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Human labour will play a critical role in the future of Europe. Discusses ways to segregate capital into “Mind Human Capital” and “Physical Human Capital”. Argues that important differences between mind and physical human capital have profound implications for the future of Europe. Very significant trends in and related to human and physical capital will have differential effects on countries of Europe. In addition, mind and physical capital have profound implications for businesses in Europe. Provides insights on key relationships between mind and physical labour and economic developments. In addition suggests specific implications of such relationships. Also provides predictions concerning the role of mind and physical capital in the future of Europe. Is of particular interest to those responsible for evaluating the European business environment and making strategic decisions about future disinvestment and investments in Europe.

Recent research supports the role of productive government spending as an important determinant of economic growth. Previous analyses have focused on the separate effects of public investment in infrastructure and on investment in education. This paper aims to introduce both types of public investment simultaneously, enabling the authors to address the trade‐offs that resource constraints may impose on their choice.

The authors employ a two‐sector endogenous growth model, with physical and human capital. Physical capital is produced in the final output sector, using human capital, physical capital, and government spending on infrastructure. Human capital is produced in the education sector using human capital, physical capital, and government spending on public education. The introduction of productive government spending in both sectors yields an important structural difference from the traditional two‐sector growth models in that the relative price of human to physical capital dynamics does not evolve independently of the quantity dynamics.

The model yields both a long‐run growth‐maximizing and welfare‐maximizing expenditure rate and allocation of expenditure on productive capital. The welfare‐maximizing rate of expenditure is less than the growth‐maximizing rate, with the opposite being the case with regard to their allocation. Moreover, the growth‐maximizing value of the expenditure rate is independent of the composition of government spending, and vice versa. Because of the complexity of the model, the analysis of its dynamics requires the use of numerical simulations the specific shocks analyzed being productivity increases. During the transition, the growth rates of the two forms of capital approach their common equilibrium from opposite directions, this depending upon both the sector in which the shock occurs and the relative sectoral capital intensities.

These findings confirm that the form in which the government carries out its productive expenditures is important. The authors have retained the simpler, but widely employed, assumption that government expenditure influences private productivity as a flow. But given the importance of public investment suggests that extending this analysis to focus on public capital would be useful.

Two‐sector models of economic growth have proven to be a powerful tool for analyzing a wide range of issues in economic growth. The originality of this paper is to consider the relative impact of government spending on infrastructure and government spending on human capital and the trade‐offs that they entail, both in the long run and over time.

The relevance of finance for strategy is probably never greater than during a recession. We argue that the strategy literature has been virtually silent on the issue of recessions, and that this constitutes a regrettable sin of omission. Recessions are also periods when the commonly held view of financial markets in the strategy literature – efficient, and therefore strategically irrelevant – is particularly misplaced. A key route to rectify this omission is to focus on how recessions affect investment behavior, and thereby firms’ stocks of assets and capabilities which ultimately will affect competitive outcomes. In the present chapter, we aim to contribute by analyzing how two key aspects of recessions, demand reductions and reductions in credit availability, affect three different types of investments: physical capital, R&D and innovation, and human- and organizational capital. We synthesize and conceptualize insights from finance- and macroeconomics about how recessions affect different types of investments and find that recessions not only affect the level of investment, but also the composition of investments. Some of these effects are quite counterintuitive. For example, investments in R&D are both more and less sensitive to credit constraints than physical capital is, depending on available internal finance. Investments in human capital grow as demand falls, and both R&D and human capital investments show important nonlinearities with respect to changes in demand.

The main aim of this paper is to verify whether the modern mainstream economic theory of multinational enterprise that explains foreign direct investment (FDI) from developed countries is also able to account for investment decisions of multinational enterprises (MNEs) from emerging economies.

Using Knowledge-And-Physical-Capital (KAPC) model as an analytical framework and Poisson-pseudo maximum likelihood estimation technique, the authors identify determinants of FDI flows from emerging economies. The data set consists of 38 home and 134 host countries during the period 2000–2012. Empirical evidence supports high explanatory power of KAPC model. Further, compared with the earlier Knowledge-Capital (KC) model, results confirm the importance of physical capital.

The estimation results confirm the hypothesis that mainstream economic theory can explain FDI flows from the emerging economies by highlighting the roles of total market size, skilled-labor abundance, investment and trade costs and geographical distance between two countries.

This study casts doubt on the alternative way that the KAPC model suggests to distinguish between horizontal and vertical FDI. The argument that horizontal MNE headquarters would be relatively more abundant than vertical MNE headquarters in countries that are abundant in physical capital relative to skilled labor seems reasonable but the idea of variable specification in the estimated equation should be revised.

Firms should be allowed to move their resources freely into and out of specific activities, both internally and internationally across border. To reach that goal, governments of potential host countries can adopt several measures, most importantly remove restrictions on payments, transfers and capital transactions and open previously closed industries to welcome foreign investment. In addition, to improve investment climate in general, governments need to pay attention to enhancing security of property rights, regulating internal taxation (i.e. corporate income tax), guaranteeing adequacy of infrastructure, efficient functioning of finance and labor markets and fighting against corruption.

The location choice of emerging investors set priority on similarity in economic size, geographical and cultural proximity. It is because shared borders or common official languages would reduce information costs and enhance information flows. Also, investors consider horizontal FDI (with motivation to expand market demand) as one of main modes of entry into a foreign market and a substitute for export. Likewise, distance is often understood as an important investment friction.

The outstanding contribution is that the research has uncovered the positive and statistically significant effect of physical capital on FDI activity, which has not been discussed in the earlier KC model. However, at the same time, the study casts doubt on the KAPC model's argument that relative abundance in physical capital to skilled labor between two countries determines FDI types and suggests that this argument and its empirical model specification should be carefully reviewed.

We extend the Jones (1971) analysis of the effects of distortions in 2×2 trade models to the case of a two-sector dynamic general equilibrium model of a small open economy with capital accumulation. We do a comparative steady state analysis for the effect of policy changes on factor prices and the capital stock, and examine the dynamics of the system in the neighborhood of the steady state. We also show that the system will have multiple equilibria when value and physical factor intensity rankings of the sectors do not agree.

The purpose of this paper, which is written in two parts, is to investigate empirically if intellectual capital (IC) has an impact on the financial aspects of organisational performance as well as attempting to identify the IC components that may be the drivers for the leading financial indicators of listed companies. The study sought evidence from the companies of the Hong Kong Stock Exchange.

Using data of all the constituent companies of the Hang Seng Index of the Hong Kong Stock Exchange from 2001 to 2005 and the VAIC™ methodology used in the measurement of IC by Pulic, regression models were constructed to examine the relationships between IC and the selected financial performance measures of these companies. The research hypotheses and research method are detailed in Part 1 of the paper. In this paper – Part 2, the results and findings of the investigation are analysed and discussed.

The results of the analysis revealed no conclusive evidence to support a definitive association between IC, as measured by VAIC™, and the four measures of financial performance in the sample companies surveyed in Hong Kong. At best, only a moderate association was recorded between IC and the profitability measures. The study further revealed that physical capital is highly regarded by the companies surveyed for enhancing market valuation, productivity and profitability.

Evidence from Hong Kong shows that there is an overall lack of association between IC and financial performance, which contradicts some prior studies conducted overseas. This may suggest that Hong Kong may be lagging behind, for example, some Asian competitors such as Taiwan and Singapore in IC development. In addition, the empirical results suggest that physical capital continues to play a prominent role in the territory, which may be an indication of Hong Kong's ongoing reliance on “tangibles” as the strategic asset to generate corporate performance. These findings may, however, illustrate that the association between IC and financial indicators such as market valuation may not be a universal and uniform one. Rather, the association may vary from market to market, probably depending on the level of IC awareness in the investors.

It is believed that this is the first study conducted in Hong Kong involving the use of VAIC™ for the measurement of IC. It not only contributes to the knowledge of IC research, but adds to the existing literature of the progress of IC development in relation to financial performance in companies internationally.

The purpose of this study is to determine whether intellectual capital (IC) creates value in the Serbian hotel industry. Specifically, this paper examines to what degree IC and its key components affect the financial performance of hotels compared to physical and financial capital.

The sample included all of the hotels that operated as independent entities in Serbia during 2009–2012. value-added intellectual coefficient was used to measure the level of IC contribution to value creation, which was linked to various measures of financial performance, including operating profit, return on equity, return on assets, profitability and employee productivity.

Results indicate that after controlling for firm size and leverage, employee productivity and, to some extent, profitability were affected by human and structural capital. The research confirms that the financial performance of hotels in Serbia remains predominantly influenced by efficient use of physical capital.

The study’s generalizability is limited to the hotel sector within Serbia.

Senior managers in the hotel industry must recognize the importance of managing both the physical aspects of their hotels and the intangible resources embedded in their employees and processes.

The findings will aid recognition of the importance of investing in IC in hotel industry as a crucial element of achieving competitive advantage in the information age. Moreover, the findings suggest that long-term growth should not rely solely on physical and financial assets.

The purpose of this paper is to explore the “resource curse” problem as a counter-example of creative performance and innovation by examining reliance on capital and physical resources, showing the gap between expectations and ex-post actual performance that became clearer under conditions of economic turmoil.

The analysis uses logistic regressions with dichotomous response and predictor variables on structured tables of count data, representing firm performance as an outcome of capital resources, physical resources and innovation where appropriate.

Key findings relevant to economic and business practice follow. First, a typical characteristic of successful Vietnamese firms in the transition period is their reliance on either capital resources or physical asset endowments. Second, poor performers exhibit evidence of over-reliance on both capital and physical assets. Third, firms that relied on both types of resources tended to downplay creative performance. Some evidence suggests that firms face more acute problem caused by the law of diminishing returns in troubled times. Fourth, the “innovation factor” has not been tapped as a source of economic growth.

This study has some limitations. The size of the survey sample is approximately 150 firms, while the potential sample of > 300 should be possible in the future. When the size increases, the research could be expanded to include further variables that will help investigate more deeply into the related issues and business implications. With regard to the implications of the study, the absence of innovations has made the notion of “resource curse” identical to “destructive creation” implemented by ex-ante resource-rich firms, and worsened the problem of resource misallocation in transition turmoil. The Vietnamese corporate sector's addiction to resources may contribute to economic deterioration, through a downward spiral of lower efficiency leading to consumption of more resources.

Insights obtained from this study could save transition economies' resources which have almost always been considered sine qua non before any critical major policymaking, while this is not necessarily true, and in many cases, even counterproductive.

Original data set on Vietnam stock market are collected, processed, prepared and used by the authors. Original design by the authors for regression equations with dichotomous predictor variables: dependence on endowed physical assets, reliance on capital resources and significant signs of creative performance/innovations. Original idea of viewing “resource curse” as absence of innovation and due to uncreative “destructive creation” of poor-performing commercial operations by resource-rich firms is used in the paper. We have searched the literature in business research and found that the empirical results have not been previously reported.

The purpose of this paper is to examine the long-run and short-run relationship between factor accumulation (i.e. physical capital and human capital) and economic growth by calculating the stocks of human capital and real physical capital.

The study uses endogenous growth model, where GDP per worker is the dependent variable and factor accumulation (real physical capital per worker and human capital) is the explanatory variable under the autoregressive distributive lag framework from 1973 to 2014 for Pakistan.

The results suggest that there is a long-run relationship between factor accumulation and GDP per worker in Pakistan. Findings of the study are consistent with the endogenous growth model suggesting that accumulation of human capital increases labor productivity, employment level and per capita income, and causes economic growth.

Developing countries like Pakistan should increase share of human capital for economic development. Government should invest in the education sector because investment in human capital has a large potential of productivity growth and welfare increase in developing countries.

This study challenges the notion of human capital and real physical capital stock used by different researchers. Considering human capital as a core factor of production, a series of human capital as average year of schooling is calculated by utilizing the perpetual inventory method.