asset specificity and the fear of exploitation if asset specificity renders the investing party dependent ex post why would the ex ante willingness to make relationship specific investments vary we show how specific investments generate both positive and counter negative cooperative incentives we also observe the influences of trust and time horizon on these incentives which are aggregated to derive the specific investments effect sie our result suggests that while the fear of exploitation increases proportionally to the magnitude of specific investments and the attendant quasi rents it grows exponentially with the deterioration of inter personal trust and or inter temporal time horizon contexts

perceived credit constraints in the european union the promotion and support of small and medium sized enterprises smes is an essential component of policies designed to help improve europe s economic performance a crucial issue is whether smes face difficulty obtaining bank loans using pre crisis survey data from 2005 and 2006 for nearly 3 500 smes firms with fewer than 250 employees in the european union eu we investigate the determinants of perceived bank loan accessibility at the firm level and at the country level based on hierarchical multi level binomial logit regressions our findings show that the youngest and smallest smes have the worst perception of access to bank loans the smes in nations with concentrated banking sectors are more positive about loan accessibility in addition a high fraction of foreign owned banks is associated with improved perception of loan accessibility in the eu 15 but not in the eu 10

price and authority in inter profit center transactions price and authority have traditionally been regarded as alternative social mechanisms for allocating resources however actual transactions whether inter or intrafirm can be evaluated in terms of the extent to which they combine both of these mechanisms an especially revealing example of this is the exchange of goods between two profit centers in the multi profit center firm three of the most common arrangements or transfer pricing polices for effecting these transactions are examined here exchange autonomy transfers depend primarily on price with no or minimal use of authority mandated full cost transfers involve a substantial exercise of authority relative to the use of price mandated market based transfers use both authority and price in important ways for all three policies the transaction costs of these internal transactions may exceed these costs on external transactions

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

allocating decision rights on the shop floor a perspective from transaction cost economics and organization theory this paper explores the links that the allocation of decision rights on the shop floor maintains with labor transaction attributes and several structural traits of the firm the approach is based on the transaction cost apparatus and harnesses the theoretical and empirical background provided by organization theory data are presented from a wide field survey in the spanish food and electronics industries standard industry classification sic 20 and 36 evidence not only verifies the influence of firm size property age and unionism but also shows that the allocation of decision rights is related to a particular mix of labor transaction traits specifically one of the most important results is that employer opportunism offers greater explanatory power than employee opportunism

profit distribution and compensation structures in publicly and privately funded hybrid venture capital funds abstract policy makers have become increasingly concerned at the lack of risk capital available to new and early stage entrepreneurial ventures as a public response to a perceived market failure several governments have set up programs to channel equity finance to capital constrained but high potential young enterprises critically government support is often directed through the agency of private venture capital funds we examine the profit distribution and compensation structures used in these hybrid public private funds we appraise government policy makers ability to use these structures to improve the expected returns in market failure areas in order to attract private sector investors and professional managers to participate in these funds the results derived from our simulation study suggest that such asymmetric profit sharing models can only resolve relatively modest market failures unless the programs also manage to attract highly competent investors who are able to produce above average gross returns in market failure areas

disentangling the theories of firm boundaries a path model and empirical test theories on the motivation underlying firm boundaries have recently sparked renewed debate what best explains whether a firm relies on market control or hierarchical control to secure required resources how do the characteristics of the resources come into play in this study we consider a comprehensive path model of the governance mode decision for sourcing technological know how by integrating different perspectives on firm boundaries including transaction cost economics a resource based view and an options perspective we link characteristics of the technology i e uniqueness barriers to imitation commercial uncertainty technological dynamism to the perceived threat of opportunism the potential for sustainable advantage and the pursuit of a licensing agreement vis a vis the outright acquisition of the firm that possesses the desired know how we use structural equation modeling to analyze 127 sourcing arrangements our results show that technological dynamism and barriers to imitation indirectly influence the governance mode decision by increasing the perceived threat of opportunism commercial uncertainty directly influences the governance mode and decreases the likelihood of an acquisition vis a vis a licensing agreement although uniqueness and barriers to imitation are also positively associated with the perceived potential for sustainable advantage the potential for sustainable advantage had no direct effect on governance mode implications and suggestions for further research are offered

incrementality of sme loan guarantees in many countries loan guarantee programs are important elements of government policy with respect to small and medium sized enterprises smes if loan guarantee schemes are to be effective a majority of firms obtaining assistance through such a scheme ought not to be able to obtain financing from existing sources a property known as incrementality or additionality this paper describes a new approach to measuring incrementality this work uses a two stage process to estimate the incrementality of loans made under the terms of the canada small business financing csbf program first a logistic regression based model of loan outcomes essentially a credit scoring model is estimated based on a large representative sample of smes the resulting model was consistent with prior expectations and exhibited high levels of goodness of fit the model was then employed to classify a sample of firms that had received loans under the terms of the loan guarantee scheme incremental loans ought to be classified as turndowns by the model hence the proportion of loan guarantee recipients that the model classified as turndowns is a direct measure of incrementality for the csbf loan guarantee program incrementality was estimated with 95 confidence as 74 8 9 0

crowdfunding and innovation entrepreneurs have started relying on crowdfunding to fund their investments this paper surveys the literature linking crowdfunding with innovation in entrepreneurial firms two distinct areas are discussed first crowdfunding has the potential to foster innovation by offering new sources of capital to innovation driven firms and thereby reduce the funding gap for innovative startups second crowdfunding offers a way for the crowd to participate in the innovation process by providing feedback to the entrepreneur this feedback can take various forms including providing ideas on the development of the product during and after the campaign in the spirit of crowdsourcing and providing valuable information on the future demand for the new product

simple monetary policy rules and exchange rate uncertainty abstract we analyze the performance and robustness of some common simple rules for monetary policy in a new keynesian open economy model under different assumptions about the exchange rate model adding the exchange rate to an optimized taylor rule that responds to cpi inflation gives only small improvements in terms of economic stability in most model configurations the taylor rule is also slightly more robust to uncertainty about the exchange rate model than are rules that respond to the rate of exchange rate depreciation our results thus indicate that the taylor rule is sufficient to stabilize a small open economy also under exchange rate model uncertainty

evaluation of alternatives for power system coordination and pooling in a competitive environment the paper defines and classifies essential issues that relate the need for electric power system coordination with the increasing development of competition principles are formulated and a coordination model and a market structure are proposed emphasizing the need for economic dispatch in the wholesale market a detailed comparison is made of the market and pooling implementations developed in argentina and chile countries that have pioneered the creation of competitive markets in the electric energy sector an evaluation of strengths and weaknesses of those two implementations is included

subjective performance measures in optimal incentive contracts objective measures of performance are seldom perfect in response incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures this paper explores the combined use of subjective and objective performance measures in respectively implicit and explicit incentive contracts naturally objective and subjective measures often are substitutes sometimes strikingly so we show that if objective measures are sufficiently close to perfect then no implicit contracts are feasible because the firm s fallback position after reneging on an implicit contract is too attractive we also show however that objective and subjective measures can reinforce each other if objective measures become more accurate then in some circumstances the optimal contract puts more weight on subjective measures because the improved objective measures increase the value of the ongoing relationship and so reduce the firm s incentive to renege we also analyze the use of subjective weights on objective performance measures and provide case study evidence consistent with our analyses

an economic approach to influence activities in organizations members of organizations spend considerable time effort and ingenuity attempting to influence decision makers such influence activities may bring benefits to the organization but they also involve real costs this essay offers an economic rationale for such influence activity as representing rational self interested behavior in the presence of informational asymmetries and an analysis of how the design of the organization s structure and policies should respond to the incentives for attempting influence it is posited that information valuable for the organization s decision making is directly available only to members of the organization who have some personal stake in the decisions these individuals may then have an incentive to try to manipulate the information they develop and provide in order to influence the resulting decisions to their benefits this can be costly both in degrading the quality of decision making and in diverting the attention and effort of the organization s members from more productive activities the organization has three different methods it can employ to discourage excessive influence activities and to encourage more directly productive uses of time and effort it can limit access to decision makers and participation in decision making it can alter its decision making criteria to favor those performing well in productive activities and it can provide direct financial incentives to encourage the desired allocation of effort it is shown that an efficiently designed organization will use such financial incentives only as a last resort instead it will always first alter its decision participation policies and decisionmaking criteria

outside enterpreneurial capital this article investigates factors that affect rejection rates in applications for outside finance among different types of investors banks venture capital funds leasing firms factoring firms trade customers and suppliers partners and working shareholders private individuals and other sources taking into account the non randomness in a firm s decision to seek outside finance the data support the traditional pecking order theory further the data indicate that firms seeking capital are typically able to secure their requisite financing from at least one of the different available sources however external finance is often not available in the form that a firm would like this article engages with four interrelated empirical questions first what are the characteristics of privately held entrepreneurial firms that seek external outside finance and what drives the request for capital from the different potential sources of external finance banks venture capitalists private individuals leasing factoring suppliers customers partners working shareholders among other sources second what are the factors that lead to rejection or acceptance of requests for external finance given this non randomness in the types of firms that seek external finance in the spirit of heckman 1976 1979 third as various forms of financing are far from being perfect substitutes are there differences in the ability of firms to obtain capital from the different available sources fourth can firms obtain all of their desired capital from the different available sources even if it is not in the form they would like it is widely recognised that the decision to seek external finance and the type of financing sought is related to information asymmetries faced by investors regarding the entrepreneurial firm s quality see for example jensen and meckling 1976 1 where

valuation and optimal operation of electric power plants in competitive markets we present an algorithm for the valuation and optimal operation of hydroelectric and thermal power generators in deregulated electricity markets real options theory is used to derive nonlinear partial integro differential equations pides for the valuation and optimal operating strategies of both types of facilities the equations are designed to incorporate a wide class of spot price models that can exhibit the same time dependent mean reverting dynamics and price spikes as those observed in most electricity markets particular attention is paid to the operational characteristics of real power generators for thermal power plants these characteristics include variable start up times and costs control response time lags minimum generating levels nonlinear output functions and structural limitations on ramp rates for hydroelectric units head effects and environmental constraints are addressed we illustrate the models with numerical examples of a pump storage facility and a thermal power plant this pide framework can achieve high levels of computational speed and accuracy while incorporating a wide range of spot price dynamics and operational characteristics

crowdfunding and innovation crowdfunding and innovation entrepreneurs have started relying on crowdfunding to fund their investments this paper surveys the literature linking crowdfunding with innovation in entrepreneurial firms two distinct areas are discussed first crowdfunding has the potential to foster innovation by offering new sources of capital to innovation driven firms and thereby reduce the funding gap for innovative startups second crowdfunding offers a way for the crowd to participate in the innovation process by providing feedback to the entrepreneur this feedback can take various forms including providing ideas on the development of the product during and after the campaign in the spirit of crowdsourcing and providing valuable information on the future demand for the new product

incentives in organizations n 1975 steven kerr published on the folly of rewarding a while hoping for b the argument was simple you get what you pay for kerr distilled this unifying theme from a disparate set of examples involving politicians soldiers doctors orphanage directors professors and students as well as manufacturing and clerical employees and even human resource managers from these examples kerr pp 77980 concluded that two main causes of distorted incentives are fascination with an objective criterion where individuals seek to establish simple quantifiable standards against which to measure and reward performance and overemphasis on highly visible behaviors when some parts of the task are highly visible while others are not it took agency theory 15 years to express kerr s title not to mention to evaluate or extend his conclusions during this period agency theory was obsessed with the tradeoff between incentives and insurance even though clear eyed observations like kerr s about the design and performance of real incentive contracts suggested that several other issues are at least as important fortunately recent work has brought agency theory not only to kerr s position but beyond in this paper i summarize four new strands in agency theory that help me think about incentives in real organizations as a point of departure i begin with a quick sketch of the classic agency model i then discuss static models of objective performance measurement that sharpen kerr s argument repeated game models of subjective performance assessments incentives for skill development rather than simply for effort and incentive contracts between versus within organizations i con

the threat from within account managers concern about opportunism by their own team members it is well known that transaction specific investments tsis made in customers by account managers makes them vulnerable to opportunism by customers i e the targets of the investments the present research shows that tsis made in customers by account managers can also lead them to be concerned about internal opportunism by nontargets of the investments e g information technology or finance specialists in their own teams furthermore it shows that concern about internal opportunism leads account managers to engage in internal blocking of their own team members i e restricting their access to customers and to customer information which results in lower performance with customers this phenomenon is a conundrum in that account managers interested in stronger performance with customers appear to block the very functional specialists who can help them attain better performance this research also identifies two types of continuities account manager customer continuity and specialist customer continuity that moderate the relationship between tsis and concern about internal opportunism building on the literature in economics and organization theory our research suggests that cross functional teams that are designed to bring different functional areas together are more complex to manage than previously believed this paper was accepted by pradeep chintagunta and preyas desai special issue editors this paper was accepted by pradeep chintagunta and preyas desai special issue editors

make buy or ally a transaction cost theory meta analysis since the publication of williamson s markets and hierarchies many empirical articles have investigated the tenets of transaction cost theory using meta analytic techniques we quantitatively syn

the role of corruption culture and law in investment fund manager fees this article considers an international sample of venture capital and private equity funds to assess the role of law corruption and culture in setting fund manager fees with better legal conditions fixed fees are lower carried interest fees are higher clawbacks are less likely and share distributions are more likely countries with lower levels of corruption have lower fixed fees and higher performance fees and are less likely to have clawbacks and cash only distributions hofstede s measure of power distance is negatively related to fixed fees and the use of cash only distributions but positively related to performance fees and clawbacks overall the data strongly indicate that corruption culture and legal settings are much more significant in determining fees than fund manager characteristics and or market conditions

benefits of control capital structure and company growth this paper studies the influence of the private benefits of control on the capital structure and the growth of private companies it is argued that companies in which existing owners would lose more control if they expanded have smaller equity increases are more highly levered and grow more slowly the dataset covers 8 964 private uk companies with limited liability for up to 5 years potential loss of control is measured as the difference in the probability of winning a vote for the largest owner before and after a hypothetical equity increase consistent with the private benefits of control the results show that companies with a high potential loss of control do indeed have smaller equity increases use more debt and grow more slowly

introduction funding gaps theoretical and empirical foundations of government policies to plug alleged business funding gaps are highly controversial but rarely subject to wide ranging in depth debate this symposium from major scholars in the field provides a counterbalance topics addressed cover the theory of lending under asymmetric information its implications for overlending relationship lending as a market solution to information asymmetries government emulation of private sector decision making to eliminate underprovision of high tech equity and theoretically based empirical work testing for funding deficiencies in the high tech sector despite the very different and potentially contradictory contributions the result is surprisingly a set of mutually agreed policy conclusions

optimal response of a thermal unit to an electricity spot market this paper addresses the optimal response of a thermal unit to an electricity spot market the objective is to maximize the unit profit from selling both energy and spinning reserve in the spot market the paper proposes a 0 1 mixed integer linear programming approach that allows a rigorous modeling of i nonconvex and nondifferentiable operating costs ii exponential start up costs iii available spinning reserve taking into account ramp rate restrictions and iv minimum up and down time constraints this approach overcomes the modeling limitations of dynamic programming approaches and is computationally efficient results from realistic case studies are reported

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

from security to mobility generalized investments in human capital and agent commitment this paper considers the impacts of different investments in human capital firm specific versus generalized investments on employee commitment to the firm the resource based literature has stressed that only firm specific human capital is likely to generate organizational rents since those assets are more likely to be inimitable rare and therefore a better basis for sustained competitive advantage generalized investments in human capital i e investments in capabilities that people can transfer and deploy to other firms or settings are to be avoided however observing lessons from the literature on psychological contracts and organizational commitment we argue that generalized investments may have value for the firm through their effects on worker commitment to the firm the gain in worker commitment is valuable to firms given the fragile state of the contemporary employment relation in which the lack of job security is likely to breed diminished employee commitment this is particularly a concern for employment relations consisting of externalized labor i e contract work or selfemployed professionals operating as agents of the firm in which agent commitment is vital but likely to be more scarce in this paper we focus on the externalized workers independent agents of two insurance firms in addressing these issues a sample of 237 agents shows support for the benefits of generalized investments on agent commitment questioning conventional wisdom that such investments should be avoided we also examine the impact of relation specific investments and other key antecedents on agent commitment concluding that a mixture of strategic investments in human capital should be considered taking into account their impacts on the firm worker psychological contract we also examine the impact of agent commitment on agent performance in this context finding committed agents do provide greater value to the insurer

strategic fit in industrial alliances an empirical test of governance value analysis abstract the exclusion of firm specific considerations in the standard economizing calculus approach to buyer supplier ties makes the large variations in the types of contracts used within the same industry unexplainable this article tests ghosh and john s 1999 strategizing calculus model that purports to close this gap the core organizing principle of this model is a three way fit among firm resources investments and governance that yields the highest net receipts from this principle the authors derive predictions and test them using data from 193 original equipment manufacturers that engage independent component suppliers the data show that investments must be aligned with more complete contract terms e g fixed prices hard designs to yield cost reduction outcomes for all firms however investments must be aligned with more incomplete contracts e g cost plus prices soft designs to yield end product enhancement outcomes but only for firms with relatively small downstream market

relationship lending under asymmetric information a case of blocked entry abstract a national bank with a low cost of capital can choose to enter a two period credit market and compete with incumbent banks to supply relationship loans to de novo entrepreneurs under short term contracting the terms on loan contracts are determined by market competition in the current period in this setting we find that the second period competitive pressure the national bank exerts on the incumbent banks turns out to give the incumbent banks a first period advantage when trying to attract new clients as a result the low cost bank may be blocked from entering the market

too much investment a problem of asymmetric information this paper shows that under plausible assumptions the inability of lenders to discover all of the relevant characteristics of borrowers results in investment in excess of the socially efficient level raising the rate of interest above the free market level will restore optimality this conflicts with generally held views and is contrasted with the stiglitz weiss model it is shown that the assumptions which yield overinvestment support debt as the equilibrium method of finance however under the stiglitz weiss assumptions used to derive an underinvestment result equity is shown to be the equilibrium method of finance

estimating the euler equation for output new keynesian macroeconomic models have generally emphasized that expectations of future output are a key factor in determining current output the theoretical motivation for such forward looking behavior relies on a straightforward generalization of the well known euler equation for consumption in this paper we use maximum likelihood and generalized method of moments gmm methods to explore the empirical importance of output expectations we find little evidence that rational expectations of future output help determine current output especially after taking into account the small sample bias in gmm

asymmetric monetary policy and the yield curve we discuss the taylor rule near low inflation and interest rates using an additional option like term in the federal reserve s loss function i e the deflation put we extend the classic taylor rule to one with an asymmetric response that is more accommodative when the inflation rate is very low once calibrated this payoff profile gives an exact and easily communicable prescription for federal reserve policy under regimes of low inflation simple models of central bank behavior can produce highly complex yield curve shapes using the usual taylor rule and our proposed extension as building blocks we construct a robust framework for generating realistic yield curves and the evolution of the economy our main focus is the impact on the yield curve and the economy of the deflation put we find that for economies like the u s the deflation put reduces yields for all maturities we also find that in highly leveraged economies such as japan the consequence of an asymmetric deflation fighting policy may result in improved economic conditions but also raises the possibility of higher longterm yields as a consequence

transmission lags and optimal monetary policy abstract the credibility problems of monetary policy are enlarged by transmission lags whenever the welfare criterion consists of arguments with differing transmission lags if as usually argued prices react to monetary policy with a longer lag than output the discretionary bias is substantially increased under a consumer welfare maximizing policy criterion flexible inflation targeting in the prototype new keynesian model money growth targeting can significantly reduce the discretionary bias but is not robust to other specifications of welfare with higher valuation of output stability

the salesperson as outside agent or employee a transaction cost analysis this descriptive study explores the reasons for integration of the personal selling function i e the use of employee direct salespeople rather than manufacturers representatives reps a hypothesized model is developed based on both transaction cost analysis and the sales force management literature data from 13 electronic component manufacturers covering 159 u s sales districts are used to estimate a logistic model of the probability of going direct in a given district results are shown to be stable across specification and estimation methods and to fit the data well the transaction cost model is generally supported the principal finding is that the greater the difficulty of evaluating a salesperson s performance the more likely the firm to substitute surveillance for commission as a control mechanism i e to use a direct sales force among other findings direct sales forces are also associated with complex hard to learn product lines and with districts that demand considerable nonselling activities several factors prove unrelated including company size the amount of travel a district requires and the importance of key accounts this article was originally published in marketing science volume 4 issue 3 pages 234 254 in 1985

a macro finance model of the term structure monetary policy and the economy this paper develops and estimates a macro finance model that combines a canonical affine no arbitrage finance specification of the term structure with standard macroeconomic aggregate relationships for output and inflation from this new empirical formulation we obtain several interesting results 1 the latent term structure factors from finance no arbitrage models appear to have important macroeconomic and monetary policy underpinnings 2 there is no evidence of monetary policy inertia or a slow partial adjustment of the policy interest rate by the federal reserve and 3 both forward looking and backward looking elements play important roles in macroeconomic dynamics

buyer supplier relations in industrial markets when do buyers risk making idiosyncratic investments it is well established that the existence of investments specific to a relationship influences the choice of governance structure including the use of contractual safeguards what is less well understood are the circumstances leading to the creation of those specific assets to begin with this paper explores the industrial buyer s motives to put itself at risk by making investments tangible and intangible which cannot be readily redeployed from one supplier to another using original data from a sample of 388 supply relationships involving all automakers in the u s and japan we examine features of the supply task the supplier and the supply environment which serve as motives to make supplier specific investments we also examine potential factors which facilitate the posting of specific assets as credible commitments to attenuate supplier opportunism we find that specific investments by buyers serve as a mechanism to 1 increase coordination when the manufacturing task is complex 2 buffer the buyer against technological uncertainty and 3 build close relationships when the requisite production skills are scarce the supply market is thin we find more specific investments in supply arrangements that are embedded in a broader business relationship we find fewer supplier specific investments in the japanese context finally we find that buyers focus their investments on lesser known low share component makers perhaps to capitalize on a unique focused supplier capability

evaluation of credit guarantee policy using propensity score matching in this article we evaluate the effect of the credit guarantee policy by comparing a large sample of guaranteed firms and matched non guaranteed firms from 2000 to 2003 the sample firms are compared with respect to growth rates of different performance indicators including productivity sales employment investment r d wage level and the survival of firms in the post crisis period in order to avoid the selectivity problem propensity score matching methodologies are adopted results suggest that credit guarantees influenced significantly firms ability to maintain their size and increase their survival rate but not to increase their r d and investment and hence their growth in productivity moreover due to the adverse selection problem firms with lower productivity were receiving guarantees

financial structure and the growing small firm theoretical underpinning and current evidence this paper introduces a special issue of small business economics on financing and small firm dynamics it establishes a general underpinning for the analysis of small firm financing over time this appeals to the control theoretic literature and permits the specification of master trajectories of key variables over time like output debt dividend and capital two trajectories for cheap debt and cheap equity respectively illustrate this type of analysis showing how financial structure can vary over time involving phases of growth consolidation and stationarity from this perspective six papers on small firm dynamics and finance are reviewed issues addressed include credit constraints funding shortages wealth as collateral financial structure target income modelling of start up and bank lending during financial liberalisation

priced based operation in an auction market structure open transmission access is a new legal requirement within the electric power industry interchange will require evaluation of the existing conditions to determine if the product can be delivered at the time required and at the level awarded through the bidding or negotiation process this paper seeks to identify the likely deregulation details for a full market implementation when native load is considered equal to any other third party load comparability this paper seeks to identify the technical issues such as standards and algorithms necessary for changing the national infrastructure from a vertically integrated industry to a horizontally integrated industry

the implementation of an energy brokerage system using linear programming the authors focus on the economics involved in energy transfers the function of an energy brokerage system is to establish interchange schedules between participating utilities in such a manner as to maximize the resulting savings a brokerage system that uses linear programming lp is presented to maximize the savings or profits to each utility subject to import and export constraints the cost quotations can also be determined using an lp formulation two examples to illustrate this formulation are given

the latent demand for bank debt characterizing discouraged borrowers concerns that small firms encounter credit constraints are well entrenched in the literature despite widespread empirical evidence that a relatively small proportion of small firms have their loan applications rejected however many firms may be discouraged from applying for fear of rejection these businesses are the focus of this paper based on responses to a large scale postal survey of uk small and medium sized enterprises smes we find that twice as many businesses were discouraged from applying for a bank loan than had their loan request denied more particularly we observe a number of distinguishing characteristics of discouraged borrowers relative to applicants these include strategy sector prior entrepreneurial experience and banking relationships the implications of our findings for policy and future research are briefly discussed

information variables for monetary policy in an estimated structural model of the euro area a small scale new keynesian model for the euro area is estimated with maximum likelihood under the assumptions of imperfect information and discretionary monetary policy the estimated parametrization of this widely used dynamic stochastic model unveils the monetary authorities objectives and the information content of two indicator variables monetary aggregates and real unit labour costs the results highlight a significant policy concern about interest rate smoothing and inflation almost no concern for output gap stabilization emerges regarding indicator variables unit labour costs provide information on potential output that is helpful for stabilization policy no useful information role emerges for monetary aggregates

commitment lending under asymmetric information theory and tests on u k startup data u k business startup data is used to examine the role of contract parameters in solving the bank s problem of lending under asymmetric information margins are found to be a direct function of the probability of failure and an inverse function of security for given loan size consistently with collateral being invoked to solve the moral hazard problem business survival is also found to be enhanced by owner equity inputs for given debt again consistent with a requirement for owner financial inputs to enhance unobservable effort security rises along with loan size and survival chances a finding consistent with a a firm loan size effect larger borrowers have lower marginal admin cost to the bank and with b positive borrower self selection better borrowers offer collateral because they are less likely to experience forfeiture observable business characteristics are found to play an important intermediary role in the solution to the moral hazard problem more mature proprietors have more experience business commitment assets for borrowing and the willingness to use them for loan collateral their contract parameters reflect these facts

targeting inflation by forecast feedback rules in small open economies abstract we argue that in practice the inflation targeting strategy can be approximated by the interest rate responding to the unchanged interest rate forecast of inflation a method is developed to derive unchanged interest rate forecasts in forward looking models and evaluate the performance of the policy rule in an optimizing new keynesian model due to monacelli european central bank working paper series 227 estimated on uk data we find that the policy rule is less prone to generate a determinate rational expectations equilibrium if based on an unchanged interest rate compared to the rule consistent forecast both rules approximate the optimal commitment policy if the central bank attaches sufficient weight to inflation as opposed to output gap stabilization the optimal forecast feedback horizon is close to a year and a half and is largely independent of how much the central bank prefers inflation to output gap stability

price taker bidding strategy under price uncertainty this paper provides a framework to obtain the optimal bidding strategy of a price taker producer an appropriate forecasting tool is used to estimate the probability density functions of next day hourly market clearing prices this probabilistic information is used to formulate a self scheduling profit maximization problem that is solved taking advantage of its particular structure the solution of this problem allows deriving a simple yet informed bidding rule results from a realistic case study are discussed in detail

are business startups debt rationed using a large random sample of u k start ups and a rich data set the paper demonstrates that human capital is the true determinant of survival and that the correlation between financial capital and survival is spurious provision of finance is demand driven with banks supplying funds elastically and business requests governing take up firms self select for funds on the basis of the human capital endowments of the proprietors with better businesses more likely to borrow a reason why others have seemingly identified start up debt gaps may be the failure to test a sufficiently rich empirical model copyright 1996 by royal economic society

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

microfinance subsidies and local externalities we analyse equilibrium borrowers effort and the cost of microcredit loans in the presence of moral hazard project correlation and subsidies under group lending conditions our results show that under the assumption of endogenous effort project correlation has significant effects on borrowers effort only when it is determined by asymmetric positive or negative shocks these findings indicate that the well known negative effect of within group symmetric project correlation on group lending with joint liability disappears once endogenous effort is taken into account we also analyse the effects of subsidised lending and asymmetric correlation on the relative convenience in terms of borrowers effort of the alternative 1 between group lending and individual lending with notional collateral and 2 among three different market structures of the microfinance industry

a discrete model for optimal operation of fossil fuel generators of electricity abstract this paper presents a new discrete approach to the price based dynamic economic dispatch pbded problem of fossil fuel generators of electricity the objective is to find a sequence of generator temperatures that maximizes profit over a fixed length time horizon the generic optimization model presented in this paper can be applied to automatic operation of fossil fuel generators or to prepare market bids and it works with various price forecasts the model s practical applications are demonstrated by the results of simulation experiments involving 2009 nyiso electricity market data branch and bound and tabu search optimization techniques

security constrained optimal generation scheduling for gencos this paper presents an approach for maximizing a genco s profit in a constrained power market the proposed approach considers the interior point method ipm and benders decomposition for solving the security constrained optimal generation scheduling sc gs problem the master problem represents the economic dispatch problem for a genco which intends to optimize its profit the formulation of the master problem does not bear any transmission network constraints the subproblem will be used by the same genco to check the viability of its proposed bidding strategy in the presence of transmission network constraints in this case if the subproblem does not yield a certain level of financial return for the genco or if the subproblem results in an infeasible solution of the genco s proposed bidding strategy the genco will modify its proposed solution according to the benders cuts that stem out of the subproblem the study shows a more flexible scheduling paradigm for a genco in a competitive arena the proposed approach proves practical for modeling the impact of transmission congestion on a genco s expected profit in a competitive environment

the investment strategies of publicly sponsored venture capital funds abstract this paper investigates the effects of public ownership on the investment strategy of hybrid vc funds we exploit a unique dataset containing data for all of the venture capital funds in europe that received financial support from the european investment fund eif during the years 1998 2007 the dataset includes 179 vc funds that invested in 2482 companies we find that the level of public ownership shows a weak negative correlation with the likelihood of observing a write off and that a higher public share is associated with a longer duration for the investment the latter effect is more relevant for those investments that generate intermediate financial returns the results are robust to the introduction of controls at the target firm level and for financial market conditions

bundling governance mechanisms to efficiently organize small firm loans abstract bank loans are a common source of financing for small firms while scholars have examined specific conditions that affect small firm loan approval and interest rates practical questions remain about how these loans are structured to address characteristically acute challenges from asymmetric information this paper suggests collateral reputation and relationship banking each perform unique exchange organizing tasks and that small firms systematically use them in predictable combinations a multiple discriminant analysis of 796 small firm loans suggests four governance bundles are commonly employed in this setting the implications for managers focus on how loan governance mechanisms are most efficiently bundled together

strategic bidding in an energy brokerage this focus of this paper is to present a framework in which strategies may developed for the individual participants in an energy brokerage such a framework is expected to be important with the increasing interest in electricity market structures such as the energy brokerage that deregulation has produced to illustrate the process of strategic bidding a simple suboptimal bidding strategy is presented with the aid of a numerical example the bidding strategy must be suboptimal because of the amount of unknown information about the other bidders further tuning of this strategy will be required before application to realistic scenarios

a simulation model for a competitive generation market the simulation of a wholesale electricity market should go beyond a simple optimization based on the operating costs of the generating units a model of a competitive electricity market must consider the market structure the strategy of the market participants and any other factor that lead to prices different from costs this paper presents cosmee a model of a wholesale electricity market based on simple bids that estimates expected bid prices and quantities system hourly prices and generation schedules taking into account the bidding strategies of generators and the structure of the market the model reflects the profit maximizing behavior of the market agents subject to different types of constraints cosmee has been used to simulate a real wholesale market