Global Banks or Global Investors? The Case of European Debt Flows

euro-1974711_1920[We’re pleased to welcome author Robert Sweeney of the University of Leeds. He recently published an article in Competition and Change entitledGlobal banks or global investors? The case of European debt flows,” which is currently free to read for a limited time. Below, Sweeney reflects on the inspiration for conducting this research:]

ccha_21_3.coverWhat motivated you to pursue this research?

It was part of my PhD. Initially I was examining capital flows in Europe from conventional perspectives and critiquing those approaches. This included a focus on unit labour costs, fiscal imbalances, and so on. I found there was already a quite large body of existing research that critically examined those accounts. That led me to consider more finanical-based explanations of capital flows. Having examined the data I felt that the emphasis on banks was unwarranted. Upon further investigation I became convinced that institutional investors are the driving force in capital markets in general, and debt-based capital flows in Europe in particular.

What has been the most challenging aspect of conducting your research? Were there any surprising findings?

The most challenging part of the research was finding the data. The paper relies on a variety of sources, many of which are pieced together by sifting through consultancy and industry reports. The most surprising thing about the paper was that the centrality of institutional investors in European debt flows had not been established previously. As the article is being published almost 10 years have passed since the crisis broke. A lot has been written on capital flows in Europe and much of existing research has built on or is some variant of previous work. Of course my work doesn’t reinvent the wheel, but I was surprised that nobody had taken my approach before.

What advice would you give to new scholars and incoming researchers in this particular field of study?

Be open minded. Don´t get too wedded to any particular theoretical framework whether you´re part of the consensus or a dissenting voice. Look at the data and see if a certain analytical framework is appropriate. Don´t try to shoehorn a theoretical approach in a context where it is not empircally supported. It can be difficult to realise that you were wrong about something. Rather than trying to defend your position to the hilt, see flaws in your argument as opportunities to learn something new. State your argument as clearly as possible. That sounds simple but all too often in social science research arguments are couched in unnecessary complexity. Economics rightly gets a hard time for mathematical rigour over substance, but the problem generalises across the social sciences. Rather than using complex mathematical constructions, research in other fields too often clouds its arguements in obscurantist language. So if you are reading an article and find it difficult to unpack, it´s probably not your fault.

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Euro photo attributed to NikolayFrolochkin. (CC)

The Internationalization of Commercial Real Estate Markets in France and Germany

[We’re pleased to welcome authors Gertjan Wijburg and Manuel B. Aalbers of KU Leuven/University of Leuven, Belgium. They recently published an article in Competition and Change entitledThe internationalization of commercial real estate markets in France and Germany,” which is currently free to read for a limited time. Below, Wijburg and Aalbers reflect on the inspiration for conducting this research:]

ccha_21_3.coverPolitical economists rarely look at real estate markets. Our research group at the KU Leuven, named “The Real Estate/Financial Complex” and funded by the European Research Council, studies the relationships between finance, real estate and the state in a range of countries, including France and Germany, the two typical examples of Continental European capitalist countries. In this paper, we look into the commercial investment markets of these countries. Fieldwork and data collection have been conducted during two extended research stays in Frankfurt am Main and Paris.

Our work is deeply informed by our empirical research and interactions with real estate and finance professionals. The challenging aspect of our work was to get wider access to real estate and finance professionals in Frankfurt am Main and Paris, two global financial centres, and interviewing these specialists, often in prime real estate locations. Commercial real estate investors have their own account of processes of internationalization in their daily work experiences, which are central to our article.

Our results show how the French state perceived the arrival of foreign investors in the 1990s as a potential threat to the French property companies and implemented a new tax regime that allowed these companies to launch publicly listed real estate vehicles known as a Société d’Investissement Immobilier Cotée (SIIC). As such, the French property sector could attract foreign capital and increase liquidity, while enjoying new tax advantages. The rise of the SIICs was a major driver of the French investment boom of 2003–2007. In 2007, another major reform followed: the new tax regime of Organisme de Placement en Immobilier (OPCI) would gradually replace the old one of SCPI and transform French investment funds into ‘hybrids’ that could invest both in listed and non-listed real estate, with investments from not only institutional investors but also the general public.

Due to the shocks of German reunification, the momentum for internationalization of commercial real estate arrived relatively late. Major reforms in the German property sector were not implemented in the 2000s. Between 2003 and 2007, American private equity and hedge funds entered the market and invested unprecedented amounts of capital in the German property sector. However, the traditionally dominant non-listed investment funds in Germany also responded. The German Spezialfonds were able to invest heavily because they collected capital from pension funds and insurance companies. In the aftermath of the GFC, the German state has introduced a new Investment Code to make the non-listed real estate sector stronger. Contrary to France, the introduction of the G-REIT in 2007 has so far made little difference; the German preference for non-listed real estate remains strong.

We hope that our work inspires other researchers to conduct similar projects. We recommend researchers working in related fields to participate in real estate fairs and congresses to meet and encounter potential interviewees.

 

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Book Review: Varietals of Capitalism: A Political Economy of the Changing Wine Industry

Image resultXabier Itçaina, Antoine Roger, Andy Smith : Varietals of Capitalism: A Political Economy of the Changing Wine Industry. Ithaca, NY: Cornell University Press, 2016.280 pp. $45.00, hardcover.

Royston Greenwood of University of Edinburgh recently published a book review in Administrative Science Quarterly. An excerpt from the book review:

The empirical story analyzed in Varietals of Capitalism concerns the events surrounding the 2008 decision of the European Union to significantly change the regulations governing the wine industry in Europe. Since that year, the EU has abandoned direct intervention in wine markets (the old and long-established policy was to subsidize distillation surpluses), used EU funds to “grub out” 175,000 hectares of uneconomical vines across Europe, revoked laws that prohibited specific techniques for wine production, and created simplified categories of wine. Using primarily qualitative data—documentary materials and interviews—collected from France, Spain, Italy, and Romania, the authors provide an account of these very significant institutional changes.

Current Issue Cover

The empirical story, however, is only the context for the authors’ primary purpose, which is to showcase a holistic theoretical framework that, they claim, “draws not only on original empirical research but also, more fundamentally, on a new standpoint in social science debates about economic change” (p. 2). As the authors put it, “our focus is on the efforts a wide range of socially structured actors make to build, maintain, dismantle, or even destroy the institutions that provide them with varying degrees of order and constraint” (p. 32). The framework that they offer (rather unfortunately named the “structured contingency” approach) “combines the tools of constructivist approaches to institutionalism . . . Bourdeau’s theory of fields . . . and a Weberian sociology approach to political work in industries” (p. 2). In presenting their framework, the authors repeatedly point out its superiority to four alternatives: actor network theory, sociological institutionalism, institutionalist economics, and regulationist economics. (A fifth alternative, historical institutionalism, is also mentioned.) “Put bluntly,” these “major theory-driven interpretations of change in the European wine industry are incomplete or wrong” (p. 4). So, no false modesty here!

You can read the rest of the book review published in Administrative Science Quarterly free for the next two weeks by clicking here.

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You can read additional blog content for Administrative Science Quarterly content from the ASQ Blog, as well as Editor Henrich Greve’s blog, Organizational Musings.

Is It Possible to Reduce Poverty and CO2 Emissions Simultaneously?

15489395937_f27a2e30e7_z[We’re pleased to welcome Denis Collins. Denis recently published an article in Organization & Environment entitled “Managing the Poverty-CO2 Reductions Paradox: The Case of China and EU” with co-author Chunfang Zheng.]

  • What inspired you to be interested in this topic?

We are greatly concerned about both the unhealthy amount of CO2 in the atmosphere contributing to climate change and poverty in developing nations. As a global community, we are quickly approaching an environmental tipping point that already contributes to social and political problems throughout the world, and threatens the human species. Also, as a global community, we need to do all that we can to help eradicate extreme poverty in developing nations. China has had tremendous success reducing poverty from 1990 to 2015, but in the process they have become, by far, the world’s largest CO2 emitter. This article examines the “Poverty-CO2 Reductions Paradox,” wherein reducing poverty through economic growth simultaneously increases carbon dioxide (CO2) emissions from increased production and consumption, at a time in history when CO2 emissions must be reduced to avoid climate change catastrophes. Which is the lesser of two evils, people living in extreme poverty or catastrophic climate change impacts caused by increased CO2 emissions? How should the Poverty-CO2 Reductions Paradox be managed at the national and international levels? These are the questions our article explores.

  • Were there findings that were surprising to you?

Key economic and environmental indicators tell a sad story. Economically, 1.0 billion people (14.5%) lived in extreme poverty in 2011, and India had Gross National Income per capita of only $1,610 in 2014. Environmentally, the 2001-2010 decade was the warmest on record, reflecting a 0.85°C (1.53°F) increase since 1880. Global CO2 emissions increased by 51% between 1990 and 2012, and CO2 atmospheric concentrations have increased from a steady level of 280 parts per million in the pre-industrial era to more than 400 ppm. Absent additional mitigations, preventative O&E_Mar_2012_vol26_no1_Cover_Final.indd2050 benchmarks will not be achieved. To put a human face on those impacted by this potential catastrophe, scholars and researchers need to look no further than the traditional undergraduate students we currently teach: they will be about 55 years old in 2050.

How do we escape this dangerous quagmire? A well-established alternative norm continually raised by China is that of fairness. Fairness claims have shaped Kyoto Protocol’s development and evolution. During the 1990s, it was considered fair to hold developed nations accountable for reducing their CO2 emissions, and to allow developing nations to use a carbon intensity, rather than an emission reduction, metric. Kyoto’s inability to generate international agreements that adequately limit carbon emissions is also rooted in fairness claims. All claims of unfairness and injustice associated the Poverty-CO2 Reductions Paradox must be acknowledged and engaged, rather than ignored or discounted. Table 4 summarizes the major unfairness/injustice claims raised in this article.

Addressing the injustices associated the Poverty-CO2 Reductions Paradox will entail international, regional, national, and sub-national regulatory engagement.    At the international level, the UN and WTO must become even more involved without threatening national sovereignties. Individuals tend to resist, or very slowly accept, externally imposed procedural processes and outcomes. Fairness and transparency are particularly essential because people employed in high-carbon industries and ancillary businesses will have to change their livelihoods, and those living high-carbon lifestyles must make adjustments. Regulatory policymakers must acknowledge the Table 4 injustices, empathize with those impacted, and commit to seeking justice. This process involves extensive dialogue within and between nations, wherein experiences are expressed and heard. Historically, this has been difficult to achieve due to tendencies toward autocratic abuse of political power and perceiving opposing viewpoints as threatening. Private party rule-making can be helpful input, even if often prone to participant biases.

The Kyoto Protocol, despite its defects, has fostered convergence between the EU and China’s environmental policies and processes. The challenge is resolving economic growth and environmental sustainability conflicts through win-win, integrative, and paradox approaches, rather than trade-off resolutions. Unfortunately, the behavioral outcomes to date are record high carbon emissions and temperatures. Incremental and drastic policy changes are required. Future economic successes in developing and developed nations are dependent on reducing CO2 emissions. Leadership from many societal sectors, including higher education, is essential.

  • How do you see this study influencing future research and/or practice?

The principle of fairness/justice is offered to guide efforts to resolve the paradox in a way that avoids irreversible climate changes projected to begin around 2050. Prominent stakeholder injustice claims are highlighted for future scholarship and policymaking considerations.

Even if affordable clean technologies were available to achieve low-carbon economic growth, integrative and 6558076321_81207b6dd7_z.jpgwin-win resolution approaches need to be undertaken to determine linkages among economic and environmental injustices to generate long-term justice benefits. Similarly, these resolution approaches need to be pursued to generate short-term justice benefits, such as protecting the poor from climate change related damages.

Business organizations have too often addressed the paradox between economic growth and the environment with a trade-off resolution approach strongly favoring economic growth to the detriment of the environment. More recently, some organizational leaders have been pursuing win-win opportunities. In the decades ahead, organizational leaders seeking competitive advantages will need to delve deeper into the tension points between profits and the environment, and develop integrative resolutions where their own economic growth and environmental performance are naturally balanced without favoring one over the other.

The regulatory rules and initiatives associated with the Poverty-CO2 Reductions Paradox must happen quickly. India, with 24% of its population living in extreme poverty, is following China’s lead. Despite already having some of the most polluted cities in the world, India’s energy minister stated in 2014 that (Harris, 2014, November 17): “India’s development imperatives cannot be sacrificed at the altar of potential climate changes many years in the future…The West will have to recognize we have the needs of the poor.”

Researchers must determine how to care for the needs of the poor in a way that does not threaten life on Earth for future generations.

The abstract for the paper:

This article examines the “Poverty–CO2 (carbon dioxide) Reductions Paradox,” wherein reducing poverty through economic growth simultaneously increases CO2 emissions from increased production and consumption, at a time in history when CO2 emissions must be reduced to avoid climate change catastrophes. Paradox theory and integrative social contracts theory are applied to help understand the evolving behaviors of China, the world’s largest CO2 emitter, and the European Union, a CO2 reduction leader, from 1990 to 2015 at the national and international levels. The environmental results of these activities have become species-threatening. The principle of fairness/justice is offered in order to guide efforts to resolve the paradox in a way that avoids irreversible climate changes projected to begin around 2050. Prominent stakeholder injustice claims are highlighted for future scholarship and policymaking considerations.

You can read “Managing the Poverty-CO2 Reductions Paradox: The Case of Chine and EU” from Organization & Environment free for the next two weeks by clicking here. Want to know all about the latest research from Organization & EnvironmentClick here to sign up for e-alerts!

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*Face mask image credited to Global Panorama (CC); Beijing smog image credited to egorgrebnev (CC)

Denis Collins (PhD, University of Pittsburgh) is a professor of management, Business School, Edgewood College, Madison, Wisconsin. His latest books—Business Ethics: How to Design and Manage Ethical Organizations (2012; John Wiley) and Essentials in Business Ethics: Creating an Organization of High Integrity and Superior Performance (2009; John Wiley)—provide practical “how-to” examples and best practices for improving an organization’s ethical performance. He has published many articles; conducted hundreds of business ethics workshops, talks, and consulting projects; and won several teaching and service awards.

Chunfang Zheng (PhD, Renmin University of China) is a professor of economics, Business College, Beijing Union University, Beijing, China. She is Second Director of the Department of International Economy and Trade, and teaches courses in macroeconomics and international economics and trade. Her research interests include international economics and trade, border tax adjustments, and sustainable development. She has published several articles and monographs in these areas, including Applicability and Application of Strategic Trade Policy in China’s Industries (2012; Economic Science Press).

 

Responding to Climate Change

A federal report released Friday warns that climate change will impact the everyday lives of Americans in coming decades, with extreme weather and climate events already taking their toll. The report, which can be downloaded here, is open for public comment starting today and scheduled to be finalized in March 2014, according to the Washington Post:

In a joint blog post Friday, White House science adviser John P. Holdren and Jane Lubchenco, head of the National Oceanic and Atmospheric Administration, wrote that it is aimed at Americans “who need information about climate change in order to thrive — from farmers deciding which crops to grow, to city planners deciding the diameter of new storm sewers they are replacing, to electric utilities and regulators pondering how to protect the power grid.”

O&E_Mar03_72ppiRGB_150pixHow are farmers perceiving and responding to climate change? How is global warming affecting controversy over nuclear energy? And why has the climate change debate become so polarized? Find out more about these issues in the following articles from Organization & Environment:

Responding to Climate Change: Barriers to Reflexive Modernization in U.S. Agriculture,” published by Diana Stuart of Michigan State University, Rebecca L. Schewe of Mississippi State University, and Matthew McDermott of Michigan State University in September 2012

Support for Nuclear Energy in the Context of Climate Change: Evidence From the European Union,” published by Fred C. Pampel of the University of Colorado in September 2011

Talking Past Each Other? Cultural Framing of Skeptical and Convinced Logics in the Climate Change Debate,” published by Andrew J. Hoffman of the University of Michigan in March 2011

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How do the World’s Nations View Nuclear Energy?

Fred C. Pampel, University of Colorado, Boulder, published “Support for Nuclear Energy in the Context of Climate Change : Evidence From the European Union” in the September 2011 issue of Organization & Environment. To read the other articles in this issue, please click here.

The abstract:

The relatively low-carbon impact of nuclear power plants and the concern over global warming have renewed both interest in and controversy over expanding nuclear energy. This study uses survey data from nations of the European Union to examine sociodemographic differences among individuals and national differences in levels and processes of support for nuclear energy. Results based on multilevel models for 27 to 29 European nations reveal relatively low support for nuclear energy, even among those concerned about climate change, but consistent patterns of determinants. At the individual level, high socioeconomic status tends to increase support for nuclear energy. At the national level, the presence of operating nuclear power plants in a country leads to higher public support. Both these results more strongly support arguments focusing on the importance of familiarity with the technology than arguments focusing on postmaterialist values. In addition, rightist political views increase support for nuclear energy, but political divisions prove particularly important in high-income nations with postmaterialist values.

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