Course Syllabus
ECONOMICS AND POLICY IN THE GLOBAL BUSINESS ENVIRONMENT
University of Basel
WWZ Summer Program
Professor J. Bradford Jensen
Summer School 2015
Course Overview
The objective of the Economics and Policy in the Global Business Environment course is to help
you understand how a firm’s strategy is influenced by the firm’s environment and the strategy
and environment interact to affect the performance of the firm. We will study the forces that
shape relative costs of production, trade flows, capital flows, interest rates, exchange rates, and
other variables that affect the global economic landscape. We will also examine how political
institutions influence the global environment. The course examines firm-level decisions in the
face of these global forces and how globalization affects firm performance. The ultimate
objective is to help you develop a toolkit for analyzing both opportunities and risks in the global
business environment.
The course will utilize lectures, case based exercises, and a team project to develop ideas.
Students will be required to work in groups and individually. In addition to team work and class
participation, a final examination will also be part of grade determination.
Course Reading Material
The principle reading for the course consists of chapters from Bernard, Knetter, and Slaughter,
Global Macroeconomics for Managers (textbook manuscript, denoted BKS in the syllabus). The
BKS chapters and a number of articles are available on the University of Basel website.
Other articles and all the cases are available from the Harvard Business School Press website
where I have created a course with the assigned cases. The readings available from the Harvard
Business Publishing website are preceded by “HBP” in the syllabus.
Project
A key feature of the course is a global industries project that is conducted by teams of students
focused on a firm’s decisions about business in a range of global industries. Similar to a
corporate strategy exercise, each team determines where to locate production and sales and how
to organize a firm in each of the industries, and how the firm’s business is affected by a major
macroeconomic or political shock that is likely to occur.
The project runs throughout the course. Each student is part of a 5-person team that analyzes
three different industries and creates a competitive firm for each of the industries. The tasks for
the team are to determine:
1. Where and how the firm should locate and organize headquarters, research & development,
design, and production of products or services for the firm in each industry
2. Where and how the firm should locate and organize distribution, marketing, and sales in each
of the industries
3. How the firm’s competitive position and strategy is affected by macroeconomic shock that
might take place in the near future (e.g., currency or debt crises).
The industries with which we work are
Information technology hardware
Software
Motor vehicles
The concluding event of the course is project presentations by each team to the class using both
presentation slides and a written report.
More details regarding the project will be provided later.
Grade Determination:
Class Participation
Vietnam Case Write-Up
10%
10%
Firm Project
Final Exam
20%
60%
Week 1 Day 1:
Topic 1: Heterogeneous Firms in the Global Economy
Readings:
HBP: “Competitive Advantage: The Value Chain and Your P&L.” 2012. Excerpted from Magretta, Joan,
Understanding Michael Porter: The Essential Guide to Competition and Strategy
HBP: “Staking Out Your Company’s Unique Competitive Position Using Michael Porter’s Elements of
Strategy.” 2012. Excerpted from Magretta, Joan, Understanding Michael Porter: The Essential Guide to
Competition and Strategy
Topic 2: International Trade I – Resource Allocation and Comparative Advantage
Readings:
BKS: Ch. 2 Resource Allocation in a Closed Economy
BKS: Ch. 3. International Trade in Goods and Services
Bernard, Jensen, and Schott, “How Offshore Work Affects Your Industry,” Harvard Business Review,
November 2004, Vol. 82, No. 11, p.24.
Week 1 Day 2:
Topic 3: International Trade II
Readings:
Bernard, Andrew B., J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott. “The Empirics of Firm
Heterogeneity and International Trade,” Annual Review of Economics, 2012, vol. 4, pp. 283-313.
Krugman, Paul. “Is Free Trade Passé?” The Journal of Economic Perspectives, Vol. 1, No. 2 (Autumn,
1987), pp. 131-144.
Topic 4: Theory of the Firm and Transaction Costs
Readings:
HBP: Tadelis, Steven. “Williamson’s Contribution and Its Relevance to 21st Century
Capitalism,” California Management Review, 2010, vol. 52, no. 2, pp. 159-166.
Teece, David J. “Transaction Cost Economics and the Multinational Enterprise: An
Assessment,” Journal of Economic Behavior and Organization, 1986, vol. 7, pp. 21-45.
Case:
HBP: Harvard Business School Case 9-107-003 “Strategic Outsourcing at Bharti Airtel Limited.”
Please be prepared for a case discussion (and possible presentation) of the Bharti Airtel case
Week 1 Day 3:
Topic 5: Foreign Direct Investment and Intra-Firm Trade
Readings:
HBP: Multinationals and Foreign Direct Investment, Darden UV1212, 2009
Bernard, Andrew B., J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott. “Intra-Firm Trade and
Product Contractibility,” American Economic Review, 2010, vol. 100, no. 2, pp. 408-13.
Case:
HBP: Harvard Business School Case 9-597-020 “Vietnam: Market Entry Decisions”
Case write-up due for the Vietnam case (please see case briefing) and please be prepared for a
case discussion (and possible presentation)
Topic 6: Markets for the Firm’s Products: Economic Growth &
Topic 7: Frictions: Trade Policy
Readings:
BKS - Chapter 6: Economic Growth in the Long Run, Sections 6.1, 6.2, 6.5.
Bartelsman, E. J. Haltiwanger, and S. Scarpetto. “Cross-Country Differences in Productivity:
The Role of Allocation and Selection,” American Economic Review. 2014. Please read pages 305-311.
Hsieh and Klenow “Misallocation and Manufacturing TFP in China and India,” Quarterly Journal of
Economics. 2009. Please read Section 1 (pages 1403-1405) and review Tables I and II on page 1418.
HBP: “The Effects of Tariffs and Quotas,” Darden UV 2703, 2007.
Bernard, Andrew B., J. Bradford Jensen, and Peter K. Schott. “Trade Costs, Firms, and Productivity,”
Journal of Monetary Economics, 2006, vol. 53, no. 5, pp. 917-937.
Congressional Research Service. “The Trans-Pacific Partnership (TPP): Negotiations and Issues for
Congress.” March 20, 2015
Case: Trans-Pacific Partnership Case
See case briefing.
Please schedule a 15-20 minute team meetings with Professor Jensen to discuss your
project on Day 3 or Day 4.
Week 1 Day 4:
Topic 8: “Real” Shocks on the Supply Side and Business Cycles
Readings:
BKS - Chapter 7: The Short Run Behavior of Output, Sections 7.1, 7.2.
Armenter, Roc. 2011. “Output Gaps: Uses and Limitations,” Federal Reserve Bank of Philadelphia,
Business Review, First Quarter, pp. 1-8.
Birnbaum, Michael. “European industry flocks to U.S. to take advantage of cheaper gas,” Washington
Post, April 1, 2013.
Topic 9: Monetary Policy
Readings:
BKS - Chapter 5: The Role of Money in the Long Run.
BKS - Chapter 8: Monetary Policy.
“Loads of Money: 1923 German Hyperinflation,” The Economist, December 23, 1999.
The Economist Big Mac Index, see http://www.economist.com/content/big-mac-index
“U.S. Monetary Policy.” 2004. Federal Reserve Bank of San Francisco (pp. 1-24)
http://www.frbsf.org/publications/federalreserve/monetary/
“The ECB’s Monetary Policy Strategy.” Ch. 3, The Monetary Policy of the ECB, European Central Bank.
2011, Sections 3.1-3.4 (pp. 55-64)
http://www.ecb.int/pub/pdf/other/monetarypolicy2011en.pdf?ca3c0911a43d0f692df7a3f6dcdeac7d
Please schedule a 15-20 minute team meetings with Professor Jensen to discuss your
project on Day 3 or Day 4.
Week 2 Day 1:
Topic 10: Fiscal Policy and Fiscal-Monetary Linkages
Readings:
BKS - Chapter 9: Fiscal Policy
Case:
HBP: Harvard Business School Case 793-033, “Germany in the 1990s: Managing Reunification.”
Please be prepared for a case discussion (and possible presentation) of the German
Reunification case
Topic 11: Determinants of Exchange Rates
Readings:
BKS - Chapter 10: The Economics of Currency Markets
Week 2 Day 2:
Topic 12: Exchange Rate Regimes
Readings:
BKS - Chapter 11: Fixed Exchange Rates and Their Implications.
Topic 13: Current Account, Balance of Payments and Currency Crises
Readings:
BKS - Chapter 4: International Trade in Capital.
Case:
HBP: Harvard Business School Case 9-702-093, “Mexico: The Tequila Crisis, 1994-95.”
Please be prepared for a case discussion (and possible presentation) of the Tequila case
Week 2 Day 3:
Topic 14: Firm Responses to Exchange Rate Fluctuations
Readings:
BKS - Chapter 14: Competing in International Markets
HBP: Froot, Scharfstein, and Stein, “A Framework for Risk Management,” Harvard Business Review,
November-December, 1994, reprint 94604.
Case:
HBP: Harvard Business School Case 9-290-005 “Jaguar, plc 1984.”
Please be prepared for a case discussion (and possible presentation) of the Jaguar case
Topic 15: Eurozone Crisis
Case:
HBP: The Greek Crisis: Tragedy or Opportunity? Harvard Business School Case 9-711-088
Please be prepared for a case discussion (and possible presentation) of the Eurozone case
Week 2 Day 4:
Topic 16: Endaka!
HBP: Harvard Business School Case 9-796-030, “Japan's Automakers Face Endaka.”
Please be prepared for a case discussion (and possible presentation) of the Endaka case
Topic 17: Firms in the Global Economy
Team Project Presentations
Final Exam