the paradox of openness revisited collaborative innovation and patenting by uk innovators we revisit the paradox of openness in the literature which consists of two conflicting views on the link between patenting and open innovation the spillover prevention and the organizational openness views we use the data from the survey of innovation and patent use and the community innovation survey cis6 in the uk to assess the empirical support for the distinct predictions of these theories we argue that both patenting and external sourcing openness are jointly determined decisions made by firms their relationship is contingent upon whether the firms are technically superior to their rivals and lead in the market or not leading firms are more vulnerable to unintended knowledge spillovers during collaboration as compared to followers and consequently the increase in patenting due to openness is higher for leaders than for followers we develop a simple framework that allows us to formally derive the empirical implications of this hypothesis and test it by estimating whether the reduced form relationship between patenting and collaboration is stronger for leaders than for followers

gone but not lost the different performance impacts of employee mobility between cooperators versus competitors this article extends research on the relationship between employee mobility and firm performance by exploring how mobility between competitors and mobility between potential cooperators are differe

progressive taxation and the social marginal cost of public funds abstract this paper describes the calculation of the social marginal cost of public funds smcf for a progressive tax system which distorts individuals labour supply decisions a formula for the smcf indicates that the income and substitution effects of the labour supply response are weighted by the changes in individuals average and marginal tax rates respectively other well known formulas for the smcf are shown to be special cases of this formula the difference between this formula and the mayshar 1991 formula is shown to be due to different but equally valid ways of computing the change in the average tax rate the condition under which a marginal tax rate increase may lead to a reduction in revenues is derived

foreign influence control and indirect ownership implications for productivity spillovers how does the presence of controlled foreign firms affect the productivity of domestic firms in the same industry we revisit the historical distinction between control and influence by the foreign owner and define controlled foreign firms as those with a foreign ultimate owner holding 50 or more of voting shares connecting insights from new internalization theory with knowledge based views of the mne we posit that controlled foreign firms will generate larger productivity spillovers than non controlled foreign firms we use a firm level panel dataset of 575 844 manufacturing firms 2 343 495 observations across 20 european countries to test our proposition we pay careful attention to how firms are categorized as foreign taking into account both direct and indirect ownership links allowing for indirect ownership turns out to be pivotal there are just as many indirectly controlled foreign firms as foreign firms captured with direct ownership data we find positive horizontal spillovers from controlled foreign firms and zero spillovers from non controlled foreign firms interestingly the strongest positive spillovers come from the indirectly controlled foreign firms the implications of our study extend beyond productivity spillovers to areas such as cross border m as joint ventures mne strategies of legitimation and corporate groups

monetary conditions and international investing we examine the relationship between monetary conditions and global stock returns previous studies established that u s stock returns during expansive u s monetary periods are significantly higher than returns during restrictive periods we found that this pattern prevails in non u s markets furthermore the pattern exists relative to both local and u s monetary conditions by examining several investment strategies we show that investors could have improved portfolio performance in the period studied by using both u s and local monetary conditions to guide their portfolio allocations using monetary conditions to determine portfolio composition would have been consistently beneficial throughout the past 30 years

government intervention as a bequest substitute abstract a subsequent generations model is used in order to characterize consumption allocation under the future generation s income uncertainty altruistic concerns towards future generations give rise to precautionary bequests which act as a hedge on risk it is shown that given a first order correlation between mean future income and the present generation s income government can provide a pareto improvement through a tax transfer policy with universal participation this policy acts as a substitute for precautionary bequests distributional aspects of government tax transfer policy are also discussed

where are the gains from international diversification eafe and international marketlike mandates are popular with u s institutional fund sponsors the rationale seems to be that the international equity market has higher expected returns than the u s equity market and can substantially diversify u s portfolios the empirical evidence for the 1970 94 period does not support either claim nor does theory help asset pricing models do not argue that risk factors have geographically different expected returns recent research for the u s market shows that two risk factors value and size explain differences in expected returns across equity portfolios preliminary evidence suggests that the same factors work in foreign markets as well international value stocks and international small stocks diversify u s portfolios more than eafe in fact a sensible reason to diversify internationally is to load up on value stocks and small stocks without concentrating in one geographic region if one does not wish to concentrate in such stocks then international di

optimal linear and two bracket income taxes with idiosyncratic earnings risk abstract this paper quantitatively characterizes optimal linear and two bracket income taxes we consider a dynamic stochastic general equilibrium model in which tax design involves redistributing income for both equity and social insurance substantive findings include i a significant fraction of agents supply zero labor or hold zero assets at the optimum ii neglecting tax distortion imposed on either of labor leisure and consumption saving decisions will lead to the prescription of tax codes that deviate substantially from the optimum and iii the optimal two bracket tax schedule will turn from regressivity to progressivity in the marginal tax rate once the volatility of idiosyncratic shocks becomes sufficiently large the last finding is consistent with the results in apps et al forthcoming and it also reconciles the contradictory results regarding the optimal two bracket tax schedule between slemrod et al 1994 and strawczynski 1998

the paradox of openness appropriability external search and collaboration a b s t r a c t to innovate firms often need to draw from and collaborate with a large number of actors from outside their organization at the same time firms need also to be focused on capturing the returns from their innovative ideas this gives rise to a paradox of openness the creation of innovations often requires openness but the commercialization of innovations requires protection based on econometric analysis of data from a uk innovation survey we find a concave relationship between firms breadth of external search and formal collaboration for innovation and the strength of the firms appropriability strategies we show that this concave relationship is stronger for breadth of formal collaboration than for external search there is also partial evidence suggesting that the relationship is less pronounced for both external search and formal collaboration if firms do not draw ideas from or collaborate with competitors we explore the implications of these findings for the literature on open innovation and innovation strategy 2013 the authors published by elsevier b v all rights reserved

social insurance and the optimum piecewise linear income tax abstract this paper calculates optimal linear income taxes when differences in income are caused by random factors luck rather than by unobserved individual skills as assumed in the classical theory of income taxation as first shown by varian 1980 varian h r 1980 redistributive taxation as social insurance journal of public economics 14 49 68 in the former case income taxation acts as social insurance by introducing life uncertainty and precautionary behavior we find higher optimal marginal tax rates than those found by varian we also find that in the context of a piecewise two bracket linear tax schedule the second marginal tax is higher than the first a finding that contrasts with results recently obtained in the framework of classical income taxation theory which show a lower second marginal tax

the relative effectiveness of patents and secrecy for appropriation abstract changes in patent law global competition and the rise of several new technologies suggest that patents could be of greater value than secrecy for many innovative firms particularly small firms that are unable to use market power or other factors to appropriate their investments in innovation data from the 1993 european community innovation survey cis for up to 2849 r d performing firms is analysed to determine the relative importance of secrecy vs patents this particular combination of appropriation methods is interesting because secrecy can act as a mutually exclusive alternative to patents the results show that a higher percentage of firms in all size classes rate secrecy as more valuable than patents however ordered logit regressions show that the probability that a firm rates secrecy as more valuable than patents declines with an increase in firm size for product innovations while there is no relationship for process innovations the firm s r d intensity has no effect on the relative value of secrecy vs patents there is weak evidence to show that participation in cooperative r d increases the value of patents over secrecy for product innovations the results are relevant to ongoing debates over changes to the patent system and the need for policies to encourage small firms to patent more

note on the shape of the optimum income tax schedule abstract we consider the class of two bracket piecewise linear tax schedules sheshinski 1971 1972 and provide sufficient conditions for the optimum income tax schedule to have positive marginal rates and to be strictly convex calculations yield optimum tax rates between 20 and 35 percent and moderate rate progression the max min optimum has higher tax rates but not necessarily more rate progression than the utilitarian optimum the conditions are quite general postulating nondecreasing income effects as the level of income increases

the optimal two bracket linear income tax abstract we investigate two bracket piecewise linear income tax structures in a two class economy pareto efficient tax schedules of this type feature at least one marginal tax rate equal to zero and that the marginal tax rate may be increasing and declining we then investigate the optimal structure of taxation when the social welfare function utility function and distribution of abilities are characterized as in the standard optimal linear income tax problem in all cases the second marginal tax rate is less than the first rate but progressivity in the sense of a uniformly rising average tax rate generally obtains

optimal linear income tax with random revenue abstract this paper introduces the concept of risk attitudes a government may take toward random revenue in the design of a linear income tax it shows that the familiar trade off formula between equity and efficiency can be derived either by assuming a risk neutral government attitude toward random revenue or by assuming no randomness of revenue we provide numerical analysis to demonstrate that optimum tax schedules for a non risk neutral government can significantly deviate from those for a risk neutral government

optimal degree of progressivity under income uncertainty the insurance effect is introduced into the design of the optimal income tax policy when individual income is uncertain one of the most noteworthy aspects of this analysis is that now it is even more difficult to derive analytically useful results for income tax policy purposes than it was in earlier analyses using numerical methods it is shown that under quite reasonable assumptions regarding utility function and income distribution we obtain a progressive marginal tax rate structure which is rather similar to the structures actually observed in many countries

efficiency with costly information a reinterpretation of evidence from managed portfolios we investigate the informational efficiency of mutual fund performance for the period 1965 84 results are shown to be sensitive to the measurement of performance chosen we find that returns on s p stocks returns on non s p stocks and returns on bonds are significant factors in performance assessment once we correct for the impact of non s p assets on mutual fund returns we find that mutual funds do not earn returns that justify their information acquisition costs this is consistent with results for prior periods coauthors are martin j gruber sanjiv das and matthew hlavka article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the structural reshaping of globalization implications for strategic sectors profiting from innovation and the multinational enterprise the rapid reshaping of the global economic order requires fundamental shifts in international business scholarship and management practice new forms of protectionist policies new types of internationalization motives and new tools of techno nationalism may lead to what we call bifurcated governance at the macro level and value chain decoupling at the micro level as a result innovation networks will require novel reconfigurations we examine the emerging constraints on multinational enterprises imposed by a bifurcated world order we also discuss how the dynamic capabilities framework can guide scholars and managers alike to achieve new forms of evolutionary fitness

capital accumulation and uncertain lifetimes with adverse selection this paper examines the implications of adverse selection in the private annuity market for the pricing of private annuities and the consequent effects on constrption and bequest behavior with privately known heterogeneous mortality probabilities adverse selection causes the rate of return on private annuities to be less than the actuarially fair rate based on population average mortality however a fully funded social security system with compulsory participation can offer an implied rate of return equal to the actuarially fair rate based on population average mortality thus since social security offers a higher rate of return than private annuities consumers cannot completely offset the effects of social security by transacting in the private annuity market using an overlapping generations model with uncertain lifetimes we demonstrate that the introduction of actuarially fair social security reduces the steady state rate of return on annuities and raises the steady state levels of average bequests and average consumption of the young the steady state national capital stock rises or falls according to the strength of the bequest motive this abstract was borrowed from another version of this item

perspectives on multinational enterprises in emerging economies multinational enterprises mnes play a pivotal role in the development of many emerging economies in consequence they became the focus of scholarly research by economists and policy analysts in contrast international business scholars have been comparatively uninterested in analysing this role of mnes yet they could make important contributions to these debates first studies taking the individual firms as starting point would enhance understanding of the interaction between mnes and the local environment second theories and research methodologies developed in international business research could provide new insights into the dynamics of mnes in emerging economies the objective of this paper is to motivate more international business scholars to engage in research on positive and negative spillovers from foreign direct investment fdi in emerging economy societies to advance this research agenda scholars need to analyse the specific activities and capabilities of the firms involved and the impact of fdi on the broader social and environmental context for management this agenda raises the ethical question to what extent ought businesses to care about their local stakeholders

the sampling error in estimates of mean variance efficient portfolio weights this paper presents an exact finite sample statistical procedure for testing hypotheses about the weights of mean variance efficient portfolios the estimation and inference procedures on efficient portfolio weights are performed in the same way as for the coefficients in an ols regression ols t and f statistics can be used for tests on efficient weights and when returns are multivariate normal these statistics have exact t and f distributions in a finite sample using 20 years of data on 11 country stock indexes we find that the sampling error in estimates of the weights of a global efficient portfolio is large

unintentional unavoidable and beneficial knowledge leakage from the multinational enterprise knowledge leakage as an undesirable outcome for mnes is an accepted view in ib literature we challenge this view and argue that knowledge leakage is often unintentional unavoidable and beneficial for the mne in a highly networked and information rich society knowledge leakage from mnes 1 happens naturally due to interfirm relationships interactions and socialization 2 is unavoidable due to employee mobility and 3 facilitates knowledge inflows due to the reciprocity nature of knowledge exchange and hence is beneficial for mnes in addition the costs of protecting knowledge incurred by an mne will often outweigh the benefits

premium subsidies and social health insurance substitutes or complements premium subsidies have been advocated as an alternative to social health insurance these subsidies are paid if expenditure on health insurance exceeds a given share of income in this paper we examine whether this approach is superior to social health insurance from a welfare perspective we show that the results crucially depend on the correlation of health and productivity for a positive correlation we find that combining premium subsidies with social health insurance is the optimal policy

capturing knowledge within and across firm boundaries evidence from clinical development how do firm boundaries influence employees acquisition of information using detailed project level data and qualitative evidence i document that pharmaceutical firms are more likely to outsource the coordination of data intensive clinical trials while they are more likely to assign knowledge intensive trials to internal teams managers do not choose between market and hierarchy but between the hierarchy of the firm in which subjective performance evaluations are combined with flat explicit incentives and the hierarchy of its subcontractor whose virtue stems precisely from the ability to provide high powered incentives on a narrow set

inherent inequality and the optimal graduation of marginal tax rates in most countries marginal tax rates increase with income this is at variance with the results of the optimal income taxation literature whose numerical calculations have established the presumption that optimal marginal tax rates should decline with income have the existing results of optimal income tax literature therefore established a presumption that the observed pattern is suboptimal the object of this paper is to attempt to answer this question the numerical calculations that followed mirrlees s 1971 pioneering contribution tried many variations on his basic parametrisation including different preference structures and different functional forms however so far as we are aware most of the reported results maintain his basic assumption of a log normal distribution of abilities or wages with a standard deviation of logs of 0 39 mirrlees 1971 himself appealed the work of lydall 1969 for this figure but it has become the industry standard we show in this paper that departures from this assumption in particular increases in inherent inequality can alter the qualitative pattern of optimal marginal tax rates dramatically contrary to the currently available calculations we show that the optimal graduation can indeed be such that marginal tax rates increase for the majority of the population which is consistent with the observed pattern but that there continues to exist a significant income range at the top where marginal tax rates decline which of course is counter to the observed pattern

risk aversion performance pay and the principal agent problem this paper calculates numerical solutions to the principal agent problem and compares the results to the stylized facts of ceo compensation the numerical predictions come from parameterizing the models of grossman and hart and of holmstrom and milgrom while the correct incentives for a ceo can greatly enhance a firm s performance providing such incentives need not be expensive for many parameter values ceo compensation need increase only by about 10 for every 1 000 of additional shareholder value for some values the amount is 0 003 cents

can a firm find the balance between openness and secrecy towards a theory of an optimum level of disclosure the purpose of this article is not merely to counter assertions about technology leakage spillovers being innocuous or benevolent but to go further and illuminate an under researched question how can companies seek the optimum balance between conscious disclosure and secrecy the article works towards a theory of optimum disclosure by identifying possible benefits and costs of disclosure or openness in paradigm 1 most companies find the net benefits of disclosure openness to be negative in paradigm 2 applicable to a few highly networked or open source mnes there could be net benefits over a limited range and up to an optimum point

knowledge connectivity an agenda for innovation research in international business the innovation driven multinational enterprise mne has dominated international business ib research for several decades now beginning with the award winning research of dunning there have been calls for ib researchers to rediscover the importance of locations recent work has emphasized that firms and locations co evolve with one another as knowledge is transferred and leveraged across space integrating insights from ib and economic geography we propose a research agenda for ib scholarship on spatially dispersed yet connected innovation processes this agenda is premised on the current reality of global value chains in which mobile mnes people and immobile locations factors interact the research perspective suggested recognizes that locations are host to increasingly fine sliced activities whose nature and composition are continuously changed by mne driven innovation processes as today s specialized activities become tomorrow s standardized ones the shifting distribution of global value creation depends on the pattern of international knowledge connectivity

r d intensity and international joint venture performance in an emerging market moderating effects of market focus and ownership structure in this study we examine the contingent relationship between r d intensity and performance of international joint ventures ijvs in an emerging market context based on teece s 1986 arguments regarding the appropriability of innovation we identify two types of appropriability hazard related to ijvs r d activities in this context local market related and local partner related hazards we argue that a positive relationship between r d intensity and ijv performance is more likely to occur if these appropriability hazard can be mitigated results using a sample of manufacturing ijvs in china provide support for these arguments we find that r d intensity is positively related to performance in export market focused ijvs but not in local market focused ijvs in addition using a configuration approach we find that r d intensity is positively related to performance in ijvs that have an export market focus and in which the multinational companies mncs have a majority ownership but not in other market focus ownership structure configurations these findings contribute to our knowledge of r d activities of mncs overseas subsidiaries