INTERNATIONAL BUSINESS AND DEVELOPMENT ECONOMICS: A WINNING COMBINATION Generating a World’s View based on Buckley and Casson and Hirschman’s Books

Much of the discussion in economics is concerned with growth. Economic growth can be discussed and measured in terms of a national state. It can be also discussed and measured in terms of a corporation, (often using the term value rather than growth). Development Economics is concerned with growth of countries run by governments; International Business is concerned with the behavior and the value of multinational enterprises run by management. This paper is about the interface between the two. The vehicle used in this paper to explore the interface is a comparative analysis between two very influential books; “The Strategy of Development” by Hirschman, (1958), and the “Future of the Multinational Enterprise” by Buckley and Casson, (1976). The main argument of the paper is that Development Economics and International Business do approach a very similar issue, but they do it from two different dimensions perpendicular to each other. Looking at the whole picture, (the matrix as a whole rather than along the two separate vectors), gives the observer a more meaningful picture. This is done in the paper through a critical comparison of the two texts focusing on the two dimensions on internalization, growth and internalization, investment choices and strategies, and multinational enterprises and the dynamics of development.http://deepblue.lib.umich.edu/bitstream/2027.42/40111/3/wp725.pd

IMPORTING HIGH-RISK CAPITAL AND REVEALING HIDDEN COMPARATIVE ADVANTAGES

The comparative advantage of a country is determined by its factor intensity. In many cases factors of production can be accumulated over time and thus effect a change in the comparative advantage of a given country. The changes in the accumulation of factors can be a policy decision, or it can arise from other economic developments. The change in the comparative advantage of Israel in the last decade of the 20th century where the country has become a center for innovative new technology was affected by the globalization of the US capital market and the ability of Israeli companies and service organization to build an informational infrastructure that has made it possible to import high-risk specific sector capital to Israel. Importing this type of capital has completed the already existing human capital and makes a potential, hidden, advantage into a business reality. The Israeli experience is evidence to the contribution of international capital movements to economic growth of a small country. It also shows the relations between the international finance model of capital movements and the development economics case for the changing pattern of the comparative advantages of small countries, and the contribution of the capital markets to the process.http://deepblue.lib.umich.edu/bitstream/2027.42/40110/3/wp724.pd

IMPORTING HIGH-RISK CAPITAL AND REVEALING HIDDEN COMPARATIVE ADVANTAGES

The comparative advantage of a country is determined by its factor intensity. In many cases factors of production can be accumulated over time and thus effect a change in the comparative advantage of a given country. The changes in the accumulation of factors can be a policy decision, or it can arise from other economic developments. The change in the comparative advantage of Israel in the last decade of the 20th century where the country has become a center for innovative new technology was affected by the globalization of the US capital market and the ability of Israeli companies and service organization to build an informational infrastructure that has made it possible to import high-risk specific sector capital to Israel. Importing this type of capital has completed the already existing human capital and makes a potential, hidden, advantage into a business reality. The Israeli experience is evidence to the contribution of international capital movements to economic growth of a small country. It also shows the relations between the international finance model of capital movements and the development economics case for the changing pattern of the comparative advantages of small countries, and the contribution of the capital markets to the process.International capital movements, globalization of capital markets, and comparativea dvantage of small countries

INTERNATIONAL BUSINESS AND DEVELOPMENT ECONOMICS: A WINNING COMBINATION Generating a World’s View based on Buckley and Casson and Hirschman’s Books

Much of the discussion in economics is concerned with growth. Economic growth can be discussed and measured in terms of a national state. It can be also discussed and measured in terms of a corporation, (often using the term value rather than growth). Development Economics is concerned with growth of countries run by governments; International Business is concerned with the behavior and the value of multinational enterprises run by management. This paper is about the interface between the two. The vehicle used in this paper to explore the interface is a comparative analysis between two very influential books; “The Strategy of Development” by Hirschman, (1958), and the “Future of the Multinational Enterprise” by Buckley and Casson, (1976). The main argument of the paper is that Development Economics and International Business do approach a very similar issue, but they do it from two different dimensions perpendicular to each other. Looking at the whole picture, (the matrix as a whole rather than along the two separate vectors), gives the observer a more meaningful picture. This is done in the paper through a critical comparison of the two texts focusing on the two dimensions on internalization, growth and internalization, investment choices and strategies, and multinational enterprises and the dynamics of development.Development Strategy, International Business Theory

Market Globalization by Firms from Emerging Markets and Small Countries: an Application of the Neoclassical Trade Model

The changes in globalization and in the world of international business make it necessary to rethink the basic model of the economics of international business. For most of the 2nd half of the 20th centuryinternational business was about how large companies in the developed countries increase their valuevia international business activities. Not surprisingly the research in the economics of international business from Caves, Kindleberger, and Hymer to Buckley and Casson, Dunning, and many others was based on models of industrial organization. The world has changed and international business has become a two-way street where firms and governments from emerging markets and small countries are as active as the developed countries MNEs and their governments. In this paper the basic international trade model is used to gain insights of the new world of international business. In particular, a dynamic model of changing factor intensity and of creating local specific competitive and comparative advantages for firms and governments from emerging markets is presented and discussed.Economics of international business, international trade models, emerging markets

Financial markets and the adjustment to higher oil prices

A great deal has been written on the actual and potential effects of the oil price increase on world financial markets, but relatively little emphasis has been placed on the role played by financial markets in the adjustment of the energy markets themselves. This paper explores the linkages betwee

Accommodation in the international capital markets and the recycling of oil funds

Prepared in association with the Sloan School of Management and the Dept. of Economic

The international finance aspects of OPEC : an informational note

National Science Foundation Grant no. SIA75-0073

Market Globalization by Firms from Emerging Markets and Small Countries: an Application of the Neoclassical Trade Model

The changes in globalization and in the world of international business make it necessary to rethink the basic model of the economics of international business. For most of the 2nd half of the 20th centuryinternational business was about how large companies in the developed countries increase their valuevia international business activities. Not surprisingly the research in the economics of international business from Caves, Kindleberger, and Hymer to Buckley and Casson, Dunning, and many others was based on models of industrial organization. The world has changed and international business has become a two-way street where firms and governments from emerging markets and small countries are as active as the developed countries MNEs and their governments. In this paper the basic international trade model is used to gain insights of the new world of international business. In particular, a dynamic model of changing factor intensity and of creating local specific competitive and comparative advantages for firms and governments from emerging markets is presented and discussed.http://deepblue.lib.umich.edu/bitstream/2027.42/64430/1/wp963.pd

Tax the Eggs, not the Hen

The VC industry provides an excellent example for an industry that is based on the ability to bring together ideas and high-risk capital in a process that generates value. Of particular interest is the case where the entrepreneurs reside in one country and the investors reside in another country. There are two types of benefits. The first type of benefits depends on the success of the young innovative technology firms. The second type of benefits depends on the total flow of high-risk capital from the country of the investors to the country where the investment takes place. While the benefits to the entrepreneurs and the shareholders are vastly discussed, the benefit to the hosting country is less explored. Successful entrepreneurs earn a lot of money in case of success. The high gains attract public pressure for higher and more effective capital gains tax. In this work we show that this to be a worthless and even harming. We show that the benefits are both direct in the form of taxes and indirect as higher wages. We use hand-picked database to estimate the total benefit to a small country that was successful in attracting international VC funding. Our main result is that the Income tax collected from VC backed employees is 10.7 higher than the Capital tax gained from exits. The call for the taxation of capital gains of the wealthy individuals could materially hurt the revenue of the hosting countr