where do markets come from production markets have two sides producers are a fully connected clique transacting with buyers as a separate but aggregated clique each producer is a distinctive firm with a distinctive product each side continually monitors reactions of the other through the medium of a joint social construction the schedule of terms of trade each producer is guided in choice of volume by the tangible outcomes of other producers not by speculation on hypothetical reactions of buyers to its actions each producer acts purely on self interest based on observed actions of all others summarized through a feedback process the summary is the terms of trade schedule which reduces to constant price only in limiting cases the market emerges as a structure of roles with a differentiated niche for each firm explicit formulae both for firms and for market aggregates are obtained by comparative statics methods for one family of assumptions about cost structures and about buyers evaluations of differentiated products not just any set of firms can sustain terms of trade with any set of buyers there prove to be three main kinds of markets and three sorts of market failure within a parameter space that is specified in detail one sort of market paradox has a madison avenue flavor another is more conventional grind and a third crowded is a new form not included in any existing theory of markets current american industrial markets are drawn on for 20 illustrations of which three are presented in some detail inequality in firms market shares measured by gini coefficients is discussed

democracy volatility and economic development growth stability is an important objective because development requires sustained increases in income because volatility is costly for the poor and because volatility deters growth we study the determinants of average growth and its volatility as a two equation system and find that higher levels of democracy and diversification lower volatility whereas volatility itself reduces growth muslim countries instrument for democracy and measures of diversification identify volatility in contrast to the lack of consensus on the democracy growth relationship the democracy stability link is robust rather than focus on growth this paper forges an alternative link between democracy and development through the volatility channel

the irish case of dependency an exception to the exceptions the dependency approach has recently been criticized by authors who quote the exceptional east asian cases the irish case is used to refute these new modernizationist arguments on two counts 1 countries such as ireland not the east asian countries have regimes with characteristics that tend to set dependency relations in motion these characteristics include radical free trade free enterprise andforeign industrial domination 2 because of these characteristics ireland has endured economic stagnation and tendencies toward higher inequality irish economic growth under foreign dominated industrialization was slowed by decapitalization and by the absence of linkages between foreign and domestic industry time series models show that foreign penetration and free trade are related to slower economic growth because of slower investment growth and other reasons inequality increased primarily because of rising unemployment although social welfare programs reduced the effects of direct income inequality their effects have been reduced by regressive taxation and austerity programs

the origins and development of the northeast asian political economy industrial sectors product cycles and political consequences theories of the product cycle hegemony and the world system are used to analyze the creation and development of the northeast asian political economy in this century japan south korea and taiwan have each developed in a particular relationship with the others the three taken together form a hierarchical constantly interacting political economic unit during the period of colonial rule japan was unique in building an imperial economic unit marked by a strong role for the state whether in tokyo or taipei by a tight integral unking of all three nations into a communications and transport network running toward the metropole and by a strategy of both using the colonies for agricultural surpluses and then locating industries there after 1945 a diffuse american hegemony replaced japan s unilateral system but elements of the prewar model have survived strong states direct economic development in south korea and taiwan here termed bureaucratic authoritarian industrializing regimes both countries are receptacles for japan s declining industries and both countries develop in tandem if in competition with each other the most recent export led competition has seen taiwan succeed where south korea has temporarily failed leaving seoul in an export led trap burdened with rapidly increasing external debt taiwan furthermore has industrialized relatively free of social disruption whereas korean society resisted its transformation at japanese hands and remains more rebellious today there can be one japan and one taiwan but not two or many of either in the world economy

financial intermediary coalitions abstract in this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment it is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors private information core allocations these intermediaries which are coalitions of agents exhibit the following characteristics in equilibrium they borrow from and lend to large groups of agents they produce information about investment projects and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers

the new institutional economics this outstanding book presents new original contributions from some of the world s leading economists including ronald coase douglass c north masahiko aoki oliver e williamson and harold demsetz it demonstrates the extent and depth of the new institutional economics research programme which is having a worldwide impact on the economics profession

the political economy of income distribution in south korea the impact of the state s industrialization policies abstract a number of previous studies of economic growth and income distribution in south korea based largely on 1960s data concluded that south korea was an exception to kuznets inverse u pattern of income inequality also it was regarded as an exception to the usual negative consequences predicted by dependency theory for an economy so dependent on foreign capital and world markets this author presents more recent data for the 1970s and early 1980s in order to support his claim that the trend toward income equality that appeared in the 1960s was reversed in the 1970s the author develops a thesis that stresses the role of the state in shaping the korean political economy he argues that it has been the strong south korean developmentalist state in firm control of both domestic and foreign capital and its export oriented industrialization policies that have been the principal determinant of the pattern of income distribution he contests the usual explanation related to the level of economic development or external dependency per se

deforestation and the rule of law in a cross section of countries relationships between deforestation and population pressure income growth and insecure property rights are examined with data from 120 countries insecure property rights are hypothesized to arise from two sources government instability or inability to enforce ownership and an absence of government accountability the former source is captured by measures of general lawlessness such as guerrilla warfare revolution and frequent constitutional change the latter is proxied by variables indicating the type of government executive frequency of political purges and the existence of an elected legislature general support is indicated for the property rights hypothesis and for the effects of population growth

economic transformation and income inequality in urban china evidence from panel data using panel data of 4 730 urban residents drawn from 20 cities in china this article examines changes in income determinants between the prereform and reform eras to guide this empirical study a conceptual model is developed that emphasizes the coevolution of politics and markets to synthesize theoretical ideas in the recent debate on the transformation of state socialist societies the findings show significant changes in returns to education and in the rise of private hybrid firms in the reform era there is also strong evidence of institutional persistence in returns to positional power and in the organizational hierarchy these findings reveal multifaceted processes of transformation that call for more sophisticated theoretical models and in depth institutional analyses

economic development and the division of production between households and markets a model is presented in which scale economies give market production a cost advantage over household production but in which market production is limited by the extent of the market the production process is viewed as a series of stages each further refining and specializing the product of the previous stage as processing proceeds the number of intermediate goods increases and markets thin out firms specialize in the early stages of production and house holds in the later stages as an economy grows production shifts out of households and into the market several other changes associated with economic development are also accounted for

business groups and product variety in trade evidence from south korea taiwan and japan abstract we analyze the impact of market structure on the trade performance of south korea taiwan and japan south korea has many large vertically integrated business groups known as chaebol whereas business groups in taiwan are smaller and more specialized in the production of intermediate inputs we test the hypotheses that a greater presence of business groups leads to less product variety but higher product quality using data on exports from these countries to the united states we find that taiwan tends to export a greater variety of products to the us than korea and this holds particularly for final goods in addition taiwan exports higher quality intermediate inputs whereas korea exports higher quality final goods a comparison with japan is also presented which has greater product variety in its sales to the us than either taiwan or korea due to its larger size

the mouse that roared taiwan s management of trade relations with the united states this analysis seeks to contribute to the growing literature on the subject of the weak in the world of the strong it examines taiwan s attempts to cope with u s commerical pressure in view of its mounting bilateral trade surplus in the recent years 10 6 billion in 1985 and 6 2 billion in the first half of 1986 taiwan s past ability to achieve relatively favorable outcomes in its commerical dealings with the united states is explained at two levels at the more micro level of bargaining tactics used by the weak in managing the strong attention is directed to taiwan s resort to 1 problem redefinition 2 damage limitation 3 exploring loopholes 4 linkage politics and 5 transnational coalitions these measures are complemented by more long term and basic economic adaptation termed positive adjustment at the more macro level two prerequisites suggested by yoffie 1983 for successful adaptation in a protectionist and competitive economic environment are discussed 1 taiwan s policy

the price of wealth business and state in labor remittance and oil economies this article contrasts the effects of state controlled oil revenues and privately controlled labor remittances on institutional development state capacity and businessgovernment relations in saudi arabia and the yemen arab republic these two countries represent extreme cases of dependence on external capital in deeply divided societies presided over by fragile emerging bureaucracies by tracing the two cases through a pattern of economic boom 1973 83 and recession 1983 87 the study demonstrates that the type volume and control of capital inflows decisively influence the relative development of the bureaucracy s extractive distributive and regulatory capacities and affect the ability of the state to respond to economic crisis in both cases external capital inflows precipitated the decline of extractive institutions however oil revenues and labor remittances had divergent effects on businessgovernment relations and this circumscribed the state s ability to implement austerity programs during the recession during the crisis the saudi government s efforts to cut subsidies to the private sector and to implement extractive policies were blocked by the state sponsored merchant class in contrast the yemeni government instituted a thoroughgoing austerity package that targeted the independent merchant class in both cases external capital inflows did not augment the efficacy of those that controlled them these paradoxical outcomes are explained by tracing the different effects of oil revenues and labor remittances on the distribution of economic opportunity in the public and private sectors and the resulting effects on the regional tribal and sectarian composition of the bureaucracy and the commercial class

the impact of 9 year compulsory education quasi experimental evidence from taiwan using a regression discontinuity design this article investigates the causal impacts of 9 year compulsory education on students educational attainment and dropout rate by taiwan population and ho

embeddedness and contractual relationships in china s transitional economy interfirm contracts represent common economic relations in the marketplace they are also deeply embedded in social relations and social institutions in the context of china s transitional economy this study examines how three mechanisms economizing transaction costs network based social relations and institutional links affect interfirm contractual relationships in 1 the choice of search channels for contractual partners 2 the formality and provisions in a contract and 3 the intensity of social interaction in contract implementation empirical evidence is drawn from information collected on 877 contracts from 620 firms in two chinese cities beijing and guangzhou the authors find distinct roles of social relations institutional links and regulatory environments in the initiation of contractual partners and the forms of contracts adopted whereas transaction specific factors play a significant role in the intensity of social interaction in contract implementation these findings suggest the interplay among economic calculativeness social networks and institutional links and the complementarity in the underlying theoretical ideas

cultural influence on the development of accounting systems internationally a test of gray s 1988 theory this paper attempts to test the theory developed by gray 1988 linking accounting values and systems with hofstede s 1980 cultural constructs based on data from twenty nine countries it finds that while gray s 1988 model has statistically significant explanatory power it is best at explaining actual financial reporting practices and is relatively weak in explaining extant professional and regulatory structures from a cultural base this paper further finds that both the development of financial markets and levels of taxation enhance the explanations offered by gray 1988

the state and foreign investment the cases of taiwan and singapore the influence of a host state on direct foreign investment attracts the attention of scholars much less than do the constraints of the latter on the former this study addresses the impact of state regulatory policies on the roles of inward foreign investment in taiwan and singapore s manufacturing sector the similarities between the two small asian open economies are first discussed the different roles played by the foreign investors in their economies are then compared a review of the literature in orthodox theories and radical points of view reveals several possible explanatory variables for such differences through the logic of the most similar systems design or method of difference some seemingly plausible factors are ruled out due to their similarities in the two chosen entities it is found that some pull factors such as geographic location colonial legacy external political environment and indigenous industrial capacity and conversion factors such as state policies toward foreign in

filling or abusing the institutional void ownership and management control of public family businesses in an emerging market despite increased attention given to family firms in the theory of organization and management the value of family governance in emerging markets is not clearly understood we draw insights from agency and institutional economics perspectives to address the debate on whether family governance fills or abuses the void left by weaker market and legal institutions we propose a dual focus on the pattern of family control and weak institutions to reconcile these opposed assessments we analyze how various combinations of family control over ownership strategy and operations yield different benefits and costs for the operational performance of firms in the absence of strong market and legal institutions the uneven development of market institutions across industries and the impact of independent directors reinforce the importance of separating different patterns of family control we find support for our hypotheses when tested on a data set consisting of all publicly listed firms in taiwan between 1996 and 2005 our study contributes to a deeper understanding of family businesses in emerging markets highlights the importance of weak institutions in shaping relative agency costs and illuminates the differential effects of independent directors

information reliability and a theory of financial intermediation this paper is an analysis of when it will be beneficial for agents engaged in the production of information to form coalitions the model is cast in a financial market framework thus leading to an identification of conditions sufficient for the existence of financial intermediaries intermediation is shown to improve welfare if informational asymmetries are present and the information generated to rectify these asymmetries is potentially unreliable the usual appeal to transactions costs to explain intermediation is not needed

market transition and the persistence of power the changing stratification system in urban china research on transitional socialist societies has explored trends in income inequality and issues concerning who gains and who loses during market reforms we find that income inequality in a major chinese city declined only slightly during the first decade of reform policies it then increased dramatically in the subsequent five years strategic position in the state bureaucracy continues to be an important determinant of income although connections to the market system are becoming alternate sources of advantage we interpret these findings in light of the historical and institutional context of urban china

many roads lead to rome implications of geographic scope as a source of isolating mechanisms studies examining the competitive implications of geographic scope have largely focused on creating competitive advantage in an attempt to investigate a less illuminated role of geographic scope that of sustaining competitive advantage this paper investigates the sources of and relationships among the causal factors leading to creation of isolating mechanisms or barriers to imitation this paper first distinguishes two sources of causal factors linked to the creation of isolating mechanisms intrinsic characteristics of knowledge and geographic scope of knowledge acquisition and then investigates the relationships among the causal factors from the two sources employing the fuzzy set qualitative comparative analysis method this paper examines equifinality and functional equivalence of causal factors from the two sources empirical analyses with united states patent and trademark office patent data of the semiconductor industry corroborate the main thesis of the paper that multiple paths can lead to the creation of isolating mechanisms and in these paths causal factors from the two sources of isolating mechanisms can be functionally equivalent the results also provide managerial implications that firms with different sets of resources and capabilities can implement different types of isolating strategies to sustain their competitive advantage

dependency theory and taiwan analysis of a deviant case the case of taiwan represents a challenge to two predictions from dependency theory that foreign economic penetration leads to slow economic growth and also to heightened inequality since the early 1950s taiwan has received massive foreign aid and investment but it has also had one of the highest sustained rates of growth in the world while income inequality on the island has decreased substantially an examinatin of this deviant case is pursued by consideration of the various mechanisms dependency theorists claim are responsible for the linkage of foreign economic penetration to stagnation and inequality in the taiwan case none of these mechanisms work out as predicated instead a variety of factors including the nature of the japanese colonial experience the emphasis on labor intensive enterprise and the absence of an entrenched burgeoisie created a situation in which both rapid growth and increasing equality could occur consideration of taiwan draws attention to flaws in the arguments of most

defense burden and economic growth unraveling the taiwanese enigma indicate that all these models capture parts of the empirical reality but none can account for all the complexity of this reality indeed in some crucial respects each of the models based as they have been primarily on intercountry comparisons is contradicted by the taiwanese time series i conclude that taiwan has not so much been able to avoid entirely the trade offs between defense and growth as to relax these trade offs the reasons contributing to this relaxation tend to set the taiwanese experience apart from the experiences of most other countries

corporate environmental citizenship variation in developing countries an institutional framework this study focuses on why some companies in developing countries go beyond environmental regulations when implementing their corporate environmental social responsibilities or citizenship behavior drawing mainly upon the new institutional theory this study develops a conceptual framework to explain three institutional factors companies market orientations industrial characteristics and corporate identities accordingly we suggest that companies from developing countries that are oriented to markets in developed countries operate in highly concentrated industries and have missionary identities adopt corporate environmental citizenship behavior by going beyond environmental regulations the study also discusses the theoretical policy and managerial implications of the conceptual framework

compensation turnover and top management incentives historical evidence the authors find that the rate of top management turnover and the sensitivity of turnover to stock returns for a sample of large industrial firms from 1933 to 1941 was significantly smaller than estimates reported for modern panels they present evidence that management compensation has become more sensitive to firm performance since the 1930s in contrast to the conclusions of michael c jensen and kevin j murphy 1990 and others the authors findings indicate that management incentives under control of the board have become stronger rather than weaker over the past half century these findings are consistent with internal and external control mechanisms functioning as complements copyright 1997 by university of chicago press

the organization of relational contracts the allocation of rights in franchising abstract franchising contracts are designed to bring together two kinds of entrepreneurs the franchiser and the franchisee and to maintain their relationship in the long run in contrast to standard exchange contracts in law which are specifically designed to bring about the completion of an exchange efficiently franchise contracts are designed to make it possible for the entrepreneurs to initiate to maintain and to eventually terminate their relationship without dispute the research reported in this article is an attempt to see how the dual purpose of franchising contracts are achieved the article first describes the internal organization of franchise contracts what we called the micro contractual aspects and how different kinds of rights and obligations are allocated to accomplish these multiple ends the second part of the article provides an empirical examination of 30 franchise contracts to see if the internal organization of the contracts influence both the expansion of the franchise operations through new franchises and the amount of dispute between the two sides of franchise contracts every franchise contract includes a set of provisions that define the commencement termination and ongoing operations of franchise relations the internal organization of franchise contracts specifies what kinds of rights and obligations are distributed to the parties and the nature of this allocation within each domain of provisions we argue that the commencement and termination aspects of franchise contracts are usually written in order to make the relationship between the parties clear and the contingencies specific in these provisions the contract is written in discrete terms in which each party s rights and duties are specifically delineated the contractual provisions dealing with the ongoing operations and the conduct of the parties on the other hand cannot be made specific because it is impossible to define all the future contingencies and possible business opportunities under these conditions the contract is usually written in relational terms in which each party s rights and obligations are defined in terms of powers and liabilities towards each other rather than in terms of specific duties and rights one critical consequence of writing contracts that include powers and liabilities however is that it may lead to disputes and undesirable conflict that are detrimental to the success of the franchise in order to deal with these conflicts among the parties the contract needs to specify conflict resolution mechanisms that are an integral part of franchise contracts these general arguments are tested with the use of 30 randomly selected franchise contracts from a diverse set of businesses our results show that indeed different parts of franchise contracts allocate rights and obligations differently and the more relational a contract becomes the more likely that it would include various dispute resolution mechanisms we also found that the success of a franchise contract which is measured by the number of legal disputes it generates and the growth of franchised units is influenced by the existence of relational provisions and the explicit dispute resolution mechanisms included in the contract we recommend that franchise contracts should be written to make the commencement and termination aspect of the relationship as discrete as possible the operations and conduct provisions of the contract on the other hand should be written in relational terms to give the parties the ability to respond to changes in business conditions without renegotiating the contract it is usually the tendency on the part of franchise lawyers to write discrete contracts that attempt to specify every conceivable contingency to avoid future disputes we argue here that a better strategy is to limit the discrete aspects of the contract to the commencement and termination clauses and to concentrate more on the dispute resolution mechanisms that can become an integral part of the contract thus we also recommend that various dispute resolution mechanisms such as franchisee associations franchisee councils and third party arbitration should be set up within the contract to address the possible disputes early on rather than to wait for potentially very costly court proceedings for both parties

organization form residual claimants and corporate control eugene fama and michael jensen s treatment of the separation of ownership and control is both insightful and informative it deepens our understanding of corporate control and the analysis of residual claimants usefully extends the economics of internal organization to include partnerships mutuals nonprofits and the like the basic argument is this specialized governance structures arise in response to the efficiency needs of each type of organization this is an important argument and one with which i broadly concur they couple this however with a strong suggestion that these structures have reached a high degree of refinement on which account there is not now if indeed there ever has been an organization control problem with which scholars and others are legitimately concerned on this point i have grave doubts my discussion of the paper addresses three issues what is the relation if any of the hierarchical organization of the firm to economic performance what relation if any does residual claimant status have to the composition and character of the board of directors and is there now or has there ever been a corporate control problem i deal with each of these issues in order

south korean and taiwanese development and the new institutional economics the publication of books by both alice amsden and robert wade provide an opportune moment to reflect on the study of east asian development after an initial surge of interest beginning in the 1970s the field has reached a plateau and scholars recently have cast a wide net in searching for ways to extend the field in assessing the state of the art regarding the economic development of the east asian newly industrialized countries nics this review will treat three themes first i will argue that the focus on states versus markets is becoming stale and that much of the scholarly interest lies in the politics behind the economics second i argue that political scientists have underexplored the historical origins of korean and taiwanese capitalism and that such attention promises to strengthen both theories and explanations of development third i argue that the international system has been more important in promoting development in east asia than accounts in the first wave have recognized the purpose of this review is to assess the field reveal

a rostovian model of endogenous growth and underdevelopment traps the paper presents a model which combines self sustained growth and underdevelopment traps into a common analytical framework we provide an analytical interpretations to rostow s observation that there is a decisive interval in the history of a society when growth becomes its normal condition and to the empirical evidence that some countries seem not to have achieved this stage yet the model exhibits aggregate non convexities and thresholds which separate a region where growth is solow type with convergence to a stationary steady state from a region where growth is romer type with endogenous self sustained growth in some critical stages of development there exist multiple equilibrium trajectories consistent with alternative sets of self fulfilling beliefs

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

the small world of germany and the durability of national networks the globalization offinancial markets and the concomitant restructuring decisions of firms challenge the historical legacy of national systems of governance german corporate ownership patterns and restructuring events in the 1990 s are examined here in this light the results show that ownership links among german firms constitute a small world that has consequences for understanding mergers and acquisitions ownership links form closely knit clusters offirms that are nonetheless highly connected across the network as a whole restructuring events fall squarely in the center of this structure despite increasing global competition the german small world tends to replicate itself to illustrate this robustness potential disruptions to the observed german network are simulated this simulation shows that the properties of the small world remain intact even when ownership ties are changed these findings suggest that a more global economy in germany need not lead to the dissolution of the ownership structure but rather may be associated with a deepening of network ties

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

industrial development and the convergence question the paper studies endogenous world balanced growth equilibria in which national learning productivity differentials govern relative per capita products learning productivities depend on the national share of world specialized goods production national and world scale and familiarity with the foreign economy familiarity indexes the extent to which imported specialized goods enhance learning productivity we find that mutual familiarization causes per capita products to converge unfamiliar economies diverge substantially and persistently unilateral familiarization of a less developed country ldc with the leading economy causes the ldc to catch up to and even overtake the leader

institutional framework and public enterprise performance abstract the purpose of this paper is to derive on the basis of available literature on successful enterprises some conjectures tentative generalizations with regard to the strategic factors and in particular the characteristics of the decision structure and processes that account for good public enterprise performance in the mining and manufacturing sector section 2 deals with the decision framework and section 3 with the motivational and inducement mechanisms the impact of distributional pressures on decision making is discussed in section 4 and the role of ideology in section 5 some concluding observations are made in section 6

the role of soft information in a dynamic contract setting evidence from the home equity credit market credit underwriting is a dynamic process involving multiple interactions between borrower and lender during this process lenders have the opportunity to obtain hard and soft information from the borrower we analyze more than 108 000 home equity loans and lines of credit applications to study the role of soft and hard information during underwriting our data set allows us to distinguish lender actions that are based strictly on hard information from decisions that involve the collection of soft information our analysis confirms the importance of soft information and suggests that its use can be effective in reducing overall portfolio credit losses ex post

the invisible hook the hidden economics of pirates peter t leeson princeton university press princeton nj oxford england 2009 271 xviv pp index isbn 0 691 13747 6 24 95

trade strategy and the dependency hypothesis a comparison of policy foreign investment and economic growth in latin america and east asia the role of state policy in the industrialization of third world nations has become the subject of increasing interest in recent years in the past the debate over economic development has either focused on the traditional modernization approach or the dependency theory of underdevelopment 2 dependency theorists base their model of development on the belief that foreign investment from core countries is harmful to developing nations long term economic growth economic relationships between the core and the periphery are structurally detrimental for the latter because of the inherent dynamics of international capitalism yet despite the claims of dependency theory the recent experience of the east asian newly industrialized countries suggests a wider range of development possibilities which include government policies specifically designed to attract foreign investment these countries appear to have structured their domestic economies in order to mitigate the pernicious effects of dependent relationships with core countries this raises new questions about the development process and the role of policy and foreign investment in the economic transactions between core and peripheral countries dependency theory a neo marxist predecessor of world systems research claims that first world nations become wealthy by extracting surplus labor and resources from the third world capitalism perpetuates a global division of labor which causes the distortion of developing countries domestic economies declining growth and increased income inequality 3 those countries on the periphery cannot become fully modernized as long as they remain in the capitalist world

management and ownership effects evidence from five countries despite the growing recognition in the corporate governance literature that the relationship between ownership concentration and profitability is context dependent this issue has not yet been subjected to direct empirical investigation using a single cross national sample this study empirically examines the ownership concentration performance relationship across the nations of canada france germany the united kingdom and the united states essentially we argue that the correlation if any between ownership concentration and firm profitability differs across countries in a systematic way determined by the national system of corporate governance results indicate that important and statistically significant differences do in fact exist across the countries studied 1998 john wiley sons ltd

agency problems and unrelated business income of non profit organizations an empirical analysis nonprofit organizations are traditionally assumed to dislike commercial activities in the usa they are however allowed to engage in commercial activities but the income they derive from these activities is then subject to the so called unrelated business income tax if npos do indeed dislike commercial income then why do they engage in these activities using a data set of 2103 us npos this study suggests that the presence of agency problems inside the organization can at least provide an explanation for the occurrence of unrelated business income

the debt wish rent seeking by business groups and the structure of corporate borrowing in india business groups play an important role in emerging economies the transactions cost perspective which has dominated our understanding of such groups argues that the emergence of business groups is a natural response to market failures in developing countries in this paper we propose an alternate theoretical perspective the rent seeking view that takes these groups as engaging in coordinated lobbying for the capture of rents created by governments we develop and implement an empirical strategy to test for the rent seeking view drawing from the property rights theory of corporate finance we find strong empirical support for the rent seeking view using a large cross sectional data set of firms in india

an aggregate private expenditure function for the bangladesh economy abstract this paper specifies and estimates an aggregate private expenditure function for bangladesh for the period 1974 1 1985 4 it is specified on the basis of a monetary approach where the level of private expenditure depends not only on the level of real permanent disposable income but also on a variable which measures the extent of disequilibrium in the real money market the regression results suggest that the long run income elasticity of private expenditure is around 0 765 which is lower than unity a fact which induces a decline in the ratio of private expenditure to income as income increases the adjustment coefficient to monetary disequilibrium indicates that in the long run around 32 of excess money supply is reflected in an increase in private expenditure while the rest is mainly used for accumulation of assets

distance and private information in lending we study the effects of physical distance on the acquisition and use of private information in informationally opaque credit markets using a unique data set of all loan applications by small firms to a large bank we show that borrower proximity facilitates the collection of soft information leading to a trade off in the availability and pricing of credit which is more readily accessible to nearby firms albeit at higher interest rates ceteris paribus analyzing loan rates and firms decision to switch lenders provides further evidence for banks strategic use of private information however distance erodes our lender s ability to collect proprietary intelligence and to carve out local captive markets suggesting that the requisite soft information is primarily local the author 2010 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

import substitution and late industrialization latin america and asia compared abstract asymmetries between the profit risk perceptions of foreign and domestic investors are unavoidable aspects of late development import substitution strategies that try to advance industrialization by compensating for the asymmetries have therefore been part of the development efforts of asian and latin american nics current explanations of the greater success of asian nics with isi are examined and an alternative is advanced that stresses the impact of culture and history on consumer preference formation and through this on the survival and modernizing of craft industry partial evidence plus suggestions for deeper testing are offered

task success based on contingency fit of managerial culture and embeddedness the article extends research on the contingency of fit in international management at the level of managerial tasks foreign firms managerial tasks are embedded in two environments with different profiles and different managerial cultures fit them to ensure task success study 1 analyzes 18 critical incidents summarizes chinese and japanese managerial cultures and identifies three types of managerial tasks we hypothesize that task success depends on the fit between task type and the chosen managerial culture such that foreign firms can have their operational local and people tasks successfully completed using home host or integrated managerial cultures respectively study 2 tests our hypotheses using 112 critical incidents the fit pattern at the level of managerial tasks advances the contingency perspective in international management and equips managers with cultural agility to confront international challenges

long term trends in the world economy the gender dimension abstract this paper considers the implications of long term trends in the international economy for the relative employment and income of men and women in developed and developing countries we find that given a persistent gender division of labor mass unemployment in the north is due to different forces operating on men and women the rate of growth of men s jobs has fallen because of deindustrialization but men have not withdrawn from the labor force at a comparable rate women have been entering the labor force in feminized jobs at a faster rate than they have been created in the south women have largely taken traditionally feminized jobs in the labor intensive export oriented growing manufacturing sectors in latin america entry has been largely in the service sector men have been losing jobs in agriculture and domestic manufacturing the paper proposes that the optimal solution to the mass unemployment problem in the north as well as in the south and the apparent competition for jobs between the north and the south and between men and women lies in achieving a trend increase in the growth rate of oecd and world aggregate demand and output but such a trend rise in the long term rate of growth of demand would only be possible if there were new cooperative institutional arrangements within and between countries in such arrangements women need to have an important independent role

the newly industrializing countries in the international system explanations of the growth of the newly industrializing countries nics by neoclassical economists and dependency theorists neglect the role of politics in shaping development strategies different social configurations state structures and ideas about development help explain the divergent policy choices made by the export oriented east asian nics korea and taiwan and the more inward looking countries of latin america particularly mexico and brazil these different strategic choices in turn account for variations in the patterns of external dependency that characterize countries in the two regions

a clash of capitalisms foreign shareholders and corporate restructuring in 1990s japan this article examines the clash between stakeholder and shareholder based business systems resulting from an increase in foreign portfolio investment in the japanese economy during the 1990s an analysis of 1 108 firms between 1991 and 2000 shows that as foreign institutional investors who were more interested in investment returns than in long term relationships replaced domestic shareholders one fundamental pillar of japan s stakeholder capitalism began to crack japanese firms began to adopt downsizing and asset divestiture practices more characteristic of anglo american shareholder economies the influence of foreigners however was weaker in firms more deeply embedded in the local system through close ties to domestic financial institutions and corporate groups thus foreign investors were influential primarily in firms less embedded in the existing stakeholder system this research contributes to debates on globalization and convergence of business systems institutional change and corporate

capital structure in transition the transformation of financial strategies in china s emerging economy during economic transition firms must dramatically reduce their financial dependence on the state and begin to borrow from nonstate capital sources this paper draws on institutional and resource dependence theories to examine this fundamental transformation of firm capital structure during china s transition i propose that managers borrowed from external sources even when internal funds were available because retained earnings were considered state assets firms used retained earnings to signal financial health but borrowed externally to reduce dependence on the state uncertainty during transformation produced interfirm imitation of borrowing strategies particularly imitation of local and high status others i argue that the dynamics of market development shaped firm borrowing strategies and that these strategies are best viewed as trajectories over time analysis of survey data on the 1980 1989 capital structure of formerly state owned firms provides support for these arguments and highlights the importance of institutional context in understanding corporate borrowing and strategic decision making

a market power based model of business groups we propose an model of vertically and horizontally integrated business groups that allows the number and size of each group to be determined endogenously we find that more than one configuration of groups can arise in equilibrium several different types of business groups can occur each of which are consistent with profit maximization and are stable we suggest that the strongly integrated groups arising in the model characterize the chaebol found in south korea whereas the less integrated groups describe those found in taiwan

an east asian model of economic development japan taiwan and south korea the east asian model of economic development focuses on 5 shared characteristics that seem significant in the contemporary economic development of japan taiwan and korea they are economic characteristics and include 1 high investment ratios 2 small public sectors 3 competitive labor markets 4 export expansion and 5 government intervention in the economy large and efficient investments in human capital and well developed capacities to absorb new technology are 2 other economic features shared by the three one could add overcrowding high man land ratios and scarcity of natural resources though these are handicaps rather than sources of economic strength it is possible however that virtue springs from necessity and that ample arable land or abundant natural resources mainly permit governments to postpone the difficult decisions needed to promote development rather than provide the wherewithal needed to finance development other noneconomic characteristics of the three such as ethnic and linguistic homogeneity relatively compact geography manageable population size and the confucian tradition have not been considered in the model even though they have undoubtedly influenced labor productivity savings behavior and other aspects of economic performance whether the east asian model ought to be followed depends on whether current and foreseeable circumstances are sufficiently like those faced by the three to justify using the same policies that they used applicability of the east asian model should also depend on whether the strategy employed by the three has been responsible for their economic success 2 aspects of the east asian models policy features are noteworthy 1 the policies typically work by influencing rather than replacing private market decisions and 2 the public expects government to intervene to influence economic growth

information from relationship lending evidence from loan defaults in china using a proprietary database from a large chinese state owned bank we examine whether information evolved from banking relationships predicts commercial loan default by industrial firms we find that the bank s relationship information is significantly linked to the incidence of default and that its contribution to prediction accuracy is larger than any hard information furthermore the effect of relationship information is stronger among firms that have a more sustained banking relationship our findings indicate that at least in the emerging markets a bank s relationship information still matters for large firms despite the fact that hard information for such firms is abundant

national and international aspects of financial policies in ldcs a prologue after a period of animated controversy between keynesians advocating policies of low interest rates and monetary expansion and monetarists who insisted on the importance of the distinction between nominal and real interest rates economists have now almost reached a consensus on the role of money in the development process this consensus has arisen because it was increasingly felt that what was called for was not new concepts so much as new ways of looking at them in ldcs money s role need be neither denigrated nor exaggerated money s traditional functions as a medium of exchange and a store of value remain important in ldcs but its function as a conduit of resources from savers to investors is more central to an inderstanding of its contributions to development coats and khatkhate 1980 p 3 the body of the consensus derives from the framework set up by mckinnon and shaw fleshed out by the earlier work of goldsmith and patrick goldsmith 1969 patrick 1966 and extended by the theoretical and empirical output of a large number of younger economists fry 1981 this analysis attached central importance to financial policies of higher real interest rates which were supposed to encourage the build up of real money balances increased financial intermediation and unification of financial markets eventually such a policy would lead to the efficient utilization of resources and particularly of scarce capital this new paradigm has contributed to an improved understanding and perception of the economies of ldcs their problems and how these problems are accentuated by distortions arising from interventionist policies for a while it was believed that the programme contained the secret of how to reconcile stabilization objectives with those of development roe 1982 however the accumulation of empirical evidence on several developing countries where the prescribed set of policies was adopted has raised doubts about the validity of this conclusion in the presence of distortions in the financial markets it is no doubt a sensible policy to raise real interest rates the problematic issue is how far to go raising real interest rates without any regard for the rates of return on investment may run counter to the requirements of development to argue that once funds are generated through the accumulation of real balances investment can take care of itself ignores the very dynamics of development thus the hiatus between stabilization and development has not really been bridged this is evident from the recent concern with supply side policies rather than demand management policies a dichotomy which parallels the distinction between the stabilization and development problems it is this dual distinction which provides the theme of this special issue of world development

engineering growth business group structure and firm performance in china s transition economy business groups have received increasing attention from academics interested in interorganizational relations and their impact on firms as part of industrial reform the chinese government began in the mid 1980s to encourage firms to form business groups with structural characteristics that promised to enhance financial performance and productivity using 1988 90 panel data on china s 40 largest business groups and their 535 member firms the study finds that the presence and predominance of interlocking directorates and finance companies in business groups improved the financial performance and productivity of the groups member firms in addition firms in groups with nonhierarchical organizational structures performed better than firms in hierarchical groups suggesting that complete integration into a hierarchical organization is not an optimal strategy

country effects on information seeking in global electronic networks we examine the existence of country effects on information seeking in response to market volatility and explore the institutional factors underlying these effects the empirical setting is the use of an electronic inter bank network over twelve months by 3 266 banks located in twenty five countries we find significant differences across countries in banks information seeking behavior in response to market volatility influenced both by differences in national industry arrangements and by national culture however national industry arrangements and national culture influence banks information seeking in distinct ways

agency and institutions national divergences in diversification behavior a fundamental theme in comparative crosscountry research is the convergence of organizational forms in diverse national settings in this paper we examine a special instance of this theme the pattern of diversification across industries a common argument is that technical and market forces compel firms to adopt coherent strategies of diversification this thesis implies that there should be a convergence in the patterns of interindustry diversification in all market based economies an institutional approach offers an alternative view from this perspective when diversification across industries is seen as subject to nation specific governance and resource constraints countries should vary widely in their interindustry diversification patterns to test these alternative views we analyze the diversification patterns of large corporations from five countries france germany japan the united kingdom and the united states our results do not support the hypothesis of a common pattern of diversification across countries and thus reject the technological thesis by comparing two case studies in which entrepreneurs attempted to diversify by acquisition in france and the united states we examine how institutions and agents interact to permit different diversification patterns to arise in diverse national environments the statistical results and case studies imply that given the fixity of certain institutions even if countries are subject to globalization convergence in diversification patterns is not necessary the results cast doubt upon the merits of stylizing the debate as a choice between technical and institutional theories of organizational choice rather the study points to the importance of two theoretical statements the first is to inquire under what conditions there is likely to be consensus on a given means end rationality for a specific managerial decision e g diversification the second is to understand the structural opportunities available to entrepreneurs for diversifying through acquisitions iterating between these cognitive and structural considerations shifts the focus from the false debate between technological and institutional arguments to the study of entrepreneurship situated in historically given national environments

prices output and the trade balance in iran abstract this paper analyses the impact of the rise in oil prices on domestic inflation the trade balance and output growth in iran for the period 1960 1977 a macro framework is developed in which the domestic spending of oil revenues results in higher output inflation and imports our results indicate that although the overall growth remained high the rapid increase in oil revenues in 1973 1974 was mainly reflected in higher inflation and higher imports in the absence of any exchange rate adjustment there was a sharp deterioration in the competitive position of the non oil traded sector

world economy level development and income distribution an integration of different approaches to the explanation of income inequality abstract the paper briefly outlines explanations of international differences in personal income distribution that have been formulated within the world economy and the level of development paradigm the predictive power of the central variables of the paradigms are tested in a cross national regression analysis with 72 countries the regression results suggest support for hypotheses from both paradigms but also suggest a partial integration of theoretical elements from both paradigms the outcome of the proposed theoretical integration offers a new interpretation of the well known curvilinear relationship between level of development and income inequality this new view on the curvature of the relationship expects the integration into the world economy to result in increased income inequality in peripheral countries but different from other views it is not implied that inequality is substantially reduced in development the core and periphery position of countries in the world economy is seen to stabilize income inequality differences between these groups of countries under these circumstances developing countries generally cannot be expected to reduce substantially their income inequality in the course of economic growth

married women s employment in rapidly industrializing societies examples from east asia a variety of explanations have addressed the phenomenon of secular change in married women s employment in rapidly industrializing countries these include theoretical frameworks that emphasize female labor supply the conditions of labor demand patriarchal values the international division of labor and the effects of exported industrialization this article examines two societies south korea and taiwan that showed considerable similarity in female labor supply conditions female labor force participation and cultural values 20 years ago but have since diverged in dramatic and puzziling ways using aggregate and microlevel data this article shows that the emergent differences in married women s employment are best explained by the intersection of labor supply similar in the two cases and demand markedly different the article highlights the impact of government policy and foreign loan investment in shaping the nature of labor demand during rapid export led industrialization in both countries

growth effects of foreign and domestic investment over tha past few years numerous studies in sociology have concluded that foreign investment harms poor nations these studies have focused on the coefficient for foreign capital stock controlling for flow new investment and defying logic have inferred that a negative coefficient for stock reflects dependency effects that retard economic growth since capital stock is the denominator for investment rate the greater the stock the lower the investment rate for a given level of new investment hence the negative coefficient for capital stock found in dependency studies indicates a beneficial investment effect not a harmful effect this point is demonstrated by reanalysis of the data used in dependency studies in these data foreign investment spurs growth earlier analysts have concluded otherwise only because their conclusions have belied their findings

revisiting economic development in post war taiwan the dynamic process of geographical industrialization taiwan s post war economic growth has been spectacular and has attracted divergent even contrasting explanations from the students of economic development while neo classicists interpret taiwan s miracle as a model of a free market economy the statists put government policy as their main emphasis however neither the neo liberalists nor the statists take the phenomena of uneven development very seriously by ignoring the process of geographical industrialization both discourses are not able to reveal the dynamic rhythm and more importantly the diversity and possibility of capitalist development this paper tackles the issue by unraveling the divergent regional industrial trajectories and the resulting geographical and social embeddedness in post war taiwan au taiwan le developpement economique d apres guerre a ete mirobolant d ou des explications divergentes de la part des etudiants du developpement economique alors que les neoclassicistes considerent le miracle taiwanais comme un modele type

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

informal credit markets and economic development in taiwan abstract taiwan is a case which shows how informal credit markets help to compensate for the limitations of the formal financial system especially in satisfying the needs of medium and small enterprises government regulations and policies affect the way participants in informal credit markets solve selection enforcement and incentive problems recent changes demonstrate the continued resilience and relevance of informal credit markets during a process of financial liberalization

the determinants of trust in supplier automaker relationships in the us japan and korea we examine the determinants of trust in 453 supplier automaker relationships in the us japan and korea we define trust and derive a model of its determinants drawing upon 1 an embeddedness relationship based perspective 2 a process based perspective and 3 an economic hostage based perspective our findings indicate strong support for the process based perspective in all countries embeddedness was only important in japan and the economic hostage based variable stock ownership was not important in any country

market culture and authority a comparative analysis of management and organization in the far east three frameworks purport to explain industrial arrangements and practices a market approach that emphasizes economic characteristics a cultural approach that sees organization as the expression of patterned values and an authority approach that explains organization as a historically developed structure of domination the efficacy of each approach is tested in explaining the organizational structures of three rapidly growing east asian economies japan south korea and taiwan the paper argues through comparative analysis that organizational growth is best explained by market and cultural factors but that authority patterns and legitimation strategies best explain organizational structure

economic ethics and institutional change our economic system the market economy is a part of a broader system or society we frequently study the operation of the market economy as if it were autonomous even though there are many complex and mutual relationships between society the economic system and the other systems political cultural religious legal etc that form part of society in a market economy we may identify several components a frame or background in which the economic activity takes place a set of ideas and theories the values shared by this society the set of institutions norms and rules that control the economic behavior of people and the incentives or motivations of the economic agents the play of these elements defines the operation of a market economy is ethics an institution or does it belong to the set of values and ideas in this paper i will discuss the role of institutions norms and rules in society with special reference to the economic system in order to gain insight into the relationship between institutions and ethics i study first the concept and features of social institutions and norms second institutional change and third the relationship between ethics and institutions