Technological change and the challenges for regional development: building social capital in less-favoured regions

The relevance of regional policy for less favoured regions (LFRs) reveals itself when policy-makers must reconcile competitiveness with social cohesion through the adaptation of competition or innovation policies. The vast literature in this area generally builds on an overarching concept of ‘social capital’ as the necessary relational infrastructure for collective action diversification and policy integration, in a context much influenced by a dynamic of industrial change and a necessary balance between the creation and diffusion of ‘knowledge’ through learning. This relational infrastructure or ‘social capital’ is centred on people’s willingness to cooperate and ‘envision’ futures as a result of “social organization, such as networks, norms and trust that facilitate action and cooperation for mutual benefit” (Putnam, 1993: 35). Advocates of this interpretation of ‘social capital’ have adopted the ‘new growth’ thinking behind ‘systems of innovation’ and ‘competence building’, arguing that networks have the potential to make both public administration and markets more effective as well as ‘learning’ trajectories more inclusive of the development of society as a whole. This essay aims to better understand the role of ‘social capital’ in the production and reproduction of uneven regional development patterns, and to critically assess the limits of a ‘systems concept’ and an institution-centred approach to comparative studies of regional innovation. These aims are discussed in light of the following two assertions: i) learning behaviour, from an economic point of view, has its determinants, and ii) the positive economic outcomes of ‘social capital’ cannot be taken as a given. It is suggested that an agent-centred approach to comparative research best addresses the ‘learning’ determinants and the consequences of social networks on regional development patterns. A brief discussion of the current debate on innovation surveys has been provided to illustrate this point.

Capital market expectations and the London office market

The analysis of office market dynamics has generally concentrated on the impact of underlying fundamental demand and supply variables. This paper takes a slightly different approach to many previous examinations of rental dynamics. Within a Vector-Error-Correction framework the empirical analysis concentrates upon the impact of economic and financial variables on rents in the City of London and West End of London office markets. The impulse response and variance decomposition reveal that while lagged rental values and key demand drivers play a highly important role in the dynamics of rents, financial variables are also influential. Stock market performance not only influences the City of London market but also the West End, whilst the default spread plays an important role in recent years. It is argued that both series incorporate expectations about future economic performance and that this is the basis of their influence upon rental values.

The dynamics of asset prices and transaction activity in illiquid markets: the case of private commercial real estate

This paper investigates the relationship between capital flows, turnover and returns for the UK private real estate market. We examine a number of possible implication of capital flows and turnover on capital returns testing for evidence of a price pressure effect, ‘return chasing’ behaviour and information revelation. The main tool of analysis is a panel vector autoregressive (VAR) regression model in which institutional capital flows, turnover and returns are specified as endogenous variables in a two equation system in which we also control for macro-economic variables. Data on flows, turnover and returns are obtained for the 10 market segments covering the main UK commercial real estate sectors. Our results do not support the widely-held belief among practitioners that capital flows have a ‘price pressure’ effect. Although there is some evidence of return chasing behaviour, the short timescales involved suggest this finding may be due to delayed recording of flows relative to returns given the difficulties of market entry. We find a significant positive relationship between lagged turnover and contemporaneous capital returns, suggesting that asset turnover provides pricing information.

Unlisted property funds and the emerging property markets

This paper sets out to describe the changing nature of global property investment, to provide background information regarding the nature of unlisted property funds and their managers and investors, and especially the role played by unlisted property funds in facilitating cross-border investing. In particular, it focuses on the development of unlisted funds as intermediary structures carrying institutional capital from developed to developing markets. It presents the results of new research by UK research firm Property Funds Research (PFR) and the University of Reading which explores the extent to which this new vehicle has been effective in delivering capital to emerging markets. The research relates the number of funds targetting particular countries and to population and GDP per capita. It finds that there is a very strong relationship between the popularity of a country for investment through this vehicle format and these independent variables. More interesting, perhaps, is the identification of outlier countries where the amount of investment is significantly less - or greater - than that predicted by population and GDP per capita.

Endogenous business cycles with frictional labour markets

We present a neoclassical model of capital accumulation with frictional labour markets. Under standard parameter values the equilibrium of the model is indeterminate and consequently displays expectations-driven business cycles – so-called endogenous business cycles. We study the properties of such cycles, and find that the model predicts the high autocorrelation in output growth and the hump-shaped impulse response of output found in US data – important features that existing endogenous real business cycle models fail to explain. The indeterminacy of the equilibrium stems from job search externalities and does not rely on increasing returns to scale as in most models.

Cross-country effects of regulatory capital arbitrage

One reason for the recent asset price bubbles in many developed countries could be regulatory capital arbitrage. Regulatory and legal changes can help traditional banks to move their assets off their balance sheets into the lightly regulated shadows and thus enable regulatory arbitrage through the securitized sector. This paper adopts a global vector autoregression (GVAR) methodology to assess the effects of regulatory capital arbitrage on equity prices, house prices and economic activity across 11 OECD countries/ regions. A counterfactual experiment disentangles the effects of regulatory arbitrage following a change in the net capital rule for investment banks in April 2004 and the adoption of the Basel II Accord in June 2004. The results provide evidence for the existence of an international finance multiplier, with about half of the countries overshooting U.S. impulse responses. The counterfactual shows that regulatory arbitrage via the U.S. securitized sector may enhance the cross-country reallocation of capital from housing markets towards equity markets.

Nonlocal office investors: anchored by their markets and impaired by their distance

Nonlocal investors purchase and sell investment property in a distant metropolitan area. In this study, we identify capital value underperformance for nonlocal investors on both sides of the transaction, when they purchase and when they sell. The commercial real estate transactions data include a national sample of office property occurring in more than 100 U.S. markets. Using propensity-score matched sample to control for selection bias, we find that nonlocal investors overpay on the purchase by an estimated 13.8 % and sell at an estimated 7 % discount. These disadvantages relative to local investors expand with the geographic distance separating investor and asset. Nonlocal investors fundamentally overvalue similar assets sold to each other relative to assets transacted between locals, and are less patient as sellers. The positive bias in overpayment is directly tied to office rent differentials between the asset and investor markets.

Cross-border capital flows into real estate

This study investigates the determinants of cross-border capital flows into direct real estate markets. In particular, it investigates how existing institutional, regulatory and real estate specific barriers affect cross-border real estate inflows and outflows in a sample of 24 developed and emerging countries, and whether investors seek out targets with lower barriers and regulatory arbitrage. We do not find evidence of significant cross-border institutional or regulatory arbitrage in the real estate market. However, real estate market liquidity is found to be the most important driver of cross-border flows. While many of the institutional barriers included in this analysis do not appear to impact the level of real estate inflows significantly, their presence tends to suppress real estate capital outflows to other countries. Overall, easy access to financial markets, a good economic environment and transparent real estate markets may enhance real estate outflows, while returns and the macroeconomy are found to enhance domestic real estate investment.

Business life cycle and capital structure: evidence from Chinese manufacturing firms

This paper uses a panel data-fixed effect approach and data collected from Chinese public manufacturing firms between 1999 and 2011 to investigate the impacts of business life cycle stages on capital structure. We find that cash flow patterns capture more information on business life cycle stages than firm age and have a stronger impact on capital structure decision-making. We also find that the adjustment speed of capital structure varies significantly across life cycle stages and that non-sequential transitions over life cycle stages play an important role in the determination of capital structure. Our study indicates that it is important for policy-makers to ensure that products and financial markets are well-balanced.

Reverse transfers of innovation and national development: evidence from Brazilian subsidiaries

The search for innovation has become an important motivation for the internationalization of companies in emerging countries. In that context, this study tests the impact that a nation’s development has on whether subsidiaries transfer innovation of products or that of processes. Survey data collected from 73 subsidiaries of Brazilian companies indicate that companies located in developed markets tend to transfer more product-oriented innovations than do those based in emerging countries. Furthermore, the size and age of a subsidiary has an impact on the transfer process. The larger and younger the subsidiary, the more likely a company is to favor the flow of product innovation into its headquarters. The level of national development was not identified as an influence on the flow of process innovation.

Yellow fever vaccination coverage among children in Brazilian capitals

Brazil recommends universal yellow fever (YF) vaccination for children who reside in or travel to endemic areas. We conducted a household survey to calculate YF vaccine coverage among children 18-30 months of age in 27 capital cities. A total of 9285 children were surveyed in the 15 cities with YF fever universal vaccination; 7290(79%) had documented evidence of YF vaccination by 12 months of age, 7996 (86%) by 18 months of age, and 8479 (91%) prior to the survey. In 12 cities with selective YF vaccination coverage was only 1% by 18 months of age. YF fever vaccination can be improved to reach all children where vaccine is recommended. (C) 2010 Elsevier Ltd. All rights reserved.

Baby, it`s you : international capital discovers the under threes

Well-established international entertainment firms such as Disney and Fisher-Price are joining new start-up firms such as Baby Einstein to create a 'Baby' market of products (including toys, games and videos) specifically targeted at children aged 0-3 years. Despite its novelty, the 'Baby' market mirrors older markets that these firms have created around other demographic groups (e.g. older children, adolescents and adults) - it redefines its target demographic group around specific commodities and promotes its redefinition as 'common sense'. The 'Baby' firms redefine babies solely as early learners whose potential to learn can be released by these firms' brand-name 'educational' or 'developmental' products. Many adults buy these products because they accept the firms' redefinition of babies, but other adults ignore the firms' promotional messages and buy the products to give themselves some time apart from their babies. The 'Baby' market is significant for children and adults because it changes young children's relationships with adults and because it subordinates local cultural differences to a children's culture that purports to be 'global' but has, in reality, extremely narrow foundations in class, race and gender.

Identifying house price diffusion patterns among Australian state capital cities

Prior research supports the proposition that house price diffusion shows a ripple effect along the spatial dimension. That is, house price changes in one region would reflect in subsequent house price changes in other regions, showing certain linkages among regions. Using the vector autoregression model and the impulse response function, this study investigates house price diffusion among Australia's state capital cities, examining the response of one market to the innovation of other markets and determining the lagged terms for the maximum absolute value of the other markets' responses. The results show that the most important subnational markets in Australia do not point to Sydney, rather towards Canberra and Hobart, while the Darwin market plays a role of buffer. The safest markets are Sydney and Melbourne. This study helps to predict house price movement trends in eight capital cities.

The role of cultural capital towards the development of a sustainable business model for design firm internationalization

This paper reports the results of three case studies of firms involved with design for the built environment who have been working in international markets for more than two decades. The first two firms are architectural practices and the third is a construction firm which designs and constructs. Their markets are diverse and their strategies have evolved over the two decades. There are numerous differences between countries including cultural, social, project governance structures, regulatory, procurement strategies, terminology, codes, etc. What is it that makes these firms able to develop sustainable business models in internationalisation? A grounded theory approach was used to examine the three case studies and develop a reflexive capability model drawing from the sociological theory of reflexivity to interpret the characteristics of the firms' ability to be able to adapt different international conditions. Twenty-two interviews were conducted across the three firms. Results indicated that sustainable business models rely upon the management of social, cultural and intellectual capital. The strategic management of capital leads to the development of increasing reflexive capability within the processes related to internationalisation. Reflexive capability is a characteristic of the three successful case study firms internationalising and working within global models of practice. This paper focuses on the role of cultural capital in a reflexive capability model for sustainable internationalisation.

The role of reflexive capability in relation to intellectual capital on multi international partnerships

This paper reports the results of an analysis of five Malaysian firms who have worked successfully on multi international partnerships and/or megaprojects. A case study methodology was employed to examine the barriers and successful strategies the firms used in decision making in various international markets. A common characteristic across the firms was the ability to self reflect and adapt their practices to different international conditions despite numerous differences between countries including cultural, social, project governance structures, regulatory, terminology and codes. A reflexive capability model developed from the social sciences theory of individual agent reflexivity was developed to explain the way in which firms as an entity can develop awareness, responsiveness and adaptability for long term success in diverse international markets. This paper builds upon an initial Australian study which developed the model grounded in empirical observations of internationalising design construction firms by presenting the results of a second study of Malaysian firms. Results indicate that the model of reflexivity capability is a useful way to interpret practices that are undertaken in multi partner relationships on larger more complex projects. Successful Malaysian firms within joint venture relationships display an ability to self reflect and adapt. This transformation process is critiqued in relation to the relationships between social, cultural and intellectual capital. Reflexive capability is a characteristic of the successful case study firms working within global models of practice. The reflexive capability model is explained in relation to common themes identified in relation to the management of intellectual capital in successful multi international partnerships and megaprojects.