Effects of Economic Recession on Export Activity

Abstract

Since 1920 there has been 15 economic recessions and expansions in the US and on average recessions have lasted just over a year. The most recent recession was that of 1989–1991, which, with the increased globalization of business, did not spare Australia. Using a geo-business model the research investigates changes in export managers' perceptions on a number of variables before and during the last recession. It also considers whether recession in the domestic market acted as a motivator for Australian firms to enter export markets. Data is analyzed from a survey that attracted respondents from 233 export firms. Findings are presented and implications for theory development and government and policy makers are discussed. Limitations are noted and directions for future research are indicated.     

Principles for Economic Recovery and Renewal

Over the past year, substantial progress has been made on the path to economic recovery. Yet, as true with most recessions induced by a financial crisis, recovery is going to be long and slow. This is particularly true for employment. Moreover, there is evidence that indicates there are structural as well as cyclical concerns about this recovery's slow employment growth. The personal as well as macroeconomic costs of this slow growth mean that there is no higher public policy priority than economic recovery and job creation. This address presents and discusses three guiding principles for economic policy: restoring confidence, increasing aggregate demand, and achieving broader and deeper education.     

Probabilities of Consistent Election Outcomes with Majorities Based on Difference in Support

Computer simulations are used to evaluate the likelihood of consistent outcomes under the class of majorities based on difference in support. These majorities require certain consensus in collective preferences to declare an alternative as the winner. More precisely, individuals show preference intensities in the unit interval among each pair of alternatives and it is required that the winner alternative obtains a difference in the sum of the intensities with respect to the loser alternative. This difference is a real number located between 0 and the total number of voters. We introduce the values of the required threshold for which majorities based on difference in support lead to transitive and triple-acyclic collective decisions with a probability of 1. Our results improve the previous theoretical ones since they require softer thresholds to reach consistent collective decisions.     

How do business and financial cycles interact?

This paper analyzes the interactions between business and financial cycles using an extensive database covering 44 countries for the period 1960:1–2010:4. Our analysis shows that there are strong linkages between the different phases of business and financial cycles. In particular, recessions associated with financial disruptions, notably house and equity price busts, tend to be longer and deeper than other recessions. Conversely, while recoveries following asset price busts tend to be weaker, recoveries associated with rapid growth in credit and house prices are often stronger. These findings emphasize the importance of financial market developments for the real economy.     

Beating the recession blues: Exploring the link between family ownership,strategic marketing behavior and firm performance during recessions

This study explores whether family firms exhibit unique marketing behavior and whether their unique behavior in turn helps them outperform non-family firms during periods of economic contraction. Findings based on a sample of 275 large publicly listed U.S. firms reveal that family firms outperform non-family firms during recessions. This superior performance is partially driven by family firms' proactive marketing behavior and their relatively strong emphasis on corporate social responsibility (CSR). During recessions, while non-family firms tend to decrease their advertising intensities and rates of new product introduction (NPI), family firms are likely to maintain relatively high levels of advertising intensity and rates of NPI. Unlike non-family firms, family firms are also likely to maintain high levels of corporate social performance (CSP) during recessions. These results underscore the benefits of proactive marketing behavior and a continued emphasis on CSR during economic downturns. The authors also add to the scant family-firm literature, demonstrating the family firm to be an effective organizational form.     

The Deeper the Recession,the Stronger the Recovery: Is It Really That Simple?

Are deep recessions typically followed by strong recoveries? This paper investigates this question. There is not a single standard definition for a deep recession or a strong recovery. Therefore, our first step is to define what constitutes a deep recession and a strong recovery. Next we examine whether there is any causal relationship between deep recessions and strong recoveries. Our analysis shows there is no relationship between the depth of a recession and the subsequent pace of economic recovery when we use Gross Domestic Product, Gross Domestic Income, and employment as measures of recession and recovery. A modestly significant relationship does exist, however, between the magnitude of increases in the unemployment rate during a recession and decreases in the unemployment rate during the ensuing recovery.     

Unpacking the interplay between organisational factors and the economic environment in the creation of consumer vulnerability

ABSTRACT

Access to credit is a key enabler of modern life. Yet many consumers face factors beyond their control which sometimes render them unable to borrow from mainstream lenders. This paper documents how firm-related factors determine lending thresholds and shape who is, or is not, a creditworthy customer. The impact of the 2008 economic recession on lending decisions is explored, an aspect that has been insufficiently discussed even though recessions are cyclical events. Drawing on semiotics and using multiple case studies, the study captures not only the groups that were excluded but also the reasons for exclusion. Empirical support is offered for the notion of vulnerability as a fluid state and the role of the timing of decisions as a source of vulnerability is described.     

Forecasting Real Inventories and the Anomaly of Money Illusion

While the transmission mechanism of inventory behavior in the business cycle has been studied, less effort has been devoted to applied forecasting of inventory change. Inventory fluctuations have accounted for a sizable portion of the changes in U.S. GDP during recessions over the past fifty years. In this paper, we report on out-of-sample forecasts of manufacturing and trade inventories generated by regression and neural network methodology. Our forecasting model is Metzlerian in approach, in that the divergence between actual and targeted sales is hypothesized as the primary cause of inventory imbalance. Our forecasts also rely on the slow adjustment of inventory investment to sales surprises. However, the likely presence of money illusion is a caveat to users, and we address several distortions it introduces to inventory management measures.     

Forecasting U.S. Recessions with Probit Stepwise Regression Models

Yield spreads have been repeatedly used in the literature as the top candidates in predicting future recessions. In this paper, we show that existing model specifications are good but fall short of the performance of more complete models. Applying a probit stepwise regression procedure to a large number of economic indicators, we find models that dramatically outperform those used in the literature. Due to a time series that only began in 1964Q1 and very few historical recessions, any model specification may capture only a few of the economy’s many aspects and thus can potentially be biased. Nevertheless, models with better statistical properties should have a better chance to capture the occurrence of recession. Our chosen models are not immune to statistical limitations but should forecast better than the existing models in the literature.     

Endogenous cyclical corporate tax burden in China: The role of tax quotas and growth targets

Using data from China Annual Survey of Industrial Firms and addressing potential endogeneity problem, we find that corporate tax burden in China is procyclical during recessions and countercyclical during booms. The cyclicality is stronger for enterprises whose corporate income taxes are levied by Local Tax Bureau (LTB). Procyclicality of corporate tax burden during recessions is larger for enterprises located in county, non-state-owned enterprises (non-SOEs), non-high-tech enterprises and large-medium enterprises. Furthermore, tax quotas and growth targets of local governments enhance procyclicality during recessions and the countercyclicality of corporate tax burden during booms. Tax collection and government spending are important channels through which tax quotas and growth targets affect the cyclicality of corporate tax burden, respectively. This paper provides important policy implications for China during economic recessions.     

The organizational ecology of retailing: A historical perspective

Little empirical research has been done on how to help retailing firms survive recessions. Using the “natural experiment” of the Great Depression and the theoretical lens of organizational ecology, we explore survival of retailers during 1929-1939 to test whether strategic competitive advantages related to human capital, the liability of newness, organizational form, and legitimacy facilitated survival through this upheaval. Consistent with theory from organizational ecology, survival was positively influenced by the average wage paid in the population, the average age of the population, chain store penetration, and an interaction of level of chain store penetration and age. The study offers recommendations for research and practice to retailers. The most important application for retailing managers is that high wage employees, presumably of higher quality, help retailers survive recessions better than low wage employees.     

Testing the asymmetric effects of exchange rate pass‐through in BRICS countries: Does the state of the economy matter?

This paper investigates not only the question of whether there is exchange rate pass‐through (ERPT) but also the extent to which the pass‐through is asymmetric or state‐dependent in the BRICS countries. Using monthly data from 1999:M1 to 2019:M12 and non‐linear smooth transition vector autoregressive (STVAR) model, our results provide evidence of period‐specific ERPT between the upper and lower regime periods, governed by the selected transition variables. The results further suggest that the pass‐through of exchange rate is higher when the economy is experiencing large appreciations and expansions as well as large depreciations and recessions. Theimplication for these findings is that ERPT is strongly affected by the state of the economy.     

Ethical Decision Making: The Effects of Escalating Commitment

Despite the recent emergence of many new ethical decision making models, there has been minimal emphasis placed on the impact of escalating commitment on the ethical decision making process. In this paper a new variable is introduced into the ethical decision making literature. This variable, exposure to escalation situations, is posited to increase the likelihood that individuals will choose unethical decision alternatives. Further, it is proposed that escalation situations should be included as a variable in Jones's (1991) comprehensive model of ethical decision making. Finally, research propositions are provided based on the relationship between escalating commitment and the ethical decision making process.     

Environmental Legitimacy,Green Innovation,and Corporate Carbon Disclosure: Evidence from CDP China 100

Firms worldwide are increasingly required to disclose (and make efforts to reduce) their carbon emissions due to the environmental damage associated with climate change. Because there has been no previous literature focusing on the determinants of corporate carbon disclosure integrating environmental legitimacy and green innovation, the present study attempted to develop an original framework to fill the research gap. This study explored the influence of environmental legitimacy (an external informal mechanism) on corporate carbon disclosure, and investigated the role of green innovation (an internal formal mechanism) as a mediator. With the samples of Carbon Disclosure Project (CDP) in China from 2008 to 2012, the results demonstrate that environmental legitimacy significantly negatively influences the likelihood of corporate carbon disclosure, and that green process innovation mediates the relationship, while green product innovation has no significant mediating effect. It means that environmental legitimacy not only directly affects the likelihood of corporate carbon disclosure, but also indirectly affects it via green process innovation. Hence, companies must increase both informal and formal mechanisms, i.e., external environmental legitimacy and internal green process innovation, to engage in carbon information disclosure and ensure sustainability.     

规范性影响敏感度(SNI)如何影响全球品牌购买可能性？——一个整合的理论视角

在消费者行为研究领域,规范性影响敏感度是个很重要的构念。但在全球品牌领域的实证研究还相对有限,其影响全球品牌购买可能性的机制还尚不清楚。为此,文章整合全球品牌资产、社会认同和社会地位消费三大理论,试图在中国市场上探讨规范性影响敏感度如何影响全球品牌购买可能性。通过实证研究,结果表明规范性影响敏感度正向影响质量、自我认同和社会地位,进而影响全球品牌购买可能性。特别地,规范性影响敏感度对社会地位和自我认同的影响大于其对质量的影响。规范性影响敏感度通过质量、自我认同和社会地位三条中介路径影响全球品牌购买可能性,但并列中介分析表明中介效应之间并没有显著差异。这个研究结果有助于我们从基于顾客的品牌资产角度,来理解为什么创建全球品牌要同时兼顾平衡感性路径和理性路径。     

Finn Organisation and Spatial Dynamics

For the past three years the world economy has suffered a recession. In contrast to earlier global, as well as national,recessions when manufacturing industries were most vulnerable,business services have been signijicantly affected. Not surpris-ingly, this has revived old doubts about the role of services in modern economies. The papers in this section re-examine the problematics associated with the efficiency and productivity of service organisations. Even if the social division of labour is a strong argument to support the growth of service industries, attempts to understand better the connection between service firm location and different ways of internally organising and coordinating production might be one useful direction for future research.     

The moderating roles of status of B2B evaluator and dependence in the switching costs – switching intentions – performance causal chain in Korea

Switching intentions in the business-to-business (B2B) relationship context have a powerful impact on a firm’s performance and are often considered in relation to perceived switching costs. This factor has also been considered as a good predictor of actual turnover behaviour resulting in reduced market share and profitability of firms. However, despite the importance of switching intentions in B2B relationships, there is still no evidence either to support linkages to switching costs as a key driver of decision-making or to demonstrate interrelationships with firm performance. The author empirically examines the theoretical process of the cognitive assessment – behavioural intentions – performance linkage that explains a firm’s likelihood of terminating B2B relationships using three moderating variables. The results suggest that the switching intentions are driven by switching costs and their similarity to the direct effect on firm performance. Meanwhile, personal relationship loss costs, rather than other types of switching costs, serve an important role in determining the reduction of switching intentions. Finally, the author discusses insights about the present results and suggests future research directions.     

Consumer Risk Preferences and Higher Education Enrollment Decisions

Although there are widespread concerns that consumers are making poor choices regarding higher education, the fact that human capital investments are risky is often overlooked in the national conversation. Therefore, this research investigates the effect of risk preferences on higher education enrollment decisions. A sample from the 1997 cohort of the National Longitudinal Survey of Youth (NLSY97 ) was analyzed, and the results indicate that consumer risk preferences have a significant effect on the likelihood of enrollment. Specifically, there was a robust, positive relationship between risk tolerance and the likelihood of enrollment even after controlling for time preferences and risk perceptions. Consistent with previous findings, ability, parental education, family net worth and income, and being female were positively associated with the likelihood of enrollment. The results suggest that risk preferences may be an important source of omitted variable bias in previous studies of higher education investment choices.     

Contrasting Strategic Response to Economic Recession in Start‐Up versus Established Software Firms*

Economic recessions represent a period of greatly reduced environmental munificence that threatens the survival of all firms. This is especially the case for smaller, start‐up firms, which have been shown to fail at a much higher rate compared with their larger, more established peers. This study surveyed 137 software executives regarding their strategic response to the most recent economic downturn (2001–2003). I draw upon Hofer's framework for turnaround strategies to develop hypotheses to explore how smaller, start‐up firms adjust their strategies in response to economic recession. The results suggest that start‐up organizations are much more inclined to pursue revenue‐generating strategies as a means to weathering recession rather than cost reductions, which tended to be the preferred strategy of larger firms.     

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.