This chapter outlines the creation and development of the Australian Future Fund (FF), showing how and why policy makers adopted this option to manage the challenges presented by the “good economic fortune” that occurred in Australia from the mid-1990s to 2010. It discusses the politics behind the governing structure of the FF, which is copied from its neighbor, New Zealand. Despite its initial emphasis on independence, political influence was inevitable when selecting and appointing the chairman of the Board of Guardians. The chapter examines the two key issues of “ethical investment” and “ethical operation” and shows the difficult balance of demands between diverse constituents; it identifies the space created by the expectation that the FF will behave in a similar fashion of all profit-maximization investors.
David T. Llewellyn
There is merit in having a diversity of ownership structures in a financial sector and mutuals and similar ownership models have a substantial contribution to make to diversity. The chapter considers the arguments in the UK in favour of conversion of mutuals to shareholder value institutions and reviews the outcomes. They are shown to have been largely bogus and have been found to be irrelevant. Members of converting institutions voted for conversion because the ‘windfalls’ implied an inter-generation transfer of wealth from previous and potentially future members to the current cohort. Comparison is made between the UK and other European countries with regard to conversions: in most other European countries such conversions are impossible because residual net worth is regarded as being held in perpetuity within the institution rather than a saleable asset owned by the current cohort of members.
Silvio Goglio and Panu Kalmi
The national cases of co-operative banking will be considered by pattern: credit unions (as in the UK and the US), decentralized networks (as in Germany, Italy, and Austria), and centralized networks (as in France, the Netherlands, and Finland). The analysis will consider the historical evolution that has characterized the different patterns with regard to national peculiarities (social and economic). We also discuss performance measurement in financial co-operatives and how the recent economic and financial crises have impacted their success vis-à-vis shareholder banks. We also consider corporate governance and regulatory challenges facing financial co-operatives. The present process of hybridization in the sector will also be taken into consideration as well as relaunched co-operatives in the twenty-first century.
Dynamic Capabilities, the Multinational Corporation, and Capture oF Co-created Value from Innovation
Christos N. Pitelis and David J. Teece
Extant explanations of the nature and scope of firms, such as transaction costs, property rights, metering, and “resources,” can be integrated into a more general capability-based theory of the nature and essence of the firm that recognizes the importance to the firm of creating and capturing value from innovation. The appropriability of returns from creative and innovative activity often requires the entrepreneurial creation and co-creation of markets and business ecosystems. Accordingly, market failure and transaction costs approaches need to be revamped to capture the essence of entrepreneurial and managerial activity that extends beyond the mere exercise of authority within existing firms and markets.
Andrew Pendleton and Andrew Robinson
The chapter reviews the development of new forms of employee ownership in Britain since the 1980s. It compares trust-based and direct forms of ownership, as well as hybrids of the two, drawing attention to the perceived benefits of each. The chapter then considers the influences on the development of these forms of ownership. It highlights the role of political factors within a broader context of economic change. Finally, drawing on a research project currently under way, it discerns four main circumstances in which employee ownership is created, such as privatization and business succession. It is noted that those involved in ownership conversions varies by these circumstances. This in turn reflects on the forms of ownership and governance adopted.
Stephen P. Magee and Christopher S. P. Magee
This article surveys the literature on the political economy of trade policy. The discussion is organized around five propositions. The first is just a statement about the ways in which interest groups can influence government policies. The second proposition is the central point made in the political economy literature, and it explains the existence of policies that transfer income within a country while clearly reducing national welfare. Proposition three discusses how interest groups will be organized in their lobbying over trade policy. The last two propositions are more recent and more controversial. Both of these effects cause the weakening of protectionist forces globally. In proposition four, the article discusses the evidence that globalization has weakened the autonomy of nation states.
Alex Nicholls and Benjamin Huybrechts
This chapter outlines the history of the Fair Trade movement, and discusses several key issues and challenges it faces. It then explores the relationship between Fair Trade and the co-operative and mutual movement, considering the close connection between the two, both in terms of producer groups and of wholesale organizations. Both share key elements of participation and empowerment and pay careful attention to economic development and fair governance. The development of Fair Trade globally is then examined, and some of its wider impacts, such as fairer supply chain practices, are explored. The authors conclude by affirming that Fair Trade is more than just a re-actualization of the co-operative idea
This chapter traces the history of cross-border joint-stock banking over roughly the last 100 years. Putting that history into its larger political, social, economic contexts may help shed light on our financial architecture’s social and economic significance, and even its sustainability. Despite recent interest in multinationals and banking, less is known about the cross-border management of financial firms than about that of other sectors. This chapter argues that during this period cross-border banking morphed from an activity conducted primarily by legally separate entities and on a comparatively small scale to one that is dominated today by megabanks that internalize a wide range of banking services in many countries and in most money-centres. It is a complex story, involving regulatory, technological, and political change in specific nations and among them.
Lucia Leung-sea Siu
Thomas Clarke and Martijn Boersma
Many of the great international corporations of the past have now largely been disembodied into global value chains. This chapter considers the implications of the continued advance of global value chains as the mode of production for an increasing number of goods and services, and how this has impacted considerably on the economies and societies both of the developed world and the emerging economies. In turn, this has transformed corporations themselves into largely finance, design, and marketing agencies which are often distant from the production and operations which they ultimately control. While the globalization of production has brought employment and economic growth to many developing countries, it is also associated with exploitative employment relations, environmental irresponsibility, and recurrent ethical dilemmas. While corporations may disaggregate production in distant networks of contractors, they cannot as readily disaggregate the moral responsibility for the social and environmental impact of their mode of production.
This article aims to explain trade flows in terms of the gravity equation (GE). The reason for focusing on GE is twofold. The first is that GE, unlike other frameworks, has had great empirical success in explaining bilateral trade flows. For a long time, however, GE was a child without a father in the sense that it was thought to have no theoretical support. Since the late 1970s, this state of affairs has changed radically. Now, the gravity equation has strong theoretical support and can be derived from a variety of models of international trade. The second is that GE can be used to sort out alternative hypotheses of international trade.
Motivated by data on the impact of stock compensation, many companies wish to provide their employees with an ownership interest in their stock. Whether they use stock options, direct share ownership, or other approaches to employee ownership, those companies must adapt their plan design to the specifics of labour law, securities’ requirements, tax regimes, privacy laws, and other issues in various countries. This article suggests guidelines for companies to design their plans by reviewing best practices in equity compensation, beginning with single-country employers and then expanding to companies with international employees. Companies are wise to begin with their ideal plan design and then adapt it to reflect legal requirements, taking into account that some companies must accommodate the requirements of multiple countries. The form of employee stock compensation will affect the development of ownership cultures at these companies, and therefore the impact of employee ownership on the companies’ performance.
This chapter tracks the volume and distribution of international investment since the mid-nineteenth century. The first part presents quantitative evidence on the volume of capital flows since the early nineteenth century. The second section focuses on the golden age of global capital mobility and the determinants of capital flows and sovereign risk during the first era of financial globalization in the late nineteenth century The third section deals with the experience of the twentieth century. The last part discusses, from the perspective of economic history, the economic effects of capital flows, in particular the role of capital flows in economic development and the link between capital flows and financial crises.
International expansion by small- and medium-sized enterprises (SMEs) has long been a subject of research. The fact that internationalization begins earlier in a firm's life cycle has attracted attention to international new ventures as ‘a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries’, ‘early internationalizers’, and ‘born global firms’. This article analyzes the internationalization of SMEs and examines the role of entrepreneurship in the literature. McDougall and Oviatt define international entrepreneurship as ‘a combination of innovative proactive and risk-seeking behaviour that crosses national borders and is intended to create value in organizations’. This definition provides a wide scope for research but also poses problems in terms of the level of the analysis and difficulties with respect to outcomes that are so far unresolved.
This chapter surveys the development of the world’s leading financial centres since the early nineteenth century, with particular attention to their working mechanisms, international influence, competition and cooperation, and rise and decline. In addition to the conditions for the development of international financial centres identified by contemporary economic and financial literature (such as political stability, strong currency, light tax burden, skilled workforce, efficient communications, and so on), the chapter emphasizes, from a long-term historical perspective, other factors of success and failure, in particular the economic power of the country hosting an international financial centre; the effects of major wars which, even more than financial crises, have affected the destiny of financial centres; and path dependency: once established, most financial centres have experienced remarkable longevity. From this perspective, it is not surprising that the financial debacle of 2008 has not fundamentally altered the hierarchy of international financial centres.
This article provides a selective, critical survey of the academic literature on the financial management policy of multinational enterprises (MNEs). The focus of much current research interest can be captured in two major themes which also dominate this analysis. The first is financial management policy in relation to the increasing volatility of real and financial asset prices in the international financial environment within which MNEs operate. This dictates one theme of this article: the impact of financial risk, in particular market risk, on MNEs and an appraisal of evolving financial risk management practices. The second theme is international market segmentation. The globalization of international business activity has evolved along with a trend towards increasing financial market integration, particularly in capital markets.
The International Monetary Regime And Domestic Political Economy: The Origin Of The Global Financial Crisis
Chile has managed to avoid the St Augustine Syndrome of fiscal procrastination. This has required the prudent management of both fiscal flows and stocks. On the one hand, a fiscal policy rule has permitted Chile to save in sunny good times and to spend extraordinary resources on rainy days. The stabilizing fiscal policy rule has been key to smooth fiscal expenditure and avoiding the economic sins present in several countries: those of deficit bias and procyclicality. On the other hand, the management of fiscal stocks through its sovereign wealth funds (SWFs) has transformed Chile into an international example of transparency, good management, and responsibility. This sounds easy but it requires both political courage and economic responsibility. Several lessons could be learned from this which would be useful for other countries in any stage of development.
The Norwegian Government Pension Fund Global and the Implications of its Activities for Stakeholders
Geoffrey Wood, Noel O'Sullivan, Marc Goergen, and Marijana Baric
The chapter discusses the role and impact of the Norwegian Government Pension Fund Global (NGPFG) (which has some $873 billion of assets), explaining its objectives, its characteristics and also providing some details of the extent of its investments, specifically investments in firm equity. It discusses the NGPFG’s behavior as a shareholder that seeks to influence corporate behavior from within, the high levels of transparency exhibited and the ethical standards expected from the NGPFG and its role in the broader scheme of international politics/relations. The chapter concludes with thoughts for further research on the NGPFG and its activities.