation 1960 was to escape from the intellectual straightjacket of neoclassical type trade and financial theory and move us towards an analysis of the multinational enterprise mne based upon industrial organization theory the magnitude of this breakthrough can be put into perspective by considering the state of the art when hymer wrote twenty five years ago in 1960 the prevailing explanation of international capital movements relied exclusively upon a neoclassical financial theory of portfolio flows in this frictionless world of perfect competition with no transaction costs capital moves in response to changes in interest rate or profit differentials see carl iversen 1936 according to this arbitrage theory capital is assumed to be transacted between independent buyers and sellers that is there is no role for the mne at the time there was no separate theory of foreign direct investment fdi the work did not even ask the question of why is there fdi despite the evidence of sectoral cross investments and the existence of large mnes with intra industry trade if anything the early work on fdi focused upon the where of investment in a particular nation or industry for example dunning 1958 was chiefly interested in explaining u s fdi in britain there was little interest in understanding the reasons for the mne or the nature of its operations the pioneering conceptual insight of hymer was to break out of the arid mold of international trade and investment theory and focus attention upon the mne per se this permits us to treat fdi as a modality by which firms extend their territorial horizons abroad the unique feature of fdi is a mechanism by which the mne maintains control over productive activities outside its national boundaries that is fdi means international production in this view fdi is more than a process by which assets or claims are exchanged internationally see robert aliber 1970 1983 hymer s great insight was in focusing attention upon the mne as the institution for international production rather than international exchange until hymer articulated the process of fdi as an international extension of industrial organization theory it was not possible to understand why the mne transfers intermediate products such as knowledge or technology among its units across different nations while still retaining property rights over such assets today it is widely recognized that the theory of fdi i e international production is primarily about the transfer of nonfinancial and ownershipspecific intangible assets by the mne which needs to appropriate and control the rate of use of its internalized advantage s see rugman 1981 david teece 1981 1982 richard caves 1982 and mark casson 1983 in this paper we first acknowledge hymer s contribution to the theory of fdi and then move on to reinterpret his dissertation in the light of the modern theory of the mne we tdiscussants raymond vernon harvard university robert z aliber university of chicago paul streeten boston university

multinational enterprise internal governance and industrial organization abstractthe following sections are included monopoly vs efficiency interpretations of the multinational enterprisehost country controlsdynamic considerationsconclusionreferences this abstract was borrowed from another version of this item

international exchange a foundation for theory building in international business there does not appear to be a consensus concerning what is the conceptual domain of international business this paper argues that this is due in part to an emphasis on the firm as the unit of analysis it is further argued that a comprehensive generative and theoretically integrative definition of international business could be established if exchange were made the unit of analysis by using the political economy paradigm and the various concepts of exchange adopted by the social sciences nine characteristics are identified and developed which uniquely define the conceptual domain of international business

financial development and openness evidence from panel data abstract this paper addresses the empirical question of whether trade and financial openness can help explain the recent pace in financial development as well as its variation across countries in recent years utilising annual data from developing and industrialised countries and dynamic panel estimation techniques we provide evidence which suggests that both types of openness are statistically significant determinants of banking sector development our findings reveal that the marginal effects of trade financial openness are negatively related to the degree of financial trade openness indicating that relatively closed economies stand to benefit most from opening up their trade and or capital accounts although these economies may be able to accomplish more by taking steps to open both their trade and capital accounts opening up one without the other could still generate gains in terms of banking sector development thus our findings provide only partial support to the well known rajan and zingales hypothesis which stipulates that both types of openness are necessary for financial development to take place