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About this book

This book gathers selected papers from the 28th Eurasia Business and Economics Society (EBES) Conference, held in Coventry, United Kingdom. While the theoretical and empirical papers presented cover diverse areas of economics and finance in various geographic regions, the main focus is on the latest research concerning the economics of innovation, finance and macroeconomics. The book also includes regional studies.

Table of Contents


Economics of Innovation


The Importance of Emerging Industries: The Case of Biopharma

The aim of this chapter is to highlight the importance of emerging industries in a continuously changing and globalized world, dominated by constant shifts of consumers’ behavior, when the arising new needs fuel the innovative approach of companies to upgrade their products and services. The interest in these new industries, in fact, traditional industries driven by disruptive ideas, is increasing within the business world in accordance with their high-growth potential, social performances, and innovation. Among the most important emerging business sectors, the biopharmaceutical industry attempts to create a very attractive commitment for increasing people’s lives, through biological substances and biotechnological means, leaving behind the traditional drugs manufactured through chemical substances. Structured in two parts, this study firstly summarizes the stages of industries’ life cycles and the characteristics, challenges, and importance of emerging industries. Secondly, it presents the case of biopharma industry emergence, with a focus on the determinant factors of industry emergence and the sources of competitive advantage of biopharma industry.
Cristina Porumboiu

The Hiramatsu Concept of “One Village, One Product” as an Element of Regional Industrial Specialization and a Cluster Policy Tool

OVOP (“one village, one product”) can be interpreted as an early phase of creating clusters, bearing in mind the differences and similarities between these two phenomena. The chapter aims to present the development of the Hiramatsu concept by including the developing countries alongside developed countries in the existing model and to evaluate the concept implementation possibilities for the development of regional industrial specializations and cluster policies. The chapter presents three research questions: (RQ1) may the Hiramatsu concept be used in the developing countries?, (RQ2) can the one village, one product model foster the development of regional industrial specializations? and (RQ3) can the Hiramatsu concept be a tool of model cluster policy? As a result of the research conducted in the chapter, it can be concluded that the Hiramatsu concept can be implemented in the developed and developing economies as an element of regional policy, wherever there is a large concentration of industry. This concept can also be a useful executive tool in cluster policy.
Anna H. Jankowiak

Entrepreneurship, Innovation, and Economic Growth: Evidence from Saudi Arabia

There have been growing interests on studies focusing on the shifting from resource economy to knowledge economy, and entrepreneurship and innovation seem to take leading roles in such discourse. Despite the fact that entrepreneurship has been recognized for the last few decades as an essential component of economic growth, which is facilitated by technological innovation, yet several studies could not establish such, especially in developing economies. Since Saudi Arabia government is dedicated to the achievement of Vision 2030 among which are diversifications of the economy from oil, increase the participation of small and medium enterprises and reduction of unemployment, there is a need for this study. This study examines the impact of entrepreneurship and innovation on economic growth in Saudi Arabia using the data obtained from World Bank Development Indicators (WDI) for the period 2005–2016. The result of the regression analysis revealed that innovation positively and significantly impacted on entrepreneurship. The results of the endogenous growth model further reveal that while entrepreneurship and innovation positively influence economic growth, the impact of entrepreneurship is significant but that of innovation is not significant on economic growth. This implies that entrepreneurship directly impacted on economic growth but innovation only impact on economic growth through entrepreneurship. Saudi government should be committed to further create a more suitable entrepreneurship ecosystem whereby improved entrepreneurial framework conditions, such as increasing the level of R&D transfers and innovation, finance for entrepreneurs, enhancing post-school entrepreneurship training and encouraging the participation of the private sector are achieved.
Yusuf Opeyemi Akinwale, Adel Abdullah Alaraifi, Aljohara Khalid Ababtain



The Impact of Capital Structure on Firm Performance and Risk in Finland

The decision pertaining to the capital structure is one of the most strategic, perpetual, and at the same time challenging corporate decisions. Having an optimum capital structure is an important aspect of the financing of firms. Firms often struggle to create an optimum balance between their debt and equity. The current chapter aims to explore whether the capital structure impacts the performance (financial and nonfinancial) and the financial risks of the firms in Finland. In the current chapter, the secondary data of 50 large-cap Finnish public firms listed at the Helsinki stock exchange has been obtained for the period 2011–2017. The findings of the research disclose that leverage affects most of the accounting, market, and hybrid performance measures negatively. On the other hand, the effect of leverage on the nonfinancial measures has been found to be insignificant. Similarly, a high level of leverage leads to increase in the total risk; however, it does not affect the systematic risk. The current chapter is one of the fewest studies that employed comprehensive analysis through multiple measures of firm performance, risk, and capital structure in the context of the Finnish corporate sector.
Shab Hundal, Anne Eskola, Sofiya Lyulyu

Financial Behavior of Investors: Long-Run Overreaction Phenomenon in Euronext Stock Exchange

The research investigates the long-run overreaction phenomenon in EURONEXT stock exchange. Data of EURONEXT stock exchange for the period of 2000–2017 were employed for the winner and the loser portfolio formation and systemic risk adjustment with the CAPM. Robustness was checked with t-test statistics. The empirical findings revealed long-run reversal effect wherein past long-run loser portfolios outperformed past long-run winner portfolio supporting the overreaction hypothesis with the exception for the period of financial turmoil. This overreaction was close to symmetric: positive average cumulative adjusted returns for the loser portfolio were similar to negative returns for the winner portfolio. Even though the findings supported long-run overreaction in EURONEXT stock exchange, this phenomenon was explained by the differences in risk. Jensen alpha was statistically insignificant, systemic risk of loser portfolio was higher than the one of winner portfolio. These results are consistent with the Efficient Market Hypothesis and the investors’ rationality—there was no possibility to apply the contrarian strategy for earning abnormal returns. Our research contributes to the existing literature providing further evidence on financial behavior in well-developed stock markets, and overreaction phenomenon during the global financial crisis of 2008–2009 (GFC).
Vilija Aleknevičienė, Inga Aleksandravičiūtė

New Evidence of the Influence of Post-materialism Orientations on the Financial Markets Mechanisms

The study comes with new empirical evidence of the impact of the sociocultural values on the financial market mechanisms. The need to test materialism and post-materialism cultural theories is leading us to a study that takes into consideration an analysis period, from 2000 to 2014, for a sample of 14 countries with markets having socio-mature economies. The data used for our study is grouped into three waves. The objective of the study is to determine the post-materialism degree in 14 mature markets having direct connection with the cultural dimensions within the same markets. We intend to observe whether the mechanisms of the mature markets are under the influence of post-materialism factors and if yes, to what extent. As dependent variables, we will use different cultural dimensions offered by the World Bank. The results lead us to conclude that the presence of post-materialism is positively associated with socio-mature economies, furthermore, citizens with a predominance of post-materialism values have better skills to invest in financial markets. The results show that the cultural determinants behave as evidence of post-materialism and the post-materialism has the ability to influence the change of values and believes.
Raluca Simina Bilți

An Analysis of Working Capital Management Strategy in Small Enterprises Operating Within Group Purchasing Organizations

Working capital management is the most important area of business management. The main purpose of net working capital management is to keep the financial safety of an enterprise. The purpose of this article is to analyze working capital management in small enterprises operating in Polish group purchasing organizations (GPOs). The research was carried out on a group of 96 commercial enterprises operating in the construction industry. The research period covered the years 2013–2017. The units operate in Polish group purchasing organizations. Statistical research was performed using the statistical average, median, minimum, and maximum values for the most important financial indicators informing about the working capital management strategy. The analysis was to show which strategies for managing working capital are used by small enterprises operating within GPOs. The results indicate that small enterprises operating within purchasing groups are abandoning aggressive strategies. They focus on the safe management of the company; their management strategies tend toward an indirect strategy, which should be defined as moderate-conservative one.
Grzegorz Zimon

Corporate Governance as a Corporate Social Responsibility Reporting Determinant

Bank failures following the 2008 global financial crisis have increased the pressure for banks to integrate corporate social responsibility (CSR) in their core business. One manifestation of this pressure is the increased focus on CSR reporting of banks. Considering this, the objective of this paper is to determine the association between corporate governance characteristics and CSR reporting of listed banks. Logistic regressions with bank-specific fixed effects are run on a global sample of 285 listed commercial banks from 35 countries. The analysis covers a period from 2005 to 2015. The results show that board size and gender diversity are positively associated with banks’ CSR disclosure decisions. After controlling for CSR commitment indicators, the presence of CSR Committee, joining Global Compact, and joining the Equator Principles exhibited a strong positive association with CSR disclosure. This indicates that diverse boards and formal CSR structures could lead banks to disclosing a CSR report. Thus, by properly influencing these indicators, for example, through some formal governance requirements, CSR reporting could be improved.
Triinu Tapver

Macro Economy


Evaluation of the State Strategy of Spatial Development Effectiveness of the Russian Federation: A Cluster Approach

One of the basic problems of countries’ balanced economic growth is the spatial heterogeneity of the regional development. The purpose of this study is to assess the effectiveness of the state strategy of spatial development of the Russian Federation based on the formation of macroeconomic regions. This paper proposes a methodological approach to the identification of macroregions as an important tool to reduce spatial heterogeneity by realizing the potential of interregional interaction. The proposed methodology for identification of macroregions was based on the tools of spatial economics: the gravity model and cluster analysis. During the study, 14 macroregions were identified. An analysis of regional development heterogeneity was carried out using the Theil index. In the course of the calculations, it was revealed that the value of the intragroup differentiation index of the territories of macroregions determined by the state strategy of spatial development is significantly higher than the same index for the territories of macroregions obtained on the basis of the author’s methodology. This suggests an ineffective consolidation of the territorial structure of macroregions by the state spatial development strategy.
Julia Dubrovskaya, Elena Kozonogova, Tatiana Pestereva

Protection Standards in Bilateral Investment Treaties and Their Contribution in Attracting Foreign Direct Investment

Since the mid-1980s, most countries, especially the developing, have become more open to foreign direct investment (FDI) aiming to benefit from its fiscal development contributions, as countries with a high level of investment systematically achieve higher levels of development. Accordingly, bilateral investment treaties (BITs) guarantee certain standards of treatment. However, there are various concerns related to the effectiveness of BITs at large and of their investment protection standards especially to promote inflows of FDI, as there are opinions indicating that many multinational enterprises do not appear to take BITs into account when determining their investment plan abroad. This paper purports at first to examine the most important investment protection standards provided by BITs, in order to connect these standards with the main host country determinants for attracting FDI. In addition, it explores the possible impact of BITs on FDI inflows, since they are the key instrument in the strategies of most countries to attract foreign investors. The present paper in order to assess the importance of BITs examines several studies that explore the impact of BITs on FDI inflows, concluding that higher number of BITs raise the FDI.
Argyrios Benteniotis, Vasiliki Delitheou, Eleftherios Podimatas

Regional Studies


The European Union as a Platform for the European NGOs’ Operations: Market Versus Democracy

The aim of this paper is to examine the influence of non-governmental organizations (NGOs) operating in the European Union (EU), as being participants of the institutionalization of regional links between states, on mitigating the deficiency of democracy. In order to achieve the aim, the following research objectives are set: (1) to identify the factors leading to the crisis of a national state, (2) to examine the impact exerted by market and democratic institutions on the conflict between market and democracy, (3) to describe the evolution of NGOs in the EU and their legitimacy to represent the social needs and interests on local and global markets, and (4) to study the influence of NGOs in the EU on the construction of democratic governance. We show that the role of NGOs in promoting civil dialogue is understood as an institutional solution leading to the socialization of the public decision-making processes and also a necessity of strengthening the social legitimacy of NGOs as democratic institutions of global importance, as well as a way of solving the conflict between the market and democracy mechanisms by counterbalancing the power of both.
Boguslawa Drelich-Skulska, Malgorzata Domiter

The Demand and Supply Analysis and Comparison of Dwellings in Szczecin

This article presents the results of a comparative study of apartments offered for sale (supply) and sold (demand). This study was conducted on the example of the Szczecin market. The aim of this article was to determine the similarity of the examined structures (offered and sold flats) with regard to selected features: price of 1 m2 and area of the flat. The data were obtained from the West Pomeranian Multiple Listing Service and the Register of Real Estate Prices and Values. Descriptive statistical methods were used to analyze supply and demand. Selected measurements were used to investigate the similarity of structures, including the Kolmogorov and the Bhattacharya metrics, the Matusita distances, and the Kullback-Leibler pseudo-distances. The results indicate a greater similarity of structures of flats offered for sale and sold in terms of price per m2 than the area of flats. In the following years of the analysis, the diversification increased, although it remained at a low level. The offer price of a 1 m2 apartment submitted for sale in Szczecin was 13% (in 2017) to 22% (in 2018) higher than the transaction price. The price expectations of apartment owners were higher in the case of small flats, and the disparity decreased as the area of the flat increased.
Anna Gdakowicz, Ewa Putek-Szeląg

Artificial Intelligence and State Economic Security

Artificial intelligence (AI) is one of the greatest contemporary threats to our planet’s social and economic well-being, accompanied by tremendous advances in education, health, economic growth, transportation, environmental sustainability and energy etc. Hence, there is an urgent need to control and govern AI. In this context, the purpose of this article is to present the risks of AI race and its effects on the state economic security of countries. To emphasize the importance of the topic at the beginning, this article presents consequences of AI as a great game changer from government politics, international political economy, and international security point of view. Next, difficulties like security dilemma and potential shifts and volatility in national sovereignty and economic power by causing oligopolistic global market structure in the world are shown. This article describes also a solution in order to design global norms, international institutions, and policies ensuring the beneficial use of AI in terms of having strategic stability between great powers, international economic security, and fair redistribution of economic power on the domestic and international level. In this context, due to growing awareness of the negative impact of AI among states, the necessity of the AI to be defined as a global public good is emphasized which may be pivotal for reducing existential risks of AI.
Murat Uzun

Assessment of the Features of the Spatial Organization of the Russian Economy Based on the Global and Local Moran Indices

The uneven economic and social development of various regions and municipalities in many countries is a negative consequence of the inefficient spatial organization of the economy. A system of spatial development indices is developed in the article using the example of Russian regions. A significant and positive spatial autocorrelation was revealed as a result of calculations of the global Moran index using the matrix of weights of inverse distances and the boundary matrix of weights. Local Moran indices were calculated in the process of identifying groups of territories with a low level of spatial development; a spatial scattering diagram and a geographical map were constructed. The results obtained make it possible not only to determine the spatial development factors of specific regions but also to develop recommendations for improving the spatial organization of the country’s economy as a whole.
Elena Kozonogova, Julia Dubrovskaya
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