How much does industry matter in an emerging market economy?

Theories of firm profitability make different predictions about the relative importance of firm, industry and time specific factors. We assess, empirically, the relevance of these effects over a sixteen year period in India, as a regime of control and regulation, pre 1985, gave way to partial liberalisation between 1985 and 1991 and to more decisive liberalisation after 1991. We find that firm effects are important throughout, when rent seeking opportunities proliferated, as well as when competitive forces were enhanced by institutional change. In contrast, industry effects significantly increased after liberalisation, suggesting that industry structure matters more within competitive markets. These findings help understand the relevance of different models over different stages of liberalisation, and have important implications for both theory and policy.

Determining underlying macroeconomic fundamentals during emerging market crises: Are conditions as bad as they seem?

Emerging market crises are characterized by large swings in both macroeconomic fundamentalsand asset prices. The economic significance of observed movements in macroeconomicvariables is obscured by the brief and extreme nature of crises. In this paper we propose to study the macroeconomic consequences of crises by studying the behavior of effective fundamentals, constructed by studying the relative movements of stock prices during crises. We find that these effective fundamentals provide a different picture than that implied by observed fundamentals. First, asset prices often reflect expectations of improvement in fundamentals after the initial devaluations; specifically, effective depreciations are positive but not as large as the observed ones. Second, crises vary in their effect on credit market conditions, with investors expecting tightening of credit in some cases (Mexico 1994, Philippines 1997), but loosening of credit in others (Sweden 1992, Korea 1997, Brazil 1999).

Emerging market patterns in recycled paper trade

The international recovered paper trade serves two important functions: increasing raw material availability in the paper and board industry and providing economic incentives to recycle. The purpose of this paper is to shed further light on emerging patterns in this trade by empirically analysing the changes in the bilateral trade flows of recycled paper between 1992 and 2008. According to our estimations, two important changes have taken place in the 1990s and 2000s. First, the growing importance of developing economies in global recycled paper trade plays a significant role in import demand as a determinant of trade flows. Second, the changes in global trade patterns necessitate investigating the transportation cost measures used in applied research.

SME internationalisation from an emerging market to a developed market : a case study from Ghana

This study focuses on understanding the internationalisation of small and medium-sized enterprises (SMEs) from an emerging market to a developed market. In particular, it examines the internationalisation process of a firm in the clothing and textile manufacturing industry in Ghana. Theoretically, the study is limited to the network internationalisation approach (e.g. Johanson & Mattsson, 1988; Johanson & Vahlne, 2009) and the industrial network approach (Håkansson & Snehota, 1995). Methodologically, a qualitative abductive case study approach is employed. The research process relies on a longitudinal method involving primary and secondary data and critical event analysis. Primary data has been collected from relevant informants at two different times in the internationalisation process. The research findings highlight the significance of both domestic and foreign business relationships in the internationalisation of an SME from an emerging African market to a developed country market. They show the greater importance of exogenous critical events than has been found in the research regarding firms in developed countries. Institutional actors were essential in the network and as sources of exogenous critical events. In addition, the successful SME should possess unique resources in the form of an entrepreneurial spirit, sufficient knowledge of internationalisation, and specific product knowledge. Theoretically, the present study contributes to business network research through providing an understanding of the process of developing network relationships and their impact in an African context. By focusing on SMEs, a contribution has been made in relation to the advancement of SME research. This research reveals empirical insight into SME internationalisation in a setting where an SME is internationalising to a developed country market from a newly emerging African market. Methodologically, the study provides an example of longitudinal research based on abductive methodology. The results provide implications for firms, managers, and policy-makers within the industry, especially on how to manage and use network relationships to promote SME internationalisation from newly emerging markets.

Acquisition Failure: The case of a multinational enterprise from an emerging market failing in Indonesia.

The escalation in the number of mergers and acquisition transactions involving emerging market firms is a relatively recent phenomenon; as a consequence academic research in such topic is rather limited. The purpose of this research study was to discuss the possible reasons that led the acquisition failure of an emerging multinational firm and an Indonesian player. Extensive theoretical research was performed and it had been achieved, based on this, the finding of a framework that facilitated to understand the way in which the concepts of cultural distances and relate liabilities of foreignness in the process of acquisitions of foreign companies in emerging markets. The theoretical background collects literature related to acquisitions, models of cultural studies between nations and liabilities of foreignness. It has been generated a variety of frameworks that aid to understand the way that the institutional distance and cultural factors together with the concept of liabilities of foreignness can affect the process of market entry of an emerging multinational company to the extent that the best way to stop losing money is to abandon the project. The empirical research consisted of selective semi-structured interviews and an extensive research in available public data on the chosen study case of this research. There were several factors that were identified as the cause of the failure in the market entry of a Mexican multinational firm in Indonesia. The weakness shown by the local government authorities was used by the local community leaders who rioted because of discomfort. These groups were the ones who made the government submit to the extent that the agreements reached at the beginning of the deal were either canceled or modified in a way that favored always the local community. The contributions of this study fall into the knowledge field of emerging multinational firms and market entry process.

ASSESSING THE PERFORMANCE OF EMERGING MARKET MUTUAL FUNDS IN CANADA

Emerging markets have received wide attention from investors around the globe because of their return potential and risk diversification. This research examines the selection and timing performance of Canadian mutual funds which invest in fixed-income and equity securities in emerging markets. We use (un)conditional two- and five-factor benchmark models that accommodate the dynamics of returns in emerging markets. We also adopt the cross-sectional bootstrap methodology to distinguish between ‘skill’ and ‘luck’ for individual funds. All the tests are conducted using a comprehensive data set of bond and equity emerging funds over the period of 1989-2011. The risk-adjusted measures of performance are estimated using the least squares method with the Newey-West adjustment for standard errors that are robust to conditional heteroskedasticity and autocorrelation. The performance statistics of the emerging funds before (after) management-related costs are insignificantly positive (significantly negative). They are sensitive to the chosen benchmark model and conditional information improves selection performance. The timing statistics are largely insignificant throughout the sample period and are not sensitive to the benchmark model. Evidence of timing and selecting abilities is obtained in a small number of funds which is not sensitive to the fees structure. We also find evidence that a majority of individual funds provide zero (very few provide positive) abnormal return before fees and a significantly negative return after fees. At the negative end of the tail of performance distribution, our resampling tests fail to reject the role of bad luck in the poor performance of funds and we conclude that most of them are merely ‘unlucky’.

Demand, supply and willingness-to-pay for extension services in an emerging-market setting

Although it may be wholly inappropriate to generalize, the most important resource available to a subsistence household is the total amount of time that its members have available to spend in productive enterprises. In this context, services that minimize the time that it takes to perform productive activities are valuable to the household. Consequently the household is willing to relinquish quantities of other resources in exchange for quantities of the time-saving service. These simple observations motivate a search for the values that subsistence households place on time-saving services. This search is especially important when it is realized that extension services promote productivity, enhance the surplus-generating potential of the household and can, as a consequence, promote immersion into markets that are currently constrained by thinness and instability. In this capacity, extension visitation has the potential to overcome one of the principal impediments to economic development, namely lack of density of market participation. In this article, we consider this issue in the context of a rich data set on milk-market participation by small-holder dairy producers in the Ethiopian highlands.

Revisiting the 'modern' multinational enterprise theory: an emerging-market multinational perspective

Using Triad-based multinational enterprises as their empirical setting, influential scholars in international management uncovered key organizational characteristics needed to create globally integrated and locally responsive multinationals. They proposed a “modern” theory of multinationals' organization (Hedlund, 1994). But recently, a new generation of multinationals from emerging markets has appeared. Little is known about their organizational choices and some scholars even doubt that they leverage organizational capabilities altogether. Does the “modern” theory still hold in their case? This exploratory study of three emerging-market multinationals (EMNEs) discloses that for reasons related to their origin in emerging economies and to the competitive specificities of these economies, EMNEs approach the global and local conundrum in ways which are both similar – and vastly different – from recommendations of the “modern” theory. We inductively develop a new theory that accounts for the evolution of organizational capabilities in EMNEs to reconcile global integration and local responsiveness. We discuss its implications for the executives of both emerging and Triad-based multinationals.

Taylor principle and inflation stability in emerging market countriesw

The goal of this paper is to evaluate the validity of the Taylor principle for inflation control in 12 developing countries that use inflation targeting regimes: Brazil, Chile, Colombia, Hungary, Israel, Mexico, Peru, Philippines, Poland, South Africa, Thailand and Turkey. The test is based on a state-space model to determine when each country has followed the principle; then a threshold unit root test is used to verify if the stationarity of the deviation of the expected inflation from its target depends on compliance with the Taylor principle. The results show that such compliance leads to the stationarity of the deviation of the expected inflation from its target in all cases. Furthermore, in most cases, non-compliance with the Taylor principle leads to nonstationary deviation of the expected inflation.

Foreign funding to an emerging market: the Monetary Premium Theory and the Brazilian Case, 1991 - 1998

We develop a framework to explain the private capital flows between the rest of the world and an emerging economy. The model, based on the monetary premium theory, relates an endogenous supply of foreign capitals to an endogenous differential of interest rates; its estimation uses the econometric techniques initiated by Heckman. Four questions regarding the capital flows phenomenon are explored, including the statistical process that governs the events of default and the impact of the probability of default on the interest rate differential. Using the methodology, we analyse the dynamics of foreign capital movements in Brazil during the 1991- 1998 period.