Entrepreneurial culture,regional innovativeness and economic growth

In this paper, we empirically study the relationship between entrepreneurial culture and economic growth. Based on a micro based comparison of entrepreneurs and non-entrepreneurs, we develop a measure reflecting entrepreneurial attitude at the regional level. We subsequently relate this newly developed variable, ‘entrepreneurial culture,’ to innovativeness and economic growth in 54 European regions. Extensive robustness analysis suggests that differences in economic growth in Europe can be explained by differences in entrepreneurial culture, albeit mostly in an indirect way.

Entrepreneurial Culture and Economic Growth: Revisiting McClelland's Thesis

We reestimate McClelland's (1961) thesis on entrepreneurial culture and economic development. McClelland found a strong positive correlation between measures of need for achievement (N achievement) imagery in school textbooks and the subsequent rate of economic growth. Benchmarking our findings against generally accepted empirical growth models, we find no support for his thesis. This leads us to rethink the relationship between entrepreneurial culture and economic growth.     

Gravity equations: Workhorse or Trojan horse in explaining trade and FDI patterns across time and space?

Gravity equations are a widely used tool in the International Business (IB) literature to explain country-level trade and FDI flows. Against the background of its increased popularity and data availability, a range of commonly made econometric mistakes have recently been discussed in the literature, mostly pertaining to the (omitted) characteristics of countries or country pairs in gravity models. In this paper we complement this literature by focusing on the time-series aspects of gravity models, something that has become crucial with the increased use of panel data. Specifically, we concentrate on the possible non-stationarity of both the dependent variable (trade or FDI flows) and of one or more of the explanatory variables. In this paper we (i) show that there is indeed a problem with the non-stationarity of variables commonly used in gravity equations; (ii) show that not correcting for this yields overestimated results; and (iii) propose an effective solution.     

Analysis of changes in Dutch emission trade balance(s) between 1996 and 2007

In this paper we construct bilateral emission trade balances (ETB) for The Netherlands with 17 regions and compare results for 1996 and 2007 for three different greenhouse gasses. We establish a cross-sectional analysis of bilateral ETBs into a volume of trade, composition and technology effect. In order to analyze the driving forces of changes over time we perform a structural decomposition analysis of embodied import and export emissions. The main findings are that the embodied import emissions have increased by 37% whereas export emissions increased by only 3%, which is primarily driven by CO₂. The 2007 bilateral balances are positive with OECD countries but negative with economies such as Russia, Africa and China. The analyses demonstrate that the worsening of the ETB is to a large extent caused by the changing composition of trade: the Dutch economy increasingly exports clean products and imports dirty products.     

Value Diversity and Regional Economic Development

We investigate the link between culture and regional economic development within European countries. Considering a variety of cultural values, we provide evidence that it is the degree of diversity in these values at the regional level that strongly correlates with economic performance, rather than the prevalence of specific values. In particular, we show that greater value diversity is negatively associated with regional economic performance within countries, which also relates to lower institutional quality and poorer public goods provision. These patterns are robust even when diversity is measured on the basis of values expressed by emigrants residing outside their region of origin.     

Cultural distance in international business and management: from mean-based to variance-based measures

Extant practice in international management is to measure cultural distance as a nation-to-nation comparison of country means on cultural values, thereby ignoring the cultural variation that exists within countries. We argue that these traditional mean-based measures of cultural distance should take within-country cultural variation into account. Therefore, we propose the use of variance-based measures of cultural distance. To illustrate our argument, we examine total US foreign affiliate sales in more than 40 host countries over the 1983–2008 period, complemented with data from the World Values Survey. We analyze the effects of three cultural distance measures: the Kogut and Singh (1988 Kogut, B., and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode,’ Journal of International Business Studies, 19, 411–432.[Crossref], [Web of Science ®] , [Google Scholar]) mean-based index of cultural distance, the Kogut and Singh (1988 Kogut, B., and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode,’ Journal of International Business Studies, 19, 411–432.[Crossref], [Web of Science ®] , [Google Scholar]) index conditioned by host-country cultural variation and a variance-based measure that takes into account both home- and host-country cultural variation. Our findings indicate that, when within-country cultural variation is taken into account, the explanatory power of the Kogut and Singh (1988 Kogut, B., and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode,’ Journal of International Business Studies, 19, 411–432.[Crossref], [Web of Science ®] , [Google Scholar]) index is substantially decreased. In addition, our variance-based measure of cultural distance outperforms the Kogut and Singh (1988 Kogut, B., and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode,’ Journal of International Business Studies, 19, 411–432.[Crossref], [Web of Science ®] , [Google Scholar]) measure in the explanation of foreign US sales. We therefore suggest to move from mean-based to variance-based measures of cultural distance, thereby taking the cultural variation within countries into account.     

Buy Smart,Time Smart: Are Takeovers Driven by Growth Opportunities or Mispricing?

Excessively high pricing by bidders and targets can be explained by new growth opportunities created by the merger or by irrational overpricing in financial markets. We integrate both explanations through a new decomposition of firm value and investigate whether it is “true” growth value or mispricing that drives takeover waves. We find that “bidders buy smart.” Bidders primarily have high market values because of growth opportunities and overpricing, and select targets that are less overpriced with similar fundamental growth value. Bidders also seem to “time smart.” Takeover activity increases when bidders are more overpriced, in order to cushion against price corrections.     

The impact of horizontal and vertical FDI on host's country economic growth

In this paper, we contribute to the literature investigating the impact of FDI on host country economic growth by distinguishing between the growth effects of horizontal (market seeking) FDI and vertical (efficiency seeking) FDI. Using a new database, we estimate the growth effects of vertical and horizontal US MNE activity into 44 host countries over the period 1983–2003, also using traditional total FDI figures as a benchmark. Controlling for endogeneity and absorptive capacity effects, we find that horizontal and vertical FDI have positive and significant growth effects in developed countries. Moreover, our results indicate a superior growth effect of horizontal FDI over vertical FDI. In line with existing literature, we find no significant effects of horizontal or vertical FDI in developing countries.     

A cultural explanation of the foreign bias in international asset allocation

This paper examines the foreign bias in international asset allocation. Following extant literature in behavioral finance, we argue that a society’s culture and the cultural distance between two markets play an important role in explaining the foreign bias. In particular, we hypothesize that the degree of a nation’s uncertainty avoidance affects the foreign bias (more uncertainty-avoiding countries allocate less to foreign markets), as does the degree of a country’s individualism (in individualistic countries performance is more directly attributed to a person and less to teams, causing these individuals to be more aggressive in their foreign asset allocations). We further expect that the degree of cultural distance between two countries affects the amount of money allocated to that market. Based on extensive robustness analyses, we find support for our hypotheses on the role of culture in international asset allocation.     

The impact of home–host cultural distance on foreign affiliate sales: The moderating role of cultural variation within host countries

Research on how multinational firms deal with home–host cultural differences argues that cultural differences are minimized and assumes that foreign cultures are homogenous. In this paper we relax the cultural homogeneity assumption. In the presence of cultural variation in host countries the minimization of cultural differences leads existing mean-based indices of cultural differences to overestimate the actual cultural differences these firms have to deal with. We test this argument in a 25-year panel analysis of total US multinationals' foreign sales in 54 host countries. At the sample average of cultural variation, the use of mean cultural difference indices yields a 74% overestimate of the actual cultural difference effect. This suggests that home–host cultural differences are a substantially smaller barrier to multinational sales than hitherto assumed. The assumption of cultural homogeneity leads to conclusions in which a too large role is attributed to cultural differences.