swap rates and credit quality this article presents a model for valuing claims subject to default by both contracting parties such as swaps and forwards with counterparties of different default risk the promised cash flows of a swap are discounted by a switching discount rate that at any given state and time is equal to the discount rate of the counterparty for whom the swap is currently out of the money that is a liability the impact of credit risk asymmetry and of netting is presented through both theory and numerical examples which include interest rate and currency swaps this article presents a model for valuing claims subject to default by both contracting parties such as swaps and forwards this extends the valuation model for defaultable claims proposed by duffie and singleton 1994 to cases in which the two counterparties have asymmetric default risk the extension permits a reexamination of the impact of credit risk on swap rates while the valuation model applies to all forms of contingent claims in which both contracting parties are at risk to default such as forward contracts we focus on swaps for purposes of illustration for example consider a 5 year interest rate swap between a given party paying a floating rate such as the london inter bank offered rate libor and another counterparty paying a fixed rate replacing the given fixed rate counterparty with a lower quality counterparty whose bond yields are 100 basis points higher increases the swap rate by roughly 1 basis point using our model and typical parameters for libor rate processes this credit impact on swap rates is approximately linear within the range of normally encountered credit quality for a 5 year currency swap given a foreign exchange rate with 15 percent volatility our model shows the impact of credit risk asymmetry on the market swap rate to be roughly 10 fold greater than that for interest rate swaps that is approximately 10 basis points in swap rate per 100 basis points in bond yield credit spread the main goal of this article is to provide a simple and theoretically consistent model allowing such computations

the international penetration of ibusiness firms network effects liabilities of outsidership and country clout the burgeoning of ibusiness firms in the modern digital economy challenges the received internationalization theory given that ibusinesses such as social networking sites create value by providing a digital platform for users to interact with one another we employ a user network perspective and externalization logic suggesting that ibusinesses internationalization process depends critically on users collective interactions instead of being solely driven by firms market commitments as noted by the uppsala model however ibusinesses may suffer from liabilities of outsidership due to the boundedness of international network effects drawing on social network theory we demonstrate that such liabilities can be mitigated by first diffusing the ibusiness platform in countries with higher clout our analysis using a unique dataset of mobile ibusiness platforms finds empirical support for the hypotheses we discuss theoretical implications for the network approach of the uppsala model in the digital era

the default risk of swaps we characterize the exchange of financial claims from risky swaps these transfers are among three groups shareholders debtholders and the swap counterparty from this analysis we derive equilibrium swap rates and relate them to debt market spreads we then show that equilibrium swaps in perfect markets transfer wealth from shareholders to debtholders in a simplified case we obtain closed form solutions for the value of the default risk in the swap for interest rate swaps we obtain numerical solutions for the equilibrium swap rate including default risk we compare these with equilibrium debt market default risk spreads swaps have been one of the most explosive and important innovations in international capital markets in the last 10 years in its simplest form a swap consists of an agreement hetween two entities called counterparties to exchange in the future two streams of cash flows in a currency swap these streams of cash flows consist of a stream of interest and principal payments in one cvtrrency exchanged for a stream of interest and principal payments of the same maturity in another currency in an interest rate swap they consist of streams of interest payments of one type fixed or floating exchanged for streams of interest payments of the other type in the same currency the two types of swap are shown in appendix 1 the economic importance of swap transactions is the fact that they can he comhined with deht issues to change the nature of the liahility for the borrower the sum of a hond issue and a currency swap gives a net liability stream which is equivalent to transforming the bond liability into a different currency a floating rate note combined with an interest rate swap results in a liability equivalent to fixed rate debt two issues have dominated the academic literature on swaps the first concerns the reasons for their use arbitrage of imperfections in capital markets was the original cause of their appearance price and henderson 1984 turnbull 1987 shows that lowering borrowing costs by a synthetic transaction involving a swap is not possible in a complete integrated capital market subsequent authors wall and pringle 1988 arak estrella groodman and silver 1988 smith smithson and wakeman 1987 observe

call options and the risk of underlying securities abstract merton 1973 in his seminal article theory of rational option pricing showed that the rationally determined price of a call option is a non decreasing function of the riskness of its associated common stock in deriving his results merton made restrictive assumptions about the way the market prices payoff distributions and used the rothschild stiglitz 1970 measure to compare the riskiness of securities i show by means of an example that the merton result will not in general be true i then derive a sufficient condition for the option on one stock to have higher market value than the option on another stock when both the stocks have the same price and explain why the merton result is valid in the black scholes environment

the price setting behavior of banks an analysis of open end leverage certificates on the german market abstract this paper presents the first analysis of open end leverage certificates on the german market the major innovations of these certificates are twofold first issuers announce a price setting formula according to which they are willing to buy and sell the certificates over time second the product s lifetime is potentially endless our main findings are that the price setting formula is i designed to strongly favor the issuer and ii is consistent with the main outcome of the life cycle hypothesis for structured financial products stoimenov p a wilkens s 2005 are structured products fairly priced an analysis of the german market for equity linked instruments journal of banking and finance 29 2971 2993 iii this holds for different product features and also in the presence of issuers credit risk and jump risk in the underlying

the pricing of leverage products an empirical investigation of the german market for long and short stock index certificates abstract this paper describes the first thorough empirical analysis of the pricing of leverage products in the german retail market these mainly exchange traded products with an impressive trading volume are frequently advertised as long and short futures contracts although they are theoretically equivalent to one sided barrier options issuers daily quotes for stock index products are compared to i theoretical values derived from the prices of eurex options and to ii boundaries obtained from semi static superhedging strategies for the vast majority of products bid and ask quotes significantly exceed both theoretical values and upper hedging boundaries thus providing almost risk free profits for the issuers

are structured products fairly priced an analysis of the german market for equity linked instruments abstract based on a unique data set this paper examines the pricing of equity linked structured products in the german market the daily closing prices of a large variety of structured products are compared to theoretical values derived from the prices of options traded on the eurex european exchange for the majority of products the study reveals large implicit premiums charged by the issuing banks in the primary market a set of driving factors behind the issuers pricing policies is identified for example underlying and type of implicit derivative s for the secondary market the product life cycle is found to be an important pricing parameter

the intersection of market and credit risk abstract economic theory tells us that market and credit risks are intrinsically related to each other and not separable we describe the two main approaches to pricing credit risky instruments the structural approach and the reduced form approach it is argued that the standard approaches to credit risk management creditmetrics creditrisk and kmv are of limited value when applied to portfolios of interest rate sensitive instruments and in measuring market and credit risk empirically returns on high yield bonds have a higher correlation with equity index returns and a lower correlation with treasury bond index returns than do low yield bonds also macro economic variables appear to influence the aggregate rate of business failures the creditmetrics creditrisk and kmv methodologies cannot reproduce these empirical observations given their constant interest rate assumption however we can incorporate these empirical observations into the reduced form of jarrow and turnbull 1995b drawing the analogy risk 5 63 70 model here default probabilities are correlated due to their dependence on common economic factors default risk and recovery rate uncertainty may not be the sole determinants of the credit spread we show how to incorporate a convenience yield as one of the determinants of the credit spread for credit risk management the time horizon is typically one year or longer this has two important implications since the standard approximations do not apply over a one year horizon first we must use pricing models for risk management some practitioners have taken a different approach than academics in the pricing of credit risky bonds in the event of default a bond holder is legally entitled to accrued interest plus principal we discuss the implications of this fact for pricing second it is necessary to keep track of two probability measures the martingale probability for pricing and the natural probability for value at risk we discuss the benefits of keeping track of these two measures

understanding the structural characteristics of a firm s whole buyer supplier network and its impact on international business performance building on the network theory and the concept of organizational ambidexterity we investigate the impact of structural characteristics of a firm s whole buyer supplier network network density betweenness centralization and average clustering coefficient on its international business ib performance we also explore the moderating roles of average path length and pagerank centrality using a manually collected dataset and a robust empirical methodology we find that while network density is negatively related betweenness centralization and average clustering coefficient have an inverted u shape and a u shaped relationship with ib performance respectively we also find significant moderation effects and in the process we show the economic importance of firms whole buyer supplier network to their ib performance we contribute to the international business and whole buyer supplier network literature

extending the internationalization process model increases and decreases of mne commitment in emerging economies the internationalization process model suggests that firms internationalize by building positions in foreign markets and networks following iterative cycles of learning and changes in commitment however as subsidiaries evolve commitments may be decreased as well as increased a phenomenon that has rarely been studied moreover it remains an open question why strategic intentions at the outset of an investment project differ from the actual operations established we address these questions by extending the model and combining it with mintzberg and waters framework of strategy formation specifically we suggest that commitment decisions correspond to statements of intended strategy while network positions correspond to realized strategies the processes of learning opportunity creation and trust building triggered by commitment decisions are however moderated by institutional influences that lead to divergences between realized and intended strategies we test propositions derived from this framework on a survey data set of subsidiaries of multinational enterprises in hungary lithuania and poland and find that institutional voids and institutional uncertainty affect subsidiary strategy implementation but in opposing directions under high institutional uncertainty investors prefer low commitment but flexible modes that enable later commitment increases whereas institutional voids increase up front information search and adaptation costs that reduce the likelihood of early post entry adjustments our analysis reinforces the need for more differentiated theoretical analyses of how institutions affect business strategies over time

the mismeasurement of risk investors typically measure risk as the probability of a given loss or the amount that can be lost with a given probability at the end of their investment horizons this view of risk considers only the final result but investors perceive or should perceive risk differently they are affected by exposure to loss throughout the investment period not just at its conclusion we introduce two new ways of measuring risk within horizon probability of loss and continuous value at risk that reveal that exposure to loss is substantially greater than investors normally assume

duration for bonds with default risk abstract does approximating duration estimates by ignoring default risk lead to error in the two major duration applications measuring interest rate price elasticity and immunization we derive a general expression for duration in the presence of default risk based on jonkhart s term structure model on the term structure of interest rates and the risk of default journal of banking and finance 3 253 262 1979 extended to encompass risk aversion the model includes terms for default probabilities and default payoffs in each period as well as for a delay between the occurrence of default and the final default payoff our main conclusion is that practical duration applications involving bonds with default risk must employ duration measures adjusted for default risk

a lattice framework for option pricing with two state variables a procedure is developed for the valuation of options when there are two underlying state variables the approach involves an extension of the lattice binomial approach developed by cox ross and rubinstein to value options on a single asset details are given on how the jump probabilities and jump amplitudes may be obtained when there are two state variables this procedure can be used to price any contingent claim whose payoff is a piece wise linear function of two underlying state variables provided these two variables have a bivariate lognormal distribution the accuracy of the method is illustrated by valuing options on the maximum and minimum of two assets and comparing the results for cases in which an exact solution has been obtained for european options one advantage of the lattice approach is that it handles the early exercise feature of american options in addition it should be possible to use this approach to value a number of financial instruments that have been created in recent years

pricing black scholes options with correlated credit risk abstract this paper presents an improved method of pricing vulnerable black scholes options under assumptions which are appropriate in many business situations an analytic pricing formula is derived which allows not only for correlation between the option s underlying asset and the credit risk of the counterparty but also for the option writer to have other liabilities further the proportion of nominal claims paid out in default is endogenous to the model and is based on the terminal value of the assets of the counterparty and the amount of other equally ranking claims numerical examples compare the results of this model with those of other pricing formulas based on alternative assumptions and illustrate how the model can be calibrated using market data

a review of research on the growth of multinational enterprises a penrosean lens abstract we provide a comprehensive review of the growth of multinational enterprises mnes based on a quarter century 25 years of scholarly international business publications we synthesize research insights on the determinants of the growth of mnes through the lens of penrose s theory of firm growth which is the most influential theoretical perspective on firm growth the review takes stock of the research findings on the facilitators constraints and the trajectory of growth of mnes and elaborates on the commonalities and differences between research on the growth of mnes that draws on penrose s theory and research that does not this comparison highlights the opportunity to build an internally coherent theory of the growth of mnes that is a theory that connects what an mne is to what determines an mne s growth it also indicates that past research placed a strong emphasis on exogenous factors e g cross country distances as key constraints on growth even though the penrosean lens suggests a close consideration of endogenous factors that drive international growth as well as endogenizing the ostensibly exogenous growth determinants the review highlights the importance of firm specific managerial knowledge and learning which shapes the direction of the growth of mnes and ensures its administrative coherence

meta paradigm change and the theory of the firm many seemingly unrelated debates on the theory of the firm are in fact part of a single deeper transformation of the social sciences as the foundational assumptions of 20th century social science have slowly been shown by science to be false new sub paradigms have emerged which cumulatively drop i theoretical assumptions about markets to explain firms ii epistemological assumptions about knowledge to explain diversity and iii metaphysical assumptions about causality to explain technical change debates occur across each of these levels

default risk and the effective duration of bonds default risk creates difficulties for fixed income portfolio managers in measuring a portfolio s exposure to interest rate risk it also heightens the anxiety of traders and arbitragers who are hedging their investments and it compounds financial institutions problem of matching assets and liabilities the consensus among researchers is that credit risk shortens the effective duration of corporate bonds this paper provides estimates of how much shorter durations become because of credit risk these estimates are based on observable data and easily estimated bond pricing parameters because the duration measures are taken with respect to movements in a common reference rate of interest they can be used with greater confidence than can other measures when attempting to compute the duration of a portfolio of bonds subject to varying degrees of credit risk

credit risk measurement developments over the last 20 years abstract this paper traces developments in the credit risk measurement literature over the last 20 years the paper is essentially divided into two parts in the first part the evolution of the literature on the credit risk measurement of individual loans and portfolios of loans is traced by way of reference to articles appearing in relevant issues of the journal of banking and finance and other publications in the second part a new approach built around a mortality risk framework to measuring the risk and returns on loans and bonds is presented this model is shown to offer some promise in analyzing the risk return structures of portfolios of credit risk exposed debt instruments

entry mode deviation a behavioral approach to internalization theory we explore when and why decision makers choose international entry modes e g hierarchies or markets that deviate from internalization theory s predictions by applying a cognitive perspective on entry mode decision making we propose that the performance of prior international activities influences decision makers behavior in different ways than assumed in internalization theory more specifically due to a representativeness bias underperforming overperforming past ventures influence the decision to change continue using the previous entry mode choice which may result in an entry mode deviation in addition the propensity to deviate from theoretical predictions is stronger when the experience is recent and or salient due to an availability bias in conclusion we argue that internalization theory can benefit from incorporating more systematically important behavioral assumptions on how firms enter international markets in so doing we contribute to the recent conversation on how variations in human behavior influence internalization theory

evolutionary theorizing in economics modern economic analysis oriented toward understanding the workings of economies that make extensive use of markets came into existence with three guiding questions all central in adam smith s 1776 1937 the wealth of nations one question concerned order without any central authority guiding and commanding action how is economic activity coordinated the second question was the challenge of explaining the prevailing constellation of prices inputs and outputs what explains the price of labor and the rent of land the third question addressed the processes of economic progress or development smith and other early economists clearly were impressed by the inventiveness the energy and the growing productivity generated by the evolving market economy how to understand its dynamics the first two questions have defined continuing central concerns of the discipline of economics since they first were posed over two centuries ago when not posed in the context of an economy that is understood as in the process of developing they seem to pull the focus of theorizing toward equilibrium conditions the third question concerned with the processes driving economic progress pulls the theorizing toward an evolutionary orientation the question of economic development has waxed and waned in centrality to the discipline as has the importance of evolutionary theorizing during the first several decades of the twentieth century evolutionary thinking and language was widespread in economics but as one contrasts the economic

the value of embedded real options evidence from consumer automobile lease contracts under the common assumption of constant interest rates we show that penalties for early termination of a lease are often structured in such a way that the cancellation option embedded in consumer automotive leases has little value furthermore our estimates drawn from a sample of three popular car models over 1990 to 2000 indicate that the stand alone value of the lease end purchase option is on average about 16 of the market value of underlying used vehicles or about 1 462 per contract finally we examine the sensitivity of our option value estimates to model parameters and default risk recent years have witnessed a dramatic growth in the leasing of automobiles for instance overall industry sales data indicate that about a third of the new vehicles and trucks sold in the united states are leased hendel and lizzeri 2002 and miller 1995 and the federal reserve board survey of family finances reports that the use of leased vehicles by individuals nonbusiness consumers has risen from 2 9 to 5 8 over the 1992 to 2001 period azicorbe kennickell and moore 2003 consumer automobile lease contracts for new cars often include two embedded options that are not associated with a typical debt contract the first is a cancellation option that allows the lessee to terminate the lease early the second is a european call option which gives the lessee the right but not the obligation to purchase the leased used vehicle at the scheduled termination of the lease at a predetermined exercise price both of these options are simple examples of real options because the asset underlying these options is a used car that is a real asset however these options constitute a special case of real options since they are embedded in the lease contract which is a financial credit instrument theoretical analyses of lease contracts show that the cancellation option is quite valuable schallheim and mcconnell 1985 with respect to the purchase option hendel and lizzeri 2002 argue that they can play an important role in

the role of business models in firm internationalization an exploration of european electricity firms in the context of the energy transition this article ties in directly with recently intensified interest in business models in international business ib using the energy transition as empirical context to explore their relevance in firm internationalization the global energy transition presents a challenge for almost all industries but some face specific difficulties particularly important from an ib perspective we study a set of european firms that used to operate in a highly regulated context with partial state ownership until government directed market liberalization started to allow further competition and internationalization existing firms were prompted to adapt their business models to these changes with new ventures entering the market to reap opportunities with novel energy related technologies and business models linking insights from strategic management to the ib literature we conceptualize business model related specific advantages bmsas and explore the role of bmsas in the internationalization of the firms in our sample we also uncover barriers to bmsa recombination in potential host countries consider bmsa location boundedness and discuss implications for firms international expansion by presenting a new framework consequences for the energy transition and the actors already involved and in directly confronted with it are explicated while outlining promising areas for further research building on the insights and limitations of our study

default risk yield spreads and time to maturity this paper extends the default model of yield spreads for bonds by showing that in gen eral they are a complex function of maturity and in particular are not always monotoni cally increasing contrary to what one traditional view suggests our results may help explain the apparently conflicting empirical results found in the literature

moving to opportunity in boston early results of a randomized mobility experiment this paper examines the short run impacts of a change in residential neighborhood on the well being of low income families using evidence from a program in which eligibility for a housing voucher was determined by random lottery we examine the experiences of households at the boston site of moving to opportunity mto a demonstration program in five cities families in high poverty public housing projects applied to mto and were assigned by lottery to one of three groups experimental offered mobility counseling and a section 8 subsidy valid only in a census tract with a poverty rate of less than 10 percent section 8 comparison offered a geographically unrestricted section 8 subsidy or control offered no new assistance but continued to be eligible for public housing our quantitative analyses of program impacts uses data on 540 families from a baseline survey at program enrollment a follow up survey administered l to 3 5 years after random assignment and state administrative data on earnings and welfare receipt 48 percent of the experimental group and 62 percent of the section 8 comparison group moved through the mto program one to three years after program entry families in both treatment groups were more likely to be residing in neighborhoods with low poverty rates and high education levels than were families in the control group however while members of the experimental group were much more likely to be residing in suburban communities than were those in the section 8 group the lower program take up rate among the experimental group resulted in more families remaining in the most distressed communities households in both treatment groups experienced improvements in multiple measures of well being relative to the control group including increased safety improved health among household heads and fewer behavior problems among boys experimental group children were also less likely to be a victim of a personal crime to be injured or to experience an asthma attack there are no significant impacts of either mto treatment on the employment earnings or welfare receipt of household heads in the first three years after random assignment

the globalization of swedish mnes empirical evidence and theoretical explanations we define globalization as the geographical dispersion of multinational enterprises mnes value chain in combination with increased inter regional coordination and use detailed firm level data to show that 12 of sweden s 17 largest manufacturing companies indeed are global by developing a globalization process model we theoretically argue in contrast to much of the existing literature that globalization may evolve to a more general phenomenon the globalization process is tortuous as mnes have to develop dynamic capabilities which make them gradually more competitive and able to cope with varying institutional contexts empirical testing on globalization of mnes originating from other home countries is suggested

pricing vulnerable european options when the option s payoff can increase the risk of financial distress abstract we extend the results of johnson and stulz johnson h stulz r 1987 journal of finance 42 267 280 and klein klein p c 1996 journal of banking and finance 20 1211 1229 for valuing european options subject to the risk of financial distress on the part of the option writer our model incorporates a default boundary which depends on the potential liability of the written option as in johnson and stulz 1987 and also on the option writer s other liabilities as in klein 1996 as in both of these papers the pay out ratio in the event of financial distress is linked to the assets of the option writer and the correlation between the assets of the option writer and the asset underlying the option is explicitly modeled although no analytical solution is available we illustrate the importance of this approach through examples which are evaluated numerically we also develop an approximate analytical solution which works well in most situations

taxes default risk and yield spreads this paper develops a model of bond prices and yield spreads that incorporates the effect of both taxes and differences in default probabilities the tax loss consequences of default are recognized traditionally tax free municipal bond yields have been viewed as linearly related to taxable yields with a slope coefficient equal to one minus the tax rate and the intercept representing differences in default risk while our model supports the linearity assumption it implies that the slope and intercept are both functions of both the break even tax rate and the default probability ies clientele effects among both municipal and taxable bonds are demonstrated finally the implied marginal tax rates and the implied default probabilities are estimated for different categories of municipal bonds students of financial markets cannot help but be impressed by the number of new financial instruments that have been introduced successfully in recent years the fixed income market has been particularly innovative as bonds carrying a whole host of specific features have been successfully marketed bonds with small or zero coupons variable coupon rates or detachable warrants are three examples from among an expanding list of such features not surprisingly there has developed a large and expanding literature attempting to explain the rate spreads between different fixed income securities this literature has evolved much as one would expect early empirical work was in general not well founded in theory and was not based on an underlying expected return price model later empirical research has tended to be more careful in its specification of factors affecting yield spreads and as a consequence better founded in valuation

global platforms and ecosystems implications for international business theories the emergence of digital platforms and ecosystems dpe as a venue for value creation and capture for multinational enterprises holds considerable implications for the theory and practice of international business in this paper we articulate these implications by considering the dual perspectives of cross border platforms and ecosystems as a venue for multifaceted innovation and as multisided marketplace and focusing on three overarching themes at the intersection of dpes and international business that is dpes as affording new ways of internationalization as facilitating new ways of building knowledge and relationships and as enabling new ways of creating and delivering value to global customers we explain specific dpe related concepts and constructs that underlie these themes and discuss how they could be incorporated into existing ib theories in ways that would enhance their richness and continued relevance as well as their ability to better predict a multitude of emerging ib phenomena

a dynamic capabilities based entrepreneurial theory of the multinational enterprise this paper develops a dynamic capabilities based theory of the multinational enterprise mne it first reviews scholarship on the mne with a focus on what has come to be known as internalization theory one prong of this theory develops contractual transaction cost informed governance perspectives and another develops technology transfer and capabilities perspectives in this paper it is suggested that the latter has been somewhat neglected however if fully integrated as part of a more complete approach it can buttress transaction cost governance issues and expand the range of phenomena that can be explained in this more integrated framework dynamic capabilities coupled with good strategy are seen as necessary to sustain superior enterprise performance especially in fast moving global environments entrepreneurial management and transformational leadership are incorporated into a capabilities theory of the mne the framework is then used to explain how strategy and dynamic capabilities together determine firm level sustained competitive advantage in global environments it is suggested that this framework complements contract based perspectives on the mne and can help integrate international management and international business perspectives

term structure effects on default risk premia and the relationship of default risky tax exempt yields to risk free taxable yields a note abstract the behavior of the default risk premium on bonds has caught the attention of many researchers some researchers have analyzed how default risk premia may vary with maturity it has been suggested that default risk premia are independent of maturity however recent research by rodriguez 1988 shows this to not hold for nonpar taxable bonds this research shows that the shape of the underlying term structure affects default risk premia for even par bonds in a systematic way furthermore the maturity dependent variation in equilibrium tax rates has a strong impact upon default risk premia behavior where equilibrium tax rates are derived from comparisons of taxable and tax exempt bonds the inclusion of the shape of the underlying term structure also has very important implications for the relation between taxexempt yields and taxable yields the slope and intercept terms of the relation between taxexempt and taxable yields are clearly dependent upon maturity a fact which has not been recognized before

income inequality and income segregation this article investigates how the growth in income inequality from 1970 to 2000 affected patterns of income segregation along three dimensions the spatial segregation of poverty and affluence race specific patterns of income segregation and the geographic scale of income segregation the evidence reveals a robust relationship between income inequality and income segregation an effect that is larger for black families than for white families in addition income inequality affects income segregation primarily through its effect on the large scale spatial segregation of affluence rather than by affecting the spatial segregation of poverty or by altering small scale patterns of income segregation

on measuring credit risks of derivative instruments abstract this paper critically reviews current practices for measuring credit risks of derivative instruments it argues that there are two major problems with the standard measurement approach first it uses models of the stoachstic behavior of finanacial variables while ignoring both their inherent oversimplification and the uncertainty in their parameters second it ignores the correlations among exposures in derivative intruments and the probabilities of countrypartly default this paper deomonstrates that these practices can produce large errors in the estimation of distribution of both future credit exposures and future credit losses

the uppsala model networks and micro foundations in our award winning 2009 article we further developed the model that we originally presented in 1977 we observed that firms form relationships and that those relationships become networks and thus in the end the business macro environment consists of networks of relationships between firms those relationships have far reaching consequences especially in terms of opportunity recognition and development since 2009 we have applied the uppsala model to a number of different ib issues most notably the process of globalization which we believe is best understood as a driver of the evolution of the multinational business enterprise mbe we suggest that our model can still be improved further by recognizing the general psychological characteristics of managers for instance what makes them tend to shy away from radical change and to prefer instead an incremental approach what does this mean for internationalization generally we think that the closer our assumptions are to reality the better the resulting model

dynamic capabilities what are they this paper focuses on dynamic capabilities and more generally the resource based view of the firm we argue that dynamic capabilities are a set of specific and identifiable processes such as product development strategic decision making and alliancing they are neither vague nor tautological although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence they have significant commonalities across firms popularly termed best practice this suggests that they are more homogeneous fungible equifinal and substitutable than is usually assumed in moderately dynamic markets dynamic capabilities resemble the traditional conception of routines they are detailed analytic stable processes with predictable outcomes in contrast in high velocity markets they are simple highly experiential and fragile processes with unpredictable outcomes finally well known learning mechanisms guide the evolution of dynamic capabilities in moderately dynamic markets the evolutionary emphasis is on variation in high velocity markets it is on selection at the level of rbv we conclude that traditional rbv misidentifies the locus of long term competitive advantage in dynamic markets overemphasizes the strategic logic of leverage and reaches a boundary condition in high velocity markets copyright 2000 john wiley sons ltd

adapting and sustaining operations in weak institutional environments a business ecosystem assessment of a chinese mne in central africa multinational enterprises mnes sometimes pursue opportunities in largely uncharted distinctive institutional environments how do these firms sustain operations in such settings we explore how mnes tailor and maintain operations in institutionally weak precarious and challenging host country environments such as those devastated by conflicts we draw on the business ecosystem framework and analyze a qualitative longitudinal case study of a chinese state owned mne that entered and developed its operations in the democratic republic of congo drc in central africa our findings indicate that after entry the mne sustained its operations in the drc by engaging in collective actions and coevolving with key stakeholders within its business ecosystem these stakeholders included the home and host governments state owned enterprises privately owned enterprises and local communities our qualitative data further suggest that the mne s business ecosystem evolved through three stages exploring establishing and embedding and that within this ecosystem the key stakeholders also coevolved with the mne by adopting new roles over time

the theoretical evolution and use of the uppsala model of internationalization in the international business ecosystem the uppsala model typically viewed as an internationalization process model an internationalization stages model or a sequential internationalization model has served as a theoretical underpinning in the international business literature since johanson and vahlne s j int bus stud 8 1 23 32 1977 article incorporated thoughts by researchers at uppsala university in one all encompassing model major updates to the model were published in 2009 and 2017 by the original authors our work examines what has now become the time tested and decade award winning 2009 version of the uppsala model relative to the original model in 1977 we also provide an outlook for international business research within the scope of the 2017 version of the model this evaluation and dive across times into the nuances of the uppsala model capture aspects of the model s theoretical and empirical power as well as its limitations within today s international business ecosystem the international business ecosystem is defined as the organisms of the business world including stakeholders organizations and countries involved in exchanges production business functions and cross border trade through both marketplace competition and cooperation in the process we push the theoretical boundaries of the model and provide a unique connection to marketing thought

psychic distance and performance of mncs during marketing crises when multinational corporations face foreign marketing crises the psychic distance between the home and host country represents a distinct challenge this paper examines the curvilinear relationship between psychic distance and firm performance during marketing crises and the moderating role of marketing capabilities we test our hypotheses using an event study on a panel dataset of 217 firms based in 19 countries facing crises in 41 host countries the results show that 1 marketing crises are most harmful when the host country is either very close or far away and 2 firms can mitigate this effect with marketing capabilities

internationalization as an evolutionary process the johanson and vahlne model of internationalization has been the main foundation of process research in international business since 1977 this model also known as the uppsala model provides a useful general framework for interpreting firm level processes increasing and occasionally decreasing resources committed to international operations however the model does not provide theoretical explanations of non linear and discontinuous dynamics of the process over time nor does it offer testable propositions we focus on the longitudinal dimension of internationalization specifically path breaking commitments that increase a firm s exposure to risk on this basis we examine the idea that the ip model represents an evolutionary process by emphasizing the role of novelty and introducing selection mechanisms we explain non linear and discontinuous dynamics of internationalization processes path breaking resource commitments create novelty and deviate from a gradual path of growth as firms take higher risks and hence face more intensive selection pressures in consequence firms are more likely to experience outstanding performance but are also more likely to experience failure this variation of outcomes is moderated by the resources a firm can draw upon in its ecosystem and by the volatility of its environment based on these ideas we develop testable propositions to advance the internationalization process model

limits to international entry mode learning in smes despite extensive research the literature is unclear about the circumstances under which a firm learns from its past foreign entry modes and how this experiential learning is related to future mode choices building on the internationalization process ip model and the idea that some experiential learning is location bound while other learning is non location bound we develop and test theory to explain how experiential learning about foreign operation modes and markets impact future mode choices in new foreign markets overall we argue that mode based experiential learning is limited through the repeated use of a specific operation mode firms develop routines and processes that are non location bound and can be replicated in new foreign markets leading to the use of this same mode type in new locations but when complemented by experiential learning about a target market region firms opt for operation modes with greater commitment in new foreign markets drawing on a sample of german smes and examining four different types of entry modes we find some support however we also identify a number of notable exceptions to our theory in this way we help provide unique new insights informing future ip model experiential learning and international entry mode research

default risk in a market model abstract this paper presents a theoretical model of default risk in the context of the market model approach to interest rate dynamics we propose a model for finite interval interest rates such as libor which explicitly takes into account the possibility of default through the influence of a point process with deterministic intensity we relate the defaultable interest rate to the non defaultable interest rate and to the credit risk characteristics default intensity and recovery rate we find that the spread between defaultable and non defaultable rate depends on the non defaultable rate even when the default intensity is deterministic prices of a cap on the defaultable rate and of a credit spread option are derived we consider swaps with unilateral and bilateral default risk and derive the fair fixed swap rate in both cases under the condition that both counterparties are of the same risk class we show that for a monotonously increasing term structure the swap rate for a defaultable swap will lie below the swap rate for a swap without default risk

the causal effect of family income on child health in the uk recent studies examining the effect of family income on child health have been unable to account for the endogeneity of income using data from a british cohort study we address this gap by exploiting exogenous variation in local labour market characteristics to instrument for family income we estimate the causal effect of family income on different measures of child health and explore the role of potential transmission mechanisms we find that income has a very small but significant causal effect on subjective child health and no significant effect on chronic health conditions apart from respiratory illnesses using the panel structure we show that the timing of income does not matter for young children moreover our results provide further evidence that parental health does not drive a spurious relationship between family income and child health our study implies that financial transfers are unlikely to deliver substantial improvements in child health

the casino model of internationalization an alternative uppsala paradigm forty years after the publication of the original uppsala model we revisit the empirical observations that inspired its conceptual development the empirical evidence we suggest invites the formulation of an alternative and complementary model of the internationalization process of the firm one that we have named the casino model of internationalization the casino model uncovers a number of new research issues pertaining to internationalization and to the nature of strategic decision making under conditions of environmental uncertainty and partial ignorance

internationalization through exaptation the role of domestic geographical dispersion in the internationalization process we introduce the notion of exaptation to internationalization theory a process in which a capability is re used for a purpose and in a context different than its historical purpose and context specifically we examine which domestic capabilities may be redeployed when organizations engage in cross border m as for the first time we suggest that organizations exapt re use coordination and control capabilities initially developed to manage domestic geographical dispersion to acquire and integrate external resources across borders by analyzing 693 indian business groups over a decade we add to the recent effort to frame the internationalization process within evolutionary theory

the underdetermined knowledge based theory of the mnc in this note we revisit two core propositions of the knowledge based view of the firm found in the seminal work of kogut and zander 1 that multinational corporations mncs exist because transfers and re combinations of knowledge occur more efficiently inside mncs than between mncs and third parties and 2 that the threat of opportunism is not necessary although it may be sufficient to explain the existence of the mnc their knowledge based view shifted the conceptualization of the firm from an institution arising from market failure and transaction costs economizing to a progeny of superior knowledge governance we question these conclusions arguing that firms are but one of the many types of epistemic communities possessing and nurturing procedural norms identity and the cognitive linguistic and reflexive attributes conducive to efficient exchange and re combination of knowledge among their members important insights may be gained by applying the concept of epistemic communities implicit in the knowledge based perspective beyond firm level hierarchies journal of international business studies 2011 42 427 435

the tax dis advantage of a firm issuing options on its own stock abstract it is common for firms to issue or purchase options on the firm s own stock examples include convertible bonds warrants call options as employee compensation and the sale of put options as part of share repurchase programs this paper shows that option positions with implicit borrowing such as put sales and call purchases are tax disadvantaged relative to the equivalent synthetic option with explicit borrowing conversely option positions with implicit lending such as warrants are tax advantaged i also show that firms are better off from a tax perspective issuing bifurcated convertible bonds bonds plus warrants rather than an otherwise equivalent standard convertible

the use of the control variate technique in option pricing this paper presents a generalized version of the lattice approach to pricing options it shows how the control variate technique can produce significant improvements in the effi ciency ofthe approach the control variate technique is illustrated using american puts on dividend and nondividend paying stocks

the effects of housing and neighborhood conditions on child mortality in this paper we estimate the causal effects on child mortality from moving into less distressed neighborhood environments we match mortality data covering the period from 1997 to 2009 with information on every child in public housing that applied for a housing voucher in chicago in 1997 n 11 680 families were randomly assigned to the voucher wait list and only some families were offered vouchers the odds ratio for the effects of being offered a housing voucher on overall mortality rates is equal to 1 13 for all children 95 ci 0 73 1 70 1 34 for boys 95 ci 0 85 2 05 and 0 21 for girls 95 ci 0 01 1 04

innovation and internationalisation processes of firms with new to the world technologies while there has been considerable research into the internationalisation of high technology firms it mostly assumes that these firms are pursuing global opportunities for technologies which are ready to be sold this assumption does not hold for firms with new to the world technologies still under development we investigate the internationalisation patterns of such firms by means of a qualitative case study our findings show the internationalisation patterns of the case firms to be uneven and discontinuous in nature we attribute these patterns to the dialectical tensions which decision makers confront between expanding internationally and developing their technologies the nature and duration of the uncertainty inherent to bringing new to the world technologies to global markets explains why tensions between innovation and internationalisation dominated rather than synergies in these conditions of fundamental uncertainty the case firms were unable to benefit from the positive self reinforcing learning mechanism that underlies both the uppsala internationalisation process model and the accelerated early and rapid internationalisation postulate instead the dialectical process model which we develop recognises the socio technical nature of technology the impact of fundamental uncertainty and the need to account for nonlinearity and interdependencies in the internationalisation process

options on the minimum or the maximum of two risky assets analysis and applications this paper provides analytical formulas for european put and call options on the minimum or the maximum of two risky assets the properties of these formulas are discussed in detail options on the minimum or the maximum of two risky assets are useful to price a wide variety of contingent claims of interest to financial economists applications discussed in this paper include the valuation of foreign currency debt option bonds compensation plans risk sharing contracts secured debt and growth opportunities involving mutually exclusive investments

a two factor hazard rate model for pricing risky debt and the term structure of credit spreads this paper proposes a two factor hazard rate model in closed form to price risky debt the likelihood of default is captured by the firm s non interest sensitive assets and defaultfree interest rates the distinguishing features of the model are threefold first the impact of capital structure changes on credit spreads can be analyzed second the model allows stochastic interest rates to impact current asset values as well as their evolution finally the proposed model is in closed form enabling us to undertake comparative statics analysis compute parameter deltas of the model calibrate empirical credit spreads and determine hedge positions credit spreads generated by our model are consistent with empirical observations

an integrated pricing model for defaultable loans and bonds abstract in recent years credit risk has played a key role in risk management issues practitioners academics and regulators have been fully involved in the process of developing studying and analysing credit risk models in order to find the elements which characterize a sound risk management system in this paper we present an integrated model based on a reduced pricing approach for market and credit risk its main features are those of being mark to market and that the spread term structure by rating class is contingent on the seniority of debt within an arbitrage free framework we introduce issues such as the integration of market and credit risk the use of stochastic recovery rates and recovery by seniority moreover we will characterize default risk by estimating migration risk through a mortality rate actuarial based approach the resultant probabilities will be the base for determining multi period risk neutral transition probability that allow pricing of risky debt in the trading and banking book

estimation of limited dependent variable models with dummy endogenous regressors applied economists have long struggled with the question of how to accommodate binary endogenous regressors in models with binary and nonnegative outcomes i argue here that much of the difculty with limited dependent variables comes from a focus on structural parameters such as index coefcients instead of causal effects once the object of estimation is taken to be the causal effect of treatment several simple strategies are available these include conventional two stage least squares multiplicative models for conditional means linear approximation of nonlinear causal models models for distribution effects and quantile regression with an endogenous binary regressor the estimation strategies discussed in the article are illustrated by using multiple births to estimate the effect of childbearing on employment status and hours of work

adapting the uppsala model to a modern world macro context and microfoundations vahlne and johanson 2017 present the multinational business enterprise mbe as a new form of cross border organization that supersedes the multinational enterprise mne they offer a general model of the evolution of the mbe arguing that the mbe evolves through ongoing internationalization processes by proactively and entrepreneurially engaging in business exchange rather than production in this counterpoint we focus on two critical dimensions absent from vahlne and johanson s 2017 arguments the impact of the digital context as a defining macro level feature of our modern world and the role of the individual as a core microfoundation of the internationalization process we argue that a robust theory of the evolution of the modern firm must necessarily account for these dimensions to explicate these impacts we draw from a range of complementary research streams across international business entrepreneurship and international entrepreneurship we identify research implications for scholars seeking to further advance the uppsala model of internationalization and those who will use the revised model to study the modern multinational

the network dynamics of international new ventures this study uses multi site case research to advance a set of propositions regarding the network dynamics of early stage international new ventures the investigative approach builds on arguments that network theory and analysis are fundamental to international entrepreneurship in the spirit of cross disciplinary research perspectives from the entrepreneurship literature are embraced to help inform our understanding of international new venture networks

the influence of hymer s dissertation on the theory of foreign derect investment the great contribution of stephen hymer s seminal dissertation 1960 was to escape from the intellectual straightjacket of neoclassical type trade and financial theory and move us towards an analysis of the multinational enterprise mne based upon industrial organization theory the magnitude of this breakthrough can be put into perspective by considering the state of the art when hymer wrote twenty five years ago in 1960 the prevailing explanation of international capital movements relied exclusively upon a neoclassical financial theory of portfolio flows in this frictionless world of perfect competition with no transaction costs capital moves in response to changes in interest rate or profit differentials see carl iversen 1936 according to this arbitrage theory capital is assumed to be transacted between independent buyers and sellers that is there is no role for the mne at the time there was no separate theory of foreign direct investment fdi the work did not even ask the question of why is there fdi despite the evidence of sectoral cross investments and the existence of large mnes with intra industry trade if anything the early work on fdi focused upon the where of investment in a particular nation or industry for example dunning 1958 was chiefly interested in explaining u s fdi in britain there was little interest in understanding the reasons for the mne or the nature of its operations the pioneering conceptual insight of hymer was to break out of the arid mold of international trade and investment theory and focus attention upon the mne per se this permits us to treat fdi as a modality by which firms extend their territorial horizons abroad the unique feature of fdi is a mechanism by which the mne maintains control over productive activities outside its national boundaries that is fdi means international production in this view fdi is more than a process by which assets or claims are exchanged internationally see robert aliber 1970 1983 hymer s great insight was in focusing attention upon the mne as the institution for international production rather than international exchange until hymer articulated the process of fdi as an international extension of industrial organization theory it was not possible to understand why the mne transfers intermediate products such as knowledge or technology among its units across different nations while still retaining property rights over such assets today it is widely recognized that the theory of fdi i e international production is primarily about the transfer of nonfinancial and ownershipspecific intangible assets by the mne which needs to appropriate and control the rate of use of its internalized advantage s see rugman 1981 david teece 1981 1982 richard caves 1982 and mark casson 1983 in this paper we first acknowledge hymer s contribution to the theory of fdi and then move on to reinterpret his dissertation in the light of the modern theory of the mne we tdiscussants raymond vernon harvard university robert z aliber university of chicago paul streeten boston university

the uppsala internationalization process model revisited from liability of foreignness to liability of outsidership the uppsala internationalization process model is revisited in the light of changes in business practices and theoretical advances that have been made since 1977 now the business environment is viewed as a web of relationships a network rather than as a neoclassical market with many independent suppliers and customers outsidership in relation to the relevant network more than psychic distance is the root of uncertainty the change mechanisms in the revised model are essentially the same as those in the original version although we add trust building and knowledge creation the latter to recognize the fact that new knowledge is developed in relationships

margining in derivatives markets and the stability of the banking sector we investigate the effects of margining a widely used mechanism for attaching collateral to derivatives contracts on derivatives trading volume default risk and on the welfare in the banking sector first we develop a stylized banking sector equilibrium model to develop some basic intuition of the effects of margining we find that a margin requirement can be privately and socially sub optimal subsequently we extend this model into a dynamic simulation model that captures some of the essential characteristics of over the counter derivatives markets contrarily to the common belief that margining always reduces default risk we find that there exist situations in which margining increases default risk reduces aggregate derivatives trading volume and has an ambiguous effect on welfare in the banking sector the negative effects of margining are exacerbated during periods of market stress when margin rates are high and collateral is scarce we also find that central counterparties only lift some of the inefficiencies caused by margining

50th anniversary article option pricing valuation models and applications this paper surveys the literature on option pricing from its origins to the present an extensive review of valuation methods for european and american style claims is provided applications to complex securities and numerical methods are surveyed emphasis is placed on recent trends and developments in methodology and modeling

assessing credit risk in a financial institution s off balance sheet commitments the first part of this paper presents a general approach to valuing a financial institution s contracts when there is credit risk the approach uses contingent claims pricing theory and is particularly appropriate for an off balance sheet contract such as a swap that can have either a positive or a negative value to the counterparty the second part of the paper extends the analysis by considering the problem faced by bank supervisory authorities of determining capital requirements for off balance sheet contracts

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

towards more realistic conceptualisations of foreign operation modes we address a long standing discrepancy between theory and practice regarding how firms choose use and modify their modes of operation in foreign markets theory typically treats foreign operation modes as choices between well specified discrete alternatives observation of business practice reveals a messier reality we commonly observe mode packages within mode adjustments and mode role changes yet by and large these aspects of international business development have been relatively ignored in the literature and in theoretical and empirical research we propose richer and more realistic conceptualisations of foreign operation modes and look at their implications for theory and practice

unpacking the uncertainty construct implications for entrepreneurial action abstract uncertainty is central to entrepreneurship however robust and generalizable findings that explain the conditions in which uncertainty may impede or promote entrepreneurial action remain elusive we operationalize uncertainty as a multi dimensional construct composed of state effect and response types of uncertainty milliken 1987 to investigate the relationship between uncertainty and entrepreneurial action we decompose more than 2800 exploitation decision policies nested within a sample of new product decision makers working in entrepreneurial software firms we focus on the primary decision maker s willingness to exploit a given opportunity in the face of varying combinations and manifestations of uncertainty and find that the type of uncertainty experienced influences the willingness to engage in entrepreneurial action differently further we find that differences in how each type of uncertainty is manifested in the environment the scale of exploitation i e large vs small and the entrepreneur s expertise serve to moderate the relationship between uncertainty and action in counter intuitive ways we discuss the implications for both theory and practice

a perspective on regional and global strategies of multinational enterprises multinational enterprises mnes are the key drivers of globalization as they foster increased economic interdependence among national markets the ultimate test to assess whether these mnes are global themselves is their actual penetration level of markets across the globe especially in the broad triad markets of nafta the european union and asia yet data on the activities of the 500 largest mnes reveal that very few are successful globally for 320 of the 380 firms for which geographic sales data are available an average of 80 3 of total sales are in their home region of the triad this means that many of the world s largest firms are not global but regionally based in terms of breadth and depth of market coverage globalization in terms of a balanced geographic distribution of sales across the triad thus reflects a special and rather unusual outcome of doing international business ib the regional concentration of sales has important implications for various strands of mainstream ib research as well as for the broader managerial debate on the design of optimal strategies and governance structures for mnes journal of international business studies 2004 35 3 18 doi 10 1057 palgrave jibs 8400073

the analytic pricing of asymmetric defaultable swaps swaps where both parties are exposed to credit risk still lack convincing pricing mechanisms this article presents a reduced form model where the event of default is related to structural characteristics of each party the cash flows submitted to credit risk are identified before the swap is priced analytical pricing formulas for interest rate and currency swaps are computed using a gaussian model for risky bonds currency swaps exhibit additional correlation risk the benefits from netting depend on the balance between exposures and market conditions in valuation we show that sources of credit risk asymmetries are also likely to impact on credit spreads

the impact of default risk on the prices of options and other derivative securities abstract this paper presents a model for valuing derivative securities when there is default risk the holder of a security is assumed to recover a proportion of its no default value in the event of a default by the counterparty both the probability of default and the size of the proportional recovery are random the paper shows how data on bonds issued by the counterparty can be used to provide information about model parameters

continuous time methods in finance a review and an assessment i survey and assess the development of continuous time methods in finance during the last 30 years the subperiod 1969 to 1980 saw a dizzying pace of development with seminal ideas in derivatives securities pricing term structure theory asset pricing and optimal consumption and portfolio choices during the period 1981 to 1999 the theory has been extended and modified to better explain empirical regularities in various subfields of finance this latter subperiod has seen significant progress in econometric theory computational and estimation methods to test and implement continuous time models capital market frictions and bargaining issues are being increasingly incorporated in continuous time theory the roots of modern continuous time methods in finance can be traced back to the seminal contributions of merton 1969 1971 1973b in the late 1960s and early 1970s merton 1969 pioneered the use of continuous time modeling in financial economics by formulating the intertemporal consumption and portfolio choice problem of an investor in a stochastic dynamic programming setting merton 1973b also showed how such a framework can be used to develop equilibrium asset pricing implications thereby significantly extending the asset pricing theory to richer dynamic settings and expanding the scope of applications of continuous time methods to study problems in financial economics 1 within a span of about 30 years from the publication of merton s inf luential papers continuous time methods have become an integral part of financial economics indeed in certain core areas in finance such as e g asset pricing derivatives valuation term structure theory and portfolio selection continuoustime methods have proved to be the most attractive way to conduct research and gain economic intuition the continuous time approach in these areas has produced models with a rich variety of testable implications the econometric theory for testing continuous time models has made rapid strides in the last decade and has thus kept pace with the impressive progress on the theoretical front one hopes that the actual empirical investigations and estimation using the new procedures will follow suit soon

internationalization of the firm a discourse based view while internationalization process theory has deepened our understanding of international expansion it and many other international business ib theories have largely neglected the underlying managerial processes and decision making contexts of internationalization in response we articulate a model that accounts for both the external context and the internal processes leading to internationalization decisions we argue that internationalization decisions are grounded in contestation and struggle for control eventually leading to a dominant discourse consensus and performativity we illustrate our model through two contrasting cases of internationalization and we show how contemporary ib theories can be enhanced by adding a discourse approach

the effects of housing assistance on labor supply evidence from a voucher lottery this study estimates the effects of means tested housing programs on labor supply using data from a randomized housing voucher wait list lottery in chicago economic theory is ambiguous about the expected sign of any labor supply response we find that among working age able bodied adults housing voucher use reduces labor force participation by around 4 percentage points 6 percent and quarterly earnings by 329 10 percent and increases temporary assistance for needy families program participation by around 2 percentage points 15 percent we find no evidence that the housing specific mechanisms hypothesized to promote work such as neighborhood quality or residential stability are important empirically jel i38 j22 r23 r38

chinese multinationals fast internationalization financial performance advantage in one region disadvantage in another our study reveals the financial performance implications of the speed at which chinese multinational enterprises cmnes expand into intra regional versus inter regional host countries in doing so we propose a framework that integrates internationalization speed and home regionalization literatures using data from 767 publicly listed cmnes from the years 2002 to 2014 we discover that the faster the intra regional internationalization the better the firm s financial performance whereas faster inter regional internationalization demonstrates a poorer financial performance we also find that fast mover cmnes technological and marketing resources are valuable in intra regional host countries but vulnerable in inter regional host countries we discuss the implications of these findings for studies of the uppsala internationalization process model and regional mnes

born digitals thoughts on their internationalization and a research agenda johanson and vahlne j int bus stud 40 9 1411 1431 2009 articulate various theoretical mechanisms underpinning the internationalization process mechanisms they suggest are pertinent across firm type their argument builds on their earlier publications and in this spirit we consider johanson and vahlne 2009 in the contemporary context of digital firms in particular we revisit their theorizing as it relates to firms that had only begun to emerge when johanson and vahlne published their award winning paper born digitals we address how technological affordances especially direct engagement with stakeholders automation network effects flexibility and scalability affect the internationalization of born digitals we also develop a future agenda for international business research on born digital firms

from internationalization to evolution the uppsala model at 40 years abstract the original uppsala model that was published in 1977 explains the internationalization process of firms we have further developed the model several times in the intervening years the present article is our latest effort a general model of the evolution of the multinational business enterprise mbe from early steps abroad to being a global firm the updated augmented model explains mbe evolution in general not only characteristics of the internationalization process in a narrow sense we believe that the newest iteration anchored in process ontology will be useful in conducting longitudinal empirical studies

the implied reserves of the bank insurance fund abstract option models of deposit insurance pricing view assessment rates as put option premiums however such models ignore the risk of guaranty fund default this paper attempts to link risk based premiums with guaranty fund reserves in a partial equilibrium setting by employing a methodology based on options with credit risk the value of full insurance per coverage period is expressed as a standard options premium and is decomposed into two parts the explicit part is due to the available assets reserves of the guaranty fund while the implicit part comes from federal support contingent on the adequacy of reserves at the end of the coverage period implied reserves are derived under an exogenous insurance coverage rate as a policy parameter the method is illustrated on a sample of 40 large bank holding companies and an extension to the case of several insured banks is provided

becoming a multinational enterprise using industry recipes to achieve rapid multinationalization we aim to build a greater understanding of how young entrepreneurial firms internationalize fast through foreign subsidiaries to become a multinational enterprise mne despite the prevalence of fast paced international expansion theory development on how it is achieved through high commitment entry modes has been scarce our work substantially addresses this gap by conceptualizing how rapid multinationalization occurs using qualitative case studies we explore eight young entrepreneurial firms operating in the software as a service industry aspiring to achieve early market dominance internationally through rapid multinationalization drawing on the concept of industry recipes we explain how recipe heuristics and recipe augmentation enable rapid multinationalization and showcase the economic and knowledge acquisition logics which underpin these endeavors this study introduces internationalization via industry recipe explains the micro level regulation of internationalization speed and contributes to aligning international entrepreneurship and mne perspectives on internationalization

evaluation of counterparty risk for derivatives with early exercise features abstract we introduce an efficient numerical approach to evaluate counterparty risk and we compute the credit valuation adjustment for derivatives having early exercise features the approach is flexible and can account for wrong way risk and various models for the underlying risk factor s dynamics numerical experiments are presented to illustrate the efficiency and versatility of the method

the pricing of options with default risk this paper considers the pricing of options with default risk the comparative statics of such options can differ from those of ordinary options and early exercise of such american call options can be optimal several examples of options with default risk are considered traditionally it has been assumed that options have no default risk such an assumption is reasonable when one studies options traded on an organized exchange in the u s default on such options would require as cox and rubinstein 5 put it a very sudden and strong movement in stock prices one considerably more extreme than any on record p 71 however many options and financial assets containing option like payoffs are sold by firms that have limited assets for such options default is often a possibility that must be taken seriously in this paper we study how options subject to default risk which we hereinafter call vulnerable options are priced it turns out that many of the well established results of the option pricing literature see e g smith 12 and references therein do not hold for vulnerable options in particular the value of a vulnerable european option can fall with time to maturity with the interest rate and with the variance of the underlying asset furthermore it may pay to exercise early a vulnerable american option on a non dividend paying asset

pricing effects when competitors arrive the case of discount certificates in germany this article investigates how overpricing of outstanding certificates also called master certificates changes when competing products that duplicate the features of master certificates are issued i argue that competition effects may be reverted and overpricing may increase rather than decrease after competitors arrive when retail investors fail to detect implications of credit risk differences on certificates values using difference in differences estimations on matched samples i find that overpricing of master certificates decreases after the competing products have been issued but only when the master issuer s credit risk is lower than that of the duplicate issuer while it increases when the credit risk difference is positive these findings are robust to controlling for retail investors demand in various ways thus the study indicates that retail investors failure to detect the value implications of issuers credit risk can undermine product competition

capabilities structure agency and evolution this paper examines conceptual issues and reviews empirical results bearing on the relationship between research approaches emphasizing organizational capabilities and those based in transaction cost economics tce or in organizational economics more generally following a review of conceptual fundamentals what capability is and why organizations differ in capability it assesses recent progress toward an integration of the capabilities and transaction cost approaches primarily in the context of the analysis of vertical structure and related phenomena this review suggests that progress has been substantial and that the key elements of a promising dynamic synthesis have been identified the paper then considers issues that call for attention if further progress is to be achieved the first of these is the role of agency which must be seen in expansive terms relative to standard economic rationality if its evolutionary significance is to be fully appreciated the second is the role of structure or more specifically industry architecture which affects capability development by way of its effect on the feedback that firms receive after drawing on the recent financial crisis for an illustration of these ideas this paper considers the rise of interest in business models as a useful field of application and it concludes with a discussion of the role of organizational economics beyond tce we argue that whatever the theoretical perspective at the level of the firm analyses must reach beyond that level to grasp the important causal forces affecting capability development firm boundaries and structural features more generally

housing vouchers income shocks and crime evidence from a lottery abstract employing exogenous variation in randomized wait list positions assigned using a lottery we identify the causal effects of section 8 housing vouchers on arrests of adult household heads based on administrative records from houston we find that voucher receipt has no effect on the likelihood of arrest even among the groups with the highest propensities for crime the vouchers have no impact income effects for these adults are particularly large relative to neighborhood effects leading us to believe that this large income shock does little to alleviate financial pressures that could lead to crime

the call sinking fund and term to maturity features of corporate bonds an empirical investigation do bond issuing firms attempt to choose the call sinking fund and term to maturity features of bonds to improve shareholder wealth this paper develops and tests two hypotheses about the determinants of bond features using a conditional logistic model the model is estimated on a sample of bonds issued between 1982 and 1986 model estimates show that a bond s call sinking fund and term to maturity features are statistically related to the issuing firm s retention ratio ratio of convertible to long term debt two year change in net operating income and whether the firm is listed on the nyse and included in the s p400 these findings support the view that firms financing highquality projects but facing information asymmetries choose shorter term medium term callable bonds with and without the sinking fund feature

neighborhood effects on crime for female and male youth evidence from a randomized housing voucher experiment the moving to opportunity mto demonstration assigned housing vouchers via random lottery to public housing residents in five cities we use the exogenous variation in residential locations generated by mto to estimate neighborhood effects on youth crime and delinquency the offer to relocate to lower poverty areas reduces arrests among female youth for violent and property crimes relative to a control group for males the offer to relocate reduces arrests for violent crime at least in the short run but increases problem behaviors and property crime arrests the gender difference in treatment effects seems to reflect differences in how male and female youths from disadvantaged backgrounds adapt and respond to similar new neighborhood environments