Entrepreneurial innovativeness and growth ambitions in thick vs. thin regional innovation systems

Research in economic geography has paid increasing attention to regional innovation systems (RISs) as a potential vehicle for growth and development. Yet despite an increasing amount of research studying RISs in particular and economic regions in general, we have limited knowledge about their influence on entrepreneurs and entrepreneurship. We respond to this knowledge gap and study if entrepreneurs’ localization in thick vs. thin RISs affects their innovativeness and growth ambitions. Thick RISs are predominately urbanized spaces that include organizations of higher-level education, R&D intensive milieus, and an ample industry sector, while thin RISs to a lesser degree encompass these features. Empirically, we analyse 870–917 entrepreneurial firms in Agder of Southern Norway. Based on trade and labour markets, as defined by the EU’s classification of local administrative units (LAU1), we identify two thick and six thin RISs in Agder. Econometric analyses show that entrepreneurs located in thick RISs are more innovative than entrepreneurs located in thin RISs, but there are no significant differences concerning entrepreneurs’ growth ambitions. In light of our findings, we discuss the potential agency role played by entrepreneurial firms at a micro level on path dependent features of RISs at a macro level.     

International Debt Shifting: The Value-Maximizing Mix of Internal and External Debt

Abstract

We study the capital structure of multinationals and expand previous theory by incorporating international debt tax shield effects from both internal and external capital markets. We show that: (i) multinationals’ firm value is maximized if both internal and external debt are used to save tax; (ii) the use of internal and external debt is independent of each other; and (iii) multinationals have a tax advantage over domestic firms, which cannot shift debt across international borders. We test our model using a large panel of German multinationals and find that internal and external debt shifting are of about equal importance.     

A Simple Improvement of the IV‐estimator for the Classical Errors‐in‐Variables Problem

Two measures of an error‐ridden variable make it possible to solve the classical errors‐in‐Variable problem by using one measure as an instrument for the other. It is well known that a second IV‐estimate can be obtained by reversing the roles of the two measures. We explore the optimal linear combination of these two estimates. In a Monte Carlo study, we show that the gain in precision is significant. The proposed estimator also compares well with full information maximum likelihood under normality. We illustrate the method by estimating the capital elasticity in the Norwegian ICT‐industry.     

Will African Agriculture Survive Climate Change?

Measurement of the likely magnitude of the economic impact ofclimate change on African agriculture has been a challenge.Using data from a survey of more than 9,000 farmers across 11African countries, a cross-sectional approach estimates howfarm net revenues are affected by climate change compared withcurrent mean temperature. Revenues fall with warming for drylandcrops (temperature elasticity of –1.9) and livestock (–5.4),whereas revenues rise for irrigated crops (elasticity of 0.5),which are located in relatively cool parts of Africa and arebuffered by irrigation from the effects of warming. At first,warming has little net aggregate effect as the gains for irrigatedcrops offset the losses for dryland crops and livestock. Warming,however, will likely reduce dryland farm income immedia-tely.The final effects will also depend on changes in precipitation,because revenues from all farm types increase with precipitation.Because irrigated farms are less sensitive to climate, wherewater is available, irrigation is a practical adaptation toclimate change in Africa.     

Slotting Allowances and Manufacturers' Retail Sales Effort

A manufacturer's incentives to undertake noncontractible investments depend on the profit margin on her sales to the retailer, and slotting allowances can facilitate such incentives by increasing unit wholesale prices. At first glance it is tempting to conclude that slotting allowances should be particularly prevalent for product categories where the manufacturer's scope for undertaking noncontractible sales effort is relatively large. At odds with this, the Federal Trade Commission (FTC) among other organizations, reports that slotting allowances are more commonly used for product categories where the scope for noncontractible effort by the manufacturer is presumably relatively small. To scrutinize this puzzle we set up a simple model with one manufacturer and one retailer, where the manufacturer undertakes noncontractible demand‐enhancing investments. The predictions from the model are consistent with market observations.     

Mergers and partial ownership

We compare the profitability of a merger between two firms in which one firm fully acquires another and the profitability of a partial ownership arrangement in which the acquiring firm, although owning less than 100% of the acquired firm, is nevertheless able to obtain corporate control over all pricing decisions. We find that joint profit can be higher in the latter case because it may result in a greater dampening of competition with respect to an outside competitor when the partial ownership arrangement is publicly observable. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firm and use them to explain puzzling features of the pay-TV markets in Norway and Sweden.     

Cooperative and Non-Cooperative R&D Policy in an Economic Union

What are the consequences of decentralized R&;D policies within an economic union? Do non-cooperative policies generate too high R&;D subsidies? To address such questions, we construct a simple model where firms invest in quality-improving R&;D. With goods produced in different countries within an economic union, we compare non-cooperative and cooperative R&;D policies. We show that non-cooperative policies imply too small R&;D subsidies for horizontally differentiated goods and too high subsidies for close substitutes. Furthermore, small countries have less incentive to subsidize R&;D than large countries, resulting in an unwarranted vertical product differentiation between goods produced in different countries.     

Marketing in underdeveloped economies

This paper by Professor Eid attempts to show that marketing, as an economic institution, is neglected in underdeveloped countries. The author argues that marketing can play a greater role in the development of these countries; specifically he writes on the status of marketing and the indigenous obstacles to the inception of distributive and marketing systems.     

The Broadband Access Market: Competition,Uniform Pricing and Geographical Coverage

In this paper we analyze the market for broadband access. A key feature of this market is that it is considerably more expensive to connect consumers in rural locations than in urban locations. We show that while competition increases welfare compared to monopoly when prices are free to differ across locations, the opposite may be true if there is a requirement of uniform pricing across locations. Furthermore, we show that given uniform pricing, the regulator may increase consumer surplus as well as profit by requiring a higher regional coverage than the market outcome.     

Private Equity Finance as a Growth Engine: What It Means for Emerging Markets

Entrepreneurship has long been considered crucial for economic development. An important element of entrepreneurship is the willingness and ability to mobilize private capital from both domestic and foreign sources. The private equity sector in the Middle East and North Africa (MENA) illustrates the role that private capital can play in the development of emerging markets. Data on the employment generation and growth performance of private equity provide evidence that it is an important driver of economic growth globally. This paper draws on initial evidence from the MENA region to illustrate the sector's potential there and in emerging markets generally. It then recommends a new generation of reforms to fuel this growth engine. A survey of MENA’s private equity industry survey conducted for this paper assesses these developments and the sector's need for proactive reforms to support it. It also shows that international financial market interest in private equity finance does not seem to have abated with the recent market bust. The paper concludes by identifying priority areas for future policy and research. JEL Classification O160