dispersed knowledge and an entrepreneurial theory of the firm in this article we propose an entrepreneurial theory of the firm that is based on dispersed knowledge we argue that the dispersion of knowledge over people and places and over time leads to uncertainty this uncertainty combined with heterogeneous expectations and the nexus of an individual and opportunity explains the emergence of new firms we then suggest that the theory of the firm proposed by us answers questions that have been overlooked by alternative theories the specific question we discuss in this article is when and why an entrepreneurial opportunity will be taken to market through an existing firm and when and why a new firm will be chosen as a vehicle for taking a new idea to market i e whether the residual will be concentrated in an existing or in a new firm d 2003 published by elsevier inc

short run exchange rate uncertainty in latin america this paper to obtain an ex ante measure of exchange rate uncertainty in 11 latin american countries as a preliminary issue the purchasing power parity ppp condition is tested using engle and granger two step procedure and johansen method the argument is that exchange rate uncertainty could be lower if ppp holds in the long run the expected exchange rate uncertainty is estimated according to an extended version of the autoregressive conditionally heteroscedastic arch model the results show that the arch adjusment produces more efficient estimates in seven countries and that the acceptance of ppp has little effect on exchange rate uncertainty

what explains global exchange rate movements during the financial crisis abstract a striking and unexpected feature of the financial crisis has been the sharp appreciation of the us dollar against virtually all currencies globally the paper finds that negative us specific macroeconomic shocks during the crisis have triggered a significant strengthening of the us dollar rather than a weakening macroeconomic fundamentals and financial exposure of individual countries are found to have played a key role in the transmission process of us shocks in particular countries with low fx reserves weak current account positions and high direct financial exposure vis a vis the united states have experienced substantially larger currency depreciations during the crisis overall and to us shocks in particular

wind insurance and mitigation in the coastal zone this paper presents the only study analyzing the decision to purchase wind coverage for individuals whose standard homeowner s policy excludes wind and one of very few analyses of the decision to undertake wind mitigation measures because these two decisions are closely related a simultaneous mixed process approach is used that allows for correlated disturbances across probit insurance and tobit mitigation equations results indicate a positive correlation between errors of the insurance and mitigation models conditioning on covariates households that hold wind insurance tend to engage in greater levels of wind mitigation

innovations stakeholders entrepreneurship in modern societies entrepreneurship and innovation are widely seen as key sources of economic growth and welfare increases yet entrepreneurial innovation has also meant losses and hardships for some members of society it is destructive of some stakeholders wellbeing even as it creates new wellbeing among other stakeholders both the positive benefits and negative externalities of innovation are problematic because entrepreneurs initiate new ventures before their private profitability and or social costs can be fully recognized in this paper we consider three analytical frameworks within which these issues might be examined pre commitments contractarianism and an entrepreneurial framework we conclude that the intersection of stakeholder theory and entrepreneurial innovation is a potentially rich arena for research

why interest rates react to money announcements an explanation from the foreign exchange market abstract when the fed announces a money supply greater than had been expected interest rates rise why one explanation is that the market raises its estimate of the future rates of money growth and inflation and bids up nominal interest rates we offer contrary evidence on such days the dollar appreciates not depreciates an alternative explanation is that the market perceives the change in the money stock as a transitory fluctuation that the fed will reverse in the future the anticipated future tightening raises today s real interest rate causes a capital inflow and appreciates the dollar the result in fact observed

economic experiments hypothetical surveys and market data studies of insurance demand against low probability high impact risks a systematic review of designs theoretical insights and determinants of demand this paper provides a systematic review of the literature on 80 experimental hypothetical survey and market data studies of insurance demand against low probability high impact risks the objective of the review is to extract lessons from these studies and to outline an agenda for future research we contrast the results of experimental and survey studies to findings from market data we focus on experimental design methods insurance characteristics as well as results about theories heuristics behavioural biases and explanatory variables lessons for policymakers are drawn which can facilitate disaster preparedness

consistency of risk preference measures an artefactual field experiment from rural china a variety of measures have been developed to elicit individual risk preferences how these measures perform in the field in particular in developing countries with non student subjects is still a

modularity in technology and organization this paper is an attempt to raid both the literature on modular design and the literature on property rights to create the outlines of a modularity theory of the firm such a theory will look at firms and other organizations in terms of the partitioning of rights understood as protected spheres of authority among cooperating parties and it will assert that organizations reflect nonmodular structures that is structures in which decision rights rights of alienation and residual claims to income do not all reside in the same hands 2002 elsevier science b v all rights reserved

analysis of uncertainty as opposed to risk an experimental approach the paper illustrates the scope for enhancing the conceptual apparatus used by agricultural economists to analyse decision making under conditions of uncertainty selected empirical results from experiments on student subjects from three universities are reported three issues are considered first the reasons for choice and the understanding of a choice problem are examined second attitudes towards different levels of uncertainty are measured third the possibility that apparently non normative psychological factors influence choice is explored the paper serves to illustrate and support a number of methodological points the major points are that a risk uncertainty distinction is useful contrary to the aging conventional wisdom of economic theory that laboratory experiments can potentially provide data of use to agricultural economists and that predictive models of choice under uncertainty may be more accurate if they take account of psychological variables which influence the decision making processes of human subjects

international order flows explaining equity and exchange rate returns macroeconomic models of equity and exchange rate returns perform poorly at high frequencies the proportion of daily returns that these models explain is essentially zero instead of relying on macroeconomic determinants we model equity price and exchange rate behavior based on a concept from microstructure order flow the international order flows are derived from belief changes of different investor groups in a two country setting we obtain a structural relationship between equity returns exchange rate returns and their relationship to home and foreign equity market order flow to test the model we construct daily aggregate order flow data from 800 million equity trades in the u s and france from 1999 to 2003 almost 60 of the daily returns in the s p100 index are explained jointly by exchange rate returns and aggregate order flows in both markets as predicted by the model daily exchange rate returns and order flow into the french market have significant incremental explanatory power for the daily s p returns the model implications are also validated for intraday returns

the effects of macroeconomic news on high frequency exchange rate behavior this paper studies the high frequency reaction of the dem usd exchange rate to publicly announced macroeconomic information emanating from germany and the u s by us ing data sampled at a five minute frequency we are able to identify significant impacts of most announcements on the exchange rate change in the 15 minutes post announcement although the significance of these effects decreases rapidly as the interval over which the post announcement change in exchange rates is increased the direction of the exchange rate response conforms in general with a reaction function interpretation whereby reac tions to macroeconomic news are driven by the likely operations of monetary authorities in domestic money markets further we detect influences of german monetary policy deci sions on the reaction of the exchange rate and also differences between u s and german announcements in the exchange rate reaction time pattern i introduction this paper studies the high frequency reaction of the dem usd exchange rate to macroeconomic information emanating from germany and the u s specif ically we utilize exchange rate data covering the period 1 1 92 to 31 12 94 sam pled at a five minute frequency to investigate how the major monthly macroe conomic releases from these two countries impact the dem usd the infor mation contained in announcements over this three year period is extracted via a set of market expectation series supplied by money market services interna tional mms 1 our analysis improves on previous work in this area in two main respects first our study is conducted using very high frequency data whereas most earlier work has used exchange rate data sampled at a frequency of a number of hours or more this allows us to construct a very precise characterization of

rational behavior and economic theory abstract nowadays it seems almost universally presumed that the fundamental characteristic of homo oeconomicus is his rationality we analyze the role played by the concept of rationality in economic theory and demonstrate that it is necessarily constrained to be an essentially contentless notion we show that the main body of economic theory is firmly grounded and that some contrasting approaches to rationality although leading to heated debates and vivid confusion have no fundamental significance for economics with a refereshed view on the essence of economics we argue that the principles of economic theory form an essential methodological guide for the emergent line of research based on the use of so called evolutive models

the entrepreneur s reward for self policing the collaboration among people is often subject to shirking the net gain from the collaboration depends on the contract governing it i argue that the entrepreneur assumes the role of the residual claimant because his actions are more costly to monitor than those of the factors with which he collaborates by offering fixed pay contracts to others and himself becoming residual claimant the entrepreneur curtails his incentive to gain at the expense of his partners and the net gain from the collaboration is then maximized costly monitoring applies to both labor and capital and thus the entrepreneur may supply both labor services and capital the entrepreneur s capital serves to guarantee the pay of the other factors

why corporations insure corporations insure to reduce the shirking information problem of joint production insurance encourages specialization in ownership increasing the returns to monitoring and lowering shareholders demand for a more diversified portfolio it enhances the credibility of specific capital as a performance bond and it lowers the cost to shareholders of compensating other members of the team for investing in firm specific assets tax and other factors may further encourage individual corporations to insure

asymmetric impact of monetary surprises on exchange rate abstractthis paper examines the asymmetric response of exchange rate to monetary surprises after controlling the type direction and origin of the news as well as business cycle phase a new asymmetry is found in the response of the exchange rate to news surprises in specific the us dollar depreciates against major currencies as the response to the negative monetary surprises in the 2001 recession while the dollar appreciates responding to similar negative monetary surprises during the 2008 recession the paper further explores possible causes and finds that time varying status of the currency with higher financial returns may contribute to the new asymmetry

on some recent explanations of why capital hires labor conventional microeconomics contains no explanation of why capital hires labor and not the reverse in view of some surprisingly positive results in the theoretical analysis of worker run enterprise systems recent contributions to the theory of the firm have attempted to explain the dominance of capitalist production relations in efficiency terms the present paper critically reviews works in this area by alchian and demsetz 1972 williamson 1975 1980 and jensen and meckling 1979 and contends that a convincing efficiency argument for the general superiority of capital owners over workers control of enterprises still is lacking

knight on risk and uncertainty it is argued that the received interpretation of knight s classic riskuncertainty distinction as concerning whether or not agents have subjective probabilities constitutes a misreading of knight on the contrary knight shared the modern view that agents can be assumed always to act as if they have subjective probabilities we document our contention that by uncertainty knight instead meant situations in which insurance markets collapse because of moral hazard or adverse selection knight s discussion of market failure although always informal and in places inaccurate was in many respects a remarkable anticipation of the modern literature

changing cognitive frames changing organizational forms an entrepreneurial theory of organizational development this paper discusses the notion of development in firm organizations on the basis of a comparison with ontogenetic phenomena in nature and offers a behavioral foundation that highlights in particular the impact of bounded rationality cognition and social learning on this basis the paper explores the role of entrepreneurship and its cognitive underpinnings particularly with regard to the nucleus multi person firm i e a newly started entrepreneurial business if the entrepreneurial venture is successful and grows the increasing business volume requires that the firm organization also be expanded its size then sooner or later reaches a stage where the cognitive underpinnings of the firm change qualitatively in a way that forces the firm into major restructuring at this point developmental paths can branch off in quite diverse directions some of which are briefly highlighted copyright 2000 by oxford university press

mortgage valuation under optimal prepayment mortgage originators offer borrowers various combinations of points loan fees and coupon high points and low coupon or low points and high coupon in this article points are interpreted as a device serving to separate borrowers with high prepayment probabilities from those with low prepayment probabilities borrowers and lenders are treated symmetrically both are risk neutral and both have complete and frictionless access to credit markets implying that borrowers can finance points if they wish except that borrowers prepayment speeds are private knowledge equilibria are derived both when borrowers cannot prepay voluntarily and when they can article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the distribution of schumpeterian and kirznerian opportunities despite their presence in modern entrepreneurship theories empirical investigations of opportunity types are scarce we develop a 5 dimensional bipolar scale to measure the extent in which opportunities are schumpeterian or kirznerian drawing on this measure we examine the shape of the opportunity distribution in relation to the environment and the characteristics of individuals who exploit them across a sample of 181 new products introduced by high tech entrepreneurs we find that pure schumpeterian and kirznerian types are rare but rather opportunities display varying degrees of membership to one or the other type the distribution is more skewed toward schumpeterian opportunities for larger ventures with a strategic focus on future needs and operating in growing markets in contrast kirznerian opportunities are more frequently pursued by small ventures and by entrepreneurs that are young with a strategic focus on present needs and who are less innovative in their behavior

exchange rates and fundamentals new evidence from real time data abstract this paper analyses the link between economic fundamentals and exchange rates by investigating the importance of real time data we find that economic news in the united states germany and the euro area have been a driving force behind daily us dollar euro dem exchange rate developments in the period 1993 2003 the larger importance of us macroeconomic news is at least partly explained by their earlier release time compared to corresponding german and euro area news the exchange rate is also shown to respond more strongly to news in periods of large market uncertainty and when negative or large shocks occur overall the model based on real time data explains about 75 of the monthly directional changes of the us dollar euro exchange rate although it does not explain well the magnitude of the exchange rate changes

exchange rate uncertainty and foreign trade abstract this paper starts with reviewing the existing literature on exchange rate uncertainty and trade flows it then argues that potential costs of medium term uncertainty in exchange rates and competitiveness are likely to be much larger than that of exchange risk which has been the focus of the existing literature two measures of medium term exchange rate uncertainty are constructed one is a weighted function of the magnitude of past movements in nominal exchange rates and the current deviation of the exchange rate from equilibrium while the second depends on both the duration and the amplitude of misalignment from equilibrium exchange rates the empirical evidence reported in the paper suggests that when exchange rate uncertainty is defined over a medium term period it does affect adversely trade flows of the industrial countries under review with the notable exception of the united states

clarifying frank knight s discussion of the meaning of risk and uncertainty frank knight s 1921 famous distinction between risk and uncertainty has entered the jargon of economics and decision theory yet it appears to have gone unnoticed that his formulation suffers from an elementary confusion this note locates the source of the problem and proposes a reformulation that avoids it it is safe to say that frank knight 1921 is more widely quoted than read on his epony mous distinction between risk and uncertainty this of course is a fate that befalls many authorities and at least in the present case is probably not particularly serious for the knightian distinction has acquired a currency of its own that is both reasonably unambiguous and relatively widely understood certainly the convention of using the term risk to describe decision situations in which probabilities are available to guide choice and uncertainty to describe decision situations in which information is too imprecise to be summarised by probabilities is deeply ingrained in both economic theory and decision theory 1 that said and as those who are familiar with it will know the long disquisition on the meaning of risk and uncertainty that appears in chapter 7 of knight s risk uncertainty and profit is well worth reading 2 not only is his categorisation of different kinds of probability situation a good deal more subtle than the simple risk uncertainty dichotomy might imply he also has many interesting things to say about induction social laws the metaphysics of chance and the psychology of decision making under uncertainty in view of the many positive aspects of knight s discussion then not to mention how often it continues to be invoked it is particularly unfortunate that it turns out to suffer from an elementary confusion the purpose of what follows is to locate the source of this confusion and to propose a reformulation of knight s position that avoids it the hope is that readers may then be able to benefit from the many insights in knight s discussion

money supply announcements interest rates and foreign exchange abstract this paper presents a test of the joint hypothesis that money supply announcements affect the real interest rate and that changes in the real interest rate affect the exchange rate in the short run the test results are consistent with the joint hypothesis for example it is found that announcement of an unexpected jump in the money supply is accompanied by an increase in interest rates and an appreciation of the dollar if the rise in interest rates was entirely due to higher inflationary expectations the dollar should not appreciate

allocating resources in an uncertain world water management and endangered species instream flows may be essential in protecting aquatic species that are threatened or endangered an economic model of the optimal allocation of water under pure uncertainty is developed with particular attention paid to the situation when a species characterized by critical depensation is affected by instream flows we adopt the notion of pure uncertainty that frank knight and daniel ellsberg intended which applies when decision makers cannot reduce their uncertainty to a unique probability distribution following recent work by hansen sargent and others we employ robust control as a way to deal with this problem copyright 2008 oxford university press

taylor rules and the deutschmark dollar real exchange rate we explore the link between an interest rate rule for monetary policy and the behavior of the real exchange rate the interest rate rule in conjunction with some standard assumptions implies that the deviation of the real exchange rate from its steady state depends on the present value of a weighted sum of inflation and output gap differentials the weights are functions of the parameters of the interest rate rule an initial look at german data yields some support for the model

exchange economies and loss exposure experiments exchange economies were created in which individuals faced losses if people are risk seeking in the losses as predicted by prospect theory then due to the nonconvexity the competitive equilibria are all on the boundaries of the edgeworth box the experimental results are that risk seeking behavior is observed in many people and appears in markets as predicted in addition market behavior is consistent with answers to hypothetical questionnaires contrary to prospect theory risk seeking seems to diminish with experience preferences in the market setting are not labile and risk seeking preferences are not simply a result of framing effects copyright 1997 by american economic association

the neglect of society in the theory of the firm a systems theory perspective the prevailing theories of the firm acknowledge the importance of trust and loyalty but neglect such behaviour in the substance of their analyses the present paper unravels this paradox by drawing on niklas luhmann s ground breaking insight that the complexity reducing function of social systems leads them to neglect their critical environmental dependencies thereby compromising their own sustainability if the firm is conceived as a social system luhmann s theory implies that the neglect of social behaviour by the predominant theories of the firm can be explained as reflecting the neglect of society by actual firms this argument promises to not only furnish the theory of the firm with a concern for sustainability but also render it more amenable to unconventional institutions such as cooperatives and non profit organisations that help compensate for the damage inflicted by conventional firms on the social environment

2 the institutional structure of production 1 prize lecture to the memory of alfred nobel december 9 1991 this abstract was borrowed from another version of this item

factor demand under conditions of product demand and supply uncertainty the paper develops a theory of factor demand under uncertainty that encompasses neo classical factor demand and keynesian effective factor demand as special cases the model allows factor demand and output to move positively with product demand even with a constant product price this in turn permits real wages to move pro cyclically in response to product demand shocks in addition the model provides a new perspective on the adding up problem which posits that total factor payments exceed output if increasing returns to scale exist and generates positive uncertainty profits that are similar in spirit to those of frank knight

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

keynes meets markowitz the trade off between familiarity and diversification we develop a model of portfolio choice to nest the views of keynes who advocates concentration in a few familiar assets and markowitz who advocates diversification we use the concepts of ambiguity and ambiguity aversion to formalize the idea of an investor s familiarity toward assets the model shows that for any given level of expected returns the optimal portfolio depends on two quantities relative ambiguity across assets and the standard deviation of the expected return estimate for each asset if both quantities are low then the optimal portfolio consists of a mix of familiar and unfamiliar assets moreover an increase in correlation between assets causes an investor to increase concentration in familiar assets flight to familiarity alternatively if both quantities are high then the optimal portfolio contains only the familiar asset s as keynes would have advocated in the extreme case in which both quantities are very high no risky asset is held nonparticipation this paper was accepted by brad barber teck ho and terrance odean special issue editors

why stakeholder and stockholder theories are not necessarily contradictory a knightian insight the normative foundations of the investor centered model of corporate governance represented in mainstream economics by the nexus of contracts view of the firm have come under attack mainly by proponents of normative stakeholder theory we argue that the nexusof contracts view is static and limited due to its assumption of price output certainty we attempt a synthesis of the nexus of contracts and the knightian views which provides novel insights into the normative adequacy of the investor centered firm implications for scholarship and management practice follow from our discussion

species preservation versus development an experimental investigation under uncertainty the safe minimum standard sms is a decision rule to preserve renewable resources unless the social costs of doing so are intolerable while unpersuasive to many support for the sms has been advocated by some economists for settings involving irreversibility and a high degree of uncertainty the objective of this paper is to explore decision making involving species preservation versus development within an experimental laboratory setting and involving uncertainty the experimental design implements a number of prior game theoretic investigations of the sms bishop 1978 ready and bishop 1991 palmini 1999 involving insurance and lottery or combined games against nature the choices are between species preservation which possibly provides a cure for a disease or developing habitat leading to irreversible depletion econometric results from a random parameters logit model using responses from 117 participants across both u s and mexican university student samples and 9 treatment choices indicate that support for the sms varies across the type of game the imposed maximum regret condition concerning the relative magnitude of the costs of disease and net benefits of development a constructed measure of respondents risk aversion and other factors there is also strong evidence of unobservable heterogeneous preferences for preservation within our sample

wait and see strategy risk management in the internationalization process model we interpret the wait and see strategy as a decision to maintain unchanged the firm s commitments to its business network relationships to explain why firms choose a wait and see strategy we propose an extension to the relationship commitment decisions aspect of the uppsala internationalization process ip model with this development we explain that the wait and see strategy can result from a change in the levels of risk assumed in the firm and not only from the decision to adjust the risk that the firm encounters by changing commitments to its network relationships this development enhances the ability of the ip model to accommodate contextual influences on relationship commitment decisions and to explain a more complete suite of internationalization trajectories extending the theoretical core of the ip model further confirms its efficacy its application to international strategy and its potential to be developed as a general process model of strategic change

entrepreneurial enterprises endogenous ownership and the limits to firm size this paper develops a simple model of entrepreneurial enterprises the analysis differs from traditional work on entrepreneurship by analyzing why entrepreneurial activities are typically conducted in small firms owned by the entrepreneur i argue that ownership incentives are an advantage of small firms when the probability of success of an economic activity becomes small if becomes costly for large firms to commit to strong incentives and small worker owned firms emerge the paper discusses application of the theory to innovation wild cat oil exploration restaurants and retail trade professional practices salesmen and franchising

frank knight on risk uncertainty and the firm a new interpretation we attempt to interpret frank knight by taking him on his own terms among our conclusions are the following 1 knight s distinction between risk and uncertainty is not solely a distinction between insurable and uninsurable risk 2 knight s explanation for the existence of firms does not reduce to a moral hazard theory except perhaps in the broadest and least interesting sense and 3 knight s treatment of the problem of the separation of ownership from control is not as obviously wrong as commentators have made it out to be

daily changes in fed funds futures prices this paper explores the properties of daily changes in the prices for near term fed funds futures contracts the paper finds these contracts to be excellent predictors of the fed funds rate and shows that the claim of a nonzero term premium in the short horizon contracts is more sensitive to outliers than previous research appears to have recognized i find some statistically significant evidence of serial correlation in the daily changes but this accounts for only a tiny part of the 1 day movements and there is essentially zero predictability for horizons longer than 1 day settlement futures prices for each day appear to incorporate the information embodied in that day s term structure of longer horizon treasury securities previous employment growth makes a statistically significant contribution to predicting futures price changes though again this could only account for a tiny part of the daily variance the paper concludes that futures prices provide a very useful measure of the daily changes in the market s expectation of near term changes in fed policy

uncertainty risk and trust russian and american credit card markets compared the strategies that russian and american banks use to evaluate the creditworthiness of prospective credit card holders are compared drawing on knight s theory of risk and uncertainty the authors argue that uncertainty inherent in any credit transaction can only be reduced to measurable risk if there are institutions that create stability over time categorize events properly and allow for verification and accumulation of information in the united states the gradual evolution of institutions underpinning rational calculation permits the transformation of uncertainty into risk in russia however such institutions are absent and a great degree of uncertainty prevails in consumer credit using data from original fieldwork in moscow this study demonstrates that when actors face uncertainty and are unable to calculate risk they rely on trust russian banks use and extend their existing social ties or in some cases build new ties they also exploit cardholders own networks unrelated to the bank to increase their accountability through anchoring these strategies however keep the market embedded limited in size and uninsurable the authors conclude that calculation of probabilities and economic rationality in its formal sense is not an innate human ability but a social capacity that exists courtesy of institutional arrangements

knight s moral hazard theory of organization in this paper i suggest that besides knight s well recognized uncertainty explanation of the firm he had another one moral hazard is the central feature in the second largely overlooked theory i argue and attempt to document that this theory is not a chance excursion but is rather quite well developed by knight

financial decision making are women really more risk averse 40 males 33 females gain gambling gain domain loss gambling loss domain a contextual frames b abstract gambling frames studies the application of experimental methods provided stronger control of the economic environment in which decisions were made we elicited data which call into question the prevalence of stereotypic risk attitudes in financial decision making first we find that the comparative risk propensity of male and female subjects is strongly dependent on the financial decision setting second and more important we observe no gender differences in risk propensity when subjects face contextual decisions since in practice financial decisions are always contextual our results suggest that the above gender stereotype may not reflect true male and female attitudes toward financial risks i gender specific risk behavior an experimental design our experiment was designed to examine gender specific risk propensity in decisions relevant for investors and managers table 1 gives an overview of the experimental design in the main treatment we implemented risky choices in the form of investment and insurance decisions choice behavior in this treatment henceforth called the context treatment directly measures the risk behavior of male and female subjects in contextual financial decisions we also ran a control treatment in which the same risky choices were presented as abstract gambling decisions this control treatment henceforth called the abstract treatment allows us to validate the risk behavior induced by our experimental procedure in the light of the above mentioned gambling evidence in the context treatment subjects were confronted with risky choices in two different decision contexts subjects first had to complete a series of investment decisions they were then presented with a series of identical choices this time however framed as insur1 wealth effects from income differences outside the laboratory may still affect risk behavior in our experiment they are controlled for in our model 2 experimental instructions are available in german from the authors or in english from our web page www wif ethz ch publikationen htm ance decisions each investment and insurance decision incorporated a choice between a risky lottery and a certain payoff with the series of choices implemented in the two frames we elicited our subjects certainty equivalents for the same four risky lotteries l1 l2 l3 l4 in both contexts we implemented two frames in the context treatment in order to measure the risk propensity of subjects toward both perceived gains and perceived losses in both frames all possible payoffs for each decision were positive in the investment frame these payoffs were also presented as gains while in the insurance frame the same payoffs were presented as losses relative to an initial endowment therefore elicited certainty equivalents in the investment frame measure subjects risk propensities in the gain domain while certainty equivalents in the insurance frame measure risk propensity in the loss domain if in contextual financial decisions female subjects are generally more risk averse than men our results should display ceteris paribus lower female certainty equivalents in both the investment and insurance frames 3 the four lotteries l1 l2 l3 and l4 each had two possible outcomes payoffs in swiss francs 1 sfr a 0 60 and their probabilities were 30 sfr 6 10 sfr 6 30 sfr 2 10 sfr 2 30 sfr 6 10 sfr 6 and 50 sfr 2 20 sfr 2 respectively 4 experimental evidence suggests that individual risk propensity will vary systematically between the gain and loss domain daniel kahneman and amos tversky 1979 383 vol 89 no 2 gender and economic transactions 3y16 my68 mp 383 friday dec 10 08 20 am lp aer my68 figure 1 differences in mean certainty equivalents ce between male and female subjects by frame note certainty equivalents and male female differences are measured in swiss francs in the abstract treatment we confronted a different group of subjects with exactly the same risky decisions as those in the main treatment however as mentioned before all choices in this control treatment were framed as abstract gambling decisions again two frames were implemented in the gaingambling and loss gambling frames we measured the risk attitudes of subjects toward gambles in the gain and loss domain respectively subjects in both treatments were told in advance that one of their choices would determine their experimental earnings further all subjects completed a post experimental questionnaire which yielded information on each subject s disposable income this information is necessary to exclude wealth effects due to income differences outside the laboratory as an explanation of gender specific choice behavior

the contractual nature of the firm for their helpful comments i am grateful to armen a alchian yoram barzel keith leffler john s mcgee and dean worcester 1 ronald h coase the nature of the firm 4 economica 386 1937 the paper however was written several years earlier see note 3 infra 2 the social sciences citation index provides the following information breaking down the period of 1966 80 into three five year periods the total citations of coase s firm paper for each subperiod are 1966 70 17 citations 1971 75 47 citations and 1976 80 105 citations

transaction cost economics in real time this paper attempts to place the theq of the boundaries of thejirm within the context of the passage of time more precisely it resurrects and places in a modem frame some of the insights of the chsical and marshallian theories of organization the modem reinterpretation of those theories centers around the capabilities view of the jirm taken together with governance costs the capabilities ofjirm and market determine the boundaries of the jirm in the short run ovw time capabilities change as firms and markets learn which implies a kind of information or knowledge cost the cost of trandewing the firm s capability to the market w vice versa these dynamic governance costs are the costs of persuading negotiating and coordinating with and teaching others they arise in the face of change notably txchnological and organizational innovation in fit they are the costs of not having the capabilities you need when you need them dynamic transaction costs provide an explanation for vertical integration that is arguably more general than those dominant in the literature in the face of uncertainty and divwgent views ofthe future common ownership of multiple stages of production is a supwior institutional arrangement for coordinating systemic change asset specrfity is neither necessary nor suffient for this to be true dynamic governance costs may also affit internal organization it may sometimes be costly in 3 terms of persuasion negotiation and teaching to create within the firm capabilities readily available on the market indeed in cases in which systemic coordination is not 4 the issue the market may turn out to be the superior institution of coordination in e 2 genwal the capabilities view of the jirm suggests that we look atfim2 and market as alternative and sometimes overlapping institutions of learning 1 transaction costs in the long rzln and the short 9 x classical and neoclassical perspectives

valuing low probability risk survey and experimental evidence abstract this study uses a survey question and an economics experiment to elicit the value of a risk mitigation investment for 93 subjects 48 males and 45 females the responses to hypothetical questions are compared with a risk mitigation decision that has a salient outcome we find no gender differentiated responses to either the maximum accepted price in the economics experiment or hypothetical willingness to pay questions from the survey in our design the two procedures generate aggregate measures that were in close agreement however individual decisions were seldom consistent

outlines of a behavioral theory of the entrepreneurial firm abstract in a behavioral theory of the firm btf cyert and march cyert r m march j g 1963 a behavioral theory of the firm prentice hall englewood cliffs nj present a clutch of ideas for explaining the behavior of established firms within an environment of well defined markets stakeholder relationships technologies and so on in this paper we outline a behavioral theory of the entrepreneurial firm that emphasizes transforming environments rather than acting within extant ones in particular we explicate three ideas that parallel key concepts in btf 1 accumulating stakeholder commitments under goal ambiguity in line with a political conception of goals 2 achieving control as opposed to managing expectations through non predictive strategies and 3 predominately exaptive rather than adaptive orientation

ronald coase on the nature of social cost as a key to the problem of the firm thirty years ago the problem of social cost i19601 was published it transformed the field of industrial organization and greatly expanded its scope we briefly survey the state of the field before 1960 and then show some of the ways by which coase s paper changed economic thinking early developments in one way or another transaction costs have always played a role in economics economists have long been aware that in a specialized economy the transformation of factors of production into utility involves more than manufacturing and transportation they have been aware that exchanges are subject to friction that the cost of doing business is positive and that buy sell differentials exist for a long time transaction cost problems had not been a subject of analysis in walras model these costs are implicitly assumed to be zero in other models these costs are implicitly assumed to be infinite in risk uncertainty and profit 1921 knight implicitly introduced significant transaction cost considerations to the analysis of the firm his uncertainty the driving force in his theory of the firm is best understood as being like risk except that it is too costly to transact in the market see barzel 1987 the transaction cost basis of the distinction between risk and uncertainty is not explicit in knight s analysis and the controversies surrounding knight s uncertainty did not attempt an analysis of the cost of transacting nor even of the costs that are specifically related to uncertainty

heterogeneous firms and the organization of production firms in the same industry exhibit systematic differences in the organization of production and the structure of employment entrepreneurial ability is the specific scarce input that limits the size of a firm this input must be allocated to two activities coordinating production and monitoring workers able entrepreneurs can convert calendar time into larger supplies of coordinating effort that enable them to assemble large firms greater ability implies a higher shadow price of time which increases the implicit costs of monitoring a dispersion of entrepreneurial abilities generates an equilibrium size distribution of firms differences in monitoring costs affect the choice of worker productivities the design of products and the organization of production the monitoring cost hypothesis advanced in this paper goes a long way in explaining the equilibrium of an industry containing heterogeneous firms that differ in size and behavior

a theoretical analysis of optimal financing strategies for different types of capital constrained entrepreneurs in this paper we compare two alternative financing strategies that capital constrained entrepreneurs can adopt they can either wait until they raised enough money to complete their project the more conservative strategy or use limited resources to achieve some intermediate milestone before contacting large outside investors such as venture capitalists the more adventurous strategy we examine how the choice of financing strategy is affected by entrepreneurial types life style serial and pure profit maximizing entrepreneur we show that specific entrepreneurial characteristics may ultimately affect the shape of firms as they may pursue different strategies to achieve similar goals the paper generates a number of empirical predictions on security design the interplay between angel and venture capital finance and the professionalization of the venture capital market c 2006 elsevier inc all rights reserved