The Institute is delighted that it has awarded 9 grants for unique research conducted on a broad range of emerging market related issues for the year 2013. 

HKUST IEMS Research Grants support high-quality research that provides valuable insights into the challenges facing businesses and governments in emerging markets. The Institute encouraged collaborative proposals among HKUST faculty and with researchers outside HKUST.  Priority is given to collaborative research projects that are oriented around the Institute's focus research themes, as well as proposals that contribute to ongoing Institute’s research initiatives on the topics of Belt and Road and Digital Economy.

Income Distribution and Sovereign Credibility in Emerging Market Countries 

Hye Jee Cho, Assistant Professor, Division of Social Science

My proposed research will explore how income inequality affects the investor perceptions of sovereign creditworthiness in emerging market countries around the world. Building credibility in financial markets is an important task if governments are to prevent capital flight and maintain market stability. Earning market confidence is especially important for emerging market countries, as these economies have experienced widespread sovereign defaults and/or debt restructuring in recent decades. I specifically pay attention to the effect of income inequality on sovereign credibility via political routes. I will explore whether the impact of income inequality on investor perception is mainly through increased political risk and instability, or income inequality directly affects market sentiment even when political problems are negligible. I further test how income volatility affects political stability and market sentiment, because income volatility may exert more damaging effects on a society than a constantly high level of inequality. [More]

Understanding Demand for Counterfeit Products in Developing Nations 

Amy N. Dalton, Assistant Professor, Department of Marketing

Counterfeit consumption poses a major problem for businesses and governments throughout the world. Although billions of dollars annually are spent trying to remove counterfeits from the supply chain, counterfeit consumption continues to rise, particularly in Asia. The present research addresses psychological factors that drive consumer demand for counterfeits. Specifically, we examine the psychological impact of resource scarcity and propose that counterfeit consumption increases when consumers perceive resources (e.g., money, goods, jobs) as scarce. Importantly, this effect may depend on cultural factors, including (1) vertical/horizontal orientation and (2) the caste system. That is, perceived resource scarcity increases demand for counterfeits to a greater extent in societies that are vertically (vs. horizontally) oriented, and in societies without (vs. with) a caste system. This research is important because little is known about the psychological factors that drive demand for counterfeits. If we can understand why counterfeits appeal to consumers, we are one step closer to curbing their demand. [More]

A Study of User Behavior in using Search Engine for Locating Infringing Digital Media in Emerging Markets 

James S.H. Kwok, Associate Professor of Business Education, Department of Information Systems, Business Statistics, and Operations Management / Kai-Lung Hui, Professor, Department of Information Systems, Business Statistics, and Operations Management

Copyright infringement has always been a major problem of digital media, including software, movie, music, electronic games, books, and broadcasting in digital environment. Piracy is a worldwide problem but it is worse in developing markets due to many factors, such as their enforcement efforts, the unavailability of digital media in particular emerging markets, and so on. This project proposes a comprehensive study of the user behavior in emerging markets in using search engine for locating infringing digital media in an attempt to evaluate the effectiveness of the delisting/de-indexing technical measure when it would be implemented in emerging markets, such as China, Russia, Thailand, India and so on. The findings from emerging markets will be compared and analyzed in order to better understanding the pros and cons of de-listing/de-indexing in various emerging markets. General policies and guidelines will be derived to help emerging markets in deploying and managing the de-listing/de-indexing technical measure in a more effective way. [More]

Relatedness Between Industries and Industrial Relocation: Evidence from Chinese Firms 

Yao Amber Li, Assistant Professor, Department of Economics

We aim to investigate how the network of relatedness between industries has affected the process of industrial upgrading and relocation in China during the period of 1998-2009. While factor prices have surely played an important role in this process, it is expected that the structure of the network of relatedness between industries is also important in determining the magnitude and order of industrial relocation and upgrading, which has not been studied in the previous literature. Using firm-level manufacturing data, we construct several measures of industry relatedness based on the coagglomeration pattern of industries across different regions in China. We expect to find that regions are more likely to gain (and less likely to lose) comparative advantage in industries that are closely related to those that they already have comparative advantage in. [More]

Corporate Risk Management in Emerging Markets: Challenges and Opportunities in the BRICS Countries

Peter Mackay, Associate Professor, Department of Finance

Firms operating in emerging markets (EM) face more risks. Even when the risk factors are known (e.g., FX rates, commodity prices), corporate risk management (CRM) in Ems is uncertain (“unknown unknows”), adding to the costs and indeed the risks: Derivatives markets are less developed and less liquid, counterparties are less trusting, disputes are more likely and their resolution is less predictable (legal and judicial risks). DM-firms active in Ems may face the same issues. But the extent and consequences of these issues is unknown, as is the scope for value-adding improvements. [More]

(selected as key project by SKOLKOVO-EY IEMS)

Private Sector Financial Contract Design to Overcome Public Sector Inefficiencies in Emerging Markets 

Abhiroop Mukherjee, Assistant Professor, Department of Finance

Emerging markets are typically characterized by various inefficiencies in their public sector framework for doing business. We focus on inefficiencies in enforcing financial contracts, e.g., lengthy delays in settling lawsuits. When financial contracts are hard to enforce, then lenders worry that borrowers can hold up future payments on loans. This might lead these lenders to seek higher interest rates, and this can crowd out many profitable investment projects. We seek to examine whether there are any financial contracts that private lenders and firms can write to circumvent this problem. We intend to use a judicial reforms in India that reduced enforcement costs, and examine whether theories that explicitly address contracting under enforcement problems work in the real world. Although the project will use the case of India to identify causal effects cleanly from a staggered reform, our work will have implications for contracting in many other emerging markets that face similar problems in judicial enforcement. [More]

Preemption and Defense: Strategy of International Patenting in Emerging Economies 

Naubahar Sharif, Associate Professor, Division of Social Science

More and more inventive activities now take place in emerging economies, beyond the traditionally innovative triadic regions of Europe, Japan, and the United States. Because of the size and growth of emerging economies, multinational corporations (MNCs) have actively sought patent protection in those countries. However, we know little about the patenting strategies of MNCs in emerging markets, particularly with respect to in which countries they choose to patent and the technologies they choose to patent. This proposed project aims to investigate international patenting activities in emerging economies at the firm level. We will use the concept of ‘patent families’ to ensure comparability of patents applied for in a wide array of 29 emerging-market national patent offices. We will link the patent data which are primarily drawn from PATSTAT database with the firm financial dataset, and finally we will link the patent-firm dataset to the data of the emerging economies at the country level. [More]

Workshop on Pathways to Sustainable Urbanization in Emerging Economies

Jimin Zhao, Associate Professor, Division of Social Science

More than 50% of the world’s population now lives in cities and that figure is set to rise to 75% by 2050. Global urbanization has long since shifted to developing countries and emerging economies. In order to make urbanization beneficial, policy making must reconcile the objectives of economic efficiency with social inclusion and environmental sustainability. This one-day workshop to be held in spring 2014 aims to explore the pathways and pattern of urbanization in China and other emerging economies from a sustainable development perspective. The invited speakers are distinguished senior scholars in different disciplines from the US, UK, and China. They will discuss environmental and energy issues associated with city development, such as climate change, air pollution, water quality, and energy consumption. The discussion will focus on city development strategies, evaluation of policy responses, best practice, and driving forces affecting these issues in emerging economies. [More]

Reverse Migration and Technology Transfer in Emerging Market Societies 

David Zweig, Professor, Division of Social Science

The project addresses the issue of whether reverse migrants, particularly scientists and entrepreneurs, are an important source of technology tranfer for emering economies. I am completing a book on this and other aspects of reverse migration to China, but want to test my findings in India and Turkey. I will do some quatitative interviews in these two coutries by the grant. I will also hire local academics to collect more questionnaires (target sample size: 200) on behalf of us. [More]

(selected as key project by SKOLKOVO-EY IEMS)