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Charlie Karlsson, Andreas P. Cornett and Tina Wallin

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Ossi Pesämaa and Martin Svensson

Principal–agency theory has influenced the formation of corporate boards worldwide. However, the viability of such an outsider-owned model has also been questioned. Weak empirical support between the structure of corporate boards and the performance of firms, and examples of bankruptcies in companies such as Enron, Lehman Brothers and Worldcom, raise doubts about the efficiency of boards. Many Asian countries are dominated by another type of model – insider governance models – relying on families and close relationships instead. Based on the central tenets of principal–agent theory and macro-level data (2006–14), we analyse differences in board efficiency between emerging economies in Asia and western economies. The findings unveil a ‘cultural effect’ where board efficiency better predicts the insider-orientated governance model that is prevalent in eastern economies. The viability of principal–agency theory as a unifying model is discussed, and then practical implications and recommendations for further research are outlined.

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Gary Cook, Yevgeniya Shevtsova and Hans Lööf

The chapter studies the impact of local and global external knowledge on the innovativeness and productivity of the multinational corporations across the UK. Using the global openness of a firm’s regional industry and its regional economy as proxies for global knowledge flows, the chapter provides new evidence of local and global knowledge spillovers. We find the evidence of positive cluster effects for both strength in the firm’s own industry and the scale and diversity of the industrial base in the firm’s NUTS2 area. We also find that the presence of foreign multinational enterprises (MNEs) in the firm’s line of activity and NUTS2 area has a negative effect on both its patenting and productivity growth. The impact of access to knowledge-intensive professional services is positive for foreign MNEs, except for the high-technology establishments, and positive and significant for the productivity growth in domestic MNEs.

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Trudy-Ann Stone

One of the most salient features of the modern economy is the globalization of production, and one key actor contributing to this development is the multinational firm. Understanding where multinational firms locate and how they operate is at the heart of academic disciplines such as international business and, more recently, international trade. An important factor shaping the location decision is the role of bilateral distance between the home and host countries. In particular, researchers have shown that cultural, institutional, geographical and economic distance between home and host countries all have a bearing on the firm’s location decision. However, ongoing developments call into question current understanding of the role of bilateral distance. This chapter reviews the literature on the effect of bilateral distance between the home and host countries on the location behaviour of multinationals, highlighting key areas for future research to address.

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Yanagiya: one of the best-practice manufacturing SMEs in Japan

Implications for Regions and Industries

Makoto Hirano, Mitsuhiro Kurashige and Kiyonori Sakakibara

Yanagiya Machinery Co. Ltd was initially involved in processing local fish to steamed fish paste, as one of the small regional enterprises in Japanese traditional craft-like industries, over 100 years ago. However, they have recently grown to be a medium-sized enterprise with over 150 employees and annual sales of over 4 billion yen. Their current business areas are designing, manufacturing and selling machines for producing processed foods – mainly steamed fish paste. Nowadays, they are developing and exporting machines for a variety of manufacturing needs within the processed foods industry. This chapter describes how they have shifted their operations to such a growing market domain and how they have developed original technologies with competitive competence. Their experience of transforming the business could be instructive to other regional small and medium enterprises (SMEs) in declining manufacturing industries.

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ICT as a driver of innovation: a life-cycle approach

Implications for Regions and Industries

Ola Olsson

This chapter is focused on how the information and communication technology (ICT) context has nourished the industrial dynamic literature stream when it comes to the innovation process. It does so by using a life-cycle approach on key node papers with a specific focus on interaction and collaboration activates between ICT firms during the past decades. According to the study these activities have nourished the process in different stages of the innovation life-cycle. In addition, choice of learning strategy seems to decide the strength of relationships and ultimately the potential magnitude of innovation and technological change. The practical implication is that ICT firms seem to have moved away from the vertical strategy of doing it all in-house. Instead, there are several indications of an open way of working which push the innovation process forward.

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Amjad Naveed

The major contributions within the field of urban studies are biased towards large cities, and the effect of creativity and knowledge on the development of big metropolitan cities and regions have been emphasized. However, very few studies have recognized the available potential of small and medium-sized cities (SMSCs). This study identifies the key determinants (from existing literature) that are required to implement the knowledge-based strategies in SMSCs. Moreover, what are the important sources of growth in SMSCs? The findings of this study show that the role of local authorities, support from urban governments, community engagement, available endogenous resources, and amenities are the key factors that are required to implement the knowledge-based strategies in SMSCs. Furthermore, the creative workforce, entrepreneurship, innovation, technology and higher educational institutions are the important determinants of growth in SMSCs.

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Georgeanne M. Artz, Zizhen Guo and Peter F. Orazem

We review the literature on rural firm entry and survival, and summarize key findings from our own recent work on this topic. Our research suggests the location choices of entrepreneurs are tied to an unobservable match between the entrepreneur and the location of the venture that enhances firm productivity and increases survival in both rural and urban places. We conjecture that entrepreneurs have place-specific human capital that affects firm entry and plays a role in firm exit and succession. In thin, rural markets, the probability of finding another entrepreneur with the same location-specific skillset to purchase the firm is low, and there are fewer alternative uses for the assets in the market. As a result, rural firms face a type of asset fixity problem which reduces exit, even as market condition lower profitability. This implies a role for place-based economic development and for rural businesses transition policies.

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Ozan Hovardaoğlu

Conflicts between generations and the effects of these challenges represent a specific field of research in economics, which seem to share a common focal point. They either focus on the problem of the generation gap in single economic organizations or on the problem of succession in family firms. In this chapter, however, I attempt to identify how local development experiences are influenced by the transitions from predecessor generations to their successors. The influences of generational transition on the local pathways of development are analysed through the local development experience of the city of Kayseri in Turkey. It is found that generational transition deeply affects local institutional structures, which sometimes results in institutional tensions that negatively influence economic development efforts, but sometimes results in construction of new institutions that create a more productive economic climate.

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Michael Olsson

Distance-friction parameters are often used to calculate accessibility and potential measures, used as explanatory variables in other studies. In this chapter, two forms of the constrained gravity model are estimated to capture proximity-preference and distance-friction parameters, the effect of house prices and wages present in the commuting pattern in Sweden. The first purpose is to investigate distance-friction parameters over time. This investigation is fruitful, since one major deviation from earlier results is observed. The second purpose is to investigate if adding wage and housing-expenditure constraints affect the distance-friction parameters. It turns out that these additional constraints have only minor effects on the distance-friction parameters. The main conclusion is that the distance-friction parameters change over time. In order to have accurate distance-friction parameters, such investigations should be repeated from now and again. In such investigations, the base form of the model is sufficient.