Pro-market Reforms Research Articles

The influence of local institutional dynamics on foreign ownership in international joint ventures: Speed, irregularity and synchronization

This research focuses on how three dynamics of institutions--speed, irregularity and synchronization of pro-market reforms −-lead to adjustment of ownership structures in established international joint ventures (IJVs). Based on empirical research on the ownership adjustments by IJVs in 30 provinces in China, I find that MNEs tend to take higher ownership in IJVs in regions with more rapid and synchronized reforms, while they are less likely to increase ownership share in provinces with highly irregular reforms. Moreover, rapid reforms are more likely to stimulate foreign ownership in regions with initially poor institutions, while regular and synchronized reforms help to increase foreign ownership when the institutional development is relatively mature. The findings suggest that managers in multinational enterprises pay more attention to the dynamics of institutions in host markets, and host governments carry out pro-market reforms more rapidly and steadily to attract foreign investments.

Speed of Pro-market Reforms and Environmental Innovation: An Institutional Dynamics Perspective

Speed of Pro-market Reforms and Environmental Innovation: An Institutional Dynamics Perspective

Political embeddedness, socioemotional wealth, and R&D investment in family firms: Evidence from China as a transition economy

The behavioral agency model predicts that family firms underinvest in R&D to preserve socioemotional wealth. In transition economies, family firms suffer from institution voids, so political embeddedness helps them do business. In a mixed gamble analysis of publicly listed firms in China, we find that politically embedded family firms are more likely to invest in R&D than those that are not politically embedded. However, this effect is weaker when the firms are in more-competitive industries or regions with higher speed of pro-market reforms. Hence, in regions with higher pro-market reforms speed or in more-competitive industries of China, family firms should be aware that potential financial and SEW gains derived from R&D investment are less dependent on the government and that political embeddedness does not always confer advantages. Family firms need to be strategic in response to institutional changes when implementing nonmarket strategies.

The Rise of Developing Economies

Abstract: This research delves into the transformative shifts in the global economic landscape, spotlighting the ascending influence of developing economies, notably China and India. Contrary to projections by international financial institutions, the study contends that India's pro-market reforms position it as a potential economic giant in the 21st century. Analyzing the economic transformations since China's 1978 reforms and India's 1991 reforms, the study emphasizes the significance of these economies' growth and diversification due to their demographic and economic resources. China's earlier reforms during the Cold War allowed advantageous dealings for domestic businesses, facilitated by a well-equipped administration. Both countries, however, exhibit growth reliant on unsustainable credit booms, rendering them financially vulnerable. As global market leaders, China and India's economic success reshaped global markets, trade patterns, and investment strategies. This chapter aims to furnish essential insights into the evolution of these economic giants, offering foundational knowledge for investment and business opportunities in India and China

China’s rise and the United States’ response: implications for the global order and New Zealand/Aotearoa. Part I: Using uneven and combined development theory to explain China’s rise

ABSTRACT Part One of this article provides a novel condensed Marxist account of China’s rapid economic growth which underpins its rising geopolitical and military power. In the vast literature on China’s rise, pro-market reforms and/or state policy-making and interventionism are emphasised as causes, depending on whether a neoliberal or neomercantilist perspective is adopted. Although these accounts contain important elements of truth, Marxist economic theory and the theory of uneven and combined development emphasise the central role played by China’s comparatively high rates of exploitation and profitability in fuelling rapid economic growth. This Marxist perspective informs a critical analysis of China’s hybrid neoliberal policy regime, regionally decentralised system of government, huge trade surpluses and foreign currency reserves, inflows of foreign direct investment, state investment in infrastructure, rising socio-economic inequality, poor social provision especially of public health care, popular support for and potential sources of opposition to the CCP regime, and military modernisation.

Democratic Autocracy: a Populist Update to Fascism under Neoliberal Conditions

Abstract What are the social dynamics behind the rise and resilience of today’s authoritarian regimes? This paper seeks to answer this question by focusing on the longest lasting elected autocracy of our era, the AKP (Justice and Development Party) regime in Turkey. Building on the authoritarian neoliberalism literature’s criticism of the scholarship on competitive authoritarianism, I point out the seeds of authoritarianism in the pro-market reforms of the 1980s–2000s. However, both literatures fail to address the popular embrace of authoritarianism. In critical engagement with analyses of fascism, I develop the concept ‘democratic autocracy’: a parliamentarised, individualised, personalistic, and relatively more market-oriented, twenty-first century version of fascism. The democratic autocracy in Turkey organises and mobilises the people through parties, youth and aid associations, paramilitary organisations, and unions. However, both unresolved economic crises and democratic autocracy’s sociopolitical dynamics set limits to its resilience, as well as to the sustainability of its parliamentarism.

CEO International Experience in Advanced Market Economies and Firm Investment Horizon in a Transitioning Economy

AbstractBuilding on the literature on managerial myopia, we investigate how chief executive officers’ (CEOs) international experience in advanced market economies affects their firms' investment horizons in a transitioning economy. To overcome myopia, CEOs should possess the knowledge needed to manage current tasks, thereby freeing up cognitive resources for future considerations. In the context of our theorizing, we argue that international experience in advanced market economies equips CEOs with knowledge about how to deal with their current tasks of market-oriented adaptation in a transitioning economy, freeing up cognitive resources for considering longer-term investment horizons. Additionally, the effect of CEO international experience in advanced market economies on firm investment horizon is stronger under conditions that increase the cognitive burden on CEOs to perform market-oriented adaptation tasks – specifically, when there is a high scope of pro-market reform, high intensity of foreign competition, analyst coverage, and a high level of institutional ownership. Our estimation based on a matched sample of 204 Chinese CEOs during the period 2002–2019 supports the majority of our predictions. Our study contributes to research on firm investment horizon, CEO international experience, and transition economies.

The internationalization of state-owned enterprises in liberalized markets: the role of home-country pro-market reforms

We study how home-country factors can alter the impact of host-country conditions on the location decisions of state-owned enterprises (SOEs). Specifically, we examine the role of home-country pro-market reforms in facilitating SOEs’ entry into host countries with a free-market logic. We consider two types of home-country pro-market reforms: market liberalization and privatization. We propose that home market liberalization mainly mitigates SOEs’ market legitimacy deficit and facilitates their entry into host countries with a prominent free-market logic. In such contexts, businesses perceive SOEs from more liberalized home markets as more accustomed to market competition and thus are less likely to exert pressure on the host government against them. We also argue that furthering SOEs’ privatization mitigates SOEs’ political legitimacy deficit in host countries with a free-market logic, thus facilitating entry. In these contexts, host governments perceive more privatized SOEs as more independent from their home state due to reduced political connections. We find support for our arguments in a dataset of 97 telecom SOEs from 97 countries over the period 1990–2010. Our study advances research on SOEs’ internationalization and research on pro-market reforms and has relevant implications for managers and policymakers.

DEVELOPMENT OF BUSINESS GROUPS IN BRAZIL

Objective: This work aims to understand and analyze the development of large business groups, or Business Groups (BG) in Brazil. Methodology: The article is based on a historical analysis focused on the longitudinal analysis of cases from the Brazilian context to uncover the development trajectories of BG. Results: The historical analysis reveals that BGs in Brazil benefited from institutional failures, some of which were generated in times of crisis, and knew how to take advantage of dynamic institutional arrangements during pro-market reforms, such as the use of government incentives to leverage their participation in the privatization process. Consequences of this capacity include the accelerated growth of several groups without the need for dispersion of capital and control, and the successful implementation of strategies such as vertical integration through acquisitions. Originality and value: By showing how BGs emerged and developed in Brazil, taking advantage of opportunities offered by local institutional arrangements, the study presents the mechanisms that explain the persistence of BGs' superior performance over a long period of time.

Pro-market reforms and firm performance

Empirical findings from prior research regarding the impact of pro-market reforms on firm performance have been mixed and ambiguous. The primary objective of this study is to conduct a systematic literature review to investigate how pro-market reforms affect firm performance. We summarize the possible factors that led to the mixed findings and provide suggestions for future research.

Russia as a country of BRICS: Issue of identification

The approach of development economics has been rarely used in the studies on the BRICS research agenda. This article is an attempt to fill this gap. According to development economics, the appearance of the BRICS association is fully justifiable, because large emerging economies have much in common. Russia is the most advanced country among the BRICS, even though some years ago it fell into the group of laggards in terms of economic growth, together with Brazil and South Africa. It may be partly explained by those countries’ adherence to neoclassical recipes of economic policy. It is believed, however, that national economic interests of all the five countries could be more effectively served by a combination of further pro-market reforms with public interventions to correct the inevitable market failures. That is why, for the Russian comparative advantages to be fully realized, the country should rely not so much on trade liberalization as on coordination among the BRICS governments in their actions aimed at trade and investment promotion.

Speed of Pro-Market Reforms and Entrepreneurial Innovation (WITHDRAWN)

Speed of Pro-Market Reforms and Entrepreneurial Innovation (WITHDRAWN)

Pro-market reforms and the outsourcing tradeoffs: Evidence from the transition economies

What determines the firm scope is a fundamental question driving strategy and international business research. Extant literature examining a firm’s vertical scope decision has historically not accounted for the influence of institutional reforms. To fill this gap, we develop a theoretical framework based on insights from institutional economics to examine how pro-market reforms and firm-level R&D activity influence the likelihood of outsourcing production activities. Using data from the Business Environment and Enterprises Performance Surveys conducted by World Bank and European Bank for Reconstruction and Development in twenty-eight transition economies, we analyze the influence of pro-market reforms on the outsourcing decision. We do not find support for a strong direct influence of pro-market reforms on the likelihood of starting outsourcing. However, we find evidence that pro-market reforms influence the relationship between R&D activity and the likelihood of outsourcing. Interestingly, economic and legal reforms moderate the relationship between R&D activity and the likelihood to start outsourcing in different ways. While economic reforms weaken the positive relationship between R&D activity and outsourcing, legal reforms strengthen it.

Highlighting Asymmetries: Re-Examining the Firm-Level Impacts of Pro-Market Reforms in Latin America

Impacts of pro-market reforms on profitability have been investigated for more than two decades, but accumulated results still prove inconclusive. While there seems to be consensus highlighting why pro-market reforms would lead to higher profitability, findings remain mixed. We refine past research by 1) employing causal analysis methods (specifically, vector autoregression and impulse response functions) that improve upon previous techniques 2) using more appropriate sampling of countries and of firms (specifically, multiple countries that are comparable and that illustrate opposing directions of reforms), and 3) including additional key financial indicators as dependent variables to parse out the complex impacts of the reforms . Using firm-level data from 1,248 publicly listed firms from seven Latin American countries (2000-2016), our results offer novel insights. Interestingly, our results do not demonstrate a statistically significant result for the impact of pro-market reforms on profitability (return on sales). However, our findings do indicate a positive relationship between pro-market reforms and operational efficiency (reduction in administrative and selling expenses) as well as between pro-market reforms and financial leverage (corporate indebtedness and interest expenses). Understanding these asymmetric effects, while also considering pro-market reversals, offers a more finely variegated lens to extant literature.

Pro-market Reforms and Green Innovation in China: A Dynamic Institutional Perspective

Do pro-market reforms facilitate firms to conduct green innovation or create hindrance to the adoption of such risky strategies? We seek to answer this question evaded by previous studies. Based on a dynamic institutional perspective, we uncover how scope of pro-market reforms (degree of market liberalization in a given year) and speed of pro-market reforms (rate of market liberalization achieved over time) affect firms’ green innovation subsidies and their subsequent conversion of such subsidies into green innovation output. Results from a sample of Chinese publicly listed firms from 2008 to 2018 indicate that scope and speed of pro-market reforms both facilitate firms to obtain more green innovation subsidies. The conversion of green innovation subsidies into green innovation output is positively moderated by scope of pro-market reforms, such that a greater scope of pro-market reforms enables firms to achieve higher green innovation output. However, this conversion is negatively moderated by speed of pro-market reforms, such that reform speeds exert an inverted U-shaped effect on green innovation output, implying that a gradual reform speed is most suitable for firms to achieve high green innovation output. These findings provide implications to the dynamic institutional perspective by explaining whether pro-market reforms serve as a facilitator of or a burden on firms’ green innovation in a major transitioning economy.

Pro-Market Reforms Complementarities and Firm Profitability (WITHDRAWN)

Four decades of pro-market reforms in emerging economies have produced highly different benefits for firms across nations. Drawing on the institution-based view, we introduce the idea of the complementarity of pro-market reforms as one of the key drivers behind the diversity of firm profitability across countries. Specifically, focusing on trade and financial reforms, we posit that trade liberalization harms profitability because it increases competition while financial reforms help profitability because it provides more funds for investments. Moreover, jointly they support firm profitability because of their complementarities. Additionally, we propose that the effect of their complementarity is stronger for firms that are more dependent on external finance. We test these ideas on a sample of 4,792 firms from 42 emerging economies during 1996-2018. Our study extends institutional economics by analyzing the role of complementarities among reforms and discussing their impact on firms.

Neo-Liberal Pitfalls and the COVID-19 Pandemic Challenges in Bangladesh

Bangladesh has been following the neo-liberal economic model since the early 1980s. Manifestly, consecutive state authorities have failed to reduce the inequalities between different social groups in the last forty years. This article examines how the reform policies resulting from the liberalisation and privatisation of Bangladesh’s economy have created avenues for a handful of business elites to surge and control its economic and political decision-making mechanisms. It also illustrates the impacts of neo-liberal reforms on the socio-economy and health-care sector of the country. Finally, this paper argues that the consequences of pro-market reforms have played a significant role in weakening the ability of the state to respond appropriately to the ongoing COVID-19 pandemic in Bangladesh as the government is compelled to maintain its nexus with the business elites rather than focus on the well-being of all its citizens.

Growth and Development under Alternative Policy Regimes in India: A Political Economy Perspective

This paper reviews the economic policies adopted by the Indian government under different policy regimes, provides a political economy perspective of economic growth in the country during 1950–2020 and examines the inclusiveness of the rapid economic growth in recent decades. The growth performance of the economy improved as the economy moved from inward-looking policy regime to the regimes of pro-business and pro-market policies. India’s political economy was supportive of the changes in policy regime. After growing at a sluggish rate during the first three decades after 1950–1951, the gross domestic product (GDP) growth accelerated significantly after the pro-business reforms in the 1980s, and there was further acceleration after the pro-market reforms since 1991–1992. It has, however, slowed down in recent years. Nevertheless, it has not been inclusive, as the benefits of growth have not reached all sections of the population and all regions of the country equally. On the contrary, disparities in income across regions and inequalities in income, wealth and consumption among individuals have exacerbated, and the problems of unemployment and poverty have been persisting in the economy.

Beating capitalists at their own game? Foreign traders and western negotiation studies in late-socialist Hungary

ABSTRACT While the history of regime changes and the eventual embrace of pro-market reforms in Eastern Europe in the 1980s and 1990s is well-known, we know little about the socialist bureaucrats who implemented and often modified abstract party declarations on the relationship of socialist states to the West or to market reforms. Equally underexplored are the cultural stereotypes that guided East-West negotiations and the training of Eastern European technocrats who became negotiators with Western governments and corporations. Through the examination of the personal archives of socialist Hungary’s key “negotiation expert” and leading foreign trade advisor, János Nyerges, this article documents the attempt of Hungarian policy elites to beat Western corporations, banks, and governments at their own game – capitalism – by importing and adopting Western business negotiation practices, while leaving the communist party’s monopoly on power intact.

A systematic review of innovation in family firms and future research agenda

PurposeIn this paper, the authors have used a systematic literature review methodology of 147 journal articles published in peer-reviewed journals. The analysis includes studies based on country of origin, the periodic proliferation of studies and the methodological design of the studies. As an outcome of the review, the studies are classified on the innovation in family firms under four broad categories – innovation input, family governance mechanisms, innovation output and the external environment. Some fruitful avenues of research are outlined in this domain.Design/methodology/approachThe literature on innovation in family firms – the most dominant and ubiquitous form of organization across the world – is gaining pace. The influence of family by way controlling ownership, management and governance on, and in interaction with business acts as a complex proposition that shapes the strategic decision-making in the family firm including innovation. The purpose of this paper, therefore, is to advance the understanding of innovation in family firms and provide a list of future research questions of theoretical and practical value.FindingsBased on this review, the authors provide future research directions pertaining to innovation in emerging economy family firms, effect of the institutional environment of family firm innovation as well family firms' innovativeness in the wake of pro-market reforms, different classes of ownership in family firms and innovation, family firm goal heterogeneity and innovation, and family firm dynamic capabilities and innovation.Originality/valueThe review provides a comprehensive understanding, trends and future research directions in the domain of innovation in family firms.