The results suggest that consistent with our theory judicial efficiency reduces t

The results suggest that consistent with our theory

This preview shows page 115 - 117 out of 136 pages.

other controls. The results suggest that, consistent with our theory, judicial efficiency reduces the likelihood on employing foreign employees in the low judicial efficiency regime while the opposite is true in the high judicial efficiency regime. The results indicate that one standard deviation increase from the mean in judicial efficiency is associated with a decrease of about 3 to 5 percent points in the likelihood of employing for- eign employees while the same decrease lead to 20 to 25 percent point increase in probability of employing them. (The mean is 46.5 percent). 45 The level of judicial efficiency that predicts the lowest probability of employing foreign employees is about 3.1, which is about 0.3 standard devi- ation positively away from the mean. One standard deviation away from this point in either way implies about 10 to 13 percent point increase in the probability of employing foreign employees. The magnitude of coefficients indicate that the only state that is in the high judicial efficiency regime is Aguascalientes which has by far the best score (4.59) while the second best state has a score of 3.4. If we exclude Aguascalientes, the square term of judicial efficiency loses significance, but the judicial efficiency itself is statistically significantly negative, confirming that all the other 45 The mean level of judicial efficiency is at the low efficiency region. Therefore, if judicial efficiency increases, the predicted likelihood of relying on foreign employees decreases first until the bottom of the U-shape and increases after it, while if judicial efficiency decreases from the mean, the predicted likelihood of relying on foreign employees increases monotonically (This asymmetry happens anywhere not at the bottom). 35
Image of page 115
states are in the low judicial efficiency regime. This is in line with the theory indicating that an increase in judicial efficiency in that regime leads to less dependance on expatriates. 46 Now we turn to our predictions on entry and the technology composition of foreign firms. The model predicts that there will be more entry of foreign firms associated with an increase in judicial efficiency because judicial efficiency increases the profit of MNCs. The rate of the increase in profit associated with higher judicial efficiency depends on the choice of subsidiary CEOs: the profit is a linear function of judicial efficiency when the CEO is local and non-linear if the CEO is an expatriate. Therefore, we include the square term of judicial efficiency in the regression to capture the potential nonlinear effects. In terms of the technological intensity of the entering foreign plants, the model predicts that for the low judicial efficiency regime an increase in judicial efficiency (which rises uncertainty) will lead to lower technology intensity because only high-tech firms generate positive profits. For the high judicial efficiency regime, the model has two opposing effects: an increase in judicial efficiency makes it easier for low-tech firms to enter while the same increase makes expatriates more attractive thus lead to more high-tech firms.
Image of page 116
Image of page 117

You've reached the end of your free preview.

Want to read all 136 pages?

  • Spring '17
  • JAMES FENSKE

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask You can ask ( soon) You can ask (will expire )
Answers in as fast as 15 minutes