Sectoral analysis of foreign direct investment and growth in the developed countries

Empirical studies on foreign direct investment (FDI) and growth in developed countries have yielded conflicting results using cross-country regressions. We use sectoral data for a group of six country members of the OECD. Our paper is the first to identify the sector-specific impact of FDI on growth in the developed countries. Our results show that FDI has positive, or no statistically discernible, effect on economic growth directly and through its interaction with labor. Moreover, we find the effects seem to be very different across countries and economic sectors.     

Thinking or Feeling the Risk in Online Auctions: The Effects of Priming Auction Outcomes and the Dual System on Risk Perception and Amount Bid

The present research sheds new light on the antecedents and outcomes of bidders' perceived risk. It examines the role of the two-system model in the context of activating the potential to either win or lose an online auction. This study demonstrates that when a bidder's affective system is primed, concern about losing the item is greater and ultimately the bid amount is higher when the bidder expects to lose rather than win. Conversely, when the cognitive system is primed, the anticipated goals of winning the auction – rather than the fear of losing – drive the bidder's actions. In the latter case, the bidder pays a higher amount if the expectancy of winning is primed, as opposed to the expectancy of losing. A field study on eBay and two lab studies confirm this phenomenon.     

Fire‐sale FDI? The Impact of Financial Crises on Foreign Direct Investment

We analyze the evolution of foreign direct investment (FDI) inflows to developing and emerging countries around financial crises. We empirically examine the Fire‐Sale FDI hypothesis and describe the pattern of FDI inflows surrounding financial crises. We also add a more granular detail about the types of financial crises and their potentially differential effects on FDI. We distinguish between mergers and acquisitions (M&A) and greenfield investment, as well as between horizontal (tariff jumping) and vertical (integrating production stages) FDI. We find that financial crises have a strong negative effect on inward FDI in our sample. Crises are also shown to reduce the value of horizontal and vertical FDI. We do not find empirical evidence of fire‐sale FDI; on the contrary, financial crises are shown to affect FDI flows and M&A activity negatively.     

Foreign Aid in the Aftermath of Large Natural Disasters

This paper examines Official Development Assistance (ODA) in the aftermath of large natural disasters between 1970 and 2008. Using an event‐study approach, the paper finds that while the median increase in ODA is 18% compared with pre‐disaster flows, the typical surge is small in relation to the size of the affected economies. Moreover, aid surges typically cover only 3% of the total estimated economic damages caused by the disasters. The main determinants of post‐disaster aid surges are found to be the intensity of the event itself and the recipient country's characteristics such as the level of development, country size and the stock of foreign reserves. The paper does not find evidence that political considerations or strategic behavior on the part of donors determine the size of post‐disaster aid surges.     

Sudden stops and the Mexican wave: Currency crises,capital flow reversals and output loss in emerging markets

Sudden stops are the simultaneous occurrence of a currency/balance of payments crisis with a reversal in capital flows. We investigate whether sudden-stop crises are a unique phenomenon and whether they entail an especially large and abrupt pattern of output collapse (a “Mexican wave”). Using a panel data set over 1975–1997 and covering 24 emerging-market economies, we distinguish between the output effects of currency crises, capital inflow reversals, and sudden-stop crises. Sudden-stop crises have a large negative, but short-lived, impact on output growth over and above that found with currency crises. A currency crisis typically reduces output by about 2–3%, while a sudden stop reduces output by an additional 6–8% in the year of the crisis. The cumulative output loss of a sudden stop is even larger, around 13–15% over a 3-year period. Our model estimates correspond closely to the output dynamics of the ‘Mexican wave’ (such as seen in Mexico in 1995, Turkey in 1994 and elsewhere), and out-of-sample predictions of the model explain well the sudden (and seemingly unexpected) collapse in output associated with the 1997–1998 Asian Crisis.     

A longitudinal examination of partnership governance in offshoring: A moving target

The complexity of the global marketplace is driving the growth of new corporate strategies that are centered on creating “synergistic alliances in procurement, distribution, marketing, and technology”. This study employs a grounded qualitative approach to investigate a growing belief that perspectives of relational governance and the resource-based view of the firm should be integrated to help explain the evolution of offshoring relationships in international marketing and supply chain settings. Specifically we ask—how well do general theories of organization correspond to governance in offshoring relationships? The premise of our longitudinal study found that offshoring relationships begin with calculative trust and opportunism, which later gives way to resource-based competency building and non-economic trust. Over time the offshoring relationships focus on building dynamic capabilities to increase process value through a trust-based relationship. In this way, offshoring relationships are a moving target in terms of governance of relationships from transactional to resource complementarity to a phase where trust and long-term orientation governs the offshored process or processes.     

The macroeconomic consequences of disasters

Natural disasters have a statistically observable adverse impact on the macro-economy in the short-run and costlier events lead to more pronounced slowdowns in production. Yet, interestingly, developing countries, and smaller economies, face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies. A close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns. Countries with a higher literacy rate, better institutions, higher per capita income, higher degree of openness to trade, and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro-economy. These all suggest an increased ability to mobilize resources for reconstruction. Financial conditions also seem to be of importance; countries with more foreign exchange reserves, and higher levels of domestic credit, but with less-open capital accounts appear more robust and better able to endure natural disasters, with less adverse spillover into domestic production.