Entry and barriers to entry in emerging markets

This note briefly introduces the symposium on entry and entry barriers in emerging markets edited by Nauro Campos and Saul Estrin. The symposium contains four inter-related case studies focusing in depth on the relationship between entry of new firms and institutional arrangements in four major emerging markets: Brazil, China, India and Russia. We find that entry rates are not necessarily low in emerging markets, and that institutional quality is a complex and “fuzzy” notion so that its impact on the entry process is not straightforward.     

The Productivity Slowdown, Sectoral Reallocations and the Growth of Atypical Employment Arrangements

This paper explores the recent shifts in employment arrangements away from long-term employment contracts and internal labor markets towards outside contracting of labor in OECD countries. It examines the driving forces behind this phenomenon, focusing on the relationship with another important trend of the last few decades, namely the labor productivity slowdown. A comparison of U.S. and European institutional arrangements shows how very different labor markets have recently displayed similar patterns in the use of contracted out labor. This paper explains these similarities and reconciles them with very different patterns in hiring, firing, and quitting behavior observed in the two regions.     

FROM INSTITUTIONS TO FINANCIAL DEVELOPMENT AND GROWTH: WHAT ARE THE LINKS?

This paper presents an integrated overview of the literature linking institutions, financial development, and economic growth. From the large body of research on institutional development, the paper first selects those contributions that make it possible to study the role of institutional arrangements in ameliorating/worsening the information frictions and transaction costs that characterize the development of financial markets. The paper then investigates the theoretical mechanisms by which these specific frictions affect economic growth and presents the stock of empirical evidence quantifying the impact of institutions on growth through financial development.     

Informal Institutional Arrangements in Credit,Land Markets and Infrastructure Delivery in Trinidad

Informal institutional arrangements, permeating both formal and informal housing settlements, allow markets to function in developing countries. Yet their economic, social and policy impacts are largely unexamined. Insights from the new institutional economics literature are used to show the significance of informal institutional arrangements in credit, land markets and infrastructure delivery. The analysis is grounded in the experience of Trinidad and Tobago, with empirical information drawn from fieldwork research done in 1993 and 1997. Research findings show that informal institutions of cooperation (e.g. sou‐sou, CBOs) support transactions by reducing transaction costs, by lowering risk and by providing mechanisms to cope with uncertainty. They are therefore used instead of formal institutions. Policy‐makers should expect intense utilization of such locally designed institutions that use social capital in the process of land and housing market reform in developing countries. Ce sont les arrangements institutionnels informels, organisent l'habitat officiel et officieux, qui donnent aux marchés la possibilité de fonctionner dans les pays en voie de développement. Néanmoins leur impact économique, social et politique n'ont généralement pas été examinés. J'utilise des outils provenant des travaux sur l'économie neo‐institutionaliste pour démontrer la signification des arrangements institutionnels officieux pour le crédit, les marchés agraires et la distribution des infrastructures. L'analyse est basée sur l'expérience de Trinidad et Tobago, et l'information empirique provient d'une recherche de terrain faite entre 1993 et 1997. Les résultats montrent que les institutions officieuses de coopération (par exemple sou‐sou, CBOs) supportent les transactions en réduisant leurs coûts, en abaissant les risques, et en fournissant des mécanismes pour faire face à l'incertitude. Elles sont donc utilisées à la place des institutions officielles. Les politiciens peuvent s'attendre à une utilisation intense de telles institutions désignées localement et qui utilisent le capital social dans le processus de réformes du marché agraire et du logement dans les pays en voie de développement.     

THE FUTURE OF THE SEABED

Increased commodity prices and improved technology have combined to increase the incentives to exploit natural resources located under the seas. However, an international seabed regime under the auspices of the United Nations presents dangers for free markets, sovereignty and security. Alternative institutional arrangements based on privatisation would produce better outcomes.     

Digital innovation and transformation: An institutional perspective

In this conceptual piece we suggest that the institutional perspective is a prolific lens to study digital innovation and transformation. Digital innovation is about the creation and putting into action of novel products and services; by digital transformation we mean the combined effects of several digital innovations bringing about novel actors (and actor constellations), structures, practices, values, and beliefs that change, threaten, replace or complement existing rules of the game within organizations and fields. We identify three types of novel institutional arrangements critical for digital transformation: digital organizational forms, digital institutional infrastructures, and digital institutional building blocks. From this vantage point, an institutional perspective invites us to examine how these novel arrangements gain social approval (i.e. legitimacy) in the eyes of critical stakeholders and their interplay with existing institutional arrangements. Questioning the disruptive talk associated with digital transformation, we draw on the institutional change literature to illustrate the institutionalization challenges and that existing institutional arrangements are pivotal arbiters in deciding whether and how novel arrangements gain acceptance. We close this essay with discussing the implications of an institutional perspective on digital transformation for policy, practice and research.     

Which exchange rate regimes in an era of high capital mobility?☆

This paper asks what influence increasing capital mobility has on the choice of exchange rate regime. Among exchange rate regimes considered are currency boards and dollarization. It is argued that a key lesson of the recent currency and financial crises in the emerging markets is that corner solutions in exchange rate policy may be preferable to less rigidly fixed exchange rates. The paper concludes that in the end the optimal exchange rate regime depends on the circumstances of a particular country and time, because each exchange rate system requires the fulfillment of certain preconditions. The paper then discusses institutional measures and innovations that may be necessary to enable exchange rate arrangements to avoid financial and currency crises or to dampen their consequences.     

Human resource management – a national business system perspective

Abstract

Although a sizeable body of academic literature has attempted to explain the role of national business systems in the context of human resource management (HRM), there is still little research on the extent to which institutional features explain patterns of HRM in the emerging economy of Dubai. Different institutional settings tend to generate their own organisational arrangements to manage their employees, and it is important to understand how this interplay works. From an economic perspective, Dubai is important, mainly due to its promising diversification of its economy and its political stability. From a national business system perspective, the institutional environment represents a peculiar case, because it differs from many other emerging markets with respect to the strong co-ordinating role of the state, the strong segmentation and specialisation of tasks, roles, skills and authority, especially between nationals and expatriates, and a unique employment system. Thirty-two in-depth interviews with HR managers, and extensive document reviews, reveal that these elements of the institutional environment are related strongly to specific patterns of HRM practices, including distinctive policies for national employees and expatriates. The insights generated in this study explain the particularities of HRM in Dubai from a national business system perspective.     

Centrally Planned Economies

A bstract . Historical comparisons between the USSR and US economies most often focus on the stark contrasts between market and centrally controlled systems. However, expediency in response to dynamic pressures caused the adoption of central planning in both countries. Additionally, the USSR's lackluster economic performance when wedded to Marxism caused institutional arrangements to move toward markets. After summarizing USSR's central planning experiences before 1965, its similarity to the US's wartime planning is discussed. These comparisons provide insights into the problems of moving between market and planned economies     

Antecedents of trust in industrial districts: an empirical analysis of inter-firm relations in a Turkish industrial district

Structural features and institutional settings of industrial districts, rather than contracts as a co-coordinating mechanism, promote trust in exchanges between firms in industrial districts. Based on this assumption, the paper explores the antecedents of trust in a Turkish industrial district at three levels: institutional environment; institutional arrangements; and inter-firm exchanges. In relation to institutional environment, dominant institutions of the Turkish economy – mainly state and finance – and their policies that undermine the role of SMEs in economic development are studied. In this context a third institution, the ‘district association’ that has a vital role in promoting trust-based governance has been analysed. At the second level, formal and informal institutional arrangements that govern the web of exchanges between firms are surveyed. The third level of analysis is directed at entrepreneurs and their attitudes towards family, friendship, expertise and reputation are studied. The research site is the Merter textile district in Istanbul. Data for second and third levels of analysis has been collected through structured interviews and is analysed quantitatively. For institutions and institutional environment, data has been collected mainly by in-depth interviews and is supported by secondary data. Research findings show that informal institutional arrangements are more important than formal arrangements and reputation and expertise of the other firm is more important than family-friendship connections as antecedents of trust.     

职业体育联盟制度安排的反垄断法分析

职业体育联盟起源于西方发达国家,随着市场经济的进一步深入,职业体育联盟的一些制度安排不可避免的受到反垄断法的规制,所以,职业体育联盟制度安排必须考虑反垄断法问题,考虑职业体育联盟生存的制度环境的差异性,尽量规避职业体育联盟的反垄断诉讼。     

影响中国房地产市场发展的主要制度安排研究

影响我国房地产市场的主要制度安排有五种:房地产住房供给和保障制度、房地产土地供给制度、房地产金融制度、房地产税收制度和存在于我国居民购房行为中的非正式制度。本文对这些制度安排的主要内容及其变迁做了分析,并研究了这些制度安排对我国房地产发展的影响。     

影响中国房地产市场发展的主要制度安排研究

影响我国房地产市场的主要制度安排有五种：房地产住房供给和保障制度、房地产土地供给制度、房地产金融制度、房地产税收制度和存在于我国居民购房行为中的非正式制度。本文对这些制度安排的主要内容及其变迁做了分析，并研究了这些制度安排对我国房地产发展的影响。     

Variations in adoption of workplace work–family arrangements in Europe: the influence of welfare-state regime and organizational characteristics

Using a unique data set of more than 2800 organizations in 19 countries, this article investigated the variations in adoption of workplace work–family arrangements and whether this variation can be explained either by differences in welfare-state contexts or by organization-related factors. Although the welfare-state context contributed significantly to the explanation of workplace work–family arrangements, the adoption of workplace arrangements was more strongly related to organizational conditions and characteristics. However, the results also show that when the development of work–family arrangements is mainly left to the market, as in the liberal context, employers do not fully make up for the absence of public provisions. The findings support the institutional argument that public provisions help to create a normative climate that gives rise to new social expectations and ‘a sense of entitlement’ regarding work–family support. The study supports the rational choice perspective where both employers' institutional environments and organizational factors are viewed as resources and constraints influencing employers' decision to adopt work–family arrangements.     

The impact of private benefits on institutional ownership change: evidence from markets with different sentiments

This study investigates the relationship between private benefits and institutional ownership change in markets characterized by different investors’ sentiments. High-sentiment markets tend to overvalue a firm and thereby offer institutional investors a chance to sell shares and profit from overvaluation by forgoing the private benefits otherwise obtainable. Empirical analysis of ownership data from 1990 to 2008 reveals that, in high-sentiment markets, institutional investors sell more shares low in private benefits (dual-class firm share) than shares high in private benefits (non-dual-class firm share). In contrast, firm insiders, who consume significant private benefits in both dual-class and non-dual class firms, sell more dual-class firm shares in both high- and low-sentiment markets. Their ownership disposition is more likely driven by the need for diversification. Subsample analyses show that public pension funds drive the market-sentiment-related change of institutional ownership.     

Credit market constraints and labor market decisions

In this paper, we examine whether imperfections in credit markets spill over to other markets, particularly the labor market. We take the case of Italy, a country that experienced changes in the mortgage market brought about by the 1992 European unification and other institutional shifts. These events make Italy a good laboratory to study the effects of financial markets on the labor market. Using household data from the Bank of Italy between 1989 and 1993, we estimate the relationship between female participation and mortgage use. We find a significant impact of mortgages on women's participation in the labor market.     

The Role of Institutional and Economic Factors in the Strategic Use of Non-GAAP Disclosures to Beat Earnings Benchmarks

Abstract

We use hand-collected data for a sample of large European firms to investigate the influence of countries’ institutional and economic factors on managers’ non-generally accepted accounting principles (GAAP) disclosures. We find that managers are more likely to use non-GAAP measures to meet or beat earnings benchmarks that GAAP earnings would miss in countries with efficient law and enforcement, strong investor protection, developed financial markets, and good communication and dissemination of information. We also find that managers in countries with developed institutional and economic conditions are more likely to adjust non-GAAP earnings for recurring expenses such as R&D, depreciation, and stock-based compensation expenses. Our findings suggest that in environments in which there is more pressure to achieve earnings benchmarks and less opportunity to manipulate GAAP earnings, managers use more non-GAAP earnings disclosures to meet the benchmarks.     

Advertising persuasion in dual markets

Many firms operate in ‘dual’ markets by selling the same products and services to both individual and institutional customers. Can they also persuade both with the same advertising content? The authors investigate this issue by examining a unique database including information on institutional and individual mutual fund flows, advertising frequency, and (persuasive and informative) advertising content. They find that the effects of persuasive advertising content on institutional and individual fund flows are similar and sizeable in terms of elasticity. In addition, they find that only the individual market responds to informative advertising content. Hence, dual‐market firms can use persuasive content to achieve advertising economies.     

An analysis of Australian exchange traded options and warrants

This study focuses on the price discovery process in Australian option and warrant markets. Characterizing these two markets in terms of their cost structures and institutional features, we formally test competing price discovery hypotheses. The general findings indicate that the warrants market is the dominant market suggesting that their lower trading cost outweigh their less attractive institutional features. Additionally, we find that idiosyncratic differences among firms may result in a clientele effect thus providing justification for the coexistence of these seemingly redundant markets.