Corporate Governance, Economic Entrenchment and Growth

Around the world, large corporations usually have controlling owners, who are usually very wealthy families. Outside the U.S. and the U.K., pyramidal control structures, cross shareholding and super voting rights are common. Using these devices, a family can control corporations without making a commensurate capital investment. In many countries, such families end up controlling considerable proportions of their countries'' economies. Three points emerge. First, at the firm level, these ownership structures vest dominant control rights with families who often have little real capital invested creating agency and entrenchment problem simultaneously. In addition, controlling shareholders can divert corporate resources for private benefits using transactions within the pyramidal group. The result is a poor utilization of resources. At the economy level, extensive control of corporate assets by a few families distorts capital allocation and reduces the rate of innovation. The result is an economy-wide misallocation of resources, and slower economic growth. Second, political influence is plausibly related to what one controls, rather than what one owns. The controlling owners of pyramids thus have greatly amplified political influence relative to their actual wealth. They appear to influence the development of both public policy, such as property rights protection and enforcement, and institutions like capital markets. We denote this phenomenon economic entrenchment. Third, we conceive of a relationship between the distribution of corporate control and institutional development that generates and preserves economic entrenchment as one equilibrium; but not the only one. Based on the literature, we identify key determinants of economic entrenchment. We also identify many gaps where further work exploring the political economy importance of the distribution of corporate control is needed.

Management innovation made in China: Haier’s Rendanheyi

This article shows how emerging market companies like China’s Haier Group create management innovations that are appropriate for an environment characterized by increased volatility, uncertainty, complexity, and ambiguity (VUCA). Dealing with VUCA effectively requires practices favoring nimble and decentralized responses; the Haier Group developed a platform of management practices under the label Rendanheyi (in Chinese: 人单合一) to transform itself from a conventional hierarchical manufacturing firm into a highly responsive online-based entrepreneurial company with “zero distance to the customer”. We demonstrate how the organizational, competitive, institutional, and technological contexts mattered for the development of Rendanheyi. Our study contributes several insights for practitioners and academics. First, we showcase how context dependent management innovations are created to allow emerging market firms like Haier to deal with a high VUCA world. Second, we draw lessons from Haier’s experimentation process for other firms. Finally, we create an extended process model of management innovation that managers, in both emerging and developed countries, can readily apply

Social Investment Landscape in Asia: Insights from North and South Asia

AVPN has identified the need for a comprehensive overview of the Asian philanthropy and social investment landscape to offer social investors a guide to the opportunities for social investment in Asia. The Social Investment Landscape in Asia will be an invaluable resource for funders and resource providers as they assess the opportunities and challenges for philanthropy and social investment in the region. It is designed to be a guide for both new social investors looking to enter the Asian market and existing social investorsexploring cross-border or cross-sector opportunities within the region. The Landscape is another way to further AVPN's mission to increase the flow of financial, human and intellectual capital to the Asian socialsector.The report provides a holistic view of the current and emerging philanthropy and social investment landscape in Asia. It also features in-depth profiles of 14 Asian regions which include:- An overview of key demographic and macroeconomic conditions- Key development issues facing the country- Background and context to the social economy in the region- Overview of the legislative environment- Key social investors, recent developments and investment trends- Opportunities, challenges and recommendation

`They don't want us to become them': Brand Local Integration and consumer ethnocentrism

This paper investigates whether positioning strategies of foreign brands that integrate both foreign and 'localised' dimensions of country-of-origin (COO) appeals shape perceptions and attitudes of domestically biased consumers. Ethnocentric consumers hold strong favourable attitudes towards local-perceived brands. At the same time, brand positioning strategies of local brands acquired by multinational corporations and of foreign brands entering the local market often integrate foreign COO appeals with locally relevant manufacturing and/or symbolic appeals. The results indicate that foreign brand identities that integrate 'localised' appeals communicating respect of local traditions (through the use of local images, symbols, and recipes) and contribution to the local society's well-being (through local manufacture, employment, use of local ingredients) lead to more favourable consumer perceptions. In distinguishing between 'purely foreign' and 'locally integrated foreign brands', consumers perceive the latter to be more acceptable for consumption. The paper concludes by considering the implications of the findings and outlining directions for further research.No Full Tex

Corporate Governance, Economic Entrenchment and Growth

Around the world, large corporations usually have controlling owners, who are usually very wealthy families. Outside the U.S. and the U.K., pyramidal control structures, cross shareholding and super voting rights are common. Using these devices, a family can control corporations without making a commensurate capital investment. In many countries, such families end up controlling considerable proportions of their countries’ economies. Three points emerge. First, at the firm level, these ownership structures vest dominant control rights with families who often have little real capital invested creating agency and entrenchment problem simultaneously. In addition, controlling shareholders can divert corporate resources for private benefits using transactions within the pyramidal group. The result is a poor utilization of resources. At the economy level, extensive control of corporate assets by a few families distorts capital allocation and reduces the rate of innovation. The result is an economy-wide misallocation of resources, and slower economic growth. Second, political influence is plausibly related to what one controls, rather than what one owns. The controlling owners of pyramids thus have greatly amplified political influence relative to their actual wealth. They appear to influence the development of both public policy, such as property rights protection and enforcement, and institutions like capital markets. We denote this phenomenon economic entrenchment. Third, we conceive of a relationship between the distribution of corporate control and institutional development that generates and preserves economic entrenchment as one equilibrium; but not the only one. Based on the literature, we identify key determinants of economic entrenchment. We also identify many gaps where further work exploring the political economy importance of the distribution of corporate control is needed

Inversionistas institucionales, reforma del régimen de pensiones y mercados bursátiles emergentes

(Disponible en idioma inglés únicamente) En este trabajo se trata la gama de factores que pueden estimular un mayor desarrollo del sector institucional interno mediante medidas de reforma de los sistemas de pensiones. El desarrollo del sector institucional de las economías de mercados emergentes se compara con las experiencias de los países miembros de la OCDE. La atención se concentra en los factores claves que han venido (y siguen) impulsando el crecimiento de las actividades de los inversionistas institucionales de la OCDE y el efecto de los inversionistas institucionales en los mercados bursátiles.

Industrial policy after the East Asian crisis - from"outward orientation"to new internal capabilities?

Before East Asia's financial meltdown in the second half of 1997, there appeared to be prospects for an uneasy consensus on the East Asian"miracle", a consensus that recognized the role of the entrepreneurialstate in accelerating industrial development but emphasized the"market-friendly'nature of the state's interventions. After the financial crisis, East Asian policies and institutions are once again under scrutiny - for their failures rather than for their miracles. The author finds that the prospects for a consensus that incorporated the East Asian experience were ill founded. East Asian policymakers emphasized growth through quantitative targets; price signals played a significant but secondary role. The author illustrates these propositions by examining trade policy, industrial conglomerates, and the provision of physical infrastructure. The evolving international consensus on industrial policy, which predates the Asian crisis, emphasizes a hands-off approach in which an activist government plays a reduced role and competition policy plays an important role. But policies emphasizing greater competition and a level playing field - implicitly thought to require less government action - may require more government expertise, not less. If implementing a ten percent export subsidy is difficult, consider the difficulty of determining whether a firm is exercising market power or restraining trade. So the prospect of governments stepping back may be unrealistic. The new consensus also proposes"deep integration", or the adoption of uniform standards in such areas as competition policy and labor and environmental standards. For East Asia, the shift to the international consensus may be appropriate because government-driven growth has declined in intellectual respectability. Also, it may be time to consolidate the gains from the rapid trade-led growth by focusing on creating a stronger incentive structure for efficiently using resources. The current consensus is based on strong priors rather than on solid empirical evidence, however, and the dangers of international uniformity in policy are evident.Labor Policies,Environmental Economics&Policies,ICT Policy and Strategies,Economic Theory&Research,Decentralization,ICT Policy and Strategies,Environmental Economics&Policies,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Achieving Shared Growth

Growth & Innovation Policies For a Knowledge Economy. Experiences From Finland, Sweden & Singapore.

Technical progress is at the heart of economic growth and development. New or improved technology can be achieved through own research and innovations or through the absorption and adaptation of foreign technologies. To facilitate such technical progress requires a complex system of supporting institutions and good economic policies. This paper analyzes technical progress and innovation policies in three small open economies: Finland, Sweden and Singapore. All three economies have transformed from depending on raw material intensive or labor-intensive production to highly competitive economies with a relatively high degree of technological knowledge. We find some common determinants to the transformation, such as large investments in physical and human capital and the importance of political or economic crises in forcing through good economic policies, but there are also many country specific aspects that have been crucial in the different countries.Economic Growth; Innovation; Economic Policies; Technology

Social Enterprise in Asia

In the absence of a widely accepted and common definition of social enterprise (SE), a large research project, the ""International Comparative Social Enterprise Models"" (ICSEM) Project, was carried out over a five-year period; it involved more than 200 researchers from 55 countries and relied on bottom-up approaches to capture the SE phenomenon. This strategy made it possible to take into account and give legitimacy to locally embedded approaches, thus resulting in an analysis encompassing a wide diversity of social enterprises, while simultaneously allowing for the identification of major SE models to delineate the field on common grounds at the international level. These SE models reveal or confirm an overall trend towards new ways of sharing the responsibility for the common good in today’s economies and societies. We tend to consider as good news the fact that social enterprises actually stem from all parts of the economy. Indeed, societies are facing many complex challenges at all levels, from the local to the global level. The diversity and internal variety of SE models are a sign of a broadly shared willingness to develop appropriate—although sometimes embryonic—responses to these challenges, on the basis of innovative economic/business models driven by a social mission. In spite of their weaknesses, social enterprises may be seen as advocates for and vehicles of the general interest across the whole economy. Of course, the debate about privatisation, deregulation and globalised market competition—all factors that may hinder efforts in the search for the common good–has to be addressed as well. The first of a series of four ICSEM books, Social Enterprise in Asia will serve as a key reference and resource for teachers, researchers, students, experts, policy makers, journalists and other categories of people who want to acquire a broad understanding of the phenomena of social enterprise and social entrepreneurship as they emerge and develop across the world

Ethics and taxation : a cross-national comparison of UK and Turkish firms

This paper investigates responses to tax related ethical issues facing busines