Sharon Poczter

Authoritarian Legacies in Post–New Order Indonesia: Evidence from a New Dataset

Democratisation has fundamentally changed the formal institutional structure of Indonesian politics, but a wealth of contemporary research has demonstrated that the informal mechanisms of power and influence have survived the transition. This article uses a unique, hand-collected dataset of information on Indonesian public figures to empirically catalogue the changes and continuities in Indonesian politics since democratisation. Our results provide quantitative evidence of a substantial shift in Indonesia’s political economy over the last decade and a half: the simultaneous rise of the private sector and decline of the military and the state as avenues to political influence at the national level. Our evidence also suggests that the origins of this shift pre-date democratisation itself.

Democratization and the depoliticization of the banking sector: Are all banks affected equally?

This paper shows that the influence of the dramatic change in political ties of the Indonesian banking sector following democratization varies widely by bank ownership type. Panel estimates using several unique data-sets show that the decrease in political ties over democratization positively influences the performance of government-owned banks while negatively influencing the performance for privately held banks. Results remain robust to a variety of alternative hypotheses and sensitivity tests. This study provides evidence not only of the differential impact of depoliticization, but also suggests that the relationship between political connections and performance may be different based on bank ownership.

Know Your Worth: Angel Financing of Female Entrepreneurial Ventures

This study explores success rates in angel financing based on the gender composition of entrepreneurial teams using unique, hand-collected data from the television program Shark Tank. We find that the likelihood of a team receiving an offer from an angel investor is independent of the entrepreneurs’ gender and initial asking valuation. However, consistent with prior work, we find that female teams receive lower company valuations and less capital to finance their new ventures relative to their male counterparts and that this differential valuation depends on industry. We also discover, however, that female teams receive less funding because they initially ask for significantly lower valuations for their companies, ceteris paribus. These results hold when controlling for important entrepreneur and firm characteristics that may strongly impact the angel financing outcome, such as the size of the entrepreneurial team, company age and prior success of the firm.

Innovation Financing in Developing Economies

While finance is a critical input to the innovative process, it is often difficult to obtain, particularly in developing economies with less well-developed financial markets. As innovation is a central driver of growth, it is therefore important for policymakers to understand how different sources of financing may affect innovation. Extant literature emphasizes the relative importance of internal versus debt financing for innovative activity for firms in developed economies, yet the effect on innovation inclusive of other sources of external finance that may be particularly important in the developing context (such as informal financing) remain relatively unknown. This paper investigates the relationship between firms’ external capital sourcing and innovative activity in a large sample of developing economy enterprises. Contrary to the established literature that focuses largely on the impact of internal financing, we argue that external financing plays a central role in financing innovative activity in developing economies, particularly for more difficult to fund innovative activity. Results using instrumental variables estimation across a wide set of economies and a series of robustness checks for endogeneity indicate that a one standard deviation increase in external financing leads to a 28 percent increase in the probability of firm innovation, a magnitude far exceeding prior estimates of the relationship between external financing and innovation in the developed context. We also find that equity financing is a more salient driver of innovative activity for firms, even though most developing economies are bank-centered. These effects are larger for less tangible innovative processes and for firms facing greater a priori obstacles to innovation such as smaller and younger firms, and those with informal organizational structures. Altogether, these results imply that the provision of government incentives to private investors (including family and friends) for equity investment in innovative activity may be an effective development policy tool.

Business Groups in Emerging Markets: A Survey and Analysis

Prior research in economics, finance and management has sought to describe the predominance of business groups in the global economy since the late 1980. Yet, theory still falls short of explaining the role of business groups as a substitute for external markets, particularly as their influence only increases as countries develop. This paper sets out to synthesize the business group literature with a focus on emerging economies, and posits that three main problems hinder the explanatory power of the literature; the difficulty of defining and identifying business groups, the prior focus on social welfare implications, and that the central business group theories are embedded in a decidedly Anglo-American, developed economy perspective. Finally, we provide suggestions for addressing these issues and suggest several hypotheses that will help further future research in explaining the nature of business groups absent an Anglo-American view.

You Can't Count on Me: The Impact of Electricity Unreliability on Productivity

While access to reliable electricity can significantly constrain industrial production, little is known as to how unreliability impacts firm level productivity. This is a particularly salient issue for firms in developing countries, where electricity provision is still unreliable and self-generation is costly. This paper analyzes the impact of electricity provision on productivity, instrumenting for electricity demand with district level solar irradiance. Results indicate that firms exhibit decreasing productivity in the initial stages of electricity adoption that decreases over time. Furthermore, I find that unreliability negatively impacts productivity initially and over time, and this effect is larger for smaller firms.

The Long Term Effects of Bank Recapitalization: Evidence from an Emerging Market

Do government-sponsored bank recapitalization programs spur lending and reduce risk? This paper assesses the impact of Indonesia’s bank recapitalization program on lending and bank risk following the Asian financial crisis of 1997. Using unique bank-level data, difference-in-differences estimates suggest that recapitalization increased lending (and more so for larger banks),but also boosted bank risk in the long term. Results remain robust to considerations of (1) bank-level differences in political connections, business group affiliation, ownership type, and (2) changes in macroeconomic conditions, capital requirements, accounting regulations, and public credit registry availability.