Recent research published in International Business Review explores how digitalization (utilization and orchestration of digital resources) and internationalization (firm-level outward internationalization and country-level inward internationalization) affect firm performance. The article introduces the degree of outward internationalization and home-country inward foreign direct investment (FDI) inflows as moderators in achieving firm performance as a result of digitalization. Using a panel dataset of 571 U.S. manufacturing firms, this article finds a J-shaped relationship between digitalization and performance. The top quartile of digitalization efforts is rewarded by significant profitability. Moreover, high levels of outward internationalization and high net-FDI inflows increase the performance gains attributable to high levels of digitalization. Read more in this article, co-authored by Featherlight's director Dr Zamborsky: https://doi.org/10.1016/j.ibusrev.2023.102135
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The late financial historian Charles P. Kindleberger has pointed to manias, panics, and crashes as hardy perennials in the financial systems around the world, documenting their presence in many countries and periods of history from the Dutch speculative South Sea mania to a textile boom mania in England. We often perceive the most recent major financial crash as unprecedented, a term used by many commentators referring to the rapid fall of stock prices (over 20-30%) in many countries around the world in March 2020 following the spread of the covid-19 virus. However, in the past, contemporary commentators used similar phrases to describe their panics. For example, in 1825 Britain (following a speculative mania of investment in Latin America), the headline read: “A panic seized upon the public such had never been witnessed before”. And in 1882 France (after a major Paris bourse crash) a headline read: “Never have I seen an equal catastrophe.”
Stock prices have fallen over 30% from peak to trough at a number of points in history, most notably by 86% from September 1929 to June 1932 during the Great Depression, 56% from October 2007 to March 2009 during the Great Financial Crisis, and 49% from March 2000 to October 2002 after the dotcom stock market bubble and the September 11 attacks in the United States. History shows that the negative economic effects of major financial crises can last over a year or two, and that the panic and a crash are not purely irrational but often a result of unsustainable ‘mania’ (investors’ over-optimism in the boom times resulting in inflated valuations of assets). Even in early April 2020, the ratio of the stock market capitalisation in the US to GDP was over 1.1 (from a peak of 1.5) compared to a historical average of 0.8, suggesting the stocks may fall further 30% (Guzman, 2020). Time will tell whether we have reached the bottom in March 2020, but it is likely we did not. Global recessions (negative changes in the global output) are very rare. There was only one since 1961 (in 2009) although we came close to a global recession in 1975 and 1982 as well. Stock market crashes, on the other hand, are more common. In the last 20 years we had 6 years where global stocks ended with negative returns. Although global stocks lost value between 1999-2011, they recovered in 2012-17. After a turbulent 2018 we will likely see volatility and slower growth.
Africa overtook Asia as the world's fastest growing region in 2011-15, according to The Economist. While growth in some commodity-driven African economies such as Nigeria and South Africa has stalled somewhat, multinationals are increasingly recognizing the growth opportunity in Africa. For example, the recent mega-merger between SABMiller (originating from South Africa) and AB InBev, was partly driven by AB InBev's unfulfilled growth potential in African beer and beverages markets. While most of the largest FDI investments into Africa are still in the resource industries (ie oil & gas), multinationals inreasingly invest in other industries, such as manufacturing (automotive, plastics, pharmaceuticals, consumer electronics) and electricity, according to The Financial Times. Read more: http://www.camara.es/sites/default/files/publicaciones/the-africa-investment-report-2016.pdf
India overtook China in GDP growth in 2016. With a possible further slowdown or even a hard landing of the Chinese economy in 2017 and 2018 (forecast by the Economist Intelligence Unit), companies may be re-assessing their growth strategy for China. However, if you take a long term view (as companies should), China will continue to grow fast and will become world's largest economy by 2050, with India getting to world's no. 3 (and very close to the US) from the current no. 9 in terms of nominal GDP, according to EIU: http://pages.eiu.com/rs/783-XMC-194/images/Long-termMacroeconomicForecasts_KeyTrends.pdf
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October 2023
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