Review on a study conducted by Boudhiaf Messaoud and Zribi El Ghak Teheni
Published in International Management Review Volume 2, Issue 2.
Events in one part of the world can quickly affect many other countries. It also led to a fall in FDI (foreign direct investments) flows into many poorer countries and pressure on governments in rich nations to cut overseas aid budgets. If a resource rich country exports the resource, then it exposes itself to damaging volatility of its export earnings. Volatility can be disruptive to economic health. It increases the risks for businesses considering capital investment, it raises the chances of people falling into extreme poverty and it makes a nation’s finances more fragile perhaps lowering the scope for important investment in public goods.
Highlighting an important facet of diversity among organizations operating in different institutional environments, this article presents a model of the growth strategy of the firm. Focusing on the stylized state-owned enterprises, we explore the interaction between institutions and organizations in these countries. Given the institutional constraints, neither generic expansion nor acquisitions, two traditional strategies for growth found in the West, are viable for firms in these countries. Instead, firms settle on a network-based strategy of growth, building on personal trust and informal agreements among managers. The institutional environment that leads to this unique strategy of growth is examined, and boundary conditions, limitations, and implications of this model are discussed.
Many nations still rely on specializing in and exporting low value added primary commodities. The prices of these goods can be volatile on world markets. When prices fall, an economy will see a sharp reduction in export incomes, an adverse movement in their terms of trade, risks of a higher trade deficit and a danger that a nation will not be able to finance state-led investment in education, healthcare and core infrastructure. Despite being rich in natural resources, for many countries this is a curse rather than a blessing.
Self-sufficiency was the main goal including investment in import-substitution industries – overseas trade was seen as a hindrance and therefore a tax opportunity to raise revenues for the government.
From an econometric point of view, the author introduced several dummy variables (for Africa, East Asia, and Latin America), so the explanatory power of doing business indicator is captured by the set of dummy variables rather than by any single dummy variable. This is in power of the government who helps promote the business in the country and is also responsible for bringing more and more business in the country to help improve the economic crisis.
The article reviews the debate about the relationship between business regulations and economic performance, taking into account recent advances in empirical analysis. This can lead to a strong argument that companies are also responsible for following the right law of the country set by the government, business regulations is associated with higher economic growth. Countries which are promoting the business and following the right laws are growing strong economically and can survive the economic crisis.
- Business regulations and economic growth: What can be explained?
About the Author
Aseer is currently pursuing a degree in Broadcasting & Journalism from Limkokwing University of Creative Technology, Malaysia and is an intern at Learning Minds Group.