towards an attention based view of the firm the central argument is that firm behavior is the result of how firms channel and distribute the attention of their decision makers what decision makers do depends on what issues and answers they focus their attention on what issues and answers they focus on depends on the specific situation and on how the firm s rules resources and relationships distribute various issues answers and decision makers into specific communications and procedures the paper develops these theoretical principles into a model of firm behavior and presents its implications for explaining firm behavior and adaptation 1997 by john wiley sons ltd

the war of attrition in continuous time with complete information this paper provides a complete characterization of the nash equilibrium outcomes for the war of attrition when time is continuous and information is complete it allows for asymmetric payoffs and an arbitrary time horizon in addition to certain asymme tric pure strategy equilibria that always exist the authors establi sh the conditions under which there is also a continuum of mixed strategy equilibria these are most likely to exist when either the horizon is infinite or the game is symmetric copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

learning and payoff externalities in an investment game abstract this paper examines the interplay of informational and payoff externalities in a two player irreversible investment game each player learns about the quality of his project by observing a private signal and the action of his opponent i characterize the unique symmetric equilibrium in a timing game that features a second mover advantage allowing for arbitrary correlation in project qualities despite private learning the game reduces to a stochastic war of attrition in contrast to the case of purely informational externalities all investments happen at the same real time instant irrespective of the sign of the correlation and beliefs never get trapped in a no learning region provided that the second mover advantage is sufficiently high

consumption externalities and diffusion in pharmaceutical markets antiulcer drugs we examine the role of consumption externalities in the demand for pharmaceuticals at both the brand level and over a therapeutic class of drugs externalities emerge when use of a drug by others affects its value and or conveys information about efficacy and safety to patients and physicians this can affect the rate of market diffusion for a new entrant and can lead to dominance of one drug despite the availability of close substitutes we use data for h2 antagonist antiulcer drugs to estimate a dynamic demand model and quantify these effects the model has three components an hedonic price equation that measures how the aggregate usage of a drug as well as conventional attributes affect brand valuation equations relating equilibrium market shares to quality adjusted prices and marketing levels and diffusion equations describing the dynamic adjustment process we find that consumption externalities influence both valuations and rates of diffusion and that they operate at the brand and not the therapeutic class level

keep searching and you ll find what do we know about variety creation through firms search activities for innovation this article critically reviews and synthesizes the contributions found in theoretical and empirical studies of firm level innovation search processes it explores the advantages and disadvantages of local and non local search discusses organizational responses and identifies potential exogenous triggers for different kinds of search it argues that the initial focus on local search was a consequence in part of the attention in evolutionary economics to path dependent behavior but that as localized behavior was increasingly accepted as the standard mode studies began to question whether local search was the best solution in all cases more recently the literature has focused on the trade offs being created by firms having to balance local and non local search we account also for the apparent variety paradox in the stylized fact that organizations within the same industry tend to follow different search strategies but end up with very similar technological profiles in fast growing technologies the article concludes by highlighting what we have learnt from the literature and suggesting some new avenues for research

accounting for creativity in the european union a multi level analysis of individual competence labour market structure and systems of education and training some workplaces offer employees opportunities to creatively use their own ideas while engaged in learning and problem solving activity without much interference from managers and bosses in this paper we analyse the preconditions for creative work using multilevel logistic modelling we examine what characteristics of the individual the organisation of work and the national institutional context promote creative work at the national level we focus on the effects of national education and training systems and labour markets the analysis demonstrates not surprisingly that individuals with higher education and a certain amount of work experience are more likely to have creative jobs it also shows that creative jobs are more likely at workplaces where managers support employees and where work is organised to promote knowledge diversity in terms of international differences we find that creative work tends to be more developed in scandinavian countries than in the south and east of europe interestingly we find significant positive relations between the likelihood of creativity at work on the one hand and the development of broad competence based systems of education and labour market flexicurity on the other this implies tha tp olicy attempts to attract the creative class as it has been defined by richard florida through promoting diversity should at the national level be combined with the institutional reform of europe s education systems and labour markets such policies may extend the category of creative employees to include significant parts of what florida defines as the working class

recruitment knowledge integration and modes of innovation abstract this paper investigates how the strength and intrinsic characteristics of firms knowledge bases and processing routines have evolved with the past inflow of employees the empirical analysis is based on linked public register and innovation survey data for norway it finds that recruitment from universities research institutes and higher education institutions has increased the capacity of firms to generate technical inventions yet the organizational knowledge bases and processing routines on which commercial innovation output depends have been strengthened only by the recruitment that has occurred from related industries implications for research management and policy are drawn

embodied knowledge and sectoral linkages an input output approach to the interaction of high and low tech industries abstract this paper considers the measurement of the direct and indirect flows of knowledge between different technology intensive industries in france germany norway sweden and the united states using the oecd input output database and the anberd database we show that product embodied knowledge accounts for about half of total technology use on average but with a substantial variation between industries we then develop a general two sector linkage measure that allows us to examine the interaction between predominantly technology producing industries generally high tech and predominantly technology using industries generally low tech this study shows that the medium high and medium low tech industries identified as specialized supplier and scale intensive industries including knowledge intensive business services kibs are essential for the production diffusion and use of technology and hence for economic growth

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

motives to patent empirical evidence from germany abstract against the background of the patent upsurge we first analyse the role of patenting and alternative instruments to protect intellectual property based on a sample of german companies active in patenting in a second step we investigate the motives to patent considering sector and company size effects we find that company size matters both for the importance of instruments and the motives to patent especially important are the new strategic motives to patent like using patents to improve a company s own position in negotiations with partners licensees and the financial sector or to use patents as incentives for r d personnel or performance indicators these correlate positively with company size we derive some possible challenges for future patent policies from these insights

investment timing and learning externalities abstract we study a duopoly model of investment in which each player learns about the quality of a common value project by observing some public background information and possibly the experience of his rival investment costs are private information and the background signal takes the form of a poisson process conditional on the quality of the project being low the resulting attrition game has a unique symmetric equilibrium which depends on initial public beliefs we determine the impact of changes in the cost and signal distributions on investment timing and how equilibrium is affected when a first mover advantage is introduced

in search of complementarity in innovation strategy internal r d and external knowledge acquisition empirical research on complementarity between organizational design decisions has traditionally focused on the question of existence of complementarity in this paper we take a broader approach to the issue combining a productivity and an adoption approach while including a search for contextual variables in the firms strategy that affects complementarity analysis of contextual variables is not only interesting per se but also improves the productivity test for the existence of complementarity we use our empirical methodology to analyze complementarity between innovation activities internal research and development r d and external knowledge acquisition our results suggest that internal r d and external knowledge acquisition are complementary innovation activities but that the degree of complementarity is sensitive to other elements of the firms strategic environment we identify reliance on basic r dthe importance of universities and research centers as an information source for the innovation processas an important contextual variable affecting complementarity between internal and external innovation activities

recruiting for ideas how firms exploit the prior inventions of new hires when firms recruit inventors they acquire not only the use of their skills but also enhanced access to their stock of ideas but do hiring firms actually increase their use of new recruits prior inventions our estimates suggest they do quite significantly in fact by approximately 219 on average however this does not necessarily reflect widespread learning by hiring in fact we estimate that a recruit s exploitation of her own prior ideas accounts for almost half of the above effect with much of the diffusion to others being limited to the recruit s immediate collaborative network furthermore although one might expect the recruit s role to diminish rapidly as her tacit knowledge diffuses across her new firm our estimates indicate that her importance is surprisingly persistent over time we base these findings on an empirical strategy that exploits the variation over time in hiring firms citations to the recruits premove patents specifically we employ a difference in differences approach to compare premove versus postmove citation rates for the recruits prior patents and corresponding matched pair control patents our methodology has three benefits compared to previous studies that also examine the link between labor mobility and knowledge flow 1 it does not suffer from the upward bias inherent in the conventional cross sectional comparison 2 it generates results that are robust to a more stringently matched control sample and 3 it enables a temporal examination of knowledge flow patterns this paper was accepted by kamalini ramdas entrepreneurship and innovation

innovation strategy choices in the urban economy this paper analyses how the innovation strategies of individual firms reflect the density diversity and international connectivity of their urban locations it makes three contributions theoretically it argues that observed strategies reflect a series of inter related choices and that each may be influenced differently by the knowledge dynamics of firms locations empirically it uses norwegian community innovation survey data to demonstrate how firms in the capital are less inclined to engage in innovation activities but also more likely to commit strongly once engaged than are comparable firms located elsewhere methodologically it illustrates how the results of sequential regressions on inter related strategy choices differ from those obtained using a more conventional estimation strategy implications for innovation policy and research are drawn

optimal cognitive distance and absorptive capacity in this paper we test the relation between cognitive distance and innovation performance of firms engaged in technology based alliances the key finding is that the hypothesis of an inverted u shaped effect of cognitive distance on innovation performance of firms is confirmed moreover as expected we found that the positive effect for firms is much higher when engaging in more radical exploratory alliances than in more exploitative alliances the effect of cumulative r d turns out to be mixed it appears to increase absorptive capacity as expected but there is clear evidence that it also reduces the effect of cognitive distance on novelty value making it increasingly difficult to find additional novelty

second mover advantages in the strategic adoption of new technology under uncertainty abstract this paper introduces technological uncertainty into a timing game of new technology adoption it is shown that the timing neither necessarily involves first mover advantages in precommitment equilibria reinganum review of economic studies xlviii 1981 395 405 nor rent equalization due to the threat of preemption fudenberg and tirole review of economic studies lii 1985 383 401 rather there may be second mover advantages because of informational spillovers furthermore the model predicts that the equilibrium payoffs will typically be discontinuous and non monotonic in the probability that the new technology is profitable a welfare analysis reveals several market failures and suggests that policy intervention should adequately depend on the nature of uncertainty and the rate of technological progress

do governments in developing countries pursue sustainable debt policies empirical evidence for selected countries in africa and latin america in this paper we test for sustainability of public debt in selected low and middle income developing countries of africa and latin america we do this by analysing how the primary surplus to gdp reacts to variations in the debt to gdp ratio where we allow for a time varying reaction coefficient moreover we test for stationarity of the overall budget deficit of the selected countries the results show that despite rising debt ratios there is empirical evidence for some of the countries that public debt is sustainable independent of whether they belong to the low income or middle income group of countries

on the diffusion of new technology a game theoretic approach this paper is an attempt at a rigorous albeit not exceedingly general analysis of the diffusion of new technology in particular consider an industry composed of two firms each using the current best practice technology the firms are assumed to be operating at nash equilibrium output levels generating a market price given demand and profit allocations when a cost reducing innovation is announced each firm must determine when if ever to adopt it based in part upon the discounted cost of implementing the new technology and in part upon the behavior of the rival firm if either firm adopts before the other it can expect to make substantial profits at the expense of the other firm on the other hand the discounted sum of purchase price and adjustment costs may decline with the lengthening of the adjustment period as various quasi fixed factors become more easily variable therefore although waiting costs the firm more in terms of foregone profits it may save money on the cost of purchasing the new technology thus the firm must weigh the costs and benefits of delaying adoption as well as take account of its rival s strategic behavior

impact of bayesian learning and externalities on strategic investment we investigate the interplay between learning effects and externalities in the problem of competitive investments with uncertain returns we examine a game theoretic duopoly investment model in which i a firm can learn about the profitability of the investment by observing the performance of the first mover and ii externalities exist between the investments of two firms we find a region of a war of attrition between the two firms in which the interplay between externalities and learning gives rise to counterintuitive effects on investment strategies and payoffs in particular we find that contrary to the conventional war of attrition where an increase in benefits for the follower generally delays the first move an increase in the rate of learning which tends to benefit the follower can hasten the first investment this paper was accepted by james smith decision analysis

learning and information aggregation in an exit game we analyze information aggregation in a stopping game with uncertain common payos players learn from their own private experiences as well as by observing the actions of other players we give a full characterization of the symmetric mixed strategy equilibrium and show that information aggregates in randomly occurring exit waves observational learning induces the players to stay in the game longer the equilibria display aggregate randomness even for large numbers of players

information revelation and strategic delay in a model of investment we model investment as an n player game with a pure informational externality each player s payoff depends only on his own action and the state of nature however because a player s action reveals his private information players wait to see what other players will do equilibrium is inefficient because delay is costly and information is imperfectly revealed we characterize the unique symmetric perfect bayesian equilibrium and study the robustness of delay which turns out to be sensitive to the reaction speed and the number of players we establish the following results i when the period length is very short the game ends very quickly and there is a form of herding or informational cascade which results in a collapse of investment ii as the period length increases the possibility of herding disappears iii as the number of players increases the rate of investment and the information flow are eventually independent of the number of players adding more players simply increases the number who delay iv in the limit the time profile of investment is extreme a period of low investment followed either by an investment surge or a collapse

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

sustainable pioneering advantage profit implications of market entry order there is strong theoretical and empirical evidence supporting the idea that first to market leads to an enduring market share advantage in sharp contrast to these findings we find that at the business unit level being first to market leads on average to a long termprofit disadvantage this result holds for a sample of consumer goods as well as a sample of industrial goods and leads to questions about the validity of first mover advantage in and of itself as a strategy to achieve superior performance we replicate the typical demand side pioneering advantage but find an evengreater average cost disadvantage which is the source of the pioneering profit disadvantage in an extended analysis we show that first to market leads to aninitial profit advantage which depending on the sample or profit measure lasts for about 12 to 14 years before turning into a disadvantage moreover we show that pioneers differentially benefit from a lack of consumer learning a strong market position and patent protection these three moderating factors together can actually help pioneers achieve a sustainable profit advantage over later entrants finally we find strong support for the theoretical argument that the entry order decision should be treated as endogenous in empirical estimation

the heckman correction for sample selection and its critique this paper gives a short overview of monte carlo studies on the usefulness of heckman s 1976 1979 two step estimator for estimating selection models such models occur frequently in empirical work especially in microeconometrics when estimating wage equations or consumer expenditures it is shown that exploratory work to check for collinearity problems is strongly recommended before deciding on which estimator to apply in the absence of collinearity problems the full information maximum likelihood estimator is preferable to the limited information two step method of heckman although the latter also gives reasonable results if however collinearity problems prevail subsample ols or the two part model is the most robust amongst the simple to calculate estimators

on the interplay of informational spillovers and payoff externalities this thesis consists of four independent essays which consider different topics in information economics and political economy the first two papers are variants of the same idea an uninformed principal e g a government will make a decision in order to gain more information it may consult two experts however these experts have a private interest in certain policies being implemented the question is to gain as much information as possible should the principal consult experts who are biased in the same direction or experts who prefer different decisions the main result is that as long as collusion between experts can be prevented homogeneous panels are superior to heterogeneous ones and this advantage increases with the experts informational precision in the third paper two firms consider entry in a new product market and must decide when to enter the market and how to design their product firms do not know for certain what the best design is so both firms want to outwait the other s decision in order to gain more information the focus of the paper is on which firm will make the first decision the main result is that if products are strong strategic substitutes the worst informed firm makes the first decision in equilibrium the analysis should apply to a range of other contexts such as investors trading decisions or the policy choices of political candidates the final paper asks the following question could it be that parties in a two party system may benefit from using several candidates in the same election to promote the use of multiple candidates i assume that a party never runs the risk of having its votes split up among its candidates despite this it turns out that parties have a strong incentive to restrict their number of nominees paradoxically it seems that the more uncertain parties are about voter opinion the fewer candidates they want to use in particular with a uniform voter distribution the optimal number of candidates is one