Pro-market Reforms Research Articles

Firm-level Impacts of Pro-Market Reforms: Latin America as a Laboratory

The impact of pro-market reforms on the profitability of companies has been investigated for more than two decades, but accumulated results are still inconclusive. While there has been general agreement in terms of the reasons why pro-market reforms would be expected to lead to higher profitability, findings across studies have been mixed. The present study improves over past research by employing causal analysis methods (specifically, vector autoregression and impulse response functions) and by using more appropriate sampling of countries and of firms (specifically, multiple countries that are comparable and that illustrate opposing directions of reforms). We use firm-level data from 1,248 publicly listed firms in seven Latin American countries, 2000-2016. Although our results were not statistically significant as regards the relationship between pro-market reforms and firm profitability (return on sales), 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), as expected.

Pro-market reforms, national culture, and internationalization: A cross-country analysis of EEFs

This study contributes to the institution-based view of the firm by examining how informal institutions influence the relationship between pro-market reforms and the degree of internationalization of emerging economy firms. We posit that firms’ response to pro-market reforms depends upon the national culture they are embedded in. Specifically, we conjecture that the two dimensions of national culture — uncertainty avoidance and individualism — shape firms’ perceptions of pro-market reforms, thus impacting the relationship between pro-market reforms and firm internationalization. Using a sample of 44,119 firm-year observations for 6,449 unique firms across 30 emerging economies between 1996 and 2018, our findings show that pro-market reforms have a positive effect on firm internationalization, but this effect is weaker in more uncertainty avoiding cultures and stronger in more individualistic cultures. Our study provides valuable insight into how national culture can shape the internationalization of firms and has useful theoretical and policy implications.

Ordinary capabilities and firm performance: The role of capital market development

Ordinary capabilities support the primary activities of a firm and are key to attaining competitive advantages. Past research indicates that there are limits to the contributions of ordinary capabilities to firm performance but has largely explored it via contingent effects of the industry context. We argue that these limits are also a function of the development of market-supporting institutions. Adopting an unbundling approach, we specifically investigate the role of developing capital markets. We argue that evolutionary pressures brought about by pro-market reforms in capital markets have a negative effect on a firm’s use of its ordinary capabilities. We trace the heterogeneity of this effect for two key firm resource attributes, investments in R&D and financial slack. We test our three-way interaction model using a sample of Indian firms over a twenty-year period of institutional reforms. Our findings contribute to integrating the organizational capability and institutional theory literature and advancing research on the sustainability of firm profits in emerging economies.

It’s a Hard-Knock Life: Child Labor Practices and Compliance with IMF Agreements

How does IMF lending impact child labor? We argue that, as compliance with IMF reforms increases, child labor increases. IMF loans can help governments avoid bankruptcy, prevent debt defaults, and credibly signal a commitment to pro-market reforms which should generate trade and investment. However, IMF policies associated with revenue and social policies can have negative impacts on child labor. Education reforms undermine the quality of schooling, making child labor more likely. Healthcare reforms undermine the quality of healthcare; when parents are ill or injured, their children are more likely to enter the workforce to make up for lost income. Similarly, social safety net reforms reduce the ability of families to access a safety net during times of hardship and make it more likely that children are pushed into the labor market to keep families afloat. To test our argument, we use a control function selection model on a sample of 70 IMF borrowers between 2002 and 2016. Using new datasets on IMF compliance and child labor, we find that increased compliance with IMF reforms worsens child labor practices. Revenue and social policy compliance in particular are associated with an increase in child labor.

The dynamic process of pro-market reforms and foreign affiliate performance: When to seek local, subnational, or global help?

Little is known about how the dynamic process of pro-market reforms influences the performance of foreign affiliates in emerging economies and how multinational enterprises (MNEs) can deal with such a dynamic process. This study disentangles the dynamic process of pro-market reforms into three dimensions – speed, (un)predictability, and (un)synchronization – and argues that the performance of foreign affiliates suffers when pro-market reforms are slow, unpredictable, and unsynchronized. To mitigate the detrimental impacts of the three distinctive dimensions of pro-market reforms, MNEs can deploy strategies that allow their foreign affiliates to seek local help from other strongly embedded “central” organizations, subnational help from sister affiliates in other subnational regions of the same host country, and global help from parent firms. To test these arguments, this study performs a 10-year longitudinal analysis of 79,763 foreign affiliates operating in China. The results provide evidence that seeking local help is effective in mitigating the negative effect of slow pro-market reforms on foreign affiliate performance, but has no effect on the unpredictability of pro-market reforms. In addition, subnational help is as effective as global help in mitigating the negative effect of unsynchronized pro-market reforms on foreign affiliate performance.

The rise and fall of the New Alliance for Food Security and Nutrition: a tale of two discourses

The New Alliance for Food Security and Nutrition (NAFSN) was launched in 2012 by the G7 countries as a major initiative to fight hunger in Africa. It promised to raise 50 million people out of poverty over the next 10 years by brokering pro-market reforms and flows of private capital to African agriculture. However, it failed to fulfil its promises and disappeared quietly from the public arena before the end of the 10-year period. This article applies critical discourse analysis to official US and French documents to examine the rise and fall of the initiative by confronting the discourses of the NAFSN and food security in the official US and French documents. The USA was the leading country, whereas France was a reluctant supporter and withdrew in 2018. The US discourse strongly promoted the neo-productivist food security paradigm embedded in techno-optimist and neoliberal solutions. By contrast, French framing leaned towards the agroecology paradigm, admittedly combined with the smallholder commercialisation perspective, which is itself remarkable for discourse at such a high policy level. We relate these divergences to the dialectical contradictions in the current global food system in terms of the tensions within the corporate/neoliberal food regime. Supplemental data for this article is available online at https://doi.org/10.1080/01436597.2021.1917355 .

Do internationalizing business group affiliates perform better after promarket reforms? Evidence from Korean SMEs

This study examines how business group affiliation moderates the performance (P) consequences of internationalization (I) by firms from advanced emerging economies that have implemented major promarket reforms. Our theoretical framework integrates institutional and network perspectives with internationalization research to investigate the effects of institutional change on the role of business groups in supporting the internationalization of their affiliates. Using a dataset of 143 publicly listed Korean manufacturing SMEs over a five-year period, our findings provide statistical evidence that business group affiliation has different moderating effects on the I-P relationship according to the degree of internationalization. Specifically, group-affiliated SMEs exhibit a U-shaped I-P relationship while non-affiliated, independent SMEs present an overall downward S-shaped relationship, where group-affiliated SMEs perform better at any level of internationalization. Besides, we also examine the moderating effect of industry characteristics and found that in the case of SMEs in technology-intensive industries, affiliation to a business group enhances firm performance at low and intermediate levels of internationalization. Overall, we conclude that business groups are able to provide benefits to their internationalizing affiliates in an improved institutional context.

A dynamic capabilities perspective on pro-market reforms and university technology transfer in a transition economy

Pro-market reforms are a form of institutional change from a socialist economy to a market economy. As the institutional environment in a transition economy changes, pro-market reforms exert a significant influence on university technology transfer (UTT). By leveraging dynamic capabilities in the context of universities, this study develops a theoretical framework for analyzing how the scope (degree) and speed (rate) of pro-market reforms in a transition economy are related to UTT. Additionally, this study analyzes whether or not the relationship between the scope/speed of pro-market reforms and UTT differs across universities depending on staff size and university-industry (UI) linkages. To test our hypotheses, we use 1061 universities in 31 Chinese sub-national regions (provinces) from 2005 to 2013. The results show that a greater scope of pro-market reforms has a positive impact on UTT, while a greater speed of pro-market reforms has a negative impact on UTT. We also find that the positive relationship between the scope of pro-market reforms and UTT is more pronounced for universities with fewer staff members or more UI linkages, and the negative relationship between the speed of pro-market reforms and UTT is less pronounced for universities with more staff members or more UI linkages. Overall, this study opens avenues for understanding the relationship between pro-market reforms and UTT in a transition economy.

Poverty in China Since 1950: A Counterfactual Perspective

The other side of the coin to post-reform success is often pre-reform failure, and the policy lessons are found on both sides. The paper estimates how much of China’s poverty rate around 1980—near the outset of Deng Xiaoping’s pro-market reforms—is attributable to the prior Maoist regime. Based on the history, it is argued that South Korea and Taiwan provide a relevant counterfactual. Then a difference-in-difference estimate using historical data indicates that about two thirds of China’s poverty in 1980 is attributed to the impact of the Maoist path since 1950. Further checks and tests suggest that (if anything) this is likely to be an underestimate. It took 10-20 years for China’s post-reform economy to make up the lost ground. The impact of the Maoist path had begun to fade in the 1970s, and half or more of the catch-up was in period up to 1990, under Deng’s rule.

China y el arte de la guerra (tecnológica)

China se encamina a convertirse en una potencia tecnológica a mediados del siglo XXI. Este proceso se funda sobre cuatro pilares: sostenido incremento del presupuesto asignado al desarrollo científico-tecnológico, su directa vinculación con estrategias de innovación a fin de aumentar la productividad y sostener competitividad exportadora, creación e internacionalización de firmas tecnológicas, y expectativas gubernamentales por cerrar las brechas de conocimiento aún existentes que separan a China de competidores asiáticos y occidentales. A lo largo de cuatro décadas, las reformas pro mercado confirman esta senda de transformación y generación de capacidades en sectores tecnológicos de punta. La competencia estratégica con Estados Unidos acelera esta carrera y confirma objetivos sobre posicionamiento de firmas tecnológicas chinas como líderes en inteligencia artificial (IA), telecomunicaciones y redes 5G.

Objectives, methods, and results in critical health systems and policy research: evaluating the healthcare market

BackgroundSince the 1980s, markets have turned increasingly to intangible goods – healthcare, education, the arts, and justice. Over 40 years, the authors investigated healthcare commoditisation to produce policy knowledge relevant to patients, physicians, health professionals, and taxpayers. This paper revisits their objectives, methods, and results to enlighten healthcare policy design and research.Main textThis paper meta-analyses the authors’ research that evaluated the markets impact on healthcare and professional culture and investigated how they influenced patients’ timely access to quality care and physicians’ working conditions. Based on these findings, they explored the political economic of healthcare.In low-income countries the analysed research showed that, through loans and cooperation, multilateral agencies restricted the function of public services to disease control, with subsequent catastrophic reductions in access to care, health de-medicalisation, increased avoidable mortality, and failure to attain the narrow MDGs in Africa.The pro-market reforms enacted in middle-income countries entailed the purchaser-provider split, privatisation of healthcare pre-financing, and government contracting of health finance management to private insurance companies. To establish the materiality of a cause-and-effect relationship, the authors compared the efficiency of Latin American national health systems according to whether or not they were pro-market and complied with international policy standards.While pro-market health economists acknowledge that no market can offer equitable access to healthcare without effective regulation and control, the authors showed that both regulation and control were severely constrained in Asia by governance and medical secrecy issues.In high-income countries they questioned the interest for population health of healthcare insurance companies, whilst comparing access to care and health expenditures in the European Union vs. the U.S., the Netherlands, and Switzerland. They demonstrated that commoditising healthcare increases mortality and suffering amenable to care considerably and carries professional, cultural, and ethical risks for doctors and health professionals. Pro-market policies systems cause health systems inefficiency, inequity in access to care and strain professionals’ ethics.ConclusionPolicy research methodologies benefit from being inductive, as health services and systems evaluations, and population health studies are prerequisites to challenge official discourse and to explore the historical, economic, sociocultural, and political determinants of public policies.

Gender wage inequality during Sri Lanka’s post-reform growth: A distributional analysis

Abstract This paper investigates gender wage inequality in Sri Lanka during 1992–2014, a period of robust economic growth following pro-market reforms. The gap in mean wages between men and women decreased steadily over this period. Unconditional quantile regression reveals the decline in gender wage inequality was driven by the upper half of the distribution, and was due to improvements in women’s observable human capital. Yet, the pay structure became more unequal, indicating widening gender gaps in the returns to labor market characteristics and in unobservable determinants of wages. The gender gap in pay structure widened disproportionately in the lower half of the distribution, coinciding with falling absolute and relative returns to women in manufacturing industries and production occupations facing greater international competition. The study also demonstrates selection bias underestimates the gender wage gap and overestimates the gains in equality over time. Factors that hinder gender equality in the labor market are discussed along with policy implications.

Democratic decentralization, microcredit, and the workings of local government in rural India

While democratic decentralization in India has commonly been studied as a project of deepening democracy, this article discusses decentralization as a form of state spatial restructuring in the epoch of market reforms. Drawing upon ethnographic fieldwork, I trace the shift in the nature of elected local bodies and their retooling to deepen financial markets in rural India. The case of the Swarnajayanti Gram Swarozgar Yojana, the Indian state’s largest microcredit program, reveals the rise in the salience of local governments as the site of state spatial policy in the 21st century, and the restructuring of decentralized local governance to deepen financial institutions’ penetration in rural areas. Local governments called panchayats have emerged as state organizations of microgovernance as capital moves to new scales in search of value. Findings from Gujarat, India’s leading state of pro-market reforms, reveal panchayats’ role in metagovernance—the governance of government, and the ascendance of information and communication technologies in panchayat practice to annihilate spatio-temporal barriers for the circulation of financial and material capital.

How a tiger became a pussycat

Based on capitalism and socialist measures, Taiwan not only achieved better results than Mainland China during the 1949-91 period, but also better results than any other country in the world in promoting economic growth. A lack of market was the main disadvantage of Mainland China during this period of time. However, its successful pro-market reforms and unsuccessful reforms in Taiwan (based on privatization), reversed the tide. During the last quarter of the century, Mainland China has more efficient economic system than Taiwan. As a result, Mainland China became the world’s leading economic power in 2014 and it continues to have higher rates of growth than Taiwan.

Multinational firms' pace of expansion within host countries: How high rates of pro-market reform hamper the local exploitation of foreign expansion knowledge

Abstract Although increases in corporate ownership positions in foreign markets occur frequently, the factors that determine how quickly such increases occur are underexplored. Combining international business research on experiential learning, knowledge recombination, and pro-market reform, we hypothesize that a firm's international experience with ownership increases has a positive effect on the pace at which the firm implements an ownership increase in a host country, but that this effect is weaker during periods of quicker pro-market reform in the country. We find support for our hypotheses in an analysis of Austrian firms expanding in Central and Eastern Europe, suggesting that, rather than merely being beneficial to foreign investors, pro-market reform also poses a challenge to them.

Structural change and economic growth in India

Using detailed sectoral data from India KLEMS, we analyze the role of structural change in determining India's aggregate productivity growth during 1980–2011. In general, the impact of static structural change on aggregate labor productivity growth has been positive, as workers moved to sectors of a relatively higher labor productivity level. However, dynamic reallocation effects—worker movement to fast-growing industries—have not been observed. The pro-market reforms in the 1990s did help a TFP growth-enhancing allocation of capital across sectors. The relative importance of the manufacturing sector for aggregate TFP growth has increased in recent years. Yet, India's structural transformation features the absorption of workers in the construction sector and slow and stagnant job creation respectively in services and manufacturing sectors. This poses a challenge, as the potential for productivity growth in construction and services are limited, and the changing nature of manufacturing production provides less room for absorbing less-skilled workers.

Whole Versus Part: Pro-Market Reforms and Unrelated Diversification of Business Groups

Whole Versus Part: Pro-Market Reforms and Unrelated Diversification of Business Groups

Institutional Schisms: The Impact of Intergovernmental Organizations on Entrepreneurship

In times of anti-globalization movements, we study how intergovernmental organizations (IGOs), as the epitome of globalization believes, impact entrepreneurship in countries with different development levels. More specifically, we introduce the novel concept of institutional schisms, as the misalignment of national institutions and supranational institutions, to the concept of formal and informal entrepreneurship in least developed, emerging, and highly developed countries. We argue that least developed countries experience minimal institutional schisms, since their existing institutions are nascent and can be influenced heavily by IGOs promoting pro-market reforms. Highly developed countries, too, experience less severe institutional schisms, since these countries often have the most influence over the creation in the supranational institutions. However, emerging markets, which have semi-formed institutions, yet do not influence the supranational institutions, experience the most severe institutional schisms. Through an examination of 272 country-year panel observations across 68 countries from 2000 to 2011, we find that the influence of IGOs on entrepreneurial activities differs among countries with different levels of development. We find that IGOs promote formal entrepreneurship while hindering informal entrepreneurship in least developed countries, given the limited institutional schism experienced in these countries. These mechanisms do not hold in emerging countries with high institutional schisms where we find the reduction of formal entrepreneurship, as a result of competing national and supranational institutions. Surprisingly, the type of IGO (e.g. social, political, or economic) has no bearing on the results. Our analysis is based on a novel combination of regime theory and institutional theory, applied to entrepreneurship literature.

Pro-market institutions and global strategy: The pendulum of pro-market reforms and reversals

We review the literature analyzing the impact of pro-market institutions on firms’ global strategy. We propose that the ideological tension between whether the government or the market should drive economic development results in a pendulum of pro-market reforms and reversals that drive changes in firm strategy and performance. Much progress has been made in the analyses of pro-market reforms and their impact on firms’ international strategies and performance. However, there is a need to further learn about four areas: (1) the concept of pro-market institutions, in particular the variety of institutional dimensions, the measures, and the influence of informal institutions on firm strategies; (2) the drivers of changes in pro-market institutions, especially firms’ influences and the co-evolution of firm strategies and institutional changes; (3) the implications of changes in pro-market reforms for the interactions among integration, diversification, and internationalization strategies, the causality chains connecting institutions and strategies, and the reconfiguration of activities globally; and (4) the non-traditional moderators that alter the impact of pro-market institutional dynamics on firms’ strategies, such as country-level political systems, industry-level competitor reactions, and individual-level managerial capabilities and perceptions.

Utilities: Innovation and Sustainability

Pro-market reforms have disrupted the playing field and strongly affected the innovative behavior of electricity, gas and water utilities. Beyond a significant reduction in sectoral R&D investments, very little is known about how these firms accomplish their innovation strategies in this new scenario. Given this gap in the literature, the first aim of this paper is to identify the internal determinants of both the product and process innovation of utilities in a liberalized environment. Additionally, there is another external force that is also disrupting the specific landscape of utilities: the sustainability challenge. Therefore, the second aim of this paper is establishing whether sustainability-orientation is a driver of innovation in the utilities industries. The empirical study is carried out on a panel of 82 Spanish electricity, gas and water utilities over the period 2005–2012 (Technological Innovation Panel dataset (PITEC)). The main findings are: (i) the acquisition of disembodied knowledge does not play a relevant role for utilities; (ii) non-formal search processes are central to product innovation; (iii) some markets for technology –external R&D and technology embedded in equipment—are determinant factors for process innovation; (iv) sustainability orientation increases the likelihood of generating both, product and process innovations. These firm-level results are novel contributions to the field of utility management.