an econometric analysis of u s foreign direct investment this paper constructs a theoretical model of foreign direct investment and examines the extent to which the model can explain the level of outward direct investment by u s companies over the last two decades the authors find that market size and factor costs both labor and capital are important factors in the investment decision instrumental variable estimation is used to demonstrate that the expectation of short run fluctuations in the dollar also influences the timing of investment copyright 1996 by mit press

causes of japanese firms direct investments in us manufacturing industries a composite model is developed to investigate the determinants of new japanese direct foreign investments in the us the time period of study is 1976 to 1990 observing 11 types of us manufacturing industries an autoregressive model is employed in the empirical estimation process using a set of panel data it is found that the higher japanese gross savings and lower after tax industry profit rates cause a larger amount of japanese direct investment an expected depreciation of the real exchange rate and or low exchange rate induced a larger amount of direct investment larger economies of scale at the corporate level such as a higher r d intensity as well as higher non trade barriers stimulate a larger amount of direct investment cultural distance did disadvantage japanese fdi in the us

the locational determinants of direct investments among industrialized countries abstract market size and growth rate as well as tariff barriers have already been shown to influence u s direct investments in the eec the present paper enlarges the field of observation to all bilateral flows of direct investments among six industrialized countries the united states germany france the united kingdom the netherlands and belgium over the years 1969 1982 it also tests the impact of two other would be locational determinants of foreign direct investments namely unit labour costs and export flows moreover a new and alternative specification is put forward and tested which assumes that in the investment decision process foreign locations are in competition not only with each other but also with the home country of the investor

multinationals response to repatriation restrictions abstract we present a model that explains how repatriation restrictions can increase or decrease a multinational s capital investment in and technology transfer to its subsidiary past remittance restrictions influence the multinational s expectation of current and future repatriation policies which affect its operations we show that the model can capture the flows of united states multinational s capital and technology in response to various forms of brazilian repatriation restrictions seen in the eighties by comparing steady state level effects of the restrictions we show countries should expect an inflow of foreign direct investment with the abolishment of restrictions not an outflow as some countries fear

genetically modified crops corporate pricing strategies and farmers adoption the case of bt cotton in argentina this article analyzes adoption and impacts of bt cotton in argentina against the background of monopoly pricing based on survey data it is shown that the technology significantly reduces insecticide applications and increases yields however these advantages are curbed by the high price charged for genetically modified seeds using the contingent valuation method it is shown that farmers average willingness to pay is less than half the actual technology price a lower price would not only increase benefits for growers but could also multiply company profits thus resulting in a pareto improvement implications of the sub optimal pricing strategy are discussed recently genetically modified gm crops have brought about important changes in the global market for agricultural technologies especially seeds prospects of high economic returns and tightened intellectual property rights iprs have provided new incentives for the private sector to invest in crop improvement and extend its business to nontraditional markets the increasingly proprietary nature of seed technologies has implications for farmers adoption and benefit distribution private innovators endowed with a patent on a technology will attempt to capture the gains from their innovation through monopoly pricing moschini and lapan recent studies have looked into the partitioning of welfare created by gm crops among agricultural producers consumers and innovating input firms e g moschini lapan and sobolevsky falckzepeda traxler and nelson in these studies however the market price of the technology is

the private sector in agricultural research systems will it fill the gap abstract this article examines whether the private sector can fill the gap of declining public research in developing countries economic theory suggests private for profit research will focus on areas where returns to research are appropriable and reasonable profits are generated actual private for profit research activities concentrate on countries and industries with large markets appropriable returns strong science infrastructure and favorable government policies governments and donors can promote private research by easing constraints to private entry and operations but if governments stop funding research on public goods and technologies with limited market potential the private sector is unlikely to fill the gap completely

bargaining power ownership and profitability of transnational corporations in developing countries as the bargaining power of the transnational corporations tncs in the sample increased relative to the bargaining power of the host country and as the desire of the tncs for a high level of equity ownership increased the percent equity ownership of the tncs in their subsidiaries increased the relationship between percent equity ownership and subsidiary success from the tncs viewpoint however was j shaped high and low levels of equity ownership were associated with high levels of success control of critical operational variables by the tnc was directly related to success

exchange rate exchange rate volatility and foreign direct investment in the light of the importance of foreign direct investment fdi for the promotion of economic development this paper examines the impact of the changes in the real exchange rate and its volatility on fdi examining japan s fdi by industries we found that the depreciation of the currency of the host country attracted fdi while the high volatility of the exchange rate discouraged fdi our results suggest the need to avoid over valuation of the exchange rate and to maintain stable but flexible exchange rate in order to attract fdi

the declining talent pool of government we consider a government for which success requires high performance by talented ministers a leader provides incentives to her ministers by firing those who fail however the consequent turnover drains a finite talent pool of potential appointees the severity of the optimal firing rule and ministerial performances decline over time the lifetime of an effective government is limited we relate this lifetime to various factors including external shocks the replenishment of the talent pool and the leader s reputation some results are surprising an increase in the stability of government and the exogenous imposition of stricter performance standards can both shorten the era of effective government and an increase in the replenishment of the talent pool can reduce incumbent ministers performance

lag length selection and tests of granger causality between money and income one of the most widely accepred relationships in macroeconomics is the positive relationship between the rate of growth of the money supply and the rate of growth of income a diversity of opinion arises however with the attempt to identify a causal relationship between these variables while friedman and schwartz 1963 initiated the empirical investigation of money income causality sims 1972 made the most significant contribution to this literature with a practical application of the criterion developed by granger 1969 for identifying a causal relationship since the appearance of sims s approach and an alternative one advanced by sargent 1976 many researchers have applied these techniques to the investigation of the causal relationship between money and income l with two exceptions hsiao 1981 and mcmillin and fackler 1984 these researchers have arbitrarily chosen the lengths of their distributed lags the purpose of this paper is to test for granger causality between money and income this paper differs from previous work in that considerably more attention is focused on the effect of the lag specification on the test results in particular we investigate the extent to which rules of thumb arbitrary lag specifications and

monetary policy and the informational efficiency of the stock market the evidence from many countries 1987 monetary policy and the informational efficiency of the stock market the evidence from many countries applied economics vol 19 no 11 pp 1521 1532

dynamic policymaking with decay it is often said that the only constant is change itself as time passes the population grows new technologies are invented and the skills demographics and norms of the populace evolve these changes whether in isolation or in aggregate influence the effectiveness of policy in particular policies designed for today s world are unlikely to provide a perfect fit tomorrow we develop a notion of policy decay that captures this impact formally we introduce policy decay into a paradigmatic model of legislative policymaking and show that it leads to a starkly different perspective on legislative politics our results upend the classic notion of gridlock and bear implications more broadly for the practice of politics we show how a changing world impacts the power of agenda control how it drives the dynamic path of legislation how it reveals a novel conception of policy expertise and how it ultimately provides a foundational logic to the design of bureaucracy

uncertainty electoral incentives and political myopia we study the determinants of political myopia in a rational model of electoral accountability with informational frictions and uncertainty when politicians ability is ex ante unknown and policy choices are unobservable elections improve political accountability and selection however incumbents underinvest in costly policies with future returns to signal high ability and increase re election probability surprisingly uncertainty reduces political myopia and may increase social welfare we also address the socially optimal political rewards and the desirability of a one term limit our predictions are consistent with several stylised facts and with a new empirical observation aggregate uncertainty is positively correlated with fiscal discipline

multinationality and corporate ethics codes of conduct in the sporting goods industry the international operations of firms have substantial impact on the formulation and implementation of business ethical principles such as codes of conduct the international sporting goods industry has been a pioneer in setting up codes and thus provides much relevant experience different sourcing strategies degrees of multinationality and national backgrounds affect the contents of codes moreover international non governmental organizations prove equally effective in triggering sophisticated codes

human capital and fdi inflows to developing countries new empirical evidence abstract despite the dramatic increase in total foreign direct investment fdi flows to developing countries in the last few years the bulk of the inflows has been directed to only a limited number of countries it has been argued that developing countries might enhance their attractiveness as locations for fdi by pursuing policies that raise the level of local skills and build up human resource capabilities nevertheless the empirical evidence in the literature in support of this recommendation for a large sample of developing countries is scant this paper evaluates this argument in the light of the evolution in the structural characteristics of fdi and empirically tests the hypothesis that the level of human capital in host countries may affect the geographical distribution of fdi the empirical findings are a human capital is a statistically significant determinant of fdi inflows b human capital is one of the most important determinants and c its importance has become increasingly greater through time

in search of substitution between foreign production and exports abstract are foreign production and exports substitutes or complements standard theory of the multinational corporation mnc assumes substitution while previous empirical work examining the relationship has generally found strong evidence of complementarity this study examines product level data which more closely fits the assumption of a single product firm often used in mnc theory and finds substantial evidence for both a substitution and a complementarity effect between affiliate production and exports with japanese automobile parts for the us market i also test for and find evidence of substitution using product level data on a set of japanese produced final consumer goods

some aspects of japanese corporate finance in this paper we attempt to blend economic theory with an understanding of the historical context and regulation of japanese financial markets particularly during the 1950s and 1960s the historical and regulatory context is critical since it represents the framework within which the economic forces operated that is we are interested in examining how a particular structure characterized by controlled interest rates segmentation of markets and functions and limited entry gave rise in understandable ways to distinctive corporate financial practices there have been a number of recent publications that attempt to describe and explain the japanese corporate financial system 1 perhaps the most discussed topics are the relatively high degree of financial leverage for the typical japa nese firm and the predominance of bank financing for the external funding of large corporations there also has been discussion of such apparent peculiarities in the equity markets as the issue of shares at a par value of 50 yen when their market value is 1 000 yen or more as well as the extensive cross holdings of shares between corporations the role of a firm s main bank as not only len der and financial advisor but in some cases exercising management control also has received attention before we address these issues we wish to make two points first the structure of the japanese financial system changed radically after world war ii as a consequence of legislation introduced by the occupation authorities and the need to rebuild for example with respect to high debt to equity ratios and heavy dependence on bank loans nakamura 26 cites evidence that equity comprised 67 percent of gross capital total assets for manufacturing industries in 1935 in a related vein kurosawa 22 provides figures that external funding by japanese corporations during the 1931 1936 period was only 4 percent from bank loans with 96 percent through stocks and industrial bonds

trade restraints and japanese direct investment flows abstract this paper analyses the factors determining the scale and location of japanese foreign direct investment fdi over the 1980s we use a pooled cross section time series annual data set covering investment in the individual ec countries and the united states our results suggest that controlling for market size and relative labour costs investment was significantly influenced by trade protection measures and in particular by the level of anti dumping actions initiated in the last decade an additional effect from the cost of finance in japan is found suggesting that the tightening of monetary policy in japan in 1989 90 contributed significantly to the observed slowdown in fdi in the early 1990s

information aggregation and optimal structure of the executive we model two aspects of executives in parliamentary democracies decision making authority is assigned to individuals and private information is aggregated through communication when information is relevant to all policies and communication is private all decisions should be centralized to a single politician a government that holds cabinet meetings where information is made available to all decision makers outperforms one where communication is private a multimember cabinet can be optimal it need not be single peaked around the most moderate politician or ideologically connected centralization is nonmonotonic in the degree of ideological divergence in a large cabinet all power should be given to the most moderate politician even when uncertainty is policy specific and a single politician is informed on each policy power should never be fully decentralized our model provides a justification for centralized authority and cabinet meetings that enhance the quality of policy

foreign direct investment exchange rate variability and demand uncertainty variable real exchange rates influence the location of production facilities chosen by a multinational with risk averse investors and fixed productive factors parent companies should not be indifferent to production location even with identical expected costs of production across countries if a nonnegative correlation exists between export demand and exchange rate shocks the multinational optimally locates some productive capacity abroad the capacity share abroad increases as exchange rate volatility rises and becomes more correlated with export demand shocks these results are confirmed using quarterly u s bilateral foreign direct investment flows with canada japan and the united kingdom copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

foreign direct investment and factor demand elasticities abstract this paper argues that the liberalisation of foreign direct investment fdi has made labour costs more important to domestic investment and long run labour demand it provides evidence from british and german data that is consistent with this view first high unit labour costs increase fdi outflows and lower fdi inflows second the effect of unit labour costs on domestic manufacturing investment was more negative in the high fdi 1980s than in the low fdi 1970s and this change was concentrated in high fdi industries the estimates suggest that the long run labour demand elasticity may have risen substantially

international taxation and multinational firm location decisions using a large international firm level data set we examine the separate effects of host and additional parent country taxation on the location decisions of multinational firms both types of taxation are estimated to have a negative impact on the location of new foreign subsidiaries the impact of parent country taxation is estimated to be sizeable consistent with its international discriminatory nature our results show that international double taxation by the parent country despite the general possibility of deferral of taxation until income repatriation is instrumental in shaping the structure of multinational enterprise

foreign direct investment in the united states an analysis by country of origin given the large size and rapid growth of foreign direct investment in the united states this subject is a central concern of u s firms and u s government policymakers this study explores the factors that contribute to the explanation of fdi in the united states by country of origin of investment evidence from the past twelve years shows that the main significant positive influences are home country s exports to the united states and home country market size significant negative influences include the home country s imports from the united states the cultural and geographic distances of the home country from the united states and the exchange rate fx

source country characteristics and the inflow of foreign direct investment into saudi arabia the paper examines the impact of source country characteristics on the inflow of fdi into saudi arabia using a gravity type model including economic distance and socio political variables a unique database listing all new investments involving foreign ownership is used to construct a panel of 33 countries in the period 1980 2005 to account for many country year observations with zero fdi the negative binomial regression the tobit regression and the heckman selection procedure are used the conclusions drawn from the analysis employing panel based techniques differ from the results obtained from pooled regression models also the determinants of fdi differ depending on whether foreign investment is measured in terms of investment expenditure or the number of individual foreign projects the heckman selection results reveal that there are a large number of factors affecting the decision to invest in saudi arabia compared with relatively few determinants of the actual size of investment traditional size and distance characteristics hold to a great extent but the relationship between fdi and bilateral trade is unclear and there is some evidence that the countries that export to saudi arabia do not invest there in terms of scope for possible spillovers there is mixed evidence on whether the investment comes from more technologically advanced economies but volume wise important investments originate from countries characterised by high income per capita

replacing cabinet ministers patterns of ministerial stability in parliamentary democracies inp arliamentary democracies individual ministers play the central role in policy formulation and implementation policymaking success therefore requires that governing parties assign well qualified individuals to key cabinet posts and that these ministers remain in office long enough to do their jobs effectively if ministers are incompetent or if competent ministers are removed from office before they have an opportunity to make an impact on their departments it will be difficult for governing majorities to develop and implement their preferred policy programs the quality of policymaking processes should therefore be influenced by turnover among ministers which can impede the accumulation of experience necessary for effective governance at one extreme if ministers in key portfolios were replaced daily it would be impossible for parties to achieve their policy objectives but changes in ministers are not always a bad thing at the other extreme if ministers were never replaced regardless of their performance this should hardly be viewed as good for democracy in fact turnover can help governments improve the public s confidence in their performance dewan and dowding 2005 and can serve as a tool to control the ministers responsible for the most powerful and organizationally complex departments indridason and kam 2005 forthcoming turnover can reflect the need for innovation and renewal in policymaking or it can reflect underlying conflictandinstability hence therelationshipbetween turnoverandpoliticalperformanceshoulddependcrucially on the underlying causes of turnover thispaperexaminesthestabilityofindividualministers in parliamentary systems one source of instability isgovernmentfailure andourstudyisthereforerelated

reappraising the eclectic paradigm in an age of alliance capitalism this article discusses the implications of the advent of alliance capitalism for our theorizing about the determinants of mne activity in particular it argues that due to the increasing porosity of the boundaries of firms countries and markets the eclectic or oli paradigm of international production needs to consider more explicitly the competitive advantages arising from the way firms organize their inter firm transactions the growing interdependencies of many intermediate product markets and the widening of the portfolio of the assets of districts regions and countries to embrace the external economies of interdependent activities

paying politicians theory and evidence this paper looks at the theory behind the idea that paying politicians better will improve their performance the paper lays out a political agency model with adverse selection and moral hazard where politicians are subject to two period term limits this model provides a number of predictions about how the pay of politicians affects agency problems we also consider what happens when the pool of politicians is endogenous the main ideas in the model are confronted with data on u s governors jel d72 j33

fifteen years of bt cotton in china the economic impact and its dynamics summary even though the economic benefit of bt cotton adoption in the short run has been well documented the dynamics of this benefit remain unclear in particular the possibility of pest resistance build up and secondary pest outbreaks has caused concern regarding the sustainability of this economic benefit in the long run hence this study analyzes the economic impact of bt cotton and its dynamics in china using nationally representative long panel data for 1997 2012 we show that this economic benefit continues 15 years after the commercialization of bt cotton

an evolutionary approach to understanding international business activity the co evolution of mnes and the institutional environment this paper examines the co evolution of mne activities and institutions external and internal to the firm we develop a theoretical framework for this analysis that draws on the more recent writings of douglass north on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness and of richard nelson on the co evolution of technology and institutions we link historical changes in the character of mne activities to changes in the institutional environment and highlight the scope for firm level creativity and institutional entrepreneurship that may lead to co evolution with the environment we argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of mne subsidiaries thus mne agency derives from more decentralized forms of experimentation in international corporate networks which competence creating nodes of new initiatives can co evolve with local institutions unlike most other streams of related literature our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms this form of co evolutionary analysis is increasingly important to understanding the interrelationships between mne activities and public policy

autoregressive modelling and money income causality detection abstract a step wise procedure based on granger s concept of causality and abaike s final prediction error criterion is suggested as a practical means to identify the order of lags of each variable in a multivariate autoregressive process the model seems useful because it can serve as a reduced form formulation to avoid imposing often spurious or false restrictions of the model it also provides a reasonably powerful test of causality the idea is applied to u s postwar money and income data it is found that between m1 and gnp a bivariate feedback model fits the data best between m2 and gnp a one way causal model from money to income performs better diagnostic checks applied to our model seem to indicate the adequacy of our approach

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

roundup ready soybeans in argentina farm level and aggregate welfare effects although adoption rates of genetically modified crops have been staggering in some countries there is still comparatively little evidence about biotechnology impacts under diverse agroecological and institutional conditions these knowledge gaps lead to an overly precautious attitude among policy makers and the public this article analyzes the effects of roundup ready rr soybeans in argentina the country with the second biggest transgenic area worldwide based on recent survey data it is shown that the technology increases total factor productivity by 10 on average with cost savings being somewhat more pronounced for smaller than for larger farms the reduction in use of toxic herbicides and of tillage operations entails positive environmental repercussions aggregate welfare effects are computed over the 1996 2001 period with a three region partial equilibrium model comprising argentina the united states and the rest of the world in 2001 rr soybeans created more than us 1 2 billion of economic surplus at the global level the largest share went to consumers 53 followed by seed and biotechnology firms 34 and agricultural producers 13 due to comparatively weak intellectual property protection and thus only small technology mark ups in seed prices and widespread adoption argentine soybean growers receive 90 of the benefits in that country this demonstrates that farmers in developing countries can gain considerably when they obtain access to suitable foreign innovations through technology spill overs

testing the bargaining hypothesis in the manufacturing sector in developing countries the bargaining power model of hc mnc host country multinational corporation interaction conceives of economic nationalism in terms of rational self interest and assumes both inherent conflict and convergent objectives in extractive industries there is strong evidence that outcomes are a function of relative bargaining power and that as power shifts to developing hcs over time the bargain obsolesces a cross national study of the bargaining model using data from 563 subsidiaries of u s manufacturing firms in forty nine developing countries indicates that while the bargaining framework is an accurate model of mnc host country relationships manufacturing is not characterized by the inherent structurally based and secular obsolescence that is found in the natural resource industries shifts in bargaining power to hcs may take place when technology is mature and global integration limited in industries characterized by changing technologies and the spread of global integration the bargain will obsolesce very slowly and the relative power of mncs may even increase over time

home country political risk and foreign direct investment in the united states this study investigates the proposition that home country political risk factors influence outward foreign direct investment investment data from the u s department of commerce is used to model investment activity in the united states from various industrialized source countries foreign direct investment is regressed on home country domestic and international economic and political risk measures for the western industrial countries results indicate that investment activity from the ics in the u s is dependent on home country economic and political conditions

capital controls and foreign direct investment abstract this paper examines the effect of three types of capital control policies on fdi a the existence of multiple exchange rates b restrictions on capital account and c restrictions on the repatriation of export proceeds we find that the impact of capital controls on fdi varies by region and has changed over time in the 1970s and 1980s none of the policies had a significant impact on fdi in the 1990s all three were significant furthermore capital controls have no effect on fdi to sub saharan africa and the middle east but affects fdi to east asia and latin america adversely

ownership patterns of u s joint ventures abroad and the liberalization of foreign government regulations in the 1980s evidence from the benchmark surveys data from the benchmark surveys of the commerce department show the beginning of a global liberalization in government restrictions on foreign equity in the 1980s this was manifested in a small but unmistakable across the board reduction in the share of 50 50 and minority affiliates out of all u s affiliates in a country across countries there remains a huge variation in this proportion and the second part of the paper seeks to statistically explain this variation in a cross sectional regression analysis

bargaining power of multinationals and host governments one of the outcomes of negotiation between multinationals and host governments in developing countries the extent of foreign ownership of subsidiaries is influenced by the bargaining power of the two parties foreign ownership measured in various ways appears to be affected by the level of technology of the multinational the degree to which a multinational attempts to differentiate its products the extent to which a subsidiary s output is exported to other parts of the multinational the diversity of products offered by the multinational and the extent of competition by other multinationals the relationship between some of these variables and ownership is not a simple one one variable that others have mentioned as probably affecting bargaining power size of the investment in question appears not to play a significant role in government policies toward ownership but many large projects tend to be located in countries that have lenient ownership policies

uk competitiveness policy vs japanese industrial policy it is often claimed that japanese industrial policy targeted high growth or high productivity growth sectors see inter alia johnson i982 carliner i986 nester i99i tyson 1992 it is then argued that because both the targeted industries and the japanese economy have prospered it follows that japanese industrial policy must have been successful hence britain and other advanced nations either are justified in emulating or should hasten to follow the japanese example this raises the question of whether the united kingdom s competitiveness policy is the appropriate response or is a completely different animal the purpose of this paper is to explore the main areas in contention but before doing so it is important to be clear about what one means by industrial and competitiveness policies

the effect of national culture on the choice of entry mode characteristics of national cultures have frequently been claimed to influence the selection of entry modes this article investigates this claim by developing a theoretical argument for why culture should influence the choice of entry two hypotheses are derived which relate culture to entry mode choice one focusing on the cultural distance between countries the other on attitudes towards uncertainty avoidance using a multinomial logit model and controlling for other effects the hypotheses are tested by analysing data on 228 entries into the united states market by acquisition wholly owned greenfield and joint venture empirical support for the effect of national culture on entry choice is found

the role of geography in financial and economic integration a comparative analysis of foreign direct investment trade and portfolio investment flows the objective of this paper is to examine the role of geography in explaining the patterns of financial and economic integration among both developed and developing countries using a gravity model we compare north north north south and south north fdi trade and portfolio investment flows to examine how geographical factors influence these bilateral flows the results indicate that the impact of geography variables on fdi and portfolio are similar to their effect on trade geography variables have a statistically significant effect both on fdi and portfolio investment but fdi is more sensitive to distance we interpret the negative effect of distance as the existence of information costs in financial flows also bilateral fdi trade and portfolio investment flows react to macroeconomic fundamentals in the same way however with different degrees of sensitivity there are significant differences between north north and north south flows our results find support for the argument that most fdi among industrial countries are horizontal whereas most fdi investment in developing countries is vertical the fact that the significance of geographical variables on financial flows still remained even after controlling for the macroeconomic fundamentals is in contrast with the standard capital market model the results can however be reconciled if geographical factors can proxy for information costs which may in turn explain why country portfolios are still home biased the significant effect of distance on financial flows may also explain how idiosyn cratic shocks are spread i e contagion to other countries in the same region ultimately the geographical location of a country may determine its economic and financial integration into the world economy

scandal protection and recovery in the cabinet empirical evidence suggests that a prime minister benefits from firing ministers who are involved in political scandals we explore a model in which scandals are positively related to policy activism so that a prime minister may wish to protect a minister from resignation calls we find that protection can sometimes discourage activism it enhances the value of a minister s career and hence encourages him to sit tight by moderating his activities on the other hand an exogenous increase in exposure to scandals may lead a minister to live for today by pursuing controversial policies the prime minister s ability to protect ministers is limited by her short term incentive to fire she may however enhance her credibility by building a collective reputation with the cabinet the heterogeneity of cabinet membership plays an important role

dynamic government performance honeymoons and crises of confidence we use a formal theoretical framework to explore the interplay between a government s longevity and its performance ministers perform well when their careers are valuable this is so when the government s duration is expected to be long the government s survival depends on its popularity and finally that popularity depends on its ministers performance the feedback loop between performance and longevity means that multiple rational expectations equilibria can arise ministers work hard for a popular government but divert efforts elsewhere if they believe the government is doomed these alternatives are both self fulfilling prophecies however the presence of perhaps small random events that buffet the performance and popularity of a government is sufficient to pin down a unique equilibrium we explore the dynamics that arise a crisis of confidence involving the rapid collapse of a government s performance is sparked when a sequence of negative shocks push the popularity of the government below a unique critical threshold

rational expectations and the impact of money upon stock prices received monetary theory supports the existence of a strong relationship between monetary activity and stock prices following the work of friedman and schwartz 8 relating money supply to aggregate economic activity some researchers have examined the more specific connection between changes in the rate of growth of money supply and associated movements in stock prices see 6 10 11 14 17 18 19 20 22 and 28 these studies use a variety of monetary aggregate measures to functionally relate the level of stock market indices to contemporaneous and lagged monetary growth rates in general the findings indicate a direct relationship between money supply and stock returns

the japanese crisis a case of strategic failure this paper provides an alternative insight into japan s current economic problems we concentrate upon the role played by the economy s central actors namely japan s transnational corporations since the early 1980 s japan s transnationals have become dominant players in the global economy and now have a higher rate of physical investment in new overseas greenfield sites than their competitors this has had detrimental consequences for japan s domestic economy particularly for small firms who operate in keiretsu networks this has led to concerns about the hollowing out of japan s domestic industry raising the possibility of long term industrial decline and strategic failure

host country environment and subsidiary competence extending the diamond network model we extend the centers of excellence concept to address the diversity and multidimensionality of subsidiary competence using rugman and verbeke s diamond network model we hypothesize the contingencies influencing the links between host country environments and subsidiary competence configuration and provide evidence from more than 2000 subsidiaries in seven european countries our results provide new insights into how multinational enterprises can overcome unbalanced national diamonds by acquiring complementary capabilities across borders

political careers or career politicians two main career paths are prevalent among politicians in modern democracies there are career politicians i e politicians who work in the political sector until retirement and political careers i e there are politicians who leave politics before retirement and work in the private sector in this paper we propose a dynamic equilibrium model of the careers of politicians in a political economy with a private sector and a political sector where individuals are heterogeneous with respect to their market ability as well as their political skills we characterize the conditions under which the two career paths emerge in equilibrium and establish a number of comparative statics results with respect to the quality of politicians and their careers

perspectives on multinational enterprises in emerging economies multinational enterprises mnes play a pivotal role in the development of many emerging economies in consequence they became the focus of scholarly research by economists and policy analysts in contrast international business scholars have been comparatively uninterested in analysing this role of mnes yet they could make important contributions to these debates first studies taking the individual firms as starting point would enhance understanding of the interaction between mnes and the local environment second theories and research methodologies developed in international business research could provide new insights into the dynamics of mnes in emerging economies the objective of this paper is to motivate more international business scholars to engage in research on positive and negative spillovers from foreign direct investment fdi in emerging economy societies to advance this research agenda scholars need to analyse the specific activities and capabilities of the firms involved and the impact of fdi on the broader social and environmental context for management this agenda raises the ethical question to what extent ought businesses to care about their local stakeholders

the politics of technological upgrading international transfer to and adaptation of gm cotton in argentina summary we describe patterns of international transfer to and adaptation of genetically modified gm cotton in argentina and ask whether political bargaining between the technology owner a multinational enterprise mne and host country actors may have influenced upgrading we suggest that the mne was able to use its exclusive capacity to upgrade gm cotton technologies as a negotiation tool to persuade host actors to change the rules that affected its multi lines of business in the country this implies wider policy scope to encourage technology upgrading host actors could negotiate over a wider range of aspects of interest to mnes

explaining the national cultural distance paradox past studies of the relationship between national cultural distance and entry mode choice have produced conflicting results some scholars find cultural distance associated with choosing wholly owned modes others find cultural distance linked to a preference for joint ventures in this paper we provide both theoretical and empirical evidence to explain the discrepant findings and thus help to resolve the national cultural distance paradox

macro determinants of fdi inflows to japan an analysis of source country characteristics this paper examines the source country determinants of fdi into japan the paper highlights certain methodological and theoretical weaknesses in the previous literature and offers some explanations for hitherto ambiguous results specifically the paper highlights the importance of panel data analysis and the identification of fixed effects in the analysis rather than simply pooling the data indeed we argue that many of the results reported elsewhere are a feature of this mis specification to this end pooled fixed effects and random effects estimates are compared the results suggest that fdi into japan is inversely related to trade flows such that trade and fdi are substitutes moreover the results also suggest that fdi increases with home country political and economic stability the paper also shows that previously reported results regarding the importance of exchange rates relative borrowing costs and labour costs in explaining fdi flows are sensitive to the econometric specification and estimation approach the paper also discusses the importance of these results within a policy context in recent years japan has sought to attract fdi though many firms still complain of barriers to inward investment penetration in japan the results show that cultural and geographic distance are only of marginal importance in explaining fdi and that the results are consistent with the market seeking explanation of fdi as such the attitude to risk in the source country is strongly related to the size of fdi flows to japan 2007 the authors journal compilation 2007 blackwell publishing ltd

greenfield vs acquisition the strategy of japanese investors in the united states multinational firms can enter a foreign market by taking over existing local firms acquisitions or by setting up new ventures greenfield investments surprisingly there has been limited empirical work on this topic this paper examines the determinants of this choice by looking at japanese entries into the united states by focusing on firms of one country entering a single market we are able to separate the impact of a firm s strategy from that of the characteristics of the target industry or country this paper tests simultaneously a number of competing hypotheses the results suggest that acquisitions are used by japanese investors with weak competitive advantages while investors with strong advantages find that greenfield investments are a more efficient way to transfer these advantages to the u s acquisitions are also chosen to enter industries with either very high or very low growth rates when entry is at a scale that is large relative to the parent and when entry is into a different industry the japanese investor s previous experience of the u s market its financial situation and its status as a follower in an oligopolistic industry have no statistically significant impact on the entry mode neither do u s stock market conditions

international expansion of telecommunication carriers the influence of market structure network characteristics and entry imperfections this paper examines the internationalization process of telecommunication carriers in this industry early entrants gain substantial first mover advantages due to the transient nature of the windows of market opportunity and the potential to influence the regulatory process as an incumbent to capture these strategic and economic advantages firms follow a strategy of preemption both of markets and partners the authors argue for the need to augment prevailing theory with contextual idiosyncrasies that characterize specific industries

economic trends and government survival in west european parliamentary democracies in this study i investigate the linkage between trends in key economic indicators inflation unemployment and growth in gross domestic product and government survival in 16 postwar european parliamentary democracies the partial likelihood method which allows for variation in indicator values over the lifetimes of individual governments constitutes the basic analytic tool the findings reveal overall causal roles for both inflation and unemployment as well as important differences in these roles between socialist and bourgeois governments and between pre oil crisis and post oil crisis eras most significant the introduction of these indicators to the analysis helps to resolve the debate between two rival explanations of governmental stability the bargaining complexity hypothesis and the ideological diversity hypothesis in favor of the latter

characteristics of privatization evidence from developed less developed and former communist countries a privatization wave has swept the world starting in the u k in the early 1980s and then progressing to other developed and less developed nations this study examines how the country characteristics for the formerly state owned enterprises relate to the nature of the privatization deal and the strategy of the acquiring firm in particular this paper examines how country characteristics affect government privatization policies and in turn firm strategy results indicate that there are differences with respect to the characteristics of privatization and government policies that translate into differences in firm strategy in former communist less developed and developed countries

the state as strategist in international business research no matter what strategy managers choose cross national differences in states strategic capabilities and objectives affect multinational corporations capabilities to manage interdependent operations in this paper we develop four attribute dimensions along which states strategic economic capabilities vary we then apply these dimensions to show how they contribute to familiar international business models of managerial process mnc strategy and organizational structure and country competitiveness

real exchange rate risk expectations and the level of direct investment four models of direct investment are analyzed assuming various relationships between foreign and domestic production the direct effect of risk adjusted expected real foreign currency appreciation is to lower foreign capital cost thus stimulating direct investment however when costs of other inputs are also affected induced productivity changes or output price changes may offset the direct effect reducing direct investment pooled estimation results for u s annual bilateral direct investment flows to five industrialized countries show significant reductions associated with expected appreciation of real foreign currency and significant increases associated with risk these results are consistent with the model where in response to risk the multinational firm reduces exports to the foreign country but offsets this somewhat by increasing foreign capital input and production

characteristics of foreign subsidiaries in industry clusters this paper examines the characteristics of foreign owned subsidiaries in export intensive leading edge industry clusters as defined by porter 1990 using a sample of 229 subsidiaries from three countries we show that subsidiaries in such clusters are more embedded more autonomous and more internationally oriented than subsidiaries in other industry sectors we also show that there are significant differences in the roles of foreign owned subsidiaries from one leading edge cluster to the next that are associated with the dynamism of the cluster and the overall level of foreign ownership the results indicate 1 that typologies of subsidiary roles should give increased consideration to environmental factors and 2 that thinking on industry clusters instead of treating them identically should recognize that they have heterogeneous characteristics

on the internationalization process of firms a critical analysis even though international marketing has been challenged because of theoretical and methodological shortcomings very few researchers have actually attempted to analyze the weaknesses based on principles of theory evaluation in this article the author examines two types of models addressing the individual firm s internationalization process a theory evaluation is performed based on the explanation and the falsification criteria in order to improve the internationalization models some measures are proposed

enhancing the obsolescing bargain theory a longitudinal study of foreign ownership of u s and european multinationals this research attempts to enhance the obsolescing bargain theory for manufacturing companies by statistically testing the effects of nine explanatory variables on the static and dynamic manifestations of bargaining success with longitudinal firm level data in order to highlight those effects it develops a conceptual framework that provides a broader context in which the primary variables operate it demonstrates that the obsolescing bargain took effect in india over a fifteen year period following restrictive legislation unlike previous research this study measures the effect of benefits received by multinationals from the host government in exchange for equity dilution american companies are found to retain a smaller share of their foreign ownership over time than british and other european multinationals some explanatory variables that have previously been found to influence level of foreign ownership static bargaining success are found to be less important or have a different effect in explaining proportion of foreign ownership retained dynamic bargaining success

the obsolescing bargaining model mnc host developing country relations revisited the traditional bargaining model of mnc host developing country relations has become obsolete today those relations are better understood as the result of a two tier multi party bargaining process tier 1 bargaining between the governments of host and home countries occurs bilaterally or through multilateral institutions it produces macro rules on fdi that affect micro negotiations in tier 2 per the traditional bargaining model the extent of fdi liberalization resulting from tier 1 bargaining varies predictably across home host country pairs and industries suggestions for testing the two tier bargaining model are also presented

institutions transaction costs and entry mode choice in eastern europe the process of change from a centrally planned system to a market economy generates an institutional framework that is only partially reformed and therefore inconsistent and unstable this leads to high transaction costs for economic agents multinational enterprises entering transition countries have to adapt their strategies to the local institutions and reduce exposure to highly imperfect markets this paper analyzes how the costs of organizing business in transition environments influence entry mode choice the empirical results show that host country institutions in transition economies have an impact on the choice of entry modes moreover different mechanisms determine the internalization of managerial and technological knowledge

supplying crop biotechnology to the poor opportunities and constraints abstract unlike the public sector research that launched the green revolution private firms based in industrialised countries have done the majority of agricultural biotechnology research and almost all commercialisation of genetically modified gm crops this paper examines consequences of the emergence of a few large companies as leaders in the commercialisation of biotechnology by addressing issues of access to technology costs of conducting research and distribution of economic benefits to provide context we first review the status of crop biotechnology research globally who is benefiting from the technology we then analyse the role of intellectual property rights market access and industry concentration public sector research and gm crop biosafety regulations in determining observed r d by firms the paper recommends policy measures that allow transfer of current technology to the poor and generate more biotechnology research focused on problems of the poor

financing agricultural research international investment patterns and policy perspectives abstract for much of the post wwii period governments in rich and poor countries alike have increased public spending on and performance of agricultural research the public involvement in and policies toward agricultural research and development r d have undergone a sea of change in more recent years in this article we document these changes focusing on the public and rapidly evolving private roles in financing agricultural r d and the international dimensions of these funding and policy issues we restate the principles for government intervention in research and highlight the financing aspects of these interventions before concluding the paper with some reflections on the implications of all these changes for internationally conceived and funded public agricultural r d

public offerings of state owned and privately owned enterprises an international comparison we compare initial offer prices in privatizations to initial prices in public offerings of private companies the evidence indicates that government officials in the united kingdom underprice ipos significantly more than their private company counterparts in canada and malaysia however the opposite is true there does not appear to be a general tendency for privatizations to be underpriced to a greater degree than private company ipos we provide additional evidence on the determinants of privatization initial returns our findings indicate that initial returns are significantly higher in relatively primitive capital markets and for privatized companies in regulated industries

determinants of foreign direct investment empirical evidence from eu accession candidates this study examines bilateral foreign direct investments fdi between the members of the european union and eight central and east european candidate ceec economies in transition awaiting accession into the european union eu crosssection data were obtained for bulgaria czech republic estonia hungary poland romania slovak republic and slovenia for 1997 once the main characteristics of fdi recipient and donor nations are identified in a bilateral framework it will be feasible to predict future fdi inflows this study reveals that the key determinants of fdi inflows in ceecs are size of the host economy host country risk labour costs in host country and openness to trade countries that are receiving fewer foreign investments could make themselves more attractive to potential donor nations by focusing on some of the key determinants identified by this study

the drivers of foreign direct investment into research and development an empirical investigation this paper examines the determinants of foreign direct investment fdi in research and development laboratories by 32 multinational enterprises in the pharmaceutical and electronics industries the paper applies a dichotomous set of motives for fdi results from an econometric analysis of 136 laboratory investments show that relative market size and relative strength of a country s science base determine whether fdi in research and development is carried out in order to exploit existing firm specific advantages or in order to build up new firm specific advantages this holds true in similar form for japanese european and u s firms and across the two industries

policy and non policy determinants of u s equity foreign direct investment this study examined the effects of policy and non policy variables on the location of new u s direct investment abroad as distinct from reinvested earnings of existing affiliates using 1977 and 1982 benchmark data the data revealed statistically significant effects for investment incentives positive performance requirements negative and host country effective tax rates negative with interesting differences between the two time periods and between developed versus developing countries significance was also found for non policy variables such as political stability cultural distance gdp per capita and infrastructure

decentralised r d and strategic competitiveness globalised approaches to generation and use of technology in multinational enterprises mnes abstract using material from surveys of multinational enterprise mne production subsidiaries and laboratories operating in the uk the paper seeks to discern vital changes in the roles of such r d facilities from the primarily tactical and technologically dependent role of adapting established group products for the local market these labs now take more committed positions in support of their group s strategic competitiveness this can involve a much more profound involvement in original product development or inputs into programmes of pre competitive basic or applied research to support the longer term evolution of the core technology of the mne group it is suggested that this evolution of decentralised labs positioning in mne knowledge strategies implies i an increasing involvement in product development rather than adaptation ii an interdependent rather than dependent position in group technology programmes iii increased relevance of supply side influences host country technology competencies capacities and heritage iv decline of centralising forces on r d e g economies of scale communication and co ordination problems concerns of knowledge security

changing locus of agricultural research will the poor benefit from biotechnology and privatization trends over the past decade the locus of agricultural research and development has shifted dramatically from the public to the private multinational sector three interrelated forces are transforming the system for supplying improved agricultural technologies to the world s farmers the first is the strengthened and evolving environment for protecting intellectual property in plant innovations the second is the rapid pace of discovery and growth in importance of molecular biology and genetic engineering finally agricultural input and output trade is becoming more open in nearly all countries these developments have created a powerful new set of incentives for private research investment altering the structure of the public private agricultural research endeavor particularly with respect to crop improvement

a unified model of cabinet dissolution in parliamentary democracies the literature on cabinet duration is split between two apparently irreconcilable positions the attributes theorists seek to explain cabinet duration as a fixed function of measured explanatory variables while the events process theorists model cabinet durations as a product of purely stochastic processes in this paper we build a unified statistical model that combines the insights of these previously distinct approaches we also generalize this unified model and all previous models by including 1 a stochastic component that takes into account the censoring that occurs as a result of governments lasting to the vicinity of the maximum constitutional interelection period 2 a systematic component that precludes the possibility of negative duration predictions and 3 a much more objective and parsimonious list of explanatory variables the explanatory power of which would not be improved by including a list of indicator variables for individual countries

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

balancing private and state ownership in emerging markets telecommunications infrastructure country industry and firm influences bargaining between host states and investors over the terms of investment in sensitive sectors of the economy generates political and economic tensions in this study we investigate the factors that contribute to the outcomes of those negotiations as measured by the private vs state owned share of newly consummated telecommunications infrastructure projects we find that private ownership is positively associated with overall economic development and investment liberalization in the host country and with greenfield vs divestiture and joint venture vs wholly owned projects private ownership is negatively associated with existing telecommunications infrastructure higher levels of state ownership of foreign investing firms and the technological sophistication of the projects our analysis also shows a curvilinear inverted u shaped relationship between investment policy hazards and private ownership this finding supports the insight from transaction cost economics that potential gains from internalization are greatest at intermediate levels of uncertainty

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