The new geography of corporate research in Information and Communications Technology (ICT)

In the new ICT-based paradigm MNCs have increasingly locationally dispersed competence-creating activities. Using patent data granted in the US to the largest European-owned electronic corporations and all the largest companies in other industries for their ICT research in the European regions, this paper investigates the regional dispersion of such research. We find that co-specialised electronic companies do not tend to develop related R&D in the same regional location, but non-electronic firms undertake related ICT development in a common centre of excellence. Thus, intra-industry competition encourages the geographical separation of co-specialised research, while inter-industry cooperation entails the co-location of related research.     

The effect of family ownership on corporate hedging: the case of Thailand

We explore how corporate hedging decisions are affected by family ownership and control in Thailand. One crucial advantage of investigating this issue in Thailand is that hedging instruments became available only recently, long after families established their presence in the firm. Thus, endogeneity is much less likely. The evidence shows that family ownership by itself does not have a significant impact on the firm’s propensity to hedge. However, when family members have a presence on the board of directors, the firm is significantly more likely to engage in hedging activities. Furthermore, we find that the presence of institutional blockholders also increases the likelihood of hedging significantly. Our study is the first to examine the impact of family ownership and control on corporate hedging behaviour in an emerging market.     

Culture and innovation: The moderating effect of cultural values on corporate entrepreneurship

In the few last decades researchers have paid attention to the role of entrepreneurship and innovation in productivity, employment, and economic and social development. In addition, literature has focused on the entrepreneurship that occurs within organizations, such as corporate entrepreneurship. Also, the role of culture is crucial for the development of innovation. Consequently, it is vital to understand why some firms are more innovative and develop more entrepreneurial projects than others, and what determines innovation performance. This research uses Institutional Economics as a conceptual framework with the objective of analyzing the environmental factors that condition innovation within the firms. Specifically, the study determines the moderating effect of cultural values on corporate entrepreneurship. The study uses a logistic regression and the Global Entrepreneurship Monitor – GEM – database from the years 2004–2008, with information of 62 different countries (718.758 observations). The main findings highlight the impact of the environmental factors on organizational innovation, specifically on corporate entrepreneurship. Variables such as living in an entrepreneurial culture and media exposure (informal factors), and the number of procedures necessary to create a new business or access to finance (formal factors), appear to be significant for corporate entrepreneurship. Moreover, informal factors behave as moderators between formal factors and corporate entrepreneurship. The article has several implications from both theoretical perspective (advancing in the application of Institutional Economics for the study of innovation within the firms) and from the practical point of view (providing insights for governmental policies interested in fostering innovation and corporate entrepreneurship).     

The identifiable victim effect in charitable giving: evidence from a natural field experiment

We design a natural field experiment to enhance our understanding of the role of the identifiable victim effect in charitable giving. Using direct mail solicitations to 25 797 prior donors of a nonprofit charity, we tested the responsiveness of donors to make a contribution to either an identifiable or a statistical victim. Unlike much previous research, which has used only laboratory experiments, we find that the campaign letter focusing on one identifiable victim did not result in significantly larger donations than the campaign letter focusing on the statistical victim. In addition to the role of the identifiable victim, we investigate the degree to which each of our campaign letters affected donors’ payments to other concurrent and future campaigns and whether there is decreasing marginal returns to campaigning in the sense that receiving a letter crowds out donors’ payments to other future and concurrent campaigns. We find some evidence of crowding out, indicating that charitable giving could be a zero-sum game; however, the treatment letters did not have different effects on other payments.     

More for everyone: The effect of local interests on spending on infrastructure

A central question in political economy is whether decision-making in representative democracies is biased towards local public investments or other types of policies which have locally concentrated benefits. The model by Weingast et al. (1981) predicts that a legislature with members from different areas will spend more in total on local public goods when the geographic constituency of each member is small. I test this prediction using panel data on the 18 Norwegian regional councils, exploiting that the geographic allocation of regional council seats varies considerably over time. Consistent with the theory, I find robust evidence that investments in regional public roads are lower when many council members come from the more populated areas in the region. This gives a more direct test of the prediction by Weingast et al. (1981) than existing empirical evidence, which concerns the relationship between public spending and legislature size. I find similar but less robust results for the maintenance of existing roads.     

How giving affects giving: a long-term analysis of donations

Social preferences theories suggest that at least some people show altruistic behaviour. However, this philanthropic behaviour ranges from pure altruistic preferences to reluctant altruists. The fact that a subset of contributors has impure preferences raises questions regarding the stability of prosocial contributions. Assuming differences in other regarding preferences, we examine whether at an aggregated level monetary contributions are stable or fragile over time. We study the aggregated donations in the US from 1973 to 2013 using ARIMA and ARMAX models. The significant autoregressive and moving average coefficients in our estimations suggest that aggregated donations are highly autocorrelated. Our estimated impulse response functions indicate that aggregated donations converge to their historic mean quickly after an exogenous shock, which shows the stickiness of the inclination to donate.     

Managerial flexibility, uncertainty, and corporate investment: The real options effect

This paper examines how changes in uncertainty affect corporate investment and how managerial flexibility influences this effect. Consistent with existing evidence, this study shows that increased uncertainty reduces a firm's capital expenditures even after controlling for investment opportunities and fund availability. It further shows that the negative effect of increased uncertainty on corporate investment is more pronounced for firms with fewer financial constraints and larger size. Overall, the results suggest that managerial flexibility proxied by certain firm characteristics affects the negative relation between uncertainty and investment.     

The effect of risk-sharing government subsidy on corporate R&D investment: Empirical evidence from Korea

Despite the wide belief that the high social rates of returns to R&D investment justify government subsidy policy in advanced countries, there are only limited studies about whether the R&D subsidy as a means of risk-sharing stimulates R&D investment of small and medium sized enterprises (SMEs) in developing countries. This paper empirically investigates the issue, using a unique data set on government subsidy for new technology development of Korean manufacturing firms, listed and non-listed, for the period from 2000 to 2007. The paper employs the DID estimation procedure and controls for simultaneity of the subsidy for new technology development using 2SLS and two step Tobit procedure. Our empirical results show that there is no solid evidence for crowding-out effects of the government subsidy. These results suggest that government subsidies could help SMEs to overcome the barriers to risky R&D projects through sharing R&D failure risk with government and by reducing capital costs to undertake new technology development projects, and thus the subsidy policy for new technology development seems to be partly successful in promoting the R&D investment of the Korean SMEs.     

Riding out of a financial crisis: The joint effect of trust and corporate ownership

We study how generalized trust shapes the ability of firms with different ownership forms to obtain trade financing and perform during a financial crisis. Exploiting geographic variations in trust across Italian regions and the occurrence of the 2008-09 financial crisis in a difference-in-differences setting, we show that generalized trust makes family firms less able to obtain trade financing during the crisis. This finding maps into performance results: trust alleviates the negative effect of a crisis for non-family firms, while it aggravates the negative effect for family firms. This latter result depends crucially on a firm's corporate governance: trust does not harm family firms whose board is open to non-family directors. Collectively, our findings illustrate how culture interacts with corporate attributes in shaping a firm's prospects.     

The sustainability of the commons: giving and receiving

This paper analyzes the use of a cost-free reward mechanism in the exploitation of a common property resource. We implement an experimental study involving a two-stages game where agents first decide resource appropriation and then have the opportunity to distribute cost-free bestowals. We observe that subjects link the two activities in such a way that appropriation determines the distribution of bestowals which in turn contributes maintaining low appropriation levels, thus avoiding the destruction of the common resource. Not all the potential bestowals are distributed, however.     

The impact of corporate social responsibility activities on corporate financing: a case of bank loan covenants

We examine the impact of corporate social responsibility (CSR) activities on the intensity of loan covenants, one of the most important nonpricing terms of syndicated loan contracts. Undocumented in the existing literature, we offer new evidence that while CSR strengths have little impact on loan covenants, CSR concerns lead to stricter loan covenants. These asymmetric results suggest that while lenders view CSR strengths as discretionary, they are more concerned about value-destroying CSR concerns, which induces the lenders to screen out firms engaging in nonsocially responsible activities and penalize these firms with stricter loan covenants. Combined with the evidence on the CSR-loan spread association in the existing literature, our results provide strong evidence that CSR matters to both pricing and nonpricing terms of loan contracts.     

All politics is local: The effect of fiscal and monetary constitutions on economic policy

The rules of behavior for the monetary authorities changed in 1933 and 1947 and the Fed temporarily changed its operating procedures in 1979, but these changes did not alter the fact that the monetary authorities serve as the agent of the fiscal authorities. On the fiscal side, a shift from a centralized process to one where Congress was composed of a set of individual entrepreneurs altered the fiscal focus from the national economy to one of localized interests. This change led to a more autoregressive and deficit-prone federal budget and changed the interaction between monetary and fiscal policy. It also elevated the status of monetary policy to the extent where financial markets react to every utterance from the monetary authorities.     

The effect of state education finance reform on total local resources

Both the federal government and the states use intergovernmental grants to try to change the composition of local spending across different programs, as well as the distribution of resources across localities. Many states are now under court order to use state education grants to reduce local disparities in education spending. While a substantial body of literature suggests that these court orders increase the level and progressivity of state education spending, there is little evidence on their broader effects on the total resources available not just for schools in low-income districts, but for other programs across all localities. We find that states finance the required increase in education spending in part by reducing their aid to localities for other programs, particularly for wealthier areas. Thus, while court-ordered school finance equalizations do increase total state aid to localities for education, they do so at the expense of drawing state intergovernmental aid away from programs like public welfare, health, hospitals, and general services. These findings provide insight into the effectiveness of using earmarked funds to achieve redistribution.     

The geography of banking: Evidence from branch closings

In the aftermath of the Great Recession, the number of bank branches declined in most developed countries. In this paper, we investigate how banks have downsized their branch networks in Italy, by comparing the pre‐ and post‐crisis spatial distribution of branches. By using a detailed data set that includes a wide set of controls for the characteristics of each bank branch, we estimate the probability of a branch being closed as a function of its distance from both proprietary and competitors' branches. We find that banks are more prone to close branches in those areas where other proprietary branches are closer and where competitors' branches are closer. This indicates that, since the start of the crisis, banks have closed branches especially in those areas where their proprietary network was relatively more populated and the competition was fiercer.     

The geography of output volatility

This paper examines the structural determinants of output volatility in developing countries, and especially the roles of geography and institutions. We investigate the volatility effects of market access, climate variability, the geographic predisposition to trade, and various measures of institutional quality. We find an especially important role for market access: remote countries are more likely to have undiversified exports and to experience greater volatility in output growth. Our results are based on Bayesian methods that allow us to address formally the problem of model uncertainty and to examine robustness across a wide range of specifications.     

The geography of output volatility

This paper examines the structural determinants of output volatility in developing countries, and especially the roles of geography and institutions. We investigate the volatility effects of market access, climate variability, the geographic predisposition to trade, and various measures of institutional quality. We find an especially important role for market access: remote countries are more likely to have undiversified exports and to experience greater volatility in output growth. Our results are based on Bayesian methods that allow us to address formally the problem of model uncertainty and to examine robustness across a wide range of specifications.     

Mixed feelings: Theories of and evidence on giving

This paper examines possible motives and institutional factors that impact giving. Specifically, I consider alternative theories parallel to dictator experiments that generate evidence on both allocation decisions and their effect on feelings. A number of new empirical findings as well as new interpretations for previously reported findings result. A novel test distinguishes warm glow from impure altruism and rules out the former as the sole motive for giving. Very generous donations to charities that aid the needy (with modal gifts of the entire dictator's stakes) cannot be attributed to familiarity with the charities. A charity that offers a matching grant increases its revenues by drawing donors and donations away from one that does not, although aggregate charitable donations do not rise. Additional results on emotions paint a picture of “mixed feelings:” generosity creates good feelings when the recipients are charities and bad feelings when they are fellow students. No group of dictators, however, feels better, on average, than a control group that is given no opportunity to donate. I propose a simple model that accounts for these results on allocation behavior and feelings by incorporating elements of two approaches, unconditional altruism and social preference theories, that to date have mostly evolved independently. A critical feature of this model is the social norm, and the results of the experiments corroborate the theory in the context of two norms of distributive justice that are important to real world giving: equity and need.     

On the distribution of tax effects on headquarters location

This paper sheds light on the distribution of profit and personal income tax elasticities of headquarters location across 13,074 firms in 68 countries over 1999–2012. Results suggest high variability in elasticities, which is overlooked in virtually all earlier work on the matter.     

The impact of taxes and wasteful government spending on giving

We examine how taxes impact charitable giving and how this relationship is affected by the degree of wasteful government spending. In our model, individuals make donations to charities knowing that the government collects a flat-rate tax on income (net of charitable donations) and redistributes part of the tax revenue. The rest of the tax revenue is wasted. The model predicts that a higher tax rate increases charitable donations. Surprisingly, the model shows that a higher degree of waste decreases donations (when the elasticity of marginal utility with respect to consumption is high enough). We test the model’s predictions using a laboratory experiment with actual donations to charities and find that the tax rate has an insignificant effect on giving. The degree of waste, however, has a large, negative and highly significant effect on giving.