• A composite index of the creative economy with application to regional best practices

      Bowen, Harry; Moesen, Wim; Sleuwaegen, Leo (2006)
      This paper develops a “Composite Index of the Creative Economy” (CICE) for the purpose of benchmarking an entity's (e.g., country or region) creative capacity as reflected by it's achievement in three dimensions: Innovation, Entrepreneurship and Openness. To determine the weight each sub-dimension should contribute to the total value of the CICE, we introduce a novel method - endogenous weighting - that allows each entity to have its own unique set of “best” weights. This method addresses the issue of whether an entity's CICE score value reflects underlying capabilities (or lack thereof) or an “inappropriate” weighting of the underlying dimensions. Our endogenous weight method isolates achievement on the underlying dimensions as the source of a higher or lower CICE score value. In this paper we construct a value of the CICE for each of nine regions: Baden-Württemberg, Catalonia, Flanders, Lombardy, Maryland, Nord-Pas-De-Calais, Quebec, Rhône-Alpes, Scotland. A region's CICE value indicates its distance from “best practice” and can therefore be used to benchmark a region's creative capacity relative to other regions. In this respect, a focus of our analysis is the relative creative capacity of Flanders. We also examine the absolute and relative achievement of each region on each of the three underlying dimensions to identify specific areas of strength or weakness. The results indicate that Baden-Württemberg ranks highest in terms of creative capacity while Nord-Pas-De-Calais ranks lowest among the nine regions. Flanders ranks 3rd behind 2nd ranked Maryland. However, Flanders' rank masks that its CICE score value is 25% below that of Baden-Württemberg and 11% below that of Maryland, indicating a non-trivial gap in creative capacity between Flanders and “best practice.” On the three dimensions underlying creative capacity, Flanders ranks 2nd behind Baden-Württemberg on Innovation and Openness, but ranks 7th on Entrepreneurship (only ahead of Rhône-Alpes and Nord-Pas-De-Calais). Flanders' relatively poor ranking on Entrepreneurship reflects it's below average level of achievement on each of the three sub-dimensions of Entrepreneurship (ratio of newly established to existing firms, absence of a fear of failure, and venture capital as a share of GDP). This indicates that fostering and improving conditions for Entrepreneurship remains a challenge for Flanders compared to the other top ranked regions.
    • Corporate international diversification: the impact of foreign competition, industry globalization and product diversification

      Wiersema, Margarethe; Bowen, Harry (2005)
      Significant reductions in barriers to international commerce since the mid-1970s have resulted in markets and industries becoming increasingly integrated across nations. A key consequence of industry globalization has been substantially increased levels of foreign competition in the markets of most nations, and in particular in the U.S. marketplace. The changes in competitive conditions facing firms as markets and industries become more globalized are significant economic phenomena that can be expected to impact corporate strategy in general, and corporate international diversification strategy in particular. Despite increasing global economic integration, the impact of industry globalization on corporate strategy is a question that has been largely overlooked in both the strategic management and international business literatures. This paper seeks to fill this important gap by examining the role of both environmental and firm specific factors in shaping a firm's international diversification strategy. Specifically, we develop a theoretical framework for understanding how industry globalization, foreign competition, and firm product diversification would be expected to influence a firm's strategic choice of its level of international diversification. We then empirically examine for the predicted impact and importance of these factors in a panel data set of U.S. firms from 1987 to 1993. Our study provides the first empirical examination and evidence that industry globalization and foreign-based competition are statistically significant factors explaining the increased international diversification of U.S. firms. Keywords: Corporate Strategy, Globalization, International Diversification
    • Does IT matter where immigrants work? Traded goods, non-traded goods, and sector specific employment

      Bowen, Harry; Pedussel, Jennifer (Vlerick Business School, 2004)
      Immigrant employment often concentrates in non-traded goods sectors and many immigrants have low inter-sectoral mobility. We consider these observed characteristics of immigrant employment for the question of how immigration affects a nation's pattern of production and trade. We model an economy producing three goods, one is non-traded. Domestic labor and capital are domestically mobile but internationally immobile. Some immigrant labor is specific to the non-traded sector. Our model indicates that the output and trade effects of immigration depend importantly on the sector and nature of immigrant employment. Empirical investigation of the model's predictions indicates that trade and immigration are complements. JEL classification: C23, D5, F16, F22, J61, O15 Keywords: trade, immigration, non-traded goods, specific factors, panel.
    • European integration: the third step

      Bowen, Harry; Sleuwaegen, Leo (Vlerick Business School, 2004)
      A perception of declining EU competitiveness has intensified calls for structural reforms within the EU. This paper examines recent evidence on changes in relative EU competitiveness and considers the observed changes in relation to the evolving competitive environment facing EU firms during the past two decades. Our analysis suggests that recent declines in EU competitiveness reflect an adjustment (or lack thereof) within the EU in response to an evolutionary “Third Step” in the process of EU integration: global market integration. We find that, starting from the mid-1990s, the EU began to face unprecedented increases in external sources of competition. The rising competition from external sources has created pressures for EU firms to alter their organizational and product market strategies to meet the challenge of a globally integrating market. While many leading EU firms are found to have responded to this challenge, EU firms remain hampered by anachronistic EU product and labor market regulations. The growing calls for structural reform therefore reflect the increased external competitive pressure on EU firms as they attempt to respond to growing global competition and to thereby strengthen their global competitiveness. JEL Classification: D21, F02, F23, L10, O40 Keywords: Competitiveness, European Integration, Foreign Competition, Globalization.
    • Evidence and implications of zipf's law for integrated economies

      Bowen, Harry; Munandar, Haris; Viaene, Jean-Marie (2006)
      This paper considers the distribution of output and productive factors among members of a fully integrated economy (FIE) in which there is free mobility of goods and factors among members and whose members share the same technology. We first demonstrate that, within an FIE, each member's share of total FIE output and its shares of total FIE stocks of productive factors will be equal. If economic policies are largely harmonized across FIE members then this “equal-share” property implies that the growth in any member's shares of FIE output and factor stocks can be taken to be a random outcome. Building on Gabaix's (1999) result for the distribution of city sizes we argue that, if output and factor shares among FIE members evolve as geometric Brownian motion with a lower bound, then the limiting distribution of these shares will exhibit Zipf's law. We empirically examine for Zipf's law for the distribution of output and factor shares across two (presumably) integrated economies: the 51 U.S. states and 14 European Union (E.U.) countries. Our empirical findings strongly support Zipf's law with respect to the distribution of output, physical capital and human capital among U.S. states and among E.U. countries. These findings imply that models used to characterize the growth of members within an FIE should embody a key assumption: that the underlying growth process of shares is random and homogeneous across FIE members. JEL Classification: E13, F15, F21, F22, O57 Keywords: growth, economic integration, Zipf's law.
    • International and product diversification: their interrelationship and impact on firm performance

      Bowen, Harry; Wiersema, Margarethe (2007)
      Corporate strategic decisions regarding the international and product market scope of a firm's activities are the essence of corporate strategy, and how these choices in turn affect performance is the subject of a large body of research in the fields of international business and strategic management. When making these strategic decisions, managers are likely to take into account that these decisions are interrelated since they will require allocating a firm's fixed bundle of resources. Yet, the international business and strategy literatures have mostly treated these two scope decisions as independent strategies, and have also largely ignored the interrelated nature of these strategic scope decisions vis-à-vis their expected impact on performance. As a result, little is known about the nature of the relationship between these strategic choices - whether they are substitute or complementary strategies - or how they jointly impact firm performance. To address this important gap in our understanding of corporate strategy, this paper examines the joint and simultaneous nature of the relationships among these strategic scope decisions and firm performance in a unified framework. Our analysis serves to integrate prior international business and strategy research, and our model and empirical methods address a number of shortcomings of prior empirical studies. Our results indicate that the relationship between a firm's international and product market strategies and its performance is nonlinear, with performance first rising but then falling as the firm's international or product diversification rises, implying that the performance impact of these strategies is path dependent. Our results also provide the first evidence that, within the firm, international and product diversification are substitute strategies for performance. Keywords: Corporate Strategy, International Diversification, Product Diversification
    • Modelling limited dependent variables: methods and guidelines for researchers in strategic management

      Bowen, Harry; Wiersema, Margarethe (Vlerick Business School, 2003)
      Research on strategic choices available to the firm are often modeled as a limited number of possible decision outcomes and leads to a discrete limited dependent variable. A limited dependent variable can also arise when values of a continuous dependent variable are partially or wholly unobserved. This chapter discusses the methodological issues associated with such phenomena and the appropriate statistical methods developed to allow for consistent and efficient estimation of models that involve a limited dependent variable. The chapter also provides a road map for selecting the appropriate statistical technique and it offers guidelines for consistent interpretation and reporting of the statistical results.
    • National institutions and the allocation of entrepreneurial effort

      Bowen, Harry; De Clercq, Dirk (2005)
      This paper examines how the allocation of entrepreneurial effort within a country is influenced by the country's institutional environment. We hypothesize that the likelihood that entrepreneurs launch a growth-oriented start-up is associated with the institutional environment in which entrepreneurs are embedded. We test our hypothesis using data on 44 countries over the three-year period from 2002 to 2004. The data are drawn from two sources: the Global Entrepreneurship Monitor and the World Economic Forum's Executive Opinion Survey. Our findings indicate that the likelihood of a growth-oriented start-up is positively related to a country's level of human capital targeted at entrepreneurship and the level of regulatory protection, but is negatively related to the extent of corruption and mistrust in public officials. JEL categories: D21, M13, O49 Keywords: institutions, entrepreneurship, resource, allocation
    • The impact of foreign-based competition on firm diversification: a resource-based perspective

      Bowen, Harry; Wiersema, Margarethe (2003)
      The globalization of industries over the past two decades has resulted in domestic markets facing increasing inroads by foreign competitors. Utilizing resource-based theory, this paper examines how increased foreign competition impacts a firm's diversification strategy. Building on the important role of a firm's core competences as the basis for sustainable competitive advantage, we postulate that increased foreign-based competition, as measured by the degree of import penetration in a firm's core business industry, will engender a defensive response by the firm to protect its core business. This defensive response will in turn lead the firm to focus on its core business at the expense of non-core business activities with a consequent reduction in the firm's level of diversification. In addition, we conjecture that this increased focus and reduction in diversification will be greater the more attractive is the firm's core business to the firm and the more attractive is the firm's core industry. Our empirical analysis is conducted using a unique panel data set of both diversified and undiversified U.S. firms over the period 1985-1994. The special nature of the data sample raises important methodological and statistical issues which are addressed here by the use of a nonlinear TOBIT procedure. Our results indicate strong support for the hypothesized negative relationship between firm diversification and foreign-based competition. Moreover, we find significant evidence that this negative relationship is moderated by the attractiveness of a firm's core business industry, the profitability of the firm's core business and overall firm performance. These findings lend support to the resource-based theory of the firm and they suggest that the observed trend in corporate refocusing over the last decade has, to a significant extent, been driven by increased foreign-based competition.
    • The limiting distribution of production in integrated economies: evidence from US States and EU countries

      Bowen, Harry; Munandar, Haris; Viaene, Jean-Marie (Tinbergen institute, 2005)
    • The use of limited dependent variable techniques in strategy research: assessment and critique

      Wiersema, Margarethe; Bowen, Harry (2006)
      Since the early 1970s, Socially Responsible Investment (SRI) has grown from a curiosity and niche-market phenomenon in the financial world to become a global movement, which is embraced now in most countries around the world. The paper focuses on the development and practices of SRI in the United States and Europe. The aim is to explore the historical, cultural and political embeddedness of SRI. Based on second sources of information, it offers a comparative analysis of the development and current practices of SRI on both sides of the Atlantic and discusses the future trends for SRI. The paper shows that SRI movements in both regions present some differences in terms of definitions, actors involved, vocabulary and motivations, and strategies implemented. However, they also share a common underlying purpose and seeking similar goals of improving corporations' policies and practices on social and environmental issues. Key words: Socially Responsible Investment, Europe, United States
    • Zipf's law for integrated economies

      Bowen, Harry; Munandar, Haris; Viaene, Jean-Marie (Tinbergen institute, 2005)