Science policy mechanism and technology development strategy in the developing countries

The strengthening of science and technology is essential for economic growth in the developing countries. Effective science policy mechanisms do not suffice. An adequate infrastructure must be established—one that is conducive to this task. The paper focuses on the roles of government and industry in creating a favorable environment.     

Cross ownership of wireline and wireless communications carriers: synergy or collusion?

This paper examines whether the ‘cross ownership’ of wireline and wireless communications carriers is socially beneficial or harmful, and therefore should be allowed or regulated. We analyze a generic model of cross ownership of the firms which produce different but inter-related services. We show that, first, if both of the wireline and wireless industries are monopolistic, cross ownership results in social gains when the two services are complements, and social losses when they are substitutes. Secondly, if the wireless industry is sufficiently competitive, there’s little or no welfare loss from cross ownership. Finally, we briefly address the effect of network externality on the welfare consequences of cross ownership.     

The relation between stock returns and short-term interest rates

This study examines the relation between the expected returns on common stocks and short-term interest rates. Using a two-factor model of stock returns, we show that the expected returns on common stocks are systematically related to the market risk and the interest-rate risk, which are estimated as the sensitivity of common-stock excess returns to the excess return on the equally weighted market index and to the federal fund premium, respectively. We find that the interest-rate risk for small firms is a significant source of investors' portfolio risk, but is not properly reflected in the single-factor market risk. We also find that the interest-rate risk for large firms is “negative” in the sense that the market risk estimated from the single-factor model overstates the true risk of large firms. An application of the Fama-MacBeth methodology indicates that the interest-rate risk premium as well as the market's risk premium are significant, implying that both the market risk and the interest-rate risk are priced. We show that the interest-rate risk premium explains a significant portion of the difference in expected returns between the top quintile and the bottom quintile of the NYSE and AMEX firms. We also show that the turn-of-the-year seasonal is observed for the interest-rate risk premium; however, the risk premium for the rest of the year is still significant, although small in mangitude.     

Dissecting Foreign Bank Lending Behavior During the 2008–2009 Crisis

This paper analyzes the lending behavior of foreign‐owned banks during the recent global crisis. Using bank‐level panel data for 51 countries, the paper explores the role of affiliate and parent financial characteristics, host location, as well as the impact of parent geographic origin and reach on foreign banks’ credit growth. Overall, the analysis finds robust evidence that foreign banks curtailed the growth of credit relative to other banks, independent of the host region in which they operate. Banks from the United States reduced loan growth less than other parent banks. Neither the global nor regional reach of parent banks influenced the lending growth of foreign affiliates. Parent capitalization and not parent funding explained the behavior of foreign bank credit growth during the global crisis. However, funding did affect the lending behavior of domestic and foreign banks in host countries, with those relying more heavily on deposits suffering a smaller decline in bank lending. Although not the focus of the paper, we also find that government‐owned banks played a countercyclical role in all regions.     

Portfolio concentration and performance of institutional investors worldwide

Using data on security holdings for 10,771 institutional investors from 72 countries, we test whether concentrated investment strategies result in excess risk-adjusted returns. We examine several measures of portfolio concentration with respect to countries and industries and find that portfolio concentration is directly related to risk-adjusted returns for institutional investors worldwide. Results suggest, in contrast to traditional asset pricing theory and in support of information advantage theory, that concentrated investment strategies in international markets can be optimal.     

The Globalization Strategy of Daewoo Motor Company

This paper aims to add to the existing body of literature on multinational enterprise (MNE) by addressing the dynamic aspect of emerging market MNEs. Emerging market MNEs can follow non-sequential and non-linear internationalization process. The paper presents the globalization strategy of Daewoo Motor Company as a case study.     

Structural change in the forward discount: Implications for the forward rate unbiasedness hypothesis

It is a well-accepted empirical result that forward exchange rate unbiasedness is rejected in tests using the “differences regression” of the change in the logarithm of the spot exchange rate on the forward discount. We model the forward discount as an AR(1) process and argue that its persistence is exaggerated due to the presence of structural breaks. We show using a stochastic multiple break model that the forward discount persistence is substantially less if one allows for multiple structural breaks in the mean of the process. We argue that these breaks could be identified as monetary shocks to the central bank's reaction function. Using Monte Carlo simulations, we show that if we do not account for structural breaks that are present in the forward discount process, the forward discount coefficient in the “differences regression” is severely biased downward, away from its true value of 1.     

Convergence across American and Korean young adults: socialisation variables indicate the verdict is still out

A study was undertaken to examine consumer socialisation variables among Korean and American young adults. Many studies have been undertaken that focus on American consumers and the consumer socialisation process, but very few cross-cultural studies exist on this topic. However, efforts are increasing to suggest that consumers are converging on a global scale and research is needed to adequately assess the reality of these claims. Specifically the research explored Korean and American consumers’ media use patterns and the believed importance of different agents (media and interpersonal) for consumption-related information. The study also examined the relative importance of social structural variables on consumers’ perceived influences of key socialisation agents. Results indicate that American and Korean consumers are quite similar in how they allocate their time across media. Both groups spent the most time with television and the internet. However, differences were evident in the perceived importance of information sources, as well as the influence of socialisation agents when making purchase decisions. These differences do call into question the ability of standardised advertising campaigns and the ability to present one strategy to a unified global target market. Implications for advertisers and consumer researchers are provided.     

HOW LARGE ARE LEARNING EXTERNALITIES?*

The quantitative features of human capital externalities are not fully understood. Although static externalities are estimated in some studies, learning externalities remain mostly unestimated. By calibrating a growth model, this article provides an estimate of learning externalities. The calibration uses an equilibrium condition that equates private returns on physical capital and human capital. The results suggest that sizable learning externalities exist, even in a conservative setup. The estimated social rate of return on human capital is 9.0%, compared to the private rate of return, 6.6%. Therefore, human capital externalities are an important source of economic growth.