decomposing productivity growth in the u s computer industry in this paper we examine the sources of the productivity growth in the u s computer industry from 1978 to 1999 we estimate a joint production model of output quantity and quality that distinguishes two types of technological changes process and product innovations based on the estimation results we decompose total factor productivity tfp growth rate into the contributions of process and product innova tions and scale economies we find that product innovation associated with better quality accounts for about 30 of the tfp growth in the computer industry furthermore the tfp acceleration in the computer industry in the late 1990s is mainly derived from a rapid increase in product innovation

hybrid r d we develop a model of r d collaboration in which individual firms carry out in house research on core activities and undertake bilateral joint projects on non core activities with other firms we develop conditions on the profit functions of the firm under which r d investments in different projects of a firm are complementary we show that this condition is met by standard price and quantity setting oligopoly models we then study the relation between the number of joint projects and investments and profits in this context we identify a second aspect of complementarity equilibrium investments in in house as well as in each joint project are increasing in the number of projects however we find that an increase in number of joint projects of all firms lowers collective profits suggesting the presence of excessive incentives for conducting research

endogenous efficiency gains from mergers this article analyzes endogenous efficiency gains from mergers it considers oligopolistic homogeneous good markets and duopolistic and triopolistic markets under product differentiation pd quantity and price competition in a two stage game firms invest in cost reducing innovation with and without mergers and then compete in output prices it is found that in homogeneous good markets all possible mergers generate efficiency gains and that these are most significant when r d spillovers are very low or very high efficiency gains increase with the number of insiders and generally decrease with the number of outsiders with pd in most cases the merger generates efficiency gains when spillovers and or pd are sufficiently high with pd efficiency gains increase with spillovers but may increase or decrease with the level of pd the implications of the results for the relationship between competition and innovation outputs and for merger policy are discussed

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

dynamic control of a monopolist s product and process innovation with reference quality our main purpose is to investigate the dynamic control problem of a monopolist s product and process innovation under reference quality the main features of this article are i a monopolist deal

firm size and the nature of innovation within industries the case of process and product r d the effect of firm size on the allocation of r d effort between process and product innovation is examined it is hypothesized that relative to product innovations process innovations are less saleable in disembodied form and spawn less growth this implies that the returns to process r d will depend more on the firm s output at the time it conducts its r d than the returns to product r d incorporating this distinction in a simple model the authors derive and test predictions about how the fraction of r d devoted to process innovation varies with firm size within industries

product and process innovation the implication of making comparisons between uniform pricing monopolist and second degree price discriminating monopolist the question of simultaneous product and process innovation price discrimination is crucial for technologically evolving industries in this paper we assume that there are two different kinds of

optimal production allocation and distribution supply chain networks abstract enterprise optimisation can rapidly strip significant bottom line costs out of global operations giving companies a real competitive edge the benefits of managing supply chain networks by integrating operational design and financial decisions have been acknowledged by the industrial and academic community the objective of this work is to determine the optimal configuration of a production and distribution network subject to operational and financial constraints operational constraints include quality production and supply restrictions and are related to the allocation of the production and the work load balance financial constraints include production costs transportation costs and duties for the material flowing within the network subject to exchange rates as a business decision the out sourcing of production is considered whenever the organisation cannot satisfy the demand a mixed integer linear programming milp model is proposed to describe the optimisation problem a case study for the coatings business unit of a global specialty chemicals manufacturer is used to demonstrate the applicability of the approach in a number of scenarios

intensity of competition and the choice between product and process innovation abstract two questions are examined within a model of vertical differentiation the first is whether cost reducing innovations are more likely to be observed in regimes of more intense bertrand or less intense cournot competition we find that there are cost reducing innovations that are pursued under cournot but not under bertrand competition the second is whether the regime of competition affects a firm s choice between product and process innovation we show that for the high quality firm whenever there is a difference between the choice made by a bertrand competitor and the choice made by a cournot competitor the former opts for product innovation while the latter prefers process innovation for the low quality firm the result is reversed

from m p to ma p multinationality alignment and performance rather than searching for a universal optimal level of multinationality for all firms we argue that firm specific attributes should result in firm specific optimal levels of multinationality specifically we draw upon transaction cost and internalization theory to argue that there will be different optimal levels of multinationality for individual firms and if firms internalize foreign operations to an extent less than or greater than their individual optimal levels transaction costs will increase and performance will decrease to test this idea we use transaction cost models in the context of large us law firms during the time period from 1986 through 2008 to estimate firm specific optimal multinationality next we test relationships between alignment with or deviations from firm specific optimal levels of multinationality and performance ma p consistent with the ma p hypothesis insufficient and excessive levels of multinationality are both negatively related to financial performance in addition excessive multinationality is positively associated with downside performance risk one key implication is that an ma p approach may offer greater theoretical validity and clarity than traditional multinationality and performance m p approaches

joint venture formation of very large multinational firms large firms differ from smaller firms in many aspects in this research note we investigate the relationship between the size of firm and the characteristics of equity joint ventures ejvs empirically we found that very large firms are more likely to have a higher equity stake in their ejvs seek alignment with other foreign firms engage in global industries and invest in large scale ejvs than smaller firms they are also less affected by the risk conditions of the host country empirical testing is based on a sample of 1 298 foreign ejvs in the people s republic of china between 1981 and 1998 interesting differences also exist among firms that are based in the u s japan and europe

innovation threats and strategic responses in oligopoly markets this paper deals with the strategic reaction of firms to competitive threats stemming from newly developed products of actual competitors product innovation projects go through multiple time consuming stages with several continuation termination decisions hence competitors can react to the threat before the new product is introduced and thereby may prevent or facilitate the product s introduction we consider a duopoly model where firm 1 can start a two stage product innovation project for obtaining a horizontally and vertically differentiated product in between the two stages firm 2 can react by making an investment that improves the competitive position of the current product we find that under weak vertical differentiation firm 2 wants firm 1 to innovate horizontal differentiation softens competition and firm 2 over invests to induce firm 1 to launch the new product second under strong vertical differentiation firm 1 starts the product innovation project triggering under investment by firm 2 but never finishes it the under investment makes firm 2 a weaker competitor which induces firm 1 not to innovate third under very strong vertical differentiation firm 2 prevents a launch of the new product by over investing this results in a strong competitive position of firm 2 it therefore captures such a big market share that firm 1 will not introduce the new product the situation of firm 1 in the old market has worsened the option to complete the innovation created by initiating the first stage of the innovation project has a negative value for firm 1

a hierarchical process industry production distribution planning model abstract global and multinational companies are subject to government regulations in addition to other international uncertainties due to operation in diverse geographic locations such government regulations often affect the cost of raw materials adversely which in turn creates adverse impact on product cost and forces the decision makers to re evaluate current production distribution plan this paper presents an integrated supply chain model for simultaneous strategic and operational planning of a strategic business unit sbu in a global supply chain affected by government regulations the model incorporates impact of changes in cost of inputs on expected product cost and solves for an optimal strategic and operational plan for the entire supply chain in addition the model includes exchange rates border crossing costs and solves a multi period model with due consideration of uncertainties in demand and transportation time

network composition collaborative ties and upgrading in emerging market firms lessons from the argentine autoparts sector what types of relational and institutional mechanisms shape knowledge flows and the upgrading capabilities of emerging market firms in the face of economic liberalization we analyze the argentine autoparts sector to distinguish the relative impact of different types of network relationships on a firm s process and product upgrading a few social ties to international assemblers appear to be most beneficial for local suppliers although they may be insufficient to compensate fully for the negative effect of being located in a lower tier supplier customer relationships that are part of regular disciplined discussions for product and process improvements appear to be especially beneficial for upgrading

extraction of surplus under adverse selection the case of insurance markets abstract we consider a principal agent setting with two types of risk averse agents with different abilities to avoid losses abilities types are characterized by two distributions f and g which are agents private information all agents have the same increasing and strictly concave utility function u under which g has a higher certainty equivalent in this environment we derive a characterization of pairs of distributions under which a first best outcome can be achieved or approximated we prove that a first best outcome can be achieved if and only if the distribution f is not absolutely continuous with respect to the distribution g if this condition is not satisfied the first best outcome can be approximated arbitrarily close if and only if the likelihood ratio df dg is unbounded journal of economic literature classification number d82

individual preferences organization and competition in a model of r d incentive provision abstract understanding the organization of rd 2 knowledge is not perfectly appropriable 3 scientists are responsive to both monetary and non monetary incentives and 4 firms compete on the product market we show that both knowledge spillovers and market competition affect the incentives given to scientists and these effects interact first high knowledge spillovers lead firms to soften incentives when product market competition is high and to strengthen incentives when competition is low second the relationship between the intensity of competition and the power of incentives is u shaped with the exact shape depending on the degree of knowledge spillovers we also show that the performance contingent pay for both applied and basic research increases with the non pecuniary benefits that scientists obtain from research while the fixed component decreases we relate our findings to the existing empirical evidence and also discuss their implications for management and public policy

the anatomy of industry r d intensity distributions using firm data disaggregated by industry we establish a set of regularities in the distribution of firm r d intensities within manufacturing industries we show how a simple probabilistic process in which chance influences a key unobserved determinant of r d and firm size conditions the returns to r d can account for these regularities and other features of the distributions the model provides a unified noncausal explanation of a series of long observed relationships across mean r d intensity market concentration and the coefficient of variation it also offers a novel explanation for the inverse relationship between r d productivity and firm size jel 031

monopoly insurance under adverse selection when agents differ in risk aversion abstract this paper considers a profit maximizing monopolistic insurer who offers insurance to two types of risk averse agents in an environment where the uninsured position has the same distribution across types agents utility functions are private information and types are independently and identically distributed we prove that if there is no lower bound on liability and the types differ markedly in their attitudes to heavy losses the insurer can extract almost all rent by offering full insurance to agents who are more risk averse and two valued partial insurance to the others under limited liability separating insurance contracts have a similar structure but it may be impossible to approximate the first best unless the uninsured position is supported by two atoms insurance is provided to all agents journal of economic literature classification numbers d42 d82

a theory of market pioneers dynamic capabilities and industry evolution we analyze a model of industry evolution where the number of active submarkets is endogenously determined by pioneering innovation from incumbents and entrants incumbent pioneers enjoy an advantage of additional pioneering innovation via a dynamic capability that takes the form of an improved technology for innovation in young submarkets entrants are motivated in part by a desire to acquire the dynamic capability we show that dynamic capabilities increase total innovation but whether the capability confers an advantage in terms of marginal or average cost is important in determining how the impact of dynamic capabilities is distributed across incumbent and entrant innovation rates we complement the existing literature that focuses on exogenous arrival of submarkets or the steady state of a model with constant submarkets by describing how competition free entry and the dynamic capability of incumbents drive the evolution of an industry the shift from immature to mature submarkets can lead to a shakeout in firm numbers and it eventually leads to a reduction in total dynamic capabilities in an industry this paper was accepted by bruno cassiman business strategy

research and development with asymmetric firm sizes this article presents a theoretical model of research and development r d competition among firms the goal of the model is to simultaneously explain two empirical observations pertaining to the persistence of dominantfirms small firms make a disproportionate share of major innovations while largefirms tend to spend more in absolute terms on r d than smallfirms do in the model here firms choose investment levels and r d project riskiness in equilibrium a large firm invests more than a smaller firm but by choosing safer r d projects makes fewer major innovations

incentives and uncertainty an empirical analysis of the impact of demand on innovation we study the impact of demand on innovation by focusing on a sample of small and medium sized enterprises in several industries and european countries we analyse how demand stimulates innovation by providing economic incentives and reducing uncertainty considering the size of the market as a proxy for the presence of demand we find support for the idea that the presence of incentives stimulates innovation this is particularly true for process innovation in considering interaction with customers as a way to reduce uncertainty we find that firms that see customers as the most important sources of information for both innovation ideas and completion tend to introduce product innovations firm size r d expenditure and sectoral effects also matter

a review of uncertainties in technology experience curves abstract the use of log linear experience curves or learning curves relating reductions in the unit cost of technologies to their cumulative production or installed capacity has become a common method of representing endogenous technical change in energy economic models used for policy analysis yet there are significant uncertainties in such formulations whose impact on key model results have been insufficiently examined or considered this paper reviews the major types of uncertainty in log linear experience curves and their effect on projected rates of cost reduction uncertainties are found not only in the learning rate parameter of a log linear model but also in the functional form that determines the shape of an experience curve evidence for alternative forms such as an s shaped curve is reviewed along with case studies that demonstrate the uncertainties associated with cost increases during early commercialization of a technology a phenomena that is widely recognized but rarely quantified or incorporated in learning models additional factors discussed include the effects of learning discontinuities institutional forgetting and the influence of social economic and political factors we then review other models of causality which aim to improve modelers ability to explain and predict the influence of other underlying processes that contribute to technology cost reductions in addition to learning ignoring other types of underlying mechanisms can create a false sense of precision and overestimate the true contribution of learning currently however uncertainties in such multi factor models remain large due to the difficulties of estimating key parameters such as private sector r d investments and extending models of a specific technology to a broader suite of technologies and cost projections pending the development and validation of more robust models of technological change we suggest ways to significantly improve the characterization and reporting of current learning model uncertainties and their impacts on the results of energy economic models to help reduce the potential for drawing inappropriate or erroneous policy conclusions

advantageous selection in insurance markets this article reverses the standard conclusion that asymmetric information plus competition results in insufficient insurance provision risk tolerant individuals take few precautions and are disinclined to insure but they are drawn into a pooling equilibrium by the low premiums created by the presence of safer more risk averse types taxing insurance drives out the reckless clients allowing a strict pareto gain this result depends on administrative costs in processing claims and issuing policies as does the novel finding of a pure strategy partial pooling subgame perfect nash equilibrium in the insurance market copyright 2001 by the rand corporation

distance to the frontier and the perception of innovation barriers across european countries abstract barriers to innovation have mainly been studied in a single country context this paper studies differences in the perception of innovation barriers between innovative and non innovative firms for 18 eu countries the countries are grouped by their distance to the technological frontier using community innovation surveys for the years 2002 2004 and 2004 2006 the results show that knowledge barriers related to the availability of skilled labour innovation partners and technological knowledge are more important for firms located in countries close to the frontier while the opposite is true regarding the availability of external finance moreover while the share of innovators decreases with the distance to the technological frontier the share of firms not interested or in no need of innovation increases this is consistent with the idea that as firms approach the technological frontier they increasingly need to focus on the creation of own knowledge and the adoption of innovation based growth strategies to stay competitive

is firm size conducive to r d choice a strategic analysis of product and process innovations abstract using a duopoly model of multiproduct firms we show that different innovation incentives cause the larger firm to invest more in process cost reducing innovations and the small one to allocate more resources to search for new products because of this heterogeneity of r d behavior the large firm remains dominant for the original product in the post innovation market but the small firm is more likely to be a leader in the new product market these theoretical results are consistent with recent empirical findings

a multi objective robust optimization model for multi product multi site aggregate production planning in a supply chain under uncertainty abstract manufacturers need to satisfy consumer demands in order to compete in the real world this requires the efficient operation of a supply chain planning in this research we consider a supply chain including multiple suppliers multiple manufacturers and multiple customers addressing a multi site multi period multi product aggregate production planning app problem under uncertainty first a new robust multi objective mixed integer nonlinear programming model is proposed to deal with app considering two conflicting objectives simultaneously as well as the uncertain nature of the supply chain cost parameters of the supply chain and demand fluctuations are subject to uncertainty then the problem transformed into a multi objective linear one the first objective function aims to minimize total losses of supply chain including production cost hiring firing and training cost raw material and end product inventory holding cost transportation and shortage cost the second objective function considers customer satisfaction through minimizing sum of the maximum amount of shortages among the customers zones in all periods working levels workers productivity overtime subcontracting storage capacity and lead time are also considered finally the proposed model is solved as a single objective mixed integer programming model applying the lp metrics method the practicability of the proposed model is demonstrated through its application in solving an app problem in an industrial case study the results indicate that the proposed model can provide a promising approach to fulfill an efficient production planning in a supply chain

what s experience got to do with it sources of cost reduction in a large specialty chemicals producer conventional learning curves relating unit cost to measures of production experience are estimated for 221 specialty chemicals produced by a fortune 500 company detailed records on cost and r d coupled with insights from company personnel are used to explain the variation across products in the rate of cost reduction products that exhibited the strongest relationship between unit cost and measures of production experience were subject to specific initiatives particularly process r d the r d was not however generally motivated or informed by production experience however cumulative past output the most commonly used measure of production experience was related to expected future output which conditioned the expected future returns from r d and the choice of r d projects thus cumulative output was connected to unit costs through its role in conditioning incentives to undertake process r d rather than as a proxy for production experience this suggests that the strong relationship commonly found between unit cost and measures of production experience may reflect incentives to reduce cost as much as learning from production experience

the making of an oligopoly firm survival and technological change in the evolution of the u s tire industry the number of producers in the u s tire industry grew for 25 years and then declined sharply and the industry evolved to be an oligopoly the role of technological change in shaping the industry s market structure is explored a model of industry evolution featuring technological change is used to derive predictions that are tested using a novel data set on firm entry exit size location distribution networks and technological choices prior to the shakeout of producers consistent with the model earlier entering and larger firms survived longer principally because of the influence of age and size on technological change

a matter of location the role of regional social capital in overcoming the liability of newness in r d acquisition activities laursen k masciarelli f and reichstein t a matter of location the role of regional social capital in overcoming the liability of newness in r d acquisition activities regional studies external knowledge acquisition is a precondition for firms competitive advantage however young firms exhibit a lower propensity to acquire external research and development r d than their older counterparts the paper explores the role of regional social capital in moderating this aspect of the liability of newness the results show that young firms operating in regions with low levels of social capital are less likely to acquire r d externally however this is not the case in regions with high levels of social capital suggesting that the liability of newness in terms of acquisition of external r d does not play a role in these regions

a dynamic analysis of investment in process and product innovation with learning by doing this paper investigates the optimal control problem of a monopolist s investments in process and product innovation under learning by doing in a dynamic setting we show that i there exists the saddle stable steady state under monopolist optimum and social optimum ii the learning rates of product and process innovation affect not only the monopolist s process or product innovation investments but also the complementarity substitutability relationship between product and process innovation iii the social incentive towards both product and process innovation is always larger than the private incentive characterizing the profit seeking monopolist these results are valuable complement and development to the results drawn from the standard product and process innovation model

competitive pressure and the adoption of complementary innovations liberalization of the european automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints leading to a substantial increase in competitive pressure among dealers we estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation adoption strategies following the elimination of exclusive territories using french data we evaluate the existence of complementarities between the adoption of software applications and the scale of production firms view these innovations as substitutes and concentrate their effort in one type of software as they expand their scale of production results are robust to the existence of unobserved heterogeneity

financial innovation the bright and the dark sides based on data from 32 countries over the period 1996 2010 this paper is the first to assess the relationship between financial innovation on the one hand and bank growth and fragility as well as economic growth on the other hand we find that different measures of financial innovation capturing both a broad concept and specific innovations are associated with faster bank growth but also higher bank fragility and worse bank performance during the recent crisis these effects are stronger in countries with larger securities markets and more restrictive regulatory frameworks in spite of these seemingly ambiguous findings our evidence points to a positive net effect of financial innovation on economic growth financial innovation is associated with higher growth in countries and industries with better growth opportunities

the role of small firms in the technology development of china science technology s t is high on the chinese policy agenda and the country aims at becoming an innovation driven economy small firms have been important in technology development in other east asian countries but the situation in chinese small firms has been far less explored we examine how much s t has been accounted for by small firms and how their s t intensity differs across industries and ownership groups we also analyse how various firm characteristics differ over size categories and s t status this study is based on newly processed micro level data provided by the national bureau of statistics with information on a large number of s t indicators for manufacturing firms in china in 2000 and 2004 our results suggest that the role of small firms in chinese s t is similar to that in many other countries they account for a comparably small share of total s t and most small firms are not engaged in any s t however those small firms that do engage in s t tend to be more s t intensive and have a higher output in terms of patents than larger chinese s t firms

supply chain design for efficient and effective blood supply in disasters abstract the emergency supply of blood in natural and anthropogenic disasters has proved challenging this article presents a stochastic bi objective supply chain design model for the efficient cost minimizing and effective delivery time minimizing supply of blood in disasters the blood supply network under investigation is comprised of blood donors mobile blood facilities local and regional blood centers and demand points a hybrid solution approach combining the e constraint and lagrangian relaxation methods is developed to solve the proposed model our numerical experiments and subsequent discussions focus on 1 investigating the utility of the proposed model in solving different size problems 2 exploring possible tradeoffs between supply chain cost and delivery time 3 identifying the areas along the supply chain where investments can be made to improve supply chain efficiency and effectiveness and 4 performance benchmarking of the proposed stochastic programming approach

r d determinants accounting for the differences between research and development the determinants of r d are an important topic of innovation studies the classical schumpeterian hypotheses about the influence of size and market power have been complemented with the role played by industry determinants such as demand pull technological opportunity and appropriability in determining r d investments however r d has always been considered as a whole even though research and development activities differ in many aspects we take advantage of a new panel database of innovative spanish firms pitec to distinguish between research and development efforts of firms we analyze the differentiated role played by traditional r d determinants in driving research and development results show that demand pull and appropriability have a higher effect on development while technological opportunity is more influential for research differences are statistically significant important in magnitude and robust to the use of different indicators for demand pull technological opportunity and appropriability and to several robustness checks

timing of entry in international market an empirical study of u s fortune 500 firms in china this study attempts to explain the timing of entry of firms in international markets based on the existing literature we propose a framework that consists of firm specific factors industry market factors and host country factors empirical results based on the entry information of u s fortune 500 firms in china between 1979 and 1996 show that larger firms with greater level of internalization and scope economies are likely to enter this foreign market earlier in addition non equity modes competitors behavior in the product market and lower levels of country risk are significantly associated with early entry

multilevel approaches and the firm agglomeration ambiguity in economic growth studies empirical studies in spatial economics have shown that agglomeration economies may be a source of the uneven distribution of economic activities and economic growth across cities and regions both localization and urbanization economies are hypothesized to foster agglomeration and growth but recent meta analyses of this burgeoning body of empirical research show that the results are ambiguous recent overviews show that this ambiguity is fuelled by measurement issues and heterogeneity in terms of scale of time and space aggregation growth definitions and the functional form of the models applied alternatively in this paper we argue that ambiguity may be due to a lack of research on firm level performance in agglomerations this research is necessary because the theories that underlie agglomeration economies are microeconomic in nature hierarchical or multilevel modeling which allows micro levels and macro levels to be modeled simultaneously is becoming an increasingly common practice in the social sciences as illustrated by detailed dutch data on firm level productivity employment growth and firm survival we argue that these approaches are also suitable for reducing the ambiguity surrounding the agglomeration firm performance relationship and for addressing spatial sectoral and cross level heterogeneity

investigating a neglected part of schumpeter s creative army what drives new to the market innovation in micro enterprises schumpeterian arguments related to creative destruction place small entrepreneurial firms at the centre of the innovation process the exclusion of micro enterprises with less than 10 employees from most innovation surveys means however that we know relatively little about innovation among this group of firms here using new survey data on a thousand micro enterprises we explore the determinants of new to the market innovation the basis for the schumpeterian creative destruction cd process our results provide strong support for the interactive nature of micro enterprise innovation and suggest the potential value of a model of interactive creative destruction icd contrary to some other recent evidence market based and supplier based collaboration both prove important for new to the market innovation our results suggest the importance of micro enterprises as sources of new to the market innovation and the potential value of including such firms in future innovation studies

understanding innovation an analysis of persistence for spanish manufacturing firms abstract this study focuses on the persistence of innovation in a panel of spanish manufacturing firms for the period 1990 2008 in particular we analyse whether persistence in firms innovation activities over time is the result of previous experience the dynamic capabilities of the firm or industry market related characteristics we find that r d input and innovation output are highly persistent at the firm level after controlling for unobserved heterogeneity and initial conditions and by using a dynamic random effects probit we conclude that there are similar determinants of persistence in r d and innovative activities among external environmental factors market dynamism affects r d and innovation regarding firm specific characteristics size and outsourcing also have a positive impact on both processes past innovative behaviour is clearly more decisive in explaining the current state of r d and innovation activities than external factors or firm level heterogeneity

you can t manage right what you can t measure well technological innovation efficiency abstract this paper proposes a new approach to tackle the innovation performance relationship it addresses the so far mixed and inconclusive results of studies analyzing this relationship we argue that the undifferentiated use of innovation inputs and outputs to measure firm innovativeness is not without problems and that from a productive perspective they should be simultaneously analyzed this study follows a two stage empirical analysis using a sample of spanish manufacturing firms for the period 1992 2005 by examining two inputs and two outputs of the innovation process in the first stage we estimate technological innovation efficiency by means of an intertemporal data envelopment analysis dea bootstrap and also observe the yearly efficiency changes based on a global malmquist index in the second stage we analyze the effect of technological innovation efficiency on firm performance through a generalized method of moments gmm system the results support our arguments that the best measurement of outcomes of technological innovations is through the efficiency with which they are developed in addition we test the moderating effect of technological intensity level and firm size on the efficiency performance relationship

size r d productivity and decision styles we extend the size innovation debate by incorporating decision making style as a relevant factor in the innovation process we propose that the size of firms affects the scale and quality of product innovation through the adoption of different decision making styles using the literature on cognition we conceptualize decision making style as the degree to which firms rely on analytical information for decision making during the r d process using longitudinal data of spanish firms we show that as firms increase in size they rely more extensively on analytical decision tools for the innovation activity additionally we show that the size of firms is negatively related to product innovation productivity in terms of scale and positively related to the quality and that these relationships are mediated by firms reliance on analytical decision making style we discuss theoretical and managerial implications for innovation research and practice

the effects of competition on the r d portfolios of multiproduct firms we investigate the r d portfolio choices of multiproduct firms when a firm increases cost reducing r d investment in a given product its rivals will modify their entire r d portfolios by reducing r d investments in that particular product and increasing r d investments in other competing products our analysis demonstrates that r d portfolios will be more specialized when firms face greater competition which will be the case if products become closer substitutes a monopolist begins to face competition from a rival firm or firms compete on price rather than quantity r d cooperation allows firms to internalize the negative externalities of their r d investments in two ways by reducing such investments across all products and by increasingly focusing their r d portfolios on different products firms may completely shut down a subset of their r d projects under r d cooperation if the products concerned are sufficiently close substitutes

the effect of process management on different types of innovations an analytical modeling approach abstract we investigate the trade off between r d efficiency and creativity during the development of a new product a firm s ability to balance efficiency with innovation positively affects its capacity to maintain its competitiveness although the trade off between efficiency and creativity has long been discussed in terms of practical application little analytical research has been performed to enhance theoretical understanding to redress this gap in the literature we present an extreme value model that accounts for innovation type and competition intensity and offer a set of theoretical and practical insights to demonstrate that the effects of process management depend on the nature of the innovation employed we show that the inverse relationship between efficiency and creativity is more pronounced if r d projects represent paradigm shifting innovations rather than incremental innovations we then demonstrate how competition drives firms to decrease investment in innovation activities and improve process efficiency to maximize profit our results suggest that process management activities are less recommended for firms that pursue radical innovation and the acceleration of growth

the size distribution of innovating firms in the uk 1945 1983 a survey of 4 378 significant innovations shows that firms with fewer than 1 000 employees commercialized a much larger share than is indicated by their share of r and d expenditures innovations per employee have been consistently above average in firms with more than 10 000 employees and have become so in firms with fewer than 1 000 intersectoral variation in the size distribution of innovating firms can be explained as a function of r and d based technological opportunities and of technological ease of entry by user firms with principal activities outside the sector copyright 1987 by blackwell publishing ltd

process and product innovation by a multiproduct monopolist a dynamic approach abstract we adopt a dynamic approach to model the behaviour of a multiproduct monopolist investing in process innovation and either product differentiation or product proliferation or both irrespective of the number of activities appearing in the r d portfolio we prove that depending on initial conditions there may exists substitutability between process innovation and either form of product innovation along the optimal path towards the steady state while in the latter only complementarity emerges looking at the threefold investment plan we qualitatively characterise the ranking of r d activities in terms of the consumer reservation price and the extent of the spectrum of varieties

submarket dynamics and innovation the case of the us tire industry beginning in 1922 the rate of exit of us tire producers increased sharply and the industry began a severe and protracted shakeout just 5 years earlier the tire industry experienced a surge in entry that led to a rise of over 80 in the number of producers we propose an explanation for this episode based on the idea of industry submarkets which we incorporate in a model of shakeouts we test this theory and alternative explanations for the surge in entry and exit and the shakeout using a novel data set on patenting in tires and production in the early 1920s of the cord tire a key innovation we feature in our theory our analysis suggests that the development of a new submarket can open up opportunities for entry but also stimulate innovation and in the process reinforce the advantages of the leading incumbents accentuating the shakeout of producers copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

the impact of order and mode of market entry on profitability and market share market share performance and profitability of overseas business activities has long been an important issue in international business in this study we explore the impact of order and mode of market entry into an overseas market we find that early entrants have significantly higher market shares and profitability than late followers we also find that equity joint ventures have a higher profitability than either wholly owned operations or contractual joint ventures a significant interaction exists between order and mode of market entry as expected firm efficiency and size affect the performance of firms these results are based on the business activities of a sample of 14 466 foreign firms in china in 1995

integrated production distribution planning in supply chains an invited review ss selc suk ereng uc s n c simpson asoo j vakharia c a department of decision and information sciences college of business administration university of florida gainesville fl 32611 7169 usa b department of management science and systems school of management university at bu alo bu alo ny 14260 4000 usa c department of decision and information sciences college of business administration university of florida 343 bus p o box 117169 gainesville fl 32611 7169 usa

a unified framework for analysing price interdependence innovative activity and exchange rate pass through this paper develops an international oligopoly model in which domestic and foreign firms simultaneously choose their price and innovation strategies under the assumption of non zero conjectural variations in relation to their competitors price changes the model captures the links between the exchange rate foreign and domestic firms prices and investment in process innovation and provides a unified framework for analysing exchange rate pass through

whom do new firms hire using the matched employer employee data set for denmark and information on the founders of new firms we analyze the hiring choices of all new firms that entered from 2003 to 2010 we develop a theoretical model in which the quality of a firm s employees determines its average cost a firm s productivity is based on its pre entry experience and persistent shocks and over time firms learn about their productivity the model predicts that more productive firms are larger and hire more talented employees which gives rise to various predictions about how pre entry experience firm growth rates and firm size influence the wages firms pay to their early hires we find that beginning with the time of entry larger firms consistently pay higher wages to their new hires these are firms with greater survival prospects at the time of entry based on the pre entry backgrounds of their founders and that grow at greater rates over time both of which are predictive of the wages paid to new hires from the time of entry onward our findings suggest workers are allocated to firms according to their abilities which can give rise to enduring firm capabilities

what percentage of innovations are patented empirical estimates for european firms abstract a 1993 survey on the innovative activities of europe s largest industrial firms obtained useable results on patenting activities for 604 respondents the data are used to calculate the sales weighted propensity rates for 19 industries the propensity rates equal the percentage of innovations for which a patent application is made the propensity rates for product innovations average 35 9 varying between 8 1 in textiles and 79 2 in pharmaceuticals the average for process innovations is 24 8 varying from 8 1 in textiles to 46 8 for precision instruments only four sectors have patent propensity rates for both product and process innovations combined that exceed 50 pharmaceuticals chemicals machinery and precision instruments regression results that control for the effect of industry sector show that patent propensity rates increase with firm size and are higher among firms that find patents to be an important method for preventing competitors from copying both product and process innovations the effect of secrecy is not so straightforward firms that find secrecy to be an important protection method for product innovations are less likely to patent as expected but secrecy has little effect on the propensity to patent process innovations the r d intensity of the firm has no effect on patent propensity rates for both product and process innovations the sector of activity has a strong influence on product patent propensities but very little effect on process patent propensities after controlling for the effect of other factors

coordinated supply chain management abstract historically the three fundamental stages of the supply chain procurement production and distribution have been managed independently buffered by large inventories increasing competitive pressures and market globalization are forcing firms to develop supply chains that can quickly respond to customer needs to remain competitive these firms must reduce operating costs while continuously improving customer service with recent advances in communications and information technology as well as a rapidly growing array of logistics options firms have an opportunity to reduce operating costs by coordinating the planning of these stages in this paper we review the literature addressing coordinated planning between two or more stages of the supply chain placing particular emphasis on models that would lend themselves to a total supply chain model finally we suggest directions for future research

on the dynamic efficiency of bertrand and cournot equilibria abstract this paper compares bertrand and cournot equilibria in a differentiated duopoly with r d research and development competition it shows that cournot competition induces more r d effort than bertrand competition however the price is lower and output is larger in bertrand than in cournot competition furthermore the bertrand equilibrium is more efficient than the cournot equilibrium if either r d productivity is low or spillovers are weak or products are very different if r d productivity is high spillovers are strong and goods are close substitutes then the bertrand equilibrium islessefficient than the cournot equilibrium journal of economic literatureclassification number l13

an exploration of the effects of the interaction between ict and labor force on economic growth in transition economies abstract complementary investments serve as one of the prerequisites for the successful translation of investments in information and communication technologies ict into macroeconomic outcomes in this study we investigate the presence of complementarity between investments in telecoms and full time telecom staff in the context of transition economies te using translog formulation of cobb douglas production function we determined the presence of statistically significant interaction effect between the two variables the direction of the effect however varies between the two subgroups of tes in our sample thus suggesting the presence of the level dependent threshold

product differentiation process r d and the nature of market competition abstract we investigate the relationship between process and product rd ii bertrand firms have a stronger incentive for product rd and iii cooperation in product r d promotes both types of r d relative to competition whereas cooperation in both types of r d discourages r d relative to cooperation in just product r d

offshoring of r d looking abroad to improve innovation performance the offshoring of knowledge services has become a phenomenon of increasing importance for firms but many of its implications are yet to be discussed thoroughly this paper analyzes whether r d offshoring contributes to enhancing firms innovation capabilities specifically the study distinguishes between two governance models of offshoring captive offshoring and offshore outsourcing and two types of innovation outcomes product and process innovations we suggest that r d offshoring has different impacts depending on the innovation results and governance models considered the study empirically tests these relationships using the spanish technological innovation panel this survey contains information on a large sample of firms from diverse sectors for the period 2004 2007 the empirical findings allow us confirm our hypotheses and highlight the strategic importance of r d offshoring the empirical evidence reveals a positive relation between offshoring and innovation performance with a greater effect on product than on process innovations the results for different governance models show that captive offshoring has a greater effect on innovation outcomes than offshore outsourcing these findings lead us to conclude that firms that look overseas can benefit from location specific and specialization advantages to improve innovation performance

r d portfolio and market structure this article analyses how firms allocate their resources when they compete for multiple patents in heterogeneous research projects simultaneously a simple model shows that firms resource allocation is biased away from risky and basic research even when imitation is not possible and firms are fully rational therefore a market may lack major innovations despite large aggregate research expenditure and strong patent protection this article also shows that as a market becomes more competitive firms invest relatively less in basic research but more in risky research these results provide a novel explanation for an ambiguous empirical relationship between innovation and market concentration

the role of sunk costs in the decision to invest in r d we present a dynamic empirical model of a firm s r d decisions that is consistent with the existence of sunk r d costs taking into account that these costs may differ between small and large firms and among different technological regimes we estimate a multivariate dynamic discrete choice model using firm level data of spanish manufacturing for 1990 2000 conditional on firm heterogeneity and serially correlated unobservable factors we find that r d history matters this true state dependence allows inferring the existence of sunk r d costs associated with performing r d sunk r d costs are found to be higher for large high tech firms

public support for technical advance the role of firm size this article develops a model that shows how firm size that most important firm level correlate of r d moderates the impact of demand and supply side government policies that support r d the most robust result is that government support to product r d will elicit less of a response the greater is average firm size within the industry this result suggests for example that government support to upstream research in the life sciences will stimulate less downstream industrial investment in the development of new drugs to the extent that the firms in the downstream industry are larger the model also predicts that where entry is less encumbered we can expect demand side subsidies to elicit greater product r d within an industry thus to the degree that for example barriers to entering the solar panel manufacturing industry are lower we should expect r d on solar panel development to rise more in response to tax credits for their purchase

innovation and employment a reinvestigation using revised pavitt classes the relationship between innovation and employment is addressed in this article through a model and empirical test at industry level for eight european countries in 1994 2004 we investigate this relationship for manufacturing and services and propose a revised pavitt taxonomy covering both of them in order to identify specific patterns of technological change and job creation and loss the contrasting effects of strategies of technological or cost competitiveness are investigated using innovation variables from cis2 and cis3 together with demand wages and industry dynamics they account for changes in employees and hours worked the diversity in these relations across industries is also explored when the model is applied to each revised pavitt class different mechanisms of technological change and effects on jobs emerge

the legacy of steven klepper industry evolution entrepreneurship and geography this introductory essay of the special issue honoring steven klepper provides a synthesis of his work and places the articles of the special issue within the context of his scholarship steven klepper s pioneering work linked life cycle patterns in industry evolution to underlying micro level firm innovation dynamics and employee entrepreneurship and to the macro level implications regarding geographical agglomeration and the growth of economies taken together the lifetime of klepper s research provides an integrated account of the key industrial mechanisms at work and also sets the stage for future research as is elaborated in individual contributions to the special issue

on the instability of the r d portfolio in a dynamic monopoly or one cannot get two eggs in one basket abstract firms innovation portfolios include several dimensions ranging from organizational aspects to cost reduction and product characteristics all of these efforts take place during the product life cycle and interact with each other in determining the spectrum of features of the product and its performance on the market this paper contributes to the related theoretical debate focussing on the possibility of having superior product quality levels at lower marginal production cost over time to deal with this issue we investigate the optimal r d portfolio of a single product monopolist investing in cost reducing activities accompanied by efforts improving the quality of its product over an infinite time horizon it turns out that the firm s relative incentives along the two directions are conditional upon market affluence measured by consumers willingness to pay for quality and r d efforts are complements in the neighbourhood of the steady state equilibrium however the dynamics of the two r d controls depend on both quality and marginal cost at every instant consequently as the stability analysis reveals the steady state equilibrium is indeed unstable due to the dynamics of marginal cost thereby implying that one should not expect the firm to supply an increasing quality level at a decreasing production cost hence the dynamic interplay between r d controls and the resulting instability affecting production costs also imply that one may not expect to observe product quality to increase and market price to decrease over the product life cycle

the evolving impact of combinatorial opportunities and exhaustion on innovation by business groups as market development increases the case of taiwan business groups are key sources of innovation in emerging market economies but we understand little about why innovativeness differs across groups and over time variation in the density of intragroup buyer supplier ties which are common structural linkages among group affiliates can help explain both cross sectional and temporal heterogeneity of group innovativeness we argue that greater buyer supplier density within a group initially creates combinatorial opportunities that contribute to group innovativeness but ultimately generates combinatorial exhaustion that constrains innovation combinatorial exhaustion will set in at lower levels of density as the market environment becomes more developed because the opportunity costs of local search increase the research introduces a dynamic argument to studies of business group innovation this paper was accepted by bruno cassiman business strategy

an enhanced robustness approach for managing supply and demand uncertainties abstract managing supply and demand uncertainties is a topic that receives increasing management attention due to 1 more price based competitions forcing firms purchase from cheaper but less reliable or unproven suppliers and 2 undesirable consequences of unaddressed demand fluctuations such as reduced service level financial loss reputational damage and loss of market share this paper presents a realistic production distribution planning model that is robust to common supply interruptions and demand variations a robustness approach named elastic p robustness is introduced that obviates the need to estimate probability distribution of random parameters when managing operational uncertainties of the supply chain the application of the proposed approach is investigated in an actual organization from discrete durable parts manufacturing sector our analyses of numerical results focus on 1 exploring different tactics for managing supply and demand variations 2 examining the benefits of concurrent consideration of supply and demand uncertainties 3 benchmarking the performance of the proposed approach against the popular robustness algorithms and 4 investigating the price of robustness under various supply and demand scenarios

consumer preferences and product and process r d firms often conduct both product and process r d consumer preferences typically play a vital role in determining these r d choices the economics literature however has mostly ignored the interrelationship between the r d choices of firms and consumer preferences istudy product and process r d from the perspective of their relationship with consumer preferences in doing so i find a novel distinction between the two kinds of r d this distinction can explain several empirical observations regarding firms choices of the two and can also potentially enable us to better empirically identify the two

the incentives for cost reduction in a differentiated industry abstract this paper investigates how the incentives for cost reduction in a differentiated industry depend upon the degree of product substitutability when goods are imperfect substitutes both cournot and bertrand competition result in underinvestment in the sense that a social planner would be willing to pay more for a given cost reduction than a profit maximizing firm overinvestment may occur when the goods are sufficiently close substitutes similarly cournot competition provides a stronger incentive to innovate than bertrand competition if the degree of substitutability is low and a weaker incentive if this degree is high

incumbent innovation and domestic entry this paper analyzes the escape entry incentive for innovation by incumbent firms the threat posed by the possibility of leading edge firms entering the market influences incumbent innovation to overcome problems of endogeneity we apply an instrumental variable approach to analyze a rich firm level dataset 1987 2000 for germany we find evidence that domestic entry has a negative effect on incumbent product innovation which is a strong indication of new entrants comparative advantage in commercializing new ideas in contrast domestic entry has a positive effect on incumbent process innovations an effect also known as the escape entry effect

a review of learning rates for electricity supply technologies a variety of mathematical models have been proposed to characterize and quantify the dependency of electricity supply technology costs on various drivers of technological change the most prevalent model form called a learning curve or experience curve is a log linear equation relating the unit cost of a technology to its cumulative installed capacity or electricity generated this one factor model is also the most common method used to represent endogenous technical change in large scale energy economic models that inform energy planning and policy analysis a characteristic parameter is the learning rate defined as the fractional reduction in cost for each doubling of cumulative production or capacity in this paper a literature review of the learning rates reported for 11 power generation technologies employing an array of fossil fuels nuclear and renewable energy sources is presented the review also includes multi factor models proposed for some energy technologies especially two factor models relating cost to cumulative expenditures for research and development r d as well as the cumulative installed capacity or electricity production of a technology for all technologies studied we found substantial variability as much as an order of magnitude in reported learning rates across different studies such variability is not readily explained by systematic differences in the time intervals geographic regions choice of independent variable or other parameters of each study this uncertainty in learning rates together with other limitations of current learning curve formulations suggests the need for much more careful and systematic examination of the influence of how different factors and assumptions affect policy relevant outcomes related to the future choice and cost of electricity supply and other energy technologies

how does probability of innovation change with firm age this paper looks at the probability of introducing innovations by manufacturing firms at different stages of their lives once differences related to activity and size are controlled for we examine how the probability of innovation varies over entry post entry ages and advanced ages of mature firms we also measure the association between exit from the market and pre exit innovation results show that the probability of innovating widely varies by activity and that small size per se broadly reduces the probability of innovation but also that entrant firms tend to present the highest probability of innovation while the oldest firms tend to show lower innovative probabilities some sets of firms with intermediate ages also present a high probability of innovation and exiting firms are clearly associated to lower levels of introducing process innovations

ownership structure governance and innovation abstract this paper tests the impact of firms ownership structure on innovation in a context featuring pronounced ownership concentration and conflicts between large and minority shareholders using data for 20 000 italian manufacturers and accounting for the possible endogeneity of ownership levels we find that ownership concentration negatively affects innovation especially by reducing r d effort conflicts between large and minority shareholders appear to be a determinant of this effect moreover risk aversion induced by lack of diversification exacerbates large shareholders reluctance to innovate family owners support innovation more than financial institutions but the benefits of financial institutions increase with their equity stakes

does r d spending boost tangible investment an analysis on european firms this article investigates the relationship between firm s r d intensity expressed as r d expenditure over sales and investment intensity in tangible assets it is commonly acknowledged that r d r

downstream research joint venture with upstream market power in a vertically related industry we examine the downstream firms incentives to invest in cost reducing research and development r d and to form a research joint venture rjv under two alternative structures of input supply exclusive vertical relations and a single supplier in contrast to the hold up argument in which downstream firms invest non cooperatively and spillovers are low r d investments are higher under a single supplier than under competing vertical chains downstream firms incentives to form a rjv are also stronger in the former case than they are in the latter we identify conditions under which an rjv is beneficial for society integrated innovation and competition policies are also discussed

anti competitive conduct in house r d and growth abstract incumbent firms have two basic possibilities to improve their competitive position in the product market investment in r d and the creation of entry barriers to the disadvantage of potential rivals e g through lobbying activities campaign contributions bribes or the adoption of incompatible technologies this paper proposes a simple oligopoly model which raises the possibility that such anti competitive conduct and r d investment are complementary activities for incumbents consequently an institutional framework or technological possibilities which encourage anti competitive conduct although impeding entry of potential rivals and accentuating standard oligopoly distortions may foster r d based growth and welfare however this outcome is less likely if entrants exert technological spillover effects e g through foreign direct investment stronger protection of intellectual property rights although triggering anti competitive conduct and thereby impeding market entry as well is more likely to foster economic growth

estimating firm size elasticities of product and process r d this paper provides an empirical test of the particular product life cycle hypothesis which postulates that the firm size elasticity of process r d exceeds the firm size elasticity of product r d panel data on german manufacturing firms is used which is affected by attrition and sample selection an inverse probability weighted generalized empirical likelihood gel estimator is proposed which corrects for the selectivity bias under the identifying assumption of conditionally independent selection and benefits from the superior small sample bias properties of gel compared to generalized method of moments gmm the product life cycle hypothesis is clearly rejected in all specifications

supply and demand uncertainty reduction efforts and cost comparison abstract in industries like health care consumer goods and agriculture shortages are widely observed and the consequences can be costly one of the main drivers of such shortages is the uncertain nature of supply and demand to reduce uncertainties sufficient information about supply and demand can be obtained by gathering relevant data e g auditing suppliers and conducting market research in this paper we conduct an analysis to examine the impacts of supply uncertainty demand uncertainty and uncertainty reduction efforts on production quantity and total cost we show that in the absence of uncertainty reduction efforts when the financial consequences of shortages are large or when the unit benefit is large supply uncertainty is more costly than demand uncertainty in addition exerting supply uncertainty reduction effort always causes the firm to produce fewer units than exerting demand uncertainty reduction effort although supply uncertainty reduction effort delivers a larger degree of improvement to total cost and hence is more efficient reduced supply uncertainty still leads to a higher system cost than does reduced demand uncertainty

technology licensing r d and welfare this paper sets up a three stage r d technology licensing and output oligopoly game in which only one of the firms undertakes a cost reducing r d and may license the developed technology to the others by means of a two part tariff i e a per unit royalty and an upfront fee contract it is found with surprise that if the licensor firm s r d efficiency is high the availability of licensing subdues the firm s r d incentive leading to a lower social welfare level this result implies that a government has to be cautious when encouraging technology licensing among firms

timing of technology adoption and product market competition abstract this paper examines how product market competition affects firms timing of adopting a new technology as well as whether the market provides sufficient adoption incentives it demonstrates that adoption dates differ not only among symmetric firms but also among markets with different market features more specifically technology adoption can occur earlier in a market with cournot competition than in a market with bertrand competition it can also occur earlier in a market in which goods are not too close substitutes therefore this paper shows that competition toughness does not always reinforce adoption incentives when goods are sufficiently differentiated adoption occurs later than is socially optimal

steven klepper recipient of the 2011 global award for entrepreneurship research this article reviews the academic contributions of the 2011 receiver of the global award for entrepreneurship research professor steven klepper carnegie mellon university the global award consists of 100 000 euro and a statuette of the internationally renowned swedish sculpture carl milles klepper has made breakthrough analyses in the realm of industrial dynamics emphasizing the regularities in the time paths of entry of new producers exit of incumbent firms spin offs and innovation his work is predominantly empirical but he has also played an essential role in developing more rigorous theoretical models of phenomena such as spin offs of particular importance is how klepper has managed to link traditional neoclassical models with evolutionary theory as well as entrepreneurship research with mainstream economics

frequent incremental change organizational size and mortality in high technology competition while radical technological change is often characterized as hazardous particularly to incumbents incremental technological change has appeared to be immune from such risks little attention has been given to the possibility that under some circumstances incremental technological change can be quite risky this article argues that there may be tradeoffs to high rates of incremental technological change the costs are of two kinds the organizational disruptions associated with frequent technological change and overestimating the advantages and receptiveness of the technological improvement we argue that larger firms are better equipped than smaller firms to cope with these costs and will reap greater benefits from incremental changes using data on the population of worldwide floppy disk drive manufacturers we find that frequent incremental technical changes decrease organizational mortality for large firms but increase it for smaller firms we also find that large firms that frequently introduce incremental technological improvements are more potent competitors this study helps us understand how frequent incremental change affects mortality as organizations grow advice to managers to engage in continuous incremental innovation can therefore be misguided because unless firms are large they may incur costs that are so great that the firm actually fails by innovating frequently copyright 2010 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

environmental risks and bank liability abstract many governments have introduced or are considering introducing laws to recover from the liable parties the cleanup costs caused by pollution damages in particular the banks who finance the firms causing environmental damages may be considered liable in various court cases in the us and elsewhere banks have been found liable while they have been exempted in others we develop a model in which the insurance sector may insure the firm for the pollution risk and the bank may lend money for investment under complete information of the bank about the firm s activities the limited liability of the firm induces excessive investment and insufficient care but full liability of the bank creates the appropriate internalization of the environmental risk this rationalization of the laws on lender liability must be qualified because in general the banks suffer from agency problems adverse selection and moral hazard in their relationships with firms in the adverse selection case full liability of the bank leads to underinvestment partial liability is better but may fail to implement the optimal second best allocation in the case of moral hazard full responsibility is killing the project too often while still leading to low care too often partial responsibility may achieve the second best optimal allocation but in some cases the level of responsibility necessary to induce the proper level of care is too high for the project to be financed by the bank we conclude with a discussion of the implications of our results with regards to liability laws for environmental damages