new venture survival ignorance external shocks and risk reduction strategies abstract although scholars have long recognized the increased mortality risk that new ventures face in terms of a liability of newness most of the discussion around this risk has been in terms of the contextual constraints that new ventures face and the difficulties that managers have in overcoming them this emphasis is in part a reflection of the perils of newness but also stems from the retrospective and aggregate perspective taken by researchers although the macro level perspective of new venture mortality has made a significant contribution to our knowledge of mortality risk patterns there has been little interest in identifying how venture managers can address the risks that all new organizations face we argue that in order to make progress in explaining new venture survival a theoretical model is required that uses a more micro level perspective to explain new venture failure and the flip side new venture survival in this paper we develop such a model we establish a definition of mortality risk and argue that the liability of newness is largely dependent on the degree of novelty ignorance associated with a new venture novelty is viewed in three different dimensions viz to the market to the technology of production and to management novelty to the market concerns the degree to which the customers are uncertain about the new venture novelty in production concerns the extent to which the production technology used by the new venture is similar to the technologies in which the production team has experience and knowledge novelty to management concerns the entrepreneurial team s lack of business skills industry specific information and start up experience we argue that mortality risk increases with the degree of novelty in each dimension and with the number of dimensions in which the new venture is novel we propose that the decline in mortality risk occurs as the venture s novelty in each of the three dimensions is eroded by information search and dissemination processes this allows the new firm to become an established business and explains what we term the evolutionary path of mortality novelty and risk decline monotonically after a period of adolescence as ignorance decays over time due to passive learning we also propose that there is a strategic mortality risk path that reflects the impact of positive and negative shocks shocks are exogenous events that alter the overall degree of novelty at a point in time positive shocks decrease overall novelty while negative shocks increase overall novelty and reversals endogenous actions that increase the overall novelty of the new venture at a point in time on the mortality risk of a new venture if the incidence and effects of these disruptions can be managed then venture managers may be able to mitigate the mortality risk for their venture we argue that risk reduction strategies can be employed most of which impact on one or more of the dimensions of mortality risk in order to increase the firm s chances of survival a series of risk reduction strategies are proposed and their impact on the determinants of mortality risk is considered

testing the long run implications of the neoclassical growth model abstract the long run implications of the one factor neoclassical growth model are tested by investigating the cointegrating relations between the log of output consumption and investment and the real interest rate with the exceptions of austria and the united kingdom the evidence for the united states and to a lesser extent for canada japan and the federal republic of germany is favorable to the neoclassical growth model a simple extension to a multicountry setting proved however to be unsuccessful national outputs nor consumption series are driven by just one common stochastic trend

government r d subsidies as a signal for private investors abstract government subsidies for r d are intended to promote projects with high returns to society but too little private returns to be beneficial for private investors this may be caused by spillovers or a low appropriability rate apart from the direct funding of these projects government grants may serve as a signal for good investments for private investors we use a simple signaling model with different types of r d projects to capture this phenomenon the agency has a preference for basic research projects as they promise high expected social returns while banks prefer applied research projects with high private returns in a setup where the subsidy can only be used to distinguish between basic and applied research projects government agency s signal is not very helpful for banks however if the subsidy is accompanied by a quality signal it can lead to increased or better selected private investments

trade offs in the investment decisons of european venture capitalists abstract previous studies of venture capital investment criteria which have tended to utilize traditional likert scaled survey methods have produced some general findings which indicate that the human factor is of utmost importance however virtually all of these studies have been undertaken with u s based venture capitalists in addition the studies have generally been exploratory and have assumed a single hierarchy of decision criteria in all cases and across all venture capitalists we do not accept that this is valid therefore our study tested this assumption by investigating the trade offs made by venture capitalists in europe thirty five investment criteria were identified from the literature and from experts in the field and a questionnaire was developed that required the venture capitalist to make 53 pairwise trade offs with multiple levels seventy three venture capitalists from across europe were interviewed and completed the questionnaire conjoint analysis was used to compute relative rankings and overall rankings were computed to provide some general insight into the overall importance of the various criteria after this cluster analysis was used to identify different decision groupings the trade offs were randomized in the questionnaire but for descriptive purposes fall into the following groupings financial product market strategic competitive fund management team management competence and deal all five management team criteria as opposed to management competence criteria were ranked among the first seven product market criteria appeared to be only moderately important and fund and deal criteria were at the bottom of the rankings overall we conclude that the venture capitalists interviewed would as a group prefer to select an opportunity that offers a good management team and reasonable financial and product market characteristics even if the opportunity does not meet the overall fund and deal requirements it appears quite logically that without the correct management team and a reasonable idea good financials are generally meaningless because they will never be achieved cluster analysis identified three groupings of venture capitalists those primarily concerned with investing nationally those who focus solely upon the deal and those mainstream investors who consistently and instinctively rank the five management team criteria at the top of their list however there was no evident country bias a conclusion that is sustained if the countries are grouped by physical proximity northern versus southern europe or by size of the local venture capital community a surrogate for experience moreover there was no relationship to the scale of the fund the typical round of financing or the apparent network the article concludes by outlining the implications of the study for venture capitalists entrepreneurs and the research community

a status based model of market competition this article explores the significance of status processes for generating and reproducing hierarchy among producers in a market it develops a conception of a market as a status order in which each

co movements of oecd growth cycles the study is of short run and long run co movements and convergence across 21 oecd real per capita outputs on a sample period spanning 1960 to 1992 using dynamic principal components analysis and coherence analysis we reject the hypothesis of convergence but find evidence for long run growth cycles closely related across countries in particular the g5 group exhibits the highest degree of economic integration in the long run the group of the original members of the community also exhibits linkages at high and medium frequencies and represents the most homogeneous area in europe in terms of output dynamics both in the long and short run

a variance ratio test of random walks in foreign exchange rates the separate variance ratio tests under homoscedasticity and heteroscedasticity both provide evidence rejecting the random walk hypothesis using five pairs of weekly nominal exchange rate series over the period from august 7 1974 to march 29 1989 the rejections cast doubt on the random walk hypothesis in exchange rates which has received support in the existing literature furthermore since the rejections are robust to heteroscedasticity they suggest autocorelations of weekly increments in the nominal exchange rate series which may be consistent with the exchange rate overshooting or undershooting phenomenon in the past decade there has been a consensus that nominal exchange rates follow a random walk process since a unit root and uncorrelated increments are both required for a random walk process the random walk is usually supported in the existing literature either because a unit root component is detected in the exchange rate series or because the increment in the exchange rate is found to be serially uncorrelated for example meese and singleton 1982 and baillie and bollerslev 1989 both find a unit root component in the exchange rate series and the evidence provided in giddy and dufey 1975 cornell and dietrich 1978 logue sweeney and willett 1978 and hsieh 1988 all suggest that the exchange rate series contains uncorrelated increments in this paper the random walk hypothesis for the nominal exchange rate series is reexamined by applying a variance ratio test developed in lo and mackinlay 1988 to five pairs of weekly nominal exchange rate series over the period from august 7 1974 to march 29 1989 while there are two implications of the random walk unit root and uncorrelated increments this paper focuses on the uncorrelated increments aspect this is not only because there are some important departures from the random walk that unit root test cannot detect but also because the autocorrelation aspect may yield

should we pay attention to investor attention in forex futures market we investigate whether forex futures dynamics is responsive to change in investor attention the currencies used in the study are the aud australian dollar cad canadian dollar eur euro gbp

the statistical properties of daily foreign exchange rates 1974 1983 abstract this paper examines the statistical properties of daily rates of change of five foreign currencies from 1974 to 1983 the main purpose is to discriminate between two competing explanations for the observed heavy tails of the distribution that the data are independently drawn from a heavy tail distribution which remains fixed over time and that the data come from distributions which vary over time evidence point to the rejection of the first hypothesis further investigations show that the rejection can be attributed to changing means and variances in the data which can be described by a simple statistical model

exchange rate return predictability and the adaptive markets hypothesis evidence from major foreign exchange rates this study examines return predictability of major foreign exchange rates by testing for martingale difference hypothesis mdh using daily and weekly nominal exchange rates from 1975 to 2009 we use alternative mdh tests for linear and nonlinear dependence which include wild bootstrap automatic variance ratio test generalized spectral test and consistent tests we evaluate time varying return predictability by applying these tests with fixed length moving sub sample windows of two years while exchange rate returns are found to be unpredictable most of times we do observe episodes of statistically significant return predictability they are associated with coordinated central bank interventions and the subprime mortgage crisis in 2007 this finding suggests that return predictability of foreign exchange rates occurs from time to time depending on changing market conditions which is consistent with the implications of the adaptive markets hypothesis

does real u k gdp have a unit root evidence from a multi century perspective we employ linear and nonlinear unit root tests to examine the stationarity of five multi century historical u k series of real output compiled by the bank of england three series span 1270 to 201

a role based ecology of technological change this article considers what factors determine whether an innovation becomes a foundation for future technological developments rather than a dea end the authors introduce the concept of the technological niche which includes a focal innovation the innovations on which the focal innovations builds the innovations that build upon the focal innovation and the technological ties among the innovations within the niche using patents and patent citations to measure characteristics of innovation niches within the semiconductor industry the authors show that the size of the niche and the status of the actors within the niche have a positive effect on the likelihood that subsequent innovations will build upon the focal innovation competitive intensity within the niche has a negative effect on this likelihood

firm survival in traded industries does localization moderate the effects of founding team experience prior studies of the impact of founder team industry and start up experience on firm survival have paid little attention to location decisions or cluster effects in this paper we focus on young firms doing business in industries that compete for customers in geographically dispersed markets traded industries we examine whether regional concentrations localization of related industrial firms moderate the effects of founder team industry and start up experience on firm survival the study draws on firm level data from the kauffman firm survey and on county business patterns data from the us census bureau we found that localization negatively moderates the positive effects of founder team prior industry experience on firm survival we did not find significant moderating effects of localization on founder team prior start up experience our findings highlight the importance of accounting for location decisions and cluster effects when evaluating the human capital inputs of founder teams

investment intensity of currencies and the random walk hypothesis cross currency evidence abstract this paper studies the cross currency and temporal variations in the random walk behavior in exchange rates we characterize currencies with relatively large investment flows as investment intensive and conjecture that the more investment intensive a currency is the closer its exchange rate adheres to random walk using 29 floating bilateral usd exchange rates we find that the higher the investment intensity the less likely it is to reject random walk and the smaller the deviation from random walk is however the effect of investment intensity is non monotonic application of threshold models shows that after investment intensity reaches the estimated thresholds the level of investment intensity has no further effect on the deviation from random walk these findings help reconcile the previous conflicting results on the random walk in exchange rates by focusing on the effect of cross currency and temporal variations in investment intensity

market efficiency of brazilian exchange rate evidence from variance ratio statistics and technical trading rules abstract this study utilizes the variance ratio test to examine the behavior of brazilian exchange rate we show that adjustments for multiple tests and a bootstrap methodology must be employed in order to avoid size distortions we propose a block bootstrap scheme and show that it has much nicer properties than the traditional chow denning chow k v denning k c 1993 a simple multiple variance ratio test journal of econometrics 58 3 385 401 multiple variance ratio tests overall the method proposed in the paper provides evidence refuting the random walk behavior for the brazilian exchange rate for long investment horizon but consistent with the random walk hypothesis for short run horizon additionally we also test for the predictive power of variable moving average vma and trading range break trb technical rules and find evidence of forecasting ability for these rules nonetheless the excess return that can be obtained from such rules is not significant suggesting that such predictability is not economically significant

the effect of government spending on the current account output and expenditures evidence from latin america abstract this paper examines the linkages between government expenditures and current account balances in several latin american economies over the period 1974 1984 in theory these linkages critically depend on private sector responses to changes in government expenditures on both the demand and supply sides the analysis provides evidence that the negative current account government expenditure linkage is much stronger in the event of a temporary shock to government expenditures than in the event of a permanent shock the source of this differential response appears to be primarily on the expenditure side suggesting that private sectors in latin america incorporate the present discounted value rather than simply the current value of government expenditures into their expenditure decisions

long memory in foreign exchange rates using the geweke porter hudak test we find evidence of long memory in exchange rate data this implies that the empirical evidence of unit roots in exchange rates may not be robust to long memory alternatives fractionally integrated autoregressive moving average arfima models are estimated by both the time domain exact maximum likelihood ml method and the frequency domain approximate ml method impulse response functions and forecasts based on these estimated arfima models are evaluated to gain insight into the long memory characteristics of exchange rates some tentative explanations of the long memory found in the exchange rates are discussed

the diminishing signaling value of patents between early rounds of venture capital financing a long stream of research has documented the positive effects that patents bring about to emerging firms in high technology industries the general consensus is that patents contribute to firm growth because they confer monopolistic market rights offer protection from competitors increase the negotiating position of patent holders and other benefits what has received relatively less attention in the literature is whether patents act as a signal that attracts investors such as venture capital firms the handful of studies that have addressed that question has not analyzed whether the signaling function of patents decreases after the initial attraction of venture capital as information asymmetries between investors and target firms reduce in this study we hypothesize that patent activity has a signaling value that diminishes once information asymmetries between investors and funded firms lessen to study our proposition we draw upon a longitudinal dataset of more than 580 u s based biotechnology firms to empirically demonstrate that biotechnology firms that have submitted patent applications substantially increase the level of funding they receive for their first round of financing in line with a reduction of information asymmetries once the initial investment has materialized patent applications and granted patents have no effect on the growth of venture capital funds raised during the second round of financing we conclude the study with a discussion of avenues for new research implications for policy makers that consider the usefulness of the current patent system and with insights that can be employed by managers of firms in knowledge intensive areas such as biotechnology

founder s human capital external investment and the survival of new high technology ventures the effect of founder characteristics in attracting external investment and enhancing survival of new high technology ventures is explored using human capital theory and signalling theory we test the effect of founder characteristics on external investment in and survival of new high technology ventures by tracking a random sample of 193 high technology start ups all participants in the israeli technology incubator program founder s business management expertise and academic status attracted external investment but founder s general technological expertise did not founder s business management expertise and general technological expertise positively affected venture survival but founder s academic status did not possible implications for entrepreneurs investors policy and further research are discussed

variance ratio tests of random walk an overview this paper reviews the recent developments in the field of the variance ratio vr tests of the random walk and martingale hypothesis in particular we present the conventional individual and multiple vr tests as well as their improved modifications based on power transformed statistics rank and sign tests subsampling and bootstrap methods among others we also re examine the weak form efficiency for five emerging equity markets in latin america

contracting signaling and moral hazard a model of entrepreneurs angels and venture capitalists abstract investment by wealthy individuals known as angels in startup firms is quite significant and has taken off in the last few years angels invest in the company at an earlier stage than venture capitalists vcs do this paper examines the relationship between an entrepreneur an angel and a vc from the seed investment made by the angel to the exit stage the study characterizes the equilibrium contracts among the players and provides insights into the related institutional arrangements next the study examines the signaling aspects of the game the paper also analyzes the moral hazard problems of the entrepreneur and the vc it shows that the outcome in a startup firm is not efficient because of the free rider phenomenon

do euro exchange rates follow a martingale some out of sample evidence abstract traditional autocorrelation and variance ratio tests are based on serial uncorrelatedness rather than martingale difference as such they do not capture potential nonlinearity in mean which could lead to misleading inferences in favor of the martingale hypothesis this paper employs various parametric and nonparametric nonlinear models as well as several model comparison criteria to examine the potential martingale behavior of euro exchange rates in the context of out of sample forecasts the overall evidence indicates that while martingale behavior cannot be rejected for euro exchange rates with major currencies such as the japanese yen british pound and us dollar there is nonlinear predictability in terms of economic criteria with respect to several smaller currencies

disasters and the welfare cost of uncertainty the combination of power utility and i i d lognormal consumption growth makes for a benchmark model in which asset prices and expected returns can be found in closed form introducing the consumption based model john h cochrane 2005 12 writes the combination of lognormal distributions and power utility is one of the basic tricks to getting analytical solutions in this kind of model a message of this paper is that the lognormality assumption can be relaxed without sacrificing tractability working under two assumptions that there is a representative agent with power utility and that consumption growth is i i d i introduce in section i a mathematical object the cumulantgenerating function or cgf in terms of which four fundamental quantities that are at the heart of consumption based asset pricing can be simply expressed those quantities are the equity premium riskless rate consumption wealth ratio and mean consumption growth the expressions derived relate the fundamentals directly to the cumulants equivalently moments of consumption growth the lognormal assumption is equivalent to the assumption that all cumulants above the second are zero if one is in the business of making up stochastic processes many suggest themselves most naturally in continuous time although there is an obvious discrete time analogue of brownian motion a random walk with normally distributed increments it is less natural to map poisson processes say into discrete time and therefore harder to deal with the possibility of jumps in consumption in section ii i show that these results carry over to the continuous time setting the i i d growth assumption is replaced by its continuous time analogue log consumption is a levy process disasters and the welfare cost of uncertainty

capital gains taxation and funding for start ups abstract we examine how capital gains taxes affect investment in private start up i e pre ipo firms using data on capital raised in individual funding rounds we estimate the effect of the 2010 sbja which implemented a full exemption from federal capital gains tax on the sale of qualified shares because of the resulting higher expected after tax returns we hypothesize and find evidence consistent with this capital gains tax reduction increasing the amount of investment in start up firms per funding round by about 12 the effect is stronger in start up firms that are likely to have greater administrative capacity we estimate that about one third of the tax benefit is captured by investors

comovement in gdp trends and cycles among trading partners abstract it has long been recognized that business cycle comovement is greater between countries that trade more intensively with one another however nations face shocks to both the cyclical and trend components of their gdp series contrary to the result for cyclical fluctuations we find comovement of shocks to the trend component of real gdp is weaker among countries that trade more intensively with one another we simulate changes in ten year output growth correlations corresponding to the estimated effects of trade and show that the impact of trade on trend comovement is quantitatively more important than its effect on cyclical comovement

high frequency quoting short term volatility in bids and offers at subsecond horizons bids and offers in u s equity markets are more volatile than what would be implied by long term fundamentals to assess costs and consequences this paper suggests that traders random delays latencies interact with quote volatility to generate execution price risk and relative latency costs analysis of the behavior of quote setters suggests that this volatility is more likely to arise from recurrent cycles of undercutting similar to the edgeworth cycles found in product markets rather than mixed strategies of limit order placement

algorithmic quoting trading and market quality in agricultural commodity futures markets this paper investigates the effect of algorithmic trading activity as measured by quoting on the corn soybean and live cattle commodity futures market quality using the cme s limit order book

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

are us stock index returns predictable evidence from automatic autocorrelation based tests this article re examines the evidence of return predictability for three major us stock indices using two recently developed data driven tests namely the automatic portmanteau box pierce test and the wild bootstrapped automatic variance ratio test in tracking the time variation of return predictability via rolling estimation window we find that those periods with significant return autocorrelations can largely be associated with major exogenous events theoretically the documented time varying nature of predictable patterns is consistent with the adaptive markets hypothesis

the value of human and social capital investments for the business performance of startups we investigate the manifold posed question to what extent does investment in human and social capital besides the effect of talent enhance entrepreneurial performance we distinguish between three different performance measures survival profits and generated employment on the basis of the empirical analysis of a rich dutch longitudinal data set of firm founders we conclude that specific investments indeed affect the three performance measures substantially and significantly specific attention is paid to the unobserved talent bias moreover the effect of the emergence of so called knowledge industries is explored

doing more with less innovation input and output in family firms family firms are often portrayed as an important yet conservative form of organization that is reluctant to invest in innovation however simultaneously evidence has shown that family firms are flourishing and in fact constitute many of the world s most innovative firms our study contributes to disentangling this puzzling effect we argue that family firms owing to the family s high level of control over the firm wealth concentration and importance of nonfinancial goals invest less in innovation but have an increased conversion rate of innovation input into output and ultimately a higher innovation output than nonfamily firms empirical evidence from a meta analysis based on 108 primary studies from 42 countries supports our hypotheses we further argue and empirically show that the observed effects are even stronger when the ceo of the family firm is a later generation family member however when the ceo of the family firm is the firm s founder innovation input is higher and contrary to our initial expectations innovation output is lower than that in other firms we further show that the family firm innovation input output relationships depend on country level factors namely the level of minority shareholder protection and the education level of the workforce in the country

an application of variance ratio test to the korean securities market abstract the efficient market hypothesis emh has recently been under attack as a result of the methodology employed in the early tests of the theory more recent evidence has shown that the traditional tests of random walks are susceptible to errors because of spurious autocorrelation induced by non synchronous trading which is characteristic of stock markets in developing countries this is the first study to apply the recently introduced lo mackinlay variance ratio test to the korean stock exchange kse the kse is chosen because it represents a typical emerging stock market the results show that under the assumption of homoscedastic error term the random walk hypothesis is rejected however with heteroscedastic stochastic disturbance term we could not reject the hypothesis of random walk for daily data when the test is applied to longer horizons such as weekly monthly 60 day and 90 day interval data we could not reject the random walk hypothesis there is also evidence that suggests the presence of spurious autocorrelation and heteroscedasticity in the market these could be due to official intervention and nonsynchronous trading in the market

canadian economic growth random walk or just a walk this paper analyses the role of shocks in canadian economic growth since 1870 it uses a nonparametric technique to evaluate the degree of presistence of an innnovation in long run gnp it is found that a one percent shock to canadian gnp changes the long run forecast of this variable by appproximately the same amount which is characteristic of a random walk process it is also shown that in important periods of canadian economic growth its gnp evolved as a random walk with constant drift with the exception of the period 1929 42 no evidence of business cycles is found these results lead to the conclusion that movements and oscillations in the gnp of canada since 1870 have been primarily driven by the accumulation of shocks rather than by cyclical movements

piero sraffa and the true object of economics the role of the unpublished manuscripts this special issue is concerned with the work of piero sraffa and with recent developments in its interpretation occasioned by the opening of the sraffa archives in late 1993 1 it brings together some of the contributions to a workshop on this theme that was sponsored by the cambridge journal of economics and held in july 2010 on the occasion of the 50th anniversary of the publication of piero sraffa s major work production of commodities by means of commodities pcmc the original workshop on new perspectives on the work of piero sraffa was aimed at sraffa scholars who had taken the opportunity to engage with materials in the sraffa archives and who were interested in exploring their potential for revisiting and placing pcmc in the wider context of ongoing debates on economic philosophy economic theory and economic policy as is usually the case not all presentations made at the workshop were advanced for consideration in this special issue nor could all invitees attend heinz kurz as chief editor of the sraffa archives agreed to present his view on the relevance of the sraffa archives to research on sraffa and to comment on contributions at the workshop as well as on their final versions submitted for publication in this special issue kurz s contribution to this special issue was thus written in the short time available between the receipt of final versions and publication deadlines we are indebted to him for his cooperation in the preparation of this special issue we are especially grateful for his patience in the time taken to bring this project to publication this abstract was borrowed from another version of this item

international evidence on persistence in output in the presence of an episodic change this paper uses some newly developed methods and techniques to examine the dynamic properties of international output in the presence of a structural break we provide statistical evidence to show that the unit root test results can in some cases be sensitive to whether a one time structural break in the data is modelled exogenously or endogenously however in most cases the unit root test results remain robust to specification of the structural break exogenously or endogenously moreover we find that the null hypothesis of a unit root in output can be rejected in favour of a flexible trend alternative for a number of countries such as canada denmark france and the united states

does patenting help high tech start ups abstract using data on all high and medium tech start ups in the uk in 2000 this paper assesses the effect associated with a firm s decision to patent on a firm s subsequent growth between 2001 and 2005 we propose a new approach to addressing well known issues challenging identification of any patent effect firm heterogeneity simultaneity between firm performance and patenting and sample selection our findings suggest that patentees have higher asset growth than non patentees of between 8 and 27 per annum 2011 elsevier b v all rights reserved

bootstrap inference in econometrics the astonishing increase in computer performance over the past two decades has made it possible for economists to base many statistical inferences on simulated or bootstrap distributions rather than on distributions obtained from asymptotic theory in this paper i review some of the basic ideas of bootstrap inference the paper discusses monte carlo tests several types of bootstrap test and bootstrap confidence intervals although bootstrapping often works well it does not do so in every case

international macroeconomic fluctuations and the current account intertemporal models of the current account generally assume that global shocks do not affect the current account we use this assumption to identify global and country specific shocks in a bivariate var we test the quality of the identification using evidence from g7 data in accordance with the theory we observe a link between the global shock and a measure of the world real interest rate we also find that long term output growth is driven by global factors in most countries that country specific shocks are less persistent in smaller economies and generally less volatile than global shocks

some evidence of random walk behavior of euro exchange rates using ranks and signs abstract this study utilises recently developed tests based on ranks and signs in addition to the traditional variance ratio test to examine the behavior of euro exchange rates we show that adjustments for multiple tests must be employed in order to avoid size distortions overall such adjustments provide evidence consistent with random walk behavior of euro exchange rates

permanent and transitory components in macroeconomic fluctuations fluctuations in real gnp have traditionally been viewed as transitory deviations from a deterministic time trend the purpose of this paper is to review some of the recent developments that have led to a new view of output fluctuations and then to provide some additional evidence using post war quarterly data it is hard to reject the view that real gnp is as persistent as a random walk with drift we also consider the hypothesis that the recent finding of persistence are due to the failure to distinguish the business cycle from other fluctuations in real gnp we use the measured unemployment rate to decompose output fluctuations we find no evidence for the view that business cycle fluctuations are more quickly trend reverting this abstract was borrowed from another version of this item

the random walk in canadian output this paper examines the time series properties of canadian real output for the years 1870 to 1985 in doing so tests for unit roots in the univariate time series representation of the series are performed the testing procedures are based on recent work by pierre perron 1989 and allow for trend breaks

international evidence on shock persistence structural change nonlinearities and subsample robustness testing for unit roots and the related issue of measuring shock persistence has attracted considerable theoretical and applied econometric interest the issue of the size of the random walk component raised by cochrane journal of political economy 96 893 920 1988 has been extended in the work of other authors leung economics letters 40 435 44 1992 in particular considers the effects of structural breaks on measures of persistence in this paper we consider new results for the effects of structural change nonlinearities and subsample robustness on spectral based measures of persistence illustrating the potential problems via an updated and extended version of the cogley journal of political economy 98 501 18 1990 data set we find that significant structural breaks exist in the majority of the series investigated furthermore measured persistence differs markedly across distinct periods with the assumption of common growth rates over very long periods leading on occasions to potentially

international evidence on output fluctuation and shock persistence we estimate output growth rate spectra for 58 countries the spectra exhibit diverse shapes to study the sources of this diversity we estimate the short run business cycle and long run frequency components of the sampled series for most oecd countries the bulk of the spectral mass is in the business cycle frequency band and the magnitude of this cyclical component increases with income for the developing countries however the spectral mass is not concentrated in the business cycle frequency band and the income cycle relationship is not as strong we also estimate two frequency domain measures of shock persistence and find both measures to vary considerably across countries with the u s having the lowest estimates for the oecd countries most of the variation in the variance ratio statistic appears to be explained by the variation in the long term growth component

wages economic development and the customary standard of life this paper examines empirically the evolution of the customary standard of life and how this relates to real wages and economic development its starting point is sraffa s reintroduction of the classical notion of wages as the cost of reproducing labour so that they are necessarily a charge on production however when considering a production system generating a surplus sraffa offered no explanation of how the surplus might be realised and distributed rather he concentrated on the choice of technique as the profit share varied from 0 to 1 his approach was one of taking a snapshot of a productive system at a point in time in contrast this paper explores the trend in wages in the uk over the past 150 years and the evolving level and composition of what became the social necessities of worker consumption i e the customary standard of life in this process four dynamically interacting processes can be identified i a progressive increase in the productive potential of the system ii the diffusion of a greater quantity and varieties of consumer goods the growth of property ownership by consumers and their use of credit in a cumulative improvement in their customary standard of life iii the consolidation of the customary standard of life into real wages by collective bargaining and iv diffusion of improved living standards by an extension of collective bargaining coverage to include groups previously excluded and the growth of the welfare state in which the failure to achieve the customary standard of life defines poverty and triggers policy designed to alleviate it the central role played by the customary standard of life in driving real wages means that the inputs of labour power into commodity production can be represented by the commodity composition of the customary standard of life in sraffa style analyses in this the successive cross sections in the historical flow of economic development showing the commodity flows into and out of production will be ever changing like the still frames in a moving picture show moreover such a historical approach rules out the possibility that at any time changes in the rate of profit will precipitate the switching of methods of production past choices of techniques are historically embedded in the capital stock the composition of which is modified by new investment and the scrapping of old as it wears out becomes technically outmoded and or demand for its products declines nevertheless changes in the distribution of income have consequences for the future path of economic and social development and what this might be is arguably the most useful area for economic and social research copyright oxford university press

uncertainty about the persistence of economic shocks the behavior of time series of economic output has been characterized in terms of the persistence of shocks for a series generated by an autoregressive integrated moving average model persistence is a function of the model parameters we demonstrate that a careful analysis based on the likelihood can lead to considerably more uncertainty about persistence than is implied by the confidence intervals that are usually calculated we examine also the estimation of persistence from a vector autoregression in this case we also find nonstandard concentrated log likelihood functions concluding again that considerable care is necessary to assess uncertainty

joint variance ratio tests of the martingale hypothesis for exchange rates there is considerable interest in whether exchange rates behave like martingales liu and he tested the martingale hypothesis for exchange rates using the variance ratio methodology of lo and mackinlay they found that exchange rates have violated the martingale property since the inception of floating rates in 1973 liu and he did not consider the joint implications of their tests however in this article we reassess the martingale hypothesis for exchange rates using the joint tests developed by hochberg and by richardson and smith contrary to the findings of liu and he the joint tests indicate that the martingale model worked quite well for exchange rates in the recent years of the floating rate regime

effects of social capital and power on surviving transformational change the case of initial public offerings we examined how social capital and the power of venture capitalists and founderceos affect ipo firm survival using data from 218 u s initial public offerings conducted in 1992 we found that average management team tenure and an ipo deal s network embeddedness decreased the likelihood of failure during a firm s first five years as a public entity founder ceo presence at the time of an ipo interacted with ceo ownership to decrease the likelihood of failure and ceo ownership and venture capitalist ownership concentration also decreased that likelihood evolutionary perspectives on organizations are often accompanied by the presumption that organizations face an increased risk of failure early in their lives owing to liabilities of newness aldrich 1999 stinchcombe 1965 as organizational goals and patterns of activity become routinized over time increased reliability in performance and accountability for actions taken enhance a firm s survival chances hannan freeman 1984 this process however also generates strong inertial pressures that not only discourage organizational change but also because of the potential for disruption to existing internal and external routines make change hazardous research findings suggest that even in older better established firms significant transformational events during their life cycles can effectively reset the clock and reintroduce risks associated with the liability of newness as firms struggle to adapt strategies internal operational and administrative processes and or external ties and relationships amburgey kelly barnett 1993 thus transformational change in organizational operations decreases efficiency and increases failure rates at least in the short term as resources and attention are diverted from normal routinized operating functions to processes involving adaptation and reorientation haveman 1992

determinants of venture capital firms preferences regarding the industry diversity and geographic scope of their investments abstract competition is intensifying in the venture capital industry in the u s the number of venture capital firms vcfs tripled from 1980 to 1989 supplier power in the form of institutional investors such as pension funds continues to grow foreign venture capital has grown to the extent that commitments to foreign vcfs exceeded domestic commitments in both 1988 and 1989 further alternative sources of financing for entrepreneurs such as individual investors angels corporations and strategic alliances are increasingly viable options vcfs face pressure to seek lower risk investments improve rates of return and provide value to new venture development surprisingly few scholarly studies have begun to investigate the strategies vcfs are aiming to implement in order to deal with this increasing pressure building on the premise that decisions regarding product market scope are a key component of firm strategy hofer and schendel 1978 this study examined 169 domestic vcfs in order to identify factors that might explain variations in preferences regarding the industry diversity and geographic scope of their investments the sample drawn from california massachusetts and texas represented about 27 of all u s based vcfs in 1987 the year in which the data were gathered in terms of the total size of investment portfolio the average for these 169 vcfs was 69 8 million which is statistically indistinguishable from the u s average of 65 million results indicate that 1 vcfs specializing in early stage ventures prefer less industry diversity and narrower geographic scope relative to other vcfs 2 corporate vcfs i e those owned by non financial corporations prefer less industry diversity but broader geographic scope relative to non corporate vcfs 3 larger vcfs prefer greater industry diversity and broader geographic scope than do smaller vcfs and 4 provision of small business investment companies sbic financing by the vcf has no impact on preferences regarding industry diversity but is associated with a preference for narrower geographic scope one implication of these results is that vcfs in the u s are not homogeneous as regards the intended product market scope of their portfolios this in turn holds implications not only for vcfs but also for their suppliers limited partners buyers entrepreneurs and policy makers vcfs can no longer rely on haphazard investment schemes they need to attract investors by virtue of the benefits offered by their portfolio strategy and they need to attract superior investments via offering valueadded services and know how potential investors in venture capital will want to examine for example the impact on risk and return of investing smaller amounts in several vcfs at one extreme versus making one large investment in a very diversified vcf at the other extreme the results of this and other studies suggest that outcomes timing magnitude and riskiness of returns of choosing such alternatives will vary widely and will depend in great part on the strategies of the vcfs involved it will not be possible for investors to make wise choices without a full examination of their own objectives and of the profiles of vcfs entrepreneurs with the most attractive ventures have alternative sources of financing to consider and should weigh the benefits of being financed and supported by various vcfs as part of the vcfs portfolios knowing a vcf s preferences regarding product market scope improves their chances of approaching and selecting the right fit and for those entrepreneurs with a narrower set of options such knowledge may make the difference between receiving and not receiving financing in a timely manner finally policy makers may be able to make use of knowledge of the forces that influence the investment strategies of vcfs presently concerns for policy makers may include the gap in seed capital increased foreign presence in the u s market and the export of promising innovative technology via alliances with foreign firms all of these factors are influenced by the strategies pursued by vcfs as they jockey for position in the increasingly competitive venture capital market

piero sraffa and the future of economics how did piero sraffa look at the future of economic theory first when he arrived in england in the mid 1920s and then after the publication of his extraordinarily compact little book production of commodities by means of commodities 1960 the author sifts through sraffa s published works and abundant unpublished papers his acquaintances and personal contacts and vicissitudes the conclusions he arrives at remain problematical but do not refrain him from clearly expressing his specific quite definite views copyright oxford university press

initial human and financial capital as predictors of new venture performance abstract this research seeks to predict the performance of new ventures based on factors that can be observed at the time of start up indicators of initial human and financial capital are considered to determine how they bear upon the probability of three possible performance outcomes 1 failure 2 marginal survival or 3 high growth four categories of initial human and financial capital are examined general human capital represented here by the entrepreneur s education gender and race may reflect the extent to which the entrepreneur has had the opportunity to develop relevant skills and contacts management know how embodied in the entrepreneur or available through advisors or partners reflects management specific skills and knowledge without regard to the kind of business industry specific know how reflects specific experience in similar businesses financial capital is one of the most visible resources it can create a buffer against random shocks and allow the pursuit of more capital intensive strategies which are better protected from imitation the study utilizes a longitudinal study of 1053 new ventures representative of all industry sectors and geographical regions the research departs from most previous studies in considering different measures of performance marginal survival and growth and in considering explicitly whether the factors contributing to marginal survival differ from those contributing to high growth it was found that measures of general human capital influenced both survival and growth except for gender with women owned ventures being less likely to grow but just as likely to survive management know how variables had more limited impact having parents who had owned a business contributed to marginal survival but not to growth number of partners contributed to growth but not to survival management level prior employment in non profit organizations or not having been in the labor force and the use of professional advisors did not have significant effects industry specific know how contributed to both survival and growth amount of initial financial capital also contributed to both the usefulness of the model is enhanced by the fact that the resource variables considered are relatively easy to assess and all can be considered at the time of start up although some of the human capital variables cannot easily be changed the benefits or risks associated with each can be assessed in some cases potential problems can be identified so that plans can be modified to improve prospects overall it appears that using a model based upon the initial human and financial capital of the venture it is possible to predict the performance of new ventures with some degree of confidence

social capital and the linkages of high tech companies to the military defense system is there a signaling mechanism this study investigates linkages of new israeli high tech companies to the military and defense system we examine the impact of social capital signaling and learning spillovers on resource acquisition in terms of investments and the financial performance of companies with and without linkages social capital signaling and learning spillovers are examined as they impact individual and organizational resource acquisition and performance of 200 new israeli high tech companies the study contributes to the existing literature of entrepreneurship by suggesting the relevance of knowledge spillovers signaling theory and social capital to the context of the interface between defense and civilian spheres

exchange rates and fundamentals co movement long run relationships and short run dynamics abstract the present study builds upon the seminal work of engel and west 2005 and in particular on the relationship between exchange rates and fundamentals the paper discusses the well known puzzle that fundamental variables such as money supply and interest rate provide help in predicting changes in floating rates it also tests the theoretical result of engel and west 2005 that in a rational expectations present value model the asset price manifests near random walk behaviour if the fundamentals are i 1 and the factor for discounting future fundamentals is near one the study explores the direction and nature of causal interdependencies among the most widely traded currencies in the world their country specific fundamentals and their us differentials a new var vecm garch multivariate filtering approach is implemented whilst linear and nonlinear non causality is tested and validated on simulated and empirical data the evidence implies that there is no indication of a prevailing causal behaviour and when nonlinear effects are accounted for the pattern of leads and lags changes over time the variations in this linkage can be attributed to parameter instability in structural models which may have little effect on fx forecastability over short horizons yet it is significant for long run cointegrating relationships while it is difficult to reconcile these findings with the rational expectations hypothesis the theory of consistent expectations or bounded rationality matches simulation and empirical findings more efficiently overall fundamentals may be important determinants of fx rates however there may be some other unobservable variables driving the currency rates that current asset pricing models have not yet captured

aggregate output dynamics in the twentieth century abstract this study shows that annual output data of the g7 countries in the twentieth century are better characterized as transitory deviations from a shifting growth trend than as integrated processes furthermore i find no two countries share common business cycles

the political economy of production of commodities by means of commodities a comment on pasinetti and sraffa luigi pasinetti s contribution in this special issue highlights the complexity and richness of sraffa s sources and points to the diversity of the streams of thought that may be detected behind sraffa s original research programme in particular pasinetti calls attention to the heuristic value of sraffa s unpublished manuscripts in assessing the constructive effort of production of commodities by means of commodities pcc this paper moves further along the above line of investigation and explores the smithian strand of pcc in particular the paper highlights that the duality between horizontal and vertical prices explored by both sraffa and pasinetti points to the existence of different complementary causal linkages in classical political economy vertical integration makes it possible to resolve prices into a sum of weighted quantities of labour and calls attention to the system of weights needed for this operation alternative weighting systems may be associated with alternative institutional arrangements for example a traditional wage profit economy would attach increasingly higher weights to increasingly remote quantities of labour but the analytics of vertical integration also raises the institutional possibility of increasingly lower weights as increasingly remote labour quantities are considered the paper argues that by assessing together the horizontal ricardian and vertical smithian strands of pcc it is possible to grasp more fully the theoretical potential of this work in particular it becomes possible to distinguish between the identification of general causal principles and the instantiation of those principles in specific historical contexts copyright oxford university press

causality and interdependence in pasinetti s works and in the modern classical approach the formal representation of economic theories normally takes the form of a model that is a system of equations which connect the endogenous variables with the values of the parameters which are taken as given sometimes it is possible to identify one or more equations which are able to determine a subset of endogenous variables priorly and independently of the other equations and of the value taken by the remaining variables of the system the first group of equations and variables are thus said to determine causally the remaining variables in pasinetti s works this notion of causality has often been emphasized as a formal property having the burden to convey some deep economic meaning in this work we will go through those pasinetti s works where this notion of causality plays a central role with the purpose to contextualize it within the econometric debate of the sixties to enucleate its economic meaning and to show its connections with other fields of the modern classical approach

international evidence on the size of the random walk in output this paper contributes three extensions of cochrane s work on measuring the relative stability of long term growth it estimates variance ratios for nine oecd countries over the period 1871 1985 presents an improved approximation to the distribution of the variance ratio and considers the comovements of long growth cycles across countries the evidence indicates that the relative stability of long term growth found by cochrane is unique to the united states relative to the united states most countries have more variable dynamics at low frequencies and smoother dynamics at frequencies traditionally associated with business cycles

real convergence in some central and eastern european countries this article examines the real convergence hypothesis in some central and east european countries both towards the german and the us economies by means of using time series techniques during the period 1950 to 2003 no evidence is found of real convergence for the whole period however when one allows for structural breaks evidence is found of a catch up process during the 1990s to 2003 period for poland the czech republic and hungary towards germany and only for poland towards the us economy

international evidence on output persistence from postwar data abstract this paper reports some international evidence on output persistence based on postwar data using fractional differencing analysis we find evidence of fractional integration in output for the u s and u k but not for the other g 7 countries implying that these two countries show much less persistence in output fluctuations than the others

do announcements of wto dispute resolution cases matter evidence from the rare earth elements market abstract rare earth elements rees have gained increasing attention recently for several key reasons 1 they are vital to many strategic industries 2 they are relatively scarce 3 they frequently exhibit high price fluctuations 4 china holds a quasi monopoly on their mining and 5 china s ree policy which was overly restrictive and led to a formal complaint from the u s japan and the eu at the world trade organization wto in 2012 this paper investigates whether the announcement of a wto dispute resolution case has the power to fundamentally change market dynamics we find empirical support for this notion because ree prices exhibit a structural break around the announcement of the wto dispute and show lower variance ratios for all tested rees afterward this indicates a tendency toward efficiency although ree prices still do not follow a random walk similarly we find that stock price informativeness of companies in the ree industry increases after the announcement reflecting more firm specific than marketwide information and less governmental influence finally we show that model uncertainty for option pricing models decreases which we measure by the lower pricing differences among them

a long run structural macroeconometric model of the uk a new modelling strategy that provides a practical approach to incorporating long run structural relationships suggested by economic theory in an otherwise unrestricted var model is applied to construct a small quarterly macroeconometric model of the uk estimated over 1965q1 1999q4 in nine variables domestic and foreign outputs prices and interest rates oil prices the nominal effective exchange rate and real money balances the aim is to develop a model with a transparent and theoretically coherent foundation tests of restrictions on the long run relations of the model are presented the dynamic properties of the model are discussed and monetary policy shocks identified

founder ceo succession and the paradox of entrepreneurial success in the last few decades we have developed a substantial body of knowledge about ceo succession however except for some studies of family businesses that lack direct applicability to nonfamily ceo succession the past studies of succession have not examined the very first succession event in a firm when the founder ceo is replaced on a large scale basis the critical differences between later stage succession and founder ceo succession include the higher level of attachment between founder ceos and the firms they create the much larger equity holdings of founder ceos which give them much more control of the firm the fact that many founder ceos remain in the firm even though it is being run by their successors and the fact that nearly all early stage succession events involve outside successors in contrast to later stage succession research which has focused on the insider outsider distinction these differences make it hard to extrapolate from later stage succession findings to founder ceo succession therefore in order to examine founder ceo succession i used field research and grounded theory building to study the factors that should affect founder ceo succession in internet start ups i find that there are two central intertemporal events that may affect founder ceo succession the completion of product development and the raising of each round of financing from outside investors i develop testable hypotheses about how each of these events affect the rate of succession and then test these hypotheses using an event history analysis of a unique dataset containing the succession histories of 202 internet firms my findings point to multiple paradoxes of success in which the founder ceo s success at achieving critical milestones actually causes the chance of founder ceo succession to rise dramatically

the role of human and social capital in growth extending our understanding human capital institutions and social capital are now all recognised as significant factors of growth they have largely been studied separately and although they present sufficient common characteristics to be conceptualised as one main category distinct from physical capital it may still be more important to focus on the links between their specific sub categories direct links with income may be spurious as there appears to be a web of associations between the sub categories which would benefit from further empirical investigation this paper reviews the literature on human capital institutions and social capital extracting three sub categories of human capital human skills capital stock of knowledge and entrepreneurship and two of social capital low and high rationalisation specific areas are then suggested for further empirical study

volatility and persistence of fluntuations individual production series in italy 1890 1985 the analysis is focused on possible time related changes in the cyclical behaviour of production using a set of individual production series disaggregate data are used to analyse whether short run fluctuations have actually become less extreme or erratic in time and whether the tendency of shocks to have permanent or transitory effects has changed between the pre war and post war eras a third aspect of cyclical trends examined concerns the correlation of short term changes across sectors the main finding of the paper is that there has been little change in the behaviour of the individual series over time in fluctuation size persistence and frequency thus a reduction in variability appears also to be due to a problem of statistical measurement rather then suggesting as the standard literature does that demand shocks were unimportant in the post war period which implies that supply shocks were more important an estimate of the italian experience gives evidence of the importance of both causes

are prices countercyclical evidence from the g 7 abstract this paper re examines the cyclical behavior of prices using postwar quarterly data for the g 7 we confirm recent evidence that the price level is countercyclical however we find strong evidence that the inflation rate is procyclical in our sample our results show the importance of making a clear distinction between inflation and the cyclical component of the price level when reporting and interpreting stylized facts regarding business cycles

high tech start up firm survival originating from a combined use of internal resources although various streams in the existing literature on the resource based view rbv of the firm argue that firm survival and performance can benefit from a combined use of internal resources relatively limited empirical evidence is provided that supports this argument to fill this gap in the literature in this article we focus on how combinations of internal resources affect the survival chance of technology based start ups by using a unique dataset from a high tech park in beijing china empirical results show that firms interconnected internal resources exert a significant influence on these firms survival chance our findings imply that the survival of new technology based start ups benefits from the synergetic effect of combining resources in detail the data support the hypothesis that the combined use of r d resources internal financial resources and scientifically skilled employees as posited by the rbv has an amplifying effect on the chances to survive of high tech start ups

bringing individuals back in the effects of career experience on new firm founding because of methodological and theoretical obstacles research on organizational foundings has largely focused on societal and population level explanations this paper takes the view that understanding firm foundings also requires linking to individual level processes we suggest that careers are an important mechanism linking individual level processes to firm foundings the firm founding experience of potential founders impacts organizational foundings by influencing expectations of the liability of newness we test our explanation on the set of inventions patented by the massachusetts institute of technology over the period 1980 1996 by examining the effect of inventors career experiences on the likelihood that an invention will be commercialized through the founding of a new organization copyright 2003 oxford university press

time reversibility tests of volume volatility dynamics for stock returns abstract non parametric tests based on the concept of time reversibility in statistical mechanics are applied to assess the dynamic implications of the mixture of distributions hypothesis mdh the tests show that shocks to volume and volatility are dynamically asymmetric thus rejecting the one factor mdh

common stochastic trends in a system of exchange rates univariate tests reveal strong evidence for the presence of a unit root in the univariate time series representation for seven daily spot and forward exchange rate series furthermore all seven spot and forward rates appear to be cointegrated that is the forward premiums are stationary and one common unit root or stochastic trend is detectable in the multivariate time series models for the seven spot and forward rates respectively this is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates a general consensus has emerged in recent years that many macroeconomic time series such as gnp consumption expenditures disposable income etc can be characterized by a stochastic trend model in particular nelson and plosser 22 described this property as one of being difference stationary so that the first difference of a time series is stationary an alternative trend stationary model where a stationary component is added to a deterministic trend term has generally been found to be less appropriate 1 similarly it has long been recognized that many financial time series such as foreign exchange rates are nonstationary e g in meese and singleton 21 the issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates for instance many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals further there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate 2 some authors e g frenkel 11 12 have conducted tests in levels while geweke and feige 14