How firm capabilities affect who benefits from foreign technology

We explore how firm capabilities affect the diffusion of technology brought with foreign direct investment (FDI). Using a panel dataset on Indonesian manufacturers from 1988 to 1996, we measure how the productivity of differing domestic firms responds to the entry of multinational competitors. We find that firms with investments in research and development and firms with highly educated employees adopt more technology from foreign entrants than others. In contrast, firms that have a small “technology gap,” meaning that they are close to the international best-practice frontier, benefit less than firms with weak prior technical competency. This finding suggests that the marginal return to new knowledge is greater for firms that have more room to “catch up” than it is for already competitive firms.     

How firm capabilities affect who benefits from foreign technology

We explore how firm capabilities affect the diffusion of technology brought with foreign direct investment (FDI). Using a panel dataset on Indonesian manufacturers from 1988 to 1996, we measure how the productivity of differing domestic firms responds to the entry of multinational competitors. We find that firms with investments in research and development and firms with highly educated employees adopt more technology from foreign entrants than others. In contrast, firms that have a small “technology gap,” meaning that they are close to the international best-practice frontier, benefit less than firms with weak prior technical competency. This finding suggests that the marginal return to new knowledge is greater for firms that have more room to “catch up” than it is for already competitive firms.     

Impediments to innovation faced by Canadian manufacturing firms

Using the findings of the 1999 Survey of Innovation in the Canadian manufacturing sector, we analyse the impediments, i.e. the problems and obstacles, that firms in the sector face when they innovate. In particular, we assess the factors which inhibit innovation, especially with regard to by small and medium enterprises (SMEs). First we try to establish the relationship between the impediments to innovation and various firm characteristics. Then we assess whether these impediments actually prevent firms from innovating or whether firms are able to overcome them.

We find that the perception of impediments to innovation vary according to firm characteristics. For example, large firms are more likely to report the high cost of developing innovation and organizational rigidities as impediments than small firms. However, they seem to have less difficulty with regard to financing innovation projects compared to SMEs. Our results also show that firms seem to be able to overcome most of the obstacles to innovation. Therefore, the impediments featured in innovation survey(s) should not be interpreted as impenetrable barriers that prevent innovation. The sole exception is organizational rigidities. Firms facing organizational rigidities are less likely to become innovative, whether they are small, medium, or large. From our results, we conclude that small firms do not face particular impediments which prevent them from becoming innovative.     

The micro-firm health insurance hypothesis

The objective of this study is to investigate the ‘micro-firm health insurance hypothesis’, a hypothesis that the greater the percentage of domestic firms that are ‘very small’, i.e. have four or fewer employees, the greater the percentage of the US population that will be without health insurance. The focus of this study is based on the premise that very small firms (as defined), ‘micro-firms’, which constitute 58.6% of all private sector firms in the US, face bargaining-power, financial, and competitive constraints that tend to limit their ability to provide group health insurance benefits to their employees, with the result being that employees at very small firms are relatively more likely than employees at larger firms to be without a health insurance fringe benefit. Weighted Least Squares (WLS) estimates provide strong empirical support for the hypothesis.     

Rent-Sharing And Wages: Product Demand Or Technology Driven Premia? 1

There is a renewed interest in non-competitive wage determination. Studies have shown that firms share rents with workers. How such rents are appropriated by firms to share, or why firms may wish to do so, is still an area of debate. Using a unique data set, where workers are matched directly to their workplace, we use instrumental variable estimation to examine which shocks create rent-sharing and the size of the rent-sharing effects. The results find rentsharing is strongest for establishments investing in new process technology, and for employers who wish to share their successes with their employees.     

Prices Versus Quantities: Technology Choice,Uncertainty and Welfare

Technological improvements have proven essential in mitigating environmental problems such as climate change, depletion of the ozone layer and acid rain. While it is well-known that price- and quantity-based regulatory instruments provide different investment levels, the effects on the choice between different technologies have received scant attention. This paper expands on the prices versus quantities literature by investigating firms’ technology choice in the face of demand and supply side uncertainty. I show that the regulator can not design tradable emissions permits and an emissions tax such that the two regimes are equivalent, even in terms of expected values. Moreover, a tax encourages the most flexible abatement technology if and only if stochastic costs and the equilibrium permit price have sufficiently strong positive covariance, compared with the variance in consumer demand for the good produced. Finally, the firms’ technology choices are socially optimal under tradable emissions permits, but not under an emissions tax.     

Rate of return on venture capital investment in China

The rate of return on venture capital investment of venture capital (VC) firms in China has been attracting increasing attention. We use robust multinomial regression models to analyze 56 exit projects of venture capital investment from 1999 to 2003 in China. The results show that the returns of state-owned VC firms are lower than those of non state-owned VC firms. Furthermore, the returns of the VC firms located in Shanghai and Shenzhen are higher than those in other regions. The capital scale of VC firms is negatively correlated with the rate of return. In addition, some variables, such as business duration, investment scale, investment duration and exit vehicle, are probably unrelated to rate of return on venture capital investment in China.     

Optimal penalty and accounting policy

This study considers risky investment projects under adverse selection and examines optimal penalties for erroneous auditing reports to maximize social welfare. These penalties give firms an incentive to choose accounting policies that maximize social welfare. We characterize the optimal penalties such that efficient firms choose an aggressive accounting policy and inefficient firms choose a conservative accounting policy.     

Investment decisions and the soft budget constraint

This paper investigates the investment behaviour of a large panel of Hungarian firms in the period 1989–99, in order to assess the impact of institutional and regulatory changes on the efficiency of credit allocation. We find that the role of financial factors for investment decisions has changed significantly after the introduction of major financial reforms, and that firms were affected differently depending on their ownership type. Reforms have hardened the budget constraint of private domestic firms, particularly small ones, and reduced informational problems for foreign‐owned firms. State‐owned firms remained subject to a soft budget constraint. In particular, small state firms became more sensitive to financial conditions, whereas large state firms were unaffected and kept operating under a soft budget constraint.     

Firm Size and Wages in Germany – Trends and Impacts of Mobility

The analysis of firm-size wage differentials in Germany, using data from the German Socio-Economic Panel, firstly corroborates the finding that wages rise with firm-size and shows that the rank order of mean wages between firm-size classes is stable for the period 1984–1993. Secondly, the most important novel results are as follows: (i) wage differentials between firm-size classes increased during the period investigated after controlling for individual attributes and computing with deflated values; (ii) average levels of the qualification of employees have diverged noticeably between small and large firms; (iii) movers from small to larger firms have to accept wages below the average pay of incumbents with comparable attributes in the new firms: (iv) movers to smaller firms, however, retain a portion of their higher wages in larger firms; and (v) wage differentials between smaller and larger firms decline with increasing unemployment.     

Employee treatment and corporate fraud

This paper examines the association between a firm’s relations with its employees and its likelihood of committing fraud. We find that firms treating their employees fairly (as measured by employee treatment index) have a lower likelihood of committing fraud since labor-friendly firms have incentives to signal their willingness to fulfill implicit contracts and maintain long-term relationships with employees. Further analysis shows that employee involvement and cash profit-sharing are the most important components in employee treatment to determine our results. Moreover, we show that the negative association between employee treatment and fraud propensity is more prominent when a firm is in a high-tech industry, when a firm in a less competitive industry, and when employees have less outside employment opportunities. Finally, we show that our results are not driven by the employee’s moral sensitivity or other labor related factors (i.e. labor wage, pension benefits, and labor union power).     

Domestic R&D,Foreign Direct Investment and Welfare

This paper provides a new rationale to examine the two‐way relationship between domestic research and development (R&D) and foreign direct investment (FDI), as well as their impacts on domestic welfare. Our analysis is based on the strategic interaction in cost‐reducing investment decisions between domestic firms and a foreign firm, which is different from the common factors that are discussed in the literature such as spillovers and technology sourcing. Our results are as follows. We show that domestic R&D investment may either increase or decrease the foreign firm's FDI incentives. Further, depending on the marginal cost of domestic firms, domestic R&D incentives can always increase regardless of the effects of domestic R&D investment on the foreign firm's FDI decision. Finally, we find that domestic welfare improves under domestic cost reduction if the slope of the marginal cost of domestic R&D investment is sufficiently small.     

Investment,Uncertainty and Credit Market Imperfection in India

The paper attempts to make a timely contribution to the debate on the status of business fixed investments in Indian private manufacturing firms. There are two key issues on which the debate hinges: lower presence of formal credit and, procedural and contractual rigidities. Lower presence of formal credit restricts or makes it costlier for a group of firms to incur investment expenditure that they would have incurred otherwise. Such firms predominantly rely on their internal funds for investment. Procedural and contractual rigidities, on the other hand, make almost all the investment projects undertaken, partially or completely, irreversible. Firms respond to such irreversibilities by aligning their investment to a relatively favorable time which, in turn, depends on the way firms process future uncertainty. The analytical exercise endogenously distinguishes between two investment regimes based on the access to external credit and uses a set of characteristics, along with different measures of uncertainty, to explain fluctuations in investment. The results provide three important observations. First, in the post-reform period there has been an adverse shift in the investment financing policy. Second, firms with inferior access to external credit are smaller, younger, pay less dividend, export less and belong to an industry with inferior demand than others. Such firms invest by running down their available cash flows and selling assets. Third, macroeconomic uncertainty depresses investment whereas microeconomic uncertainty has no impact on investment.

     

The financing of small innovative firms: the Italian case

Small firms encounter difficulties in collecting external finance due to greater information problems. For small innovative firms, whose activity is more difficult to evaluate, the cost of external finance could be even higher. This paper aims to shed light on special features in financial structures of small innovative firms, compared with firms of similar size that do not innovate. The evidence shows that small innovators rely less on financial debts and more on internal financial resources; no important differences appear for large firms. This is consistent with the view that information problems mainly affect small firms. Another finding is that small innovative firms show a lower investment sensitivity to cash flow than small non-innovative firms: it is likely that the high incidence of internal financial resources allows them more flexibility in deciding their investments. No difference in investment sensitivity to cash flow, by innovative attitude, is found for large firms.     

When is FDI a capital flow?

In this paper we analyze the conditions under which a foreign direct investment (FDI) involves a net capital flow across countries. For this purpose, we investigate how multinational firms finance their foreign affiliates, globally or locally. We develop a contract theoretical model in which the financing structure is used to govern the incentives of managers. We find that the investment tends to be financed locally if managerial incentive problems are large. Thus, microeconomic governance problems may have macroeconomic implications for the net capital flow to host countries. Our results are consistent with survey data on German and Austrian investment flows of firms to Eastern Europe.     

State antitrust enforcement in the US and implications for small business entry and relocation

This article examines the impact of the important, yet little studied, state-level antitrust enforcement activity on entry and relocation behaviour by small US firms. Feinberg and Husted (2011) have shown that this enforcement, especially nonhorizontal cases, may be viewed by potential entrants as a negative aspect of the state business climate. However, they did not pursue a more disaggregate analysis of small firm entry behaviour; nor did they investigate different responses between manufacturing, wholesaling and retailing firms. Another related issue is the extent to which state cases filed in tandem with federal investigations have the same impact on establishment entry as do purely ‘independent’ cases. These considerations are dealt with in this article. The author uses annual state-level data from the Statistics of US Business to examine entry and relocation reactions to state antitrust enforcement by firms within three small-business categories: 1–19 employees; 20–99 employees; 100–499 employees. Generally speaking, the smallest retail and wholesale firms seem to favour vigorous antitrust activity, especially enforcement targeted against cartel behaviour by suppliers. The largest small-firm retailers and wholesalers (those with 100–499 employees) seem somewhat threatened by such activity, especially the more controversial nonhorizontal enforcement. However, it must be acknowledged that the effects on entry or relocation of small firms – both positive and negative – are quite small.     

Evaluating investment projects in the presence of sectoral linkages1

In this paper we develop a framework to assess the economic impact of foreign investment projects. If investment projects interact with other industries in the host economy, either by buying inputs locally or by selling their own product to local downstream firms, they can create sectoral linkages. The expansion of upstream and downstream industries can feed back to the project's own industry leading to a further expansion of the local industry. We study the circumstances under which investment projects lead to the creation of sectoral linkages and characterize the factors that determine the project's welfare impact. We link analytical findings to case studies undertaken for the EBRD.     

科技型中小企业自主创新双元投资策略与财务绩效间关系的经验研究——以河北省为例

通过界定企业的自主创新行为和双元投资策略,给出了企业自主创新双元投资策略在财务业绩方面的协同效果或权变关系差异,建立了企业自主创新双元投资策略与其财务业绩的权变关系分析框架。利用河北省208家科技型中小企业创新项目验收数据,实证分析了科技型中小企业自主创新双元投资策略对其财务绩效的影响。研究结果显示:企业在R&D领域和基础领域的投资均与产品销售、利润和收入显著正相关;平衡的二元投资策略和联合的二元投资策略对企业的自主创新均具有积极影响。     

Banks with market power,sectoral structure and the big push

Due to complementarities between different investment projects, simultaneous implementation of many investment projects (big push) may be needed to avoid coordination failures. This paper examines potential and limitations of private coordination by banks with market power. Our analysis shows that such private coordination may not work if banks with market power find it more profitable to finance firms in the traditional sector than in the modern sector. Our results highlight the importance of sectoral policies in addressing coordination failures.     

Infrastructure,Multinational Affiliate Production,and the Pattern of Trade

In a two-country general equilibrium model with endogenously determined domestic and multinational firms, it is shown that public infrastructure development can have diverging implications for horizontal multinational affiliate firm production and trade, depending on the type of infrastructure invested in. Infrastructure investments with strong productive or local transport effects (i.e. schools or local roads) lead to greater domestic firm production and exports, fewer imports, and more foreign multinational affiliate firm production in the country making the investment. On the other hand, infrastructure projects that lower international trade and transaction costs (i.e. shipping ports or airports) lead to more domestic firms in both countries, a greater volume of bilateral exports in both directions, and less multinational affiliate production. Further, the effect of different types of infrastructure investment on income and welfare of the open economies is explored.