Effective Recruitment of Engineers From Other Companies: Whether to Pull Individuals or Teams?

This study empirically analyzes effective conditions for cross-border “learning by hiring” in the electronics industry. Many previous studies have indicated that the mobility of engineers serves as a conduit for knowledge diffusion and that knowledge is more likely transferred when the geographical distance is short, that is, when the conduit is short. However, the relationship between conduit thickness and density and the knowledge spillover effect has only rarely discussed. The findings of this study suggest that it is more effective to hire multiple people simultaneously for learning by hiring from companies in other countries.

AUDITOR PROVIDED TAX SERVICES, INCOME SHIFTING, AND DEFAULT RISK

<p>This study investigates two capital markets effects of auditor provided tax services (APTS), a particular form of auditor provided non-audit services (APNAS). Firstly, this study examines the influence of APTS on income shifting by United States of America (U.S.) multinational companies and, secondly, this study examines the impact of APTS on default risk of all U.S. companies. There are two competing hypotheses on the impact of APNAS on the quality of the work of auditors and the empirical evidence is mixed. One strand of literature suggests that APNAS provide knowledge spillover effects and thus improve the quality of the work of the auditor. The other strand of literature suggests that APNAS impair the independence of the auditor and therefore lead to a decrease in the quality of the audit. APNAS may thus increase or decrease the value of audit as a governance mechanism. The U.S. Securities Exchange Commission (SEC) has banned several previously allowed APNAS such as bookkeeping, financial information systems design and implementation, appraisal and valuation, and internal audit. However, the SEC continues to permit auditors to provide tax services. This study extends the literature on APNAS by examining the effect of APTS on income shifting by multinational companies and on default risk. Using a sample of 10,248 firm-year observations on U.S. multinationals over the period 2002 – 2015 and the income shifting measurement model developed by Dyreng and Markle (2016), this study finds that APTS reduce outbound income shifting, which is consistent with knowledge spillover rather than impairment of independence. The result holds after addressing potential endogeneity concern and is robust to excluding observations from the financial crisis periods. Furthermore, the result holds after including firm-specific characteristics as influences on the income shifting parameters. Using a sample of 21,364 firm-year observations on U.S. firms over the period 2003 – 2016, this study finds that APTS have a positive relationship with default risk, consistent with impaired independence of the auditor. The result holds after addressing potential endogeneity concern and is robust to excluding the global financial crisis period. The effects of APTS on income shifting and default risk are therefore opposite in direction. However, the positive relationship between APTS and default risk is weaker for firms with high institutional holdings and a strong information environment, indicating that stronger corporate governance mitigates the impact of APTS on default risk. Furthermore, this study finds that the channel for the effect of APTS on default risk appears to be earnings quality. That is, APTS lower audit quality, thereby lowering earnings quality and increasing default risk. Given the cost of default, this is an important finding. Thus, taking the results on income shifting and default risk in combination, the question of the SEC continuing to permit auditors to provide tax services is left open to question.</p>

AUDITOR PROVIDED TAX SERVICES, INCOME SHIFTING, AND DEFAULT RISK

<p>This study investigates two capital markets effects of auditor provided tax services (APTS), a particular form of auditor provided non-audit services (APNAS). Firstly, this study examines the influence of APTS on income shifting by United States of America (U.S.) multinational companies and, secondly, this study examines the impact of APTS on default risk of all U.S. companies. There are two competing hypotheses on the impact of APNAS on the quality of the work of auditors and the empirical evidence is mixed. One strand of literature suggests that APNAS provide knowledge spillover effects and thus improve the quality of the work of the auditor. The other strand of literature suggests that APNAS impair the independence of the auditor and therefore lead to a decrease in the quality of the audit. APNAS may thus increase or decrease the value of audit as a governance mechanism. The U.S. Securities Exchange Commission (SEC) has banned several previously allowed APNAS such as bookkeeping, financial information systems design and implementation, appraisal and valuation, and internal audit. However, the SEC continues to permit auditors to provide tax services. This study extends the literature on APNAS by examining the effect of APTS on income shifting by multinational companies and on default risk. Using a sample of 10,248 firm-year observations on U.S. multinationals over the period 2002 – 2015 and the income shifting measurement model developed by Dyreng and Markle (2016), this study finds that APTS reduce outbound income shifting, which is consistent with knowledge spillover rather than impairment of independence. The result holds after addressing potential endogeneity concern and is robust to excluding observations from the financial crisis periods. Furthermore, the result holds after including firm-specific characteristics as influences on the income shifting parameters. Using a sample of 21,364 firm-year observations on U.S. firms over the period 2003 – 2016, this study finds that APTS have a positive relationship with default risk, consistent with impaired independence of the auditor. The result holds after addressing potential endogeneity concern and is robust to excluding the global financial crisis period. The effects of APTS on income shifting and default risk are therefore opposite in direction. However, the positive relationship between APTS and default risk is weaker for firms with high institutional holdings and a strong information environment, indicating that stronger corporate governance mitigates the impact of APTS on default risk. Furthermore, this study finds that the channel for the effect of APTS on default risk appears to be earnings quality. That is, APTS lower audit quality, thereby lowering earnings quality and increasing default risk. Given the cost of default, this is an important finding. Thus, taking the results on income shifting and default risk in combination, the question of the SEC continuing to permit auditors to provide tax services is left open to question.</p>

Threshold Effect of the Internet on Regional Innovation in China

Internet business adoption is an essential determinant of regional innovation which has received little attention in the literature. This paper emphasizes the role and threshold effect of Internet business adoption in increasing regional innovation outputs. We construct a threshold spatial autoregressive model to illustrate the nonlinear positive impact of Internet business adoption on innovation, simultaneously estimating interregional knowledge spillovers. To test threshold effect and interregional knowledge spillover, we use province-level panel data set in China and calculate Moran’s I and LR-like statistics to confirm the nonlinearity and spatial dependence. Within the empirical model, we find a positive relationship between the number of websites owned by local firms and the number of patents filed in that specific region. Our analysis suggests that Internet business adoption has a greater marginal benefit on the innovation of isolate regions. The results also indicate that ignoring interregional knowledge spillover may cause mistakes in the model on regional innovation systems. Policy implications for these results suggest that the government should not only pay attention to Internet development of the whole country but also encourage the reduction of digital divisions among regions

Frank Knight, uncertainty and knowledge spillover entrepreneurship

In his seminal 1921 book, Risk, Uncertainty, and Profit, Frank Knight distinguished uncertainty and risk. This paper applies Knight's concept of uncertainty to knowledge generated in incumbent organizations to explain the inherent difficulty in assessing potential innovations along with the key role played by knowledge spillover entrepreneurship as a conduit for transforming new knowledge created by an incumbent organization but ultimately commercialized through the creation of a new firm and innovation. Knowledge is inherently uncertain and constitutes what is characterized as the knowledge filter impeding innovative activity in the context of incumbent firms and organizations. The organizational and institutional context and market uncertainty can either facilitate or impede the spillover of knowledge from the firm where it was created to the entrepreneurial startup where it is transformed into innovation. The empirical evidence based on a large, unbalanced panel of 9,126 UK firms constructed from six consecutive waves of a community innovation survey and annual business registry survey during 2002–2014. Implications for managers, scholars, and policymakers are provided.

Labour Productivity Spillovers from Foreign Direct Investment: Evidence from Malaysian Industry Level Panel Data by Labour Skills Composition

This study adds to the literature by examining both technology and knowledge spillover effects of foreign direct investment (FDI) according to skill composition and also by country spillovers in Malaysian medium-high industry, which raises the question of the real benefits produced by both spillovers that Malaysia can reap from the presence of FDI in enhancing the labour productivity. Using the seemingly unrelated regression (SUR) estimator to estimate labour productivity function by skill composition, the results reported that the presence of Japanese, Singaporean and the United States MNCs are statistically significant in influencing the productivity of high and medium-skilled workers from both technology and knowledge spillover effects during the period of 2000 to 2018. Conversely, the analysis indicated that both Chinese and Taiwanese MNCs significantly increase the low-skilled labour productivity. An interesting finding was discovered, that the negative association between knowledge spillovers and labour productivity across the skills draws the attention for the role of local firms as recipients of FDIs depends not only on their absorptive capacity but also on their strategic decisions regarding search direction and motivational disposition to absorb external knowledge. These issues need to be investigated further to understand how local firms may increase their chances of benefitting from MNC presence.