Is Better Information Always Good News? International Corporate Strategy and Regulation

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 propos...

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Bibliographic Details
Main Author:	Kitzmuller, Markus
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2013
Subjects:	ACCESS TO INFORMATION ACCOUNTING ADVERSE EFFECTS ADVERTISING ARBITRAGE BANK POLICY BARGAINING BARGAINING POWER BERTRAND COMPETITION BINDING CONSTRAINT BOND BRAND CHILD LABOR CLEAN TECHNOLOGY COMMERCE COMMITMENT DEVICE COMPARATIVE ADVANTAGE COMPETITIVE ADVANTAGES COMPETITIVE PRICES COMPETITIVENESS CONSUMER EXPECTATIONS CONSUMER PREFERENCES CONSUMERS CONTRACTUAL OBLIGATION COORDINATION FAILURE CORPORATE TAXES CREDIBILITY DERIVATIVE DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT POLICY DISCLOSURE OF INFORMATION DISPLACEMENT DRIVERS DUMPING ECOLOGICAL ECONOMICS ECONOMIC ACTIVITY ECONOMIC ANALYSIS ECONOMIC BEHAVIOR ECONOMIC COMPETITION ECONOMIC INTEGRATION ECONOMIC MOTIVATION ECONOMIC PERFORMANCE ECONOMIC THEORY ECONOMICS ECONOMISTS EMERGING MARKET EMERGING MARKET ECONOMIES EMERGING MARKET ECONOMY EMERGING MARKETS EMISSIONS EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPLOYMENT ENVIRONMENTAL ENVIRONMENTAL ECONOMICS ENVIRONMENTAL IMPACTS ENVIRONMENTAL KUZNETS ENVIRONMENTAL MANAGEMENT ENVIRONMENTAL PERFORMANCE ENVIRONMENTAL POLICY ENVIRONMENTAL PROTECTION ENVIRONMENTAL QUALITY ENVIRONMENTAL REGULATIONS ENVIRONMENTS EQUILIBRIUM EQUILIBRIUM PRICES EXPENDITURES EXPLOITATION EXPORTS EXTERNALITIES EXTERNALITY FAIR FAIR TRADE FINANCIAL MARKETS FIRM PERFORMANCE FIXED COSTS FLOW OF INFORMATION FOREIGN DIRECT INVESTMENT FREE TRADE GDP GLOBALIZATION HOLDING HORIZONTAL INTEGRATION IMPERFECT INFORMATION INCENTIVE COMPATIBILITY CONSTRAINT INCOME EFFECTS INCOME LEVELS INDUSTRIALIZATION INFORMATION ASYMMETRIES INFORMATION ASYMMETRY INFORMATION DISCLOSURE INNOVATION INSTRUMENT INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL STANDARDS INTERNATIONAL TRADE LABOR FORCE LABOR ORGANIZATION LABOR STANDARD LABOR STANDARDS LEGAL TOOLS LIABILITY LOCAL MARKETS LYON MARGINAL COST MARGINAL COSTS MARKET ECONOMIES MARKET ECONOMY MARKET FAILURE MARKET FORCES MARKET LEVEL MARKET LEVELS MARKET MECHANISM MARKET MECHANISMS MARKET SHARE MARKET VALUE MARKETING MINES MONITORING COSTS MONITORING TECHNOLOGY MONOPOLY NASH EQUILIBRIUM NEGATIVE EXTERNALITY PER CAPITA INCOME PERFECT INFORMATION POLITICAL ECONOMY POLLUTION POLLUTION ABATEMENT POLLUTION LEVELS PRICE SETTING PRICING STRATEGY PRIVATE INFORMATION PRODUCERS PRODUCT MARKETS PRODUCT QUALITY PRODUCTION COSTS PRODUCTION PROCESS PRODUCTION PROCESSES PRODUCTIVITY PROFIT MAXIMIZATION PROPERTY RIGHTS PUBLIC GOOD PUBLIC GOODS PURCHASING PURCHASING POWER QUALITY STANDARDS REGULATORY AUTHORITY REGULATORY CONSTRAINT REGULATORY FRAMEWORK REGULATORY STANDARDS REGULATORY SYSTEM RELEVANT MARKETS RETAILING RETURNS SALES SCALE EFFECTS SELF-REGULATION SPREAD STOCK MARKET STOCKS SUBSTITUTE SUPPLIERS SUPPLY CHAINS TAX TAX REVENUE TRADE BARRIERS TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS TRADING TRANSPARENCY UTILITY FUNCTIONS UTILITY MAXIMIZATION VALUATION WEALTH WELFARE EFFECTS WELFARE FUNCTION WILLINGNESS TO PAY
Online Access:	http://documents.worldbank.org/curated/en/2012/10/16873350/better-information-always-good-news-international-corporate-strategy-regulation http://hdl.handle.net/10986/12092

Description
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.

Is Better Information Always Good News? International Corporate Strategy and Regulation

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