Do external funds yield lower returns? Recent evidence from East Asian economies

One of the central explanations of the recent Asian Crisis has been the problem of moral hazard as the source of over-investment and excessive external borrowing. There is however rather limited firm-level empirical evidence to characterise inefficient use of internal and external finances. Using a large firm-level panel data-set from four badly affected Asian countries, this paper compares the rates of return to various internal and external funds among firms with low and high debt financing (relative to equity) among financially constrained and other firms. Selectivity-corrected estimates obtained from random effects panel data model do suggest evidence of significantly lower rates of return to long-term debt, even among firms relying more on debt relative to equity in our sample. There is also evidence that average effective interest rates often significantly exceeded the average returns to long-term debt in the sample countries in the pre-crisis period. © 2006 Elsevier Inc. All rights reserved.

Industrial networks of the future:review of research and practice

Academic researchers have followed closely the interest of companies in establishing industrial networks by studying aspects such as social interaction and contractual relationships. But what patterns underlie the emergence of industrial networks and what support should research provide for practitioners? Firstly, it appears that manufacturing is becoming a commodity rather than a unique capability, which accounts especially for low-technology approaches in downstream parts of the network, for example in assembly operations. Secondly, the increased tendency towards specialization has forced other, upstream, parts of industrial networks to introduce advanced manufacturing technologies to supply niche markets. Thirdly, the capital market for investments in capacity, and the trade in manufacturing as a commodity, dominates resource allocation to a larger extent than previously was the case. Fourthly, there is a continuous move towards more loosely connected entities that comprise manufacturing networks. More traditional concepts, such as the “keiretsu” and “chaibol” networks of some Asian economies, do not sufficiently support the demands now being placed on networks. Research should address these four fundamental challenges to prepare for the industrial networks of 2020 and beyond.

A review of research and practice for the industrial networks of the future

Academic researchers have followed closely the interest of companies in establishing industrial networks by studying aspects such as social interaction and contractual relationships. But what patterns underlie the emergence of industrial networks and what support should research provide for practitioners? First, it appears that manufacturing is becoming a commodity rather than a unique capability, which accounts especially for low-technology approaches in downstream parts of the network, for example, in assembly operations. Second, the increased tendency towards specialisation has forced other, upstream, parts of industrial networks to introduce advanced manufacturing technologies for niche markets. Third, the capital market for investments in capacity, and the trade in manufacturing as a commodity, dominates resource allocation to a larger extent than was previously the case. Fourth, there is becoming a continuous move towards more loosely connected entities that comprise manufacturing networks. Finally, in these networks, concepts for supply chain management should address collaboration and information technology that supports decentralised decision-making, in particular to address sustainable and green supply chains. More traditional concepts, such as the keiretsu and chaibol networks of some Asian economies, do not sufficiently support the demands now being placed on networks. Research should address these five fundamental challenges to prepare for the industrial networks of 2020 and beyond. © 2010 Springer-Verlag London.

Lessons for African economies from Irish and East Asian industry policy

When comparisons in terms of industrial policy lessons to be learned have taken place, it has tended to be solely vis-a-vis the ‘development state’ East Asian experience. This paper broadens the analysis and considers lessons which African countries can learn from other so-called ‘tiger’ economies including Ireland and the East and South Asian countries. We recognise that the latter are indeed clearly significant as many African countries at the time of independence had economic structures and levels of income quite similar to East Asian countries, yet have grown at vastly different rates since then. Exploring why this has been the case can thus offer important insights into possibilities for industrial policy. Yet this comes with some health warnings over East Asian experience. We suggest that another important contribution can come by looking at the Irish example, given its emphasis on corporatism rather than simply relying on state direction in the operation of industrial policy. The Irish model is also more democratic in some senses and has protected workers’ rights during the development process in contrast to the often highly dirigisite East Asian model. Overall we suggest that some immediate actions are needed, notably with regard to the financial system in small African economies. Without such changes, a poorly functioning financial system will continue to keep investment at low levels. In relation to the small size of the African economies, the paper recommends regional integration and sufficient overseas development assistance (ODA) for infrastructural development. It is also critical to note that the various small African economies each face their own industrial and economic development challenges, and that a ‘one size fits all’ approach is not appropriate; rather the key is to tailor policies and systems to the unique opportunities and development challenges in each African country.