Latvia

Situated on a trading crossroads between Western Europe and Russia, Latvia has emerged as one of the most successful countries in Central Europe. This article provides a comprehensive review of Latvia's historical development, political structure, economy, investment, and foreign‐trade environment. It aims to be a useful source of information for foreign businessmen and investors interested in doing business in Latvia. In the fall of 1991, when the Baltic States separated from the Soviet system, no one predicted that these countries would make the transition to a market‐based economy as quickly and as effectively as they have. However, 11 years later, with notable growth and rising standards of living, such thinking is no longer considered overly optimistic. “It is the biggest, most complicated, and most promising piece of the new Europe,” wrote The Economist (1998) in reference to the Baltic region. Wherever there is new growth, there are many business opportunities to be found. Latvia's position in the center of this region is one indication of the business potential for those with the capacity to do business there. © 2003 Wiley Periodicals, Inc.     

Bridging the innovation divide: The Brazilian experience

The purpose of this article is to discuss the Brazilian innovation environment. It addresses the challenges, promises, bottlenecks, and opportunities by examining the country's quest to bridge the innovation divide. In addition, it applies the main dimensions of the “innovation diamond model” to assess how the country is faring in its journey toward competitiveness. The article analyzes Brazil's main innovation policies and agencies. Its companies and policymakers have recently understood that, without a dynamic and rich innovation environment, it will not be able to design long‐term economic development strategies and engage in long‐term sustainable growth. © 2012 Wiley Periodicals, Inc.     

Why Do European Companies Have Innovation Hubs in Silicon Valley—Best Practice Examples and Key Takeaways

Innovation hubs are gaining high attention in recent years, especially from European companies. Silicon Valley has been deemed as one of the most attractive and successful environments for establishing innovation hubs. This article highlights examples of companies from Europe that made the step to California—namely, Volkswagen, Swisscom, BMW, Axel Springer, Munich Re, and Innogy SE (RWE Group). Based on these companies’ experiences, recommendations are given on how companies might approach a setup in Silicon Valley for long‐term success. © 2016 Wiley Periodicals, Inc.     

Psychological drivers in the adoption of morally controversial innovations: the moderating role of ethical self‐identity

The present article conceptualizes morally controversial innovations as a category of innovations that raise ethical issues due to their potentially undesirable long‐term consequences on society or the natural environment. Then, it analyzes the case of biofuel crops by applying an extended version of the theory of planned behavior, which includes moral norm (i.e. the personal convictions of what is wrong or right for society) and ethical self‐identity (i.e. the extent to which one perceives himself/herself as an ethical person). The obtained results show that attitude and subjective norms are positively related to farmers' intention to grow biofuel crops. Yet the intention of those farmers with a higher ethical self‐identity is also influenced by perceived behavioral control and moral norm. In particular, moral norm negatively affects their intention to grow biofuel crops, thus restraining the adoption of this innovation. Implications for theory, as well as for policymakers interested in promoting the diffusion of morally controversial innovations, are discussed.     

Revisiting the Honorable Merchant: The Reshaped Role of Trust in Open Innovation

We examine trust mechanisms in innovation within a number of inter‐ and intraorganizational contexts and outline the challenges posed by open innovation to those mechanisms. The organizational contexts that we have chosen for examination are supply chain development, clusters, and employee involvement. We argue, through an in‐depth literature review that is supported by examples, that trust is being highly reshaped to better suit the growingly open innovation environment, which in many ways resonates with the historical concept of the honorable merchant. Our findings provide a better understanding of how trust facilitates the flow of information in open innovation and show how trust is becoming increasingly intermediated. Our systematic overview provides a rich context for further empirical research and innovation management practice. © 2015 Wiley Periodicals, Inc.     

Factors Influencing Growth Potential of E‐Commerce in Emerging Economies: An Institution‐Based N‐OLI Framework and Research Propositions

Given the tremendous success of the Internet and e‐commerce in developed countries, emerging economies are quickly embracing information technology as well. The purpose of this study is to examine factors (both determinants and deterrents) influencing the growth potential of e‐commerce in emerging economies from a multitheoretical perspective (namely, institution‐based network‐ownership, location, and internalization, i.e., i‐based N‐OLI framework). Factors are identified at three levels. At the global level, we identify multilateral agreements, strategic behavior of multinational enterprises (MNEs), and technological innovation as the key factors. At the national level, institutional environment, infrastructure, and culture are identified. The transactional level examines the role of integrity of transactions, online intermediaries, and network externalities and value clustering as the key factors for growth of e‐commerce in emerging economies. Based on the multitheoretical framework, the study advances several propositions and highlights implications for MNEs, both from developed markets and emerging markets, operating in emerging economies. © 2015 Wiley Periodicals, Inc.     

Innovation Economy,Productive Public Expenditure and Economic Growth

Multidisciplinary innovation is the main engine of growth for an increasing number of economies. Innovation requires the participation of and interaction between all economic agents. It also requires public spending on education, research and infrastructures. Our main goal is to emphasize the government's role in a growing innovation economy. Developing a non‐scale, idea‐based, one‐sector growth model with complementarities and productive public expenditure, we analyse theoretically the growth effects of an increase in productive public expenditure, which we find positive in the short, medium and long run.     

Economic growth with demand saturation and “endogenous” demand creation

In this article, we present a model of economic growth through “demand creation” in the face of “demand saturation,” by representing demand saturation by an S‐shaped logistic function and reckoning the firm's R&D as an activity to determine the probability of product innovation, that is, of demand creation. By defining the parameter of birth rate of a new product as the probability that a new product is derived from an existing one and identifying the time path of this parameter with the firm's R&D plan, we derive the optimal R&D plan and examine the growth rate of the firm's expected total revenue along this optimal plan. We then find that the optimal birth rate of a new product is influenced positively by the speed of diffusion of demand and the initial level of demand but negatively by the unit cost of production and the interest rate and that the growth rate of the firm converges to the optimal birth rate of a new product.     

Gender differences in consumers’ acceptance of genetically modified foods

Research has shown that women are less accepting of genetically engineered products than men. We expect two mechanisms to be at work here. First, in consumer behaviour theory, more knowledge is assumed to lead to more acceptance. We assumed that for genetically engineered foods, this general principle does not apply since long‐term consequences are not known yet. The well‐informed consumer is likely to be comparatively more concerned with this lack of knowledge. We call this the information paradox. Theory on the topic is relatively recent. The results of this study will help to distinguish consumer behaviour with regard to new types of food as compared with traditional foods. Second, we assumed that there is a gender factor included in attitudes toward foods. In general, women still plan food and household purchases. A tentative attitude and an accompanying reluctance toward food innovation are adopted when buying food for children. We call this the gender paradox. In this exploratory study we use data from the Eurobarometer. Eurobarometer surveys have been executed since 1973 by the European Commission among the adult population of European Union member countries (n > 10 000), monitoring the evolution of public opinion. Analysis of these surveys shows that gender differences exist in the acceptance of genetically modified (GM) foods in Europe. Women tend to be less accepting toward genetically modified foods. This supports our gender hypothesis. However, no evidence was found to support the assumed information paradox. It seems that knowledge leads to acceptance, also of GM foods, but more so for men than for women.     

Multinational Corporations and the Transforming Operational Environment in China

China and the multinational corporations (MNCs) have had a long period of close relationship. In locating operations in China, MNCs beneficially followed the principle of least‐cost location. However, China's economic and business environment has been undergoing a striking transformation. The Chinese economy is losing some of its beneficial emerging‐market traits. Many foreign business enterprises and MNCs have experienced deep erosion of profits. This article first focuses on the growing importance of China and the Chinese markets for foreign business firms and MNCs. The sheer size of the market naturally draws them in. Next, it dwells on the challenges that have evolved over the years and the budding new business environment, often referred to as “the new normal.” Many MNCs realize the need to adapt to the new operating environment in China. This article proposes a list of adaptive and coping measures for the foreign enterprises and MNCs. © 2015 Wiley Periodicals, Inc.     

HYSTERESIS IN THE KALECKIAN GROWTH MODEL: A BAYESIAN ANALYSIS FOR THE US MANUFACTURING SECTOR FROM 1984 TO 2007

Responding to the Classical criticism of the baseline Kaleckian growth model which is not fully adjusted in the long run, post‐Kaleckians have proposed model variants that imply the economy to converge to a steady state in which the realized and the normal utilization rates as well as the realized and the expected secular rate of sales growth are congruent. Convergence is caused by endogenous adjustments of the conventional rates to their respective realized rates which is theoretically justified by hysteresis effects. Using a dynamic linear specification of the Kaleckian investment function in state‐space form and by the aid of the Kalman filter, this paper studies the endogeneity of the normal utilization rate and the expected secular rate of sales growth empirically for the US manufacturing sector and its sub‐sectors. We find evidence for an endogenous adjustment of both variables.     

Innovation and internationalization as growth strategies: The role of technological capabilities and appropriability

Firms grow either by launching new products (innovation) or by attracting new customers (internationalization) or by using a mixed strategy. An interesting question is whether innovation and internationalization activities are complementary or substitutive. The paper discusses the connections between technological capabilities, their appropriability, innovation activities, and internationalization, and derives hypotheses from the knowledge-based view of the firm. The hypotheses are empirically analyzed using survey data from 300 Finnish firms clustered as follows: (i) domestic replicators, (ii) domestic innovators, (iii) international replicators, and (iv) international innovators. The performance of the clusters is empirically analyzed, the success criteria being actual growth rate and profitability. We conclude that a profitable firm needs to have unused technological capabilities in order to exploit economies of scope through innovation. A strong appropriability regime strengthens growth. Internationalization and innovation combined is the most advisable option when domestic markets are limited.     

How Institutions Influence SME Innovation and Networking Practices: The Case of Vietnamese Agribusiness

This paper addresses impacts of the institutional framework on small and medium‐sized enterprise (SME) innovation and networking practices. Through an explorative study of a domestic SME‐dominated sector in Vietnam, we find that the institutional framework limits incentives for long‐term investments, resulting in exploitative cost‐control strategies rather than product‐oriented innovation. Due to dominating social norms, SMEs form trust‐based friendship networks, potentially limiting knowledge acquisition and weakening business rationality. Institutional pressures reinforce negative influences on SMEs' incentives to develop innovation ambidexterity. The findings suggest that new institutional economic sociology provides a promising foundation for understanding how institutional frameworks influence SMEs' innovation practices in emerging economies.     

Growth-cycle decomposition diffusion model

The diffusion model has been widely used to explain the S-shaped cumulative growth of markets for retail service and consumer durable goods. In many situations, sales fluctuate because of both growth of innovation diffusion and transitory changes in an external factor, called cycle. The traditional diffusion model, however, cannot distinguish between the two. We develop the growth-cycle decomposition diffusion model to distinguish the growth from the cycle, where the cycle incorporates a few external variables determining the transitory sales environment. The proposed model is applied to estimating the diffusion process for the annual sales of room air conditioners in Korea.     

Thick and Thin Borders in the European Union: How Deep Internal Integration is Within Countries,and How Shallow Between Them

The existence of large border effects is one of the main puzzles of international macroeconomics. The seminal paper by McCallum found that trade between any two Canadian provinces was (on average) 22 times greater than trade between any Canadian province and any US state. Although various authors have estimated internal and external border effects for the whole European Union and some specific European countries, none has done so in the manner that McCallum's seminal paper, stymied by lack of data on region‐to‐region international trade flows. This study uses a novel data set that captures intra and international truck shipments between Spanish regions and regions in seven European countries during the period 2004–11. It computes internal and external border effects, offering novel results for aggregate flows and the importing countries, and estimates several specifications of the gravity equation, so as to tackle such issues as the multilateral resistance term, heteroscedasticity, and zero flows and non‐linear relation between trade and distance. The paper also adds a detailed analysis on the external border effect for each Spanish exporting region and each of the seven European countries considered. By means of this analysis, we shed new light on the relative integration between regions of these seven countries and Spanish exporting regions. Finally, we conduct an extrapolation exercise, computing the ‘trade potentials’ that would be expected in a fully integrated Europe and estimating how long full integration would take to achieve between each Spanish exporting region and each European importing country. To this regard, two alternative scenarios are considered: one using the growth rates of the Spanish exports before the crisis (2001–08) and other considering the post‐crisis growth rates (2011–13).     

Enlargement and the European Geography of the Information Technology Sector

The information technology sector in Europe, comprising the production of computer hardware and software, is disproportionately located on the continent's western periphery. The vast bulk of computers sold in Europe in the 1990s were assembled either in Ireland or Scotland, while Ireland also accounted for over 40 per cent of all packaged software and 60 per cent of all business software sold in Europe. As the sector in both these locations is largely foreign owned, the question arises as to whether EU enlargement might impact on the geography of the sector by diverting information technology FDI from the western to the new eastern periphery. This issue is explored in the present paper by analysis of five individual sub‐segments: computer assembly and electronic components, R&D, mass‐market packaged software and the remainder of the software sector. The paper deems it likely that computer assembly operations will continue the shift seen in recent years from Ireland and Scotland to Central and Eastern Europe. The production of electronic components such as microchips represents a growing share of activity in most EU locations as well as in the CEE countries. Analysis suggests that this pattern of geographically‐dispersed growth will resume once the consequences of the collapse of the high‐tech bubble are played out. The distribution of R&D activity across Europe and globally is also considered unlikely to be much affected by enlargement. As for software, as long as localisation activities remain important, Ireland – the EU location in which most of this activity is carried out – seems set to be able to compete strongly, given the attractiveness of its English‐language environment and other attributes to the young continental Europeans upon which this activity relies. Most software services remain largely non‐tradable however. This sector will grow in the accession states as computer penetration rates converge on the EU average, but without displacing activity from the incumbent EU member states. For firms already competing in the tradable niche software segment, on the other hand, enlargement cannot but be beneficial because of its impact on the size of the market into which they sell.     

New Geography of M&As: A Framing Device of Firms' Strategies

The emergence of new economic centers is changing the competitive scenario. The diffusion of power across an increasingly broad range of countries has opened a window of opportunity for firms from China that want to compete globally. These firms understand their options in exploiting economic geography, and they frequently use cross‐border mergers and acquisitions (M&As) to penetrate developed countries. The United States and Europe are becoming natural destinations for such investments because of their huge markets and leading‐edge technologies. This article provides a “framing device” for firms’ strategies in a multipolar world. © 2015 Wiley Periodicals, Inc.     

Catch‐up through Collaborative Innovation: Evidence from China

Collaborative innovation has received the attention of management scholars for decades. The primary focus of our research is to explore the mechanisms that drive innovation catch‐up of latecomers in an emerging economy through research and development collaborations (i.e., academic and industrial collaborations). Using a sample of 1,066 firms in a high‐tech cluster in China, we find that collaborative innovation strategy has an inverse U–shaped effect on a firm's innovation performance. In addition, the relationship between collaborative innovation strategy and innovation performance is positively moderated by absorptive capacity © 2016 Wiley Periodicals, Inc.     

Why Does Employment Differ in the Course of Time and Across Nations? An Institutional Answer In The Light of the ‘Regulation’ Theory

The paper argues that contemporary unemployment is related not so much to the short run malfunctioning of the labor market as to the erosion of the growth regime in the post-war period. What most theories attribute to increasing labor market rigidities is in fact closely related to the mismatch between the national institutional forms and the trends associated with a new production paradigm and the transformation of the international regime. Some long run historical analyses inspired by the “regulation” theory are then used in order to interpret the unprecedented pattern of French unemployment. Similarly contemporary international comparisons help to explain why employment performances differ so much in North America, Japan, Continental Europe and Scandinavian countries. Some general objectives for economic policy are then suggested but the general conclusion stresses the obstacles to the transition from one growth regime to another which arise from institutional inertia and complementarity.     

When innovation in education works: stimulating teachers' innovative work behaviour

The twenty‐first century labour market requires employees that proactively shape innovations and solve complex problems. Professionals in the education sector are expected to perform innovative behaviour that not only entails the generation, but also the realization and sustainable implementation of new ideas. In a sample of 458 employees in Dutch secondary and higher vocational education (abbreviated in Dutch to MBO and HBO, respectively), this study investigated the relation between environmental factors (namely task variety, management support and exposure to innovation) and Innovative Work Behaviour (IWB) across the different phases of the innovation process, including a sustainability phase. Results of hierarchical regression analyses showed that management support and exposure to innovations served as a predictor for all phases of IWB. Teachers with supportive managers and a high degree of exposure to innovations showed higher scores on innovative behaviour across all phases. Linear regressions revealed a significant relationship between task variety and IWB. In the hierarchical model, only management suport and exposure to innovations showed significant relations. Background characteristics, such as gender, age, tenure, number of working hours and type of education, for which we controlled during the analyses, played a role in how much IWB is displayed. It can be concluded that a work environment, in which employees are exposed to innovation and are supported is crucial. Additionally, in view of the role background characteristics play, it is recommended to select teachers with specific profiles for the different phases of the innovation process.