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Article
Publication date: 29 January 2020

Chensheng Xu, Feng Yao, Fan Zhang and Yonghong Wang

This study aims to investigate the influence of the Confucius Institute (CI) on outward foreign direct investment (OFDI) by China and its potential interaction with…

Abstract

Purpose

This study aims to investigate the influence of the Confucius Institute (CI) on outward foreign direct investment (OFDI) by China and its potential interaction with cultural difference and institutional quality in host countries.

Design/methodology/approach

In the empirical study, the gravity model is adopted as the benchmark to investigate the effects of CI on China's OFDI using the ordinary least squares or Poisson Pseudo Maximum Likelihood estimators. Panel data on China's OFDI from 2004 to 2015 are used. Cultural difference and institutional quality are included explicitly as control variables to examine the effects of CI on China's OFDI.

Findings

CI has a significant positive effect on China’s OFDI, and this effect depends on the cultural difference and institutional quality of the host country. The impact of CI on China’s OFDI is more prominent in host countries with a smaller cultural difference or lower institutional quality.

Originality/value

CI is a comprehensive platform for foreign cultural exchange and signifies the rebirth of Confucianism in China. The present study shows that CI can stimulate the growth of China’s OFDI, with implications for other Asian countries influenced by Confucianism. Based on the results of the study, strategies for “Going Global” and encouraging economic growth based on cultural exchange and the recognition of host country heterogeneities are proposed.

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Article
Publication date: 21 January 2021

Ahmed Yamen, Cemil Kuzey and Muhammet Sait Dinc

This paper examines the link between culture, institutional quality and real earnings management and accrual earnings management by combing the study by Hofstede (2001…

Abstract

Purpose

This paper examines the link between culture, institutional quality and real earnings management and accrual earnings management by combing the study by Hofstede (2001) and Enomoto et al. (2015). The paper tries to test the effect of culture on institutional quality and both real earnings management (REM) and accrual earnings management (AEM).

Design/methodology/approach

The sample of the research paper includes 38 countries. Hofstede cultural dimensions are used to measure cultural values. Public governance indicators published by the World Bank are used as a proxy for measuring the institutional quality. Earning management scores constructed by Enomoto et al. (2015, p. 191) are used for measuring real earnings management (REM) and accrual earnings management (AEM). Partial Least Square (PLS) based Structural Equation Modelling (SEM) is used to test the relationship between culture, institutional quality and earnings management.

Findings

The results support the relationship between culture and institutional quality. Also, the results reveal a significant relationship between culture and accrual earnings management, but an insignificant relationship between culture and real earnings management. In addition to that, another important finding is that institutional quality has a significant impact on real earnings management, but has no significant effect on accrual earnings management.

Practical implications

The results suggest that standard setters need to consider the quality of institutions to improve the quality of financial reports. Also, it highlights the role of both formal and informal cultures in shaping financial reports.

Originality/value

For the best of our knowledge, this the first time to test the link between culture and institutional quality and comparing the impact on both real earnings management and accrual earnings management.

Details

EuroMed Journal of Business, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1450-2194

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Article
Publication date: 29 March 2021

James Temitope Dada and Folorunsho M. Ajide

This study examines the moderating role institutional quality plays in shadow economy–environmental pollution nexus in Nigeria between 1984 and 2018. Further, the study…

Abstract

Purpose

This study examines the moderating role institutional quality plays in shadow economy–environmental pollution nexus in Nigeria between 1984 and 2018. Further, the study also determines the threshold level of institutional quality that lessens shadow economy and abates environmental pollution.

Design/methodology/approach

Shadow economy is measured as a percentage of gross domestic product (GDP) using the currency demand approach while environmental pollution is proxy by carbon dioxide (CO2) per capita. Autoregressive distributed lag (ARDL) is used as the estimation technique.

Findings

Results from the study show that shadow economy has a positive and significant effect on environmental pollution both in the short and long run, while institutional quality has a negative effect on environmental pollution. This reveals that shadow economy worsens environmental quality while institutional quality abates environmental pollution. The interactive term of shadow economy with institutional quality has a negative but insignificant effect on environmental pollution in the long run. It implies that institutional quality is weak to bring about significant reduction in shadow economy and environmental pollution. Further, the threshold level of institutional quality required to lessen the effect of shadow economy and abate environmental pollution is found to be 5.69 on an ordinal scale of 0–10.

Practical implications

Institutional quality in Nigeria is weak and needs to be strengthened up to the threshold level in order to effectively moderate the impact of shadow economy on environmental pollution.

Originality/value

The study addresses the perceived gap in the empirical literature on the emerging role of strong institution in abating environmental pollution in Nigeria. It also develops a threshold level of institutional quality capable of mediating the negative impact of shadow economy on environmental pollution. This empirical contribution is largely missing in the context of Nigeria.

Details

Management of Environmental Quality: An International Journal, vol. 32 no. 3
Type: Research Article
ISSN: 1477-7835

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Article
Publication date: 9 October 2020

Reffat Mushtaq, Aijaz Abdullah Thoker and Aaqib Ahmad Bhat

The purpose of this paper is to empirically examine the impact of institutional quality on the international tourism demand of India. To carry out the analysis, the study…

Abstract

Purpose

The purpose of this paper is to empirically examine the impact of institutional quality on the international tourism demand of India. To carry out the analysis, the study first analyses the impact of composite institutional quality index and then proceeds to examine the impact of each of the individual components of institutional quality on the international tourism demand of India. The impact of income of the tourist originating countries, tourism price, trade openness and Human Development Index (HDI) on tourism demand has also been examined.

Design/methodology/approach

The study employed panel autoregressive distributed lag (ARDL) model, with data from top 30 tourist originating countries for India for the period of 1995–2016.

Findings

The results indicated that an increase in the income of the tourist originating countries has spillover effects on the development of tourism sector of India. The impact of cost of travel proxied by relative prices between the destination and origin country is found to be negative, however, statistically insignificant. The impact of trade openness and development level of the host country (proxied by HDI) is found to have positive association with the tourism demand. Institutional quality is found to have positive association with international tourism demand of India. Among the individual components of institutional quality, rule of law, regulatory quality, control of corruption and voice and accountability are found to promote the tourism sector development in the economy. Contrarily, the impact of government effectiveness is found to be negative. In the short run, most of the variables were found to support their counterpart results in long run.

Practical implications

This study has practical implication not only in formulating tourism sector policies of the host countries but also for issuing tourist advisories in tourist originating countries. The study holds that policymakers should work for improving institutional environment of the country such as bureaucracy, legislature, regulatory quality, rule of law and for reducing corruption at all levels so as to ensure a sustained rise in tourist inflows to India.

Originality/value

This study validates the link between institutional quality of a country and international demand for its tourism. To the best of the authors' knowledge, the study is the first attempt that has comprehensively analysed the impact of institutional quality on tourism demand in Indian context which has been generally ignored in the tourism literature.

Details

Journal of Hospitality and Tourism Insights, vol. 4 no. 5
Type: Research Article
ISSN: 2514-9792

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Article
Publication date: 15 June 2020

Lela Mélon and Rok Spruk

Because of the renewed interest in public purchasing and the strategic use of public funds under the requirements of sustainable development, the question arose once again…

Abstract

Purpose

Because of the renewed interest in public purchasing and the strategic use of public funds under the requirements of sustainable development, the question arose once again as to how to curb the fall of institutional quality once criteria other than price are inserted into the decision-making in public purchasing. E-procurement has been repeatedly named as one of the most efficient tools to that effect and the present paper sets out to discover whether the implementation of e-procurement in a particular country per se entails also higher institutional quality, allowing for a wider implementation of green and sustainable procurement at the national, regional and municipal level without the fear of worsening the country’s institutional quality. By analyzing the implementation of e-procurement in Denmark, the Netherlands and in Portugal, this paper aims to verify the hypothesis that the implementation of e-procurement implies better institutions in terms of public purchasing. As such, the conclusions will be used in further research on the prerequisites for a successful implementation of green public procurement across the European Union.

Design/methodology/approach

Gathering data on institutional quality of three early e-procurement adopters (Denmark, the Netherlands and Portugal) allows for comparison of institutional quality pre- and post-e-procurement implementation. By using difference-in-differences comparison the paper seeks to answer the question how doesmandatory e-procurement influence institutional quality on the national level.

Findings

The paper finds that the reform is generally associated with a relatively stronger control of corruption in the Netherlands and Denmark, while a similar reform in Portugal failed to translate into a stronger control of corruption. Furthermore, while using the quality of regulation as a dependent variable, a positive and robust effect on the quality of regulation in Denmark was shown, while the quality of reputation in the Netherlands and Portugal declined in the post-reform period, with the drop in the quality of regulation in Portugal being considerably greater, a two-fold higher amount than the estimated drop in the Netherlands. The paper suggests that in spite of the same aims, the reform yielded substantially different or even opposing effects compared to Denmark.

Research limitations/implications

By examining three examples of early adopters, further research with broader impact is needed to deduce general implications for e-procurement implementation. Furthermore, implementation of e-procurement at the regional or local level can also yield distinct results.

Social implications

Understanding the actual impact of e-procurement on institutional quality is indispensable for further study on the matter. The present study argues that e-procurement needs to be accompanied by additional measures or variables to yield a positive impact on institutional quality in public procurement.

Originality/value

As to originality, the present paper uses a law and economics approach, originating or better said drawing motivation from green public procurement concerns, trying to provide an insight in terms of tools that can be used to eliminate concerns regarding institutional quality when implementing green public procurement practices.

Details

Journal of Public Procurement, vol. 20 no. 4
Type: Research Article
ISSN: 1535-0118

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Article
Publication date: 3 March 2020

Md. Sariful Islam, Sonia Afrin, Debasish Kumar Das and Md. Nasif Ahsan

This paper aims to study students' strategic behaviors for increasing their job prospect in response to university administrators' moves for lifting up institutional

Abstract

Purpose

This paper aims to study students' strategic behaviors for increasing their job prospect in response to university administrators' moves for lifting up institutional reputation in the academia.

Design/methodology/approach

A Stackelberg differential game is used to study this strategic interplay between administrators and students. In this game, an administrator maximizes institutional quality to build university reputation while student maximizes grades to increase their job prospects. Therefore, administrators being the leader move first while students set strategies for maximizing their objective function by following administrators' move.

Findings

The study produces several distinctive results by analyzing administrator–students’ strategic interactions. First, university administrators need to be sufficiently more impatient for building reputation by improving institutional quality than students’ impatience for increasing their job prospects to have feasible solutions. Second, students attempt to increase academic grades for making them more marketable in response to administrators’ additional efforts for increasing their students’ job prospects. Third, exogenous increase in university reputation improves institutional quality and students’ job prospects without affecting their academic grades. However, increase in job prospects motivates students to increase their grades. Fourth, administrators’ too much impatience for increasing university reputation could inflate students’ grade, reduce job prospect and degrade institutional quality. Fifth, an exogenous rise in students’ impatience improves institutional quality and students’ job prospects but reduces students’ grades. Finally, the exogenous increase in opportunity cost of securing good grade degrades institutional quality, thus reducing further job prospects. Therefore, administrators’ positive but moderate impatience for reputation will improve students’ academic performances, institutional quality and job prospects.

Originality/value

To the best of the authors’ knowledge, this is the first study to analyze students’ strategic responses for improving their job prospects in response to administrators’ actions for enhancing university reputation. It helps administrators to design an effective framework for building university reputation in the academic market through improving institutional quality and expanding job markets for their students.

Details

Journal of Modelling in Management, vol. 15 no. 3
Type: Research Article
ISSN: 1746-5664

Keywords

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Article
Publication date: 6 June 2016

Bana Abuzayed and Nedal Al-Fayoumi

This study aims to examine the influence of institutional quality on the relationship between economic growth and banking sector concentration.

Abstract

Purpose

This study aims to examine the influence of institutional quality on the relationship between economic growth and banking sector concentration.

Design/methodology/approach

The sample of our study covers 15 Middle East and North African (MENA) countries over the period 1996-2010. The results are estimated based on static and dynamic panel data analysis.

Findings

The results reveal a positive and significant relationship between economic growth and each banking concentration and institutional quality. The results support the argument that banking concentration and institutional quality are matters for growth in MENA countries. The results also indicate that the interaction variable between concentration and institutional quality is negative and significant.

Research limitations/implications

Building on Petersen and Rajans’ (1995) argument, this study suggests that in the absence of an appropriate level of institutional quality, banks in MENA region can depend on their market power to protect their benefits. This can be achieved by building long-term relationships with their borrowers to provide continuing credit and subsequently enhancing economic growth.

Practical implications

Under the low level of institutional quality in MENA countries, regulators and decision-makers should thoroughly think before imposing any policy that aims to restrict banking market power because such action could harm the economy.

Social implications

In developing countries, banking concentration may have a positive impact on the economy. This outcome may lead to an improvement in the standard of living for the society.

Originality/value

This is the first known study, to the best of our knowledge, that examines the role of institutional quality in shaping the relationship between economic growth and banking concentration in MENA countries. The authors opted to select MENA countries’ data because they generally reflect an institutional setting similar to many developing countries. Therefore, the results could be applicable in many developing economies and will encourage other researchers to investigate this proposition.

Details

Review of International Business and Strategy, vol. 26 no. 2
Type: Research Article
ISSN: 2059-6014

Keywords

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Article
Publication date: 21 August 2017

Fernando Robles

The purpose of this paper is to explore the location decision of multinationals across major cities in Latin America. Based on agglomeration economics and institutional

Abstract

Purpose

The purpose of this paper is to explore the location decision of multinationals across major cities in Latin America. Based on agglomeration economics and institutional theory, the paper explores whether institutional quality of a city can temper the attraction of agglomeration factors.

Design/method/approach

The paper analyzes the geographic dispersion of three global fast-food franchise networks in 45 Latin American cities. The explanatory variables are horizontal aggregation of other multinationals and the institutional quality of a city. The direct and indirect impacts of horizontal agglomeration are explored through negative binomial regression with controls for city population and economic power [gross domestic product (GDP)].

Findings

The key finding is that location choice of fast-food networks is driven principally by market conditions and to a lesser extent by horizontal agglomeration. The institutional quality of a city has a positive influence on the agglomeration of fast-food networks. A city with strong institutional quality makes this relation stronger.

Research limitations

Other multinational and national fast-food franchises are not included in the paper. Future studies should include a greater number of global and local fast-food franchisers.

Practical implications

The positive reinforcements of agglomeration and strong institution are important for the investment location decision of fast-food multinationals. The institutional quality of the city should be an important consideration in the location decision as it expands regionally and within a country. Smaller cities may not offer the agglomeration advantages of the large metropolitan areas, but their good institutional quality may reduce the business costs for multinationals.

Social implications

Large cities in Latin America tend to reap the benefits of agglomeration. As a result, smaller secondary cities struggle to be relevant in generating economic activity and attracting private investments. One strategy to achieve relevance is to build strong and transparent institutions and a solid business environment.

Originality/value

The inclusion of institutional quality at the city level as moderation of the agglomeration factors influencing the location decision of a multinational is original. This paper contributes to our understanding of the importance of regional cities in attracting the investment of multinational firms.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 15 no. 3
Type: Research Article
ISSN: 1536-5433

Keywords

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Article
Publication date: 8 January 2018

Vidhya Sathyamoorthy and Tuck Cheong Tang

The purpose of this paper is to examine the influence of institutional quality on the export-led growth (ELG) with global evidence of a panel of 119 countries.

Abstract

Purpose

The purpose of this paper is to examine the influence of institutional quality on the export-led growth (ELG) with global evidence of a panel of 119 countries.

Design/methodology/approach

The research framework looks at the role of exports in promoting growth via. good institutional quality. The methods of testing are panel data approach of causality, and fixed and random effects models.

Findings

Empirical results show that good Institutional quality mediates the ELG relationship in general, and middle income group in specific. The legal institutional quality has significant positive impact, whereas political and economic institutional quality have significant negative impact on ELG for all sampled countries.

Research limitations/implications

The Kuncic’s (2014) institutional quality data are annually available between 1990 and 2010. Therefore, time series analysis for individual country is bias with 21 observations. And, this study ignores other potential variables such as capital, labor, real exchange rate, and so on, may possibly contribute to omitted-variables bias.

Practical implications

Policymakers may well utilize institutional quality reforms either in terms of improving existing institutional quality or enhancing “second-best” institutions as a policy instrument to reap success from export-oriented growth strategies.

Originality/value

Existing studies on ELG have ignored institutional quality as a relevant variable. It looks at the three institutional quality indicators, namely political, economic, and legal in ELG framework.

Details

Journal of Economic Studies, vol. 45 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 9 February 2015

Chinmay Pattnaik, SoonKyoo Choe and Deeksha Singh

The purpose of this paper is to examine the impact of quality of market supporting institutions (institutional quality) in host country and the similarities and…

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Abstract

Purpose

The purpose of this paper is to examine the impact of quality of market supporting institutions (institutional quality) in host country and the similarities and differences of institutional quality between the home and host country (institutional distance) on subsidiary performance.

Design/methodology/approach

Based on the conceptualization of new institutional economics, the authors divide quality of host country institutions into factor markets; product, capital, labor market and sociopolitical dimensions. The authors examine the impact of the quality these institutional dimensions in host countries and their difference between home and host country on the performance of 318 subsidiaries of 146 Korean listed manufacturing firms operating in 28 host countries from 2001 to 2006.

Findings

The empirical results based on 1,129 observations show that institutional distance explains a significant variance in the subsidiary performance. In particular, the difference in quality of institutions in product, capital and labor market has negative impact on subsidiary performance. However, except for quality of regulation in labor market, host country institutional qualities do not significantly explain the variation in subsidiary performance.

Originality/value

The evidence suggests that host country institutions matter substantially when considered with their relative similarity and difference with home country institutions. The impact of individual dimensions of institutions varies on subsidiary performance.

Details

Management Decision, vol. 53 no. 1
Type: Research Article
ISSN: 0025-1747

Keywords

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