do mergers increase product variety evidence from radio broadcasting mergers can reduce costs and alter incentives about how to position products so that theory alone cannot predict whether mergers will increase product variety we document the effect of mergers on variety by exploiting the natural experiment provided by the1996 telecommunications act we find that consolidation reduced station entry and increased the number of formats available relative to the number of stations we find some evidence that increased concentration increases variety absolutely based on the programming overlap of jointly owned stations we can infer that the effects operate through product crowding that is consistent with spatial preemption

optimal growth with many consumers abstract a method is described for constructing all pareto optimal allocations for a dynamic economy with many heterogeneous consumers under certainty in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time optimal perfect foresight competitive equilibrium allocations are obtained through the study of a dynamic program for an economy with one consumption good sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth for a two person exchange economy sufficient conditions are given for the global asymptotic stability of the unique interior stationary point

doomed from the start what is the value of selecting a future dominant design this study investigates how important it is for a firm to select what turns out to be a dominant design in a technology driven industry using the personal computer industry as a case study this research shows that firms are not doomed when their entry design choices turn out to be wrong for early entrants we found that switching to the dominant design is associated with increased chances of survival and market share contrary to our expectations we found that even later entrants that switched to the dominant design also enjoyed higher survival rates and greater market position copyright 1999 john wiley sons ltd

interpreting comovements in the trade balance and the terms of trade abstract i examine the relation between the trade balance and the terms of trade in a two country dynamic stochastic exchange economy with complete markets along an equilibrium path for this economy the relation is governed by the substitutability between foreign and domestic goods i find in contrast to non stochastic analyses of the harberger laursen metzler effect that a positive association does not require persistent shocks or non constant rates of time preference this contrast highlights the role played by the structure of asset markets complete and otherwise in generating equilibrium comovements

an r d race with knowledge accumulation i develop a model of an r d race with knowledge accumulation my model does not inherit the memorylessness property of the exponential distribution that troubles existing models of r d races hence firms knowledge stocks are no longer irrelevant to their behavior during the r d race and knowledge accumulation has strategic implications in this more general setting i obtain results that stand in marked contrast to the previous literature in particular under some conditions the firm that is behind in the race engages in catch up behavior this pattern of strategic interactions action reaction is consistent with empirical research copyright 2003 by the rand corporation

patenting in the shadow of competitors this article empirically examines the patenting behavior of new biotechnology firms that have different litigation costs i show that firms with high litigation costs are less likely to patent in subclasses with many other awards particularly those of firms with low litigation costs this pattern is consistent with the literature on costly litigation which suggests that firms that have high litigation costs will take greater precautions to avoid litigation these results are robust to a variety of control variables and modifications that seek to test alternative explanations

what really matters discounting technological change and sustainable climate this paper discusses the interplay between the choice of the discount rate greenhouse gas mitigation and endogenous technological change neglecting the issue of uncertainty it is shown that the green golden rule stock of atmospheric carbon is uniquely determined but is not affected by technological change more generally it is shown analytically within the framework of a reduced model of integrated assessment that the optimal stationary stocks of atmospheric carbon depend on the choice of the discount rate but are independent of the stock of technological knowledge these results are then reinforced numerically in a fully specified integrated assessment analysis

installed base and compatibility innovation product preannouncements and predation a good is often more valuable to any user the more others use compatible goods the authors show that this effect may inhibit innovation if an installed base exists and transition to a new standard must be gradual early adopters bear a disproportionate share of transient incompatibility costs this can produce excess inertia the installed base however is stranded if the new standard is adopted this may create excess momentum these dynamic effects have strategic implications temporary price cutting can permanently prevent entry and product preannouncements can be critical in innovation these strategic actions have ambiguous welfare effects

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

weakly non separable preferences and the harberger laursen metzler effect we examine the current account effect of a terms of trade deterioration for a small country model incorporating weakly non separable preferences a la shi 1994 under endogenous time preference this enables us to emphasize a welfare change as an important determinant of the current account even with increasing marginal impatience the harberger laursen metzler effect occurs if consumers preference toward imports is sufficiently wealth enhanced in that case a terms of trade deterioration must reduce steady state welfare to shift preference away from imports to exports several empirical implications are also derived jel classification f41 f32 preferences faiblement nonseparables et l effet de harberger laursen metzler l auteur examine l effet sur le compte courant d une deterioration des termes d echange dans un modele d un petit pays quand les preferences sont faiblement nonseparables a la shi 1994 et que la preference temporelle est endogene cela permet de souligner qu un changement dans le niveau de bien etre est un determinant important du compte courant contrairement a ce qu on trouve dans la litterature specialisee meme quand on postule une impatience marginale croissante l effet harberger laursen metzler se produit si la preference des consommateurs pour les importations est suffisamment dependante du niveau de richesse dans ce cas la une deterioration des termes d echange doit reduire le niveau de bien etre en regime permanent de maniere a deplacer les preferences des importations vers les exportations on deduit certaines implications empiriques de ces resultats

protecting intellectual property rights are small firms handicapped this paper studies the determinants of patent suits and settlements during 1978 99 by linking information from the u s patent office the federal courts and industry sources we find that litigation risk is much higher for patents that are owned by individuals and firms with small patent portfolios patentees with a large portfolio of patents to trade or other characteristics that facilitate cooperative resolution of disputes are much less likely to prosecute infringement suits however postsuit outcomes do not depend on these characteristics these findings show that small patentees are at a significant disadvantage in protecting their patent rights because their greater litigation risk is not offset by more rapid resolution of their suits our empirical estimates of the heterogeneity in litigation risk can help in developing private patent litigation insurance to mitigate the adverse affects of high enforcement costs

entry and competitive dynamics in the mobile telecommunications market abstract we propose an extension of the gans stern gans j s stern s 2003 the product market and the market for ideas commercialization strategies for technology entrepreneurs research policy 32 2 333 350 framework that includes entry by existing firms an incumbent firm possessing complementary assets and strong appropriability is in a formidable position teece d j 1986 profiting from technological innovation implications for integration collaboration licensing and public policy research policy 15 6 285 305 however a de alio entrant can leverage complementary assets to enter along a new technological trajectory and then develop appropriability we illustrate how several mobile telecommunications firms ericsson nokia and samsung pursued this strategy to catch up with the market leader motorola we also identify several shortcomings in motorola s approach it was too inward looking in developing technologies but ironically not inward looking enough in exploiting its most valuable patents

the predictive power of implied volatility evidence from 35 futures markets abstract using data from 35 futures options markets from eight separate exchanges we test how well the implied volatilities ivs embedded in option prices predict subsequently realized volatility rv in the underlying futures we find that for this broad array of futures options iv performs well in a relative sense for a large majority of the commodities studied the implieds outperform historical volatility hv as a predictor of the subsequently rv in the underlying futures prices over the remaining life of the option indeed in most markets examined regardless of whether it is modeled as a simple moving average or in a garch framework hv contains no economically significant predictive information beyond what is already incorporated in iv these findings add to previous research that has focused on currency and crude oil futures by extending the analysis into a very broad array of contracts and exchanges our results are consistent with the hypothesis that futures options markets in general with their minimal trading frictions are efficient

aggregate spending and the terms of trade is there a laursen metzler effect this paper investigates the spending and current account effects of terms of trade shifts in a model where households maximize utility over an infinite planning period in the framework developed here an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated permanent worsening in its terms of trade the paper s model thus provides a setting in which the current account deficit predicted by laursen and metzier harberger and others fails to materialize

demand heterogeneity and technology evolution implications for product and process innovation the evolution of technology has been a central issue in the strategy and organizations literature however the focus of much of this work has been on what is essentially the supply side of technical change the evolution of firm capabilities we present a demand based view of technology evolution that is focused on the interaction between technology development and the demand environment in which the technology is ultimately evaluated we develop a formal computer simulation model that explicitly considers the influence of heterogeneity in market demand the presence of consumers with different needs and requirements on firms innovation choices the model is used to examine the dynamics of product and process innovation utterback and abernathy 1975 the analysis reveals that demand heterogeneity offers an alternative to supply side explanations of the technology life cycle further by considering the implications of decreasing marginal utility from performance improvements the model highlights the role of technologically satisfied consumers in shaping innovation incentives and suggests a rationale for a new stage in the technology life cycle characterized by increasing performance at a stable price the stage has not yet been treated formally in the literature but is widely observed most prominently in digital and information based technologies

when do stronger patents increase continual innovation under continual innovation greater patent strength expands innovating firms profit against imitation but also shifts profit from current to past innovators we show how the impact of patents on innovation as determined by these two opposing effects varies with industry characteristics when the discount factor is sufficiently high the negative profit division effect is negligible and innovation monotonically increases in patent strength otherwise innovation has an inverted u relationship with patent strength and stronger patents are more likely to increase innovation when the discount factor or the fixed innovation cost is higher we also show how the impact of patents on innovation may change with firms innovation capability and with the intensity of competition from imitators

letting rivals come close or warding them off the effects of substitution threat on imitation deterrence a resource based theory postulate is that firms must defend their resources against imitation to sustain competitive advantage however by deterring imitation firms may induce rivals to create su

innovation and industry evolution the theoretical literature on innovation has been concerned with a single innovation produced by a number of identical agents by contrast we consider a market in which one firm is the current incumbent while the remaining firms are challengers moreover we consider a sequence of innovations so that success does not imply that the successful firm reaps monopoly profits forever after but only until the next better innovation is developed we begin with a fully optimizing behavioral model and derive the equivalent of the schumpeterian process of creative destruction that is a firm enjoys temporary monopoly power but is soon overthrown by a more inventive challenger the essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process the fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers goods the new methods of production or transportation the new markets the new forms of industrial organization that capitalist enterprise creates schumpeter 1942 pp 82 83

does ecological economics have a future contradiction and reinvention in the age of climate change abstract this paper addresses the role of neoclassical methodologies in ecological economics and the contradictions these methodologies pose to the field s critical founding principles we first consider robert costanza s treatment of nicholas stern s global deal and then survey climate change related articles published in this journal over the past five years this survey reveals how mainstream neoclassical methodologies dominate discourse and do so by marginalizing more critical political economy analyses this situation imperils the field s founding vision of a no growth steady state it also fails to address the related growth dynamics of capitalism without such a critical treatment the field s formal embrace of methodological pluralism actually entails an ideological empiricism that renders ecological economics theoretically incoherent this situation undermines the field s historical promise as an alternative economic paradigm ecological economics now faces a problematic future its survival in a form faithful to its founding vision will require an explicit choice to address its internal contradictions and reinvent itself in ways relevant to our contemporary context without such a choice ecological economics will likely succumb to an implicit acceptance of the hegemony of mainstream economic methodologies and their pro growth imperatives

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

vertical scope turbulence and the benefits of commitment and flexibility we address the contested state of theory and the mixed empirical evidence on the relationship between turbulence and vertical scope by studying how turbulence affects the benefits of commitment from integrated development of components and the benefits of flexibility from sourcing components externally we show that increasing turbulence first increases but then decreases the relative value of vertical integration moderate turbulence reduces the value of flexibility by making supplier selection more difficult and increases the value of commitment by mitigating the status quo bias of integrated structures both effects improve the value of integration higher levels of turbulence undermine the adaptive benefits of commitment but have a less adverse effect on flexibility making nonintegration more attractive we also show how complexity and uneven rates of turbulence moderate the nonmonotonic relationship between turbulence and integration this paper was accepted by jesper sorensen organizations

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

a simple dynamic general equilibrium model abstract we analyse a single sector economy with h 1 infinitely lived agents that operate in a continuous time framework utility functions are recursive but not additive both efficient and perfect foresight competitive equilibrium allocations are considered the existence and stability of such allocations are investigated locally i e in a neighbourhood of steady state allocations the model is shown to be useful for explaining the distribution of wealth and consumption across agents and for analysing the way in which wealth redistribution can affect the dynamics of aggregate economic variables

the relation between implied and realized volatility abstract previous research finds the volatility implied by s p 100 index option prices to be a biased and inefficient forecast of future volatility and to contain little or no incremental information beyond that in past realized volatility in contrast we find that implied volatility outperforms past volatility in forecasting future volatility and even subsumes the information content of past volatility in some of our specifications our results differ from previous studies because we use longer time series and nonoverlapping data a regime shift around the october 1987 crash explains why implied volatility is more biased in previous work

deterioration of the terms of trade and capital accumulation a reexamination of the laursen metzler effect abstract this paper analyzes the effect of both a permanent and a temporary deterioration in the terms of trade on a small open economy the model based on intertemporal optimization emphasizes the labor leisure choice and the role of capital accumulation the transitional dynamics is shown to depend upon the long run response of the capital stock to the terms of trade shock this consists of a negative substitution effect together with a positive income effect whether or not the laursen metzler effect holds depends upon whether the income effect dominates the substitution effect

the costs of inefficient bargaining and financial distress abstract this study provides the first large sample analysis of the stock market reactions to interfirm litigation when a suit is filed the common stock of the typical defendant declines by about 1 while the plaintiff experiences no significant gains for the average pair of firms the combined drop in value upon filing is 21 million much of the loss is regained if the suit is settled the findings suggest that bargaining among firm claimants sometimes leads to very inefficient outcomes part of the leakage is explained by the costs of increased financial distress imposed on the defendant

the harberger laursen metzler effect under capital market imperfections abstract this paper re examines the effects of a permanent terms of trade change on a dynamic small open economy facing an imperfect world capital market as studied in obstfeld 1982 aggregate spending and the terms of trade is there a laursen metzler effect quarterly journal of economics 97 251 270 which assumes that the economy faces a downward sloping bond curve the novelty of the present paper is that a saddle path stable steady state comes into existence under the assumption that households subjective discount rate is a decreasing function of instantaneous utility the harberger laursen metzler hlm effect is shown to hold unambiguously i e an unanticipated permanent terms of trade deterioration leads to an increase in aggregate expenditure and a current account deficit this result is in stark contrast to those obtained in obstfeld 1982 aggregate spending and the terms of trade is there a laursen metzler effect quarterly journal of economics 97 251 270 and many other studies in the literature

decreasing and increasing marginal impatience and the terms of trade in an interdependent world economy abstract using a two good two country model we examine macroeconomic adjustment by allowing for decreasing and increasing marginal impatience dmi and imi in the reference case where both countries have imi a negative output shock in one country lowers the interest rate and both countries welfare levels in steady state whereas when either one country has dmi the negative income shock raises the interest rate thereby benefiting the imi country and harming the dmi one in steady state in a country either with imi or dmi the harberger laursen metzler effect takes place if negative welfare supporting effects dominate positive income compensating effects

persistence of innovation in dutch manufacturing is it spurious this paper studies the persistence of innovation and the dynamics of innovation output in dutch manufacturing using firm data from three waves of the community innovation surveys cis pertaining to the periods 1994 1996 1996 1998 and 1998 2000 we estimate by maximum likelihood a dynamic panel data type 2 tobit model accounting for individual effects and handling the initial conditions problem we find that there is no evidence of true persistence in achieving technological product or process innovations while past shares of innovative sales condition albeit to a small extent current shares of innovative sales

the rate of time preference and dynamic economic analysis strong restrictions on the structure of preferences are a central feature in the received theory of intertemporal allocation in fact most of the modern literature concerned with capital theoretic problems represents preferences by a functional in which an additive utility function is discounted by a constant rate of time preference this specification is attractive because it is analytically tractable in dynamic models and it clearly delineates how tastes and opportunities interact to determine an economy s household s paths of consumption and capital formation however its rigid structure constancy of time preference severely limits the conclusions and explanatory power of the corresponding models this paper considers a class of utility functionals in continuous time which have the appealing feature that the rate of time preference depends systematically on an index of aggregate future consumption the more flexible structure embodied in these functionals leads to important generalizations and

weakly nonseparable preferences and distortionary taxes in a small open economy this paper examines the dynamic effects of distortionary taxes in a small open economy the employed utility function implies both endogenous rates of time preference and a tractable form of weak nonseparability between consumption and leisure weak nonseparability induces novel long run welfare and wealth effects of taxes and generates very different current account movements endogenous rates of time preference facilitate the examination of a tax on international borrowing and lending copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

option prices implied price processes and stochastic volatility this paper characterizes all continuous price processes that are consistent with current option prices this extends derman and kani 1994 dupire 1994 1997 and rubinstein 1994 who only consider processes with deterministic volatility our characterization implies a volatility forecast that does not require a specific model only current option prices we show how arbitrary volatility processes can be adjusted to fit current option prices exactly just as interest rate processes can be adjusted to fit bond prices exactly the procedure works with many volatility models is fast to calibrate and can price exotic options efficiently using familiar lattice techniques

invention and innovation under alternative market structures the case of natural resources this paper examines the interactions between market structure and resource allocation over time when there is endogenous technical progress the structures considered are a planned economy pure monopoly and competition with patent rights in an efficient allocation the date of invention coincides with the date of innovation the date at which technology is used this is also true with a pure monopoly but monopoly retards technical progress relative to the efficient level competition for patents rights to a new technology results in excessively rapid technical progress if the resource endowment of the economy is sufficiently large also competition may lead to sleeping patents where invention strictly precedes the date of innovation

technology success and failure in winner take all markets the impact of learning orientation timing and network externalities in industries characterized by network externalities a single technology standard often rises to dominance locking out competing technologies this research demonstrates that despite path depend

capital accumulation and the current account in a two country model abstract this paper examines the joint determination of international debt and capital accumulation in a two country model national rates of time preference are endogenous adjusting along an optimal path to come into equality with one another in the steady state the characteristics of short run current account dynamics are crucially linked to world capital accumulation and to a country s long run net external asset position steady state creditor countries tend to have current account surpluses during episodes of world output growth and vice versa for debtor countries this gives rise to possible non monotonic adjustment in the current account and consumption

technological diversity uncertainty and innovation performance abstractwe analyse the impact of technological diversity on innovation performance in the discovery stage measured by r d intensity and patent applications and in the commercialization stage mea

strategic behaviour of incumbent firms in the uk abstract the main purpose of this paper is to examine the incidence of strategic behaviour in the uk by means of a questionnaire study performed across three broad manufacturing industries food electrical engineering and chemicals of the strategies which have received substantial theoretical attention r d and advertising appear widely used patenting pricing and excess capacity much less so vertical instruments such as purchasing policy also stand out as important but possibly only a minority of firms in our sample actively pursue strategic instruments

habit persistence and the harberger laursen metzler effect in an infinite horizon model abstract the habit persistence model of ryder and heal is used to examine the harberger laursen metzler h l m effect our results are in contrast to the general view in the literature that the stability requirements preclude the h l m effect in an infinite horizon model we show that if the marginal utility of real consumption is strongly increasing in the habitual standard of living then the h l m effect holds and a terms of trade deterioration reduces savings however if the marginal utility of real consumption is not sufficiently strongly increasing or is decreasing in the habitual standard then the h l m effect is overturned

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

governance and uncertainty the trade off between administrative control and commitment this study elaborates upon the motives for initiating equity based collaborations vs acquisition of another firm already having a desired technology we characterize both minority direct investments and joint ventures as options to defer either internal development or acquisition of a target firm in domains where learning about growth opportunities dominates investment activity this incremental mode of governance economizes on the cost of committing resources to a technology with an uncertain value using a sample of 402 transactions in the biotechnology industry we find strong support for the theoretical model the findings suggest that the cost of commitment in the face of technological uncertainty may offset the administrative benefits of hierarchical governance 1998 john wiley sons ltd

technology selection and commitment in new product development the role of uncertainty and design flexibility selecting the right technologies to incorporate in new products is a particularly challenging aspect of new product definition and development while newer advanced technologies may offer improved performance they also make the product development process more risky and challenging in this paper we focus on the problem of technology selection and commitment under uncertainty a major challenge to firms in turbulent environments we argue that the pizza bin approach of rejecting prospective technologies outright may not serve firms well when the pressure to differentiate products is enormous after motivating the challenges and decisions facing firms using a real life application from dell computer corporation we formulate a mathematical model of a firm that must define its products in the presence of technology uncertainty specifically the firm faces two options i aproven technology that is known to be viable and ii aprospective technology that offers superior price to performance results but whose viability is not a fully certain outcome to minimize the impact of technology uncertainty we consider two approaches to design flexibility termedparallel path andsufficient design which allow the firm to concurrently develop its products while the technology is being validated our analysis helps understand appropriateness of the different flexible design approaches we illustrate our model with the dell portable computer example and note the managerial implications of our analysis

prices technology development and the rebound effect abstract energy efficiency is the critical parameter for policies that aim at reducing energy consumption while maintaining or even boosting economic growth the two main options to influence energy efficiency are changes in relative prices i e raising the price of energy through economic instruments or to introduce new technologies which increase the productivity of each unit of energy this paper is based on the notion that in an equilibrium economy the marginal economic productivity is identical for all factors i e energy labour knowledge and capital from this premise two main conclusions can be drawn first any change in price or technology will have an impact on the whole economy by creating feedbacks through the substitution of factors of production and goods as well as increased wealth second the two policy approaches changing relative prices and technology development are not opposite to each other they are the two faces of the same reality and should be developed and promoted simultaneously and consistently

organizational environments and industry exit the effects of uncertainty munificence and complexity economists and organization theorists have asked which factors are linked to the rate at which firms exit an industry yet little research has linked exit rates to changes over time in the key dimensions which characterize an industry s environment this study examines linkages between exit rates and changing levels of uncertainty munificence and complexity in an industry a longitudinal study of the american cement 1888 1980 and minicomputer 1958 82 industries reveals that uncertainty is the key environmental dimension associated with organizational mortality controlling for ecological and macroeconomic conditions exit rates are associated with uncertainty but not complexity or munificence the greater the uncertainty the higher the exit rates two kinds of uncertainty create hazardous environmental conditions unpredictable changes in demand and eras of ferment bounded by technological discontinuities and dominant designs our results indicate that while organizations can deal with different levels of economic munificence and complexity uncertainty is a significantly more lethal characteristic of organizational environments the results support schumpeterian perspectives linking industry turnover to waves of creative destruction but suggest more broadly that an organization s ability to cope with uncertainty is a key determinant of its life chances copyright 2001 by oxford university press

resolving the commitment versus flexibility trade off the role of resource accumulation lags we examine how time consuming resource accumulation influences the classic strategy trade off between commitment and flexibility in particular using 1975 95 data from the worldwide petrochemical

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

project management under risk using the real options approach to evaluate flexibility in r d managerial flexibility has value in the context of uncertain r d projects as management can repeatedly gather information about uncertain project and market characteristics and based on this information change its course of action this value is now well accepted and referred to as real option value we introduce in addition to the familiar real option of abandonment the option of corrective action that management can take during the project the intuition from options pricing theory is that higher uncertainty in project payoffs increases the real option value of managerial decision flexibility however r d managers face uncertainty not only in payoffs but also from many other sources we identify five example types of r d uncertainty in market payoffs project budgets product performance market requirements and project schedules how do they influence the value from managerial flexibility we find that if uncertainty is resolved or costs revenues occurafter all decisions have been made more variability may smear out contingencies and thus reduce the value of flexibility in addition variability may reduce the probability of flexibility ever being exercised which also reduces its value this result runs counter to established option pricing theory intuition and contributes to a better risk management in r d projects our model builds intuition for r d managers as to when it is and when it is not worthwhile to delay commitments for example by postponing a design freeze thus maintaining flexibility in r d projects

the creation and resolution of market uncertainty the impact of information releases on implied volatility we model and examine the impact of information releases on market uncertainty as mea sured by the implied standard deviation isd from option markets distinguishing between scheduled and unscheduled announcements we hypothesize that since the timing although not the content of scheduled announcements is known a priori the pre release isd will impound the anticipated impact of important releases on price volatility and that the isd will normally decline post release as this uncertainty is resolved conversely we hypothesize that the unexpected high volatility caused by major unscheduled releases will cause market participants to adjust upward their estimates of likely volatility over the remaining life of the option resulting in an increase in the isd our evidence supports both hypotheses the isds that we consider are from the t bond eurodollar and deutschemark options markets we examine scheduled macroeconomic news releases such as the employment report and the ppi we also find that the observed tendency for the isd to fall on fridays and rise on mondays is due to the weekday pattern of scheduled news releases

change in domestic network centrality uncertainty and the foreign divestment decisions of firms abstract we investigate the role of domestic interfirm networks for the foreign divestment decisions of firms we argue that firms foreign operations risk being divested when a firm becomes more central in its domestic network positive changes in firm centrality at home facilitate access to information about new business opportunities but they may also lead firms to consider reconfiguring their value chain activities and resources across locations the resulting opportunity costs of maintaining foreign operations could subsequently lead to their divestment moreover we argue that the positive association between an increase in firm centrality in the domestic network and foreign divestment is stronger under higher uncertainty as pursuing new business opportunities at home becomes more appealing we distinguish between firm specific uncertainty and domestic market uncertainty we test and get support for our hypotheses using foreign subsidiary data from u s firms in the ict industry

unraveling the process of creative destruction complementary assets and incumbent survival in the typesetter industry when radical technological change transforms an industry established firms sometimes fail drastically and are displaced by new entrants yet other times survive and prosper drawing upon an unusually rich data set that covers the technological and competitive history of the typesetter industry from 1886 to 1990 this paper uses a combination of quantitative and qualitative analysis to unravel this process of creative destruction it argues that the ultimate commercial performance of incumbents vs new entrants is driven by the balance and interaction of three factors investment technical capabilities and appropriability through specialized complementary assets in this industry specialized complementary assets played a crucial role in buffering incumbents from the effects of competence destruction and an analysis that examined investment or technical capabilities in isolation would have led to misleading results this work thus highlights the importance of considering multiple perspectives when examining the competitive implications of technological change 1997 by john wiley sons ltd

the role of technological change for a sustainable development technological change has become a major focus in environmental policy as well as in energy and climate policy indeed there is a growing body of knowledge about how and in which direction technological change might have an impact on environmental resource constraints and how environmental policy might have an impact on this direction in this article we introduce the contributions to this special issue showing how they add to recent developments in the field of economics of technological change and sustainability we also discuss potential avenues for future research

why put all your eggs in one basket a competition based view of how technological uncertainty affects a firm s technological specialization conventional wisdom suggests that when a firm faces technological uncertainty it responds by becoming less technologically specialized so as to remain adaptable to subsequent resolution of this uncertainty we adopt a competition based view of technological uncertainty to identify an opposite effect in competitive settings the firm may instead become more specialized when faced with greater technological uncertainty so as to focus on advancing its technologies against competition and influence the resolution of uncertainty in its favor over rivals we propose that this effect is accentuated when the firm expects that it cannot easily adapt to rivals technologies subsequently specifically when rivals are a greater deterrent through being litigious or innovative using u s government funding for fuel cell research as a policy shock with stock option implied volatilities to measure expected uncertainty we find empirical support for our propositions among firms active in research and development in the u s communications equipment industry through these findings we demonstrate that a competition based view of uncertainty identifies an alternative path for the firm s resource accumulation under uncertainty and we stress that the resolution of uncertainty can be something the firm attempts to influence rather than adapt to

luxury and wealth i develop a dynamic theory of luxury consumption particularly emphasizing the causal effect that pursuit of luxury goods has on wealth accumulation a quasi luxury is defined as a good whose marginal rate of substitution is increasing in a utility index under certain conditions it is indeed a luxury good when current wealth holding falls short of exceeds long run needs luxury consumption is postponed more less easily than necessity consumption due to a lower higher time preference for luxury and or a higher intertemporal elasticity of substitution thereof preferences for quasi luxuries lead to a higher steady state value of wealth or capital

analyzing literature based innovation output indicators the italian experience abstract this paper presents the results of a study on the product innovations introduced in the italian market in 1989 and reported in a selected number of trade journals the analysis of data collected by means of this literature based counting procedure confirms that r d oriented industries and large firms do not in italy have a marked competitive advantage in innovation the country appears to be instead characterized by a significant presence of consumer goods industries and small firms in innovation our data indicate a statistically significant association between trade competitiveness and strength in product innovation and show the comparatively higher capacity for product innovation of some of the industries in which italy achieves a positive performance in international trade moreover the presence of spillovers at the regional level from both private and public r d expenditures proves to be positively correlated with the development of product innovations finally small firms with fewer than 50 employees appear to be more innovative than is usually believed to be the case

using what you know patented knowledge in incumbent firms and employee entrepreneurship prior studies have shown that the acquisition of relevant knowledge by employees in existing firms is associated with the creation of new firms through employee entrepreneurship some researchers propose that the transition to entrepreneurship may be explained by established firms undervaluing knowledge created by employees whereas other scholars maintain that firm strategies may lead to the underutilization of knowledge we ask the question of which of these drivers is more pronounced as an explanation of employee entrepreneurship and what technological factors matter in this relationship analyzing a unique data set we find that the likelihood of employee entrepreneurship increases with the inventor s assessment of the value of a patent for an invention developed while at the incumbent firm but dramatically decreases when the invention protected by the patent is commercialized by the firm licensed to third parties interdependent with other firms inventions protected by patents or technologically broad we also find that conditional on high valuation by the inventor a matching high valuation by the firm further increases the likelihood of transitioning to entrepreneurship in combination we show that a situation when both the inventor and the firm consider the invention valuable but the firm ends up not commercializing the invention is more predictive of employee entrepreneurship than simple differences in assessing the value of the invention the study refines our understanding of the drivers of entrepreneurship by underscoring the strategic explanation of employee entrepreneurship