Ethnic homophily perceptions as an emergent IHRM challenge: evidence from firms operating in Sri Lanka during the ethnic conflict

Ethnic conflict is a defining characteristic of the post-Cold War era and is prevalent particularly in emerging economies, areas of increasing interest to multinational enterprises. Yet little is known about the international human resource management challenges arising from such societal context. Utilizing social identity theory, we propose that ethnic homophily perceptions in the workplace – an employee's assessment that colleagues prefer working with ethnically similar others – is a reflection of the societal context and can be detrimental to the organization if not managed appropriately. We investigate whether contact theory offers insights to manage such perceptions. Drawing on a sample of 550 managers in Sri Lanka during a period of protracted ethnic conflict, we found that employee sensitivity to ethnic conflict in the societal context is positively related to ethnic homophily perceptions in the workplace, and that both ethnic diversity in workgroups and quality of work relationships serve to reduce perceptions of ethnic homophily.     

Choosing between internal and external development for innovation projects: antecedents and consequences

Unlike alliance proponents, we posited that high-tech small firms (HTSFs) may not prefer interfirm collaboration for innovation activities. Drawing on the transaction cost and corporate entrepreneurship perspectives, we proposed that boundary decisions in innovation activities are determined by the perceived uncertainties of innovation projects and entrepreneurial orientation (EO). We also examined the consequences of collaborative innovation. In a sample of 178 Korean HTSFs in software development, we found that some aspects of perceived uncertainty prevented collaborative innovation, and that EO moderated this effect, enhancing the outcomes of collaborative innovation. We discuss theoretical and practical insights of these findings.     

Variance ratio tests of the random walk hypothesis for European emerging stock markets

The hypothesis that stock market price indices follow a random walk is tested for five European emerging markets, Greece, Hungary, Poland, Portugal and Turkey, using the multiple variance ratio test. In four of the markets, the random walk hypothesis is rejected because of autocorrelation in returns. For the Istanbul market, which had markedly higher turnover than the other markets in the 1990s, the stock price index follows a random walk. This contrasts with the results of earlier research, carried out for periods of lower turnover, which rejected the random walk hypothesis.     

Exchange rate fluctuations, financing constraints, hedging, and exports: Evidence from firm level data

This paper examines whether exchange rate fluctuations are significantly related to the export quantities of firms. We build a simultaneous structural model with external financing costs, and estimate the model on 14 separate Japanese four-digit level industries. We find that export volumes at the firm level are significantly affected by exchange rate fluctuations. We find higher elasticities of exports with respect to exchange rates than in previous work. Our results cast some doubt on the prevailing wisdom that exchange rates have no effect on trade. Finally, we find in our data that financing constraints play an important role in affecting the sensitivity of exports to exchange rate fluctuations. Firms that are less financially constrained tend to have lower exchange rate elasticities, which is consistent with our model.     

Testing for Sunspot in the Foreign Exchange Market

It has been shown that the nonfundamental uncertainty called sunspots matters in many areas of the economy. Noting the fact that nationwide capital movement and the speculative demand for foreign currencies are rapidly increasing, this paper conducts empirical tests on the sunspot exchange rate model. The empirical result shows that the sunspot equilibrium exchange rate deviating from Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) is consistent with the real data. More importantly, the Generalized Method of Moments (GMM) over-identification test is shown to support the evidence that more general Euler equations are in favor of our sunspot equilibrium exchange rate model. [C52, E44]     

Employee preference for performance-related pay: predictors and consequences for organizational citizenship behaviour in a Japanese firm

Research on performance-related pay (PRP) has largely focused on the outcomes of PRP implementation in a Western context. This paper examines the predictors of employee preference for PRP and the consequences for organizational citizenship behaviour (OCB) in Japan where seniority-based pay and teamwork have long been the norm. The sample consists of 155 sales representatives in a large electric appliance manufacturing company that was transitioning from a seniority-based to a PRP-based compensation system. Overall, respondents indicated a preference for PRP over seniority-based pay. The hierarchical regression results indicate that employee preference for PRP is positively and significantly associated with individual competitiveness and occupational commitment, while being negatively and significantly related to organizational commitment and to the age group of employees who joined the labour market prior to the bursting of the economic bubble in Japan. No significant relationship was observed between PRP preference and OCB in the hierarchical regression analysis, although the two are positively and significantly correlated contrary to our expectations. Implications for international human resource management are discussed.     

Income Distribution,Consumer Debt and Keeping up with the Joneses

We extend Kaldor's theory of income distribution to include workers' debt accumulation and their motive to emulate rentiers' consumption. Our results show that (i) the interaction between income distribution and emulation can produce instability; (ii) instability is more likely when the workers' emulation motive is strong and bankers' lending decisions are highly accommodating; and (iii) a plausible assumption on the non‐linearity of emulation behavior can generate a limit cycle. Our analysis provides an alternative perspective on the increase in household indebtedness for the decades before the recent crisis and the subsequent deleveraging process.     

THE PARADOX OF DEBT AND MINSKY'S FINANCIAL INSTABILITY HYPOTHESIS

Some authors have claimed that the paradox of debt invalidates Minsky's theory of financial instability. Their theoretical frameworks are radically different from Minsky's in several aspects. Important Minskian elements, the role of margins of safety as a basis of financial decisions and the effects of asset prices on debt dynamics, among others, are absent in the critics' frameworks. We maintain that the thrust of the paradox of debt‐based criticism to Minsky's theory has been exaggerated and key insights of Minsky's theory of financial instability can be formalized in an alternative macroeconomic framework. We provide a stock‐flow consistent model of Minskian long waves.     

Banks with market power,sectoral structure and the big push

Due to complementarities between different investment projects, simultaneous implementation of many investment projects (big push) may be needed to avoid coordination failures. This paper examines potential and limitations of private coordination by banks with market power. Our analysis shows that such private coordination may not work if banks with market power find it more profitable to finance firms in the traditional sector than in the modern sector. Our results highlight the importance of sectoral policies in addressing coordination failures.