THE POLITICAL EMBEDDEDNESS OF PRIVATE ECONOMIC TRANSACTIONS*

Governments are able to manipulate economic transactions in order to achieve foreign policy goals. This article addresses the question: can managers of multinational enterprises (MNEs) structure economic transactions in ways that will limit the costs resulting from government intervention? Using a transaction cost framework, the efficiency of alternative structures (exporting, joint ventures, licensing, or wholly owned subsidiaries) for protecting a firm's interests are assessed. We argue that the traditional focus on the dyadic relationship between supplier and buyer misses sources of transaction costs; by conceptualizing economic transactions as embedded in a political context, additional sources of transaction costs are revealed. We examine three cases of home government intervention in US MNE transactions with the Soviet Union. We find that the full range of structural alternatives is affected by government sanctions, although sanctions are imposed on exporting relationships first and removed last. We find that MNEs are, therefore, beginning to insulate international transactions by making their overseas subsidiaries more independent of US technology and supplies with the hope that the US government will be less likely to impose its will extraterritorially by intervening in foreign subsidiaries’private economic transactions.     

Monetary policy analysis and inflation targeting in a small open economy: a VAR approach*

Empirical monetary policy research has increased in the last decade, possibly because deregulation and explicit monetary targets have made monetary policy issues more interesting. In particular, within the inflation targeting framework it has been argued that inflation forecasts can be used as optimal intermediate targets for monetary policy, and the development of empirical models that have good forecasting properties is therefore important. This paper shows that a VAR model with long‐run restrictions, justified by economic theory, is useful for both forecasting inflation and for analysing other issues that are central to the conduct of monetary policy. Copyright © 2001 John Wiley & Sons, Ltd.     

A note on the relationship between obesity and driving

Vehicle travel and obesity rates in the United States have surged in recent decades. This paper contributes to the mounting evidence of a link between them by drawing attention to a very close relationship between trends in miles driven per licensed driver and adult obesity rates six years later. It also presents evidence on why the effect might be expected to be lagged by six years. A simple model is produced, which predicts reductions in obesity rates over the next few years. If these reductions come about, the model will be seen to offer a powerful insight into the relationship between driving and obesity. If the relationship is more than coincidental, it has implications for transport policy and supports the development of a multi-pronged, interdisciplinary approach to tackle increased driving and obesity.     

How Organizational Policies Influence Bystander Likelihood of Reporting Moderate and Severe Sexual Harassment at Work

Little is known about the causal effect of sexual harassment policies on sexual harassment outcomes at work. Based on schema theories of social cognition, organizational policies related to sexual harassment should have a greater impact on responses to moderate, versus severe, forms of sexual harassment. In Study 1, 219 undergraduate students were shown a fictitious company website describing one of three company policies on sexual harassment (a zero-tolerance policy, a standard harassment policy, or no policy), and were then assigned to read about a moderate or severe instance of sexual harassment they ostensibly observed at the organization. Results indicated participants in the zero-tolerance policy condition were more likely to intend to formally report the harassment to their organization than those in the other conditions. This effect was especially strong for the moderate, or more ambiguous, sexual harassment scenario. Study 2 replicated and extended Study 1 using 101 Human Resources professionals and actual policy statements from an organization. Results again indicated that a zero-tolerance policy leads to the highest estimates of bystander reporting, especially for instances of moderate sexual harassment. Implications for practice include a caution against using minimal or compulsory harassment policies in place of salient zero-tolerance policies.     

John Brewer and Frank Trentmann, eds. Consuming Cultures, Global Perspectives: Historical Trajectories, Transnational Exchanges

This collection of eleven essays examines consumer culturesfrom different eras and different countries in transnationalcontexts. The essayists cover a broad chronological swath, startingwith the porcelain trade in Britain and China during the seventeenthand eighteenth centuries and concluding with a case study ofglobal water welfarism in present-day South Africa and New Zealand.Consuming Cultures also offers a rich sampling of disciplinaryapproaches, featuring work by historians, anthropologists, sociologists,geographers, and media scholars. Despite such diversity, theessays generally     

Credit Risk Versus Capital Requirements under Basel II: Are SME Loans and Retail Credit Really Different?

Under Basel II, retail and SME credit (R&SME) receive special treatment because of a supposedly smaller exposure to systemic risk. Most research on this issue has been based on parameterized credit risk models. We present new evidence by applying Carey's (Carey, Mark. “Credit Risk in Private Debt Portfolios.” Journal of Finance 53, no. 4 (1998), 1363–1387.) nonparametric Monte-Carlo resampling method to two banks' complete loan portfolios. By exploiting that a sub-sample of all borrowers has been assigned an internal rating by both banks, we can compare the credit loss distributions for the three credit types, and compute both economic and regulatory capital under Basel II. We also test if our conclusions are sensitive to the definitions of R&SME credit. Our findings show that R&SME portfolios are usually riskier than corporate credit. Special treatment under Basel II is thus not justified. JEL classification: C14, C15, G21, G28, G33.     

The ethics of greenmail

In the contemporary flurry of hostile corporate takeover activity, the ethics of the practice of greenmail have been called into question. The authors provide an account of greenmail in parallel with Daniel Ellsberg's conception of blackmail, as consisting of two conditions: a threat condition and a compliance condition. The analysis then proceeds to consider two questions: Is all greenmail morally wrong? Are all hostile takeovers morally wrong? The authors conclude that there is no basis for answering either question in the affirmative. While there is no cause for moral concern per se, the practices of both greenmail and hostile takeovers yield deeper and more interesting questions for the theory of corporate governance.     

The effects of the keiretsu on the export performance of Japanese companies: help or hindrance?

This study investigates the effect that membership in a financial keiretsu has on the export performance of Japanese manufacturing companies. Companies that belong to one of the six major financial keiretsu are found to have lower export ratios than similar companies who are not members. The negative effects of keiretsu membership appear confined to producer goods companies where intergroup linkages such as preferential trading relationships are tightest. Additional evidence from the producer goods sector showing that keiretsu members do less well on other measures of company performance supports the argument that the cartel-like properties sometimes ascribed to the keiretsu actually reduce competitiveness, thus dampening export performance. In general, the data do not support recommendations that non-Japanese companies might look to keiretsu-type alliances as an organizational strategy that will lead to competitive advantage in global markets. © 1998 John Wiley & Sons, Ltd.     

The recency of technological inputs and financial performance

Inventions differ in terms of the age of the knowledge base they build upon. We examine what effects differences in the recency of knowledge inputs have on financial performance. Using threshold regression analysis, we isolate three regimes that exhibit different associations between recency and stock return. We find that for firms whose new patents use inputs in the mid‐range of the technological recency distribution, the relationship is positive; higher recency leads to higher stock return. However, for firms whose new patents make use of either nascent or very mature technological inputs, the effects are negative; higher recency leads to lower stock return. These findings indicate that it is not firms utilizing the most recent technological inputs that experience the highest returns to their inventive activity. Indeed, firms operating at the technological input frontier have market returns significantly below the mean. Rather, it is firms whose new patents utilize medial‐aged technological inputs (i.e., firms using inputs slightly behind the technology frontier) that tend to experience the highest returns. Copyright © 2008 John Wiley & Sons, Ltd.