Franklin

Is Better Information Always Good News? [electronic resource] International Corporate Strategy and Regulation Markus Kitzmuller

Author/Creator:
Kitzmuller, Markus
Publication:
Washington, D.C., The World Bank, 2012
Format/Description:
Government document
Book
1 online resource
Series:
Policy research working papers.
World Bank e-Library.
Status/Location:
Loading...

Options
Location Notes Your Loan Policy

Details

Other Title:
World Bank working papers.
System Details:
Mode of access: World Wide Web.
Summary:
This paper develops a simple model to analyze the interaction between strategic corporate public good provision, international firm location and national regulation. An information-based strategic corporate public good provision mechanism is proposed to shed light on recent firm behavior within different regulatory environments. The main insight derived is that in the presence of firms with geographic flexibility (multinational enterprises) and market provision of an international public credence good, unilateral (non-cooperative) regulatory scope depends on (1) the absolute probabilities to verify firms' corporate public good provision levels within different geographic and institutional environments, and (2) the differential between these probabilities across countries. The relative information asymmetry determines not only the market levels of the public good produced under autarky, but also the relocation incentives of multinational enterprises. A firm trades off lower production costs, which increase its competitiveness in pricing, with higher expected informational price premiums, which decrease its competitiveness. A government's ability to regulate above market (corporate public good provision) levels decreases with the absolute level of foreign transparency, while it increases in the relative (positive) difference between the same transparency at home and abroad. This may not only explain mixed empirical evidence of theoretic propositions such as the Pollution Haven Hypothesis and Regulatory Race to the Bottom dynamics, but also open up interesting policy implications as the international information playing field becomes leveled through development, while existing regulations are rather rigid, and policy coordination remains limited.
Notes:
Description based on print version record.
Contributor:
Kitzmuller, Markus
World Bank.
Other format:
Print version: Kitzmuller, Markus Is Better Information Always Good News?
Publisher Number:
10.1596/1813-9450-6251
Access Restriction:
Restricted for use by site license.