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What is balanced growth? This book shows that the definitions and implications of the concept of balanced growth vary significantly among the different disciplines in economic science, but are not exclusive at all.

Terms such as sustainability or balanced growth have become buzzwords. In practice, they are often a desirable vision rather than an achievable objective. Why? Doubts may arise about the extent to which such concepts are compatible with a modern market economy. Is balanced growth possible at all? Is it reasonable to accept balanced growth as a norm? Why should a balanced growth path be a desirable strategy to pursue for policymakers, managers, employees, and other societal stakeholders? Empirical evidence suggests that the actual worldwide economic growth is not balanced at all. Meanwhile, ever since the beginning of the financial and economic crisis in 2007 and its accompanying spillover effects, our globalizing world has uncompromisingly shown the flip side of its coin. Its crisis-prone character has intensified the discussion about our economic system’s sustainability. Questions related to acceptable sovereign debt levels, suitable trade deficits and surpluses, firms’ growth targets, resource management and efficiency have aroused high interest. What is the cause of the observed imbalances? In our opinion, this debate must involve rethinking the qualitative and quantitative dimension of our present understanding of the nature of economic growth.

This book accompanies the 9th DocNet Management Symposium of the University of St. Gallen, Switzerland. It contains contributions of the symposium's panel speakers, renowned authors to the field and young researchers. The Ph.D. students’ and post-doctoral association DocNet organizes the DocNet Management Symposium on a yearly basis with the goal to foster exchange between academia and practitioners.

Inhaltsverzeichnis

Frontmatter

Balanced Growth – the economics perspective

Frontmatter

Growth imperative and money creation – a new outlook on growth dynamics

Abstract
Modern economic development is characterized by a permanent tendency towards growth. I will argue that growth depends substantially on the continuing and boundless creation of money and the resulting dynamics.
Hans Christoph Binswanger

Beyond balanced growth: The effect of human capital on economic growth reconsidered

Abstract
Human capital plays a central role in theoretical models of endogenous growth. Nevertheless, the existing empirical evidence on human capital’s effect on economic growth is mixed. Part of this weak evidence might be the result of overly restrictive specifications of the estimated empirical growth models. A more flexible estimation framework’s results reveal that human capital does indeed have a strong positive effect on economic growth, but this effect differs substantially across countries. In particular, the evidence suggests that human capital has a stronger effect in countries in which the population faces favorable living conditions in terms of life expectancy and geographic characteristics, while the effects do not differ substantially between countries that differ with regard to their political institutions’ quality.
Uwe Sunde, Thomas Vischer

Global imbalances and long-term interest rates

Abstract
The bond yield conundrum describes the unusual behavior of US long-term interest rates between 2004 and 2007. These rates’ constancy or decline was considered puzzling, as US monetary policy was restrictive during this period. Theory and historical evidence suggest that such restrictiveness would cause an increase in longterm interest rates. Global imbalances in the form of sustained and increasing international capital flows to the US are believed to be a promising explanatory factor for the interest rate development during this period. A cointegration approach is applied to assess international capital movements’ influence on US long-term interest rates. The inclusion of international capital flows in the analysis can indeed explain a considerable part of the low long-term interest rate environment, which played a decisive role in the recent financial and economic crisis.
Daniel Kienzler

Development and capital flow mysteries

Abstract
There are significant per capita income differences between countries. Since additional capital is more productive in firms and countries with low capital levels, standard theory predicts that poor countries should receive investments as a matter of priority. Nevertheless, capital flows from poor to rich countries, which constitutes a serious challenge to standard economic theory. Extensions to standard theory have been considered, such as considering countries’ human capital qualities or financial development levels. Investors could, for instance, fear expropriation in poor countries and prefer lower but safer returns at home. The result is that both education and credit market imperfections help explain why capital does not flow from rich to poor countries, but theory still lacks something. Economic science must step up before it can make reliable economic development policy recommendations. Still, inaction would be worse, and incomplete scientific knowledge can be helpful in designing policy. While better financial institutions and education systems might both stimulate growth, these are not sure recipes for successful development. Policy-makers are invited into economists’ kitchens.
Thomas Davoine

Sustainable development of housing finance markets – An international perspective after the crisis

Abstract
Like Michel Ende’s novel “The Never-ending Story,” it seems that house price bubbles tend to occur at regular intervals. Due to the interlinkages with the banking sector, a bursting property bubble often leads to a banking crisis, damping economic growth and destroying prosperity. The objective is to show the relationship between property and bank lending. The factors which fuel a housing bubble will be discussed and the indicators pointed out that help identify rising house price inflation. In conclusion an analysis is given of the future prospects of property markets in advanced economies and in emerging markets.
Friedemann Roy

Balanced Growth – a business perspective

Frontmatter

Selecting the right growth mechanism: The choice between internal development, strategic alliances, and mergers & acquisitions

Abstract
When seeking to realize growth strategies, firms have three choices: internal development, alliances, and mergers & acquisitions. How to choose between these growth mechanisms is, however, not well-understood in practice. Managers seldom sufficiently strategically analyze this critical first step in any growth-related decision process. Instead, many managers commonly base their decision on “gut-feel” or simply follow successful traits. This chapter offers a framework to systematically guide managers in their choice of growth mechanisms. Four sets of factors should be simultaneously considered to decide on when to make, ally, or buy: the environment, the target, the growth strategy, and company-related factors. By systematically analyzing each growth mechanism’s context-specific advantages and disadvantages, firms may avoid mistakes that could not be compensated for in later implementation phases.
Markus Kreutzer

Challenges and success factors for sustainable growth: Experience from strategy consulting

Abstract
Economic recovery following a financial crisis includes companies in most sectors showing increased growth ambitions. Although some of the immediate growth opportunities might be tempting, a clear strategic path must be followed to achieve sustainable success. It is important to first define and assess a company’s core business. The next steps are then – depending on the outcome of the first analyses – to focus on and realize the existing core business’s full potential, to expand into adjacencies, or to redefine the core business. This chapter illustrates the way to become a sustainable value creator by raising a set of questions each manager must answer along a successful growth path. Potential answers to the individual questions are described, supported by selected company examples.
Jens Schädler, Melanie Oschlies

How sustainable are the growth strategies of sustainability entrepreneurs?

Abstract
Sustainability-driven firms, or firms in the sustainable lifestyle industry producing environmentally friendly and socially just goods and services, pursue a range of growth strategies, including organic growth, acquisitive growth, equity sale to strategic investors, strategic alliances, franchising, and licensing. Each of these growth options may be socially, environmentally, and financially sustainable or unsustainable, depending on the growth strategy arrangements, such as the source and type of funding, as well as on the organizational structure and control. Sustainability entrepreneurs, as well as conventional entrepreneurs seeking socially, environmentally, and financially sustainable growth for their firms, should compare the specific organizational and financial arrangements of growth strategy alternatives and their wider sustainability implications.
Liudmila Nazarkina

Boards’ contribution to organizational growth: Effectiveness as a critical success factor

Abstract
As a guardian of corporate values, boards are not only ultimately responsible for organizations’ strategic direction, but also play a decisive role concerning balanced growth. However, not all boards place equal emphasis on identifying and populating strategic growth opportunities. Instead of leaving everything to management, board members could make a difference by becoming more actively involved in a company’s affairs.
Michèle F. Rüdisser

Balanced Growth – a resource management perspective

Frontmatter

HR strategies for balanced growth

Abstract
In order to fulfill the expectations of shareholders, growth has become an inevitable imperative for most companies. However, growth is always associated with increased complexity. Additional resources, especially human capital resources, are necessary to master this added complexity. Companies can satisfy this demand by either recruiting new employees, or by increasing their current personnel’s efficiency. However, in times of extreme talent bench shortfall and rapidly increasing burnout statistics, HR departments are facing serious challenges. Firms may not be able to recruit the necessary talent, may dilute the company’s culture and identity through intense recruitment within short periods, or may overload their current personnel quantitatively or qualitatively. This chapter outlines how companies can master these challenges through strategies such as: expanding the recruitment population, becoming a desired employer, recruiting very deliberately, prioritizing tasks and services, and, finally, interlinking strategic human resource management and high performance work systems’ activities. By applying these strategies, companies can avoid the risks of excessive growth. Instead, they can capitalize on times of growth, establishing sustainable or balanced growth in order to get ahead of their competitors.
David J. G. Dwertmann, Justus Julius Kunz

Electricity storage: Making large-scale adoption of wind and solar energies a reality

Abstract
The growth case for using renewable energy remains very much intact, despite the effects of a global economic downturn, and the prospects for wind and solar photovoltaic (PV) power appear particularly strong. To realize this potential, however, these technologies will have to overcome a key hurdle: the challenge posed by their intermittent nature. Unlike other forms of renewable energy, such as hydropower and geothermal energy, the energy generated by wind and solar PV fluctuates. This fluctuation poses a sizable challenge to their integration into the power grid and their widespread adoption as bona fide mainstream power sources.1 While there are several potential answers to the challenges of intermittency, the most viable, we believe, is a credible form of electricity storage.
Cornelius Pieper, Holger Rubel

Balanced growth through local entrepreneurship: The Komba coffee project in southern Tanzania

Abstract
This case study describes the approach and learnings of the Komba Coffee Project in Songea, Tanzania. The social start-up, which is driven by local entrepreneurs from the NGO Songea Network Center, aims to improve coffee farmers’ economic conditions by allowing them a larger share of the value-creation process and giving them bargaining power. Thanks to the re-designed supply chain and the direct export to roasters, farmers have a greater share of the value added and, thus, the profits. In line with Banerjee and Duflo (2011), this case study argues that regional socioeconomic deficits can be successfully addressed when their specific characteristics are taken into consideration. For sustainable growth, economic activities should be supported by the important stakeholder groups and driven by local citizens: Balanced growth is ultimately a question of creating self-confident communities with project ownership and leaders committed to sustainability. Finally, developing a project that is financially self-sufficient and sustainable takes time: Citizens should not only understand the concept and its intentions, but also accept responsibility and ownership for it to be a success.
Felix Meissner, Xaver Kazimoto Komba

Backmatter

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