Accounting for Heterogeneity in Network Formation Behaviour: An Application to Vietnamese SMEs

Network formation is often characterized by homophily, i.e. the tendency of agents to connect with others who have similar attributes. However, while most agents are homophilous, others could be heterophilous; they aim to create ties with dissimilar agents. This study provides empirical evidence supporting this hypothesis by applying a random coefficient approach to data on the information-sharing networks of small- and medium-sized Vietnamese enterprises. In particular, we find that firms tend to form heterophilous links with respect to business type and gender ratio. One possible reason for the heterophily is that firms can obtain useful and performance-improving information from such dissimilar partners.     

Subsidy competition and imperfect labor markets

This study presents a two‐country model of subsidy competition for manufacturing firms under labor market imperfections. Because subsidies affect the distribution of firms, subsidies influence unemployment rates and welfare in both countries. We show that when labor market frictions are high, subsidy competition is beneficial, although subsidies under subsidy competition are inefficiently high. In the coordinated equilibrium, the supranational authority provides a subsidy to firms that equal the expected total search costs, which increases the number of firms relative to laissez‐faire and improves welfare relative to laissez‐faire and subsidy competition. Finally, we find that a rise in a country's labor market frictions raises the equilibrium subsidy rate, affects unemployment rates, and lowers welfare.     

Technology Gap Matters on Spillover

This paper develops an oligopoly model with endogenous technology spillovers through foreign direct investment (FDI). The foreign entrant brings a superior technology and therefore may spend resources to prevent spillovers of its technology to the home firm. The home firm has an incentive to spend resources to gain these spillovers. After firms strategically choose their expenditures to influence technology spillovers, they compete in a Cournot–Nash quantity game. This study provides theoretical insight on the positive and negative empirical spillover results of FDI on productivity of local firms. Up to a critical bound, the larger the initial technology gap between the foreign and home firms, the more the home firm spends to gain spillovers. Past that boundary, the home firm decreases spending. As a result, the home firm's profits from spillovers vary, but larger technology gaps engender greater net profit losses from FDI.     

Financial repression and external openness in an endogenous growth model

An endogenous growth model has been developed that extends Sidrauski (1967), Roubini and Sala-i-Martin (1992,1995) and Lucas (1988) by combining financial development, human capital investment, and external openness. Financial development and trade liberalization are shown to increase the economic growth rate by increasing the marginal benefits of human capital investment. Expansionary governments are, however, provided with an incentive to increase the money supply growth rate, to repress the financial sector, to close its economy, and to impose a high proportional income tax rate.     

Knowledge spillovers from FDI in China: The role of educated labor in multinational enterprises

This paper employs a firm-level panel data set for a high-tech cluster in China to examine knowledge spillovers from multinational enterprises (MNEs) to domestic firms, focusing on the role of MNEs’ employment of educated workers. We find that knowledge of MNEs spills over to domestic firms in the same industry through MNEs’ employment of workers with graduate-level or overseas education. We also find that Japanese MNEs contribute less to knowledge spillovers than US MNEs. This is likely due to the fact that Japanese MNEs in China do not employ much educated labor.     

Precautionary saving under liquidity constraints: Evidence from rural Pakistan

This paper investigates precautionary saving under liquidity constraints in Pakistan using household panel data. In particular, while it estimates Kimball's [Kimball, M.S. Precautionary saving in the small and in the large. Econometrica 1990; 58; 53–73.] prudence parameter based on a framework that is similar to Dynan [Dynan, K.E. How prudent are consumers? Journal of Political Economy 1993; 101; 1104–1113.], this study deviates from the framework by explicitly considering liquidity constraints, as in Zeldes [Zeldes, S.P. Consumption and liquidity constraints: an empirical investigation. Journal of Political Economy 1989; 97; 305–346.]. By doing so, this paper attempts to differentiate the standard precautionary saving caused by uncertainty from that caused by liquidity constraints. Furthermore, endogenous liquidity constraints are used in order to resolve issues of selection biases. We find substantial evidence of the presence of precautionary saving in Pakistan. More specifically, the estimated prudence is significantly higher for liquidity-constrained households as compared with unconstrained ones. The finding suggests that the precautionary saving motives appear stronger when households see that their access to credit markets is limited.     

Quantitative Evaluation of the Determinants of Export and FDI: Firm‐level Evidence from Japan

Using firm‐level data for Japan, this paper examines the determinants of the export and foreign direct investment (FDI) decision. We contribute to the literature by employing a mixed logit model, i.e. a multinomial logit model with random intercepts and random coefficients, to incorporate any unobserved firm heterogeneity and by paying special attention to the quantitative significance of the determinants. We find that while the impact of productivity on the export and FDI decision is positive and statistically significant, it is economically negligible. The effect of firm size, credit constraints and information spillovers from experienced firms is also small in magnitude. A quantitatively dominant determinant of the export and FDI decision is instead the prior status of firms in terms of internationalisation. In addition, the use of the mixed logit model enables us to find a substantial role of unobserved firm characteristics in internationalisation of the firm. These findings suggest that entry costs to foreign markets, which substantially vary in size across firms, play an important role in the export and FDI decision. In addition, given that the negligible effect of productivity and the dominant effect of prior status appear to be more prominent in Japan than in some other countries, this study helps highlight the uniqueness of Japanese firms.     

Firms' open innovation policies,laboratories' external collaborations,and laboratories' R&D performance

The value of the open innovation approach is now widely recognized, and the practice has been extensively researched, but still very little is known about the relative impact of firm‐level and laboratory‐level open innovation policies and practices on R&D performance. This study attempts to measure that impact by analyzing a sample of 203 laboratories of Japanese firms located in Japan. It examines simultaneously the effects of firm‐level open innovation policy and laboratory‐level external collaborations on laboratory R&D performance. The study aims to go beyond a general understanding of the importance of open innovation; it shows how an open innovation policy can have a positive and significant effect on collaborations between a laboratory and local universities or business organizations. The results also show how an open innovation policy can contribute to the laboratory's R&D performance by facilitating external collaborations by the laboratories. It demonstrates how these factors affect R&D performance in different ways, depending on the type of R&D tasks. Our findings suggest several theoretical and practical implications in the field of R&D management.