fragmentation and stability of markets trading skills are highly rewarded in practice but largely ignored in theoretical models of financial markets this paper demonstrates the importance of skills by examining their interaction with market fragmentation and market stability we consider a computational model where traders abilities to accurately price assets are endogenous in contrast to models that do not consider skills we find that centralising markets can lead to higher price volatility and less resilience to shocks because it increases the equilibrium proportion of unskilled traders

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

estimating the gains from trade in limit order markets we present a method to estimate the gains from trade in limit order markets and provide empirical evidence that the limit order market is a good market design using observations on order submissions and execution and cancellation histories we estimate both the distribution of traders unobserved valuations for the stock and latent trader arrival rates we use the resulting estimates to compute the current gains from trade the gains from trade in a perfectly liquid market and the gains from trade with a monopoly liquidity supplier the current gains are 90 of the maximum gains and 150 of the monopolist gains the majority of the world s stock exchanges operate some form of a limit order market a feature of good market design is that traders realize most of the potential gains from trade we develop a method for identifying and estimating the gains from trade in a limit order market and apply our method to a sample from a particular limit order market the vancouver stock exchange vse we find that gains from trade in the vse are approximately 90 of the gains from trade in a perfectly liquid market and approximately 50 more than gains from trade in a market in which liquidity is supplied by a profit maximizing monopolist our results therefore provide new empirical evidence that the limitorder market is a good market design a large number of experimental studies document that the gains from trade in a double auction are close to the maximum gains from trade see for example cason and friedman 1996 or the survey by holt 1995 similarly our empirical results show that the limit order market a market design similar to

spillovers and governance an analysis of knowledge and reputational spillovers in information technology investigating spillovers potential costs and benefits to a firm that extend beyond an individual transaction i integrate transaction cost theory and the knowledge based view of the firm in an effort to better understand the efficient governance of knowledge contracts with detailed task descriptions were associated with transactions with the potential to generate new and reusable knowledge the risk of a firm s technology spilling over to others and the risk of reputation impairing spillovers were associated with suppliers using their own employees rather than subcontractors thus results suggest that the creation and protection of knowledge are key factors in understanding governance decisions

the role of patent rights in mergers consolidation in plant biotechnology few micro level empirical papers have addressed the impact of the patent system on industry structure using firm level patent data for public and private firms in plant biotechnology we develop a measure of patent enforceability duration models show that patent statistics are a useful predictor of the timing of merger activity we find that patent enforceability is an important factor influencing the likelihood of mergers mergers in plant biotechnology may be partially motivated by the enforcement of patent rights when firms have overlapping technologies some of the merger activity may be explained by attempts to avoid mutually blocking technology as exemplified in the case of roundup ready corn

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

keeping organizational secrets protective institutional mechanisms and their costs the notion that firms generate rents from proprietary knowledge is widely accepted however the mechanisms that firms as institutions can differentially deploy to protect their knowledge form appropriation by rivals are not well understood this paper examines three broad classes of protective mechanisms that firms coon deploy to keep their knowledge secret rules compensation schemes and structural isolation the paper concludes that keeping organizational secrets through the deployment of protective mechanisms is both difficult and costly economizing considerations can therefore be expected to bear strongly on this aspect of firm organization copyright 1997 by oxford university press

corporate financial policy and corporate control abstract this paper presents evidence that stockholder wealth declines on average when managers respond to attempted hostile takeovers with defensive changes in asset and ownership structure the data also indicate that these corporate restructurings are typically quite large and that many are attempts by managers to create barriers specific to the hostile bidder and or to consolidate a block of voting securities in the hands of management allies the evidence suggests that defensive motives whether beneficial or harmful influence corporate asset and ownership structure

contested tender offers an estimate of the hazard function in this article we estimate the hazard function takeover probabilities for firms that are targets in unsolicited tender offers the data support a weibull gamma specification and imply a hazard rate that increases sharply in the initial period following the bid announcement after which it declines steadily in explaining the hazard we find that the initial bid premium has no explanatory power but the onset of an auction and the proportion of institutional ownership in the target firm significantly enhance the hazard legal and financial restructuring actions by target management are effective in reducing the hazard thereby prolonging the contest

duration of firms in an infant industry the case of indian computer hardware abstract this study analyses survival of firms in an infant industry in a developing economy it is found that a entry size and the probability of exit are positively related which is the opposite of the result in most previous studies b similar to previous studies post entry size is negatively related to the hazard c firms with longer duration have a more volatile time path of size d the hazard declines with age at an increasing rate suggesting increasing returns to learning and e diversification of firms and public ownership have little effect on duration

the high frequency trade off between speed and sophistication abstract central to the ability of a high frequency trader to make money is speed in order to be first to trading opportunities firms invest in the fastest hardware and the shortest connections between their machines and the markets yet this is not enough algorithms must be short no more than a few instructions as a result there is a trade off in the design of optimal high frequency trading strategies being the fastest necessitates being less sophisticated to understand the effect of this tension a computational model is presented that captures latency both of code execution and information transmission trading algorithms are modelled through genetic programming with longer programmes allowing more sophisticated decisions at the cost of slower execution times it is shown that depending on the market composition short fast strategies and slower more sophisticated strategies may both be viable and exploit different trading opportunities the relative profits of these different approaches vary however slow traders benefit and social welfare increase in the presence of hfts a suite of regulations are tested to manage the risks associated with high frequency trading the majority are found to be ineffective though constraining the ratio of orders to trades may be promising

learning information processing and order submission in limit order markets by introducing a genetic algorithm learning with a classifier system into a limit order market this paper provides a unified framework of microstructure and agent based models of limit order markets that allows traders to determine their order submission endogenously according to market conditions it examines how traders process and learn from market information and how the learning affects limit order markets it is found that measured by the average usage of different group of market information trading rules under the learning become stationary in the long run also informed traders pay more attention to the last transaction sign while uninformed traders pay more attention to technical rules learning of uninformed traders improves market information efficiency but not necessarily when informed traders learn opposite to the learning of informed traders learning makes uninformed traders submit less aggressive limit orders and more market orders furthermore private values can have significant impact in the short run but not in the long run one implication is that the probability of informed trading pin is positively related to the volatility and the bid ask spread

a hybrid stock trading system using genetic network programming and mean conditional value at risk abstract this paper describes a hybrid stock trading system based on genetic network programming gnp and mean conditional value at risk model gnp cvar the proposed method combining the advantages of evolutionary algorithms and statistical model has provided useful tools to construct portfolios and generate effective stock trading strategies for investors with different risk attitudes simulation results on five stock indices show that model based on gnp and maximum sharpe ratio portfolio performs the best in bull market and that based on gnp and the global minimum risk portfolio performs the best in bear market the portfolios constructed by markowitz s mean variance model performs the same as mean cvar model it is clarified that the proposed system significantly improves the function and efficiency of original gnp which can help investors make profitable decisions

chasing trends at the micro level the effect of technical trading on order book dynamics abstract technical traders attempt to exploit trends in market prices and the order flow despite this little is known about how these traders behave in a micro structure context we consider a model of an order book based financial market the market contains two groups informed traders and technical traders a numerical technique is used to identify a markov perfect equilibrium of the trading game and so determine the optimal strategies we find that technical trading rules are profitable and allow traders to increase their returns the effect of technical traders on the market however is ambiguous they decrease volatility and pricing errors but also increase trading costs despite primarily acting as liquidity suppliers

signaling through private equity placements and its impact on the valuation of biotechnology firms abstract this paper investigates how young publicly held technology firms contend with information asymmetry and the hazards it introduces to acquire the capital necessary for future growth we ascribe to the view that firms issuing private equity signal the marketplace that managers believe their growth opportunities are undervalued consistent with this view we find significant positive abnormal returns to announcements of private equity placements we develop theory suggesting that returns are determined by the timing of previous signals we also argue that the characteristics of the private placement signal specifically whether private equity is bundled with research partnerships influence the strength of the signal our results largely support our expectations

the risk concept for entrepreneurs reconsidered new challenges to the conventional wisdom abstract this paper explores the entrepreneurial risk construct focusing on how the decision to launch a new venture may entail risks different from what is found in established firms opportunities often emerge from the creation of specialized knowledge in start ups this knowledge is characterized by concerns for rent appropriation and information asymmetry we suggest that traditional measures of risk do not properly account for these concerns hence an illusion of greater risk taking attaches itself to entrepreneurs especially if the specialized knowledge is difficult to observe we suggest alternative measures that better capture these concerns including the dilution of control when issuing equity cash burn rates etc

do patents slow down technological progress abstract this paper challenges the widely held view in the industrial organization literature that patents always speed up technological progress we introduce a model of an innovating firm with uncertain property right to its innovation the impact of a commitment to an r d project is to create future options for patenting and market introduction each decision undertaken will change the conditions in which the innovator operates it is shown that an increase in patent protection reduces the elasticity of the option value of the program with respect to the value of the project raising the threshold value of market introduction and enhancing the ability of the innovator to wait thus while the effect of patent is to raise the rents on and thereby the potential amount of innovations it also tends to slow down market introduction

leveraging research and development assessing the impact of the u s advanced technology program this paper examines the factors that affect a firm s chances of winning an award from the advanced technology program atp and the subsequent impact of the award on a firm s success in raising additional funds for its research and development rd the halo effect from the award increases the success of these firms in attracting additional funding from other sources our conclusion is that the atp is leveraging activities that have a strong potential for broad based economic benefit

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

examining the effectiveness of price limits in an artificial stock market abstract this paper proposes an agent based framework to examine the effectiveness of price limits in an artificial stock market the market is composed of many boundedly rational and heterogeneous traders whose learning behavior is represented by a genetic programming algorithm we calibrate the model to replicate several stylized facts observed in real financial markets based on this environment the impacts of price limits are analyzed from the perspectives of volatility price distortion volume and welfare we find that the imposition of price limits possesses both positive and negative effects however compared with the market without price limits appropriate price limits help to reduce volatility and price distortion and increase the liquidity and welfare

informed traders and limit order markets abstract we consider a dynamic limit order market in which traders optimally choose whether to acquire information about the asset and the type of order to submit we numerically solve for the equilibrium and demonstrate that the market is a volatility multiplier prices are more volatile than the fundamental value of the asset this effect increases when the fundamental value has high volatility and with asymmetric information across traders changes in the microstructure noise are negatively correlated with changes in the estimated fundamental value implying that asset betas estimated from high frequency data will be incorrect

futures markets cognitive ability and mispricing in experimental asset markets we study the effect of a futures market in which contracts maturing in the last period of the life of the asset can be traded our experiment has two treatments one in which a spot market operates on its own and a second treatment in which a spot and a futures market are active simultaneously futures markets lower spot prices but increase price volatility the futures markets themselves exhibit considerable overpricing individuals with higher cognitive reflection test crt scores achieve greater earnings and tend to sell in the overpriced futures market while traders with lower crt scores make purchases in the futures market greater average crt score among a group of traders is associated with better price discovery when no futures market is present but there is no such relationship in the presence of a futures market modified measures of crt which take into account different types of incorrect responses are introduced

is technical analysis in the foreign exchange market profitable a genetic programming approach using genetic programming techniques to find technical trading rules we find strong evidence of economically significant out of sample excess returns to those rules for each of six exchange rates over the period 1981 1995 further when the dollar deutsche mark rules are allowed to determine trades in the other markets there is significant improvement in performance in all cases except for the deutsche mark yen betas calculated for the returns according to various benchmark portfolios provide no evidence that the returns to these rules are compensation for bearing systematic risk bootstrapping results on the dollar deutsche mark indicate that the trading rules detect patterns in the data that are not captured by standard statistical models

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

french firms strategies for protecting their intellectual property in attempting to protect their innovations firms can choose from a range of mechanisms which may be either non statutory trade secrets design complexity and lead time advantage over competitors or statutory patent design registration trademark copyright yet little is known about how firms do actually make their choices from among these different appropriability mechanisms the aim of this paper is to determine how french firms use of intellectual property protection mechanisms relates to the type of innovation the characteristics of the market sector in which they operate the firms characteristics and their human resources strategies our empirical model draws on four french databases covering the period 2001 2004 our results show that the choice of a means of protection matters and emerges out of a complex strategy our results also reveal that the different statutory and non statutory means of protection are complementary within their own categories but hardly so between categories