Foreign direct investment and its impact on the Thai economy: the role of financial development

This paper examines the roles of foreign direct investment and financial development in the process of economic development using Thailand as the case study. We argue that better developed financial systems allow an economy to exploit the benefits of foreign direct investment more efficiently. The estimation draws upon an unrestricted error-correction model to avoid omitted lagged variable bias, and an instrumental variable estimator to correct for endogeneity bias. Using annual time series data from 1970 to 2004, the results show that financial development stimulates economic development whereas foreign direct investment impacts negatively on output expansion in the long run. However, an increased level of financial development enables Thailand to gain more from foreign direct investment, suggesting that the impact of foreign direct investment on output growth can be enhanced through financial development. The results are robust to different measures of financial development.      

Knowledge seeking in going abroad

Based on knowledge theories, this study examines the impact of client‐following and market‐seeking entry strategies on foreign market entry by firms. The article also explores the subsequent development of knowledge in firms. Using data from 116 firms, we test three hypotheses using logistic regression. Our hypotheses are supported in the data. Our analysis shows that significant differences exist between client‐following firms and market‐seeking firms. Client followers are both supported and trapped by their international network, whereas market seekers, though not supported, are much freer to pursue higher‐order learning. Due to differences in their network ties, these two types of firms learn at different speeds and learn different things. We also found that firms with proactive knowledge‐seeking strategies learn more. Thus, learning strategies have consequences for exploration and exploitation of international markets, what is learned and how much is learned, and proactive internationalization strategies for firms. © 2009 Wiley Periodicals, Inc.     

An analysis of air mass effects on rail ridership in three US cities

This paper examines whether daily weather affects ridership in urban transportation systems. When examining human–weather relationships, it is often advantageous to examine air masses, which take into account the entire parcel of air over a region. Spatial synoptic classification characterizes air masses based upon numerous meteorological variables at a given location. Thus, rather than examining temperature or precipitation individually, here we compare daily ridership to synoptic air mass classifications for three urban rail systems: Chicago Transit Authority (CTA), Bay Area Rapid Transit (BART), and the Hudson–Bergen light-rail line in northern New Jersey. Air masses are found to have a significant impact on daily rail ridership, with usage typically increasing on dry, comfortable days and decreasing on moist, cool ones, particularly on weekends. Although the comfort of a particular air mass changes throughout the year, seasonality is not a significant factor with respect to the air mass–ridership relationship. The results of this study can benefit rail system managers who must predict daily ridership or in the development of cost-benefit analyses for station improvements.     

Disciplining: A question of ethics?

The importance of evaluating a discipline system from an ethical perspective is considered. Disciplinary practices in contemporary organizations are frequently characterized by managers having to choose from among alternative courses of corrective action. Since the selected alternative may have serious consequences for the individuals involved, its rightness or wrongness is of concern. The pattern of these choices reflects the overall disciplinary practice of the organization, and is an issue that warrants attention from an ethical perspective. Basic schools of thought that influence contemporary discipline practices are discussed and suggestions are made for conducting an evaluation of the ethical nature of a discipline system.     

A political economy theory of the soft budget constraint

Why do soft budget constraints exist and persist? In this paper we argue that the prevalence of soft budget constraints can be best explained by the political desirability of softness. We develop an infinite horizon political economy model where neither democratic nor autocratic politicians can commit to policies that are not ex post optimal. We show that because of the dynamic commitment problem inherent in the soft budget constraint, politicians can in essence commit to make transfers to entrepreneurs which otherwise they would not be able to do. This encourages such entrepreneurs to support them politically. Though the soft budget constraint may induce economic inefficiency, it may be politically rational because it influences the probability of political survival. In consequence, even when information is complete, politicians may fund bad projects which they anticipate they will have to bail out in the future. We show that, maybe somewhat surprisingly, dictators who are less likely to lose power, are more likely to use the soft budget constraint as a strategy to gain political support.     

Time-consistent taxation in a dynastic family model with human and physical capital and a balanced government budget

Abstract .  This paper analyzes optimal, time consistent taxation in a dynastic family model with human and physical capital and with a balanced government budget. When tax revenue is used for publicly provided consumption or lump-sum transfers, leisure would be higher than its social optimum. Pareto optimal taxation requires taxing capital income more heavily than labour income and subsidizing investment at the same rate of the tax. Also, it requires either subsidizing labour at the same rate as a consumption tax or subsidizing consumption at the same rate as a labour income tax, and hence it is not a practical guide to policy. Further, a consumption tax, or equivalently a uniform income tax with investment subsidies at the same rate, can be improved on by taxing capital income more heavily than labour income.     

Promise and peril in implementing pay‐for‐performance

Why would managers abandon pay‐for‐performance plans they initiated with great hopes? Why would employees celebrate this decision? This article explores why managers made their decisions in 12 of 13 pay‐for‐performance “experiments” at Hewlett‐Packard in the mid‐1990s. We find that managers thought the costs of these programs to be higher than the benefits. Alternative managerial practices such as effective leadership, clear objectives, coaching, or training were thought a better investment. Despite the undisputed instrumentality of pay‐for‐performance to motivate, little attention has been given to whether the benefits outweigh the costs or the “fit” of these programs with high‐commitment cultures like Hewlett‐Packard was at the time. © 2004 Wiley Periodicals, Inc.     

Compatibility,interoperability, and market power in upgrade markets

We examine the market power of a seller who repeatedly offers upgraded versions of a product. In the case of pure monopoly, the seller also controls compatibility across versions. In the case of an entrant who offers an upgrade, the incumbent seller also controls subsequent interoperability across versions. We argue that control of compatibility and interoperability does not allow an incumbent seller to charge a price premium relative to when such control is absent and, consequently, neither is a necessary source of market power.     

Internationalizing audit education

Audit education is typically offered only to accounting majors. We argue that auditing provides a way of thinking that could serve as a framework for an accounting curriculam. We describe two parts of a course content that could be incorporated into an existing auditing course or a begining accounting course. The first section emphasizes accountability; the second emphasizes the role of the auditor in the accountability process. The concepts are best taught within an international paradigm that permits examination of various institutional environments.