Foreign direct investment via M&A and domestic entrepreneurship: blessing or curse?

There are conflicting predictions in the literature about the relationship between FDI and entrepreneurship. This paper explores how foreign direct investment (FDI) inflows, measured by lagged cross-border mergers and acquisitions (M&A), affect entrepreneurial entry in the host economy. We have constructed a micro-panel of more than two thousand individuals in each of seventy countries, 2000–2009, linked to FDI by matching sectors. We find the relationship between FDI inflows and domestic entrepreneurship to be negative across all economies. This negative effect is much more pronounced in developed than developing economies and is also identified within industries, notably in manufacturing. Policies to encourage FDI via M&A need to consider how to counteract the prevailing adverse effect on domestic entrepreneurship.     

Individual and place-based drivers of self-employment in Chile

This paper analyzes the importance of individual and place characteristics on the selection into self-employment in Chile. Following a structural and multilevel empirical approach, we test whether both sets of variables explain the variation of individual wages, self-employed earnings, and the propensity of being in independent work. The results indicate that while most of the variation in these three outcomes is explained by individuals’ traits, place-related variables account for a non-negligible share of spatial variation. Second, as suggested by occupational choice theories, the propensity of being in self-employment positively correlates with larger expected earning differentials, but only in the case of employers. This, along with other results, suggests that while employers seem to choose their occupational status, own accounts in Chile seem to respond to factors pushing them into self-employment.     

Cost of capital and public loan guarantees to small firms

In this paper, we study the determinants of the spread charged by banks under a UK policy intervention scheme, aimed at supporting access to the credit market for small firms through guarantee backed loans. We exploit a unique dataset containing data on 29,266 guarantee backed loans under the UK SFLG scheme over the period 2000 to 2005. Results suggest that lower spreads are offered for loans of larger amounts and higher durations, for service firms, for larger firms, and for those located in the most advanced regions. Higher spreads are applied to high-tech manufacturing firms and to loans issued for working capital purposes. We also find that the presence of other extant debt is associated with a relatively higher spread and that this effect is especially significant for the subset of firms that have reached a maximum debt capacity based on collateralized assets. Further, we also find that the higher the incidence of the publicly guaranteed debt over the total amount of outstanding loans, the lower, on average, the spread. However, an increase in the guaranteed coverage leads to a contraction in the spread only for loans aimed at covering working capital needs rather than investments.     

Factors affecting the long-term survival of eBay ventures: a longitudinal study

With 40% of the world able to access the internet, online marketplaces provide the small entrepreneur with a hitherto incomprehensible opportunity to reach a global audience with very low barriers to entry and low risk. Yet, academic research has not studied the factors unique to online businesses that affect their long-term survival. This study is the first of its kind that does so using data gathered from eBay’s feedback system in 2004, 2009, and 2013. The results present data on the rate of discontinuance of eBay ventures. Further, a logistic regression analysis suggests that unique factors such as venture size, age, and feedback reputation positively influence the likelihood of long-term survival of an eBay venture. Based on these results and the ensuing discussion, implications for researchers and practitioners are provided.     

What is not beautiful should match: how attractiveness similarity affects consumer responses to advertising

This study introduces the concept of attractiveness similarity, empirically examines its main effect and whether it moderates the effect of endorser attractiveness on consumer responses to advertising. The results show a positive main effect of attractiveness similarity over and above the mere effect of endorser attractiveness. In addition, a consistent moderating effect of attractiveness similarity on the effect of endorser attractiveness emerges: attractiveness similarity buffers against the less positive effects of lower levels of endorser attractiveness (i.e., it compensates for lower levels of endorser attractiveness). Overall, these findings reveal attractiveness similarity as a new variable in endorser advertising, which has important managerial implications. Advertising campaigns employing averagely attractive endorsers should pay special attention to attractiveness similarity.     

Negotiating Effectively: Justice in International Environmental Negotiations

Are negotiators who rely on justice principles in the process of bargaining and drafting agreements more—or rather less—effective than others? This article examines whether adherence to principles of procedural and distributive justice in negotiations contributes to more effective results, with a focus on international environmental negotiations. Effectiveness is defined in terms of the extent of agreement (among parties and on issues), time to reach agreement, and comprehensiveness of the agreement. A set of hypotheses is evaluated on a selection of bilateral and multilateral cases of environmental negotiations, using statistical methods. The analyses reveal that adherence to principles of procedural justice contributes to more effective results in multilateral environmental negotiations. These principles are found to hinder effectiveness in the bilateral cases. On the other hand, adherence to principles of distributive justice is only moderately related to effectiveness in both the bilateral and multilateral cases.     

Collaborative Decision-Making in Non-formal Planning Settings

Planning initiatives outside the formal planning system can constitute a favourable environment for implementing and analysing collaborative decision-making processes. The conceptualisation of the decision-making context in the light of the Policy Network analysis helps to better understand the underlining conditions, as well as their influence in the outcomes. In the case under analysis, were the decision-making conditions were of co-responsibility and power-sharing, the challenge has been to warrant the effectiveness of the decisions, which lies, as is argued, in the reliability of the framework for decision-making and in the ability to translate the collaborative participation outputs into actions at different time-frames. Moreover, as the case-study deals with strategic spatial planning, a future oriented approach is needed to warrant the flexibility and robustness of the plan in addressing the uncertainty associated with long term objectives. Those are the critical issues to be handled in the multi-criteria analysis (MCA) framework which sustains the analytical hierarchy process (AHP) that was used to support the decision-making process.     

Inflation,uncertainty, and monetary policy

Low inflation likely reflects factors whose influence should fade over time. But many uncertainties attend this assessment, and downward pressures on inflation could prove to be unexpectedly persistent. My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation. In interpreting incoming data, we will need to stay alert to these possibilities and, in light of incoming information, adjust our views about inflation, the overall economy, and the stance of monetary policy best suited to promoting maximum employment and price stability. How should policy be formulated in the face of such significant uncertainties? In my view, it strengthens the case for a gradual pace of adjustment. But we should also be wary of moving too gradually. It would be imprudent to keep monetary policy on hold until inflation is back to 2%.     

<Emphasis Type="Italic">The Man Who Knew: The Life and Times of Alan Greenspan</Emphasis> by Sebastian Mallaby

I agree that Sebastian Mallaby’s detailed and well-sourced The Man Who Knew: The Life and Times of Alan Greenspan, will be essential for every future economic historian studying the Greenspan era. That said, Mallaby does not convey to his readers a sound understanding of monetary policy. I disagree with Mallaby’s claim that Greenspan could and should have done something about the housing and subprime mortgage bubbles. Peter Wallison makes a strong case that the affordable housing quotas did not just “encourage” but forced the GSEs to buy subprime mortgages. Information available in real time on aggregate subprime mortgage issuance was seriously flawed because the GSEs did not report accurately. Greenspan cannot be held responsible for the GSEs hiding the subprime debt on their balance sheets. These mortgages were central to the crisis. It seems improbable that any monetary policy mistake of 2001–05 was large enough to create the crisis. Mallaby could have written a final chapter emphasizing the Maestro resisting the power of a malign and evil pair of GSEs and the power of the President and Congress of the United States pursuing a disastrous housing policy. Despite the Maestro’s best efforts, Leviathan triumphed and brought ruin upon the Nation.