Value Contributed by Education in IT Firms

An educated workforce is critical to IT firms’ ability to innovate and compete in the market. Surprisingly, there is very little research on how education contributes to the profitability of IT firms and how educated employees contribute to a firms’ research and development activities. Using theories from human capital literature, we propose a model to measure how aggregate firm level education impacts firms’ profits in IT industries and how the relation is moderated by a firm’s R&D investments. Our results suggest that education is associated with a positive firm performance in IT industries. We also show that the interaction effects between R&D and education is positive, suggesting that IT firms which invest in highly skilled employees are in a better position to take advantage of R&D investments. This paper adds several new insights to the literature on human capital and firm performance

Academic Entrepreneurship: A Comparison of U.S. and Japanese Promotion of Information Technology and Computer Science

Manufacturing hardware is increasingly a commodity product with low margins. The reason for the diminished value of hardware is that more and more of the value in high-tech products is contributed by software meeting user needs, through enabling new functionalities and services. Those firms better able to create and use software advances, improve their competitive outcomes. Japanese high-tech firms have been slow to recognize and act on the growing importance of software and have suffered competitively. The reasons are many. It is widely recognized that human capital is a critical component of software innovation and thus would be central to any explanation of Japanese firms’ weakness in software. For this reason, I focus on the role of university engineering education in IT, comparing the U.S. and Japan. My analysis documents the leadership role played by U.S. universities and in particular, the academic entrepreneurship demonstrated by leading computer science departments. The contrasts with leading Japanese universities, the University of Tokyo in particular, are striking. On the Japanese side, they include a slowness in recognizing the importance of software and in adopting state of the art curriculum, a failure of MEXT to regulate the way in which universities implemented their mandate to develop information technology, an egregious sabotaging of the new information technology departments by university administrators, and a reluctance of leading firms to hire computer science graduates. Finally, centralized faculty decision making allowed engineering faculty in other departments to resist changing student quotas (teiin) in favor of the new discipline. Taken together, these factors inhibited the development of computer science as a distinctive discipline and put a break on any faculty entrepreneurs seeking to promote the new discipline. By contrast, I will show how institutional practices in the U.S. acted to promote academic entrepreneurship enhancing the growth of the new discipline

401(k) Plans and Retirement Savings: Issues for Congress

[Excerpt] Over the past 25 years, defined contribution (DC) plans—including 401(k) plans—have become the most prevalent form of employer-sponsored retirement plan in the United States. The majority of assets held in these plans are invested in stocks and stock mutual funds, and the decline in the major stock market indices in 2008 greatly reduced the value of many families’ retirement savings. The effect of stock market volatility on families’ retirement savings is just one issue of concern to Congress with respect to defined contribution retirement plans. This report describes seven major policy issues with respect to defined contribution plans: 1. Access to employer-sponsored retirement plans. In 2007, only 61% of employees in the private sector were offered a retirement plan of any kind at work. Fifty-five percent were offered a DC plan. Only 45% of workers at establishments with fewer than 100 employees were offered a retirement plan of any kind in 2007. Forty-two percent were offered a defined contribution plan. 2. Participation in employer-sponsored plans. Between 20% and 25% of workers whose employer offers a DC plan do not participate. Workers under age 35 are less likely than older workers to participate. 3. Contribution rates. On average, participants in DC plans contributed 6% of pay to the plan in 2007. The median contribution by household heads who participated in a DC plan in 2007 was $3,360. This was just 22$15,500 in that year. 4. Investment choices. At year-end 2007, 78% of all DC plan assets were invested in stocks and stock mutual funds. This ratio varied little by age, indicating that many workers nearing retirement were heavily invested in stocks and risked substantial losses in a market downturn like that in 2008. Investment education and target date funds could help workers make better investment decisions. 5. Fee disclosure. Retirement plans contract with service providers to provide investment management, record-keeping, and other services. There can be many service providers, each charging a fee that is ultimately paid by participants in 401(k) plans. The arrangements through which service providers are compensated can be very complicated and fees are often not clearly disclosed. 6. Leakage from retirement savings. Pre-retirement withdrawals from retirement accounts are sometimes called “leakages.” Current law represents a compromise between limiting leakages from retirement accounts and allowing people to have access to their retirement funds in times of great need. In general, borrowing from a 401(k) plan poses less risk to retirement security than a withdrawal. Pre-retirement withdrawals can have adverse long-term effects on retirement income. 7. Converting retirement savings into income. Retirees face many financial risks, including living longer than they expected, investment losses, inflation, and possible large expenses for medical care and long-term care. Annuities can protect retirees from some of these risks, but few retirees purchase them. Developing polices that motivate retirees to convert assets into a reliable source of income will be a continuing challenge for Congress and other policymakers

401(k) Plans and Retirement Savings: Issues for Congress

[Excerpt] Over the past 25 years, defined contribution (DC) plans—including 401(k) plans—have become the most prevalent form of employer-sponsored retirement plan in the United States. The majority of assets held in these plans are invested in stocks and stock mutual funds, and the decline in the major stock market indices in 2008 greatly reduced the value of many families\u27 retirement savings. The effect of stock market volatility on families\u27 retirement savings is just one issue of concern to Congress with respect to defined contribution retirement plans. This report describes seven major policy issues with respect to defined contribution plans: 1. Access to employer-sponsored retirement plans. In 2007, only 61% of employees in the private sector were offered a retirement plan of any kind at work. Fifty-five percent were offered a DC plan. Only 45% of workers at establishments with fewer than 100 employees were offered a retirement plan of any kind in 2007. Forty-two percent were offered a defined contribution plan. 2. Participation in employer-sponsored plans. Between 20% and 25% of workers whose employer offers a DC plan do not participate. Workers under age 35 are less likely than older workers to participate. 3. Contribution rates. On average, participants in DC plans contributed 6% of pay to the plan in 2007. The median contribution by household heads who participated in a DC plan in 2007 was $3,360. This was just 22$15,500 in that year. 4. Investment choices. At year-end 2007, 78% of all DC plan assets were invested in stocks and stock mutual funds. This ratio varied little by age, indicating that many workers nearing retirement were heavily invested in stocks and risked substantial losses in a market downturn like that in 2008. Investment education and target date funds could help workers make better investment decisions. 5. Fee disclosure. Retirement plans contract with service providers to provide investment management, record-keeping, and other services. There can be many service providers, each charging a fee that is ultimately paid by participants in 401(k) plans. The arrangements through which service providers are compensated can be very complicated and fees are often not clearly disclosed. 6. Leakage from retirement savings. Pre-retirement withdrawals from retirement accounts are sometimes called leakages. Current law represents a compromise between limiting leakages from retirement accounts and allowing people to have access to their retirement funds in times of great need. In general, borrowing from a 401 (k) plan poses less risk to retirement security than a withdrawal. Pre-retirement withdrawals can have adverse long-term effects on retirement income. 7. Converting retirement savings into income. Retirees face many financial risks, including living longer than they expected, investment losses, inflation, and possible large expenses for medical care and long-term care. Annuities can protect retirees from some of these risks, but few retirees purchase them. Developing polices that motivate retirees to convert assets into a reliable source of income will be a continuing challenge for Congress and other policymakers

Technological Innovation and Inclusive Growth in Germany. Bertelsmann Stiftung Inclusive Growth for Germany|18

Economic growth in Germany is no longer as inclusive as it used to be. Between 1990 and 2010 all measures of income and wealth inequality rose considerably,1 which even led the media to portray Germany as a ‘divided nation’.2 Income inequality was relatively low before 1990, and even declined over much of the 20th century, but changed direction after German unification. The rise in income inequality from 1990 onwards is depicted in Figure 1 through various inequality indicators and the ‘at-risk-of-poverty rate’. It can be seen that all measures of income inequality (before and after tax) increased markedly after 1990 along with the ‘at-risk-ofpoverty rate’.3 Felbermayr et al. (2014) furthermore document that the rise in wage inequality was faster in Germany than in the United States, the United Kingdom, and Canada between the mid-1990s and 2010. This rise in income and wage inequality has been accompanied, and to a certain extent occasioned, by a simultaneous increase in wealth inequality. Using data from the Socio-Economic Panel (SOEP), Frick and Grabka (2009) show, that the Gini coefficient for wealth increased from 0.77 to 0.80 during this period, and wealth grew particularly strongly at the top 1 percent of the wealth distribution

Construction waste management practices in Malaysia: an overview

The construction industry is one of the major wealth-generating industries and is seen as an elevated sector in the Malaysia economy. However, this activity has generated a significant amount of waste which is detrimental to the environment. The increasing amount of waste from construction projects has shown that construction waste management has not been practised effectively in Malaysia. Therefore, an overview of the composition of construction waste and existing waste management practices on construction sites in Malaysia are the highlights of this study. The findings can potentially be used to enhance the effectiveness of construction waste management in Malaysia and create awareness among contractors for a better alternative in managing the construction waste on-site. Current practices in the construction sector need to be analysed in order to enhance strategies so that improved and more sustainable design, development, operation and maintenance will be attained, leading to minimal waste

Entrepreneurial Finance: Insights from English Language Training Market in Vietnam

Entrepreneurship plays an indispensable role in the economic development and poverty reduction of emerging economies like Vietnam. The rapid development of technologies during the Fourth Industrial Revolution (Industry 4.0) has a significant impact on business in every field, especially in the innovation-focused area of entrepreneurship. However, the topic of entrepreneurial activities with technology applications in Vietnam is under-researched. In addition, the body of literature regarding entrepreneurial finance tends to focus on advanced economies, while mostly neglecting the contextual differences in developing nations. Therefore, this research contributes to these topics by investigating the main characteristics of a high potential market for entrepreneurs in Vietnam, which is the English language training market (ELTM). It also aims at indicating the impacts of technology on the entrepreneurial firms within this market, with an emphasis on financing sources. To answer the research questions, this study employs a qualitative analysis and conducts 12 in-depth, semi-structured interviews with entrepreneurs and researchers in the field. The key findings in our study highlight the main contributing factors to the growth of the market, both universally and context-specific for a developing nation like Vietnam. It also lists the leaders in each market segment and the industry’s potential profit margin. The results also show that most entrepreneurs in the ELTM utilized private sources of finance rather than external ones, such as bank loans. It again confirms the idea from previous works that even with the rapid development of the economic and technological landscape, entrepreneurial activities in general barely benefit from additional sources of funding. However, it also points out the distinct characteristics of the ELTM that may influence these financing issues; for example, English training services usually collect revenues from customers before delivering their classes. This is of advantage for entrepreneurs in this area and helps significantly reduce the financial barriers. These findings, which are among the first attempts to contribute to a better understanding of entrepreneurial opportunities in the Industry 4.0 in Vietnam, provide valuable insights for policymakers and entrepreneurs, as well as investors

Why do Indian firms go abroad?

Overseas investments by the emerging economies are a feature of globalisation. Investments by Indian firms, though not large in volume, differ from that of other emerging economies such as China in their composition, destination and modality of investments. A relatively high proportion of their investments are in the manufacturing and services sectors of the developed economies such as the UK and the USA. A number of statistical studies have attempted to identify the factors motivating Indian firms to invest abroad. Most of these studies attempt to ground the analysis in the received theory of foreign direct investment centred on the ownership advantages, location and internalisation (OLI) paradigm. This paper argues that statistical tests cannot fully account for the unique nature of India’s investments abroad. The pattern of investments that differs from that of the other emerging economies is to be attributed to India’s endowments of entrepreneurial skills centring on exploration of investment opportunities and astute management of complex organisations. These endowments are an inheritance from history augmented by the contribution of India’s diaspora abroad. The lukewarm investment climate at home may also be a factor in the decision of Indian firms in technology and skill intensive firms to venture abroad. Explanations for the unique nature of overseas direct investments by Indian firms have to be sought in the organisational structure and history of Indian business houses

The Enigmatic Services Sector of India

The share of services in India’s GDP, at round 60%, is much higher than that in other emerging economies including China. Since the year 1991 Growth of services in the economy has surpassed that of agriculture and manufacturing, a feature that defies received wisdom on the growth pattern of economies. Received wisdom, grounded in the Kuznets paradigm, is that growth in the productivity of agriculture and agricultural incomes provides the manufacturing sector both low cost agricultural raw materials and a demand for its output. In time, the continued growth in incomes promotes the growth of the services sector both through a demand for consumer services and for services as growth promoting inputs into manufacturing and agriculture. India’s services sector, though, has grown alongside an agriculture sector that is none too productive, and a manufacturing sector that accounts for a relatively low 20% of the GDP. This paper provides an explanation, grounded in the country’s history and economic policies of the pre- liberalization era, for the growth of the services sector and argues that, contrary to popular opinion, it can lead the economy

Foreign Direct Investments in Business Services: Transforming the Visegrád Four Region into a Knowledge-based Economy?

Foreign direct investments (FDIs) in the service sector are widely attributed an important role in bringing more skill-intensive activities into the Visegrad Four (V4). This region—comprising Poland, the Czech Republic, Hungary and Slovakia—relied heavily on FDIs in manufacturing, which was often found to generate activities with limited skill content. This contribution deconstructs the chaotic concept of “business services” by analysing the actual nature of service sector activities outsourced and offshored to the V4. Using the knowledge-based economy (KBE) as a benchmark, the paper assesses the potential of service sector outsourcing in contributing to regional competitiveness by increasing the innovative capacity. It also discusses the role of state policies towards service sector FDI (SFDI). The analysis combines data obtained from case studies undertaken in service sector outsourcing projects in V4 countries. Moreover, it draws on interviews with senior employees of investment promotion agencies and publicly available data and statistics on activities within the service sector in the region. It argues that the recent inward investments in business services in the V4 mainly utilize existing local human capital resources, and their contribution to the development of the KBE is limited to employment creation and demand for skilled labour