Public Investment in Transportation Infrastructure and Economic Performance in Portugal

In this paper, we use a VAR approach to investigate the effects of public investment in transportation infrastructures on private investment, employment, and output in Portugal. Estimation results suggest that public investment crowds in private investment and employment, and has a strong positive effect on output. We estimate that one euro in public investment increases output in the long‐term by 9.5 euros, which corresponds to a rate of return of 15.9%. These figures imply that there are strong long‐term budgetary benefits from public investment in the form of increased future tax revenues. A closer look at the effects of different types of public investment uncovers the same general patterns. These results are very important from a public policy perspective. They suggest that the strategy followed by the Portuguese authorities of investing in public infrastructures is justified, both from a long‐term development perspective and a long‐term public budgetary perspective.     

The potential for underinvestment in internet security: implications for regulatory policy

With the continuing growth of the use of the Internet for business purposes, the consequences of a possible cyber attack that could create a large scale outage of long time duration becomes a more and more serious economic issue. In this paper, we construct a game-theoretic model that addresses the economic motivations for investment in added Internet security and makes a case for a possible market failure in the form of underinvestment in the provision of Internet security. This result relies on the fact that the social value derived from consumption (which is at least equal to a fraction of the surplus derived from e-commerce) greatly exceeds the revenue at stake associated with the telecommunications companies’ and ISP’s security levels. If the ratio of social value to revenue at stake to Internet providers continues to grow, the likelihood of underinvestment in security becomes higher and some form of regulation may become necessary. We discuss the difficulties associated with designing and enforcing a regulatory scheme based upon mandatory security standards.      

Takings, litigation, and just compensation

A constitutional right to just compensation for governmental takings implies a right to a judicial review of the adequacy of the compensation. Thus, a property owner, subjected to a takings action, can threaten to litigate if he considers compensation insufficient. This paper uses a theoretic settlement-litigation analysis to demonstrate how the litigation threat influences the size of the compensation. In addition, it revises the theoretical explanation for earlier empirical findings that certain classes of property owners often receive more than market value for their property. It is also shown that the just compensation mechanism cannot guarantee efficient takings. Extending the basic model to regulatory takings, this paper demonstrates that recent changes in the judicial doctrine of when a regulation has gone too far and demands compensation has strengthened the litigation threat of property owners. It explains why political decisionmakers are moving toward settlements with terms which are increasingly defined by legislation.     

The multi-faceted role of experience dealing with policy risk: The impact of intensity and diversity of experiences

Firms learn from their previous experience, transfom routines into knowledge and thus develop capabilities. This holds for the market- and the non-market environment likewise. Experience is therefore useful to deal with policy risk arising from potential discretional and opportunistic behavior of political authorities, such as governments. We argue that firms can not only learn from the intensity of experience dealing with policy risk, but also from the exposure to a more diverse range of policy risk across different political environments. Testing a sample of 164 Spanish multinational firms, we find that the positive impact of diversity of experiences on the scope of internationalization is more important than the intensity of experience. Moreover, we also find a moderating impact between both types of experience. Overall, our findings emphasize the multi-faceted nature of experience and the need to disentangle the impact and interrelationships of its different components.     

Family firms and internationalization: An exploratory study on high-tech entrepreneurial ventures

This paper empirically explores a highly relevant, although poorly investigated topic: internationalization of family firms that operate in high-tech industries. Specifically, we compare internationalization of family and nonfamily entrepreneurial ventures in these industries. Relying on prior studies on internationalization of family firms, we speculate on how the specificities of high-tech industries shape the advantages and disadvantages of family entrepreneurial ventures in pursuing internationalization as compared with their nonfamily peers. In the empirical part of the paper, through a rigorous quantitative analysis of unique data from 264 Italian high-tech entrepreneurial ventures, we explore whether in high-tech industries family entrepreneurial ventures are more (or less) likely to pursue internationalization than their nonfamily counterparts. Surprisingly enough, our econometric estimates indicate that, in high-tech industries, family entrepreneurial ventures exhibit a higher internationalization propensity than their nonfamily peers.     

Charisma,paternalism, and business leadership in Latin America

If populist politics reveals a paradigm, in countries where populist politics are acceptable, effective paternalistic business leaders must offer unlimited protection in exchange for similarly unlimited allegiance from the workers. The reverse interview survey reported here suggests that, within knowledge‐based industries, the knowledgeable leader might override paternalistic considerations that nonetheless rule for the larger segment of Brazilian workers, who may shun the foreign‐appointed boss the most. Unfortunately, multinationals tend to expand abroad when they are mature businesses whose people‐oriented founders may be long gone. Their more technocratic successors are more likely to appoint the most despised leaders at subsidiaries. © 2010 Wiley Periodicals, Inc.     

The influence of strategic patterns of internationalization on the accuracy and bias of earnings forecasts by financial analysts

This paper examines how financial analysts’ earnings per share forecasts are affected by strategic patterns that multinational firms have used to expand abroad. Prior empirical studies have examined a firm's internationalization level as a one-dimensional construct involving increased task complexity for financial analysts’ forecasting and therefore resulting in lower accuracy and greater optimistic bias in earnings forecasts. In contrast, we use two strategic patterns of internationalization associated with geographic dispersion and cross-border integration to characterize a firm's international strategy, and find different empirical results using a sample of U.S. public companies with domestic and international operations. The empirical evidence suggests that geographic dispersion contributes to increases in forecasting accuracy and decreases in optimistic bias. Further, the results support that cross-border integration leads to decreases in forecasting accuracy. The two strategic patterns of internationalization are a consequence of managerial choices and therefore these results are important for managers, investors and shareholders as they help explain the linkages between international strategies and earnings forecasts by financial analysts.     

Final Energy Demand in Portugal: How Persistent it is and Why it Matters for Environmental Policy

ABSTRACT

The objective of this paper is to examine the degree of persistence in final energy demand in Portugal. Our results suggest that when structural breaks are accounted for, aggregate energy demand and all of its components are stationary. Accordingly, the response to shocks is not permanent. We find, however, strong levels of persistence. Demand for electricity is the most persistent component of aggregate demand while the levels of persistence for petroleum and gas are similar and close to the aggregate level. In turn, demand for coal and biomass are also similar and the least persistent. These results have important implications for the design of macroeconomic policies. Indeed, high persistent levels mean that temporary energy shocks translate into persistent changes in energy demand and thereby in less transient shocks to the overall economy. These results are also important for the design of environmental policies. The fact that energy demand is highly persistent means that the effects of environmental policies will tend to be long lasting. Also, the relatively high persistence of electricity, gas and petroleum and the fact that their levels of persistence are similar suggests that fuel switching policies involving these fuels will be relatively easy to implement.     

THE CAUSAL LINK BETWEEN FINANCIAL INCENTIVES AND WEIGHT LOSS: AN EVIDENCE‐BASED SURVEY OF THE LITERATURE

Obesity and overweight are linked to diseases that cost society a significant amount of resources. While behavior modification can reduce the problem, instigating such lifestyle changes is an uneasy task. One potential way to reduce the problem is through the use of financial incentives. In this survey, we review the available evidence, properly emphasizing studies that credibly yield meaningful estimates of the effect of financial incentives on weight loss. We find that the scientific literature on the subject has not yet satisfactorily settled whether such a mechanism is effective at eliciting the desired behavioral and health outcomes. We therefore advocate a rigorous large‐scale randomized experiment to provide reliable estimates of the effect.     

Causality Rules: Performance Feedback on Hierarchically Related Goals and Capital Investment Variability

We extend March and Simon’s (1958) analysis of strategic decisions by distinguishing between two rules for allocating attention – priority versus causality. We develop theory concerning causality rules which have been largely overlooked in prior literature. Specifically, we examine how performance feedback on the intermediate productivity goal and the higher‐order profitability goal independently and jointly influence the variability of firm capital investments. Panel analysis of 2,477 Spanish manufacturing firms reveals that these goals jointly affect the variability of capital investments through both priority and causality attention rules. Our study provides new insights on how firms handle multiple goals, deconstruct performance feedback, and cope with the attentional constraints of bounded rationality.