Editorial on Growth and Governance, and Strategic Paradox of Global Integration and Local Adaptation

In this issue, we present six interesting and impressive research manuscripts. These manuscripts address important managerial and scholarly issues, and employ varied methodologies. The research addresses the following research and managerial issues.

1. Relationship between supply chain organization and manufacturing
2. Seasonal behavior of daily stock return series
3. Application of the Brownian-walk Monte Carlo simulation in option pricing
4. Factors that impact consumer choice of luxury products
5. Learning and Organizational Development
6. Experiential v. functional benefits in banking service industry

These research manuscripts are in the tradition of manuscripts published in this Journal since my editorial leadership in April 2012.

Here, in this issue, I want to present two interesting research ideas and questions that are worthy of our attention and research efforts. The first idea relates to the potential relationship between governance and growth. The second idea relates to strategic paradox of global integration and local adaptation.

Governance and Growth: Are they endogenous?

While there is considerable agreement that societies with accountable democracies, low corruption, stable property rights and a rule of law are generally more efficient at solving their economic problems, there is divergence in what should be the path of progress for developing societies. Economics and governance theory put forward two broadly distinct frameworks for identifying and designing appropriate growth strategies.

One perspective is that good governance leads to growth and prosperity. Good governance is defined as: f o c u s i n g o n a n t i – c o r r u p t i o n , d e m o c r a t i c accountability, strengthening property rights and the rule of law. Supported by the New Institutional Economics developed by Douglass North and others, these elements make markets more efficient. The distinctive feature of this approach is that the activities are rules-based: institutionalizing and enforcing generalized rules of public conduct, and the effect on growth is through making markets more efficient (Khan 2012).

An alternative view affirms that it is growth and specific capacity building that eventually leads to good governance. This view is based on the experience of rapidly growing developing countries and the governance capabilities that have sustained their growth and development. Here, the focus is on administrative and political capacities to address specific problems in a context where markets are not efficient. Instead of general rules, this approach relies on processes and capabilities of critical agencies for solving particular problems. This approach becomes necessary because the (market) contracting failures are too widespread for efficient allocations by the market.

Some recent evidence suggests that regardless of regime type, ‘good governance’ approach has achieved limited results in developing countries. On the other hand, process-based governance capabilities in specific agencies were critical for sustaining development in many contexts (Kalyanaram 2012, 2009).Accordingly, the following research questions are of great import.For developing countries:

1. Does good governance lead to growth or is it growth that leads to good governance?
2. Are good governance and growth endogenous?

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