A perspective on the symptoms and causes of the financial crisis

Prior to the 2007–2008 financial crisis, banking sector profits were very high but the profitability of financial intermediation was poor. Using a novel model of banking, this article argues that the high profits were achieved through balance sheet expansion and growing default, liquidity, and term risk mismatches between assets and liabilities. As a result, large banks’ financial leverage rose as they became less liquid, setting the conditions for a systemic banking crisis. This article argues that the increase in financial leverage was possible due to misguided changes in the regulatory framework, specifically, the Basel I capital accord and reductions in reserve requirements. Finally, this article overviews and assesses the policy response in the aftermath of the crisis.     

Heterogeneous beliefs and optimal ownership in entrepreneurial financing decisions

Our setting comprises one entrepreneurial firm with a growth opportunity seeking for external funding from a venture capitalist, where the entrepreneur and venture capitalist have homogeneous or heterogeneous beliefs about its growth prospects. We developed a real options model to determine the optimal ownership structure that triggers the simultaneous exercise of the growth option on the entrepreneurial firm by entrepreneurs and venture capitalists. Our results show that the more optimistic any of the parties is, the lower the post-money firm ownership that party will retain. However, optimism leads parties to delay their decision to invest in the entrepreneurial firm, by demanding higher profit triggers and investing only in more valuable entrepreneurial firms. The combination of these two effects leaves perceived returns on investment unchanged and not dependent on their own optimism.     

The cities/services-nexus: determinants of the location dynamics of advanced producer services firms in global cities

This paper presents an analysis of the determinants of the location dynamics of advanced producer services firms in global cities. By gauging the importance of the presence of leading firms for the years 2000 and 2004, a measurement of the aggregate location change is produced. This measure is used to search for determinants of the observed location change, both in general and in sectoral terms (management consultancy and banking). We also investigate how the presence of firms from the same and from other sectors influences the dynamics of a firms' location strategy.     

Retail service quality as a key activator of grocery store loyalty

This paper demonstrates the crucial role of retail service quality as a key activator in the formation of customer loyalty to the store; the latter is understood in a conative and action sense. Applying a modified version of the RSQS scale, a model is tested by administering a questionnaire to 450 customers in an under-investigated retail setting, i.e. supermarkets, within the Italian context. Structural equation modelling was employed. The results prove that customers consider retail service quality as a second-order dimension and recognize the main contribution of physical aspects and reliability first-order dimensions. Findings corroborate the crucial role played by perceived service quality and the mediating role of customer satisfaction and conative loyalty within the relationship between service quality and action loyalty.     

ICT stochastic externalities,technology innovation and business services: is there an evidence of missed opportunity growth?

ABSTRACT

In this paper, we present an analysis of the production process for some OECD countries and consider the new technology of the ICT capital as driver of growth. In doing so, the production function approach adopted allows to disentangle the externalities not exploited. In line with the general-purpose technology theory, we attribute such externalities to the new technology ICT capital. Business services are a relevant vehicle to use better the innovative capital embedded in the production process. We develop and implement a methodology for the evaluation of the effect on growth related to the interaction between innovative capital and business services. The main conclusion of the paper is that the potentials of new technologies in use are almost completely exploited during the productive process. Then, even if a competitive solution is viable, there are small, though possible, margins to improve a sustainable European growth in the long run linked to externalities. We also point out some conclusions on the capital and labor shares showing that the latter is ‘too small’ both in the long and short run.     

Changing returns to education in Portugal during the 1980s and early 1990s: OLS and quantile regression estimators

This paper examines the evolution of the returns to education in Portugal over the 1980s and early 1990s. The main findings indicate that the returns to education have increased, particularly after joining the European Union in 1986. Since this occurred along with an increase in the level of education within the labour force, the process is most likely demand driven. The results also indicate that modelling on average (i.e. OLS) misses important features of the wage structure. Quantile regression (QR) analysis reveals that the effect of education is not constant across the conditional wage distribution. They are higher for those at higher quantiles in the conditional wage distribution. Wage inequality expanded in Portugal over the 1980s and the returns to education had an important role in this process.     

Relations of the regional Brazilian cane agro-industry with the national economy: analysis applied to the Centre-South and North-Northeast

Cane, sugar and ethanol production in Brazil has been divided between two major production regions, the Centre-South (CS) and the North-Northeast (NNE), which present very different productivity, and henceforth production costs. The CS average productivity is more than 72 tonnes of cane per hectare, while average productivity in the NNE is 49 tonnes per hectare. The objective of the study was to establish interrelations between the cane agro-industry and other regional sectors and with the overall Brazilian economy. This framework was used to compare a demand impact upon regional cane production upon the regional and the overall Brazilian economy. An interregional input–output matrix was used to characterize how regional demand impacts on both regional and overall Brazilian economies. Rasmussen–Hirschman indexes, together with a pure linkage index were used for the analysis. In addition, production multipliers, with and without considering endogenous family consumption were estimated. The results showed that a positive demand impact upon the cane agro-industry produces a greater impact upon the NNE compared to the CS, considering income effects, indicating that cane production is more important for the NNE than for the CS. These results can be useful to establish priorities for development policies for the country.     

Analysis of Competences for Innovation in Technology-Based Enterprise Incubators

ABSTRACT

Incubators are rated as public policy mechanisms driving innovation in companies. The purpose of this project was to ascertain the level of development of competences for innovation in Technology-Based Enterprise Incubators (TBEI) as perceived by businesspeople in associated companies. With regard to technological innovation, it was decided to use a neo-Schumpeterian approach, and with regard to competences, the Resource-Based View (RBV) theory was used, which evaluates internal attributes that contribute directly to the innovative capacity. Four constructs were taken into consideration for analyzing the development levels of competences for innovation, grounded on the model of François and colleagues (1999 François , J. P. , Goux , D. , Guellec , D. , Kabla , I. , and Temple , P. ( 1999 ). “Décrire lês Compétences pour l'innovation: une Proposition d'enquête.” In: Foray , D. , and Mairesse , J. (Eds.), Innovation et Performance, Approaches Interdisciplinaires , Editions EHESS . [Google Scholar]) and Munier (1999 Munier , F. Taille de ( 1999 ). La Firme et Innovation: Appoches Theóriques et Empiriques Fondées sur le Concept de Compétence , Thèse (Doctorat en Économie)—Estrasburgo: Université Louis Pasteur . [Google Scholar]). Competences for innovation were examined through a questionnaire that tries to identify and assess development levels of competences in TBEI. The findings were analyzed through construct reliability tests: summated scales and cluster analysis. It was noted that the means competences representing the basic resources needed for the development of the company were assessed favorably by the businesspeople, indicating the development of this competence. In terms of technical and relational competences, it was noted that the businesspeople assessed these aspects unfavorably, indicating that these competences are not well developed by the TBEI. It was also ascertained that corporate development levels and operating sectors also influence the assessment of these businesspeople in terms of competences for innovation. This leads to the conclusion that its effectiveness must be assessed as an agent of innovation, with indicators being defined to measure the effectiveness of its role as a mechanism driving technological innovation.     

The Risk-Return Relationship of Pension Funds With Investments in Hedge Funds

This article investigates if investing in local hedge funds improves the risk-return relationship of Brazilian pension funds. Investment in hedge funds by pension funds is growing elsewhere, with an increasing utilization of a multiplicity of hedge funds specialized in specific strategies or niches. We analyzed the performance of a typical pension fund allocation in Brazil as well as alternate allocations that included hedge funds. We used robust estimates of the covariance matrix to mitigate the errors in variables that are problematic in the inputs of the optimization. The results show that hedge funds improve the risk-return relationship of the typical pension fund allocation, contribute to a higher accumulated return at the end of a one-year period, and reduce portfolio rebalancing. Investments in hedge funds ease reaching the typical 6% annual return target with less risk exposure.     

Foreign Direct Investment and Trade: A Study on Selected Brazilian Industries

This study aims to investigate whether foreign direct investment (FDI) growth improved the Brazilian foreign trade in the long run and whether there is a predictable relationship between a firm's FDI strategy and a firm's foreign trade. We applied moderated multiple regressions and generalized linear models to test the effects of FDI on both export and import equations of 11 Brazilian industries from 1996 to 2009. Our data sources include the Ministry of Development, Industry and Foreign Trade Ministry, Central Bank of Brazil, and the Applied Research Institute. Results showed that FDI is correlated with increased exports in the short run, but not in the long run. In the long run, the positive relationship between FDI and exports will only occur for export-oriented industries in which resource-seeking strategies are preponderant. We found a positive relationship between imports and FDI in the short run, particularly in import-oriented industries. A negative relationship between FDI and imports was found in the long run.