Brazil Post‐Lula: Challenges and Opportunities Facing the Brazilian Business Environment

The Brazilian economy indicates great potential for future economic growth. An increasing and affluent middle class, expanding exports, and foreign reserves are testimonies of Brazil's recent accomplishments. The country, however, still faces a number of challenges that may compromise its sustainable long‐term economic goals and objectives. This article focuses on the Luiz Inacio “Lula” da Silva government's economic performance. The article's main findings show increasing bottlenecks being created as a result of the Lula government's eight years of low economic growth rates, which have penalized the country's competitiveness. The newly elected president, Dilma Rousseff, will inherit a substantial investment deficit in the areas of infrastructure, education, health care, research and development (R&D), and innovation, as well as Brazil's worst public debt/gross domestic product (GDP) ratio in the past 100 years. These conditions will prevent Brazil from growing and developing at faster rates. This article also elaborates on Dilma Rousseff's most recent statements and discusses likely future paths for the Brazilian economy. © 2012 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.     

The Impact of User Review Volume on Consumers' Willingness-to-Pay: A Consumer Uncertainty Perspective

Numerous studies have investigated the impact of review volume and review variance on product price, but their findings are mixed. The perspective of mismatch cost framework (e.g., Sun 2012) argues that, at the market level, the impact of review variance on product price varies with review valence due to diverse product tastes across individuals. The perspective of classic expected utility framework (e.g., Wu and Ayala Gaytán 2013; Wu et al. 2013) further argues that heterogeneous risk attitudes across individuals directly drives the varying impact of both review volume and variance on willingness-to-pay, regardless of review valence. Although both frameworks have gained good empirical support, neither of them probed whether the impact of review volume or review variance varies within an individual.We extend the current research by focusing on the varying impact of review volume on consumers' willingness-to-pay. Combining economic and behavioral theories of decisions under uncertainty, we argue that consumers' preferences of uncertainty can vary both across and within individuals. The extended framework thus concludes that the impact of review volume on consumers' willingness-to-pay not only varies across individuals with different types of uncertainty preferences, but may also change with review valence within an individual of some types of uncertainty preferences. The framework is tested using an experimental study and an empirical study. Results from both studies provide good support for this broader framework.     

Thailand: Opportunities and risks in a fast‐changing business environment

Thailand's business environment is changing dramatically in the wake of the worst financial crisis and economic recession in the country's recent history. Some of these changes may be ephemeral, and Thailand will return to old business practices once the crisis eases, but many of the economic and political reforms now being implemented can make trade and investment in Thailand easier, more transparent, and less affected by corruption. Some of the reforms will not deliver the expected results. Others may increase uncertainty that will be counterproductive in the short run. But some of the constitutional changes—the restructuring of family controlled conglomerates, better regulation of the financial sector, demands for stronger corporate governance, and new incentives for private investment—can have profound impacts on the country's business climate and the way American companies do business in Thailand. © 2001 John Wiley & Sons, Inc.     

Future rent-seeking and current public savings

The conventional wisdom is that politicians' rent-seeking motives increase public debt and deficits. This is because myopic politicians face political risk and prefer to extract political rents as early as possible. In this paper we study the determination of government debt and deficits in a dynamic political economy model. We show that this conventional wisdom relies on economic volatility being low relative to political uncertainty. If economic volatility is high relative to political uncertainty, then a rent-seeking government actually over-saves and over-taxes along the equilibrium path relative to a benevolent government. This result emerges because of the option value of rent-seeking: a rent-seeking government over-values future funds because of the possibility of using them for future rents instead of cutting taxes in the event of a future boom (when marginal utility of private consumption is low). This over-saving bias is temporary since, in the long run, the rent-seeking government over-borrows relative to the benevolent government as it eventually squanders the funds it has accumulated. We find that both the under-saving and over-saving bias of the government can be solved by a rule of capping deficits.     

Macro‐institutional conditions in Ghana and the challenges to HRM program development and implementation

Multinational enterprises (MNEs) originating from advanced economies with operations in less developed host countries need to have a good understanding of the macro‐institutional conditions of the host country. Given HRM practices are context‐specific and embedded within the institutional and cultural settings of the host country, an exploratory qualitative study approach was employed to ascertain the host country's institutional dimensions (drivers) likely to undermine HRM program implementation in large local companies and in MNEs. Data were drawn from key stakeholder participants, including HR managers from MNE subsidiaries, domestic firms, and officials from key stakeholder institutions. The evidence points to six (6) dimensions of a less‐developed host country's macro institutions that undermine firms' HRM advancement. These include the regulatory system, education and training arrangement, labor market conditions, cultural barriers, political actors' intrusion, and economic uncertainty. The implications thereof are discussed.     

Financial safety nets: reconstructing and modelling a policymaking metaphor

This paper explains that financial safety nets exist because of difficulties in enforcing contracts and shows that elements of deposit-insurance schemes differ substantially across countries. It shows that differences in the design of financial safety nets correlate significantly with differences in the informational and contracting environments of individual countries and that a country's GDP per capita is correlated with proxies for a country's level of: (1) informational transparency, (2) contract enforcement and deterrent rights, and (3) accountability for safety net officials. The analysis portrays deposit insurance as a part of a country's larger safety net and contracting environment. This means that there is no universal method for preventing and resolving banking problems and that the structure of a country's safety net should evolve over time with changes in private and government regulators' capacity for valuing financial institutions, disciplining risk taking and resolving insolvency promptly, and for being held accountable for how well they perform these tasks.     

The Impact of Trade Openness on Regional Inequality: The Cases of India and Brazil

Regional inequalities are large in India and Brazil and represent a development challenge. This article aims to determine whether regional inequalities are linked to a country's trade openness. An annual indicator of regional inequalities is constructed for India for the period 1980–2004 and for Brazil from 1985–2004. Results from time series regressions show that Brazil's trade openness contributes to a reduction in regional inequalities. The opposite result is found for India. India's trade openness is an important factor aggravating income inequality among Indian states. In both countries, inflows of foreign direct investment are found to increase regional inequalities.     

Foreign Direct Investment in Africa: The Role of Natural Resources,Market Size,Government Policy,Institutions and Political Instability

Data from several investor surveys suggest that macroeconomic instability, investment restrictions, corruption and political instability have a negative impact on foreign direct investment (FDI) to Africa. However, the relationship between FDI and these country characteristics has not been studied. This paper uses panel data for 22 countries over the period 1984–2000 to examine the impact of natural resources, market size, government policies, political instability and the quality of the host country's institutions on FDI. It also analyses the importance of natural resources and market size vis‐à‐vis government policy and the host country's institutions in directing FDI flows. The main result is that natural resources and large markets promote FDI. However, lower inflation, good infrastructure, an educated population, openness to FDI, less corruption, political stability and a reliable legal system have a similar effect. A benchmark specification shows that a decline in the corruption from the level of Nigeria to that of South Africa has the same positive effect on FDI as increasing the share of fuels and minerals in total exports by about 35 per cent. These results suggest that countries that are small or lack natural resources can attract FDI by improving their institutions and policy environment.     

International Franchising Decision-Making: A Model for Country Choice

The present study examines how a number of market conditions may drive diffusion of franchising. It considers a sample of 63 Spanish franchisors operating through 2321 franchisee outlets across 20 different Latin American countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay, and Venezuela in January 2011. Results conclude that geographical and cultural distance between the host and home country, as well as the level of the host country's uncertainty avoidance, individualism, political stability, unemployment rate, market potential, and efficiency of contract enforcement, may drive the spread of international franchising. Results reinforce previous research on country choice as to the association between international franchising and the host country's unemployment rate and cultural distance, but also identify differences from other regions in some issues such as political stability. Moreover, new insights relative to the effect of market potential, individualism, uncertainty avoidance, and the efficiency of contract enforcement on international franchise diffusion are also shown.     

Hysterical nostalgia in the postcolony: from Coming Home to District 9

Much of the remembering of recent years in South Africa has involved nostalgia, but a nostalgia of excess and morbidity, or what might be called hysteria. The endangered body stands as a memorial to the distortions of apartheid, and there are many manifestations in the culture of the country. Here I analyse two performative works by expatriate South Africans who in contrasting but related ways express through them a hysterical-nostalgic relation to their country's past: Coming Home, a memory-play by Athol Fugard, and Neill Blomkamp's dystopian film District 9, both of which touch on the country's HIV/AIDS crisis. Resisting inadmissible yearnings for the apartheid past leads to revealing versions of nostalgia, in terms of broader cultural aesthetics, and the politics of the present – a time of continuing turbulence and uncertainty.     

Country Resources,Country Image,and Exports: Country Branding and International Marketing Implications

ABSTRACT

A country's economic, political, and socio-cultural institutions have always been regarded as important determinants of a company's exports and international marketing strategies. With the recent thinking about countries becoming more like a brand, these factors should impact a country's marketing and branding strategies. There has been a call for more research on how countries can use their institutions and resources to enhance their globalization efforts. This study intends to fill this gap by examining the relationships between country institutions and resources, country image, and exports based on institution theory and resource advantage theory. Both archival and primary data for 24 countries over 12 years (1995–2006) were used to assess a random-effects panel data model. The results reveal the significance of economic development and communication infrastructure on exports. In addition, country image was found to indirectly affect exports. The theoretical and practical implications on country branding and international marketing conclude the article.     

Does Brain Drain Lead to Institutional Gain?

A country's endowment of human capital affects its institutions through various channels. This raises the possibility that skilled emigration can leave its mark on a country's institutional development. We explore the impact of emigrant human capital on home country's institutional quality. Using geographical and genetic distance‐based instrumental variables for emigration and a dynamic panel estimation method, we find that human capital emigration helps the home country's political institutions, but hurts economic institutions. The conventional ‘brain drain’ argument, therefore, needs to incorporate the institutional changes due to skilled labour emigration.     

The role of home governments in entry bargaining of multinationals: China's investment in Central Asia's natural resource sector

Over the last two decades, China's participation in Central Asia's energy sector has increased dramatically. This article explores the case study of China's outward foreign direct investment (OFDI) in Central Asia's natural resource sector through the framework of bargaining model. Although the scholarly literature studied extensively FDI determinants and support of the home government on MNE activities abroad, there is little evidence‐based research on the effect of governmental negotiations on OFDI. The existing research on China's OFDI in natural resource sector highlighted the country's complex approach to energy deals, which was facilitated by investment in infrastructure projects and provision of loans. As this study confirmed, support with loans and investment in the development of export pipeline infrastructure was crucial in securing energy deals for Chinese multinationals (CMNEs). More specifically, this article makes an important contribution toward the understanding of China's investment in developing markets with high levels of political risk such as Central Asian region. The presented evidence suggests that there is a positive correlation between home government support and successful entry of CMNEs to natural resource sectors in emerging markets.     

Future rent-seeking and current public savings

The conventional wisdom is that politicians' rent-seeking motives increase public debt and deficits. This is because myopic politicians face political risk and prefer to extract political rents as early as possible. In this paper we study the determination of government debt and deficits in a dynamic political economy model. We show that this conventional wisdom relies on economic volatility being low relative to political uncertainty. If economic volatility is high relative to political uncertainty, then a rent-seeking government actually over-saves and over-taxes along the equilibrium path relative to a benevolent government. This result emerges because of the option value of rent-seeking: a rent-seeking government over-values future funds because of the possibility of using them for future rents instead of cutting taxes in the event of a future boom (when marginal utility of private consumption is low). This over-saving bias is temporary since, in the long run, the rent-seeking government over-borrows relative to the benevolent government as it eventually squanders the funds it has accumulated. We find that both the under-saving and over-saving bias of the government can be solved by a rule of capping deficits.     

Evaluating Political Risk Forecasting Models: What Works?

Definitions of “political risk” abound, including with “assessments” or “analysis,” but even though ratings are widely used by investors, few understand either the theory behind particular instruments or what the ratings say about their potential investment. The assessment of political risk works backward from losses to foreign investors (not domestic) that could have been insured or protected, to a determination of how high the risk is, what the cost of the likely loss might be, the type of insurance coverage that might be necessary, and then to what an investor should be willing to pay to protect against that risk. A wide range of potential losses and potential causes of those losses is covered by the many political risk assessment firms and indices that are available to potential investors. BERI, the PRS Group, ICRG, the Eurasia Group, PERC (Hong Kong), and many others provide an array of ratings that investors can employ in making their choices. Few of these focus on the critical element of forecasting. Insurance doesn't relate to circumstances of the moment but rather those of the future. What will they be? Just a few of the risk assessments (PRS, BERI, ICRG) deal explicitly with the future, as good as that might be. Few also deal with the matter of risks to particular industries, companies, regions of a country, or external circumstances (what are the country's neighbors up to?). This article offers some suggestions on improving the political risk assessment business. © 2014 Wiley Periodicals, Inc.     

A politico-economic view of the debt-servicing capacity of emerging economies

While there are a multitude of approaches to analysing a country's debt-servicing capacity, these display a number of weaknesses, notably as regards the integration of political and economic risk factors. This article presents a stylised politicoeconomic model that highlights a number of determinants which have so far been neglected in the literature.     

US–Brazilian cotton policies

Brazil filed a lawsuit with the WTO against the United States for providing cotton production and export subsidies, and the WTO ruled in favour of Brazil. Brazil threatened to impose retaliatory tariffs if the United States does not comply with the WTO rulings. After a prolonged litigation stretching from 2002 to 2010, both countries agreed to a negotiated settlement wherein the United States paid Brazilian cotton producers to compensate for any adverse effects. This study develops a political economic model to theoretically analyse US cotton policies, Brazil's threat of retaliatory tariffs and the negotiated settlement between the two countries. The theoretical results show that the volume of cotton output, supply price response, politicians' apathy for the public welfare, elasticities of excess supply/demand and the magnitude of US transfers play a crucial role in determining US policies. This study contributes to the literature by being the first to model political economic aspects of the complex system of trade and domestic policies in the cotton industry using a three-country framework, tariff retaliation and transfers between the countries.     

Social and Political Risks: Factors Affecting FDI in China's Mining Sector

Political risk can be defined as the potential for uncertainty and harm to business/economic operations that arise from political (governmental and other) behavior and events. These risks typically stem from factors such as economic structures, government institutions, policies, and societal characteristics, and are becoming more of a concern to prospective investors in a changing global political economy. This article seeks to expand upon the framework of political risk analysis by looking at “softer,” nonquantifiable risk factors. Through the analysis of foreign business experiences in China, we aim to demonstrate, via a qualitative case study of foreign direct investment (FDI) in the Chinese mining sector, that in addition to typical financial, operational, and geological factors, firms should be better aware of the particular sociopolitical and cultural risks that can harm their investments in a given industry. This study draws on primary fieldwork, focuses on micropolitical risks to the industry, and stresses that multinational corporations (MNCs) could be more cognizant of the many societal factors that can influence an investment success. © 2016 Wiley Periodicals, Inc.     

International spillovers and absorptive capacity: A cross-country cross-sector analysis based on patents and citations

This paper brings together the issues of knowledge spillovers and absorptive capacity, by assessing the role of prior R&D experience in enhancing a country's ability to understand and improve upon external knowledge. International spillovers are found effective in increasing innovative productivity in laggard countries, while technological leaders are a source rather than a destination of knowledge flows. Quantitative estimates of the effect of absorptive capacity on innovative performance, through knowledge spillovers, show that absorptive capacity increases the elasticity of a laggard country's innovation to international spillovers, while its marginal effect is negligible for countries at the technological frontier.