Banking systems,innovations, intellectual property protections,and financial markets: Evidence from China

One unique feature of the emerging economies in Asia is the rich variation in the development of financial systems and technological sectors across different geographical areas. This unbalanced evolution provides us a potentially more powerful setting to investigate the dynamics among banking systems, innovations, intellectual property (IP) protections, and stock market reactions that are especially useful in understanding the policy–finance–innovation nexus in emerging economies. Using newly available data from China, this study confirms the nurturing role of financial systems on innovations, the value-enhancing function of firms' innovative activities, and the lead–lag predictive role of innovations on stock returns, in the context of emerging economies. More importantly, the study documents that stronger provincial IP protections reduce patent piracy and hence enhance local firms' market values.     

The role of stock markets on environmental degradation: A comparative study of developed and emerging market economies across the globe

It is well established in the literature that stock markets increase both economic activities and energy consumption across countries. Therefore, it is commonly believed that stock markets are expected to have a significant effect on CO₂ emissions. However, it is not known whether these stock markets can contribute to more or less CO₂ emissions. Hence, the goal of this study is to examine the impact of stock market indicators on CO₂ emissions across a global panel of both developed and emerging market economies. The results establish that stock market indicators have a significant negative and positive impact on carbon emissions in developed and emerging market economies, respectively. Furthermore, the findings illustrate the presence of the Environmental Kuznets Curve (EKC) hypothesis, implying that stronger stock markets lead to a further decline in carbon emissions. Given these findings, the study argues that the role of stock markets in the abatement of CO₂ emissions significantly varies across both developed and emerging market economies. Significant implications have to do with the fact that developed markets might have initiated effective policies on listed firms to minimize carbon emissions, while emerging markets are yet to achieve this.     

The Stock Liquidity of Banks: A Comparison between Islamic and Conventional Banks in Emerging Economies

We explore the stock liquidity of Islamic banks (IBs) and matching conventional banks (CBs) in emerging economies. We find that IBs have higher stock liquidity than CBs, suggesting that investors prefer IBs' stocks and neglect what they consider to be “sin stocks” (i.e., CBs' stocks), which do not conform to their religious beliefs. We also find that the liquidity effects are particularly important for small IBs, and during the global financial crisis. This evidence is stronger in countries with less developed banking sectors and weaker bank supervision and regulation. Hence, faith-driven investors tend to value more norm-conforming stocks (i.e., IBs) during times of distress and uncertainty, and in weaker regulatory environments.     

Stock market,credit market,and heterogeneous innovations

The relative importance of credit market development and stock market development in boosting innovation remains a long-standing debate issue. In this study, we document how different types of financial markets development affect heterogeneous innovations. Using a broad sample across 42 developed and emerging economies and a generalized difference-in-differences identification strategy, we find that stock market development leads to significantly higher substantive innovation, especially in young and small firms, but has negative impact on incremental innovation. Conversely, credit market development promotes incremental innovation, especially in mature and large firms, but has negative impact on substantive innovation. Further analyses indicate that stronger shareholder protection enhances the positive impact of stock market on substantive innovation, while stronger creditor rights enhance the promoting effect of credit market on incremental innovation, and even turn the negative impact of credit market on substantive innovation into positive. Our paper provides new insights into the heterogeneous effects of credit market and equity markets on the real economy.     

How does stock market liberalization influence corporate innovation? Evidence from Stock Connect scheme in China

Using China's Stock Connect program as a quasi-natural experiment, we assess the impact of stock market liberalization on corporate innovation. The baseline result based on a difference-in-differences (DID) estimation suggests that allowing foreign investors to buy domestic stocks has a beneficial effect on Chinese firms' innovative outputs. Specifically, eligible firms affected by the Stock Connect scheme generate more and higher quality patents than other unaffected firms subsequently. Furthermore, we explore potential channels that may explain this beneficial effect in terms of improving corporate governance, reducing information asymmetry, and mitigating financial constraints. In addition, the effect is more pronounced for firms in high-tech industries. However, we find that the influence of stock market liberalization is insignificant in state-owned firms. Besides, the findings are generally robust to different measures of innovation and different methods of estimation. Overall, this paper provides new insights into understanding the positive effect of stock market liberalization in emerging market economies.     

How Small Business Advisory Program Delivery Methods (Collective Learning,Tailored, and Practice‐Based Approaches) Affect Learning and Innovation

Past studies relate small business advisory program effectiveness to advisory characteristics such as advisory intensity and scope. We contribute to existing literature by seeking to identify the impact of different advisory program methods of delivery on learning and subsequent firm innovation behavior. Our research is based on a survey of 257 Australian firms completing small business advisory programs in the three years preceding the research. We explore the range of small business advisory program delivery methods in which our surveyed firms participated and, with reference to the literature on organizational learning and innovation, we analyze predictors of firms' learning ability and innovativeness based on the identified delivery methods. First, we found that business advisory programs that involved high levels of collective learning and tailored approaches enhanced firms' perceptions of their learning of critical skills or capabilities. We also found that small business advisory programs that were delivered by using practice‐based approaches enhanced firms' subsequent organizational innovation. We verified this finding by testing whether firms that have participated in small business advisory services subsequently demonstrate improved behavior in terms of organizational innovativeness, when compared with matched firms that have not participated in an advisory program.     

Financial factors and exporting decisions

Is financial health a determinant of export market participation? Is it an outcome? Using a panel of 9292 UK manufacturing firms over the period 1993–2003, we explore the links between firms' financial health and their export market participation decisions. We find that exporters exhibit better financial health than non-exporters. Yet, when we differentiate between continuous exporters and starters, we see that this result is driven by the former. Starters generally display low liquidity and high leverage, possibly due to the sunk costs which need to be met to enter export markets. Furthermore, we find no evidence that firms enjoying better ex-ante financial health are more likely to start exporting, and strong evidence that participation in export markets improves firms' financial health.     

Drivers of Green Supply Chain in Emerging Economies

In spite of the burgeoning interest in green supply chain management in Western developed countries and large emerging economies, little research exists on the topic in small emerging and developing countries. In this study, we surveyed firms based in Dubai to identify the main drivers of green supply chain management and their impact on supply chain greening. We discuss theoretical and managerial implications of the findings. © 2013 Wiley Periodicals, Inc.     

Firms' efficiency and global value chains: An empirical investigation on Italian industry

This paper investigates the effect of participation in global value chains (GVCs) on firms' efficiency and explores heterogeneity in this impact across different firms, according to GVC governance, positioning in the chain and time length of participation. Our analysis takes advantage of survey data providing information on involvement in GVCs for a large set of Italian industrial SMEs between 2008 and 2012. We employ Data Envelopment Analysis (DEA) to retrieve a measure of firms' technical efficiency (i.e., DEA efficiency scores) and estimate the impact of involvement in GVCs on firms' efficiency through propensity-score matching techniques and truncated regression. Our results show that participation in GVCs induces significant efficiency premia, especially for suppliers, with stronger effects in the case of relational modes of participation.     

How does FX liquidity affect the relationship between foreign ownership and stock liquidity?

This study investigates the roles foreign investors play in a representative emerging market, focusing on the relationship between foreign ownership and stock market liquidity as well as this relationship's response to foreign exchange (FX) liquidity. Our analyses yield three main results. First, the bid–ask spread and price impact of stock trades decrease along with foreign ownership, supporting the view that foreign investors tend to improve stock liquidity. Second, foreign ownership decreases along with a decline in FX liquidity, suggesting that foreign investors care about FX liquidity when determining their stock holdings. Third, stock liquidity increases continuously along with foreign ownership as FX liquidity decreases. Overall, this study's evidence indicates that foreign investors, as liquidity providers, can play a positive role in an emerging economy even when FX liquidity declines.     

Channel Collaboration,Market Orientation and Performance Advantages: Discovering Developed and Emerging Markets

Abstract

Channel collaboration has occupied an increasingly prominent role in contemporary business strategy, and has been considered a key driver for providing value for the partnering firms involved. Drawing on the resource based theory of the firm, the present study aims to explore the effects of collaborative capability and market orientation on firms' performance advantages in the context of marketing channels. We also investigate whether the firms in developed and emerging markets significantly differ in their capability profiles. The data consists of 545 responses to a survey of small, medium-sized and large companies representing the grocery goods sector (manufacturers, wholesalers and retailers) in nine countries. In line with the theory, channel collaboration enhances positional and performance advantages of firms, and this collaboration is shaped by the type of economy adopted.     

Small businesses and liquidity constraints in financing business investment: Evidence from shanghai's manufacturing sector

When firms experience financial hierarchy, external finance, if at all available, is substantially more expensive than internal finance. Factors such as transaction costs, agency problem, and asymmetric information have created such a hierarchy. Stiglitz and Weiss (1981) argue that asymmetric information between firms and potential suppliers of external finance creates adverse selection and moral hazard problems in the credit market in developed market economies. This problem of a higher cost of external finance is commonly thought to be more serious for small firms because they are more disadvantaged than their larger counterparts in accessing external finance due to several factors: (1) Public information on small firms is generally not available and leads to the even greater problem of asymmetric information, i.e., more severe adverse selection and moral hazard problems. These information problems have excluded small firms from bond and share markets. (2) Due to the lack of available means of external finance, small firms rely more heavily on bank loans than their larger counterparts. In addition, as small firms are more interested in cultivating stable relationships with a few banks in order to secure a stable supply of credit, these banks become virtual monopolies by lending to small businesses and exercise their market power in lending to small firms.Most of existing research considers only small firms in market economies; little research has been done to understand the relationship between firm size and investment financing in any economy in transition. This paper makes a contribution to the literature by studying the relationship between firm size and liquidity constraints by using a firm level data of manufacturing enterprises in Shanghai during the period of 1989–1992. We consider whether small manufacturing firms in Shanghai are constrained by the availability of liquidity compared with their larger counterparts when they are financing their fixed investment. In a transforming economy such as China (or other similar transition economies), external finance relies heavily on loans from banks that are fully owned by the state. Due to historical reasons, allocations of credit are always biased in favor of state-owned enterprises. Such a `lending bias' imposes an extra cost on small Chinese enterprises in financing investment as the majority of them are not state-owned.In such an environment, our empirical results show that small manufacturing firms in Shanghai are actually less liquidity-constrained than their larger counterparts in financing their fixed investment. This surprising result is rather different from what people normally predict based on the experience in market economies. We suggest three possible explanations for this peculiar finding: (1) The composition of various firm size classes plays an important role in explaining the result: Non-state enterprises which are fast growing and efficient dominate the small firm classes. Their successes in the markets helps them to generate enough internal funds to smooth their investment over time. (2) The presence of heavy indebtedness of large state-owned enterprises may deprive them of sufficient cash available for investment decision. Given that state-owned enterprises have been making heavy losses, the central and regional governments have a liquidity problem in satisfying their huge liquidity demands. (3) Small enterprises in non-state sectors can rely on the informal credit market to obtain funds for investment although they are excluded from the state banking system.However, the further trade liberalization in terms of eliminating tariffs and quotas caused by China's bid of joining the WTO will erode the profits of these small enterprises as imported goods will be supplied at lower prices. In addition, further reforms in financial sectors may also affect the supply of external finance to small enterprises in nonstate sectors. The consequence may lead to a tight liquidity constraint for small enterprises in China.     

International acquisitions and emerging market firms' performance—a structural contingency perspective

Entry modes have impact on firms' performance in international markets. Using an organizational structural contingency perspective, we assert that firms with mechanistic structure can enhance their performance in international markets if they choose acquisitions as an entry mode. Mechanistic structure limits organizations' learning capability, which can be managed through acquisitions but not through other entry modes such as joint ventures. For managing limitations associated with the poor knowledge absorption capability of mechanistically structured organizations, firms should not follow the standard integration procedures associated with acquisitions aiming to achieve economies of scale or scope. Rather, they should provide corporate parenting advantage to the newly acquired unit by (a) granting complete autonomy and (b) contributing required resources for future growth, thus treating the acquired business as a strategic business unit. Since mechanistic structures are more common in emerging markets, we explain our perspective using illustrative caselets from these markets.     

Supply Chains,Global Financial Shocks and Firm Behaviour towards Liquidity Needs

Driven by the increasingly important role of supply chains in global production, this paper studies empirical association between global credit‐market shocks and firm behaviour towards liquidity needs across countries and industries. Focusing on the adjustment of working‐capital financing, we find two pieces of supporting evidence from international firm‐level panel data covering the period 2002:I–2012:IV. First, for industries where specific investment in the input supplier–customer relationship is large, firms are more exposed to credit‐market shocks. We find that measures of global credit‐market shocks are negatively associated with trade receivables, trade payables and inventories, conditional on the level of contract intensity in the industries where firms operate. Second, firms in emerging markets are more vulnerable to credit‐market shocks than are firms in developed countries. We are also able to verify the economic significance of sales growth, operating cash flows, cash stock and firm size in the overall adjustment. Our findings highlight the importance of balance‐sheet contagion along supply chains during the 2007–09 global financial crisis.     

Outside directors,firm life cycle,corporate financial decisions and firm performance

We investigate whether directors with multiple outside board directorships are related to corporate financial strategy across firm life cycle stages. Using a large sample of firms from the Gulf Cooperation Council (GCC) countries, we find that when the number of directors with multiple board seats increases, firms' level of cash holdings rises, capital expenditure declines, selling, general and administrative (SG&A) expenses increase, and firm performance decreases. We further demonstrate how the relationship varies across different stages of their life cycle. Our findings have significant implications for policy makers, regulators and stockholders in GCC countries and in other emerging markets.     

The performance implications of outsourcing customer support to service providers in emerging versus established economies

Recent discussions in the business press query the contribution of customer-support outsourcing to firm performance. Despite the controversy surrounding its performance implications, customer-support outsourcing is still on the rise, especially to emerging markets. Against this backdrop, we study under which conditions customer-support outsourcing to providers from emerging versus established economies is more versus less successful. Our performance measure is the stock-market reaction around the outsourcing announcement date. While the stock market reacts, on average, more favorably when customer-support is outsourced to providers located in emerging markets as opposed to established economies, approximately 50% of the outsourcing firms in our sample experience negative abnormal returns. We find that the shareholder-value implications of customer-support outsourcing to emerging versus established economies are contingent on the nature of the customer support that is being outsourced and on the nature of the outsourcing firm. Customer-support outsourcing to emerging markets is less beneficial for services that are characterized by personal customer contact and high knowledge embeddedness than for customer-support services that involve impersonal customer contact and are low on knowledge embeddedness. Firms higher in marketing resource intensity and larger firms benefit more from outsourcing customer-support services to emerging markets than firms lower in marketing resource intensity and smaller firms.     

Financial disclosure by SMEs listed on a semi-regulated market: evidence from the Euronext Free Market

This study investigates the financial disclosure policy of small and medium-sized enterprises listed on a stock market with very low disclosure requirements: the Free Market of the Euronext Stock Exchange. In contrast to firms listed on a regulated stock market, firms on the Free Market do not have any obligation to disclose periodic or price-sensitive information. We investigate the determinants of voluntary financial disclosure and its influence on stock liquidity. Our results suggest that firms disclose more financial information when they are likely to benefit from disclosure. Firms especially disclose when they issue equity. Voluntary disclosure also has a significant positive effect on stock liquidity, consistent with disclosure reducing information asymmetry.     

Export stimulation of micro- and small locally owned firms from emerging environments: New evidence

This paper reports the findings from an empirical investigation into the export stimulation behaviour of micro- and small locally owned firms. It investigates whether the decision to initiate exporting in these smaller firms is a result of a systematic planned investigation into foreign market opportunities or is a mere response to fortuitous circumstances. This issue has received extensive attention in the literature on the internationalisation of firms from large developed environments, but very little is known about it in emerging environments especially small, open economies. This study will add to the literature by investigating export stimulation from a small, emerging Caribbean economy, Jamaica. Using a quantitative approach supported by insights from qualitative data gained during the fieldwork, the study analysed 20 stimuli that are demonstrated to impact export initiation decision. The key finding reveals that export initiation is a result of a planned systematic approach to international market rather than a mere response to fortuitous circumstances. The originality of this finding is in its extension of earlier work from developed economies to an emerging, resource-poor, open economy and its departure from analysing large and multinational firms to focus on micro- and small locally owned firms.

Trade liberalisation and domestic brands: Evidence from China's accession to the WTO

In this paper, we examine how trade liberalisation affects firms' branding behaviours. We investigate this question with China's accession to the WTO in late 2001. We find that firms in sectors with large import tariff reductions discontinue more trademarks. Meanwhile, these firms file more trademark applications and their total number of effective trademarks increases after trade liberalisation. This growth in trademarks is mainly driven by large firms, as measured by the number of employees. In fact, small firms' applications and effective trademarks decline during trade liberalisation. It is also found that trademark applications are mainly filed for the traditionally non-dominant products of industries. We provide a conceptual model that incorporates the channels through which both passive and active responses occur.     

Firm-level determinants of gender diversity in the boardrooms: Evidence from some emerging markets

This paper examines the determinants of board gender diversity in the context of emerging economies. Specifically, we investigate the impact of organizational characteristics on gender diversity in the boardrooms of Brazilian, Russian, Indian and Chinese firms and compare our findings with a control sample from US and UK. Analysing data for 1002 firms between a period of 2005 and 2012, we find some similarities between developed and emerging economies on the factors determining women representation on boards. In particular, we observe board gender diversity is positively related to the firm size, and it is inversely related to corporate risk across both emerging and developed economies. Family control affects positively board gender diversity only in India, China, UK and US. However, in contrast to developed countries, there is some evidence to suggest that state ownership has a negative effect on board gender diversity in India and Russia.