BEST Scholarly Journals

Understanding FDI and Production Networks in East Asia

Dr. Willem Thorbecke, Japan’s Research Institute of Economy, Trade and Industry (RIETI), Tokyo, Japan

Nimesh Salike, Lecturer, International Business School Suzhou, Xi'an Jiaotong-Liverpool University, China

ABSTRACT

We investigate the factors influencing foreign direct investment in East Asia. We provide empirical evidence from the electronics industry supporting Kojima’s (1973) hypothesis that FDI in the region originates from the capital exporting country’s disadvantaged industry into the host country’s advantaged industry. These results imply that FDI and trade are complementary, unlike in Mundell’s (1957) model where they are substitutes. The results also indicate that exchange rate volatility deters trade, implying that reduction in the service link cost between production blocks can promote fragmentation. These findings imply that host countries in East Asia can obtain technology transfer by lowering service link costs. Why do firms engage in foreign production? According to Dunning (1988), the answer depends on a firm’s OLI (Ownership, Location, and Internalisation) configuration and its ability to exploit these OLI advantages in the target market. Ownership advantage is based upon technological and managerial superiority of home country firms relative to host country firms. Such superiority must be sufficient to overcome the extra costs incurred due to differences in business customs, formal and informal norms, languages, etc. Thus ownership is linked with control, and control becomes weaker as ownership becomes more diluted. Of course firms that outsource or subcontract may retain some control if they are involved in long-term relations. There may also be benefits to relinquishing ownership if the business partner has better managerial or technological ability in a particular product. Locational considerations and advantages include wage levels, factor endowments, technology transferability, physical and human infrastructure, and market-supportive institutions and political regimes. Internalisation advantage refers to the net benefits obtained by FDI firms through more captive and more integrated business activities conducted by parent firms.

Full text

Cited by: 1

Reengineering Culture as a Way to Address the Economic Disparity Among Native Hawaiians

Dr. Larson Ng, University of Hawai‘i at Mānoa, Honolulu, Hawai‘i

ABSTRACT

Native Hawaiians are the most economically disenfranchised ethnic group living in Hawai‘i. Many have often attributed their situation to a lack of education and/or economic opportunity. However, there is another possible factor that could be contributing to this situation. This factor is culturally rooted in the Native Hawaiian notion of economic production and profit. The following paper will initially survey the current economic disparity facing Native Hawaiians and then go on to explain the Native Hawaiian cultural understanding of economic production and profit, illustrating its differences with the capitalist-based notions of economic production and business profit. The paper will then conclude by offering what can be done to reengineer traditional Native Hawaiians economic beliefs that may work to culturally assist Native Hawaiians address the economic problems most of them face. Native Hawaiians are one of the most disadvantaged people living in Hawai‘i. The following will briefly survey the economic situation that a majority of Native Hawaiians face. Native Hawaiians have the highest unemployment rate of any major ethnic group living in Hawai‘i. Nearly one in ten Native Hawaiians in the civilian labor force was unemployed, in contrast with approximately one in seventeen statewide from 2006 to 2010 (Kamehameha Schools, 2014). Native Hawaiians are also underrepresented in white collar or management and professional occupations, which tend to offer the most economic security. For example, the ratio of Native Hawaiians in such occupations is 8.1 percentage points lower than the statewide average (Kamehameha Schools, 2014).Conversely, Native Hawaiians are overrepresented in blue collar or non-management, nonprofessional occupations. For example, the ratio of Native Hawaiians in transportation and production occupations is 3.0 percentage points higher than the statewide average (Kamehameha Schools, 2014). Similarly, the ratio of Native Hawaiians in construction, extraction, and repair occupations is 3.5 percentage points higher than the statewide average (Kamehameha Schools, 2014). Moreover, Native Hawaiians continue to be employed in agricultural, labor, and production occupations at higher rates than the state population. This gap between the Native Hawaiian rate and the statewide average, however, has ranged from 7.5 percentage points in 1990, decreased to 5.7 percentage points in 2000, but increased 6.5 percentage points in 2010 (Kamehameha Schools, 2014).

Full text

Cited by:

Defining The Market: Performance Measurement For Management Forecasting

Dr. Tony Carter, Professor, University of New Haven, West Haven, CT

ABSTRACT

This article investigates and examines the positive role that management tools, such as quantitative based sum of the least squares regression analysis can have coupled with qualitatively based Customer Advisory Boards. The ability to identify the future conditions in the marketplace, how active a company will be, what staff levels it will need or the actions of competitors can be difficult to predict with any degree of precision. Documenting this plan creates a degree of accountability rather than just being able to say “I’ve got our plan all in my head.” No business understands the importance of effective sales planning better than the competitive soft drink beverage industry. PepsiCo’s net sales totaled $30.4 billion, with 71 percent of its revenue generated from the domestic U.S. market. Coke’s net sales totaled $18 billion, with 71 percent of its revenue coming from global markets. PepsiCo will alter its global strategy in the future, targeting emerging markets, like China, India and Eastern Europe. Managers that direct growing business activity annually have the ability to know their customers well enough in order to design a sales process that meets their needs. Customer sophistication and price and value sensitivity are strong factors in both retail and business to business customer buying behavior. Wal-Mart changed its business design by offering inexpensive access to a wide range of nationally known products. Wal-Mart made shopping easier by offering lower prices than other department stores and using logistics to cut an average of two hours off shopping time. Customer Advisory Boards are a dynamic practical management tool that can greatly enhance the customer development and retention process and give firms a distinct competitive advantage. Organizations should develop programs for customer satisfaction, measure customer loyalty and further understand customer intimacy and its role in customer retention and more study is warranted in this area. The purpose of this article is to look at how management tools, such as Customer Advisory Boards along with traditional quantitative forecasting, such as sum of the least squares and regression analysis, can help organizations. The turmoil in the workplace results in part from management ineffectiveness that made these organizations less competitive. Workers who gave loyalty under the old system have suffered under the new. It is no surprise that employee cynicism has grown.

Full text

Cited by:

Knowledge Spillover Effects of Star Analysts

Dr. Po-Kai Huang, Shih Hsin University, Taiwan

ABSTRACT

This paper investigates the knowledge spillover effects of star analysts. Specifically, we investigate whether the analysts who belong to the investment banks existing star analysts can forecast earnings accurately through the knowledge spillover effects of star analysts. This issue is important for knowledge spillover effects, and yet we know so little about it. We find that earnings forecasts that are produced by star analysts are indeed more accurate than those by non-star analysts. Moreover, we indicate that if during the specified year a brokerage firm has star analysts, the average earnings forecasting errors of other analysts at the same brokerage firm will be lower. These results remain unchanged even control for the number of companies and industries analysts covered, the number of days from forecast earnings to published actual earnings, and company characteristics, etc. Each year the Institutional Investor asks analysts who work on the buy-side to vote for their “star analysts.” The candidates consist of analysts that work on the sell-side. Institutional Investor asks the buy-side to rate sell-side analysts in six of their primary activities: picking stocks, estimating corporate earnings, acquiring knowledge of their industry, writing reports, being responsive to clients’ requests and initiating timely calls to investors. Academic literature believes that these star analysts indeed excel in what they do. For example, star analysts supply more accurate earnings forecasts than other analysts (Stickel, 1992), and stocks recommended by the all-star analysts outperform benchmarks (Desai, Liang, and Singh, 2000). Sinha, Brown, and Das (1997) also indicate that star analysts remain superior in the next period. Star analysts have expertise that can be transferred to other analysts who work at the same brokerage firm. As Nelson (1986) and Jaffe (1989) considered, when the research and development conducted by universities or research institutes produces external benefits by facilitating the production and innovation of manufacturing firms in their neighboring industries, such a diffusion of knowledge is known as a knowledge spillover.

Full text

Cited by:

A Study of Emotional Hyperbolic Discount Utility for Intertemporal Decision Making

Dr. Yeu-Shiang Huang, National Cheng Kung University, Taiwan

Yu-Sheng Chen, National Cheng Kung University, Taiwan

ABSTRACT

The hyperbolic discount utility model, which is commonly used to help explain intertemporal decision-making behaviors, is well-recognized for resolving the paradox of preference reversal and being less steeply discounting than the exponential discount utility model. However, while much attention has been paid to hyperbolic discount utility, it still cannot explain some anomalies. This study considers decision makers’ internal feelings toward the difference between the actual and anticipated results of a future event to explain intertemporal decision-making behaviors, and proposes an anticipative hyperbolic discount utility model in which the degree of the subjective feeling of inner happiness, which is an emotional function that may affect the decision-making process, is taken into account. This proposed emotional hyperbolic discount utility model investigates the effects of the decision makers’ emotional fluctuations on intertemporal decisions with conditions of different amounts of payoffs, probabilities of obtaining payoffs, and timing of obtaining payoffs. The proposed model can also be used to infer the relationship between the emotional factor and discount utility, and thus can explain some paradoxes that cannot be explained by the original intertemporal discount models. Therefore, the proposed model is more realistic in interpreting intertemporal decision behaviors. People would generally prefer to obtain $1,000 immediately rather than a week later, since they often calculate the discounted present value of the future amount of money based on the market interest rate. However, in an intertemporal decision-making context, the discount rate does not have a basis for the discounted utility of the anticipated results of a future event. Discount utility models have thus been developed to evaluate intertemporal decision-making behaviors (Samuelson, 1937; Lancaster, 1963; Stevenson, 1986). However, discount utility, like the expected utility theory, has some unexplainable anomalies (Thaler, 1981; Roelofsma, 1996; Wathieu, 1997; Lazaro et al., 2002). This study investigates the effects of the anticipated results of future events on current feelings based on the hyperbolic discount utility model with consideration of both the time factor and the likelihood the anticipated results would occur or not.

Full text

Cited by:

Some Thoughts on Business Rules

Dr. Mirko Cubrilo, Zagreb University, Croatia

Dr. Mirko Malekovic, Zagreb University, Croatia

Dr. Kornelije Rabuzin, Zagreb University, Croatia

ABSTRACT

In this paper we discuss some aspects of the current state in the field of business information systems domain with an emphasis on the domain (context) of business rules, ranging from theoretical assumptions through modelling (in appropriate languages and tools) to use in business, with a focus on so called business rule paradox. It is well known that in many areas of human activity there is a gap between theory and practice and that this gap is mostly expressed either through inadequate theory or inadequate practice, where it is usually more often the case that the theory is more developed then the practice, or (in its own way, even though that may seem to be paradoxical) practice is more developed then theory. In the context of business processes and rules, their modelling and effective application to business practices, there is a paradox of the existence of highly developed theories which would enable quality practices, and a whole array of individual, very proficient practical solutions (implementations of business rules) on the one side, but no universal and generally accepted methodology for modelling bussines rules as a service for business processes and information systems to support them on the other side. The part of the problem is to be found in the inherent complexity of corresponding theories and tools which are necessary for modelling business rules and processes, but a part is to be found in inadequate (and due to systemic reasons incomplete) education of the main participants in that process, as well as a lack of communication between them. Business rules are undoubtedly one of the most important resources of any business subject. They are inherent to every business process, independent of its being conducted manually or with the support of information technology. In the first case they are dispersed in the multitude of laws, statutes, standards, business regulations, business and technical documentation and so on. In the second case, in the context of modern business practice, which is increasingly dependent on the support of information technology and is conducted in the virtual world of computers and computer nets ranging from local to global, like the World Wide Web, they are partially implemented in the processes through which business itself is pursued.

Full text

Cited by:

The Financial Characteristics of Firms that Have Changed Their Pension Plans

Dr. Tae Ryu, Metropolitan State University of Denver, CO

Dr. Gregory Clifton, Metropolitan State University of Denver, CO

ABSTRACT

Pension plans are designed to provide income to individuals during their retirement years. This is accomplished by setting aside funds during an employee’s working years so that at retirement the accumulated funds plus earnings from investing those funds are available to replace wages. In general, pension plans are divided into two basic types: defined benefit (DB) and defined contribution (DC). DB plans promise a specified benefit at retirement, whereas DC plans are based on contributions into individual accounts, with benefits being determined by the value of the fund at retirement. Thus, employers are at risk with DB plans because they must contribute enough to meet the cost of benefits that the plan defines. According to a recent survey conducted by the U.S. Government Accountability Office, the number of private DB pension plans has declined substantially over the past two decades. About 92,000 DB plans existed in 1990 compared to just under 29,000 plans in 2009. At the same time, the number of DC pension plans, such as 401(k)-type plans, has grown dramatically and resulted in a huge shift from DB plans to DC plans. The primary reason for the shift is that government regulations make DB plans cumbersome and costly to administer. DC plans often cost no more than 3 percent of payroll, but DB plans can cost 5 to 6 percent of payroll. Also, employers bear the burden of any investment losses, in the form of increased funding requirements, because DB plans guarantee a certain benefit. In this study, we investigate the financial characteristics of firms that switch to DC plans. Using the dichotomous regression model, we examine the effects of firms’ financial characteristics – profitability, liquidity, activity, solvency, size, cash flows, pension funding status, pension expense ratio, bankruptcy risk - on their decisions to either stay with DB plans or switch to DC plans.

Full text

Cited by:

Integrative Forces in Dynamic Ecosystems of Entrepreneurship

Dr. Maryluz Ordonez Santos, University of Pamplona, Colombia

Luz Stella Arenas Perez, Francisco de Paula Santander University, Colombia

ABSTRACT

Analyzing the vision of entrepreneurship, beyond a traditional position, implies an ecosystem look, which assumes the convergence of various actors towards a common goal. Faced with this challenge, this article seeks to interpret the structure underlying the dynamic ecosystems of entrepreneurship, and presents an abstract model to define the study of its nature and address the complexity of the phenomenon that the complex relationships present between the actors and their environment. From a graphical view, the results are shown as a driving force with integrative view, which is obtained through a qualitative study, and supported methodologically in hermeneutics and ethnomethodology. The article aims to contribute both from a theoretical perspective, and from a practical point of view, by linking stakeholders in the ecosystem and contribute to the discussion an image that will allow a systematic review. One of the basic pillars of Entrepreneurship is developing the “Ecosystem” term, which refers to the study, analysis and explanation of the various complex relationships between institutions and entrepreneurs, with academic, social, political and economic environments. In the Ecosystem, strategies are developed to create successful relationships as a source capable of generating a competitive advantage. It is argued that universities contribute to the formation of entrepreneurs with the teaching of the knowledge that the environment calls for it; however, training programs, the definition and identification of the idea, methodologies and tools to build business models and business plans do not always give a seal of approval for business initiation. Given this inconsistency, it is interesting to remember the entrepreneurial action from two key concepts: the ecosystem and sustainability, for all systems of innovation and entrepreneurship work the way they should be. In the literature focused on issues of entrepreneurship, it is common that the terms ecosystem and sustainability have taken off in recent years. When referring about the culture of entrepreneurship, the local development and the competitiveness, in any social study is sought to understand the place that each player occupies as an individual, as a member of an organization, and as an association.

Full text

Cited by: