Projects by Focal Areas:
Trade, Investment, and Labor Policy
Property Rights and Global Innovation
Natural Resource Scarcity, Security, and Sustainability
Economic, Financial, and Political Crisis
Diaspora Investment and Entrepreneurship
Projects by Researcher:
Projects by Focal Areas: Firm-State-Society Relations
Characteristics and Implications of Chinese Macroeconomic Data Revisions
PI: Tara M. Sinclair, Assistant Professor, Department of Economics, CCAS
Firms depend on macroeconomic data as key inputs to their production and pricing decisions. Generally data released by official government agencies are considered trustworthy and valuable for business decisions, but the quality of data released by the China's statistical authorities has regularly been questioned by both the media and researchers. One aspect of the data quality that has yet to be fully studied is the pattern of the revisions to the data made by the Chinese government. Two different types of data revisions are made: regular revisions as delayed data arrive and more substantial benchmark revisions which have occurred following the two economic censuses. Open research questions include: Are the revisions more commonly made in one direction or another resulting in a bias in the revisions on average? Is there a pattern in the revisions over time, such as is a positive revision more likely to be followed by another positive revision, or are there certain times when larger revisions are likely to occur? The proposed study will substantially improve our understanding of the properties of Chinese statistical data releases.
Innovation and the Organization of R&D Activities in the Multinational Firm
PI: Anu Phene, Associate Professor, Department of International Business, GWSB
Research on multinational firm (MNC) innovation has examined the global dispersion of the firm's R&D network. However an area that has been largely overlooked in this research is how MNCs organize their global R&D networks and the consequent implications for firm innovation. Teece (1996) posits that firm organization is an important determinant of innovation and the links between firm structure and innovation process are poorly understood. We propose that in order to understand multinational firm innovation, it is critical to look beyond the existing emphasis of international dispersion of activity and evaluate how global R&D networks are organized. As the resource based view suggests it is not merely the possession of resources but the organization and management of these resources that determine firm capability and therefore competitive advantage. Our research question in this study is, "How does the organization of the MNCs global R&D network influence its innovation?". We evaluate the organization of the MNCs global R&D network by examining a) the national factors that determine configuration of the network and b) organizational factors that influence co-ordination within the network. We suggest that while configuration of the R&D network is important, effective co-ordination moderates the relationship between configuration and innovation, often compensating for the effects of a less optimal structure or strengthening the effects of an appropriate configuration.
Financial Deregulation and Private Sector Borrowing
PI: Senay Agca, Associate Professor, Department of Finance, GWSB
This project will examine the impact of financial deregulation policies on the costs of corporate borrowing by utilizing international panel data on corporate loan issuances. If financial deregulation policies reach their aim, corporations should be able to borrow more and at better terms. The results of this project will provide a better understanding on whether these policies achieve their objective in improving the funding resources for corporations by increasing its availability or by reducing its cost.
Syndicated Lending to Emerging Markets: Foreign Banks and Local Subsidiaries
PI: Hein Bogaard, Assistant Professor, Department of International Business
Banks from advanced economies finance a substantial amount of investment in emerging markets, both in the form of "direct" cross-border lending and "indirectly" through subsidiaries in host countries. In this research project, we ask how country and borrower characteristics affect the choice between direct and indirect lending by studying the market for syndicated loans. We distinguish between institutional and economic factors affecting this choice. We also investigate how financial crises in the home country of the lenders or in the host country where the borrower is located affect the choice between direct and indirect lending. Our research has implications for the availability of finance for investment and growth in emerging markets and provides insight in the transmission of financial crises between countries.
How do Political Institutions Affect Post-Conflict Reconstruction
PI: Jai Kwan Jung, Assistant Professor, Department of Political Science, CCAS
In the aftermath of civil wars, the most important task is to maintain the fragile peace. Managing post-war hostilities and reducing the risk of a return to conflict are, in turn, essential for successful reconstruction of war-torn economies, because political stability is necessary for attracting investment from multinational corporations and foreign capital. Economic development is, in turn, considered the prerequisite for democracy building. This supposedly reciprocal relationship of peace, development, and democracy promotion in post-conflict societies raises the core questions of this project: under what conditions can the promotion of sustainable peace and development be mutually reinforcing?; what political institutions are more conducive than others to contributing to the “democratic reconstruction” of civil-war-torn countries?; what role do various international actors play in shaping the long-term prospects for building democratic governance in post-civil war countries? The PI is collecting a large-N dataset to conduct quantitative analyses that investigate how different types of political institutions and varying degrees of international commitment affect the pace and outcome of post-conflict reconstruction.
National Institutions and Firm Characteristics as Determinants of Corruption: Evidence from the U.N. Oil-for-Food Program
PI: Yujin Jeong, Doctoral Student, Department of International Business, GWSB
Corruption is a major concern in international business, affecting international trade, foreign direct investment, and economic growth. Research on corruption is limited, however, as illicit activity by its very nature is hard to observe. The project examines the determinants of corrupt behavior in international business using an unusual, detailed bribe payment data from a forensic investigation into the UN Oil-for-Food Program (OFFP). The OFFP, as a natural laboratory, enables us to address the question of whether country institutions, firm characteristics, or both matter for corruption in international business.
Globalization & Transnational Terrorism: An Empirical Investigation
PI: Holger Schmidt, Assistant Professor, Department of Political Science, CCAS
This project examines the links between economic globalization and countries’ vulnerability to transnational terrorism. Many analysts and policymakers assert that the current surge of transnational terrorist activity is at least partly rooted in a backlash against economic globalization. While this argument is not entirely implausible, the evidence used to support it is anecdotal. The goal of the present study is to move this debate onto more solid empirical ground by conducting a quantitative analysis of the link between economic openness and the level of terrorist activity experienced by countries. In addition, the project also aims to examine whether U.S. businesses abroad are at particular risk when operating in societies that are underdeveloped yet highly exposed to economic globalization, or whether moves toward greater economic openness help reduce the likelihood that U.S. firms and personnel become the targets of transnational terrorist activity.
Do Financial Development and Strong Institutions Reduce Corporate Level Financial Constraints
PI: Senay Agca, Associate Professor, Department of Finance, GWSB
This research project addresses important issues that are relevant for cross-discipline studies of corporate finance and international business. More specifically, the project investigates whether firms in countries with strong institutions, better governance, and improved financial sector (factors that reduce capital market imperfections) raise external funds easier and depend less on internal funds. Additionally, the PI examines whether the above-mentioned factors really matter in each country, and, if there are deviations in the countries, what the possible reasons for this are.
Senay Agca, Gianni De Nicolo and Enrica Detragiache: Credit Market Reforms and Corporate Debt Policy: International Evidence
Abstract: We study how the deregulation of the domestic banking sector affects corporate debt policy. If deregulation lowers the cost of credit and increasing its availability, as intended, firms should use more debt in their capital structure following deregulation. We test this hypothesis with a large panel of publicly traded non-financial firms using a new index that carefully tracks policies to deregulate domestic credit markets. After controlling for other factors, we find that reforms seem to be associated with a reduction, rather than an increase, in corporate debt in emerging market firms. This negative effect is attenuated in countries with better institutions, and it disappears in advanced countries. Furthermore, we do not find evidence of a differential effect of reforms on financially constrained firms, financially dependent firms and firms with no access to global markets.
Indigenous Firm Response to FDI Investment: A Dyadic Analysis
PI: Meghana Ayyagari, Associate Professor, Department of International Business, GWSB
Despite extensive research, the direction and magnitude of spillovers from foreign direct investment (FDI) to local firms in developing countries remain unclear. This project takes a different methodological approach focusing on multinational enterprises’ (MNEs) characteristics that contribute to differential spillovers in India. The PI uses a unique database that tracks the capital investments of MNEs and local firms in India; since the country is vast, it offers the opportunity to study the role of FDI across different institutional environments. A greater understanding of the impact of FDI can assist U.S. trade negotiators in making the case for liberalization, and help MNE managers predict the probable response of local policy makers and the strategic response of local competitors to their investment. In addition, identifying how governance-related factors influence MNE investment and local firm response will help contrast U.S. governance models with non-market based models in other countries.
Business Responses to the Protective Public Policy Process
PI: Jorge Rivera, Associate Professor, Department of Strategic Management and Public Policy, GWSB
Building on a previously-funded GW-CIBER project, this study explores the business responses to the enactment and implementation of public policies requiring enhanced social labor standards, worker health and safety, consumer protection, and environmental protection. The current study aims at developing a more robust theoretical model of the protective policy process-business response relationship.
Voluntary Environmental Programs: A Policy Perspective
Edited by Peter deLeon and Jorge E. Rivera
Protecting the environment is often not the primary objective of businesses. As the world has become more environmentally aware, the necessity of environmental regulations becomes apparent. Voluntary Environmental Programs: A Policy Perspective examines different approaches to environmental protection in business. Environmental improvements on the part of industry often result from government regulations that command certain action on the part of industry and then control how well they perform. An alternative approach is Voluntary Environmental Agreements (VEA), where firms voluntarily commit to make certain environmental improvements individually, as part of an industry association, or under the guidance of a government entity. For example, many new initiatives targeted towards climate change originate from companies that voluntarily commit to reduce their carbon output or "footprint." Voluntary Environmental Programs (VEP) provides an overview of current research on VEPs, looking at issues such as what motivates firms to participate, how a VEP structure affects a company's efficiency and credibility with stakeholders, and who monitors compliance of participants. This current work examines how a firm's environmental performance over time compares with VEP commitments. This book also discusses the particular considerations for VEPs in developing countries, where information flows and regulatory oversight capacities differ from the U.S. This book has been published by Lexington Books, click here for further information.
Domestic Institutions and State-Private Actor Relations in Electronic Information Governance
PI: Henry Farrell, Associate Professor, Elliott School of International Affairs
This project seeks to understand how states' domestic institutions shape new forms of global governance. The specific objectives of the study are: (i) to map the relationship between domestic institutions, private actors, and global governance arrangements in key fields of e-commerce and information policy; and (ii) using cases from the field of e-commerce, to examine the circumstances under which states can or cannot use these domestic institutions to press private actors into service as proxy regulators, and thus to shape effective international regulatory outcomes.
Henry Farrell. "Making International Markets: Domestic Institutions in International Political Economy" Review of International Political Economy. Forthcoming 2010.
This article will be the lead article of a special issue on the topic of new forms of business and market regulation.
Trade Openness, Property Rights and Private Investment
PI: Shahe Emran, Assistant Professor, Department of Economics, CCAS
This project seeks to understand the link between trade-growth and institutions-growth by looking at the effects of trade openness and quality of property rights institutions on private investment across a sample of developed and developing countries. According to the PI, this is an important analysis since capital accumulation is found to be the most robust determinant of growth, and trade liberalization that is conditioned by higher quality institutions (especially such as those that protect property rights) encourages private investment and entrepreneurship. The project involves econometric analysis using cross panel data for the period 1960-2003 to investigate the above conjectures and interactions.
Shahe Emran, M. and Stiglitz, Joseph E., “Financial Liberalization, Financial Restraint, and Entrepreneurial Development.”
Abstract: This paper argues that there is a fundamental conflict between financial liberalization and private sector led development strategy in developing countries. Using a simple model of occupational choice with moral hazard, it shows that under financial liberalization banks may (i) fail to finance new entrepreneurs because of poaching externality, and (ii) systematically favor projects with front-loaded returns at the expense of projects with strong learning effects. We identify two types of policies that are helpful in escaping from a ‘no entrepreneurial experimentation equilibrium’: intersectoral and intertemporal policies. Among intersectoral policies, a deposit rate ceiling, or a tax on the deposits coupled with a ‘contingent subsidy’ to the new industrial financing (but not interest rate subsidy) may be helpful for entrepreneurial discovery. The intersectoral policies are, however, not effective in weeding out short-termism in project choice. Among intertemporal policies, a dual track policy where competition is preserved in the lending to competing activities (agriculture) but limited duration monopoly is awarded to industrial lending is shown to be effective for both the discovery of new industrial entrepreneurs and tackling short-termism in project choices.
The Public Policy Process and Business Political Strategies in Developing Nations
PI: Jorge Rivera, Associate Professor, Department of Strategic Management and Public Policy, GWSB
This project investigates business political strategies addressing governmental demands for increased corporate social/environmental responsibility in developing countries. The PI develops a framework which explains the underlying institutional logic determining business political strategies adopted during the different stages of the public policy process in developing countries. Additionally, several cases are identified and documented that illustrate how business political resistance to environmental/social responsibility and regulatory demands varies depending on the stage of the policy process and country contextual characteristics.
Jorge Rivera and Kalim Shah. Export processing zones and corporate environmental performance in emerging economies: The case of the oil, gas, and chemical sectors of Trinidad and Tobago
Abstract: Export processing zones (EPZs) are increasingly being established to promote economic growth in developing countries. However, they remain controversial and are often criticized for being associated with a ‘‘race to the bottom’’ characterized by the easing of labor and environmental standards. This paper investigates whether the decision to locate facilities inside these zones is associated with higher corporate environmental performance. Findings indicate that facilities operating in Trinidad and Tobago’s EPZs are more likely to show higher corporate environmental performance than those outside. Additionally, firms in state-managed zones appear to show higher corporate environmental performance than those located in privately managed zones. Enhanced institutional pressures from regulators, local communities, and fellow tenant firms may explain these
differences. These results suggest that environmental policy makers and environmentalists can take advantage of already established EPZs to promote enclave enhanced institutional pressures associated with superior corporate environmental performance.
* See Also: Results Table Erratum
Jorge Rivera, Jennifer Oetzel, Peter deLeon, and Mark Starik. Business responses to environmental and social protection policies: toward a framework for analysis
Abstract: This conceptual paper seeks to advance neo-institutional work that has traditionally portrayed environmental and social protection policies as constraints followed by businesses. Drawing from the policy sciences literature, we propose that in the United States, businesses tend to show increasing resistance as the protective policy process moves from initiation to selection and growing cooperation thereafter. Most importantly, we also contribute to the neo-institutional theory literature by positing that this inverted U-shaped policy process–business response relationship proposed for the U.S. context may be moderated by variations in the level of democracy, system of interest representation, regulatory approach, and national income.