Institutional capacity to dynamically innovate: An application to the Portuguese case

The present paper addresses the dynamics of innovation, by extending the analysis beyond a static-economic perspective. It offers a dynamic-institutional mapping of relational capacities to dynamically innovate. Its main goal is to contribute to the above-mentioned research theme by presenting a new methodology able to pinpoint different trends in the relational capacities of institutions when they are innovative. Thereby, major characteristics in the networks of innovation are identified. This investigation uses an extended set of private institutions and public organizations located in Portugal, evaluated by their WebPage contents. To this data set a new combination of multivariate statistical methods is applied to detect group performances, to compare them, and to identify gradients of capacity to dynamically innovate. The results demonstrate that this method can provide extremely useful and tailor-made information for policy evaluation at regional or national levels.     

Cointegration with structural changes between per capita product and income inequality in Mexico

The long-run relationship between per capita product and income inequality in Mexico is assessed for the period 1963–2010. The methodology consists of stochastic unit root techniques with structural changes. The integration and cointegration tests suggest that it is not possible to understand this link if the possibility of structural changes is not taken into account. Causality, running from per capita product to income inequality, and a negative and significant overall effect are estimated. However, after the regime shifts – mainly estimated to occur in the 1980s – the connection is no longer meaningful. This result seems to be linked to the slow growth of the Mexican economy after these structural breaks, affecting, in turn, the reductions in income inequality.     

Asymmetric Demand Information and Foreign Direct Investment*

We examine the FDI versus exports decision of firms competing in an oligopolistic (quantity‐setting) market under demand uncertainty and asymmetric information. Compared to a firm that chooses to export, a firm that chooses to set up a plant in the host market has superior information about local market demand. In addition to the well‐known tension between the fixed set‐up costs of investment, the additional variable costs of exports and oligopoly sizes, the incentive to invest abroad is explained by the strategic learning effect. FDI may be observed even if trade costs are zero. The analysis is robust to price competition and to the possibility that a foreign firm can engage in both FDI and exports.     

A Cointegration Analysis of Car Advertising and Sales Data in the Presence of Structural Change

This paper examines whether there is a long‐run stable equilibrium relationship between advertising and sales across the market segments of the UK car industry over the period 1971–2001. In order to achieve this goal, we allow for structural breaks in the series using cointegration techniques. The results show the existence of long‐run equilibrium relationships in all six market segments, although in four of them the relationship is not stable. In general, one structural change is detected in the late 1970s and another in the early 1990s, coinciding with two economic recessions. When we do not account for structural changes, the estimated long‐run elasticities of advertising on sales are seen to be substantially downwardly biased. Finally, a noticeable increase is observed in long‐run elasticities in most car market segments during the nineties with respect to previous decades.     

Training policy and organisational performance in the Spanish hotel industry

There is currently a general agreement about the importance of training as a tool to help companies in the development of sustainable competitive advantages based on their human resources. Staff qualification is not an option in the tourism industry; human capital training actually becomes a determining factor to be able to achieve a differential positioning within the sector. In Spain, where the tourism sector is a strategic element, it becomes essential to analyse the training policy applied by tourism enterprises with the aim of assessing its quality and effectiveness. The objective sought in this study is to identify the main factors related to training policy that have an impact on performance. The study carries out an empirical research into the effects that training practices cause on performance levels in the Spanish hotel industry using a sample of 110 hotels.     

An Estimated Stochastic General Equilibrium Model with Partial Dollarization: A Bayesian Approach

In this paper, we develop and estimate a dynamic stochastic, general-equilibrium New Keynesian model with partial dollarization. Bayesian techniques and Peruvian data are used to evaluate two forms of dollarization: currency substitution (CS) and price dollarization (PD). The empirical results are as follow: first, it is noted that the two forms of partial dollarization are important in explaining the significance of the Peruvian data. Second, models with both forms of dollarization dominate models without dollarization. Third, a counterfactual exercise shows that by eliminating both forms of partial dollarization, the response of both output and consumption to a monetary policy shock doubles, making the interest rate channel of monetary policy more effective. Fourth, based on the variance decomposition of the preferred model (with CS and PD), it is found that demand type shocks explain almost all the fluctuation in CPI inflation, the monetary shock being the most important (39%). Remarkably, foreign disturbances account for 34% of the output fluctuations.     

Nontradable Goods and the Real Exchange Rate

How important are nontradable goods and distribution costs to explain real exchange rate dynamics? We answer this question by estimating a general equilibrium model with intermediate and final tradable and nontradable goods. We find that the estimated model can match characteristics of the data that are relevant in international macroeconomics, such as real exchange rate persistence and volatility, and the correlation between the real exchange rate and other variables. The distinction between tradable and nontradable goods is key to understand real exchange rate fluctuations, but the introduction of distribution costs is not. Nontradable sector technology shocks explain about one third of real exchange rate volatility. We also show that, in order to explain the low correlation between the ratio of relative consumption and the real exchange rates across countries, demand shocks are necessary.     

Corporate Governance and Value: Evidence from “Close Calls” On Shareholder Governance Proposals

The authors summarize the findings of their recent study of the effects of specific corporate governance provisions on firm value. Using a sample of governance provisions that were subjected to shareholder votes during the period 1997–2011, this study analyzes cases in which shareholder‐sponsored corporate governance proposals were either rejected or passed by a small margin (no more than 5% of the vote). By so doing, this study helps correct two limitations of the existing governance literature: (1) that the effects of expected governance changes are already incorporated in share prices (the “expectations” problem); and (2) that governance policies are often a consequence rather than a cause of other variables such as corporate performance and are thus correlated with many other firm characteristics (the “endogeneity” problem). The authors' findings show that expected improvements in corporate governance through the adoption of particular corporate governance provisions—particularly the removal of anti‐takeover provisions—is associated with both positive abnormal stock returns and improvements in long‐term firm operating performance. The authors estimate that the adoption of such governance proposals increases shareholder value by 2.6%, on average. Moreover, these returns are consistent with, and thus accurate predictors of, future changes in corporate investment (reductions of capital spending, in most cases) and improvements in operating performance.     

Innovation at the workplace: Do professional competencies matter?

This paper analyzes individuals' propensity to innovate in professional environments, by focusing on the specific competency profile of individuals who play a role in the incorporation of product, technological, and knowledge innovations at work. The analysis draws on economic and managerial literature on innovation, innovative behavior, and competencies to gain a better understanding of the relationships between the process of competency development and innovative behavior in working environments. Using data from REFLEX, a European survey on the transition from higher education to labor markets, the empirical component of this study estimates discrete response models to explain the propensity of individuals to innovate at work. The models take the responses to a set of 19 questionnaire items as the basis for determining individuals' competency profiles, while also incorporating firm, working environment, and personal characteristics. The estimation results provide evidence of significant marginal effects of specific competencies on the probability that individuals act as innovators at the workplace. Competencies such as alertness to new opportunities, ability to present products, ideas or reports, ability to mobilize the capacities of others, ability to come up with new ideas and solutions, and ability to use computers and the Internet appear to have stronger marginal effects on the likelihood of innovating and, consequently, emerge as key competencies in explaining the propensity of individuals to become innovators in their working environments.     

Learning about monetary policy rules when the cost-channel matters

We study how monetary policy may affect determinacy and expectational stability (E-stability) of rational expectations equilibrium when the cost channel of monetary policy matters. Focusing on instrumental Taylor-type rules and optimal target rules, we show that standard policies can induce indeterminacy and expectational instability when the cost channel is present. A naïve application of the traditional Taylor principle could be misleading, and expectations-based reaction function under discretion does not always induce determinate and E-stable equilibrium. This result contrasts with the findings of Bullard and Mitra [2002. Learning about monetary policy rules. Journal of Monetary Economics 49, 1105–1129] and Evans and Honkapohja [2003. Expectations and stability problem for optimal monetary policies. Review of Economic Studies 70, 807–824] for the standard new Keynesian model. The ability of the central bank to commit to an optimal policy is an antidote to these problems.