‘First Impressions’ Press Review: October 2013

Our press review features the latest publications by UNU-MERIT and its School of Governance, from working papers to policy reports to books, as well as mentions in the media. The output for October includes 14 working papers, a journal article and a PhD thesis. We cover issues including innovation in Brazilian and Chinese companies, energy consumption in Kyrgyzstan, and the corruption-innovation nexus in emerging economies. Our working papers include several new studies on the links between institutions and long-term economic performance, executed in partnership with the French Development Agency (AFD).

Hundreds of demonstrators marched from the slum of Cité Soleil to the Haitian Government's headquarters in Port-au-Prince to protest government corruption, carrying brooms symbolizing a "clean-up" of the Administration. Transnational corruption and innovation in transition economies’ shows that the involvement of foreign firms in corruption practices reduces the propensity of firms in host countries to invest in research and development and harms their ability to improve existing products and services. The results of this working paper indicate that transnational corruption exacerbates the negative effects of local corruption by further deteriorating the innovation potential of firms in host countries. Its short-term positive payoffs for bribing firms must be weighed against the long-term loss in the ability of competing firms to generate future innovations. The authors conclude that efforts to tackle corruption must be directed not only towards local officials but also foreign corporate managers who are likely to cash positive payoffs without bearing the effects of corruption. The ongoing efforts engaged by the EU to fight corruption in transition economies are still relevant today and must continue to be targeted at both local bureaucracy and foreign corporations, especially those involved in public procurement in these economies. By Alexis Habiyaremye and Raymond Wladimir.

Complementarity between In-house R&D and Technology Purchasing: Evidence from Chinese Manufacturing Firms’ explores the impact of internal and external technology sourcing on firms’ innovation and productivity performance in small- and medium-sized Chinese manufacturing firms. Published in Oxford Development Studies, the article investigates the returns of R&D and external technology purchasing and their possible complementarity or substitutability. It does so by distinguishing two performance measures: innovation in products or processes and labour productivity. The evidence shows signs of complementarity between the two sources of knowledge in reaching a higher unconditional intensity of product innovation for firms with 100–300 employees and, in general, a significant degree of substitutability between them in achieving higher levels of labour productivity. The authors conclude that external TP complements internal R&D in fostering innovation and labour productivity and recommend the Chinese government to promote the adoption of both sources of technology acquisition. By Jun Hou and Pierre Mohnen

Traditional Kyrgyz cooking range
Switching off or switching source: energy consumption and household response to higher energy prices in the Kyrgyz Republic’ uses data from the Kyrgyz Integrated Household Survey (KIHS) 2011 to analyse household energy consumption and the impact of electricity tariff increases on the probability that households would switch to alternative energy sources. The results of this working paper suggest that households would respond to an electricity price increase by increasing consumption of fuels. The authors conclude that households would tend to move away from electricity-only heating source towards the use of stove-only. By Franziska Gassmann and Raquel Tsukada.

A series of new working papers on the relationship between institutions and long-term economic performance were made available in October 2013. These papers represent the findings of the second phase of a research programme on ‘Institutions and Economic Growth’, executed in partnership with the French Development Agency (AFD). In 2012, the first 10 working papers of this project were published. The present set of papers builds on our previous results and extends them in new directions. The new papers focus on state capacities (a paper by Luciana Cingolani, Kaj Thomsson and Denis de Crombrugghe; plus a second paper by Luciana Cingolani); the relationships between foreign and domestic investment and their institutional determinants (Kristine Farla, Denis de Crombrugghe and Bart Verspagen); micro- and macro-determinants of firms’ investment behavior (Kristine Farla); the relationships between geography, institutions, trade and growth (Samyukta Bhupatiraju and Bart Verspagen); and institutional and policy influences on the duration of economic slumps (Richard Bluhm, Denis de Crombrugghe and Adam Szirmai). More will follow.

Agnes Leina, Executive Director of Il’laramak Community Concerns (Kenya), speaks on the issue of violence against indigenous women and girls, during a press conference held as part of this week’s eleventh session of the UN Permanent Forum on Indigenous Issues (UNPFII). ‘The Arc of Institutional change in the long shadow of elites: essays on institutions, human capital and ethnicity in developing countries’ investigates the link between the level and distribution of human capital and institutional change in societies where elites have a privileged access to political and economic organizations. In order to understand why elites maintain such privileges in certain societies in the first place, this PhD thesis studies the social and institutional fundamentals that may contribute to elite domination in a given society. Using Kenya as a case study, the author shows that competitive tribalism has persisted in the face of sizable class cleavages because initial inter-group inequalities have undermined the political salience of rising individual inequality. Faced with political fragmentation and uncertainty, the elites chose to minimize the risk of intra-elite crisis by resorting to the default option of honouring the rule of law. All in all, early institutions and the corresponding distribution of resources have continued to influence current institutions through the strategic use of ethnicity by the elites for mobilizing collective action. By Biniam Bedasso.

Exploring the paradox of competence-creating subsidiaries (CCS): balancing bandwidth and dispersion in Multinational Enterprises (MNEs)’ gathers various contributions to a special issue on Long Range Planning for CCS. This working paper shows that effective competence-creation through a network of subsidiaries requires an appropriate balance between internal and external embeddedness and that there are multiple types of firm-specific advantages (FSAs) essential to achieve this. The author calls for greater resources for knowledge integration and coordination as intra- and inter-firm R&D cooperation becomes more intensive and extensive. He argues that MNEs need to invest in mechanisms to promote wide-bandwidth knowledge flows, without which widely dispersed and networked MNEs can suffer from internal market failures. By Rajneesh Narula.

8724995921_bee86978c3_zBeyond technological catch-up: An empirical investigation of further innovative capability accumulation outcomes in latecomer firms with evidence from Brazil’ draws on fieldwork evidence from pulp and paper firms in Brazil (1950-2010). This working paper examines in particular the outcomes achieved by latecomer firms from the accumulation of innovative capabilities. Unlike most studies, it explores outcomes in addition to technological catch-up and shows that firms can attain important performance outcomes by accumulating innovative capabilities. The empirical research contributes to the further understanding of the intricate relationship between innovative capabilities and outcomes, especially in latecomer firms. By Paulo N. Figueiredo.

Innovation and survival of new firms in Chinese manufacturing, 2000-2006’ analysed a dataset from more than 100,000 Chinese firms to explore the possible link between innovation effort (R&D) or innovation output (the share of innovative sales) and the firm’s duration of survival. The authors of this working paper found that innovative firms tend to survive longer, more for R&D than for introducing new products. The results suggest an inverted-U relationship between R&D or innovation output and long-term survival, indicating that too much R&D or product innovation can cause firms to die, perhaps because of excessive risk. Their study indicates that survival has a cyclical behaviour, and it varies across provinces. It also varies with ownership. State-owned firms have a higher hazard rte than privately-owned firms, which have a higher hazard rate than foreign-owned firms. By Pierre Mohnen and Mingqian Zhang.

Semiconductor factory, Shenzhen, ChinaGovernment support, innovation and productivity in the Haidian (Beijing) District’ examines whether the government support in favour of firms located in the Haidian district of Beijing, which includes the Zhongguancun Science Park, was effective in terms of innovation and economic performance. This working paper uses a dataset of 500 manufacturing firms drawn from a merger of the 2007 nationwide innovation survey and the Annual Survey of Industrial Enterprises databases from the National Bureau of Statistics. The authors find that among all firms (state- or collectively-owned, non-state- or collectively-owned and Hong Kong, Macau, Taiwan or other foreign-funded firms) that received direct government support for innovative activities only the non-state- or collectively-owned domestic firms invested more in innovation than the firms that did not receive such support. However, despite higher government support, domestic firms have lower labour productivity than foreign-funded firms, including those funded from Hong Kong, Macau, or Taiwan. By Can Huang, Yilin Wu, Pierre Mohnen and Yanyun Zhao.

Male use of parental leave in Luxembourg: Empirical analysis of administrative records’ investigates the decisions of fathers to take parental leave, with a focus on the opportunity cost of using such a scheme. Data for this working paper are based on anonymous administrative records of fathers working in the Grand Duchy of Luxembourg over a period of five years. The hypothesis was that fathers who experience a period of salary growth would be less likely to take parental leave for fear of a higher opportunity cost in terms of foregone salary-growth opportunities during the leave. While the relationship is not exactly linear, the study found that this is not necessarily the case. One possible interpretation for the unexpected result is that fathers prefer to take parental leave when they have reached a relatively higher and more stable position in their work, making them decide that they can afford the (possible) income-reduction associated with leave. By Nevena Zhelyazkova.

7984692236_5bfed039c4_zParental leave within the broader work-family trajectory: What can we learn from sequence analysis?’ This working paper illustrates how sequence analysis can be used to analyse work-family reconciliation strategies of parents and in particular the role of parental leave in these strategies. Using anonymous administrative records of mothers and fathers working in Luxembourg, the study was able to make a detailed, longitudinal analysis, providing a holistic approach to the question from the broader life-course view. Sequence analysis results also proved to be a powerful instrument for formulating further research questions. By Nevena Zhelyazkova.

by Howard Hudson and Sueli Brodin, UNU-MERIT Communications Officers. Images: UN Photo / P.Gorriz / E.Schneider; Flickr / MM-J / BASF / ILO Asia & Pacific / A.Nieto Porras