integrative capabilities vertical integration and innovation over successive technology lifecycles the analysis presented here provides a new explanation for why vertically integrated and specialized firms may continue to coexist as industries evolve especially during time periods when conditions unequivocally favor lower cost specialized firms in contrast to the common view that firms should match their organizational form to the prevailing nature of technology vertically integrated firms may rationally choose to stay integrated and bear the sunk costs of developing integrative capabilities as well as the ongoing costs of maintaining them even when they lose money during some time periods due to competition from lower cost specialized firms in particular in industries characterized by successive systemic innovations which entail interdependence across stages of production some firms may remain vertically integrated to maintain their capability to innovate over multiple cycles of technological innovation the results hinge on the sunk costs of long lived investments in integrative capabilities an extension to the analysis suggests that vertically integrated firms may retain their organizational form to pioneer systemic innovations in other industries including industries not subject to frequent technology lifecycles providing another explanation of product market diversification and market entry over time

corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

analysts gaap earnings forecasts and their implications for accounting research abstract we use newly available gaap forecasts to document that traditionally identified gaap forecast errors contain 37 measurement error correcting for this measurement error we settle a long standing debate regarding investor preference for gaap versus non gaap earnings and provide strong evidence of a preference for non gaap earnings we also revisit the use of non gaap exclusions to meet analysts forecasts when gaap earnings fall short results indicate that 34 of these traditionally identified meet or beat firms are misidentified due to measurement error and this error masks evidence that firms more frequently exclude transitory rather than recurring expenses for meet or beat purposes

more on measuring budget related rent seeking a comment following the work of tuuock 1967 kreuger 1974 and posner 1975 the theory of rent seeking has become a well established part of economics in a recent paper we katz and rosenberg 1989 offered a measure of the rentseeking associated with government spending basing himself on our work scully 1991 presents further results relating to such rent seeking and makes two claims first that our measure is a conceptually incorrect evaluation of the rent seeking associated with government expenditure and second that the measure of rent seeking suggested by him and into which our measure is an input is a meaningful and appropriate estimate of such rent seeking while reading scully s paper we realized that he touches upon a matter whose importance goes far beyond his offered measure this issue concerns the extent of rent seeking that takes place in given periods of time is there rentseeking for everything in every period or does the rent seeking occurring at any point in time mainly involve struggles over m i n o r reallocations of property rights the answer to this question has crucial implications for the amount of waste which occurs through rent seeking activities if rent seeking is always for everything rent seeking waste is likely to suck up a large proport ion of gnp in each period in this view rent seeking constitutes something like an economic black hole which threatens all economic well being if on the other hand rent seeking involves minor adjustments then while it reduces economic welfare rent seeking does not devour the benefits of a major proport ion of economic activity

rent seeking in u s government budgets 1900 88 a measure of waste from the competitive rent seeking activity of special interest groups in federal state and local budgets was calculated over the period 1900 88 this period in u s fiscal history is characterized by constitutional changes that have made for more transparency in governmental fiscal activities and for greater diffusion of taxes the xvi amendment to the constitution created the progressive individual income tax the corporate income tax was judged to be an excise tax in 1909 and passed the test of constitutionality high marginal tax rates are a justification for a high average level of taxation the full employment act of 1946 insitutionalized government deficits as a means of meeting a political objective as a result opportunities for rent seeking through budgetary reallocations rose in the united states in the first two decades of the 20th century waste at all levels of government represented about 10 percent of incremental national output today waste is three times that amount the transparency and diffusion of taxes are highest at the federal level and least at the local level rent seeking through budgetary reallocation has followed the public purse one explanation for the observed centralization of government in the 20th century may be that opportunities to concentrate benefits and diffuse taxes are highest at the federal level finally the withdrawal of resources from the productive economy to pursue rent seeking in government budgets lowers the rate of real economic growth i find that rent seeking through budget reallocations has had a significant and large negative effect on the growth rate

a discussion of assessing the relative informativeness and permanence of pro forma earnings and gaap operating earnings abstract by analyzing a carefully constructed earnings announcements sample that discloses a pro forma earnings number bhattacharya et al j account econom 36 1 3 2003 contribute to recent research documenting increasing differences between earnings as defined by generally accepted accounting principles gaap and alternative earnings definitions followed by capital markets the paper provides interesting descriptive data on pro forma earnings per share relative to both gaap earnings per share and actual earnings per share as tracked by i b e s also the authors conduct tests of the relative informativeness and persistence of these three earnings measures econometric and data limitations inhibit the inferences that can be drawn from some of these tests

does entry size matter the impact of the life cycle and technology on firm survival a wave of empirical studies has recently emerged showing that smaller scale entry is confronted with a lower likelihood of survival than their larger counterparts the purpose of this paper is to examine whether the relationship between size of a firm when entering an industry and the likelihood of survival holds under different technological conditions and across the different stages of the industry life cycle the empirical evidence suggests that the relationship between firm size and the likelihood of survival is shaped by technology and the stage of the industry life cycle while the likelihood of survival confronting small entrants is generally less than that confronting their larger counterparts the relationship does not hold for mature stages of the product life cycle or in technologically intensive products in mature industries that are still technologically intensive entry may be less about radical innovation and possibly more about filling strategic niches thus negating the impact of entry size on the likelihood of survival

industry and firm specific factors of innovation novelty this article investigates the underlying factors that might shape the firm s choices with respect to degrees of innovation novelty using a sample of 2983 firms observed under the portuguese community innovation survey we assess the relative relevance of a set of firm and industry specific factors in explaining firms choices about incremental or radical innovation the results indicate that both the firm s idiosyncratic historical factors giving rise to heterogeneous r d capabilities and the industry context have power to shape the firm s innovation choices even though firm specific factors appear to be more powerful the estimated impacts on firm s innovation novelty are nonetheless significantly moderated by the type of firm and industry

gender as a determinant of small business performance insights from a british study the performance of small businesses that is the ability of small firms to contribute to job and wealth creation through business start up survival and growth has been an important area of policy and academic debate in the 1980s surprisingly little has been written about gender and small business performance our literature search revealed only a small number of studies of any substance on this subject though over forty made some mention of it most studies shied away from direct examination of quantitative performance measures such as jobs created sales turnover annual growth tending to concentrate on qualitative measures of success or failure the paper examines small business performance and gender using data obtained from a survey of 600 300 women 300 men scottish and english small business ownermanagers part of a three year study on the impact of gender on small business management analyses suggest that the relationship between gender and small business performance is complex but that gender still appears to be a significant determinant even after other key factors are controlled for

efforts in two sided contests the degree of rent dissipation is studied in extended two sided contests that in volve two types of efforts while usual contestants expend resources in trying to win the contested prize potential recipients of the rent seeking efforts also participate in the con test this is due to uncertainty regarding the source of power in the contest that induces the bureaucrats to expend resources to increase their share in the rent seeking efforts by try ing to appear as the party controlling the allocation of the prize we show that the existing theoretical and empirical studies are incomplete and may underestimate the extent of rent dissipation

firm and product life cycles and firm survival on average roughly 5 10 percent of the firms in a given market leave that market over the span of a single year at least so data for a broad range of industries in several economies tell us what is it other than random shocks that determines the probability of survival for a firm in a given market we start by decomposing the forces that affect survival into industry and firm attributes industry attributes we hypothesize encompass variables that exert their influence both over time and across markets the variables that operate over time are defined by the life cycle of the industry life cycles of the industry affect mainly the characteristics of demand and the rate and form of technical change variations across firms we hypothesize arise mainly from learning by doing darwinian survival of the fittest and the obsolescence of initial endowments these variables are linked to the life cycle of the firm how these industry and firm life cycles define patterns of survival is the story

testing gibrat s law for small young and innovating firms this article analyses whether small young and innovating firms have experienced a greater employment growth than other spanish firms over the period 1990 2000 the study draws upon a sample of 1272 manufacturing firms in which only 967 of the firms survived for the entire ten year period the analyses test gibrat s law both by least squares and by utilizing the procedure proposed by heckman in which a probit survival equation is first estimated to correct for sample selection bias two estimators correcting for selection bias are utilized one that incorporates the inverse mill s ratio and the other that employs maximum likelihood methods all the results reject gibrat s law and support the proposition that small firms have grown larger additionally the results show that old firms grow less than young ones and innovating activity both process and product is a strong positive factor in the firm s survival and its employment growth

the heterogeneous dynamics between growth and profits the case of young firms while there is an increasing interest in the literature about the relationship between profits and business growth the empirical evidence is mixed and inconclusive this can be explained by the difficulty of fully addressing the complex nature of this relationship building on resource based and evolutionary considerations the present study investigates the dynamics between growth and profits of young firms by explicitly considering the endogeneity and heterogeneity aspects of the relationship data are based on a cohort of spanish manufacturing firms tracked during the period 1996 2010 the results indicate that young firm growth has a positive impact on profits in contrast the effect of profits on growth is not significant neither is there a significant correlation between past and current growth importantly we find that the results are strongly influenced by inter firm heterogeneity implications from these findings are discussed

the influence of age on smes growth determinants empirical evidence this paper seeks to investigate whether age is a fundamental characteristic of the relationships between determinants and growth the empirical evidence obtained allows us to conclude that 1 age and size are restrictive factors of the growth of young smes but they are not important for the growth of old smes 2 cash flow and debt are of greater relative importance for growth in young smes than for growth in old smes 3 rd 4 interest on debt is of greater relative importance for diminished growth in young smes than for diminished growth in old smes and 5 r d intensity in situations of financial deficit is of greater relative importance for diminished growth in young smes than for diminished growth in old smes but only in context of high tech smes

an intertemporal model of industrial exit a finite horizon model of industrial exit is developed after an initial lag most exits are by young firms the duration of the lag is positively related to sunk entry costs but not due to the fallacy of sunk costs the conception of entry differs from previous research as a result not all entrants are identical and firm size affects the rate of learning on average larger new firms last longer entrepreneurs in declining firms act more lazily as the firm declines a number of empirical observations about declining firms are organized by the model

on the relationship between firm size and export intensity export marketing literature supports the view that firm size is positively related to export intensity although the empirical findings have been mixed a number of theoretical arguments are used to support this proposition i e international marketing economies of scale limited managerial and financial resources of small firms decisionmaker s risk perception based on a large survey of the italian manufacturing industry the article falsifies the proposition and challenges some widely held assumptions in export marketing literature

survival of newly founded businesses a log logistic model approach based on a longitudinal database we test the liability of adolescence hypothesis which states that new firm hazard rates follow an inverted u shaped pattern that is the hazard rate is low for the initial period the end of adolescence is marked by a hazard maximum from which the rate declines monotonically we use a log logistic model which shows that the liability of adolescence argument describes the hazard rates of new establishments for all two and three digit industries fairly well further the rate shows that the desegregation of industries matters and considerable differences are found within and across two and three digit low moderate and high tech industries in assessing the effect of market environment conditions on risk we find that risk to be elevated in a relatively large number of two digit low and high tech industries in the presence of scale economies but it is substantially reduced in moderate tech industries by contrast the hazard rate tends to be reduced for quite a large number of three digit low moderate and high tech industries in comparison with the two digit industries indicating a longer adolescence the influence of start up size in reducing the hazard rate is apparently similar between two and three digit low moderate and high tech industries the impact of market growth on the risk of failure is not much different for both two and three digit low moderate and high tech industries

how optimal distinctiveness affects new ventures failure risk a contingency perspective abstract in this article we apply the concept of optimal distinctiveness to test whether category spanning has a nonlinear effect on new ventures risk to fail we argue that by being optimally distinct i e by attaining a level of category spanning that allows new ventures to benefit from balancing the competing needs of conformity with and differentiation from competitors new ventures can improve their survival chances in addition we argue that the relevance of optimal distinctiveness varies with a venture s age and a category s density we tested our hypotheses using data from 1668 metal bands that were founded in the united kingdom between 1967 and 2005 the results indicate that optimal distinctiveness is relevant to new ventures failure risk moreover we show that venture age attenuates the relevance of optimal distinctiveness whereas category density strengthens that factor s relevance

small business growth in the short run this paper examines the determinants of short run employment growth in very small firms in the services sector the study shows evidence of non linearities in the growth size relationship and it is argued that these non linearities reflect the short run constraints that small firms face in adjusting to demand shocks the paper also suggests that there are other systematic influences on growth apart from size the paper draws on survey evidence from the northern region of the united kingdom

business failure of new firms an empirical analysis using a multiplicative hazards model abstract this paper investigates business failure of new firms using a multiplicative hazards model we estimate the determinants of business failure among new manufacturing firms in tokyo during the period 1986 to 1994 it is found that a new firm without sufficient capital or a sufficient size has a higher risk of business failure it is also found that the new firm tends to have more difficulty surviving in an industry characterized by a high entry rate with respect to the timing of entry the new firm that entered just before or after the collapse of the so called bubble economy has been more likely to fail furthermore we estimate a regression model based not only on age but also on calendar time by using a regression model based on calendar time it is found that the firm s age has been related to business failure

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

age size growth and survival uk companies in the 1980s this paper examines growth and survival amongst quoted and unquoted u k companies in the period 1975 85 and compares the results with earlier u k and u s studies an examination of death rates shows that smaller companies had higher death rates but the largest and smallest companies were least vulnerable to takeover careful attention is therefore paid to problems of sample selection bias it is shown that smaller companies grew faster than larger companies that gibrat s law does not hold amongst smaller firms that age is negatively related to growth and that these results are not an artifact of sample selection bias copyright 1994 by blackwell publishing ltd

decomposition of new venture growth into firm age survey period and vintage effects firm data are accumulated on a yearly basis in view of the linear relationship of firm age foundation year survey year the fluctuations of firm data classified by age and period cannot be decomposed into age period and cohort foundation year effects three decomposition methods are briefly reviewed and applied to japanese data on new ventures founded since 1995 regarding sales and employment growth the age effect is the largest with a downward trend and the cohort effect is negligible regarding labour productivity the age effect indicates upward movements and the cohort effect is negligible the reason of the negligible cohort effect is discussed

the effects of business to business e commerce on transaction costs this paper studies transaction costs changes arising from the introduction of the internet in transactions between firms we divide transaction costs into coordination costs and motivation costs we classify coordination efficiencies into three categories process improvements marketplace benefits and indirect improvements for motivation costs we focus on informational asymmetries we apply this framework to internal data from an internet based firm to measure process improvements marketplace benefits and motivation costs our results suggest potentially large process improvements and marketplace benefits we find little evidence that informational asymmetries are more important in the electronic marketplace than in the existing physical ones

the information content of losses abstract this study hypothesizes that because shareholders have a liquidation option losses are not expected to perpetuate they are thus less informative than profits about the firm s future prospects the results are consistent with the hypothesis they also show that the documented increase in the earnings response coefficent as the cumulation period increases appears to be due exclusively to the effect of losses the liquidation option effect extends to profitable cases where earnings are low enough to make the option attractive alternating explanations for the low informativeness of losses such as mean reversal of earnings are not supported by the tests

interest rates and credit risk this paper explores the effects of shifts in interest rates on corporate leverage and default we develop a dynamic model in which the relationship between firms and their outside financiers is affected by a moral hazard problem and entrepreneurs initial wealth is scarce the link between leverage and default risk comes from the lower incentives of overindebted entrepreneurs to guarantee firm survival the need to finance new investment with outside funding pushes firms leverage ratio above some state contingent target towards which they gradually adjust through earnings retention the dynamic response of leverage and default to interest rate rises and cuts is both asymmetric and heterogeneously distributed across firms both rises and cuts increase the aggregate default rate in the short run however a higher interest rate reduces firms target leverage and hence produces lower default rates in the longer run this helps rationalize some evidence regarding the risk taking channel of monetary policy

do neoliberal policies deter political corruption this article probes the relationship between neoliberal economic poli cies and political corruption focusing in particular on the impact of trade and invest ment policies regulatory policy and the overall size of the public sector on corruption using a large cross national data set from the mid to late 1990s we test the neolib eral hypotheses that market oriented economic policies are associated with lower lev els of political corruption and state intervention in the economy with higher levels consistent with the neoliberal argument we find that open trade and investment pol icies and low effective regulatory burdens do correlate with lower levels of political corruption however we find no consistent relationship between the aggregate size of the public sector and political corruption while the neoliberal hypothesis on polit ical corruption has initial empirical support its lessons cannot be applied wholesale market oriented states may be less corrupt but interventionist states as measured by public spending are not necessarily more corrupt

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

early life cycle behaviour of micro firms in scotland the paper reports on the behaviour of young less than three years old micro firms less than ten employees in scotland with an emphasis on life cycle effects two main tests were carried out the first took gibrat s law that growth is independent of size as the null hypothesis and a life cycle effects model as the alternative the gibrat s law model was rejected in favour of the life cycle model smaller micro firms grow faster than larger micro firms robust nonlinear variants of the life cycle model were discussed and shown to display stable equilibrium characteristics which were consistent with the sample evidence the second took a classical simultaneous equations model as the null hypothesis for which growth and profitability were mutually reinforcing a managerial model was set up as the alternative for which growth and profitability were in a trade off relationship the classical model was rejected in favour of the managerial in the short run young micro firms experience a trade off between profitability and growth the managerial model was shown to imply a stable equilibrium with characteristics consistent with sample evidence

is comprehensive income superior to net income as a measure of firm performance abstract with the exception of financial firms we find no evidence that comprehensive income is more strongly associated with returns market value or better predicts future cash flows income than net income moreover the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment our results do not support the claim that comprehensive income is a better measure of firm performance than net income our results also raise questions about the appropriateness of items included in sfas 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries

patents and the survival of internet related ipos abstract we examine the effect of patenting on the survival prospects of 356 internet related firms that made an initial public offering on the nasdaq at the height of the stock market bubble of the late 1990s by march 2005 almost 2 3 of these firms had delisted from the exchange changes in the legal environment in the us in the 1990s made it much easier to obtain patents on software and ultimately on business methods though less than 1 2 of the firms in our sample obtained or attempted to obtain patents for those that did we hypothesize that patents conferred competitive advantages that translate into higher probability of survival though they may also simply be a signal of firm quality controlling for other determinants of firm survival patenting is positively associated with survival quite different processes appear to govern exit via acquisition compared to exit via delisting from the exchange due to business failure firms that applied for more patents were less likely to be acquired though if they obtain unusually highly cited patents they may be a more attractive acquisition target these findings do generally not hold true for business method patents which do not appear to confer a survival advantage

gaap versus the street an empirical assessment of two alternative definitions of earnings managers security analysts investors and the press rely increasingly on modified definitions of gaap net income known by such names as operating and pro forma earnings we document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where gaap and street earnings differ further there is a very strong bias toward the reporting of a street earnings number that exceeds the gaap earnings number we also show that the market response to the street earnings number has displaced gaap earnings as a primary determinant of stock prices finally through an analysis of earnings releases we show that management has taken a proactive role in defining and emphasizing the street number when communicating to analysts and investors

effectiveness of regulatory interventions on firm behavior a randomized field experiment with e commerce firms economic regulators use various instruments to stimulate smes to change their behavior but limited evidence exists on the effectiveness of such interventions we analyze the effectiveness of three ways of providing e commerce firms guidance about the legal rules on information disclosure the initial non compliance is considerable in two interventions firm specific guidance is given by post mail and by e mail respectively in another intervention guidance on industry level is given by means of dedicated publications and presentations in all cases the guidance was given on behalf of the regulatory authority the effectiveness of the firm specific guidance is measured through a randomized field experiment while for the industry guidance a panel analysis is conducted we find that sending the firms a letter by post mail slightly improved firm compliance but overall the various forms of guidance appear to be ineffective although information related interventions are commonly used in practice such regulatory interventions can fail to influence the behavior of smes

redefining business success distinguishing between closure and failure new firms are believed to have high closure rates and these closures are believed to be failures but two u s census bureau data sources illustrate that these assumptions may not be justified the business information tracking series bits showed that about half of new employer firms survive beyond four years and the characteristics of business owners cbo showed that about a third of closed businesses were successful at closure the cbo also made it possible to compare results of models of business survival and business success but because of non response bias logit models were used similar to previous studies firms having more resources that were larger with better financing and having employees were found to have better chances of survival factors that were characteristic of closure such as having no start up capital and having a relatively young owner were also common in businesses considered successful at closure hence few defining factors can be isolated leading to true failures the significant proportion of businesses that closed while successful calls into question the use of business closure as a meaningful measure of business outcome it appears that many owners may have executed a planned exit strategy closed a business without excess debt sold a viable business or retired from the work force it is also worth noting that such inborn factors as race and gender played negligible roles in determining survivability and success at closure

interdependency competition and industry dynamics asystematic understanding of industry dynamics is critical to strategy research because individual firm performance dynamics both reflect and affect change at the industry level descriptive research on industry dynamics has identified a dominant pattern where prices fall output rises and the number of firms rises and then falls over time several models have been advanced to explain these patterns with a particular focus on explaining why a shakeout in the number of firms occurs in the most prominent models shakeout is generated by rising realized heterogeneity among firms that either is assumed to be unrecognized but determined ex ante or is generated by stochastic innovation outcomes coupled with convex adjustment costs and scale advantages in innovation and learning in this paper we develop an alternative model where heterogeneity develops among firms over time leading to a shakeout because firms must make choices about highly interdependent productive activities where the ideal combinations cannot be easily deduced or imitated by combining two established models a cournot model of competition with an nk model of interdependency in production activities we are able to advance an alternative explanation for the observed patterns of industry behavior including shakeout we show that variation in the potential for interdependency in activities among industries is able to explain varying levels of shakeout as well as differing patterns of entry and exit among industries notably the model generates several empirical predictions not apparent in past research and several that directly conflict with the results of prominent alternative models of industry dynamics specifically we show that when the potential for interdependency within an industry is low entry slows down and incumbent survival is all but assured whereas in industries where the potential for interdependencies is high shakeouts are severe and the rates of entry and exit remain high over longer time periods with decreasing survival rates for incumbents

selection and firm survival evidence from the shipbuilding industry 1825 1914 several theories of firm performance can explain the well known observation that survival is positively related to age however a more mundane explanation selection bias driven by variations in firm quality may also underlie the phenomenon this paper employs a 90 year plant level panel data set on the u s iron and steel shipbuilding industry of the nineteenth and early twentieth centuries to discriminate between the explanations the shipbuilding industry exhibits the usual joint dependence of survival on age and size but this dependence is eliminated after controlling for heterogeneity by using preentry experience as a proxy for firm quality the evidence points to a dominant role for selection bias in creating the age dependence of survival at the same time preentry experience is found to have a large and extremely persistent effect on survival and this finding is inconsistent with standard explanations for the role of preentry experience on firm performance

the convergence of fiscal regimes and the decline of the tiebout effect i have argued that the spatial convergence of per capita incomes and income distributions lead to the spatial convergence of fiscal regimes and that convergence diminishes opportunities for tiebout type moves in the economy considerable empirical evidence confirms the hypothesis states with relatively low initial levels of taxation have had relatively higher growth rates of taxation low per capita income states have had higher growth rates of real per capita incomes than have had high per capita income states the high economic growth rate states have had lower growth rates of taxation than the low income growth rate states spatial convergence of per capita incomes is associated with spatial convergence of fiscal regimes furthermore there has been a spatial convergence in income distributions increased equality of income empirically is associated with increased size of the fiscal regime confirming the public choice insight the spatial convergence of fiscal regimes has diminished the gains from tiebout type moves as such fiscal convergence diminishes the opportunity for citizen voters to reveal their preference for collective goods through migration of course at the limit where per capita incomes and the income distribution are invariant spatially the spatial convergence of fiscal regimes makes the musgrave samuelson problem of revealed preference for collective goods as intractable at the state and local levels as at the national level tiebout type moves no longer allow escape from leviathan

getting to know you a theory of strategic group identity this paper develops a theory of strategic group identity that explains how strategic groups emerge in an industry and how they can affect firm behaviors and outcomes in so doing it provides a theoretical basis for the existence of strategic groups we argue that managers cognitively partition their industry environment to reduce uncertainty and to cope with bounded rationality social learning theory and social identification theory are used to describe how cognitive groups coalesce into meaningful substructures and how a group level identity emerges we describe the ways in which macro level factors condition the development of groups and their identities we introduce the notion of a strong identity which characterizes any group sufficiently recognized and attended to by members to affect individual action groups with weak identities are no more than transient agglomerations of firms and do not exist in any meaningful sense these ideas are developed into propositions that describe the conditions under which groups with strong identities are likely to emerge a second set of propositions describes their transformation over time identity strength is linked to both positive and negative outcomes in a final set of propositions we show how strategic groups with strong identities can affect firm performance resolving a longstanding problem which has plagued strategic groups research and conclude by suggesting some approaches for measurement and future research 1997 by john wiley sons ltd

the empirical measurement of rent seeking costs this survey focuses on the efforts carried out mainly by public choice scholars to measure the social cost of rent seeking the concept introduced by gordon tullock in 1967 and coined by anne krueger in 1974 is well known and accepted by the profession but its empirical measurement has fallen behind with respect to its theoretical formulation an often criticized lack in the literature although there are good general surveys none has specifically focused on reviewing the empirical efforts made to measure the phenomenon the purpose of this paper is to provide such a survey it could be said that the rent seeking concept has been fully integrated into economic jargon it is commonly used when some agent seeks to obtain an artificial transfer usually from government and covers all the actions efforts or expenses that the agent has to carry out to obtain the prize the key issue however is the possible social waste that arises in these situations the empirical efforts to measure such waste constitute the main purpose of this survey the concept of rent seeking was introduced by tullock 1967 although the term was first coined by krueger 1974 in a paper not related to the former in a recent paper tullock himself wrote of the history of the concept and the intellectual context within which it arose tullock 2003 starting with the pioneering work by harberger 1954 several studies were conducted during the 1950s in which the calculation of the social cost of monopolies and tariffs always gave the result of very modest figures the first response to these results was made by leibenstein 1966 and his x efficiency which refers to a hypothetical loss in efficiency due to the absence of competition shortly after leibenstein s paper appeared tullock argued that the deadweight costs of monopoly and tariffs understate the true social cost because the expenditures made to capture related rents have to be included so rectangles as well as harberger s triangles have to be included in the calculations let us see this argument once more figure 1 depicts the iconic tullock graphic analysis of rent seeking it represents the demand schedule d for a monopolized good where pm is the monopoly

post entry behaviour and the cycle evidence from germany abstract based on a rich database on establishments in western germany the paper aims at characterising the relationship between on the one hand growth and exit of entering cohorts and on the other hand aggregate business fluctuations a main finding is that exit is not responsive to the cycle which is at odds with views of recessions as times of cleansing where creative destruction processes occur the growth of survivors also displays little cyclical sensitivity but tends to become more responsive to aggregate business fluctuations as the cohort ages two possible explanations for this role of age on the cyclical sensitivity of surviving units are offered in the final section of the paper the first draws on the product specialisation of young and more established plants the second on the role of irreversible investment and industry selection

the survival and growth of new establishments in sweden 1987 1995 the aim of the study is to examine the survival of new establishments and to identify factors affecting their survival probability and their employment growth this study uses a unique data set on all new establishments that were created in sweden 1987 and 1988 with the exception of the construction industry the results show among others that i new establishments face a high risk of closing down ii the probability of establishment survival increases with the age and size of the establishment iii variables that are assumed to measure access to resources being a part of a multi unit firm and being new due to merger or dispersal have a positive effect on survival iv the number of employees at the start up year has a negative effect on the employment growth and v demographic and educational factors are important in explaining survival and growth

trajectories of small business financial structure a dynamic theory of the small firm is expounded assuming entrepreneurs maximise business value over a finite time horizon predicted trajectories for key financial variables are seen to depend on whether debt or equity are cheaper the predicted trajectories are compared with actual trajectories using empirical evidence from three years of detailed primary source data on one hundred and fifty new business startups in scotland evidence largely confirms predictions of the model for the cheap equity case for this case as capital and sales rise steadily debt is retired rapidly except when interest rates on long term debt are low this finding is supported by explicit empirical trajectories of key financial variables

biased forecasts or biased earnings the role of reported earnings in explaining apparent bias and over underreaction in analysts earnings forecasts the extensive literature that investigates whether analysts earnings forecasts are biased and or inefficient has produced conflicting evidence and no definitive answers to either question this paper shows how two relatively small but statistically influential asymmetries in the tail and the middle of distributions of analysts forecast errors can exaggerate or obscure evidence consistent with analyst bias and inefficiency leading to inconsistent inferences we identify an empirical link between firms recognition of unexpected accruals and the presence of the two asymmetries in distributions of forecast errors that suggests that firm reporting choices play an important role in determining analysts forecast errors r 2003 elsevier b v all rights reserved

the growth profit nexus in this paper we investigate the relative importance of firm and market effects on the profitability of a sample of independent unquoted u k firms over the period 1991 1993 specifically we attempt to isolate the effects of internal governance given that the typical firm is closely held in terms of its shareholdings and has a high degree of owner control our findings suggest that there is no short run growth profit trade off of the type outlined by marris in fact growth and profits move in parallel further there is a significant degree of profits persistence

the struggle to survive in the r d sector implications for innovation and growth by allowing for investment activities by research and development r d firms to prevent product obsolescence we show that if legal patent protection is too strong a higher r d subsidy rate delivers insufficient investments for survival in the r d sector depressing innovation and growth in the long run

small business survival and sample selection bias analyses of small business and the factors affecting their survival are fairly common in the research literature the level of research interest may stem from the fact that in the us only about half of all new small businesses survive after 4 years headd 2003 however research attempting to understand the phenomenon that employs data using only information from and about surviving firms may lead to erroneous conclusions regarding the factors that influence firm survival and failure in this paper we provide evidence that omitted information about the firms that disappear from the research data over time leads to biased coefficient estimates comparing the heckman two step estimation approach of switching regression models to a semi parametric cox hazard model the accelerated failure time aft model we conclude that the cox atf approach is the most appropriate model for firm survival analysis

reconciling quantile autoregressions of firm size and variance size scaling the aim of this paper is to understand what economic mechanisms may cause the law of proportionate effect to break down for fast growing and shrinking firms recent evidence has highlighted that the first order coefficients of quantile auto regression of firm size decline across quantiles our theoretical results show that negative variance size scaling is sufficient to yield a decline in quantile auto regression coefficients if firm log size is laplace distributed conditional on size one period ahead however it is sufficient only for declining auto regression coefficients for fast growing firms under asymmetric laplace conditional log size if skewness is decreasing with size in other words if the growth of large firms is less dispersed and more left skewed size is a disadvantage for the growth of fast growers but not necessarily an advantage for fast decliners thus size related determinants of negative growth skewness such as diseconomies of growth market power and managerial attention issues impact on how the lpe is violated using data on dutch manufacturing companies from the business register of enterprises observed between 1994 and 2004 our empirical estimates of quantile regression models confirm the evidence of declining quantile regression coefficients for small medium firms 20 199 employees mainly in the right most quantiles and for the same subsample we find that growth rates variance and skewness are decreasing with size the theoretical propositions of the paper are thus corroborated

the greener the better job creation effects of environmentally friendly technological change this article investigates the link between environment related innovation and job creation at firm level employing italian data on 4507 manufacturing firms matched with patent records for the period 2001 2008 we test whether green innovation measured by the number of environment related patents has a positive effect on long run employment growth that is specific with respect to non environmental innovation results show a strong positive impact of green innovation on long run job creation substantially bigger than the effect of other innovations our findings are robust to a number of additional tests including controls for patents quality and cost differential between generic and green innovation and endogeneity

a temporal analysis of earnings surprises profits versus losses i show that median earnings surprise has shifted rightward from small negative miss analyst estimates by a small amount to zero meet analyst estimates exactly to small positive beat analyst estimates by a small amount during the 16 years 1984 to 1999 i show that a rightward temporal shift in median surprise from negative to positive describes earnings but neither profits nor losses median profit surprise shifts within the positive quadrant from zero to one cent per share median loss surprise shifts within the negative quadrant from extreme negative about 33 cents per share to zero i show that the median surprise for profits exceeds that for losses in every year i document significant positive temporal trends in both meet and beat analyst estimates for both profits and losses but i find a greater frequency of profits that either meet or beat analyst estimates in every year i find a significant positive temporal trend in positive profits that are a little bit of good news and a significant negative temporal trend in managers who report losses that are an extreme amount of bad news my results are robust to the four internal validity threats i consider namely temporal changes in 1 analyst forecast accuracy 2 the mix of earnings of one sign preceded by earnings of another sign four quarters ago 3 the timeliness of the most recent analyst forecast and 4 the i b e s definition of actual earnings i find that managers of growth firms are relatively more likely than managers of value firms to report good news profits i show that when they do report positive profit surprises managers of growth firms are more likely to report a little bit of good news in every year

rent seeking for budgetary allocation preliminary results for 20 countries in this paper we present quantitative measures of the proneness of different countries to respond to pressure groups in determining the composition of their spending these in turn help us to derive simple measures of the rent seeking done in relation to the government s spending pie

the diffusion of e commerce among smes theoretical implications and empirical evidence as a specific institution of distributive trades e commerce displays similarities with retail stores and mail order companies as well as providing theoretical support for the assumption that e commerce is a way to sell certain goods and services at prices potentially lower than those of traditional distributive channels this paper analyses its inter firm diffusion among a sample of firms mostly smes in italy the paper has three main purposes firstly it challenges the view of e commerce as a technological revolution by pointing out its nature as a cost minimizing marketing channel in particular it shows how under certain conditions e commerce is a source of transaction cost advantages analogous to those yielded by mail order business secondly the paper identifies from a theoretical viewpoint the circumstances under which e commerce sales might achieve a significant level of penetration among those smes that would otherwise incur high costs in organizing a proprietary distributive channel thirdly it employs a unique data set of italian manufacturing service and hospitality firms nearly 90 of them with fewer than 100 employees to estimate a diffusion model based on the logistic curve according to the estimates by the fourth quarter of 2003 nearly 50 of the population of firms in the geographical area surveyed will have introduced e commerce among their marketing channels

entrepreneurs creativity and firm innovation the moderating role of entrepreneurial self efficacy there are several studies in entrepreneurship investigating determinants of innovation outcomes in smes although entrepreneurs entrepreneurial creativity is often seen as a prerequisite previous research indicates it is not an exclusive determinant of innovation we use theoretical logics of social cognitive theory and innovation theory to develop a conceptual model of entrepreneur s creativity self efficacy and innovation outcomes the model is then tested on a large sample of small and medium firms from two distinct economies the united states and slovenia empirical findings partially support the proposed moderation effects of entrepreneurial self efficacy but with the same variations between countries the implications of these results in relation to entrepreneurship theory and practice are discussed