Corporate Governance Structures and Financial Constraints in Multinational Enterprises – An Analysis in Selected European Transition Economies on the Basis of the IWH FDI Micro Database 2013 –
Andrea Gauselmann, Felix Noth
IWH Discussion Papers,
No. 3,
2015
Abstract
In our analysis, we consider the distribution of decision power over financing and investment between MNEs’ headquarters and foreign subsidiaries and its influence on the foreign affiliates’ financial restrictions. Our research results show that headquarters of multinational enterprises have not (yet) moved much decision power to their foreign subsidiaries at all. We use data from the IWH FDI Micro Database which contains information on corporate governance structures and financial restrictions of 609 enterprises with a foreign investor in Hungary, Poland, the Czech Republic, Slovakia, Romania and East Germany. We match data from Bureau van Dijk’s AMADEUS database on financial characteristics. We find that a high concentration of decision power within the MNE’s headquarter implicates high financial restrictions within the subsidiary. Square term results show, however, that the effect of financial constraints within the subsidiary decreases and finally turns insignificant when decision power moves from headquarter to subsidiary. Thus, economic policy should encourage foreign investors in the case of foreign acquisition of local enterprises to leave decision power within the enterprise and in the case of Greenfield investment to provide the newly established subsidiaries with as much power over corporate governance structures as possible.
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The Regional Distribution of Foreign Investment in Russia: Are Russians more Appealing to Multinationals as Consumers or as Natural Resource Holders?
K. Gonchar, Philipp Marek
Economics of Transition and Institutional Change,
No. 4,
2014
Abstract
This article conducts a plant-level study of the factors affecting foreign direct investment (FDI) inflow to a large opening economy endowed with specific factor advantages. We conclude that the distribution of FDI in Russian regions depends on market access and can be most notably described by the knowledge-capital framework. Factor endowments built by natural resources are more successful in explaining the location decisions of export–platform affiliates. The impact of natural resources depends on how the availability of these resources is measured. The results reject the crowding out effects of resource FDI and prove co-location mode, when service investments are attracted to resource-rich regions. Labour cost advantages better explain the preferences of non-trading service affiliates.
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Granularity in Banking and Growth: Does Financial Openness Matter?
Franziska Bremus, Claudia M. Buch
IWH Discussion Papers,
No. 14,
2013
Abstract
We explore the impact of large banks and of financial openness for aggregate growth. Large banks matter because of granular effects: if markets are very concentrated in terms of the size distribution of banks, idiosyncratic shocks at the bank-level do not cancel out in the aggregate but can affect macroeconomic outcomes. Financial openness may affect GDP growth in and of itself, and it may also influence concentration in banking and thus the impact of bank-specific shocks for the aggregate economy. To test these relationships, we use different measures of de jure and de facto financial openness in a linked micro-macro panel dataset. Our research has three main findings: First, bank-level shocks significantly impact on GDP. Second, financial openness lowers GDP growth. Third, granular effects tend to be stronger in financially closed economies.
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Determinants of Foreign Technological Activity in German Regions – A Count Model Analysis of Transnational Patents (1996-2009)
Eva Dettmann, Iciar Dominguez Lacasa, Jutta Günther, Björn Jindra
Abstract
This paper analyses the determinants of spatial distribution of foreign technological activity across 96 German regions (1996-2009). We identify foreign inventive activity by applying the ‘cross-border-ownership concept’ to transnational patent applications. The descriptive analysis shows that foreign technological activity more than doubled during the observation period with persistent spatial heterogeneity in Germany. Using a pooled count data model, we estimate the effect of various sources for externalities on the extent of foreign technological activity across regions. Our results show that foreign technological activity is attracted by technologically specialised sectors of regions. In contrast to existing findings this effect applies both to foreign as well as domestic sources of specialisation. We show that the relation between specialisation and foreign technological activity is non-linear and that it is influenced by sectoral heterogeneity. Externalities related to technological diversification attract foreign R&D only into ‘higher order’ regions.
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Start-up Competitions as an Instrument of Entrepreneurship Policy: The German Experience
Michael Schwartz, Maximilian Göthner, Claus Michelsen, N. Waldmann
European Planning Studies,
No. 10,
2013
Abstract
The number of aspiring entrepreneurs in high-tech industries who successfully complete the transition from a nascent start-up project towards an operational new venture is comparatively low in Germany. Since the mid-1990s, policy-makers have initiated numerous start-up competitions (SUCs or business plan competitions) to facilitate this important step in the venture creation process. SUCs have two key objectives. They are aimed at increasing start-up activity by motivating potential entrepreneurs, while they should also help to increase the likelihood of subsequent entrepreneurial success through providing necessary entrepreneurial skills to prospective entrepreneurs. With our explorative study, we provide the first comprehensive empirical evidence from a cross-sectional survey of existing SUCs in Germany. Overall, 71 SUCs are identified which are analysed regarding their development, regional distribution, and main structural characteristics. Finally, we outline an agenda of future research questions concerning the effectiveness and efficiency of SUCs as an instrument of entrepreneurship policy.
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Granularity in Banking and Growth: Does Financial Openness Matter?
Franziska Bremus, Claudia M. Buch
CESifo Working Paper No. 4356, August,
2013
Abstract
We explore the impact of large banks and of financial openness for aggregate growth. Large banks matter because of granular effects: if markets are very concentrated in terms of the size distribution of banks, idiosyncratic shocks at the bank-level do not cancel out in the aggregate but can affect macroeconomic outcomes. Financial openness may affect GDP growth in and of itself, and it may also influence concentration in banking and thus the impact of bank-specific shocks for the aggregate economy. To test these relationships, we use different measures of de jure and de facto financial openness in a linked micro-macro panel dataset. Our research has three main findings: First, bank-level shocks significantly impact on GDP. Second, financial openness lowers GDP growth. Third, granular effects tend to be stronger in financially closed economies.
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Big Banks and Macroeconomic Outcomes: Theory and Cross-Country Evidence of Granularity
Franziska Bremus, Claudia M. Buch, K. Russ, Monika Schnitzer
NBER Working Paper No. 19093,
2013
Abstract
Does the mere presence of big banks affect macroeconomic outcomes? In this paper, we develop a theory of granularity (Gabaix, 2011) for the banking sector, introducing Bertrand competition and heterogeneous banks charging variable markups. Using this framework, we show conditions under which idiosyncratic shocks to bank lending can generate aggregate fluctuations in the credit supply when the banking sector is highly concentrated. We empirically assess the relevance of these granular effects in banking using a linked micro-macro dataset of more than 80 countries for the years 1995-2009. The banking sector for many countries is indeed granular, as the right tail of the bank size distribution follows a power law. We then demonstrate granular effects in the banking sector on macroeconomic outcomes. The presence of big banks measured by high market concentration is associated with a positive and significant relationship between bank-level credit growth and aggregate growth of credit or gross domestic product.
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Teacher Experience and the Class Size Effect - Experimental Evidence
Steffen Müller
Journal of Public Economics,
2013
Abstract
We analyze teacher experience as a moderating factor for the effect of class size reduction on student achievement in the early grades using data from the Tennessee STAR experiment with random assignment of teachers and students to classes of different sizes. The analysis is motivated by the high costs of class size reductions and the need to identify the circumstances under which this investment is most rewarding. We find a class size effect only for senior teachers. The effect exists at all deciles of the achievement distribution but is less pronounced at lower deciles. We further show that senior teachers outperform rookies only in small classes. Interestingly, the class size effect is likely due to a higher quality of instruction in small classes.
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How does Institutional Setting Affect the Impact of EU Structural Funds on Economic Cohesion? New Evidence from Central and Eastern Europe
Marina Grusevaja, Toralf Pusch
Journal of Common Market Studies,
2012
Abstract
Structural Funds are the main instrument of the EU Cohesion Policy. Their effective use is subject to an ongoing debate in political and scientific circles. European fiscal assistance under this heading should promote economic and social cohesion in the member states of the European Union. Recently the domestic institutional capacity to absorb, to distribute and to invest Structural Funds effectively has become a crucial determinant of the cohesion process and has attracted attention of the scientific community. The aim of this study is to shed light on the effectiveness of Structural Funds in the countries of the first Central and Eastern European enlargement round in 2004. Using regional data for these countries we have a look on the impact of several institutional governance variables on the effectiveness of Structural Funds. In the interpretation of results reference is made to regional economics. Results of the empirical analysis indicate an influence of certain institutional variables on the effectiveness of Structural Funds in the new member states.
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How does Institutional Setting Affect the Impact of EU Structural Funds on Economic Cohesion? New Evidence from Central and Eastern Europe
Marina Grusevaja, Toralf Pusch
Abstract
Structural Funds are the main instrument of the EU cohesion policy. Their effective use is subject to an ongoing debate in political and scientific circles. European fiscal assistance under this heading should promote economic and social cohesion in the member states of the European Union. Recently, the domestic institutional capacity to absorb, to distribute and to invest Structural Funds effectively has become a crucial determinant of the cohesion process and has attracted attention of the scientific community. The aim of this study is to shed light on the effectiveness of Structural Funds in the countries of the first Central and Eastern European enlargement round in 2004. Using regional data for these countries, we have a look on the impact of several institutional governance variables on the effectiveness of Structural Funds. In the interpretation of results, reference is
made to regional economics. Results of the empirical analysis indicate an influence of certain institutional variables on the effectiveness of Structural Funds in the new member states.
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