Little Czech Mole,Deep Affection From

Do you remember the little animated character in The Mole? The famous mole has lived for over 86 years in this animation movie which was made by Studio Bratri v- triku,Czech.When I was still a child,I was a crazy fan of this kind-hearted but a little silly mole.I even knew how to say it in Czech:krtek! Because of that mole,I began to fall in love with Czech.After China's Foreign Trade did an interview with Am- bassador of the Czech Repulic to China,H.E.Dr.Vitezslav Grepl, also an old friend of the Magazine, I have more reasons to have affec- tion towards this country. H.E.Dr.Vitezslav Grepl has been the Ambassador of the Czech Repulic to China for about 3 years.Besides his mother tongue, he can also speak very good English,Swed- ish,Finnish and Russian.He was fond of old map collection.In the exhibition room of the Embassy,we could found many previous art works he collected.From his proud smile when he shown us the old Chinese map he collected,I suddenly knew why I could like that little mole so much. Former Czechoslovakia estab- lished former diplomatic relations with People's Republic of China only 5 days after its foundation. During those years,we witnessed together the good relationship be- tween China and Czech Republic. In December 2005,Premier Wen Jiabao visited this beautiful Czech, honored"garden of Mid-Europe". On August 31 this year,the 7th Meeting of Sino-Czech Joint Economic Com- mission was held in Prague.Both sides had an all-round review of the bilateral economic re- lations.By more exchanging activities,China and Czech are walking closer to each other. By Editor     

Wage Inequality in the United Kingdom: Trade and/or Technology?

I employ two alternative intra‐industry trade Applied General Equilibrium (AGE) models to explain some stylised facts of the British economy. The model with skill‐biased technical change (i.e. exogenous skill‐biased technical change à la Solow) can explain the rise in wage inequality between skilled and unskilled workers, the decline in manufacturing and the expansion of modern services. However, the model where technical change is trade‐induced (i.e. endogenous sector‐biased technical change à la Romer) performs better, because it can also explain the exponential rise of imported intermediate capital goods and developments in the wage rate of unskilled workers.     

Why Does the Problem Persist? ‘Rational Rigidity’ and the Plight of Japanese Banks

One of the most perplexing factors in the Japanese financial crisis is the apparently non‐optimal and non‐rational behaviour of Japanese banks. We provide a “rational” explanation for bank behaviour based on a theory of community banking that incorporates Japanese institutional characteristics. We find three implications of community banking – a low lending rate, a low bankruptcy rate, and in particular, institutionalisation of ‘rational rigidity’ (an institutional pledge of no profit maximisation) – in Japanese banks. We argue that this type of banking is viable as long as the economy expands and asset prices go up, which was the case before the asset‐market crash in 1990. The stagnation and free‐fall of asset prices in the 1990s exerted tremendous pressure on Japanese banks but did not paralyse them completely in the 1990s, although there are indications that they failed to restructure distressed large corporations in some sectors, notably real estate. Thus, the problem is not that paralysed banks are blocking recovery, but that their current institutionalised rigidity in banking practices is no longer viable because private enterprises in the market economy are suffering from asset‐price deflation and economic stagnation.     

Towards a Handbook on European Contract Law and Beyond: The Commission’s 2004 Communication “European Contract Law and the Revision of the <Emphasis Type="Italic">Acquis</Emphasis>: The Way Forward”

The European contract law project has crossed the threshold between an intellectual exercise and concrete policy. The 2004 Communication on the way forward describes the procedure to implement the policy suggested by the 2003 Action Plan, and so it would now be timely to give some thought to the likely impact of the Common Frame of Reference (CFR) on future Community law. It is submitted that the CFR is indispensable for the planned crafting of full harmonisation consumer contract law. This article therefore focuses on the possible uses of the CFR for consumer legislation and attempts to make the case for a recasting of Community law on consumer protection as a first priority in the implementation of the project. Based on policy papers and policy considerations, this article suggests making a test case of the travel and tourism sectors. It also reflects further on the potential virtues of an optional instrument for consumer legislation.     

Business and the Environment: Is There More to the Story?

Actions taken to improve the environment are frequently good for profits, but many executives, including economists, are not fully aware of just how good businesss environmental record is. As a result, they often have difficulty responding to critics. This article will present three major points: 1) the environment of the United States is much improved over the past several decades, and businesss pursuit of profits has been an important factor; 2) the publics information about business and the environment is poor; and 3) this faulty information fosters the impression that business is evading its responsibilities.JEL Classification Q50     

Europe's R&;D: Missing the Wrong Targets?

Europe is not delivering on its commitment under the Lisbon agenda to increase its R&;D-to-GDP ratio to 3% by 2010. But does the European Commission's practice of benchmarking each and every member state against the headline 3% figure make sense? R&;D intensity is influenced by industrial specialisation, but also by other factors such as a large integrated market for technology and a favourable environment for academic research. What can be done by the EU and by the governments of the member states to improve the situation?     

R&D: Who does the R,who does the D?

This paper examines the determinants of the allocation of national R&D resources between research and development activities. We derive conditions under which a firm being outdistanced by a foreign rival in a two-stage international patent race would drop out, and relate those conditions to home-market size and to the race's cost and risk characteristics. Because of this “discouragement effect”, firms located in smaller markets appear as if they were, on average, less successful in transforming research expertise into commercial product development. We also show that in a two-sector model (R and D), the proportion of R&D resources going into product development as opposed to research increases with country size. Moreover, starting from a symmetric game and increasing the size of one country induces the opposite effect on other countries (a shift of R&D resources from development to research) through strategic interaction among research teams.     

Market Cultures,the Middle Classes and Islam: Consuming the Market?

In discussions of Islam and consumer practices, there is a tendency to focus exclusively on the “clash of cultures”, particularly that between Islam and the “west”. In Islamic societies, consumer culture is often portrayed as a threat, harmful to religion as it privileges hedonism, pleasure, individualism and an expressive lifestyle. To counter the influences of the market and “deislamisation”, Islamic fundamentalists and revivalists have posited Islam as an innoculative pill against decadent western values. Such analyses, however, do not add very much to our knowledge of contemporary modernist Islamic societies undergoing rapid social and economic transformation. In examining the case of Malaysia, the paper seeks to shed some light on how the various interpretations of Islam impacts on modern Malaysian Muslims.

The paper starts with an examination of the central concept of Islam as a discursive tradition and its continuing legacy in the Malaysian social and political formation. The paper next examines the role of the state and how its ability to affect a national vision of high‐modernist development and growing affluence has created a new Malay middle class. Increasing wealth and a growing middle class have seen an intensification of new consumption patterns and practices. At the same time, there is a growing Islamisation, and culturally and politically the urban Malay middle classes are split as they are both sympathetic to the Islamic revivalist tradition and are active consumers of middle‐class lifestyle. These contradictions played themselves out in the public sphere and percolate down into everyday life and practice, affecting power structures and discourses. Classes, identities, entrepreneurship, the nature of capitalism, civil society and dissent are consequently all affected. The paper therefore argues that the differing interpretations in Islam enable different understandings of consumption and identity formation and that such analysis can engender richer and greater analytical insights in the context of Islamisation, modernity and consumption.     

Beyond the corporation: Who represents business to the government and public?

A new kind of business leadership has emerged during the past decade, a leadership devoted to the public interest. What are the stages that characterize the development of these leaders?     

How Does the Franchisor's Choice of Different Control Mechanisms Affect Franchisees’ and Employee-Managers’ Satisfaction?

Satisfaction of franchisees and employee-managers affects the overall performance of a franchise system. We argue that different actors in the same franchise system need to be treated in different ways. The franchisor's choice of control mechanisms affects the satisfaction of franchisees and employee-managers differently. To our knowledge this is the first study that gathers primary data from franchisees and employee-managers in the same franchise system at the store level with almost identical questionnaires. We show based on data from the largest German franchise system that outcome control leads to higher satisfaction among franchisees and employee-managers, while behavior control enhances employee-managers’ satisfaction. Thereby, outcome control leads to higher satisfaction among more experienced franchisees, while behavior control enhances both highly and lowly experienced employee-managers’ satisfaction. Our results suggest that franchisors face a dilemma: On the one hand, behavior control is associated with high costs and has no impact on franchisees’ satisfaction at all. On the other hand, it might still be necessary to prevent franchisees from behaving opportunistically.     

Deans’ Forum on the Globalization of Business Education and Development: Reflections and Directions for the Future

In this special issue of the Journal of Teaching in International Business, a number of deans reflect on the growth and development in global business education and development. The objective of the special issue is to provide insight into where the field originated and where it needs to move to continue advancement. Seven articles, written by current and former business school deans and their colleagues, are presented from a strategic perspective that cover the curricular, research, and business community outreach issues as they relate to international business academic and professional development programs. Through the presentation and discussion of these related issues, a dialogue will be started to set the agenda for continued advancement and sustainability of international business education across the globe.     

Interpersonal relations in China: Expatriates’ perspective on the development and use of guanxi

The literature on social networks identifies relationship building through guanxi as an effective way for Western organizations to reduce their liability of foreignness in China. Even though it is individuals rather than organizations who build these relationships, the focus in previous literature has been on organizational outcomes, and only a handful of studies have attempted to explain how expatriates perceive guanxi relations are built and maintained. To help address this issue, we conducted in-depth, semi-structured interviews with 36 Western expatriates working in China. Our findings suggest that guanxi is perceived to be an informal process that is used to build trust between individuals, which in turn can reduce the uncertainty around contract enforcement in China. We also find that the process for building guanxi between parties is initiated by the individual whose organization has less market power. Finally, the findings suggest that firms should be cautious if they elect to use agents as intermediaries to help connect to, and build relations with buyers and sellers.     

TQM and performance: Is the relationship so obvious?

This study explores the relationship between total quality management (TQM) and firm performance taking TQM as an internally consistent system of practices. The study tests the link between the two variables using the universal approach, analyzes whether the most competitive firms are those adopting TQM, and tests for an isomorphic effect on other firms. The study uses a sample of Spanish firms that have received TQM prizes at the national or regional level between 1997 and 2003 and a control sample for comparison. The findings indicate that in the absence of any evidence to confirm the universal hypothesis, TQM pioneers experience performance gains, because of the early implementation of the system; however, late adopters do not experience similar results. Firms using a TQM system are not necessarily better than their counterparts are, before putting the system into action. The study uses panel data that takes into account the unobservable heterogeneity between individuals and the dynamics of firms' financial variables.     

Why Doesn't the Black‐‐Scholes Model Fit Japanese Warrants and Convertible Bonds?

In this paper, we investigate the systematic departures of traded prices of Japanese equity warrants and convertible bonds from their theoretical Black–Scholes values. We briefly consider transactions costs and the dilution adjustment as potential explanations of the discrepancy. However, our major focus is on shifts in volatility of the prices of the underlying stocks as a function of the stock price changes; such shifts are not taken into account in the Black–Scholes values. We assume that the pseudo‐probability distributions of prices of stocks of cross‐sections of companies which are roughly similar in size are identical. This simple assumption, which can be generalized, enables us to infer the implied probability distribution and binomial tree for stock price changes using the Derman and Kani (1994), Rubinstein (1994) and Shimko (1993) approach. The cross‐section of warrant prices implies an inverse volatility smile and a positively skewed probability density for stock prices. Rubinstein's identifying assumptions generate an implied binomial tree in which the relative size of up‐steps and down‐steps, and thus volatility, changes systematically as stock prices change. We briefly consider potential explanations for the implied behaviour, and for the difference in the smile pattern between index options and the warrants and convertibles.     

Trade Liberalisation and Poverty: What are the Links?

This paper asks whether a developing country's own trade liberalisation could translate into increased poverty, and what information would be required to identify whether it will do so. It plots the channels through which such effects might operate, identifying the static effects via four broad groups of institutions – households, distribution channels, factor markets and government – and the dynamic issues of volatility, long–term economic growth, and short–term adjustment stresses. An increase in the price of something a household sells (labour, good, service) increases its welfare. Thus, the paper first explores the likely effects of trade liberalisation on the prices of goods and services, taking into account the distribution sector. Also critical is whether trade reform creates or destroys markets. Trade reform is also likely to affects factor prices – of which the wages of the unskilled is the most important for poverty purposes. If reform boosts the demand for labour–intensive products, it boosts the demand for labour and wages and/or employment will increase. However, not all developing countries are relatively abundant in unskilled labour and trade can boost demand for semi–skilled rather than unskilled, labour. Hence poverty alleviation is not guaranteed. Trade reform can affect tariff revenue, but much less frequently and adversely than is popularly imagined. Even if it does, it is a political decision, not a law of nature, that the poor should suffer the resulting new taxes or cuts in government expenditure. Opening up the economy can reduce risk and variability because world markets are usually more stable than domestic ones. But sometimes it will increase them because stabilisation schemes are undermined or because residents switch to riskier activities. The non–poor can generally tide themselves over adjustment shocks from a liberalisation, so public policy should focus on whether the initially poor and near temporary, setbacks. The key to sustained poverty alleviation is economic growth. There is little reason to fear that growth will not boost the incomes of the poor. Similarly, while the argument that openness stimulates long–run growth has still not been completely proven, there is every presumption that it will.     

Linking Culture and Ethics: A Comparison of Accountants’ Ethical Belief Systems in the Individualism/Collectivism and Power Distance Contexts

This study uses accounting professionals from an international setting to test the individualism and power distance cultural dimensions developed by Hofstede [Culture’s Consequences (Sage Publications, Beverly Hills, CA) 1980]. Six countries, which appropriately represented high and low values on the Hofstede dimensions, were chosen for the survey of ethical beliefs. Respondents (n = 249) from the six countries were requested to supply their agreement/disagreement with eight questionable behaviors associated with the work environment. Each of these behaviors contained an individualism and/or power distance cultural component for the responding accountants to consider. The results of the cultural analysis indicated significance on five of the eight survey items. Results lend support for the presence of the individualism cultural element in the ethical responses of the accountants surveyed.     

Absorptive capacity and R&;D tax policy: Are in-house and external contract R&;D substitutes or complements?

Firms fund research and development (R&;D) to generate commercializable innovations and to increase their ability to understand and absorb knowledge from elsewhere. This dual role and opposed incentive structure of internal R&;D create a significant question for both theory and R&;D policy: Is internal R&;D a complement or substitute for external R&;D? We develop a model and novel technique for empirically estimating R&;D substitution elasticities. We focus on bio-pharmaceutical and software industries in California and Massachusetts, where tax credit rates changed differently over time for the two types of R&;D, creating a natural experiment. The effective tax prices for the two R&;D types differ from type to type, firm to firm, state to state, and year to year. This allows us to examine changes in the composition of firms’ R&;D budgets between in-house R&;D and external basic research when the relative tax prices of each category of research change. We find evidence of a substitute relationship both for a sample comprising exclusively small firms as well as for a more general distribution of firm sizes.