Capital flows and growth dynamics in Central and Eastern Europe

This article assesses the importance of capital flows as measured by the current account balance for the growth dynamics of the EU countries from Central and Eastern Europe. Economic growth in these countries was on average relatively high before the global financial crisis but markedly lower after the crisis. Panel data econometrics using annual data for 1997–2015 point to the contemporaneous current account balance having a sizeable negative effect on annual GDP growth. Estimations using many control variables and instrumental variables suggest that the negative effect is mainly demand driven. Counterfactual simulations show that growth rates in all CEE countries would have been lower in the absence of capital flows, and this applies particularly to the countries with the most disadvantageous starting points.     

Impact of international entry choices on the nature and type of innovation: Evidence from emerging economy firms from the Indian bio-pharmaceutical industry

As emerging economy multinational enterprises (EMNEs) enter foreign countries in search of new markets, seeking to expand their knowledge bases, research on the type and nature of innovation activity is needed to address the impact of EMNEs’ choices related to international expansion. Building on prior literature on entry mode and location choices, as well as on organizational learning, we argue that how and where an EMNE expands internationally will impact the nature of its innovation. We carry out empirical analysis on a sample of 167 Indian bio-pharmaceutical firms for the period from 1997–2017. Our findings suggest that greenfield ventures foster innovation in core technologies, while cross-border mergers and acquisitions (M&As) foster innovation in non-core technologies. In addition, locating subsidiaries in high income countries encourages product innovations, while locating in low income countries encourages process innovations. Our findings contribute to the growing literature on differences in learning outcomes of EMNE internationalization.     

Does ethics improve stock market resilience in times of instability?

This paper compares the resilience of ethical (Islamic and socially responsible) indexes among five developed (US, UK, Japan, Canada, Australia) and three emerging markets (Brazil, India, South Africa) during the period following the 2008 subprime crisis. It relies on a multivariate CAPM-EGARCH model that accounts for sudden changes in volatility through the application of an iterated cumulative sums of squares (ICSS) algorithm on daily data over the sample period 2008–2014 to model time-varying volatility and ensure reliable estimates. The study confirms the lower systemic risk associated with Islamic indexes during the bearish period and reports that SRI, despite being more subject to systemic risk, offered higher alphas in highly integrated markets, while Islamic indexes performed better in less integrated ones. The evidence also reveals a very limited increase in the models’ predictability power from the integration of sudden changes in volatility into the EGARCH models during the full sample period. This limit is more marked during the bearish sub-period. Our findings have important implications for international investment and portfolio diversification perspectives in times of financial downturn.     

How do materialists choose prominent brands in emerging markets?

Materialism is a worldwide phenomenon. However, our knowledge about the effect of materialism on consumer brand choice is limited. This study unlocks the path from materialism to brand prominence focusing on fashion, quality, and price consciousness. Our findings within the Chinese context show that the paths from materialism to fashion, quality, and price consciousness are positive. Further, we found that the paths from fashion and quality conscious to brand prominence are positive, while the path from price conscious to brand prominence is negative but not significant. These findings have significant implications for brand managers in emerging markets.     

Institutional investors and international investments in emerging economy firms: A behavioral risk perspective

While the extant literature has examined the influence of controlling and non-controlling principals on the internationalization decisions of emerging market firms, heterogeneity among non-controlling principals is largely ignored. The risk characteristics of different groups of owners, shaped by their institutional environments, could contribute to the differences in their preferences for firm internationalization. In this paper, we draw insights from institutional theory and behavioral risk perspective to examine the risk propensities and risk perceptions of various non-controlling principals, such as pressure-resistant (FIIs and mutual funds) and pressure-sensitive (banks, insurance companies and lending institutions) institutional investors. Empirical results from a sample of 2364 unique Indian firms during the 2005–2014 time-period show that, after controlling for firm-level resources and capabilities identified in prior literature, the ownership share of different types of institutional investors is associated with firms’ international investments differently. While pressure-sensitive institutional investors, such as banks and insurance companies, are not supportive of foreign investments by firms, pressure-resistant institutional investors, such as FIIs and mutual funds, are supportive of this strategic decision. Furthermore, our results show that the family ownership in a firm (measured in terms of family shareholding) further lowers the preference of pressure sensitive institutional investors for internationalization, whereas family ownership positively moderates the pressure resistant investors towards internationalization.     

What Makes Firms Competitive? States,Markets, and Organisational Embeddedness in Competitive Firm Restructuring in Postsocialist Economies

The prevailing transitions literature suggests that dynamic firms in postsocialist economies are the result of macroinstitutional reforms leading to the making of markets. This article builds on work in comparative political economy and economic sociology to show that the degree of competitive behaviour of postsocialist firms is determined not by the existence of general market institutions alone but by the kinds of organisational allies firms possess and the kinds of markets they compete in. Using firm survey data across 28 postsocialist economies, the article examines the determinants of competitive restructuring by firms, including product innovation, standards upgrade, financial transparency, and investments in research and development. The article confirms insights from comparative political economy which suggest that dynamic enterprise sectors emerge when governance is effective. However, at the firm level, the article finds that transnational ties and supportive policy environments are most significant in the making of dynamic postsocialist enterprises. The article also highlights important regional variation in firm behaviour and discusses the relationship between institutional frameworks, organisational embeddedness, and firm restructuring in postsocialist economies.     

Farm size and productivity growth in the United States Corn Belt

In recent decades, agricultural production in the U.S. has continued to shift to large-scale operations, raising concerns about the economic viability of small and midsized farms. To understand whether economies of size provided an incentive for the consolidation of production, the study estimates the total factor productivity (TFP) of five size classes of grain-producing farms in the U.S. Heartland (Corn Belt) region. Using quinquennial Agricultural Census data from 1982 to 2012 the study also compares TFP growth rates across farm sizes to gain insight into whether observed productivity differences are likely to persist. The finding of a strong positive relationship between farm size and TFP suggests that consolidation of production has contributed to recent aggregate productivity growth in the crop sector. The study estimates the extent to which sectoral productivity growth can be attributed to structural change versus other factors including technological change. The study also explores some tradeoffs associated with policies that raise the productivity of small versus large farms.     

The heterogeneous relationship between board social ties and corporate environmental responsibility in an emerging economy

Firms in emerging economies are faced with multiple, incompatible institutional forces in their environmental activities. Which of these forces will be dominant and instantiated within an organization is partly determined by the social relationships that a firm maintains with external actors. This paper investigates the relationship between board social ties and the level of environmental responsibility undertaken by firms in China, an emerging economy, by categorizing board social ties into three types in terms of the three isomorphic forces in the institutional field (coercive, normative and mimetic). Drawing on institutional and agency theories, using a sample of listed firms in environmentally sensitive industries, and a generalized least squares regression method, the results provide empirical evidence that ties that are linked to coercive and normative forces (i.e., political organizations and universities) are related to a higher level of environmental responsibility; however, those that are linked to mimetic forces (i.e., industrial peers) have a negative association with environmental responsibility, which is mitigated by CEO power. These findings suggest that the heterogeneous effects of board social ties on environmental responsibilities experienced by firms in a context of environmentalism are at an early stage.     

Co-movement in Stock Prices in Emerging Economies: The Case of the Caricom Region

The Grand Anse Declaration of 1989 recognised the need for financial integration within the emerging economies that comprise the CARICOM region, as a way of furthering the wider process of economic integration and, indeed, economic development in that region. Using co-movement as a measure of financial integration, this paper investigates the co-movement in stock prices among the Barbados, the Jamaica and the Trinidad and Tobago Stock Exchanges, the three major exchanges within the CARICOM region. It also examines how integrated these exchanges are with the New York Stock Exchange. The GARCH-Copula methodology and, to a lesser extent, estimated correlation coefficients, are used to attain this objective. There appears to be co-movement in stock prices and returns within the CARICOM stock markets and significant dependence structures between the returns of the three CARICOM stock markets. However, there is considerably less evidence of integration between the CARICOM markets and the New York Stock Exchange.     

COVID-19 and business renewal: Lessons and insights from the global airline industry

The emergence of the COVID-19 pandemic has adversely affected the fortunes of multiple companies around the globe. Accordingly, questions are increasingly being asked about how organizations can revitalize during and after a crisis. Yet, we have limited understanding of how organizations renew themselves during crises over time. We explore this question through the lens and examination of two South-Asian airlines: Pakistan International Airlines and Sri Lankan Airlines. The cases offer important insights into the reasons behind underperformance of state-controlled enterprises and renewal activities. We shed light on strategic renewal (SR) in the wake of increasing liberalization and deregulations in the global airline industry. To this end, we propose a four-stage approach towards renewing such underperforming organizations to respond effectively to black swan events and external shocks.