|
on South East Asia |
| By: | Keiichiro Kobayashi; Masaru Inaba |
| Abstract: | We conducted business cycle accounting (BCA) using the method developed by Chari, Kehoe, and McGrattan (2002a) on data from the 1980s--1990s in Japan and from the interwar period in Japan and the United States. The contribution of this paper is twofold. First, we find that labor wedges may have been a major contributor to the decade-long recession in the 1990s in Japan. We argue that the deterioration of the labor wedge may have been caused by sticky wages and monetary contraction, and it may have been prolonged by the continuation of asset-price declines through binding collateral constraints. Second, we performed an alternative BCA exercise using the capital wedge instead of the investment wedge to check the robustness of BCA implications for financial frictions. The accounting results with the capital wedge imply that financial frictions may have had a large depressive effect during the 1930s in the United States. This implication is the opposite of that from the original BCA findings. |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:05023&r=sea |
| By: | Hibbs Jr., Douglas A. (CEFOS, Göteborg University); Piculescu, Violeta (Department of Economics, School of Economics and Commercial Law, Göteborg University) |
| Abstract: | In this paper we propose a model of how institutional benefits, taxation and government regulations affect the productive activity of private enterprises. We consider an environment in which public officials enforcing tax and regulatory obligations are potentially corruptible, and markets for corruption may therefore arise that give firms the option of producing unofficially and evading taxes and regulations. By contrast to some previous studies that view corruption and bribery as forces driving firms out of official production into the underground economy, our model features the idea that the ‘grabbing hands’ of corrupt bureaucrats may alternatively serve as ‘helping hands’ allowing firms to exploit profitable opportunities in the unofficial sector. And contrary to a traditional view maintaining that high tax rates are intrinsically a major cause of large shadow economies, our model implies that incentives to evade taxation and produce underground depend on statutory tax rates relative to firm-specific thresholds of tax toleration. Tax toleration is determined, among other things, by firm-specific institutional benefits available to official producers and the costs of corruption required to produce unofficially. Some core predictions of the model concerning the determinants of tax toleration and the relative size of unofficial activity and tax evasion receive broad support from empirical analyses based on firm-level data from the World Business Environment Surveys sponsored by the World Bank. <p> |
| Keywords: | institutions; corruption; tax evasion; tax toleration; unofficial economy; underground economy; black economy; WEBS |
| JEL: | D21 H26 K42 O17 |
| Date: | 2005–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0173&r=sea |
| By: | Tsutomu Miyagawa; Yukie Sakuragawa; Miho Takizawa |
| Abstract: | Constructing thirty-seven industries database, we examines whether measured productivity in Japan is procyclical and investigates the sources of that procyclicality using the production function approach employed by Hall (1990) and Basu and Fernald (1995). At the aggregate level, the measured Solow residual shows procyclicality. Large numbers of industries show constant returns to scale. No significant evidence for the presence of thick-market externalities is found. Our results also hold when we consider labor hoarding, part-time employment, and the adjustment cost of investment. The results suggest policies to revitalize the Japanese economy should concentrate on promoting productivity growth. |
| JEL: | E32 E47 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:hst:hstdps:d05-108&r=sea |
| By: | Masahiro Hori; Satoshi Shimizutani |
| Abstract: | This paper explores empirically whether Japanese consumers became more prudent in the second half of the 1990s, a decade in which Japan registered historically low economic growth. Employing the methodology developed by Dynan (1993), this study uses micro-level data from the Family Savings Survey and the Family Income and Expenditure Survey to estimate the coefficient of prudence for Japanese households in the second half of the 1990s. The estimates reveal that the coefficient of prudence is positive and statistically significant in the 1998-1999 period. The obtained value for the coefficient of prudence is four, which is much higher than those estimated for U.S. households (not significantly different from zero) or U.K. households (around 2). The estimated coefficient for young households is higher still, which is consistent with simulation studies conducted by Gourinchas and Parker (2002) showing that precaution is the most important saving motive for younger households. |
| Keywords: | Precautionary saving, Coefficient of Prudence, Euler equation, Household Data |
| JEL: | D12 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:hst:hstdps:d05-109&r=sea |
| By: | Fabiosa, Jacinto F.; Hu, Dinghuan; Fang, Cheng |
| Abstract: | In China, with the cost of improved technology rising, surplus labor shrinking, and demand for food quality and safety increasing, it will be just a matter of time before the country’s hog production sector will be commercialized like that of developed countries. However, even if China’s cost of production converges to international levels, as shown in this case study, China may continue to retain some competitive advantage because of the labor-intensive nature of the marketing services involved in hog processing and meat distribution. The supply of variety meats offers the most promising market opportunity for foreign suppliers in China. The market may open further if the tariff rate for variety meats is reduced from 20% and harmonized with the pork muscle meat rate of 12%, and if the value-added tax of 13% is applied equally to both imported and domestic products. The fast-growing Western-style family restaurant and higher-end dining sector is another market opportunity for high-quality imported pork. |
| Keywords: | commercial, cost structure, imports, pork value chain. |
| Date: | 2005–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12410&r=sea |
| By: | Rasmus Fatum (School of Business, University of Alberta); Michael M. Hutchison (Department of Economics, University of California) |
| Abstract: | This article examines the rationale behind the massive increase in Japanese foreign exchange market intervention operations in 2003-04, and evaluates its effectiveness both in limiting yen exchange rate appreciation and influencing the direction of monetary policy. The two main questions addressed in this study are: Was the intervention effective in slowing exchange rate appreciation compared to a counterfactual case with no intervention? And, has intervention on such a large scale authorized by the Ministry of Finance been able to directly influence liquidity creation or indirectly influence the stance of Bank of Japan policy? |
| Keywords: | foreign exchange intervention; Japanese monetary policy |
| JEL: | E51 E58 F31 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:kud:epruwp:05-05&r=sea |
| By: | Yosuke Okada |
| Abstract: | This paper examines the determinants of productivity in Japanese manufacturing industries, looking particularly at the impact of product market competition on productivity. Using a newly available panel data on around ten thousand firms in Japanese manufacturing for the years 1994-2000, I show that competition, as measured by lower level of industrial price-cost margin, enhances productivity growth, controlling for a broad range of industrial and firm-specific characteristics. Moreover, I suggest that market power, as measured by either individual firm’s price-cost margin or market share, has negative impact on productivity level of R&D performing firms. |
| JEL: | L11 L60 O30 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11540&r=sea |
| By: | Midori Wakabayashi; Charles Yuji Horioka |
| Abstract: | In this paper, we use Japanese micro data to examine what characteristics borrowing-constrained households have and whether borrowing constraints have an important influence on household consumption behavior. We identify borrowing-constrained households using three different indicators, some of which are unique to our data source, and find that the characteristics of households that are likely to be borrowing-constrained differ depending on which of the three indicators we use. We also find that changes in current income have a positive and significant impact on changes in consumption in the case of households that are likely to be borrowing-constrained but not in the case of households that are unlikely to be borrowing-constrained. This result suggests that borrowing constraints have an important influence on household consumption behavior and that the presence of borrowing constraints is one explanation for why the life cycle-permanent income hypothesis does not hold in the real world. |
| JEL: | D12 D91 E21 O16 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11560&r=sea |
| By: | Amy Y.C. Liu (National Centre for Development Studies, Australian National University) |
| Abstract: | This paper examines the changes in relative earnings of workers with different education levels during Vietnam’s transition. It is found that females enjoy a higher return to education than males do in 1998, reversing the situation observed five years ago. A large fall in the returns to vocational training for males, amid the rapid growth in the representation of better-educated females in the private sector where education is valued higher could be responsible for what have occurred. A direct assessment of the role of demand using a simple demand and supply framework developed by Katz-Murphy (1992) is undertaken. The result suggests an increase in the relative demand for better-educated workers appears to play an important role in explaining the earnings differentials between workers of different education groups. Education reform to better suit the needs of the post-reform emerging market, on-the-job training for workers, as well as equal access to education are some policy options that hold the key to reduce wage inequality between different education groups. |
| Keywords: | returns to education, Vietnam, wage structure |
| JEL: | I21 J31 P2 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:eab:develo:596&r=sea |
| By: | Hideaki Tanaka (Australia–Japan Research Centre, The Australian National University, Canberra) |
| Abstract: | The 1990s saw an era of fiscal consolidation in industrialised countries, which struggled with fiscal deficits throughout the 1970s and 1980s. Reforms in public expenditure management, typically the introduction of fiscal rules and targets, together with favourable economic growth contributed to a significant improvement in fiscal positions. However, fiscal deficits have been increasing again since the turn of the 21st century in many OECD countries. Interestingly, some countries have been able to maintain fiscal discipline since the achievement of fiscal balance in the latter half of the 1990s. What has caused this difference? This paper derives important lessons for reform in public expenditure management from the experiences of major OECD countries’, including Australia, France, Germany, Japan, the Netherlands, New Zealand, Sweden, the UK and the USA. Essentially, success in maintaining fiscal discipline lies in maintaining a firm political commitment, and strengthening expenditure management that underpins any such commitment, specifically a medium-term fiscal plan in line with fiscal rules and targets in a centralised and transparent manner. Public expenditure management reform is a cornerstone of the restructuring of public sector services, especially in welfare programs aimed at overcoming problems arising from an aging population. |
| Keywords: | fiscal deficit, public expenditure management, OECD, Australia, France, Germany, Japan, Netherlands, New Zealand, Sweden, UK, USA, welfare programs, aging population |
| JEL: | O23 H87 E63 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:613&r=sea |
| By: | Nobuo Akai (School of Business Administration at the University of Hyogo); Yusaku Horiuchi () (Asia Pacific School of Economics and Government, Australian National University); Masayo Sakata (Faculty of Politics, Economics and Law at the Osaka International University) |
| Abstract: | Theoretical studies suggest that corruption may counteract government failure and promote economic growth in the short run, given exogenously determined suboptimal bureaucratic rules and regulations. As the government failure is itself a function of corruption, however, corruption should have detrimental effects on economic growth in the long run. In this paper, we measure the rate of economic growth for various time spans—short (1998–2000), middle (1995–2000) and long (1991–2000)—using previously uninvestigated state-level cross-section data for the United States. Our two-stage least square (2SLS) estimates with a carefully selected set of instruments show that the effect of corruption on economic growth is indeed negative and statistically significant in the middle and long spans but insignificant in the short span. |
| Keywords: | corruption, economic growth, United States, US |
| JEL: | D73 F43 C21 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:555&r=sea |
| By: | Kate Barclay (Asia Pacific School of Economics and Government, Australian National University); Sun-Hui Koh (Marine Social Science Department, Faculty of Fisheries Kagoshima University.) |
| Abstract: | Neoliberalism is a political economy term that refers to a public policy mix that is market oriented, pro trade liberalization and advocates minimal state intervention in the economy. Japanese governance has arguably not been based on neoliberal principles, and some see this as contributing to Japan’s long running recession. Japan’s distant water tuna longline fleet has been in economic difficulties since the early years of the recession. In 2001 Prime Minister Koizumi came to power promising neoliberal style reform. This paper presents a history of government involvement in the distant water tuna longline industry and looks for evidence that recent reforms have changed this involvement; both in terms of observable changes to governance structures, and of key stakeholders’ receptiveness to neoliberalism as visible in their representations of issues facing tuna fisheries. We find that very few neoliberal reforms have been implemented in this sector. Furthermore key stakeholders show little sympathy with neoliberal policy prescriptions, meaning they are unlikely to champion such reforms. This conclusion may be specific to fisheries since in Japan the political importance of food production and the iconic status of fish cuisine make the sector particularly susceptible to economic nationalism. In examining relations between industry and government the paper also highlights problems in Japan’s co-management of fisheries. |
| Keywords: | Japan, tuna fisheries, government intervention, reform, distant longline industry, neoliberal, |
| JEL: | G18 G28 Q22 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:556&r=sea |
| By: | Suiwah Leung (Asia Pacific School of Economics and Government,Australian National University.); Vo Tri Thanh (CIEM); Kem Reat Viseth (NIM) |
| Abstract: | Coming out of French colonial rule and central planning, the three transitional economies of Indochina, Vietnam, Cambodia and Lao PDR, embarked on market-oriented reforms in the late 1980s and early 1990s. Vietnam was certainly the most successful, but all three countries quickly achieved macroeconomic stability and rapid growth. However, the Asian financial crisis in 1997/98, as well as the countries’ use of administrative edicts in response to the crisis, highlights the fragile nature of their transition. The paper holds as a premise that effective integration of the three Indochina economies with the “old ASEANS” involves the former developing market institutions that can sustain “quality” growth which will take them out of the transitional economy status. It finds that, although the three economies are open to international trade and investment flows, their domestic market structures are still very much under-developed, with heavy protection of the state sector in terms of tariff structures and bank credits, and inadequate legal and judiciary developments. As a result, foreign investment flows which went principally into the state-owned enterprises in Vietnam and Lao PDR, and into the quota-dependent garment sector in Cambodia, peaked in the mid-1990s and have been declining ever since. Private sector developments have been retarded, and the process of building a commercial/legal infrastructure to support private enterprise has only just begun. Meanwhile, modern production technologies and processes involving component manufacturing in different countries and then assembly in yet a third country (the so-called “component production and assembly within integrated production systems”) means that the cost of doing business includes not just labour cost but also cost of services such as transport, telecommunication, electricity, insurance and banking. The latter are high cost industries dominated chiefly by SOEs in Vietnam and Lao PDR. The bilateral agreements already in place and the WTO agreements (when negotiated) will set deadlines for the three countries to open their service sectors to entry by international firms. Competition has, and will continue, to drive down prices for these services, thereby benefiting the domestic private sector as well as improving competitiveness for foreign direct investments. Implementation of the international trade agreements will also help to streamline cumbersome laws and regulations as well as improve the judiciary in the three countries, again with significant benefits for the domestic private sector. An important challenge is to develop the necessary human resources to complement the countries’ public administration reform. Another challenge is to maintain macroeconomic stability whilst opening the countries’ domestic and external financial sectors. A third challenge for the “New ASEANs” is to counter protectionism of the developed countries with whom they enter trade agreements. |
| Keywords: | integration, transition, Vietnam, Cambodia, Lao PDR, growth, macroeconomic stability, ASEAN, foreign direct investment, garment sector, infrastructure, private sector, FDI, competition, protectionism |
| JEL: | P27 F36 F15 F13 O53 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:566&r=sea |
| By: | Tom Kompas (Asia Pacific School of Economics and Government,Australian National University.) |
| Abstract: | This paper analyzes the dramatic increases in rice output and productivity in Vietnam due largely to market reform, inducing farmers to work harder and use land more efficiently. The reform process is captured through changes in effort variables and a decomposition of total factor productivity (TFP) due to enhanced incentives for two main reform periods: output contracts (1981-87) and trade liberalization (1988-94). The results show that the more extensive is market reform the larger the increase in TFP and the share of TFP growth due to incentive effects, suggesting that more competitive markets and secure property rights matter greatly. However, in the post-reform period (1995-99), the incentive component of TFP dissipates as a result of falls in the price of rice and slow increases in input prices, especially for hired labour, fertilizer and capital. A stochastic production frontier is estimated to determine what farm-specific factors limit efficiency gains. Results show that farms in the main rice growing regions, those with larger farm size and farms with a higher proportion of rice land ploughed by tractor are more efficient, suggesting the need for additional reforms to augment productvity. In particular, the requirement that rice be grown in every province in Vietnam, restrictions on farm size (especially in the north) and the slow development of rural credit markets for capital and land are seen to restrict the level and growth of efficiency substantially. |
| Keywords: | market reform, total factor productivity, efficiency, rice production |
| JEL: | O13 O47 Q10 |
| Date: | 2004–04 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:587&r=sea |
| By: | Christer Ljungwall (China Centre for Economic Research at Peking University); Steven Wang (Department of Economics and statistics, Goteborg University) |
| Abstract: | This paper uses quarterly balance of payment data over the years 1993:1 - 2003:4 to explore the determinants of Chin's capital flight. The long run relationship and dynamic interactions among the variables are examined using cointegration and innovation accounting methodology. The result that capital flight is stimulated by external debts growth is noteworthy. The 'Holy Trinity' exlpains the link: For the agents in Chian, when the authorities insist in keeping a rgidly pegged CNY excahnge rate and monetary policy autonomy, incurring external debts is a ready challenge for large-scale cpaital inflows and outflows. As the country's external debts are state-guaranteed, the 'revolving-door syndrome' intensifies debtors moral hazard in expecting a government bail-out, and they over-borrow from abroad; hence there is an incident of capital flight. Despite China's strict control of its fiancial account, capital flight happens, and it is defacto being funded by increasing external debts. Hence, reforms in external debts management and fiscal resource allocation should be introduced to downsize such capital flight. |
| Keywords: | capital flight, cointegration, China |
| JEL: | F21 G15 F32 |
| Date: | 2004–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:606&r=sea |
| By: | Sugata Marjit (Department of Economics and Finance, City University of Hong Kong); Amit Biswas (Viswasharati University, india) |
| Abstract: | Stringent regulations coupled with corruption generate and sustain extra legal or informal transactions in the developing countries. Does trade related reform discourage informal activities and corruption? This appears attempts to analyze such a phenomenon. An import competing firm allocates production between a high wage formal and a low wage informal segment. Illegal use of labour in the informal sectior is characterized by a probability of punishment which depends on the size of the informal output. In such a structure, as tariff comes down, total employment contracts but the informal sector expands. However, lowering of interest rate, possibly through the liberalization of capital account, tends to reduce the size of the informal segment. Hence, trade reforms may have conflicting impact on informaility and corruption. |
| Keywords: | Trade liberalization, informal sector, corruption |
| JEL: | F11 H2 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:607&r=sea |
| By: | David Vanzetti (Asia Pacific School of Economics and Government, The Australian National University); Greg McGuire (United Nations Support Facility for Indonesia Recovery); Prabowo (United Nations Support Facility for Indonesia Recovery) |
| Abstract: | Indonesia provides an interesting case study of the potential benefits and costs of alternative trade strategies that are under active consideration in many developing countries. The ASEAN region has recently announced a deepening of its commitments and is considering widening the agreement to include countries such as China, Japan and the Republic of Korea. A bilateral agreement with the United States is also a possibility. Against this background, Indonesia’s options on trade policy range from increasing protection to actively pursuing bilateral, regional and multilateral initiatives. |
| Keywords: | Indonesia, trade policy, United States, US, ASEAN, Japan, bilateral agreement, protection, incentive |
| JEL: | F13 O31 F14 F15 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:612&r=sea |
| By: | Warwick J. McKibbin |
| Abstract: | The world is in the midst of a significant demographic transition with important implications for the macroeconomic performance of the global economy. This paper summarizes the key features of the current and projected future demographic change that are likely to have macroeconomic effects. It then develops and applies a new ten regions DSGE model (the MSG3 model) incorporating demographic dynamics, to examine the impacts of projected global demographic change on the world economy from 2005 to 2100. The focus in this paper is on Japan and the effects of demographic change on recent Japanese macroeconomic performance as well as projected performance over the remainder of this century. A distinction is made between the effects on Japan of demographic change that occurs in Japan and the effects on Japan of the equally large demographic changes occurring in the rest of the world. |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:pas:camaaa:2005-13&r=sea |
| By: | Jesus Felipe |
| Abstract: | This comment raises three main issues about He and Qin's (2004)attempt at modeling investment in the PRC. The first is this author's skepticism about the general applicability of the neoclassical model of investment to the PRC. Second, that their model for business investment, based on the neoclassical theory of investment, can be viewed as an approximation to an accounting identity derived by manipulating two other identities, namely, that of the capital share in output, and that of the motion of the capital stock. It is shown that the difference between He and Qin's equation and the identity is simply yhat they use the rental price of capital, while the identity relies on the profit rate. At best, all their analysis would indicate is that rental price of capital and profit rate are different. It is also argued that the empirical results are not clearly related to the supposed theoretical model. Based on this, the conclusion is that the policy implications of He and Qin's alleged model are somewhat dubious. Third, He and Qin's equation for government investment introduces the deviations of output from the long-run trend as an explanatory variable, estimated using an aggregate production function. The problems underlying this latter concept make the estimation of the output trend using this method a questionable exercise. Also, the empirical results suffer from serious problems of interpretation. |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:pas:camaaa:2005-17&r=sea |
| By: | Ross H. McLeod |
| Abstract: | The blanket guarantee introduced in 1998 in response to the emerging banking and economic crisis resulted in $50 billion of losses to the general public. The government has now introduced a law that enables the phasing out of this blanket guarantee, but which also allows for its reinstatement in the event of any threatened collapse of the banking system. Rather than eliminating the possibility of any repetition of the previous banking disaster, the new law effectively mandates an almost identical approach to handling system-wide banking collapses in the future, suggesting that the authorities and their advisers learned very little from the recent bitter experience. It is argued here that the crucial starting point for formulating policy in this field is to correctly specify the exact purpose that government intervention is intended to serve: namely, the avoidance of major macroeconomic disruption as a result of bank failures. |
| Keywords: | banking, bailout, deposit guarantee, deposit insurance, moral hazard |
| JEL: | E42 E44 G21 G28 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2005-08&r=sea |
| By: | Kelly Bird; Chris Manning |
| Abstract: | This study focuses on the efficiency of minimum wage policy for poverty reduction, taking Indonesia as a case study. A simulation approach assesses who benefits and who pays for minimum wage increases. On the benefits side, the rise in minimum wages boosts incomes in households with low wage workers. However, increases in wage costs are passed on through higher consumer prices. As a result, three out of four poor households lose in net terms, even when we assume no job losses. The findings suggest that minimum wages are unlikely to be an effective antipoverty instrument, at least for Indonesia. |
| Keywords: | Minimum Wages, Poverty, Income distribution, Indonesia |
| JEL: | I31 J33 J38 O15 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2005-09&r=sea |
| By: | Duo Qin (Queen Mary, University of London); Marie Anne Cagas (Asian Development Bank); Pilipinas Quising (Asian Development Bank); Xin-Hua He (Chinese Academy of Social Sciences) |
| Abstract: | Investment-driven growth has long been regarded as a key development strategy in China. This paper investigates empirically the validity of this view. Post-1990 data analyses and macroeconometric model simulations show that market demand has become a regular force in driving investment since reforms, that non-demand-driven investment growth contributes to increasing capital-output ratio far more than output growth, that government investment exerts a pivotal role in amplifying investment cycles, albeit effective in promoting employment, and that delayed and rising consumption from current investment surge can help sustain the impact of growth even with constant-returns-to-scale in the long-run GDP. |
| Keywords: | Investment, Growth, Impulse response function, Cointegration, Granger non-causality |
| JEL: | E22 E62 R34 O23 P41 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp545&r=sea |
| By: | Gavin C. Reid; Torcail M. Stewart |
| Abstract: | This paper looks at oil Independents, and potential disabilities on organizational performance which may arise when internationalization is contemplated. The evidence used is field work based, and uses sub-samples of British and North American oil Independents. It is argued, on the basis of grounded evidence, from field work interviews, that companies which do not internationalize, may be constrained by resource weaknesses, rather than by satisfactory strength within domestic territories alone. These weaknesses may rise from an unwillingness to confront the ambiguity of rules, regulations and mores of non-Western countries. Personal attitudes, beliefs, political affiliations, spheres of influence, and so on, may be more important to success in non-Western territories, than more familiar notions of business strategy and organizational competence. This is because, in the ‘non-ideal’ functioning of the non-Western context, decisions are relationship based, rather than based on formal modes of selection. It is shown how Independents have an advantage over Majors in decision-making speed, the authority to commit, the seniority of personnel and the establishment of relationships. This translates into relative success in applying for licenses in non-Western countries. Because of such capabilities, the Independents are more able to target non-traditional, under-explored overseas areas. Indeed, they display an active willingness to engage with countries in which they will encounter relatively high political and/or security risks (e.g. as rated by the IMF Political Stability index). |
| Keywords: | independent oil companies; petroleum industry; negotiation; non-traditional contracting; political risk |
| JEL: | D8 L1 L7 L71 M21 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0507&r=sea |