The remarkable increase in FDI flows to developing countries over the last decade has focused attention on whether this source of financing enhances overall economic growth. We use a mixed fixed and random (MFR) panel data estimation method to allow for cross country heterogeneity in the causal relationship between FDI and growth and contrast our findings with those from traditional approaches. We find that the relationship between investment, both foreign and domestic, and economic growth in developing countries is highly heterogeneous and that estimation methods which assume homogeneity across countries can yield misleading results. Our results suggest there is some evidence that the efficacy of FDI in raising future growth rates, although heterogeneous across countries, is higher in more open economies.
This paper examines the impact of investments in modernization and innovation on productivity in a sample of firms in the global pulp and paper industry. This industry is important because it has traditionally accounted for significant amounts of employment and capital investment in North America and Europe. In contrast to much of the existing literature which focuses on the impact of R&D and patents on firms' performance and productivity, we examine data on actual investment transactions in four main areas of operations: (i) mechanical, (ii) chemicals, (iii) monitoring devices and (iv) information technology. We find that firms which made decisions to implement a greater number of investment transactions in modernization achieved higher productivity, and these estimated quantitative effects are greater than the impact of standard innovation variables such as patents and R&D. Investment transactions in the information technology and digital monitoring devices imparted a particularly noticeable boost to productivity. These results are obtained after controlling for other firm-specific variables such as capital-intensity and mergers and acquisitions. Two broad messages emerge from our study. First, firms' decisions to undertake investments in modernization and various forms of incremental innovations appear to be critical for achieving gains in productivity. While these may typically generate small gains on a year-to-year basis, they can compound to form meaningful differences in performance, productivity and competitive position across firms in the longer-run. Second, for some of the traditional industries like pulp and paper, R&D and patents seem to be particularly poor indicators of innovation and, more generally, how firms go about achieving gains in productivity. While this paper focuses on the pulp and paper industry, our broad framework and methodology is general and can be applied to understanding firms' strategies related to enhancing performance and productivity in a variety of industries. JEL Codes: D20, L20, L60, M10.
Information and communication technologies (ICTs) have been increasingly promoted as a key solution for comprehensive development, poverty eradication and the empowerment of historically disadvantaged groups, such as women and minorities in the Global South. ICT-based business initiatives, and e-commerce projects in particular, have been hailed as "potential goldmines" for women's empowerment. However, research and experience show that to be successful, projects must balance the need to overcome structural barriers to women's advancement with sensitivity to the limited space within which many women in the Global South navigate. In this paper, we review literature on ICT and empowerment of women, drawing upon several e-commerce/e-retailing projects as case studies to identify a set of best practices that underlie a successful project: 1) government and institutional support, 2) societal involvement, 3) training and empowerment, 4) expansion of market access, and 5) managerial best practices. We anticipate that the insights generated by this study will be useful both for purposes of effective program development and policy design. (c) 2008 by The Massachusetts Institute of Technology.
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