Cost heterogeneity and the destination of Japanese foreign direct investment: A theoretical and empirical analysis

This paper first of all develops a Cournot oligopolistic model with heterogeneous firms to examine each firm's choice between export-oriented foreign direct investments (FDI) and FDI to serve the host-country market. It is shown that there exist a critical level of efficiency such that all firms below that level choose the former and those above it the latter. The hypothesis is tested using firm-level data on 118,300 Japanese firms covering the entire manufacturing sector. Multinomial logit estimates strongly support our theoretical findings.     

Logic of Aid in an Intertemporal Setting

The paper studies the welfare implications of temporary foreign aid in the context of a simple two‐country model of trade. In addition to its usual effects, a transfer of income in one period is assumed to influence the preferences of the recipient country in the following period. The implied changes in the terms of trade over the two periods are consistent with a number of possible outcomes with respect to the intertemporal welfare of the donor, the recipient, and the world as a whole. Particular attention is devoted to the conditions for strict Pareto improvement and the circumstances under which temporary aid transactions are likely to occur.     

Managing internationalization and innovation tradeoffs in entrepreneurial firms: Evidence from transition economies

For entrepreneurial firms (EFs), internationalization and innovation present two major avenues for growth. Prior research, based primarily on EFs from advanced economies, demonstrates mixed insights for the relationship between these strategies. A deeper understanding of the tradeoffs involved in the internationalization-innovation relationship may help better comprehend the issue. In this study, we draw on the organizational learning and capabilities-based literatures to examine the relationship in the context of EFs in transition economies (EFTEs). Our findings suggest that in EFTEs, internationalization is negatively associated with the likelihood of innovation. We also find that three knowledge-based capabilities of EFTEs (absorptive capacity, appropriation capability, and managerial capability) positively moderate the aforementioned negative relationship. We do not find any evidence of reverse causality (EFTE innovation impacting internationalization). Our research provides novel insights to the IE literature by shedding light on the internationalization–innovation tradeoffs that EFTEs experience.     

Do Market‐Supporting Institutional Characteristics Explain Firm Performance? Evidence from Emerging Markets

The importance of market‐supporting institutions and their impact on business investment and economic growth has gained the attention of researchers and practitioners alike. In this study, we extend this research by capturing the impact of the quality of regulative institutional characteristics on firm performance in an emerging market context. We use a sample of 26,493 emerging market firms from 91 countries over the years 2003 to 2010 and test for the relationship between government effectiveness, regulatory quality, rule of law and control of corruption, and firm performance. Results indicate that governmental effectiveness and regulatory quality impact performance outcomes positively, while rule of law impacts performance negatively. These findings provide important insights and encourage managers and public policymakers to be cognizant of the impact of these factors and adapt accordingly. © 2014 Wiley Periodicals, Inc.     

India-focused publications in leading international business journals

Despite an increase in the number of India-focused articles appearing in leading international business journals, there has not been any attempt to conduct systematic reviews that can inform academicians and practitioners about research that has accumulated over the years and identify areas that may be worthwhile to pursue in the future. This article attempts to fill this gap by providing an overview of all publications focusing on the Indian context that appeared in seven leading international business journals between 1991 and 2008. Findings suggest that 74 publications involving 180 authors affiliated to 112 academic and six non-academic institutions from nine international locations contributed to the research by examining a wide variety of international business topics. Findings also reveal that authors affiliated to US-based institutions published more than others and the majority of top-cited publications appeared after 1995. Contributions of various authors and institutions are ranked and summaries of publication types, research methodologies, examined topics, and citations received by different articles are provided. This article concludes by suggesting avenues of future research.     

Trade and domestic tax reforms in the presence of a public good and different neutrality conditions

This paper develops a perfectly competitive general-equilibrium model of a small open economy with production of private traded goods and of a public good which is financed by revenues from trade and domestic taxes. Within this framework we consider the effects on public good provision and on welfare of the following tax reforms: (i) a producer-price-neutral reduction in export taxes and a corresponding increase in production taxes, (ii) a consumer-price-neutral reduction in tariffs and a corresponding increase in consumption taxes, and (iii) a partial tax-revenue-neutral reform in trade and domestic taxes.     

Donor Strategy under the Fungibility of Foreign Aid

We develop a political–economic model of aid fungibility: a part of aid is diverted away from its intended target by lobby groups. The size of this diversion – the degree of aid fungibility – is determined endogenously by the recipient government. The donor can affect the equilibrium degree of fungibility by choosing both the size of aid and the timing of its decision. We derive a condition under which the donor's reaction to fungibility is to reduce the amount of aid. Under this condition, if the donor acts as a follower, both the donor and the target group are better off.     

Controlling Illegal Immigration: Border Control vs. Domestic Enforcement

This paper presents a two-country general equilibrium model where international mobility of labor is prohibited. Illegal immigration nevertheless occurs. The probability of success at illegal immigration depends on resources allocated to border control and domestic enforcements. We examine the effects of switching resources form border control to domestic enforcement on illegal immigration and on welfare levels. We characterize the allocation of resources between the two methods of immigration control, that minimizes illegal immigration, and find that, starting from this allocation, moving resources from border control to domestic enforcement is unambiguously welfare improving for the destination country.