Advanced Business Services Research Articles

Contesting coercion: U.S.-China strategic competition, the middle technology trap, and Chinese government-guided funds

This study examines the possible emergence of a Middle Technology Trap (MTT) in U.S.-China strategic competition through the lens of the Global Financial Network (GFN) and the Global Innovation Network (GIN). By conducting doctrinal analysis, theoretically informed case studies, and in-depth interviews, we offer a granular study into how the U.S. has been weaponizing its leading position in the GFN to affect China’s level of participation in the GIN. Our findings reveal three U.S. tactics to induce the MTT with China: first, leveraging U.S. private equity and venture capital (PEVC) to enhance its technology advantage over China; second, pushing U.S. investors to withdraw from China’s PEVC market, thereby restricting Chinese access to American capital; and third, inducing Advanced Business Services (ABS) supporting innovation and global business to cease or reduce their operations in China, thereby increasing intermediation costs for innovation. Although Chinese government-guided funds (GGFs) have managed to partially mitigate the “funding gap” from the departure of American PEVCs, they have yet to assume the brokerage role previously played by American PEVCs in both the GIF and the GIN. As such, our study contributes to a better understanding and theoretical advancements of the MTT by linking up the scholarship of innovation and finance with financial statecraft.

China’s national oil companies going global and coming home: State–firm nexus, global financial networks, and geopolitical risks

Both the “going global” strategy and the Belt and Road Initiative have prompted Chinese companies to carry out overseas investment and global financing. China’s three major national oil companies (NOCs), China National Petroleum Corporation (CNPC), China Petrochemical Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC) have pursued “modernization through globalization” while balancing profitability and national energy security. This paper attempts to shed some light on NOCs’ going global process by integrating global production networks’ (GPNs) extra-firm (state–firm) relations and global financial networks’ (GFNs) emphasis on world cities and financial and advanced business services providers. Going global, however, has also increased NOCs’ geopolitical risks, resulting in a retreat from the financial centers of world cities and a return home. This paper contributes to the GPN/GFN literature by examining the interactions between lead firms from developing economies and extra-firm actors while also emphasizing the increasing significance of geopolitical risks.

Growth of total productivity of the factors, innovation and spillovers from advanced business services

Advanced business services (ABS) are seen as generators and disseminators of innovation among their client companies, and their use by client companies can improve efficiency and productivity. However, one question that has not been addressed is whether ABS provision can be an explanatory factor for the total productivity of the factors (TPF). This paper aims to determine whether the innovation generated and/or transmitted by ABS companies is reflected in the TPF growth in the manufacturing sector. For this purpose, a Cobb-Douglas function was estimated using panel data analysis on data of ten OECD countries in the period 1977-1996. ABS labour was considered the proxy variable for the provision of these types of services and treated as a separate factor in the production process. The quantitative study shows that the contribution of labour endowment in ABS to the efficiency and productivity of manufacturing industry is significant, that it generates spillovers and that it is an explanatory factor for the TPF.

The multiple faces of financialization: Financial and business services in the US economy, 1997–2020

The literature on financialization tends to overemphasize the increasing size of the financial sector vis-á-vis the rest of the non-financial business sector, usually excluding from the analysis the inter-sectoral relationships between firms. Moreover, few studies have utilized the analytical tools of network theory and the notion of centrality, despite the fact that they conceptualize financialization as the rising centrality of the financial sector. This paper attempts to address these issues and explore the evolution of financialization in the US economy before and after the subprime crisis, investigating the changes in the position of the financial sector. Informed by financial geography and the framework of Global Financial Networks (GFN), we also shed light on the impacts of financialization on those advanced business services sectors that complement financial activity, such as accounting, law, business consulting, and other business services firms. Empirically, we estimate backward and forward inter-sectoral linkages, clustering coefficients, and measures of centrality, utilizing a long time-series of input–output tables at a highly disaggregated level, in order to study the inter-sectoral evolution of financialization in the US.

Regulating the global illicit economy: Singapore's role in United States' spatial financial surveillance

Illicit transactions are increasingly integrated to legitimate financial flows between international financial centers (IFCs) and offshore jurisdictions (OJs). The United States (US) is actively engaged in regulating illicit transactions through anti-money laundering and counter-terrorist financing (AML/CFT) regulations backed by economic sanctions statutes. In this paper, I show how US sanctions regulatory capacity has developed by scaling out compliance and enforcement functions to state regulators and advanced business services (ABS) intermediaries in Singapore. Scaling out draws on a relational scale framework that locates the multiscalar surveillance of IFCs and OJs' entangled financial networks as an instrument for governing the illicit global economy. At the same time, Singapore's enrolment in US financial surveillance benefits the financial center by strengthening the city-state's regulatory functions. Using cases of high-profile illicit financial activities as well as interviews with regulatory agents in Singapore and to a lesser extent the US, the paper shows how multiscalar compliance and enforcement practices support US′ extra-jurisdictional discipline of rogue actors and jurisdictions while augmenting Singapore's stature as a clean and trusted financial center.

Offshoring white collar jobs and structural change in host economies: the regional dimension

ABSTRACT The main objective of this paper is to investigate the extent to which inward foreign direct investment (FDI) in advanced business services (ABS) – a result of so-called offshoring of white collar jobs – contributes to the structural change of employment in regions of host economies. We use a fixed-effect regression model based on cross-regional panel data for Hungary and Poland for the period between 2005 and 2014. Our findings show that ABS FDI carries structural impacts: employment in foreign-owned firms increases the share of the tertiary sector in a region both directly and indirectly through inducing other tertiary activities as well.

Offshoring of white-collar jobs: theory and evidence1

Abstract Foreign direct investment (FDI) in advanced business services (ABSs), referred to here as the offshoring of white-collar jobs, has become one of the major developments in the operations of multinational corporations (MNCs). However, a specific theoretical approach to this phenomenon has not been adequately defined. In this article, we have two objectives. The first objective is to outline the key elements of the theoretical framework and introduce a simple formal model for business services within MNCs. The second objective is to verify the assumptions of the model in the empirical part. We use the sample of the largest European companies having foreign affiliates. Special attention is paid to Visegrád economies (i.e. Czech Republic, Hungary, Poland, and Slovakia) as host economies. We applied here a multinomial logistic model, which indicates the probability of having an ABS subsidiary taking into consideration the characteristics of MNCs.

POTENCJAŁ WYBRANYCH POLSKICH MIAST DLA LOKALIZACJI ZAAWANSOWANYCH USŁUG BIZNESOWYCH


 
 
 Big cities of Poland have been chosen as investment locations by many companies operating in business sector services. The relatively low cost of skilled labour seems to be their main advantage in this field. However, Polish destinations do not have the absolute labour cost advantage over many other locations, especially those in Asia. Therefore, attracting more demanding advanced business processes becomes a chal- lenge to Polish cities today. Thus, the aim of the paper is to assess the potential of these cities in attracting more advanced business processes, which include, among others, R&D. To attain this goal, synthetic measure based on Hellwig’s development pattern was created. The variables used are rooted in the findings from the review of the literature. The results show that the biggest academic city areas of Poland offer the greatest potential to attract advanced business services.
 
 

Determinants of foreign direct investment in advanced business services

AbstractThis paper is aimed at investigating determinants of recent flows of foreign direct investment (FDI) into advanced business services (ABS) in the European Union with the distinction between “old” (till 2004) and “new” member states (after 2004 extension). Special attention is put on the Visegrád countries. The factors affecting location decisions of multinational corporations were analysed at the national and regional level. The latter approach proved to be very effective due to the fact that foreign companies operating in ABS are highly unequally distributed across economies. Indeed, there are only few regions in economies attracting bulk of the operations in ABS.The research method applied in the paper is negative binomial regression, which measures the probability of occurrence of an ABS foreign firm in an economy or a region taking into consideration its characteristics. This research combines macroeconomic, regional and firm-level data. The explanatory variables are divided into two groups: demand and supply. The main conclusion is the high significance of the supply factors. In other words, foreign companies focus on locations offering large number of skilled workers at reasonable prices. The key recommendation for governments interested in attracting ABS type of investment is to focus on the quality of human capital.

Marketing Aspects of Image Formation and Investment Attractiveness of Territories and Enterprises

Purpose: The article identifies the differences between Ukraine and Poland in the image formation of the territory and investment attractiveness. Design/Methodology/Approach: A territorial-oriented approach is being introduced in Poland (an approach taking into account local conditions), which implies emphasis on a combination of investments and an integrated territorial approach, providing emphasis on activities that contribute to development. Findings: The regions of Ukraine are characterized by different levels of investment volume due to the differences in competitive advantages. In contradistinction from Ukraine, the competitive advantages of the territories provide a high level of investment attractiveness in Poland; they are integrated, and are generally based on advanced infrastructure (digital, business, transport), high-tech industries, advanced business services, economic zones, academic centers. Practical Implications: The conducted research makes it possible to identify several basic features of image formation and investment attractiveness of territories. Originality/Value: The basic key difference concerns the competence of countries’ integration of formed competitive advantages of the territory. The specified competence is traced in Poland, while in Ukraine the absence of this competence leads to underutilization of the regions’ potential.

Financing the Belt and Road Initiative (BRI): research agendas beyond the “debt-trap” discourse

ABSTRACTBy way of introduction to the four papers that follow, we chart some key parameters of debate about finance and the Belt and Road Initiative (BRI). In particular, we argue that the rise of discourses about “predatory lending” and “debt trap” (that feature in much commentary and reportage about BRI) merits critique and contextualization. The financing needs of BRI also raise important implications for the geography of financial markets and business services in Asia and other key locations in global financial networks. The networked nature of financial centers and the vital role of advanced business services bring into view actors, sites and spaces (such as law firms and offshore centers) that have been neglected by the geopolitical lenses most often applied to analyze BRI.

Linking global financial networks with regional development: a case study of Linyi, China

ABSTRACTThis study applies the global financial network (GFN) framework to investigate the process and consequences of global financing for a regional economy in a financial globalization era. Using Linyi, a prefectural-level city in China as a case study, it illustrates how the regional economy has been linked with GFN via overseas listings of the lead regional firms. By incorporating in offshore jurisdictions, listing on overseas stock exchanges in world cities and through interaction with international advanced business services firms, since the early 2000s the lead firms and regional economy of Linyi have established global capital and knowledge pipelines.

Dirty Banking: Probing the Gap in Sustainable Finance

In 2016, the Global Sustainable Investment Alliance estimated the market for sustainable investments to have reached 22.89 trillion USD of assets under management. While financial institutions have embraced the idea of sustainable finance as a business opportunity, they have arguably done little, but to piggy-back on investors’ demand. Today, it is not unusual for a single firm to retail fossil free investment funds and concomitantly offer commercial loans towards fracking, coal, and Arctic drilling. This paradox is underpinned by a major gap in the way sustainability has permeated primary and secondary markets which, we argue, calls for a serious rethinking of the sustainability transition in finance. This article proposes two contributions in this direction. First, we develop an original conceptualisation of finance as a socio-technical system to discuss the dynamics that both hinder and promote a transition from mainstream to sustainable finance. Second, we propose to study how investment banks integrate sustainability in their underwriting services. To do so, we filter through close to half a million of debt and equity underwriting deals (2005–2017) using the Government Pension Fund Global of Norway’s list of 153 excluded companies. Our results suggest that investment banks do not shy away from underwriting companies that have been flagged for major environmental, social, and governance misconduct, neither do they restrain from underwriting companies providing contentious products, such as tobacco, coal, and nuclear weapons. Moving forward, we suggest ways to address this problem and call for further research on the responsibility and agency of finance and advanced business services firms in sustainability transitions.

Social power, offshore financial intermediaries and a network regulatory imaginary

While studies have paid attention to the activities of firms and their financial flows in offshore tax havens and secrecy jurisdictions, there is scant work on role of advanced business services (ABS) intermediary providers in shaping the geography of these jurisdictions. Yet such a study is needed in light of the recent release of the Panama Papers and the fallout of major political figures, celebrities and corporations as a result of the leaks. This paper examines the role of relational ties in mediating and linking high net worth individuals, political elites, corporations, intermediary providers, and, secrecy jurisdictions. By examining the major organizational hubs of social power embedded in network structures, it suggests that regulatory responses to tax avoidance and evasion associated with secrecy jurisdictions may need to move beyond a state-centered model of governance. Transnational governance involves a broader set of auspices and governors that include ABS actors and their social practices which constitute both a source of learning and normative regulation.

Agglomeration Economies and Foreign Direct Investment in Advanced Business Services in Poland

Abstract For many years, services attracted most of the foreign direct investment (FDI) in Central and Eastern European countries. Recently, a distinctive type of business services, i.e., advanced business services (ABS), has become the focal point in FDI in the region. This paper is aimed at defining the role of agglomeration economies in FDI in ABS in Poland. The topic is important from the policy point of view, as foreign investment is supported by the host country’s authorities, and various incentives are provided. The research method applied in this paper is the negative binomial regression. The outcome variable was the number of firms operating in ABS in particular regions. Explanatory variables pertain to the characteristics of 16 regions classified as Level 2 under the Nomenclature des Unités territoriales statistiques (Nomenclature of Territorial Units for Statistics or NUTS) in Poland. The main conclusion of the research is that agglomeration economies are important in the decision of the firms investing in ABS in Poland. The most important factor is the concentration of supply factors, such as abundance of educated employees. The specific features of ABS are associated with lower importance of demand factors in a region.

Advanced business services in the global economy and the Visegrád Group economies

Advanced business services in the global economy and the Visegrád Group economies

Servitization and advanced business services as levers for competitiveness

In the servitization section of IMM’s special issue Vol 60/2017, we examine the current state of the domain of servitization and provide insight into emerging trends.

Effects of foreign direct investment in business services in Poland

The main goal of the paper is to investigate the impact of foreign direct investment (FDI) in advanced business services sector on economic development. We analyse the topic on the regional level as FDI in Poland is not equally distributed across the country. In order to investigate the research problem we estimate linear regression model using panel data. The dependent variable is the value of GDP per capita as the indicator of economic development. The most important independent variable from the point of view of the main objective of the paper is the number of foreign-owned advanced business services firms. This variable will be also lagged to control time necessary for investment to materialise and influence the economy. The main conclusion of the analysis of data over the period of 10 years is that there is a positive influence of operations of foreign-owned firms in the analysed sector on the economic growth of particular regions in Poland

‘Capitalist tools in socialist hands’? China Mobile in global financial networks

The paper analyses the evolution of China Mobile – one of China's pioneer ‘national champions’, and one of the world's largest telecom companies – through the lens of global financial networks, focusing on the role of advanced business services, financial centres and offshore jurisdictions in economic development. It demonstrates that despite being a domestic company, China Mobile is plugged firmly into the global financial networks, with incorporation in Hong Kong, cross‐listing in Hong Kong and New York, and opaque offshore companies registered in the British Virgin Islands. Global advanced business services firms, with Goldman Sachs in the lead, have been instrumental in the very conception of China Mobile in 1997 and its subsequent expansion, thus helping the Chinese government consolidate and modernise the whole telecom sector. The study highlights the position of Hong Kong as an onshore‐offshore financial centre intermediating between global financial markets and mainland China, and underwriting the reputation of China's ‘national champions’. The analysis also points to the advantages of Beijing over Shanghai as a command centre of state‐owned and controlled enterprises, acting as a magnet for advanced business services. The relevance of global financial networks to China, a latecomer on the stage of financial globalisation, highlights the scope for applying the concept to the rest of the world, and its potential contribution to economic geography.

Strategic nodes in investment fund global production networks: The example of the financial centre Luxembourg

The patterns and dynamics of contemporary financial capitalism are mirrored in micro-production structures of finance in international financial centres (IFCs). Applying the global production network framework allows for analyses of these structures in greater detail, better illuminating the industry’s organization, its locally anchored professional practices, and the far-reaching power relationships between IFCs. The example of the IFC Luxembourg, the world’s largest cross-border investment fund centre, shows that, in particular, advanced business services firms facilitate the global reach of investment funds (i) in their close collaboration with both local and global financial corporations, and (ii) in their exploitation of localized arbitrage assets.