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Focusing on firm-level behavior in the US pharmaceutical and agrochemical industries, Chapter 4 provides evidence that companies do indeed seek stricter standards on their own, out-of-patent products in order to boost sales of newer, patented substitutes, even providing negative information about their own products in pursuit of this goal. In order to show this, the chapter leverages petitions submitted by pharmaceutical and agrochemical companies to the US FDA and EPA, respectively, requesting that the agencies place stricter standards or all out bans on products that these companies themselves developed. In the case of the pharmaceutical petitions, the chapter provides evidence that all but one of the requests for a product ban has targeted a drug that is about to lose or has already lost patent protection and for which the company had a more recently patented substitute. This suggests that such requests are not publicly minded attempts to ensure dangerous products remain off the market but, instead, are strategic gambits to boost profits of exclusively produced alternatives. In addition, the chapter provides a statistical analysis of petitions submitted by agrochemical companies and farm groups to show that, whereas farmers are no more likely to seek stricter standards on out-of-patent pesticides, agrochemical companies systematically request stricter standards on these products while requesting more lenient standards on products still enjoying patent protection.
Tax evasion can be considered as a systemic fraud in which different parties such as taxpayers, lawyers, banks, and multinational entities interact. Here, accountants are key agents owing to their legal liability in tax reporting and their knowledge on accounting rules. The present study analyzes the role that accountants play in firms tax evasion by presenting evidence from a randomized field experiment carried out with microenterprises in Ecuador’s tax system in early 2016. The article evaluates to what extent a notification of accountants is more effective in increasing tax reporting than a notification of taxpayers, through five different treatments. The results show that simultaneous persuasive notifications of both accountants and taxpayers were the unique treatment that significantly increased firms’ declared income tax. Furthermore, it was shown that penalty notifications of accountants, rather than taxpayers only, were the most significant treatment at reducing revenue underreporting.
Despite agreement on many points, including our shared insistence that ‘corporation’ and ‘firm’ are different concepts, Jean-Philippe Robé still maintains that they are mutually exclusive: no corporation is a firm, and no firm is a corporation. In contrast, we follow standard nomenclature when we point out that all (business) corporations are firms, but some firms are not corporations. We show here that this is a standard practice among lawyers writing in leading law journals and note that Robé seems to have abandoned the task of defining the firm.
How do coalitional dynamics matter for the capacity of states to maintain social inclusion in coordinated models of capitalism? Taking its departure in scholarship emphasizing the influence of employers on the extent of state intervention in post-industrial economies, this paper argues that employer influence depends on which actors they team up with – unions or parties. If unions depend on employers for their organizational influence in a policy field, unions become a strong coalitional partner for employers in weakening demands for inclusiveness from the parliamentary arena. Conversely, if unions have influence independent of any coalition with employers, both unions and employers are likely to team up with political parties aligned with their preferences. This makes the level of inclusion resulting from increased state intervention more fluctuating, depending on who holds government power. A comparative study of reforms of Danish and Austrian vocational education institutions corroborates the empirical purchase of the argument.
The Verein der am Caffeehandel betheiligten Firmen, an association that grew to include all of Hamburg-based coffee traders, was established in May 1886. By 1939, the association was completely subjugated to the will of the Nazi regime, and it collapsed within the first few weeks of World War II. In the postwar period, the coffee traders of Hamburg were largely regulated by the Allied occupying forces, and this often led to undesirable circumstances, including internal competition. This chapter looks at the evolution of Hamburg coffee traders and how they functioned in the global market from the nineteenth through the late twentieth centuries. It considers the history of the Hamburg coffee traders, from the turbulent life span of the association to the challenging relationship between the Hamburg coffee traders and the Allied forces in West Germany and the global coffee moguls of the 1980s. The chapter analyzes the factors that contributed to the association’s downfall, including shifting worldviews, international market upheavals, and strong state intervention. Primary sources consulted include meeting minutes, news articles, legal documents, annual reports, and commission transactions.
China after Mao is typically characterized as a country where economic opportunities are based on merit instead of ideological conformity. However, the salience of ideology has grown under the rule of Xi Jinping. Using a large-scale resume audit experiment and a conjoint survey experiment of hiring managers in China, we find that firms in China do not reward job candidates for expressing conformity to the ideology of the regime, but job candidates who express support for Western democracy are less employable. Results suggest that firms in innovative industries designated as strategically important by the Chinese regime (e.g., artificial intelligence) penalize support for Western democracy by the largest magnitude while the remaining firms in innovative industries do not penalize political non-conformity.
Global law firms and their prominent postion in the investment arbitration market is under-appreciated; yet there is a sound hypothesis that law firms seek to establish and maintain their social capital in the arbitration field in a similar manner as individuals such as arbitrators and counsel, as was captured in Dezalay and Garth’s pioneering study. Building on the social networks of arbitrators, this study focuses on the relationships between the most influential arbitrators and the most influential law firms in the system and how these relationships might create real or perceived conflicts of interest issues for the ISDS system. Using mixed methods – integrated network, statistical and doctrinal analyses – the chapter documents how the law firms have gained a central position in the ISDS network by establishing strong relationships to leading arbitrators. The author finds that the top law firms have positioned themselves as ‘gatekeepers’ to the ISDS system, in particular in terms of distribution of cases among potential arbitrators and the acceptance of new arbitrators, and discusses possible impacts on the perceived independence and legitimacy of the ISDS system.
In his recent book on Property, Power and Politics, Jean-Philippe Robé makes a strong case for the need to understand the legal foundations of modern capitalism. He also insists that it is important to distinguish between firms and corporations. We agree. But Robé criticizes our definition of firms in terms of legally recognized capacities on the grounds that it does not take the distinction seriously enough. He argues that firms are not legally recognized as such, as the law only knows corporations. This argument, which is capable of different interpretations, leads to the bizarre result that corporations are not firms. Using etymological and other evidence, we show that firms are treated as legally constituted business entities in both common parlance and legal discourse. The way the law defines firms and corporations, while the product of a discourse which is in many ways distinct from everyday language, has such profound implications for the way firms operate in practice that no institutional theory of the firm worthy of the name can afford to ignore it.
This article asks whether firms should exempt employees when they object to elements of their work that go against their conscience. Fairness requires that we follow the rules of an organization we have joined voluntarily only if these rules express mutual advantage. In corporations, I argue that subordination and exemption provides for mutual advantage better than subordination plus right of exit. This is because agents want to protect their conscientious convictions, even in hierarchical organizations geared towards efficient preference satisfaction. Thus exemptions should be granted in unforeseeable circumstances, provided the costs are limited.
Political economists have paid increasing attention to distinctions between exporting and nonexporting firms, particularly with regard to their preferences on trade policy liberalization. A multitude of past studies focusing on economically advanced democracies characterized exporters as a small, elite group of large and highly productive firms, but this profile of a prototypical exporter is not necessarily representative of the body of firms operating under different domestic contexts. Using current and methodologically consistent cross-national surveys of firms conducted by the World Bank, this paper re-evaluates the link between certain firm-level characteristics and firms’ propensity to export, taking into account how national-level political, economic, and geographic conditions affect these relationships. The pooled sample of firms from approximately 100 countries spanning different political regimes and levels of development confirms that, generally speaking, exporters are large, productive, and innovative. However, in less democratic and less developed settings, productivity and innovation do not appear to be a prerequisite to export orientation. When developing generalizable theories of firms’ participation in the policymaking process, we must therefore be careful not to treat export behavior as an unqualified predictor of pro-free-trade attitudes.
Moving from politics to economics, this chapter investigates the role of Islam in the success of an Islamic-based business association operating in Turkey. MÜSİAD, the Independent Industrialists’ and Businessmen’s Association, was founded to bring together small- and medium-sized enterprises based in Anatolia who, because of their size and their lack of political connections, struggled to succeed in Turkey’s volatile, statist economy. Since its foundation, MÜSİAD seems to have helped these small businesses grow into “Anatolian Tigers,” apparently outpacing non-member firms. While existing theories of identity-based trade would suppose that MÜSİAD’s success rests in its ability to support a reputation mechanism among member firms or, alternatively, because of its new-found political connections to the AKP or privileged access to Islamic micro-credit, I find little empirical support for these hypotheses. Instead, using data at the firm level, I show that MÜSİAD firms succeed by relying on long-term “quasi-integrative” relationships among members, relationships which mimic the benefits of vertical integration enjoyed by larger firms. More specifically, this quasi-integration serves to protect MÜSİAD members during periods of economic volatility, although it proves to less efficient under more stable conditions, including during the period of AKP rule.
This chapter presents the empirical setting in Russia and then introduces and describes the data used to test the main arguments throughout the book. First, I describe how businesspeople became attracted to running for office in Russia since the fall of the USSR and defend my focus on regional legislatures as the best level of government to study their candidacies. Next, I document the firm-, candidate-, and region-level data sources and describe the Python algorithm used to match candidates with firms. I then present summary statistics about the types of candidates, firms and sectors connected to businessperson candidacy in Russia from 2004–2011.
Chapter 5 focuses on the domain of international trade. In this chapter, we claim that states often withhold economic information that is essential for adjudicating trade disputes because they fear harmful reactions by market actors. We demonstrate that properly designed international organizations can ameliorate this problem by receiving and protecting such information. After formalizing our theory, we assess our hypotheses using new data on information sharing with the World Trade Organization. We show that key reforms designed to safeguard sensitive information increased the provision of this information and boosted trade cooperation in relevant industries. We conclude by discussing how solving this pervasive issue puts international trade institutions in tension with the normative goals of transparency and accountability.
In Chapter 7, we focus on the domain of foreign direct investment (FDI). We claim that states often refrain from sharing sensitive economic information, even though it can be important to adjudicating investment disputes. We demonstrate that properly designed IOs, such as the International Centre for Settlement of Investment Disputes (ICSID), can ameliorate this problem by receiving and protecting sensitive information. We assess our hypotheses using new data on specific pieces of information shared – along with information withheld – from this institution. Specifically, we pair a measure of redactions in publicly released panel reports with qualitative case evidence. We show that key reforms designed to safeguard sensitive information increased the provision of this information and boosted FDI, especially in areas where sensitive information is particularly common. We conclude the chapter by discussing how solving this pervasive issue puts international investment institutions in tension with the normative goals of transparency and accountability.
Policies to mitigate global climate change entail significant economic costs. Yet a growing number of firms lobby in favor of regulation to mitigate carbon emissions. Why do firms support environmental regulations that directly increase production costs? This question is all the more puzzling in a globalized economy where regulation may undermine the competitiveness of domestic firms at home and abroad. By imposing differential costs on participants in the domestic market, policies designed to mitigate carbon emissions shift market share toward firms with low anticipated adjustment costs. I develop and test a model of climate change policymaking in the presence of market competition and open borders. Heterogeneity in adjustment costs induces a preference for regulation among low-cost firms. Firms facing import pressure—or export competition—may prefer stringent regulation if costs are sufficiently asymmetric. Firms embedded in global value chains also benefit if regulation raises the costs of domestically produced intermediate goods.
An introduction of the field of economics and its place as a framework to understand human behavior. This overview is used to explore the ideas of violence, kinship, radicalization, entity, and organizing structures in communities.
We briefly discuss the rationale and the premises for the theoretical model of the book and how does our theoretical model relate to the existing and related literature. The model describes an economy with an oligopolistic industrial sector and our purpose is to analyze the interactions between the market structure and the macroeconomy – in particular, how does the equilibrium among the oligopolistic firms impact the macroeconomy and how does the macroeconomy impact back on the equilibrium among the oligopolistic firms? We set the premises of the whole work, exploring the theoretical pillars of the relationships between the industrial structure and the macroeconomy.
This paper identifies recurrent patterns in the political activity of American corporations that support trade. These firms have made public coalitions a central element of their pro-trade activities, and their collective efforts vastly outstrip those of trade's corporate opponents. This superiority in organization is paired with dramatically greater volumes of lobbying and campaign contributions. I explain these striking divergences by integrating collective action theory into a firm-centred model of trade politics: the heavy concentration of gains from trade among a small number of firms makes both individual and collective political action easier for pro-trade firms than for producers opposed to trade. This explanation is supported in panel analysis of firms’ participation in pro-trade coalitions, which shows that size, multinationality, and heterogeneity in global networks of production and sales drive participation in pro-trade groups. Globally engaged firms have supported trade by matching pro-trade preferences with highly organized political action.
The birth and death of firms is one of the main features of the business cycle. Yet mainstream DGSE macroeconomic models mostly ignore this phenomenon, thereby excluding any potential impact of economic policy on the probability of the birth and death of firms. Those DGSE models that do allow for this phenomenon do so at the cost of drastic simplifications, which effectively rule out causal links between the strategic interaction of industrial firms and the macroeconomy. This innovative new book develops a bottom-up, agent-based framework that shows how strategic interactions at the level of oligopolistic firms, and even at the level of individuals, affect entire industrial sectors and the equilibrium of the macroeconomy. It will appeal to academic researchers and graduate students working in computational economics, agent-based modelling and econophysics, as well as mainstream economists interested in learning more about alternatives to DGSE models in macroeconomics.
What determines whether or not firms lobby on the same policy issues? Scholars offer two broad answers to this question. Firms that are (1) similar or (2) connected through interorganizational ties target the same policy issues. In this article, I argue that the co-occurrence of these two conditions produces the opposite outcome, namely a tendency to lobby on different issues. This expectation draws on ideas from collective action theory and the literature on issue niches. From these, I derive the following assumptions: similar firms share political objectives and they should, when possible, act collectively by jointly delegating their lobbying activities. The reason for doing this is that it allows them to focus on their issue niches. However, the ability to delegate hinges on coordination and monitoring, which is facilitated by interorganizational relations. To test this proposition, I study the largest American corporations. The dependent variable is activity overlap, a measure of the extent to which firms lobby on the same issues. According to expectations, activity overlap is reduced when firms operate in the same industry and, simultaneously, enjoy favorable conditions for social interactions, such as a concentrated market structure. These results lend support to collective action theory.