The income distribution problem in Latin America and the Caribbean

Includes bibliography

Investment and economic reform in Latin America

Includes bibliography

Business development service centres in Italy. An empirical analysis of three regional experiences: Emilia Romagna, Lombardia y Veneto

Includes bibliography

Chinese foreign direct investment in Latin America and the Caribbean: China-Latin America cross-council taskforce. Working document

Although Chinese corporations were relatively unknown in Latin America until a few years ago, their direct investments in the region have averaged about US$10 billion per year since 2010. Their presence and economic leverage have become very significant in many industries and countries of the region, but their motivation, strategy and procedures are not always well understood by Latin America’s governments, businesses and civil society. Similarly, Chinese companies still need to gain a better understanding of Latin America’s business environment and opportunities. This working document is an input for discussing the future of Chinese foreign direct investment (FDI) in Latin America at the China - Latin America cross-council taskforce at the Summit on the Global Agenda, to be held under the auspices of the World Economic Forum (WEF), in Abu Dhabi on 18-20 November 2013. It was prepared jointly by Taotao Chen, Professor of Finance of the School of Economics and Management of Tsinghua University in China and member of the WEF Global Agenda Council on China, and by Miguel Pérez Ludeña, Economic Affairs Officer at the Economic Commission for Latin America and the Caribbean (ECLAC), under the supervision of Alicia Bárcena, Executive Secretary of ECLAC and Vice-Chair of the WEF Global Agenda Council on Latin America.

Nature and relevance of inherited blueprints on business models choices and innovation: an assessment

One important metaphor, referred to biological theories, used to investigate on organizational and business strategy issues is the metaphor about heredity; an area requiring further investigation is the extent to which the characteristics of blueprints inherited from the parent, helps in explaining subsequent development of the spawned ventures. In order to shed a light on the tension between inherited patterns and the new trajectory that may characterize spawned ventures’ development we propose a model aimed at investigating which blueprints elements might exert an effect on business model design choices and to which extent their persistence (or abandonment) determines subsequent business model innovation. Under the assumption that academic and corporate institutions transmit different genes to their spin-offs, we hence expect to have heterogeneity in elements that affect business model design choices and its subsequent evolution. This is the reason why we carry on a twofold analysis in the biotech (meta)industry: under a multiple-case research design, business model and especially its fundamental design elements and themes scholars individuated to decompose the construct, have been thoroughly analysed. Our purpose is to isolate the dimensions of business model that may have been the object of legacy and the ones along which an experimentation and learning process is more likely to happen, bearing in mind that differences between academic and corporate might not be that evident as expected, especially considering that business model innovation may occur.

Fresh Produce Safety and Good Agricultural Practices: Stakeholders' Perception and Consumers' Choice in Thailand

Concerns of Thai consumers on food safety have been recently increasing, especially in urban areas and for fresh produce because food safety scandals, such as chemical residues on fresh produce (e.g., cabbage) still frequently occur. The Thai government tried to meet consumer needs by imposing in the domestic market a stronger regulation aimed at increasing the baseline level of food safety assurance and by introducing a voluntary standard (based on Good Agricultural Practices or GAPs and known as Q-GAP) and the related food safety label (i.e., Q mark). However, since standards and regulations are weakly implemented in the domestic market compared to exported products, there is still a lack of Thai consumers’ confidence in the safety of local food products. In this work the current situation of GAPs adoption in Thai fresh produce production is analysed. Furthermore, it is studied whether Thai consumers place value on food safety labels available on the market, to know whether consumer demand could drive the market of certified safer products. This study contains three essays: 1) a review of the literature, 2) a qualitative study on stakeholders' perception toward GAPs adoption and 3) a quantitative study, aimed at analysing consumers' preferences and willingness-to-pay for food safety labels on fresh produce using a discrete choice experiment. This dissertation contributes to the economics of quality assurance and labelling, specifically addressing GAPs and food safety label in the fresh produce supply chain. Results show that Q-GAP could be effectively used to improve food safety in Thai domestic market, but its credibility should be improved. Stakeholder’s awareness toward food safety issues and the delivery of reliable and sound information are crucial. Thai consumers are willing to pay a premium price for food safety labelled produce over unlabelled ones. Implications for both government and business decision-makers are discussed.

The Influence of Enterprise Systems on Business and Information Technology

Business strategy is important to all organizations. Nearly all Fortune 500 firms are implementing Enterprise Resource Planning (ERP) systems to improve the execution of their business strategy and to improve integration with its information technology (IT) strategy. Successful implementation of these multi-million dollar software systems are requiring new emphasis on change management and on Business and IT strategic alignment. This paper examines business and IT strategic alignment and seeks to explore whether an ERP implementation can drive business process reengineering and business and IT strategic alignment. An overview of business strategy and strategic alignment are followed by an analysis of ERP. The “As-Is/To-Be” process model is then presented and explained as a simple, but vital tool for improving business strategy, strategic alignment, and ERP implementation success.

The Changing Environment of Audiovisual Media. New Technologies, New Patterns of Consumer/Business Behaviour and Their Implications for Audiovisual Media Regulation

Digital TV offers of 200 channels and 500 video-on-demand films, podcasting, mobile television, a new web blog being created every two seconds - these are some of the factual elements depicting contemporary audiovisual media in the digital environment. The present article looks into some of these technological advances and sketches their implications for the markets of media content, in particular as newly emerging patterns of consumer and business behaviour are concerned. Ultimately, it puts forward the question of whether the existing audiovisual media regulatory models, which are still predominantly analogue-based, have been rendered obsolete by the transformed (and continually transforming) digital environment.

The struggle to diversify rural livelihoods: Bio-enterprise development initiatives and their impacts on agro-/pastoral communities in the drylands of Kenya

This article analyses the impacts of four different bio-enterprise initiatives on agro-pastoral livelihoods and on improved natural resources management (NRM) in the drylands of Kenya. In this way it contributes to an area of rural development that is gaining increasing interest, but still has little empirical evidence. Data were collected through interviews, focus group discussions, informal discussions and the study of reports. One of the key findings of this article is that diversification into enterprises requires cooperation among the stakeholders with their varying experiences in development, NRM and business development. In addition to initial investments, such enterprises need sustained financial, as well as other support like capacity development to survive the market introduction phase. For such enterprises to defend their market niches, the quantity and quality of the product are critical. In addition to support in human, financial, social, physical and natural capital, mentoring is another crucial factor for success.

Three essays on the concept of trust and its foundations

The present dissertation focuses on trust and comprises three empirical essays on the concept itself and its foundations. All three essays investigate trust as an expectation and rely on selfreport measures of trust. Whereas the first two chapters investigate social trust, the third chapter investigates political trust. Essentially, there are three related important debates to which the following chapters contribute. A first debate discusses problems with current selfreport measures. Scholars recently started to question whether standard trust questions really measure the same across countries and languages. Chapter 1 engages in this debate. Using data from Switzerland it studies whether different trust questions measure the same latent trust constructs across individuals belonging to three different culturallinguistic regions. The second debate concerns the socalled forms or dimensions of trust. Recently, scholars started investigating whether trust is a onedimensional construct, i.e. whether an individual's trust judgment differs for categories of trustees such as strangers, neighbors, family members and friends or not. Relying on confirmatory factor analysis Chapter 2 investigates whether individuals really do make a difference between different trustee categories and to what extent these judgments can be summarized into higherorder latent trust constructs. The third debate is concerned with causes of differences in trust across humans. Chapter 3 focuses on the role of laterlife experiences, more precisely victimization experiences and investigates their causal relationship with generalized social trust. Chapter 4 focuses on the impact of direct democratic institutions on the trust relationship between citizens and political authorities.

Corporate aging and investment decisions

Paper I: Corporate aging and internal resource allocation Abstract Various observers argue that established firms are at a disadvantage in pursuing new growth opportunities. In this paper, we provide systematic evidence that established firms allocate fewer resources to high-growth lines of business. However, we find no evidence of inefficient resource allocation in established firms. Redirecting resources from high-growth to low-growth lines of business does not result in lower profitability. Also, resource allocation towards new growth opportunities does not increase when managers of established firms are exposed to takeover and product market threats. Rather, it seems that conservative resource allocation strategies are driven by pressures to meet investors’ expectations. Our empirical evidence, thus, favors the hypothesis that established firms wisely choose to allocate fewer resources to new growth opportunities as external pressures force them to focus on efficiency rather than novelty (Holmström 1989). Paper II: Corporate aging and asset sales Abstract This paper asks whether divestitures are motivated by strategic considerations about the scope of the firm’s activities. Limited managerial capacity implies that exploiting core competences becomes comparatively more attractive than exploring new growth opportunities as firms mature. Divestitures help stablished firms free management time and increase the focus on core competences. The testable implication of this attention hypothesis is that established firms are the main sellers of assets, that their divestiture activity increases when managerial capacity is scarcer, that they sell non-core activities, and that they return the divestiture proceeds to the providers of capital instead of reinvesting them in the firm. We find strong empirical support for these predictions. Paper III: Corporate aging and lobbying expenditures Abstract Creative destruction forces constantly challenge established firms, especially in competitive markets. This paper asks whether corporate lobbying is a competitive weapon of established firms to counteract the decline in rents over time. We find a statistically and economically significant positive relation between firm age and lobbying expenditures. Moreover, the documented age-effect is weaker when firms have unique products or operate in concentrated product markets. To address endogeneity, we use industry distress as an exogenous nonlegislative shock to future rents and show that established firms are relatively more likely to lobby when in distress. Finally, we provide empirical evidence that corporate lobbying efforts by established firms forestall the creative destruction process. In sum, our findings suggest that corporate lobbying is a competitive weapon of established firms to retain profitability in competitive environments.

Three Essays on Age and Firm Performance

Old captains at the helm: Chairman age and firm performance Urs Waelchli and Jonas Zeller December, 2012 This paper examines whether the chairmen of the board (COBs) impose their life-cycles on the firms over which they preside. Using a large sample of unlisted firms we find a robust negative relation between COB age and firm performance. COBs age much like ‘ordinary’ people. Their cognitive abilities deteriorate and they experience significant shifts in motivation. Deteriorating cognitive abilities are the main driver of the performance effect that we observe. The results imply that succession planning problems in unlisted firms are real. Mandatory retirement age clauses cannot solve these problems. Corporate Aging around the World Jonas Zeller January, 2014 This paper examines whether firms internationally age as US firms do (Loderer, Stulz, and Wälchli, 2013). Using a large panel, I find that Tobin’s Q monotonically falls with firm Age across all nineteen countries in the sample. The decrease varies across countries but is generally extremely robust and economically significant. ROA, sales growth, and market share decrease over a firm’s lifetime in most countries as well. Furthermore, older firms reduce their capital expenditures and R&D outlays. Instead, they distribute more cash to their shareholders. Overall, the results suggest that corporate aging is not confined to the US but is a genuine phenomenon that affects listed firms worldwide. This evidence supports the hypothesis that corporate aging is driven by managers who optimally focus on managing their assets in place and neglect the development of growth opportunities. I finally ask whether the managers’ choice and with it the magnitude of the decline in Tobin’s Q is a function of country-level institutional settings. I find that most notably firms age faster in countries where employees are relatively well protected by labor regulation. Is employment protection the fountain of corporate youth? Claudio Loderer, Urs Wälchli, Jonas Zeller* September 2014 Acharya, Baghai, and Subramanian (2012, 2013) find that employment protection legislation (EPL) encourages innovation. We argue that this effect should be particularly strong in mature firms. We would therefore also expect EPL to boost growth opportunities. Using the natural Experiment created by the staggered passage of changes in EPL across seventeen countries, we find evidence that employment protection legislation does indeed stimulate Innovation efforts, especially in mature firms. The effect is stronger in countries in which patents are owned by the firm and in the context of regular contracts. Consistent with that, EPL encourages risk taking. Overall, however, there is Little evidence that the effect of EPL on innovation effort translates into higher firm value, not even in mature firms. EPL does motivate employees in those firms to put in a greater effort, as evidenced by stronger sales growth. Yet it also increases costs, reduces profitability, and depresses Tobin’s Q ratios in all firms, especially the mature ones, possibly because of the rigidities that characterize these firms [Loderer, Stulz, and Waelchli (2014)].

Bargaining for power and information : an experimental and theoretical analysis of the interaction between institutions, externalities and adverse selection

Bargaining is the building block of many economic interactions, ranging from bilateral to multilateral encounters and from situations in which the actors are individuals to negotiations between firms or countries. In all these settings, economists have been intrigued for a long time by the fact that some projects, trades or agreements are not realized even though they are mutually beneficial. On the one hand, this has been explained by incomplete information. A firm may not be willing to offer a wage that is acceptable to a qualified worker, because it knows that there are also unqualified workers and cannot distinguish between the two types. This phenomenon is known as adverse selection. On the other hand, it has been argued that even with complete information, the presence of externalities may impede efficient outcomes. To see this, consider the example of climate change. If a subset of countries agrees to curb emissions, non-participant regions benefit from the signatories’ efforts without incurring costs. These free riding opportunities give rise to incentives to strategically improve ones bargaining power that work against the formation of a global agreement. This thesis is concerned with extending our understanding of both factors, adverse selection and externalities. The findings are based on empirical evidence from original laboratory experiments as well as game theoretic modeling. On a very general note, it is demonstrated that the institutions through which agents interact matter to a large extent. Insights are provided about which institutions we should expect to perform better than others, at least in terms of aggregate welfare. Chapters 1 and 2 focus on the problem of adverse selection. Effective operation of markets and other institutions often depends on good information transmission properties. In terms of the example introduced above, a firm is only willing to offer high wages if it receives enough positive signals about the worker’s quality during the application and wage bargaining process. In Chapter 1, it will be shown that repeated interaction coupled with time costs facilitates information transmission. By making the wage bargaining process costly for the worker, the firm is able to obtain more accurate information about the worker’s type. The cost could be pure time cost from delaying agreement or cost of effort arising from a multi-step interviewing process. In Chapter 2, I abstract from time cost and show that communication can play a similar role. The simple fact that a worker states to be of high quality may be informative. In Chapter 3, the focus is on a different source of inefficiency. Agents strive for bargaining power and thus may be motivated by incentives that are at odds with the socially efficient outcome. I have already mentioned the example of climate change. Other examples are coalitions within committees that are formed to secure voting power to block outcomes or groups that commit to different technological standards although a single standard would be optimal (e.g. the format war between HD and BlueRay). It will be shown that such inefficiencies are directly linked to the presence of externalities and a certain degree of irreversibility in actions. I now discuss the three articles in more detail. In Chapter 1, Olivier Bochet and I study a simple bilateral bargaining institution that eliminates trade failures arising from incomplete information. In this setting, a buyer makes offers to a seller in order to acquire a good. Whenever an offer is rejected by the seller, the buyer may submit a further offer. Bargaining is costly, because both parties suffer a (small) time cost after any rejection. The difficulties arise, because the good can be of low or high quality and the quality of the good is only known to the seller. Indeed, without the possibility to make repeated offers, it is too risky for the buyer to offer prices that allow for trade of high quality goods. When allowing for repeated offers, however, at equilibrium both types of goods trade with probability one. We provide an experimental test of these predictions. Buyers gather information about sellers using specific price offers and rates of trade are high, much as the model’s qualitative predictions. We also observe a persistent over-delay before trade occurs, and this mitigates efficiency substantially. Possible channels for over-delay are identified in the form of two behavioral assumptions missing from the standard model, loss aversion (buyers) and haggling (sellers), which reconcile the data with the theoretical predictions. Chapter 2 also studies adverse selection, but interaction between buyers and sellers now takes place within a market rather than isolated pairs. Remarkably, in a market it suffices to let agents communicate in a very simple manner to mitigate trade failures. The key insight is that better informed agents (sellers) are willing to truthfully reveal their private information, because by doing so they are able to reduce search frictions and attract more buyers. Behavior observed in the experimental sessions closely follows the theoretical predictions. As a consequence, costless and non-binding communication (cheap talk) significantly raises rates of trade and welfare. Previous experiments have documented that cheap talk alleviates inefficiencies due to asymmetric information. These findings are explained by pro-social preferences and lie aversion. I use appropriate control treatments to show that such consideration play only a minor role in our market. Instead, the experiment highlights the ability to organize markets as a new channel through which communication can facilitate trade in the presence of private information. In Chapter 3, I theoretically explore coalition formation via multilateral bargaining under complete information. The environment studied is extremely rich in the sense that the model allows for all kinds of externalities. This is achieved by using so-called partition functions, which pin down a coalitional worth for each possible coalition in each possible coalition structure. It is found that although binding agreements can be written, efficiency is not guaranteed, because the negotiation process is inherently non-cooperative. The prospects of cooperation are shown to crucially depend on i) the degree to which players can renegotiate and gradually build up agreements and ii) the absence of a certain type of externalities that can loosely be described as incentives to free ride. Moreover, the willingness to concede bargaining power is identified as a novel reason for gradualism. Another key contribution of the study is that it identifies a strong connection between the Core, one of the most important concepts in cooperative game theory, and the set of environments for which efficiency is attained even without renegotiation.