Tuesday, June 25, 2013

International Product Cycles, East Asian Growth, And Effect MNE Strategies

[Author: William Rapp, New Jersey Institute of Technology]

The systematic migration or “Flying Geese” pattern of shifting competitive advantage in particular industries from one country to another first proposed by Kaname Akamatsu for the global textile and apparel industries and then extended by Ray Vernon and others to additional industries including steel, ships and automobiles gained much attention in the 1960s through the 1990s as Japan, Taiwan, Korea, the ASEAN Nations, and finally China sequentially entered and exited industries such as textiles, apparel, toys, electronics, steel, ships and cars. However as China has emerged over the last decade and a half as the world’s factory the International Product Cycle or Flying Geese theory seemingly lost its relevance as analysts appeared to assume China’s export competitiveness in low wage industries would continue indefinitely. But perhaps nothing continues indefinitely.

That is more recently China is experiencing the same economic forces in terms of increasing per capita incomes, labor skills, wages, land prices and price inflation as its predecessors such that textiles, apparel and similar low skill low pay industries after first shifting to lower wage areas within China itself are now migrating to lower wage countries such as Bangladesh, Cambodia or Indonesia. Thus China now too seems to be following the same “Flying Geese” pattern.

Click here to download the complete paper.

Risk Management and Contractual Obligations

[Author: William Rapp, New Jersey Institute of Technology]

Many financial analysts, policymakers and regulators have forcefully argued that over $700 trillion in derivatives and other contractual risk management tools are a clear and unambiguous good for financial markets and economic growth because they transfer risk from organizations and individuals wanting stability and less volatility managing principal and cash flows. This wisdom argues risk is shifted to those better able to handle these effects while also dispersing it across a wide range of participants. The recent global financial crisis brings these claims and assumptions into doubt. Indeed these financial instruments may add to the amount risk that must be managed and regulated rather than just transferring it to stronger hands. This paper explains how this occurs and why laws and regulations requiring more capital and the use of exchanges may not be enough to limit contractual exposures and related systemic risk.

Click here to download the complete paper.

Monday, June 24, 2013

Print edition of Boil, Bubble, Toil & Trouble now available

Boil, Bubble, Toil and Trouble is the outgrowth of a project at the New Jersey Institute Of Technology’s School of Management funded by the Leir and Ridgefield Foundations that has evolved into the Leir Center For Financial Bubble Research dedicated to the study and understanding of Financial Bubbles. The material and ideas for the chapters in this book were first presented at a Conference organized by the Leir Center at NJIT and supported by the Leir Retreat Center. However the ideas and concepts they contain have benefitted greatly from the comments and questions of the conference participants and their subsequent inputs and revisions.

The first question posed was whether the participants could agree on a definition of a financial Bubble or how it might be modified for different types of Bubbles. From this evolved the question how one would know when one was in a bubble as opposed to looking back after a bubble had burst and stating “Oh yes! That was definitely a bubble.” Robert Aliber who attended the Conference has defined a bubble as “a non-sustainable increase in the prices of certain currencies and classes of assets.” In this way the journey to a greater understanding of financial bubbles has begun.

Tuesday, June 11, 2013

Boil, Bubble, Toil & Trouble eBook on Amazon.com

Boil, Bubble, Toil and Trouble is the outgrowth of a project at the New Jersey Institute Of Technology’s School of Management funded by the Leir and Ridgefield Foundations that has evolved into the Leir Center For Financial Bubble Research dedicated to the study and understanding of Financial Bubbles. The material and ideas for the chapters in this book were first presented at a Conference organized by the Leir Center at NJIT and supported by the Leir Retreat Center. However the ideas and concepts they contain have benefitted greatly from the comments and questions of the conference participants and their subsequent inputs and revisions.

The first question posed was whether the participants could agree on a definition of a financial Bubble or how it might be modified for different types of Bubbles. From this evolved the question how one would know when one was in a bubble as opposed to looking back after a bubble had burst and stating “Oh yes! That was definitely a bubble.” Robert Aliber who attended the Conference has defined a bubble as “a non-sustainable increase in the prices of certain currencies and classes of assets.” In this way the journey to a greater understanding of financial bubbles has begun.