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on Business Economics |
| By: | Pierre Van Der Eng |
| Abstract: | How do multinational enterprises (MNE) respond to the ‘liability of foreignness’ (LoF) they experience in foreign markets? The case study in this paper demonstrates that firms develop dynamic, interactive strategies to minimise the LoF risks they perceive. The Australian subsidiary of Dutch MNE Philips Electronics experienced a significant LoF during 1939-1943, when it came close to being nationalised. In response, Philips Australia set out to build ‘FDI legitimacy’ after 1945 in order to maximise both its ‘national embeddedness’ in the host country and its influence on government policy that guided the rapid development of Australia’s postwar electronics industry. This strategy aimed to minimise risk and maximise commercial opportunities for the firm. Philips Australia localised senior management, maximised local procurement and local manufacturing, took a leading role in industry associations, engaged politically influential board members and used marketing tools to build a strong brand and a positive public profile in Australia. The firm became aware of the limitations of this strategy in 1973, when a new Labor government reduced trade protection. Increasing competition from Japanese electronics firms forced Philips Australia to restructure and downsize its production operations. Despite increasing reliance on imports from the parent company’s regional supply centres and efforts to specialise production on high- value added products, the firm saw its profitability and market share in Australia decrease. The case demonstrates that the success of strategic responses to minimise LoF and maximise ‘FDI legitimacy’ is highly context-dependent. |
| Keywords: | liability of foreignness, FDI legitimacy, Philips, Australia, electronics industry |
| JEL: | F23 L68 M16 N87 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:auu:hpaper:057&r=bec |
| By: | MIYAGAWA Tsutomu; EDAMURA Kazuma; KAWAKAMI Atsushi |
| Abstract: | In endogenous growth models and mid-term business cycles as seen in the works of Romer (1987) and Comin and Gertler (2006), it is assumed that there are positive effects of product variety. Using product-firm level data, we examine these effects empirically. Using data from the Census of Manufacture, the Survey of Research and Development (R&D), and the Basic Survey of Japanese Business Structure and Activities, we construct a database that includes number of products, R&D expenditures, and data on firm performance. We find that the number of products in R&D firms is higher than that of non-R&D firms, and that R&D firms are more sensitive than non-R&D firms for product dynamics. In the Poisson regression model, we also observe positive effects of R&D activities on product dynamics in empirical studies. As the increase in product variety contributes to productivity growth, our empirical results support the government's policies for enhancing R&D activities. |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:17101&r=bec |
| By: | OKUBO Toshihiro; Alexander F. WAGNER; YAMADA Kazuo |
| Abstract: | We employ a comprehensive database of Japanese manufacturing firms, covering up to 220,000 firm-year observations, to examine the role that ownership structure plays in explaining differences in export and innovation decisions of firms. Firms with higher foreign ownership are more export-oriented and engage more in innovation. This result holds controlling for differences in incentive structures (the use of stock options, which themselves are also associated with more export and innovation activities) and is robust to the use of an instrument exploiting peer effects with regard to foreign ownership. We also show that pre-World War II differences in cognitive skills and non-cognitive characteristics (attitudes) still explain modern-day, cross-prefecture differences in firm choices. Overall, our results suggest that both firm-internal corporate governance and the employee pool from which a company can draw upon can play an important role for the export and innovation activity of firms. |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:17099&r=bec |
| By: | Tavassoli, Sam (RMIT University); Karlsson, Charlie (KTH) |
| Abstract: | This paper analyses the role of regional context on innovation persistency of firms. Using five waves of the Community Innovation Survey in Sweden, we have traced firms’ innovative behaviour from 2002 to 2012, in terms of four Schumpeterian types of innovation: product, process, organizational, and marketing. Employing transition probability matrix and dynamic Probit model and controlling for an extensive set of firm-level characteristics, we find that certain regional characteristics matter for innovation persistency of firms. In particular, those firms located in regions with (i) thicker labour market or (ii) higher extent of knowledge spillover exhibit higher probability of being persistent innovators up to 14 percentage points. Such higher persistency is mostly pronounced for product innovators. |
| Keywords: | location; innovation; persistence; product innovations; process innovations; market innovations; organizational innovations; firms; Community Inno¬vation Survey |
| JEL: | D22 L20 O31 O32 |
| Date: | 2017–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2017_011&r=bec |
| By: | Christian Fons-Rosen; Sebnem Kalemli-Ozcan; Bent E. Sorensen; Carolina Villegas-Sanchez; Vadym Volosovych |
| Abstract: | We study the impact of foreign direct investment (FDI) on total factor productivity (TFP) of domestic firms using a new, representative firm-level data set spanning six countries. A novel finding is that firm-level spillovers from foreign firms to domestic companies can be significantly positive, non-existent, or even negative, depending on which sectors receive FDI. When foreign firms produce in the same narrow sector as domestic firms, the latter are negatively affected by increasing competition and positively affected by knowledge spillovers. We find that the positive spillovers dominate if foreign firms enter sectors where firms are “technologically close,” controlling for the endogeneity of their entry decision into such sectors. Positive technology spillovers also affect firms in other sectors, if those sectors are technologically close to the sectors receiving FDI. Increasing FDI in sectors that are technologically close to other sectors boosts TFP of domestic firms by twice as much as increasing FDI by the same amount across all sectors. |
| JEL: | E32 F15 F36 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23643&r=bec |
| By: | Faber, Benjamin; Fally, Thibault |
| Keywords: | Social and Behavioral Sciences |
| Date: | 2017–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:agrebk:qt7z60j648&r=bec |
| By: | Tanaka, Yasuhito; Hattori, Masahiko |
| Abstract: | We investigate the existence of a strictly convex and strictly sub-additive cost function with positive fixed cost. If there is a positive fixed cost, any cost function can not be super-additive, and concavity (including linearity) of cost function implies strict sub-additivity. Then, does there exist a strictly convex and strictly sub-additive cost function? We will present such a cost function. It is close to a linear function although it is strictly convex. |
| Keywords: | cost function, strict convexity, strict sub-additivity |
| JEL: | D43 L13 |
| Date: | 2017–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80579&r=bec |
| By: | Svetlana Vtyurina; Adrian Robles; Bennett W Sutton |
| Abstract: | This paper overviews patterns in bond issuance in local and external markets by firms in six large Latin American countries. Data suggest that despite rising issuance, local markets remain small and shallow in several countries. Nevertheless, since greater funding is available to many firms in both markets, we investigate the factors that may explain the firm’s choice on where to issue a bond. Using an unbalanced panel of firm and market-level indicators for years 1995-2015, we control for variables representing several theories of capital structure, and the results show that firm characteristics such as size and liquidity increase the likelihood of firms to issue externally. With respect to market characteristics, the market completeness hypothesis generates the most support, where market scale and depth are most important for the issuer’s choice of the market, suggesting that local markets will have to become deeper to draw more firms and investment. |
| Keywords: | Latin America;capital structure, firm-level, LA-6, corporate bond markets, Institutions and the Macroeconomy, General |
| Date: | 2017–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:17/157&r=bec |
| By: | Robert J. Kurtzman; David Zeke |
| Abstract: | Central bank large-scale asset purchases, particularly the purchase of corporate bonds of nonfinancial firms, can induce a misallocation of resources through their heterogeneous effect on firms cost of capital. First, we analytically demonstrate the mechanism in a static model. We then evaluate the misallocation of resources induced by corporate bond buys and the associated output losses in a calibrated heterogeneous firm New Keynesian DSGE model. The calibrated model suggests misallocation effects from corporate bond buys can be large enough to make them less effective than government bond buys, which is not the case without accounting for misallocation effects. |
| Keywords: | QE ; LSAPs ; Misallocation |
| JEL: | E22 E51 E52 G21 |
| Date: | 2017–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-76&r=bec |
| By: | Thomas K. Bauer; Tanja Kasten; Lars-H. R. Siemers |
| Keywords: | tax incidence, profit taxation, wages, inequality, asymmetric effects |
| JEL: | H22 H25 H32 J31 J38 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:sie:siegen:182-17&r=bec |
| By: | Vasama, Suvi |
| Abstract: | I examine optimal managerial compensation and turnover policy in a principal-agent model in which the firm output is serially correlated over time. The model captures a learning-by-doing feature: higher effort by the manager increases the quality of the match between the firm and the manager in the future. The optimal incentive scheme entails an inefficiently high turnover rate in the early stages of the employment relationship. The optimal turnover probability depends on the past performance and the likelihood of turnover decreases gradually with superior performance. Following weak performance, the contract implements a permanently inefficient turnover rate. With correlated outcome, a permanent inefficiency is needed to save on information rents to the agent, even when the agent does not have persistent private information. |
| JEL: | C73 D82 D86 |
| Date: | 2017–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2017_014&r=bec |