Country's Institutional Environment Research Articles

Politics and Productivity

We use a stochastic frontier approach to study the effects of political and regulatory institutions on aggregate productivity in 39 countries from 1975 to 1990. We show that technical efficiency is positively related to policies supporting laissez‐faire and political structures that promote policy stability. Moreover, models of technical efficiency incorporating both measures perform better than models including only one or the other. This suggests that economic performance depends not only on current policies but also on the confidence of market participants and outside investors that these policies will remain in place.

Mode of International Entry: An Isomorphism Perspective

The determination of entry-modes is examined using an institutional theory framework. Two sources of isomorphic pressures affect a strategic business unit's (SBU) entry-mode choice: (1) host country institutional environment, and (2) internal institutional environment (the parent organization). SBUs were hypothesized to adopt similar organizational forms, structures, policies, and practices, thus becoming isomorphic, based on felt pressures to conform to behavioral norms within the environments. The results indicated that SBUs using wholly-owned entry-modes demonstrated high levels of internal (parent) isomorphism; those using exporting, joint ventures, or licensing agreements demonstrated external isomorphism; and those using multiple or mixed entry-mode demonstrated low levels of isomorphic pressures.

Competing capitalisms: capital investment in American, German, and Japanese firms

This study explains one way the home country institutional environment causes strategy differences across firms from different countries. It contrasts the investment conduct of American, German, and Japanese firms in the 10 largest manufacturing industries. We find profound national differences among these firms that are stable across industries. These differing conducts are tied to the institutional environments of the home market. The shareholder firms of the United States make investments primarily in response to expected investment returns, measured by Tobin’s Q ratio. The coalitional firms of Germany and Japan make investments primarily in response to the availability of internal finance, measured by operating cash flow. Copyright © 1999 John Wiley & Sons, Ltd.

Comparing theoretical and actual feasibility of transferring management of river lift irrigation systems in Sudan

This article focuses on agricultural production in lift irrigation schemes along the White Nile in the Sudan. A comparison is drawn between the theoretical forecast and actual practical experience regarding the feasibility of transferring management from government‐run parastatal organizations to private farmer organizations. Although the theoretical model indicates that farmers should be able to cover the cost of managing the river lift irrigation systems, field data show, however, that farmers growing wheat are barely able to break even. Even assuming a doubling of the present wheat yields, the cash surplus earned would only suffice for fuel to operate the pumps. Under these circumstances, it is not surprising that, contrary to government expectations, the private sector has been unenthusiastic about taking over management of White Nile river lift schemes. The lessons that emerge from this study indicate that unplanned and rapid withdrawal of state management can lead to negative results. The transfer of management responsibility for the river pumps does not appear to influence economic performance considerably, which depends on the wider context of the country's economic, political and institutional environment, within which the agricultural sector functions.

Governance structures and the durability of economic reforms: Evidence from inflation stabilizations

This paper investigates the relationship between a country's political-economic and institutional environment, and its ability to implement sustainable economic reform programs. The policy issue on which the study focuses is inflation stabilization. It consists principally of econometric estimations of the relationship between the success of stabilizations in a large sample of countries and several political and economic explanatory variables. The hypotheses tested are drawn both from the recent macroeconomic literature on policy credibility and from political science. The major findings include the following: 1. (a) despite the “conventional wisdom” to the contrary, political repression does not appear to be an effective means for implementing sustainable stabilization policies. Durable economic reforms and political freedoms appear to be complementary. 2. (b) As has been previously argued theoretically and demonstrated empirically, political instability is detrimental to policy reform. 3. (c) The political will and popular consensus for stabilization policies are enhanced during a severe economic crisis. 4. (d) There is weak evidence that intervention by the International Monetary Fund, rather than supporting reform programs, can undermine their credibility.