informal investment in transition economies individual characteristics and clusters this paper investigates the factors driving informal investment in croatia hungary and slovenia using global entrepreneurship monitor gem data we find that the low rates of informal investment activity and the small amounts of investments in these countries are driven by entrepreneurial behaviors consistent with limited market economy experience we extend prior studies by investigating the role of business ownership and identify significant differences between individuals with and without business ownership experience in terms of having start up skills knowing an entrepreneur and fearing failure cluster analysis identifies seven distinct groups of informal investors and reveals the heterogeneity in terms of investors age gender level of education amount of investment start up skills ownership status income opportunity perception and country of residence

the birth of a new industry entry by start ups and the drivers of firm growth the case of encryption software the paper analyses the birth of the encryption software industry esi a new niche in the software industry using a chandlerian perspective this work reports the main facts about fir entry and growth with a particular focus on start up strategies and actions since scale economies do not play a major role in esi the paper investigates the different sources of fir competitive advantages this work shows that innovation and product differentiation along with investments in co specialised assets are variables strongly correlated to young fir probability to survive and grow in doing so we have collected highly detailed information on product introduction us patents granted worldwide alliances and biographical data of fir founders 2004 elsevier b v all rights reserved jel classificatio m13 l86 o32

a model of delegated project choice we present a model in which a principal delegates the choice of project to an agent with different preferences the principal determines the set of projects from which the agent may choose the principal can verify the characteristics of the project chosen by the agent but does not know which other projects are available to the agent two frameworks are considered i a static setting in which the collection of available projects is exogenous to the agent but uncertain and ii a dynamic setting in which the agent searches for projects

not only what but also when a theory of dynamic voluntary disclosure we examine a dynamic model of voluntary disclosure of multiple pieces of private information in our model a manager of a firm who may learn multiple signals over time interacts with a competitive capital market and maximizes payoffs that increase in both period prices we show perhaps surprisingly that in equilibrium later disclosures are interpreted more favorably even though the time the manager obtains the signals is independent of the value of the firm we also provide sufficient conditions for the equilibrium to be in threshold strategies

endogenous information flows and the clustering of announcements we consider the strategic timing of information releases in a dynamic disclosure model because investors don t know whether or when the firm is informed the firm will not necessarily disclose immediately we show that bad market news can trigger the immediate release of information by firms conversely good market news slows the release of information by firms thus our model generates clustering of negative announcements surprisingly this result holds only when firms can preemptively disclose their own information prior to the arrival of external information these results have implications for conditional variance and skewness of stock returns jel d21 d83 g12 g14 l11

credit ratings and corporate disclosure behaviour evidence from regulation fair disclosure in korea abstractthis article provides evidence that firms with high market expectations disclose more information to investors utilizing the fair disclosure regulation in korea to proxy for their disclosure choices this finding is consistent with the argument that in order to retain their dominant positions highly evaluated firms are more concerned about the market s perception of them as providers of timely and detailed disclosure we also find that the impact of market expectations on disclosure is more pronounced for chaebol firms combined with prior research on the relationship between firm performance and voluntary disclosure we provide important implications for the determinants of corporate disclosure

microeconomic consequences and macroeconomic causes of foreign direct investment in southern african economies the authors use a new data set on firms in thirteen countries of the southern african development community sadc and comparators from other regions to identify the benefits and determinants of foreign direct investment fdi in this region fdi has facilitated local development in the sadc foreign owned firms perform better than domestic firms are larger and locate in richer and better governed countries and in countries with more competitive financial intermediaries they are also more likely to export than domestic firms and evidence suggests that they might have positive spillover effects on domestic firms based on a standard empirical model the sadc is attracting the inward fdi per capita the region s level of income would predict but this means that there are less capital inflows per capita to the region than there are to wealthier parts of the developing world moreover the sadc is attracting less fdi than comparators for reasons that are possibly more fundamental than current income namely countries past growth record demographic structure and the quality of physical infrastructure interestingly inward fdi is less sensitive to variation in income within the sadc than in other parts of the world but is more responsive to changes in country s openness to trade

managerial control of international firms and patterns of direct investment abstract formal analyses of international firms have concentrated on advantages from large operations due to for example economies of scope however the standard framework implicitly assumes the existence of managerial costs for running international operations the paper develops a model that explicitly incoporates both economies of scope and costs of managerial control of large and international operations it highlights the potential importance of international firms organizational structure suggesting a qualitative difference between situations where international firms have different stages of production located in different countries and situations where firms in addition have the same stage located in different countries

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

taxes tariffs and transfer pricing in multinational corporate decision making three interrelated aspects of u s multinational corporation activity are analyzed here the ability to shift profits from high tax countries to low tax countries the impact of host country taxes and tariffs on the distribution of real capital and the influence of these policies on international trade patterns of the united states and host countries the cross sectional empirical analysis indicates that the observed pattern of reported profits in high and low tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs the united states appears both to import more from and export more to low tax countries where mnc investment is greater but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected copyright 1991 by mit press

from hybrids to hierarchies shareholder wealth effects of joint venture partner buyouts this study examines the parent firm performance implications of joint venture jv partner buyouts which involve the conversion of a hybrid governance structure to an internal unit within the firm s hierarchy transaction cost theory as developed and applied in the international literature and market entry research is extended to the post entry investment setting to isolate sources of value creation or dissipation from the governance changes effected by jv partner buyouts the evidence complements recent research on jv longevity and its determinants copyright 2001 john wiley sons ltd

the multinational firm direct investment is incorporated into a simple general equilibrium model of international trade the analysis focuses on an attempt to endogenize the internalization decision it is argued that a reasonable approach assumes that arm s length contracts must be simple so that complex arrangements require internalization the model relates direct investment to the degree of underlying uncertainty and to fundamental trade determinants such as relative factor endowments the behavior of the model contrasts sharply with that of the markusen helpman model which takes internalization for granted

globalization derailed multinational investors response to the 1997 denial of fast track trade negotiating authority is globalization being derailed by opponents results of this event study analysis of the 1997 fast track denial suggest that investors 1 may have perceived fast track as a debate on globalization and 2 appear to have expected financial losses to result from the failure to enact fast track regression results further support the event study findings

new silicon valleys or a new species commoditization of knowledge work and the rise of knowledge services clusters this paper explores knowledge services clusters kscs as a distinct and increasingly important form of geographic cluster in particular in developing countries kscs are defined as geographic concentrations of lower cost skills serving global demand for increasingly commoditized knowledge services based on prior research on clusters and services offshoring and data from the offshoring research network orn major properties and contingencies of ksc growth are discussed and compared with both high tech clusters and low cost manufacturing clusters special emphasis is put on the ambivalent effect of commoditization of knowledge work on ksc growth it is proposed that kscs attract most client projects if service commoditization is medium whereas higher or lower commoditization either increases global competitive pressure or lowers demand and economies of scale and scope ksc attractiveness is further related to the perceived availability of skills at relatively low costs and cluster connectedness with client economies through corporate networks and professional communities findings not only advance current debates on clusters global services sourcing and the geography of knowledge production but also have important policy implications

tacitness learning and international expansion a study of foreign direct investment in a knowledge intensive industry this paper examines the impact of knowledge tacitness on a firm s propensity to establish plants in foreign rather than domestic locations our predictions build on knowledge based internalization and evolutionary theories of foreign direct investment we argue that the tacitness of technology has an inverted u effect on the propensity to undertake foreign investment we also expect that as a firm learns about a technology it will become more likely to make foreign investments we examine two forms of learning that which accumulates as a function of the number of plants previously built by the firm transfer based learning and that which accumulates as a function of time since the firm started using a technology time based learning we investigate empirical effects in a sample of investments in the memory segment of the semiconductor industry our predictions about the curvilinear effect of tacitness are supported the results also suggest that learning is a matter of taking time to become acquainted with the use of the technology and of gaining experience through successive foreign plant investments the study adds to the understanding of the effects of knowledge on corporate expansion

uncertain outcomes of foreign investment determinants of the dispersion of profits after large acquisitions when u s firms make large international acquisitions the unpredicted component of their profits over the next five years increases with the relative size of the acquired firm degree of product diversification and reliance on r d assets the unpredicted component declines with the acquirer s size experience and previous profits transitory and longer run unpredicted components are distinguished

predisclosure information firm capitalization and security price behavior around earnings announcements several studies on the relationship between earnings reports and security price behavior provide evidence suggesting that a significant portion of the information revealed through earnings reports is reflected in security prices prior to the report month e g ball and brown 1968 and brown and kennelly 1972 this has been attributed at least partly to the existence of other more timely sources of information which allow market agents to forecast earnings prior to their release the evidence above reflects an average finding across all firms one question of interest is whether there are significant systematic crosssectional differences in the security price reactions to earnings announcements of firms which are associated with specific firm characteristics that lead to differential amounts of predisclosure information this study focuses on firm size capitalization as one such characteristic a firm

valuation of the operating flexibility of multinational corporations the returns to multinationality are estimated as the value of operating flexibility empirical measures of the return of multinationality require a precise specification of the extensiveness of the mnc s transnational network to measure the degree of multinationality this precise empirically grounded definition of multinationality has been absent from the academic literature to date we address this omission and we find that two characteristics of the transnational network its breadth number of foreign countries in which the mnc has operations and depth the concentration of foreign subsidiaries in a few countries are significant in explaining the value of operating flexibility in particular we find that the returns to multinationality are maximized for firms with networks that have breadth but not depth the role of market intangibles such as r d and advertising on mnc market valuation is shown to depend on the flexibility regime

greenwash vs brownwash exaggeration and undue modesty in corporate sustainability disclosure corporate greenwashing has accelerated in recent years bringing in its wake growing skepticism about corporate green claims although a theory of the drivers and deterrents of greenwashing has begun to emerge it is static in nature and does not incorporate the full range of ways in which firms can misrepresent their environmental performance our contribution is threefold first we extend the theory of organizational information disclosure to incorporate the possibility of undue modesty about a firm s environmental social and governance practices second we hypothesize about the drivers of exaggeration and undue modesty based on which of a firm s stakeholders are salient at a given point in time to do so we place the firm within a dynamic context that has largely been missing in the prior literature third we test our hypotheses using a data set that allows us to directly compare corporate green claims against actual performance results reveal that corporate output growth deregulation and low profits under deregulation significantly affect the choice between greenwashing and brownwashing the effects of growth and profits are mitigated by external scrutiny

new business formation in a rapidly growing economy the irish experience the extraordinary growth of the irish economy since the mid 1990s the celtic tiger has attracted a great deal of interest commentary and research indeed many countries look to ireland as an economic development role model and it has been suggested that ireland might provide key lessons for other eu members as they seek to achieve the objectives set out in the lisbon agenda much of the discussion of ireland s growth has focused on its possible triggers the long term consequences of the late 1980s fiscal stabilisation eu structural funds education wage moderation and devaluation of the irish punt the industrial policy perspective has highlighted the importance of inflows of foreign direct investment but a notable absence from the discourse on the celtic tiger has been any mention of the role of new business venture creation and entrepreneurship in this paper we use unpublished irish vat data for the years 1988 2004 to provide the first detailed look at national trends in business birth and death rates in ireland over the take off period we also use sub national vat data to shed light on spatial trends in new venture creation our overall conclusions are that new business formation made no detectable contribution to the acceleration of ireland s growth in the late 1990s although we do find evidence of spatial convergence in per capita business stocks

the value of control in emerging markets when a developed country multinational firm acquires majority control of a firm in an emerging market there is an economically large and statistically significant increase in the acquiring firm s stock price in 1986 2006 developed market acquirers experienced positive and significant abnormal returns of 1 16 on average over a three day event window positive acquirer returns and dollar value gains appear unique to emerging market mergers and acquisitions and are not replicated when the same developed market acquirers take over firms in developed markets the size of the stock price increase is more pronounced a the weaker the contracting environment in the emerging market and b for industries with high asset intangibility the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

accounting for endogeneity when assessing strategy performance does entry mode choice affect fdi survival firms choose strategies based on their attributes and industry conditions therefore strategy choice is endogenous and self selected empirical models that do not account for this and regress performance measures on strategy choice variables are potentially misspecified and their conclusions incorrect i highlight how self selection on hard to measure or unobservable characteristics can bias strategy performance estimates and recommend an econometric technique that has been developed to account for this effect although this concern applies to a wide range of strategy questions to demonstrate its effect i empirically examine if entry mode choice acquisition versus greenfield influences foreign direct investment survival in specifications that do not account for self selection i find that greenfield entries have survival advantages compared to acquisitions this confirms previous findings however the significance of this effect disappears once i account for self selection of entry mode in the empirical estimates the results confirm that estimates from models that do not account for self selection of strategy choice can lead to incorrect or misleading conclusions

the revealed preferences of high technology acquirers an analysis of the innovation characteristics of their targets this paper investigates whether acquisitions involving public high technology firms are best understood in terms of acquirers taking over firms with superior innovation performance to access their assets or acquiring firms with inferior innovation performance to turn them around innovation performance is proxied by r d intensity r d expenditure over assets patent intensity patents per us million of assets i e the r d productivity of a firm s assets and the patent stock i e the accumulated r d output we find substantial overlaps between target and non acquired firm characteristics nevertheless targets have a relatively high r d intensity and a large patent stock which is consistent with acquirers targeting firms with a superior innovation performance however these targets have significantly lower pre acquisition patent intensity and hence a lower r d productivity the targets are also experiencing weak financial performance our results are consistent with a selection process in which acquirers seek out firms that have a superior past innovation performance but that are failing in terms of recent r d productivity and financial performance a comparison of the performance of the targets with their acquirers reinforces this conclusion

could the irish miracle be repeated in hungary it is widely recognized that foreign direct investment fdi plays an important role in economic development however its impact on entrepreneurial activity has not been well researched internalization theory is used to explore how inward fdi impacts entrepreneurial activity using data from global entrepreneurship monitor gem we find significant differences in entrepreneurial activity between ireland and hungary in both the type of people starting businesses and the opportunities pursued economic development policies should focus on increasing human capital promoting enterprise development and upgrading the quality of fdi

the boundaries of multinational enterprises and the theory of international trade this paper begins with a review of empirical evidence on multinational firms conceptual underpinnings of a theory are developed relying in particular on the notion of knowledge capital as a mobile joint input into geographically separated production facilities this idea is embedded in a simple two country general equilibrium model that supports multinational production in equilibrium under conditions consistent with the empirical evidence the final section examines internalization and shows why certain properties of knowledge capital also imply a preference for transferring technologies internally within the firm rather than through arm s length markets

strategic information revelation we analyze the problem in which agents have non public information and are to play an asymmetric information game the agents may reveal some or all of their information to other agents prior to playing this game revelation is via exogenously specified certifiable statements the equilibria resulting from various revelation strategies are used to determine equilibrium revelation of information sufficient conditions are provided for complete revelation of all private information a number of examples are provided illustrating when revelation will or will not occur in commonly analyzed games many economic problems are characterized by the presence of both strategic behaviour on the part of individuals and by asymmetric information models encompassing both of these characteristics have been used successfully to examine questions in many fields usually using the concept of bayesian nash equilibrium as the solution concept typically the agents information is given exogenously and is fixed throughout the analysis modelling the information structure as static is appropriate for some problems but not for all in particular situations that are inherently dynamic most economic encounters allow for some interchange between the agents before the outcome is settled irrevocably in such circumstances it is possible that at least one or more of the agents possessing non public information may be able to reveal part or all of his information to one or all of the other agents in the economy during the course of their contact to the extent that such a communication is believed by the other agents the priors of the other agents will change and we will have what is in essence a new asymmetric information game new in

global disaggregation of information intensive services information intensive services are being globally disaggregated as corporations respond to the pressures of increasing global competition and take advantage of the opportunities made available by the progress of information technology and the emerging global work force in order to globally disaggregate services corporations must decide whether or not to carry out a service activity within the organization and where to locate it within or outside the geographic boundary of the home base country this paper analyzes the opportunities and challenges of global disaggregation of information intensive services specifically the paper proposes a taxonomy of disaggregation and develops a theoretical framework that identifies the criteria and guidelines for successfully selecting service activities to be globally disaggregated

what the seller won t tell you persuasion and disclosure in markets imagine that you are considering an investment in a new public offering of a firm s shares the firm s officers make a presentation that includes an audited financial statement an earnings forecast reviewed by its prestigious investment bankers and an impressive demonstration of its new technology or suppose that you are buying a new furnace to replace an old one that is not working well the salesman displays a chart showing that the projected total life cycle cost of one particular model including capital costs and fuel usage over the projected lifetime of the furnace is lower than that of some competing models you have considered this paper reviews the theoretical arguments about how sellers disclose information in an attempt to encourage buyers and the potential role for regulation in encouraging efficient disclosure of information how well does a system of private reporting work when should we expect all the relevant information to be reported if testing and reporting by the seller are costly will too little testing and reporting be done or too much when some information is withheld what sort of information is withheld how do rational buyers respond to such withholding how are prices and welfare affected what role is there for laws and regulations to improve the functioning of markets we address these questions by studying the theory of persuasion games games in which one or more sellers provide verifiable information to buyers to influence the actions they take

using acquisitions to access multinational diversity thinking beyond the domestic versus cross border m a comparison prior research provides ambiguous results regarding the performance of international acquisitions drawing on a survey of 248 acquisitions we find that acquirers enhance their capabilities when they buy a target with a multinational geographic scope a financial event study uses a subsample of the acquisitions to show that the financial markets also value targets multinational scope both surveys and stock market based studies suggest that targets with access to heterogeneous resource environments provide the acquirer with greater potential for capability enhancement and financial performance in contrast simply acquiring firms across borders has less influence on post acquisition outcomes the study demonstrates greater value of the attributes of the target rather than of international expansion alone thus the multinational scope of the target is more likely to account for the resource diversity provided by the target than the country of origin of the target per se the study changes the emphasis on multinational acquisitions by shifting the focus from foreign market expansion country level emphasis to accessing geographically distributed resources that are embedded in target firms firm level emphasis

rapid fdi expansion and firm performance today more firms are expanding rapidly into foreign markets to reach global scale quickly and to capture or nullify first mover advantages these trends run counter to the conventional theory of gradual internationalization which suggests that firms maximize the benefits of learning from prior experience thereby minimizing the hazard of failure we argue that this conventional wisdom does not consider the risk of being a perennial late mover in the face of increased global competition this study explores the circumstances under which rapid fdi expansion a strategy of undertaking fdi expansion at an accelerated speed can be a viable strategy using data on korean firm expansion we find that rapid fdi expansion enhances firm performance in industries where globalization pressures are high and when it is done by firms with superior internal resources and capabilities

news management and the value of firms the literature on asymmetric information has been concerned mainly with the problem of the informed party lying to the uninformed parties however in many cases the informed party will stop short of lying but will seek to gain from private information by managing the disclosure of news this article examines the pricing of a firm when there is such manipulation of news i model this situation as a variant of the persuasion game of milgrom and roberts 1986 in which i can parameterize the notion of the degree of credence placed by the market on the disclosures of the informed party an empirical hypothesis thrown up by the theory is that for otherwise identical firms a low price earnings ratio will be associated with a greater degree of positive skewness of the disclosure strategy

the association between accounting earnings and security returns for large and small firms abstract the differential information hypothesis advanced by atiase 1980 states that information production and dissemination by private parties for the purpose of identifying mispriced securities is an increasing function of firm size this study examines two corollaries of that hypothesis first security prices of large firms anticipate accounting earnings earlier than security prices of small firms second for a given level of unexpected earnings the cumulative abnormal returns of small firms exceed those of large firms the results are generally consistent with atiase s hypothesis

do corporate global environmental standards create or destroy market value arguments can be made on both sides of the question of whether a stringent global corporate environmental standard represents a competitive asset or liability for multinational enterprises mnes investing in emerging and developing markets analyzing the global environmental standards of a sample of u s based mnes in relation to their stock market performance we find that firms adopting a single stringent global environmental standard have much higher market values as measured by tobin sq than firms defaulting to less stringent or poorly enforced host country standards thus developing countries that use lax environmental regulations to attract foreign direct investment may end up attracting poorer quality and perhaps less competitive firms our results also suggest that externalities are incorporated to a significant extent in firm valuation we discuss plausible reasons for this observation

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

knowledge transfer capacity and its implications for the theory of the multinational corporation this study updates and extends research on foreign entry modes by examining the impacts of knowledge transfer capacity and knowledge tacitness research on international corporate expansion has long emphasized that deploying intangible knowledge based assets is required for successful international expansion more recently research from a knowledge based perspective has addressed the role of tacitness in constraining a firm s ability to transfer knowledge internationally we combine these perspectives to describe how knowledge tacitness affects the relative suitability of four archetypal entry modes exporting licensing establishing an alliance and wholly owned entry we then examine and develop conceptually a seldom studied firm characteristic knowledge transfer capacity we offer predictions that describe the combined effects of knowledge tacitness and transfer capacity on entry mode choice we distinguish between the transfer capacity of the organization that develops knowledge source transfer capacity and that of the organization that seeks to access that knowledge recipient transfer capacity the discussion addresses how our model generalizes to knowledge seeking strategies and to the study of ongoing multinational networks the study enriches and reconciles multiple theoretical perspectives on entry strategy it brings together the study of knowledge characteristics and firm heterogeneity in the theory of the multinational corporation and in international and strategic management more generally journal of international business studies 2003 34 356 373 doi 10 1057 palgrave jibs 8400037

international corporate diversification market valuation and size adjusted evidence errunza and senbet es 7 analyze the effects of international operations on the market value of the firm both at theoretical and empirical levels the theoretical model which is largely heuristic exploits the costly supply adjustment of multinational firms mncs in providing international portfolio diversification services to investors who face differential cost barriers to direct holdings of assets across national boundaries mncs compete as financial intermediaries to undo the barriers so that in equilibrium profits are driven out mncs and pure domestic firms sell at an equivalent risk adjusted return however costly financial intermediation and the associated relative efficiency leads to a positive valuation effect for mncs relative to purely domestic firms further the equilibrium analysis implies that demand side investor barriers to international capital flows alone are inconsequential to the valuation of mncs in their pure financial role but that the interaction with the supply side costs are necessary to produce a valuation effect at the corporate level es subject the theory to an empirical analysis in a value based approach by employing a variant of tobin s 17 qratio the analysis controlling for industrial market power suggests that the relationship between the excess valuation and the degree of international involvement doi has magnified over periods characterized by severe u s government controls vis a vis the more recent periods in this paper we formalize the theoretical argument by viewing indirect portfolio diversification by mncs as a means of completing the international capital market we employ a paradigm in the unanimity literature and formally characterize the equilibrium in which there is a rationale for mnc financial intermediation we then perform an expanded empirical study by employing generalized least squares and maximum likelihood procedures since the positive relationship between excess valuation and doi as suggested in es 7 might be attributed to the so called small firm or size and the p e effects the test methodology controls for such effects also the traditional literature has relied upon foreign sales percentage as a proxy for doi in view of the well recognized limitations of this proxy we employ four different measures of international

the effects of international operations on the market value of the firm theory and evidence this paper investigates the existence of monopoly rents associated with international operations in a market value theoretic framework the benefits of international operations evolve from such factors as 1 imperfections in the product and factor markets 2 differential international taxation and 3 imperfections in the financial markets in this paper these factors are subject to an equilibrium analysis in the context of recent advances in financial theory in particular imperfections in the financial sector arising from corporate international diversification are examined in a framework which allows a supply adjustments by multinational firms and b the interaction of barriers to international capital flows faced by both firms and investors taking the u s capital market and investors as a base we then specify the conditions under which the foregoing imperfections get priced out in an equilibrium these pricing effects cannot be detected empirically through the methodologies employed by the existing studies which examine the effects of corporate international diversification indeed it was an attempt to rescue the limitations of these studies which initially motivated our paper the existing empirical inquiries into this area rely on traditional risk adjusted performance measures e g 7 or international analogs of return generating processes e g 1 8 instead at the empirical level we employ a value based method which is in the same vein of the thomadakis 17 approach developed to identify the monopoly benefits of industrial market structure we conduct the tests over subperiods characterized by differential government controls in an attempt a to separate the pure financial motives for multinationality from other motives and b to detect if the benefits of international operations carry through recent periods

valuation effects of global diversification this paper examines the effect of global diversification on firm value using a data set of us firms from 1994 to 2002 we document that global diversification enhances firm value specifically we find that tobin s q our proxy for firm value increases with foreign sales measured as a fraction of the firm s total sales even after we control for well known determinants of firm value in contrast we find no such evidence for industrial diversification we find evidence of both financial and real effects driving such a value enhancement from global diversification furthermore we find that the valuation benefits from global diversification are higher if the firm diversifies into countries with creditor rights that are stronger than those of the united states our results are also robust to controlling for the firm s endogenous choice to diversify across countries or across industries our study is anchored by the theories of both the financial and real dimensions of global diversification and our results support both theories overall our results provide a unifying view that global diversification benefits are driven by both the real and financial dimensions

internalization an event study test abstract the internalization theory of multinational firms proposes that direct international investment occurs when a firm has information related intangible assets with public good properties we find that firms with characteristics suggesting the presence of information based assets experience a significantly positive stock price reaction upon announcing a foreign acquisition on the other hand firms apparently lacking such assets experience at best zero abnormal returns upon announcing overseas acquisitions

disclosure and choice an agent chooses among projects with random outcomes his payoff is increasing in the outcome and in an observer s expectation of the outcome with some probability the agent will be able to disclose some information about the true outcome to the observer we show that choice is inefficient in general we illustrate this point with a characterization of the inefficiencies that result when the agent can perfectly disclose the outcome with some probability and can disclose nothing otherwise as in dye 1985a in this case the agent favours riskier projects even with lower expected returns on the other hand if information can also be disclosed by a challenger who prefers lower beliefs of the observer the chosen project is excessively risky when the agent has better access to information excessively risk averse when the challenger has better access and efficient otherwise we also characterize the agent s worst case equilibrium payoff we give examples of alternative disclosure technologies illustrating other forms the inefficiencies can take for example in a two dimensional setting we demonstrate a hitting for the fences effect where the agent systematically focuses on the harder dimension at the expense of success on the easier

national elections and tail risk international evidence abstract we investigate stock tail risk around national elections worldwide over the period of 1982 2012 we find that firm stock is less likely to crash during the election years and is more likely to crash during the post election period this inter temporal pattern is consistent with the suppression of negative information when there is heightened political uncertainty around elections and with the subsequent release of adverse news when the uncertainty is reduced further analysis shows that the impact of political uncertainty on tail risk is stronger in countries with poorer investor protection fewer electoral checks and balances more uncertain election outcomes and pro business incumbent governments in industries which are more politically sensitive and in firms with larger information asymmetry

corporate takeover bids methods of payment and bidding firms stock returns this study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids the results reveal significant differences in the abnormal returns between common stock exchanges and cash offers the results are independent of the type of takeover bid i e merger or tender offer and of bid outcomes these findings supported by analysis of nonconvertible bonds are attributed mainly to signalling effects and imply that the inconclusive evidence of earlier studies on takeovers may be due to their failure to control for the method of payment recent studies on corporate takeovers provide inconclusive results on the valuation effects of acquisitions on the common stock of bidding firms 1 substantial differences are reported between the studies that analyze acquisitions initiated as tender offers and those that confine their samples to merger proposals the existence of mixed empirical findings for the bidding firms makes it difficult to interpret existing evidence and to draw conclusions about the managers acquisition motivations nevertheless the reason for the substantial difference between empirical findings on mergers and tender offers still remains an unresolved issue it is observed however that mergers are usually common stock exchange offers whereas tender offers are usually cash offers given that different methods of financing a project have different signalling implications myers and majluf 39 the differential stock returns of bidders in mergers and tender offers may be due to the method of acquisition financing

securing access to lower cost talent globally the dynamics of active embedding and field structuration manning s sydow j and windeler a securing access to lower cost talent globally the dynamics of active embedding and field structuration regional studies this article examines how multinational corporations shape institutional conditions in emerging economies to secure access to high skilled yet lower cost science and engineering talent two in depth case studies of engineering offshoring projects of german automotive suppliers in romania and china illustrate how multinational corporations engage in active embedding by aligning local institutional conditions with global offshoring strategies and operational needs multinational corporations thereby contribute to the structuration of field relations and practices of sourcing knowledge intensive work from globally dispersed locations the findings stress the importance of institutional processes across geographic boundaries that regulate and are shaped by multinational corporation activities manning s sydow j and windeler a

the roles of reputation and transparency on the behavior of biased experts we analyze situations in which an expert is biased toward some decision but cares also about his reputation in the market for experts the information the expert reveals decreases as his bias moves toward stronger preference for the status quo we show that it is optimal to publicly disclose both the expert s contribution and his identity surprisingly revealing the intensity of the expert s bias doesn t always improve the information he reveals in equilibrium the presence of a second expert raises the first expert s incentives to report truthfully when reports are public but reduces them when they are secret in particular having an option to call another expert may be detrimental in terms of information production if reports are not public finally sequential consultation of experts reduces the information obtained when reports are public but raises it when they are secret

performance following changes of international presence in domestic and transition industries we examine relationships between firm performance and changes in international presence in five medical sector industries between 1978 and 1989 conditioned on the international status of the industries and the market position of the firms international expansion was necessary for survival when foreign firms began to enter a domestic market but only firms with substantial market share and international experience gained prior to the industry transition could expand successfully operating only in the home market may permit a firm to survive in a primarily domestic industry but moderate international expansion often brings current benefits and provides a base for future success should the industry become more global however expansion carries the risk of failure firms that retrench after expanding internationally disappear

is knowledge power knowledge flows subsidiary power and rent seeking within mncs in recent years as multinational corporation mnc subsidiaries have become more closely linked to international networks their knowledge intensity has risen and some of their r d has gained a more creative role simultaneously and often connectedly many subsidiaries have acquired considerable strategic independence in all aspects of their operations and therefore are able to exercise considerable intra firm bargaining power to influence the distribution of the firm s resources in this context we suggest that intra mnc knowledge flows are a key determinant of subsidiary bargaining power we argue that subsidiary managers can exploit such power to pursue their own ends such rent seeking behavior is implicit in much of the literature on managerialism but our analysis suggests that such behavior can now occur in headquarters subsidiary and subsidiary subsidiary relations thus subsidiary strategic independence designed to enhance the competitiveness of outputs market knowledge and inputs asset seeking and learning can be corroded when the pursuit of subsidiary objectives encourages rent seeking empirical analysis of a sample of high technology subsidiaries in the uk provides strong support for the theory we examine several avenues whereby the incentives of units within the mnc can be aligned

strategic transmission of costly information it is ofren the case that an individual s decision is at least partly based on information received from another and when the agents payoffs depend on both the former s decision and on the latter s information there is an incentive for the informed individual to attempt to bias the decision maker s decision in his or her favor by strategically manipulating the information transmitted in a seminal paper crawford and sobel 1982 hereafter c s study such strategic information transmission in the context of an abstract sender receiver game variants of the crawford and sobel model have been applied widely and as the application varies so often does the interpretation of type in some cases type refers to a preference parameter given by nature as for example in bargaining theory e g farrell and gibbons 1989 matthews 1989 whereas in other settings for instance legislative decision making or expert testimony type refers to more or less technical information concerning how decisions map into final consequences and as such is acquired information e g gilligan and krehbiel 1987 milgrom and roberts 1986 when the information has to be acquired it is natural to suppose the acquisition is costly for otherwise there is no reason why such information is asymmetrically distributed so long as the receiver can observe surely or at least accurately infer whether the sender is informed and so long as messages are cheap talk there is no issue here for strategic information transmission save whether to become informed at all however there are many circumstances when it is inappropri ate to assume the receiver has such knowledge one possibility is that a receiver may know that a sender has some relevant informa tion but be uncertain of the quality of this information a second perhaps more important possibility is that a receiver is unable to tell whether a potential sender is uninformed inter alia this problem constitutes the rationale for ignorance of the law being inadmissible as a legal defense were it admissible then informed miscreants would mimic uninformed transgressors leads voters to be skeptical of politicians claiming ignorance of illegal arms deals and makes the sec sensitive to problems in distinguishing insider trading from legitimate good judgement so there is an intrinsic asymmetry in that it is generally possible for say senders to verify possession of at least some information but it is typically prohibitively difficult to verify any lack of knowledge

evidence games truth and commitment an evidence game is a strategic disclosure game in which an informed agent who has some pieces of verifiable evidence decides which ones to disclose to an uninformed principal who chooses a reward the agent regardless of his information prefers the reward to be as high as possible we compare the setup where the principal chooses the reward after the evidence is disclosed to the mechanism design setup where he can commit in advance to a reward policy the main result is that under natural conditions on the truth structure of the evidence the two setups yield the same equilibrium outcome

are foreign it workers cheaper u s visa policies and compensation of information technology professionals the use of h 1b and other work visas to hire foreign information technology it professionals in the united states has attracted significant controversy and policy debates on one hand hiring high skill foreign it professionals on work visas can be advantageous for u s firms and the overall economy on the other hand high skill immigration can adversely impact the wages of foreign and american it professionals this study uses data on skills and compensation of more than 50 000 it professionals in the united states over the period 2000 2005 to study patterns in compensation of foreign and american it professionals to inform these debates contrary to the popular belief that foreign workers are a cheap source of labor for u s firms we find that after controlling for their human capital attributes foreign it professionals those without u s citizenship and those with h 1b or other work visas earn a salary premium when compared with it professionals with u s citizenship the salary premiums for non u s citizens and for those on work visas fluctuate in response to supply shocks created by the annual caps on new h 1b visas setting lower and fully utilized annual caps results in higher salary premiums for non u s citizens and those with work visas we discuss implications of this study for crafting informed visa and immigration related policies by the u s government for staffing practices of firms and for human capital investments by it professionals

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

ignorance in agency problems we extend the standard agency model of adverse selection to incorporate the possibility that the agent may be ignorant i e know no more about a critical parameter than does the principal ignorance introduces a discontinuity pooling and particularly severe output distortions into the optimal incentive contract journal of economic literature classification numbers c79 d82

mitigating risk in international mergers and acquisitions the role of contingent payouts previous internationalization studies have focused on the entry modes employed by multinational firms but have not considered the contractual heterogeneity that underlies each mode it is important to examine these contractual details as the firm may be able to obtain some of the benefits typically associated with one entry mode while selecting another in the case of international mergers and acquisitions m as a key contractual variable is whether the parties agree to a performance contingent payout structure which can mitigate the risk of adverse selection in this paper we examine the antecedents of contingent payouts in the form of earnouts and stock payments the results indicate that firms lacking international and domestic acquisition experience turn to contingent payouts when purchasing targets in high tech and service industries firms tend to avoid contingent payouts in host countries with problems with investor protection and legal enforceability

determinants and effects of new business creation using global entrepreneurship monitor data this paper is an introduction to the present special issue dedicated to scientific research using data collected as part of the global entrepreneurship monitor gem and considering new venture creation as the hallmark of entrepreneurship after a short description of gem s theoretical and methodological background this introduction highlights the main results of seven papers which were presented at the first gem research conference in berlin from 1 to 3 april 2004 first there is empirical evidence that the role of entrepreneurial activity differs across the stages of economic development in that there appears to be a u shaped relationship between the level of development and the rate of entrepreneurship consequently a positive effect of entrepreneurial activity on economic growth is found for highly developed countries but a negative effect for developing nations second it is shown that different types of entrepreneurship may have a different impact on a nation s innovativeness and economic growth rate in particular potentially high growth business start ups and so called opportunity entrepreneurship enhance knowledge spillovers and economic growth third entrepreneurship is again shown to be a regional event that can only be understood if regional framework conditions including networks and regional policies are taken into consideration

international venturing by emerging economy firms the effects of firm capabilities home country networks and corporate entrepreneurship past literature on foreign direct investment generally supports an economics perspective that there is a direct relationship between firm specific ownership advantages and international expansion however in emerging economies with their institutional environment context characterized by low resource munificence and continuous economic liberalization a theoretical extension of the current perspective is needed this paper introduces new parameters by focusing on specific ownership advantages and strategic actions that firms have to develop in response to the institutional characteristics of the emerging economies when they decide to pursue outward fdi the focus here is on international venturing that requires a firm to engage in activities for new business creation in a foreign country rather than simply seek to distribute a product in another nation it is shown empirically that the relationship between firm specific ownership advantages and international venturing is moderated by the degree of home industry competition and export intensity in addition such a relationship is mediated by the intensity of corporate entrepreneurial transformation in the form of innovation new business creation and strategic renewal

global delivery models the role of talent speed and time zones in the global outsourcing industry global delivery models gdms are transforming the global it and business process outsourcing industry gdms are a new form of client specific investment promoting service integration with clients by combining client proximity with time zone spread for 24 7 service operations we investigate antecedents and contingencies of setting up gdm structures based on comprehensive data we show that providers are likely to establish gdm location configurations when clients value access to globally distributed talent and speed of service delivery in particular when services are highly commoditized findings imply that coordination across time zones increasingly affects international operations in business to business and born global industries

the structure of ownership and the theory of the firm the separation of ownership from control produces a condition where the interests of owner and of ultimate manager may and often do diverge and where many of the checks which formerly operated to limit the use of power disappear in creating these new relationships the quasi public corporation may fairly be said to work a revolution it has divided ownership into nominal ownership and the power formerly joined to it thereby the corporation has changed the nature of profit seeking enterprise 1

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

disclosures and asset returns public information in financial markets often arrives through the disclosures of interested parties who have a material interest in the reactions of the market to the new information when the strategic interaction between the sender and the receiver is formalized as a disclosure game with verifiable reports equilibrium prices can be given a simple characterization in terms of the concatenation of binomial pricing trees there are a number of empirical implications the theory predicts that the return variance following a poor disclosed outcome is higher than it would have been if the disclosed outcome were good also when investors are risk averse this leads to negative serial correlation of asset returns other points of contact with the empirical literature are discussed

when to drop a bombshell sender who is either good or bad wishes to look good at an exogenous deadline sender privately observes if and when she can release a public flow of information about her private type releasing information earlier exposes to greater scrutiny but signals credibility in equilibrium bad sender releases information later than good sender we find empirical support for the dynamic predictions of our model using data on the timing of u s presidential scandals and u s initial public offerings in the context of elections our results suggest that october surprises are driven by the strategic behaviour of bad sender

strategic environmental disclosure evidence from the doe s voluntary greenhouse gas registry abstract although mandatory disclosure programs have been studied extensively strategic voluntary environmental disclosures by firms are not well understood we study the motivations for and impacts of firms strategic disclosure of greenhouse gas reductions to the us government we first model firms joint abatement and disclosure decisions incorporating both economic and political incentives we then use data from the department of energy s voluntary greenhouse gas registry to compare reported reductions to actual emissions we find that participants in the program engage in highly selective reporting in the aggregate they increase emissions over time but report reductions in contrast non participants decrease emissions over time participants tend to be large firms facing strong regulatory pressure pressure from environmental groups reduces the likelihood of participation suggesting such groups viewed the program as a form of greenwash participating in the 1605 b program had no significant effect on a firm s changes in carbon intensity over time

strategic investments and the development of multinationals a model of multinational behavior is presented in which either the existence or absence of multinationals can be a nash equilibrium outcome the key determinant is the relationship between plant scale economies a force for geographic centralization and multiplant economies plus transport costs leading to multinationality the model predicts that multinational enterprise production arises when firm specific and transportation costs are large relative to plant scale economies the latter are both a technological and a strategic variable in the entry decision copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

us companies in transition economies wealth effects from expansion between 1987 and 1999 this study uses a unique sample to evaluate changes in shareholder wealth from announcements of expansion by us firms into 18 transition economies through four entry modes from 1987 to 1999 on average expansion in transition economies is associated with significant positive wealth effects results show that value creation is most significantly associated with expansion through less risky entry modes into host countries that are in the more advanced stages of market liberalization and structural reform sample firms with lower profitability also experience significantly higher abnormal returns while significant value creation documented for firms entering transition economies in 1989 1990 and 1992 suggests first mover advantages

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

asset returns under periodic revelations of earnings management the article investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings a principal agent model with financial reporting and managerial effort is embedded in a lucas asset pricing model with periodic revelations of the firm s underlying profitability the return process generated from the model is consistent with a range of empirical regularities observed in the return data volatility clustering asymmetric volatility and high idiosyncratic volatility the calibration results further indicate that earnings management can be quantitatively important in accounting for the dynamic patterns of stock returns abstract from author

intangible resources as a key factor in the internationalisation of spanish firms abstract in this paper we analyse the effect of the availability of intangible resources measured by way of tobin s q on the probability of spanish firms increasing their international diversification we find that this impact is positive and statistically significant we also discover that firms with a higher endowment of intangible resources increase their presence in their current markets concentration and that those with a multinational status also expand to new markets scope