The globalization of Chinese enterprises

The question of how and why Chinese firms globalize is one of the most pressing issues for businesses today. China's globalization process is nothing less than remarkable. The twenty‐first century will feature a developing country as the leader of the global economy by 2020, when, by most estimates, China's purchasing power parity (PPP) gross domestic product (GDP) surpasses America's. With China's new role on the world's stage, global economic and political institutions are likely to change. China's foray into Latin America, for example, has changed the traditional role that America has played in its “backyard.” While the Chinese government was given much credit for China's globalization, Chinese private‐ and family‐owned businesses have also propelled China outward. Our research stream and annual China Goes Global conference at Harvard has attempted to frame the questions associated with China's globalization. This special issue is another important step in this direction. © 2012 Wiley Periodicals, Inc.     

On the informational inefficiency of discriminatory price auctions

We analyze bidding behavior in large discriminatory-price auctions in a common value setting where the number of objects is a non-trivial proportion of the number of bidders. We show that the average price paid in the auction is biased downward from the expected value of the objects, even in the competitive limit. We show that conditional on a signal that falls below a threshold, a bidder bids no more than the expected value of an object conditional on the signal and winning; while conditional on any signal that lies above the threshold the bid is strictly lower than the expected value conditional on the signal and winning.     

Envy-freeness and implementation in large economies

We show that an asymptotic envy-freeness condition is necessary for a form of robust approximate implementation in large economies. In settings where allocations are excludable, asymptotic envy-freeness is also sufficient for implementation, while in non-excludable settings it is not sufficient.     

Does Culture Matter in Inter-Firm Cooperation? Research Consortia in Japan and the USA

Collaborative research consortia allow firms to pursue scale and scope economies in research, finance large costly proposals, share risks, avoid unnecessary duplication, internalize the externalities created by research spillovers, and allow the use of firm-specific complementary skills and resources. In this study we examine the evolution of cooperative research organizations in the USA and Japan. We explore the factors which influence the emergence of alternative forms of cooperation. Specifically, we examine the role of culture and the institutional environment in molding the organization of cooperation between firms in R&D and the consequences of such cooperation. © 1997 John Wiley & Sons, Ltd.     

Dynamic signaling and market breakdown

We consider the effects a public revelation of information (e.g. rating, grade) has on trading in a dynamic signaling model. Competing buyers offer prices to a privately informed seller who can reject them and delay trade. Delay is costly and the seller has no commitment to its duration. The external public information allows for signaling in equilibrium. More interestingly, we characterize the dynamics of trade and prices. If signals are noisy, no trade takes place just before the revelation of external information. If signals are fully revealing, then trade occurs even close to revelation, however, transaction prices are discontinuous.     

Diversification as a Public Good: Community Effects in Portfolio Choice

Within a rational general equilibrium model in which agents care only about personal consumption, we consider a setting in which, due to borrowing constraints, individuals endowed with local resources underparticipate in financial markets. As a result, investors compete for local resources through their portfolio choices. Even with complete financial markets and no aggregate risk, agents may herd into risky portfolios. This yields a Pareto‐dominated outcome as agents introduce “community” risk unrelated to fundamentals. Moreover, if some agents are behaviorally biased, or cannot completely diversify their holdings, rational agents may choose more extreme portfolios and amplify the effect.     

Local comparison of linear rank tests,in the Bahadur sense

Summary As continuation ofKremer [1979a] a theory of asymptotic comparison based on local Bahadur efficiency is derived for general linear rank tests of the one-sample symmetry problem and thek-sample problem (k2). The results are similar to former considerations based on Pitman efficiency but hold under weaker conditions on the scores-generating functions or local alternatives.     

The Use of Franchising by U.S.-Based Retailers

The question of whether to franchise or to own has received much research interest in recent years. Two popular approaches used to explain the proportion of franchising (PF) in the franchisor's system are resource-scarcity and agency theories. This study combines both theories to explain the proportion of franchised outlets in the U.S. retailing sector between 1990 and 1997. The findings show mixed results with regard to both previous studies and hypothesized relationships. The study shows that the proportion of franchising used by retailers is positively related to size (number of outlets) and geographical scope, and negatively related to the rate of growth and the level of investment. Age and royalty rates are not found to be significant to the proportion of franchising.     

Spring cleaning: rural water impacts, valuation, and property rights institutions

Using a randomized evaluation in Kenya, we measure health impacts of spring protection, an investment that improves source water quality. We also estimate households' valuation of spring protection and simulate the welfare impacts of alternatives to the current system of common property rights in water, which limits incentives for private investment. Spring infrastructure investments reduce fecal contamination by 66%, but household water quality improves less, due to recontamination. Child diarrhea falls by one quarter. Travel-cost based revealed preference estimates of households' valuations are much smaller than both stated preference valuations and health planners' valuations, and are consistent with models in which the demand for health is highly income elastic. We estimate that private property norms would generate little additional investment while imposing large static costs due to above-marginal-cost pricing, private property would function better at higher income levels or under water scarcity, and alternative institutions could yield Pareto improvements.