better together signaling interactions in new venture pursuit of initial external capital after new ventures have exhausted the limited financial resources of founders family and friends they often pursue initial external capital to secure investment entrepreneurs can signal about

optimal redistribution and monitoring of labor supply this paper extends the mirrlees 1971 model of optimal non linear income taxation with a monitoring technology that allows the government to verify labor supply at a positive but non infinite cost we analyze the joint determination of the non linear monitoring and tax schedules and the conditions under which these can be implemented monitoring of labor supply reduces the distortions created by income taxation and raises optimal marginal tax rates possibly above 100 the optimal intensity of monitoring increases with the marginal tax rate and the labor supply elasticity our simulations demonstrate that monitoring strongly alleviates the trade off between equity and efficiency welfare gains of monitoring are around 2 8 of total output the optimal intensity of monitoring follows a u shaped pattern similar to that of optimal marginal tax rates our paper can explain why large welfare states optimally rely on work dependent tax credits active labor market policies benefit sanctions and work bonuses in welfare programs

product differentiation and entry timing in a continuous time spatial competition model abstract we extend the well known spatial competition model d aspremont gabszewicz thisse 1979 to a continuous time model in which two firms compete in each instance our focus is on the entry timing decisions of firms and their optimal locations we demonstrate that the leader has an incentive to locate closer to the center to delay the follower s entry leading to a non maximum differentiation outcome we also investigate how exogenous parameters affect the leader s location and firms values and in particular numerically show that the profit of the leader changes non monotonically with an increase in the transport cost parameter

best of both worlds how embeddedness fit in the host unit and the headquarters improve repatriate knowledge transfer knowledge transfer within multinational enterprises is a source of competitive advantage however we know little about repatriates role in reverse knowledge transfer upon their return to headquarters hq using an organizational embeddedness perspective we conceptualized how embeddedness fit individuals perceived match between their knowledge and skills and the job requirements during the expatriation assignment and upon repatriation predicts repatriate knowledge transfer to test the hypotheses we collected multi wave survey data from 129 repatriates and their supervisors and developed a repatriate knowledge transfer scale the results show that perceived organizational support from hq positively influences embeddedness fit both in the host unit during expatriation and in the hq upon repatriation further embeddedness fit in the hq upon repatriation has a direct effect while embeddedness fit in the host unit during expatriation has an indirect effect on repatriate knowledge transfer via increased communication frequency with the former host unit in addition we found that knowledge transfer is particularly pronounced for repatriates with both high levels of embeddedness fit in the hq upon repatriation and frequent communication with colleagues in their former host unit our results highlight the critical importance of helping expatriates increase their perceived embeddedness fit for reverse knowledge transfer to occur

endogenous sequential entry in a spatial model in this paper we simulate a sequential entry of firms in a differentiated industry a la hotelling firms select a product location once for all they are aware of the unique price equilibrium that will take place after entry has occurred and take into account the behaviour of subsequent entrants it is found that early entrants will systematically locate around the centre but in such a way as not to induce later competitors to locate in between them location choices are also investigated as an instrument for entry deterrence which is feasible because of a fixed cost we identify several ranges of fixed cost for which entry is innocently deterred corresponding to a natural monopoly duopoly triopoly entry deterrence is then typically used to stretch the range of fixed cost for which a given number of firms can be sustained deterrence strategies are consistently such that firms locate at more regular intervals

endogenous sequential entry in a spatial model revisited abstract this article reexamines sequential entry of firms in a hotelling model of spatial product differentiation as analyzed by neven neven d j 1987 endogenous sequential entry in a spatial model international journal of industrial organization 5 419 434 i show that the pattern of locations is generally asymmetric in the case of a duopoly profits are non monotonic in market size even in the range where the number of firms does not change the firm that bears the burden of entry deterrence gains from lower barriers to entry as long as entry deterrence is possible equilibrium profits of all firms may be larger in situations in which more firms are active

strategic multi store opening under financial constraint abstract this paper analyzes strategic store openings in a situation in which firms can open multiple stores depending on the financial constraints of the firm specifically given any upper limit of the number of store openings that two potentially symmetric firms can open they sequentially determine the number of store openings including their locations to maximize their profits as a result of our analysis in a microeconomic framework we show that the equilibrium strategy can be wholly classified into only two following opposite strategies according to the level of their financial constraints involved when firms can afford to invest significant amounts of money in the market the leader chooses segmentation strategy in which a part of the market can be monopolized by opening a chain of multiple stores and deterring the follower s entry in contrast when the leader has a severe financial constraint so that it can only monopolize less than half of the market the leader chooses minimum differentiation strategy where firms open each of their stores at exactly the same point as the rival s under this strategy the leader necessarily captures just half of the market furthermore we show that regardless of potential symmetry between firms both first and second mover advantages in terms of profit can occur in the equilibrium

industry self regulation without sanctions the chemical industry s responsible care program industry self regulation the voluntary association of firms to control their collective action has been proposed as a complement to government regulation proponents argue that the establishment of

how green management influences product innovation in china the role of institutional benefits does being green facilitate product innovation this study examines whether green management in firms operating in china fosters radical product innovation to a greater extent than it does incremental product innovation and investigates the underlying institutional mechanisms involved in the relationship between green management and product innovation the findings show that green management is more likely to lead to radical product innovation than to incremental product innovation moreover government support as a formal institutional benefit more strongly mediates the effect of green management on radical product innovation than its effect on incremental product innovation whereas social legitimacy as an informal institutional benefit more strongly mediates the effect of green management on incremental product innovation than its effect on radical product innovation these findings provide important implications for explaining how firms employ green management to facilitate product innovation 2014 springer science business media dordrecht

do esg controversies matter for firm value evidence from international data the aim of this paper is to investigate the relationship between environmental social and governance esg controversies and firm market value we use a unique dataset of more than 4000 firms from 58 countries during 2002 2011 primary analysis surprisingly shows that esg controversies are associated with greater firm value however when interacted with the corporate social performance csp score esg controversies are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive building on this evidence we attempt to explore the channels through which csp may enhance market value conducting sample split analysis indicates that higher csp score has an impact on market value only for high attention firms those firms which are larger perform better located in countries with greater press freedom more searched on the internet more followed by analysts and have an improved corporate social reputation thus our findings provide new insights on the role of firm visibility through which firms can profit from their csp

confronting the environmental kuznets curve t he environmental kuznets curve posits an inverted u relationship between pollution and economic development kuznets s name was apparently attached to the curve by grossman and krueger 1993 who noted its resemblance to kuznets s inverted u relationship between income inequality and development in the first stage of industrialization pollution in the environmental kuznets curve world grows rapidly because people are more interested in jobs and income than clean air and water communities are too poor to pay for abatement and environmental regulation is correspondingly weak the balance shifts as income rises leading industrial sectors become cleaner people value the environment more highly and regulatory institutions become more effective along the curve pollution levels off in the middle income range and then falls toward pre industrial levels in wealthy societies the environmental kuznets curve model has elicited conflicting reactions from researchers and policymakers applied econometricians have generally accepted the basic tenets of the model and focused on measuring its parameters their regressions typically fitted to cross sectional observations across countries or regions suggest that air and water pollution increase with development until per capita income reaches a range of 5000 to 8000 when income rises beyond that level pollution starts to decline as shown in the conventional ekc line in figure 1 in developing countries some policymakers have interpreted such results as conveying a message about priorities grow first then clean up numerous critics have challenged the conventional environmental kuznets curve both as a representation of what actually happens in the development process and as a policy prescription some pessimistic critics argue that crosssectional evidence for the environmental kuznets curve is nothing more than a

sequential product positioning under differential costs this paper examines the product positioning decisions of firms that enter a market sequentially and that have potentially different cost structures it shows that if the first mover knows the second mover to have a lower production cost it positions away from the most attractive location in the market further the larger the second mover s cost advantage the farther away the first mover positions from the most attractive location the paper also models uncertainty in the first mover s mind about the later entrant s cost structure and shows that an increase in this uncertainty in the sense of mean preserving spread also makes the first mover position farther from the most attractive location in the market overall this paper suggests that unless the first entrant in a market is certain that the later entrant will not have a superior cost structure it may be better off leaving the best position in the market vacant and having a niche or fringe product

sequential location games we study location games where market entry is costly and occurs sequentially and where consumers are nonuniformly distributed over the unit interval we show that for certain classes of densities including monotone and under some additional restrictions hump shaped and u shaped ones equilibrium locations can be determined independently of when they are occupied our analysis reveals a number of peculiarities of the uniform distribution extensions of the model allow for price competition and advertisement in media markets winner take all competition trade offs between profits in the short and the long run and firms operating multiple outlets

policy incentives r d investment and the energy intensity of china s manufacturing sector abstract the chinese strategic plan made in china 2025 aims at improving the independent innovation capacity of the manufacturing industry it also commits to constructing green manufacturing systems through cleaner production and green technologies the chinese government provides research and development r d preferential policies to promote the realization of these aims using the two stage least square 2sls method this paper tests the impact of r d capital and its spillover on the energy intensity of the chinese manufacturing industry it also evaluates the effectiveness of r d policy in promoting r d investment at the industry level the findings show that r d capital is positively linked to the reduction of energy intensity and heterogeneity exists in the relationship between energy intensity and r d capital across industries this study finds that in general r d subsidies and tax relief do not significantly promote r d investment but r d subsidies generate a significantly positive effect on the r d intensity in the high tech industries

beyond the question does it pay to be green how much green and when abstract this research investigates the relationship between green management and performance in italian firms the analysis compares innovation and productivity of firms with similar features but different environmental activities firms are matched on a rich set of covariates extending the coarsened exact matching to survey data matched data are analysed with parametric and non parametric tests and endogenous treatment regression the analysis shows that the relationship between green management and performance is u shaped green firms are performing no better than firms with no environmental activity especially in energy intensive sectors among green firms more advanced environmental management is associated with higher performance overall the results suggest that green management has strong sectoral patterns and no linear relationship with performance findings suggest that green managers should pursue a comprehensive environmental management system sectoral specific policies to promote environmentally friendly activities are needed when green activities are not paying off

success factors for agricultural biogas production in sweden a case study of business model innovation as government officials policymakers and the general public increasingly express their concern about global warming caused by greenhouse gas emissions scientists search for alternative sources o

taxes and employment subsidies in optimal redistribution programs this paper explores how to optimally set taxes and transfers when taxation authorities 1 are uninformed about individuals value of time in both market and non market activities and 2 can observe both market income and time allocated to market employment we show that optimal redistribution in this environment involves distorting market employment upwards for low wage individuals through decreasing wage contingent employment subsidies and distorting employment downwards for high wage individuals through positive and increasing marginal income tax rates in particular we show that whether a person is taxed or subsidized depends primarily on his wage with the optimal program involving a cut off wage whereby workers above the cutoff are taxed as they increase their income while workers earning a wage below the cutoff receive an income supplement as they increase their income finally we show that the optimal program transfers zero income to individuals who choose not to work

brand positioning under lexicographic choice rules this paper discusses a brand positioning model in which two brands of a product are to be positioned in a price quality space under a new behavioral assumption this assumption asserts that customers determine the highest quality product within their reservation price and purchase it provided its quality does not fall short of a minimum standard the model also includes producers costs that are incurred for delivering a certain quality we first delineate reaction functions for the optimal location of one brand give a location of its competitor we then show that nash equilibria do not exist as long as price and quality are both variable finally we consider a two phase model in the first phase the duopolists sequentially choose their quality levels under the assumption that both competitors know that in the second phase a nash equilibrium in prices follows single variable mathematical programming formulations are presented to solve the problem a numerical example is also given to illustrate the working of the model

innovation appropriability and the underpricing of initial public offerings using the information asymmetries theory of underpricing we investigate the role of innovation in the underpricing of initial public offerings ipos we develop and test a model in which patents reduce information asymmetries in industries where the link between patents and inventive returns is transparent thereby reducing underpricing conversely patents reflect increased information asymmetries and underpricing in industries where the link is not transparent we examine these relationships in a sample of 1 413 ipos and find strong support for our hypotheses in so doing we make an important theoretical contribution by showing that the ipo market contextualizes firm information abstract from author copyright of academy of management journal is the property of academy of management and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder s express written permission however users may print download or email articles for individual use this abstract may be abridged no warranty is given about the accuracy of the copy users should refer to the original published version of the material for the full abstract copyright applies to all abstracts

uncertain intellectual property conditions and knowledge appropriation strategies evidence from the genomics industry innovating science and technology based firms often endure a sustained period of uncertain intellectual property rights ipr protection before patents could be granted to their valuable knowledge assets this problem is exacerbated as firms increasingly develop their innovations or operate in countries with weak ipr institutional environments but how does ipr uncertainty affect firms strategy toward knowledge appropriation capturing of economic value from their knowledge assets and toward providing access to these knowledge assets drawing on research from the economics of science and intellectual property strategy we examine this question using a novel panel data covering 362 firms and organizations in the knowledge intensive genomics industry based on all genomics patents and matching papers from 1988 to 2005 we find that under uncertain ipr conditions firms reveal and accumulate more knowledge through open science follow on publishing but shift to knowledge appropriation through commercial science follow on patenting when ipr uncertainty is narrowed this effect is most salient when firms develop their knowledge assets or operate under strong ipr institutional regime for highly science based knowledge assets firms continue tapping into open science for access and reciprocity in knowledge acquisition from the scientific community these findings highlight the role of patent grant as a potential lever to shape firms knowledge processes and long term innovative capacity and the emergence of a concerted science strategy employed by firms

asymmetric equilibria in spatial competition abstract the main purpose of this paper is to study the impact of consumer concentration around the market center on the equilibrium locations of location price games in the case of symmetric triangular density it is shown that no symmetric equilibrium exists however we demonstrate the existence of asymmetric equilibria in pure strategies these equilibria are also characterized our secondary purpose is to study the sequential entry of two firms when the location space is not restricted to the market space this leads us to uncover a substantial first mover advantage which has been neglected in the literature

corporate social performance as a business strategy having the ambition to contribute to the practical value of the theory on corporate social performance csp this paper approaches the question whether csp can contribute to the competitive advantage of firms we adopted an explorative case study methodology to explore the variety of positive and negative effects of csp on the competitiveness of organizations as this study aimed at identifying as great variety of these effects as possible we selected a diversified group of respondents data was thus collected through embedded units of analysis in a petrochemical company and triangulated with the opinions of experts on csp overall we found various positive and negative effects of csp on the competitiveness of organizations csp is therefore not an innocent adventure for executives but rather a strategy for achieving corporate objectives if not carefully implemented the csp strategy may harm the competitive advantage of the firm as our results have suggested

collaborative mechanism of a sustainable supply chain with environmental constraints and carbon caps abstract negative impacts on environment such as carbon emissions and pollution resulting from the business activities of firms in a supply chain have attracted great attention worldwide hence one of the crucial issues for supply chain management is the trade off between economic objectives and environmental sustainability this paper focuses on investigating the government policy incentive mechanism with which supply chain members are motivated to work collaboratively to reduce carbon and pollutant emissions by investing in producing environmental friendly products efp such a mechanism affects the transfer price through negotiation between the supply chain firms and consequently it has an impact on the supply chain s value transition and profit allocation a collaborative supply chain decision making framework is formulated with environmental constraints and carbon caps its objective is to maximize the net present value of an integrated supply chain as well as satisfy the interests of its individual members our key contribution lies in exploring a decision making mechanism for an environmentally sustainable supply chain that is jointly constrained by environmental carrying capacities and carbon caps and also takes into account government policy incentives the results show that collaboration between supply chain members plays a crucial role in improving their environmental performance as the transfer price is determined through negotiations to share government subsidies to satisfy the individual interests of supply chain members while the level of pollutants and carbon emissions are in compliance with environmental standards

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

product imitation product differentiation and international trade using the hotelling approach to product differentiation this article derives the equilibrium product configurations and prices when two firms enter and sell in two interdependent markets separated by barriers to trade it shows that product imitation and no trade as well as product differentiation with two way or one way trade are all consistent with the equilibrium copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

adopting knowledge from reverse innovations transnational patents and signaling from an emerging economy is there knowledge adoption of innovations from emerging economies we theorize that to help overcome information asymmetry across countries granting patents to technology in the emerging economy of china can serve as a signal of technology potential and market opportunity to enhance technological knowledge adoption in a developed economy such as the united states the effect may be greater in a complex technology sector with high information asymmetry than in a discrete technology sector and in regions with less developed market intermediaries where information asymmetry is high our difference in differences estimates using 4226 china u s patent dyads and comparable u s patents support our hypotheses

do corporate global environmental standards create or destroy market value arguments can be made on both sides of the question of whether a stringent global corporate environmental standard represents a competitive asset or liability for multinational enterprises mnes investing in emerging and developing markets analyzing the global environmental standards of a sample of u s based mnes in relation to their stock market performance we find that firms adopting a single stringent global environmental standard have much higher market values as measured by tobin sq than firms defaulting to less stringent or poorly enforced host country standards thus developing countries that use lax environmental regulations to attract foreign direct investment may end up attracting poorer quality and perhaps less competitive firms our results also suggest that externalities are incorporated to a significant extent in firm valuation we discuss plausible reasons for this observation

incumbent positioning as a determinant of strategic response to entry existing research has identified different firm characteristics that determine an incumbent s reaction toward market entrants this study widens the perspective from a firm s absolute attributes to its relative positioning within its competitive environment the hypotheses for the empirical analysis are derived from game theoretic models with either vertical or horizontal product differentiation in each of the two theoretical models two incumbents initially choose very different quality and variety levels respectively and move closer to the center when faced by entry of a competitor from the vertical differentiation model we predict a stronger price reduction by high quality firms in our empirical analysis we are using a novel dataset of the high quality restaurant market in germany to test the theoretical findings while the hypotheses with respect to adjustments of prices and varieties are supported we do not find empirical evidence for the predicted quality adjustment

institutional regime shift in intellectual property rights and innovation strategies of firms in china this study develops a novel conceptual framework to understand the differential impact of formal institutional regime shift in intellectual property rights on the innovation and patenting strategies of chinese and western firms operating in china we argue that to the extent that chinese firms have been deeply embedded in china s informal institutions they are less responsive to formal institutional changes than western firms operating in china using the major china patent law reform of 2001 as an exogenous event we find results consistent with our key arguments with the strengthening of the previously weak utility model patent protection chinese firms are less likely to apply for such patents to safeguard their innovations than western firms however this difference becomes less pronounced in regions with higher quality intellectual property rights and legal institutions that foster research and development and innovation and when western firms gain longer operational experience in china this s

pollution accumulation and abatement policy in a supply chain abstract this paper seeks to determine how the double marginalization phenomenon affects the tradeoff between polluting emissions and abatement activities related to pollution accumulation in a supply chain composed of one manufacturer and one retailer the environmental consequence of this inefficiency which emerges in a non cooperative vertical setting governed by a single parameter contract is overlooked in the literature on pollution control in the setup of a two stage game we investigate the impact of double marginalization for non cooperative equilibrium to check whether there are differences between dynamic and strategic effects of double marginalization on pollution accumulation both the open loop and feedback nash equilibria are derived over a finite time horizon with the cooperative solution as a benchmark

implementation of first best allocations via generalized tax schedules abstract the classical problem of optimal taxation introduced by j mirrlees rev econ stud 38 1971 175 208 is addressed and it is argued that by using generalized tax schedules i e schedules which depend not only on individual income but also on the whole profile of incomes announced by the society a planner can implement any pareto optimum which stands in great contrast with the set of second best pareto optima attainable via classical tax schedules the mechanism relies crucially on the fixed probability distribution of characteristics and on a finite number of agents journal of economic literature classification numbers d78 d82 h21

strategic entry deterrence in analyzing deterrence of large scale entry two classes of entry barriers may be distinguished an innocent entry barrier is unintentionally erected as a side effect of innocent profit maximization in contrast a strategic entry barrier is purposely erected to reduce the possibility of entry two types of innocent barriers may also be distinguished a postentry absolute advantage has the property that if entry did occur the established firm would be at a profit advantage over the entrant examples are superior technology or product design patents and lower input prices a preentry asymmetry advantage arises from the fundamental preentry asymmetry between established firm and potential entrant before the entrant makes his entry decision the established firm has already committed resources this prior existence gives first move advantages the preentry asymmetry is independent of symmetry or asymmetry in the rules the equilibrium concept of the postentry game that might ensue even if the postentry game will be played according to nash cournot or entrant as leader rules the preentry leadership

sequential entry and deterrence with competitive spatial price discrimination abstract this paper analyzes sequential entry with perfect foresight in a competitive spatial price discrimination model with both an exogenous and an endogenous number of firms the spne locations do not coincide with the social cost minimizing locations

the roles of stakeholder support and procedure oriented management on asset recovery abstract as the management of returned products is fast becoming a business trend caused by pressure for compliance asset recovery is increasingly viewed as a fertile area for firms to reduce cost and improve quality environmental management is a viable approach for chinese manufacturers to respond to the escalating international quest for conserving the environment to tackle the problem of rising raw material costs and to improve product quality by analyzing returned products to reach the goals of cost reduction and product quality improvement manufacturers need to understand how asset recovery can be leveraged through procedure based practices and stakeholder support to enhance performance product type characterized by different levels of demand uncertainty and time to market may affect the outcomes of asset recovery adoption and should also be taken into account drawing on the environmental management and business logistics literature we provide empirical insights on asset recovery adoption using survey data collected from export oriented chinese manufacturers we find that asset recovery and stakeholder support are complementary in strengthening manufacturers financial performance regardless of product type in addition the performance impact of asset recovery can be substantial when manufacturers environmental management practices are less procedural allowing flexibility in the logistics management of product flows

corporate social responsibility its economic impact and link to the bullwhip effect this paper examines the economic impact of implementing corporate social responsibility csr in the supply chain operations of multinational corporations mnc because they have global supply chains in emerging markets mncs face certain operational challenges for example unethical operations often result in a huge loss to mncs in the long run even though their initial cost seems to be low in this paper we extend the bullwhip effect theory in supply chain management to the ethical operations context and define and evaluate a special bullwhip effect due to unethical operations beuo using economic data from various sources including ford toyota and gm in the auto industry we first estimate the indices of beuo for the three companies and demonstrate the economic necessity for mncs to incorporate csr with supply chain operations we then propose a coherent approach blending what we term the bottom up and proactive methods to achieve such an outcome the bottom up approach requires mncs to switch their focus on stakeholders shifting from shareholders to consumers and workers and on decision levels from public relationships to supply chain operations the proactive approach recommends initializing specific csr operations to mitigate the negative impact of beuo both theoretical analysis and case studies are conducted to evaluate our developed propositions that mncs adopting the proposed csr operations will in the long run achieve better economic performance recommended actions for implementation based on best practices are also presented

weak entrants are welcome abstract this paper investigates the decision problem of an incumbent firm confronted by both a weak and strong entrant in a differentiated market suppose that the incumbent can deter entry of the weak firm but cannot deter entry of the strong firm by itself then the incumbent may allow entry of the weak firm and use it to alter the strong firm s entry decision the present paper formalizes this idea and it sheds new light on the fact that domestic firms are sometimes able to block strong foreign firms after trade liberalization the idea also explains why a dominant firm lets fringe firms be in the market

does the porter hypothesis explain expected future financial performance the effect of clean water regulation on chemical manufacturing firms previous research provides opposing theoretical arguments regarding the effect of environmental regulation on financial performance as one important argument the porter hypothesis claims that tighter regulation improves financial performance this study provides empirical evidence on this debated effect in particular we employ panel data analysis to examine the effect of clean water act regulation as measured by permitted wastewater discharge limits on expected future financial performance as measured by tobin s q for publicly owned firms in the chemical manufacturing industries we find that tighter permitted discharge limits lower tobin s q i e more stringent clean water act regulation undermines expected future financial performance by decomposing tobin s q into its constituent components market value and replacement costs and estimating each component separately we find that tighter permitted discharge limits lower both components with a larger impact on market value which implies that investors revise their expectations of the discounted present value of future profits in response to changes in clean water act regulation

moral hazard income taxation and prospect theory the standard theory of optimal income taxation under uncertainty has been developed under the assumption that individuals maximise expected utility however prospect theory has now been established as an alternative model of individual behaviour with empirical support this paper explores the theory of optimal income taxation under uncertainty when individuals behave according to the tenets of prospect theory it is seen that many of the standard results are modified in interesting ways the first order approach for solving the optimisation prob lem is not valid over the domain of losses and the marginal tax schedule offers full insurance around the reference consumption level the implications of non welfarist objectives under income uncertainty are also examined

what determines the inclusion in a sustainability stock index a panel data analysis for european companies this paper examines the determinants of the inclusion of european companies in the dow jones sustainability world index and the dow jones stoxx sustainability index in doing so the paper contributes to the micro econometric literature analyzing the determinants and economic effects of sustainability performance in three respects first it examines a broad measure of corporate sustainability behavior and thus does not only apply narrow measures of environmental performance such as toxic releases which is common in other studies second the paper examines the effect of internal assessment processes regarding corporate sustainability performance by an independent financial service institution finally it analyzes the influence of unobserved heterogeneity in the framework of panel data models the analysis shows that the probability for an inclusion in the sustainability indexes strongly decreases if a company does not respond to the written survey of the assessing institution furthermore time invariant random effects and an autoregressive structure in the stochastic components are important factors in contrast a significant influence of past economic performance cannot be confirmed robustly

a great wall of patents what is behind china s recent patent explosion abstract china s patent surge documented in this paper is seemingly paradoxical given the country s weak record of protecting intellectual property rights using a firm level data set that spans the population of china s large and medium size industrial enterprises this paper explores the factors that account for china s rising patent activity while the intensification of research and development in the chinese economy tracks with patenting activity it explains only a fraction of the patent explosion the growth of foreign direct investment in china is prompting chinese firms to file for more patent applications amendments to the patent law that favor patent holders and ownership reform that has clarified the assignment of property rights also emerge as significant sources of china s patent boom these results are robust to alternative estimation strategies that account for over dispersion in the patent counts data and firm heterogeneity

the impact of environmental management on firm performance environmental management has the potential to play a pivotal role in the financial performance of the firm many individuals suggest that profitability is hurt by the higher production costs of environmental management initiatives while others cite anecdotal evidence of increased profitability a theoretical model is proposed that links strong environmental management to improved perceived future financial performance as measured by stock market performance the linkage to firm performance is tested empirically using financial event methodology and archival data of firm level environmental and financial performance significant positive returns were measured for strong environmental management as indicated by environmental performance awards and significant negative returns were measured for weak environmental management as indicated by environmental crises the implicit financial market valuation of these events also was estimated cross sectional analysis of the environmental award events revealed differences for first time awards and between industries first time award announcements were associated with greater increases in market valuation although smaller increases were observed for firms in environmentally dirty industries possibly indicative of market skepticism this linkage between environmental management and financial performance can be used by both researchers and practitioners as one measure of the benefits experienced by industry leaders and as one criterion against which to measure investment alternatives

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

strategic entry deterrence recent developments in the economics of industry this paper reviews the recent developments in the economics of industry with respect to strategic entry deterrence starting from bain s 1956 classical analysis a simple two stage game between an incumbent firm and a potential entrant is used to present the general structure of the entry deterrence problem commitments credible threat and sub game perfection are illustrated in this context the various strategic variables that an incumbent firm can use to bar entry are discussed the issue of whether a group of incumbents can noncooperatively deter entry is taken up and some empirical evidence is reviewed copyright 1989 by blackwell publishers ltd

multiproduct nonlinear pricing typically work on mechanism design has assumed that all private information can be captured in a single scalar variable this paper explores one way in which this assumption can be relaxed in the context of the multiproduct nonlinear pricing problem it is shown that the firm will choose to exclude some low value consumers from all markets a class of cases that allow explicit solution is derived by making use of a multivariate form of integration by parts in such cases the optimal tariff is cost based

information and incentives the economics of carrots and sticks prize lecture to the memory of alfred nobel december 9 1996 this abstract was borrowed from another version of this item

the impacts of carbon co2 emissions and environmental research and development r d investment on firm performance abstract while the rate of climate change appears to have risen substantially in recent years relatively little is known regarding how firms alter the relationship between corporate environmental performance cep and corporate financial performance cfp recent research into the relationship between cep and cfp proposes a variety of contextual and firm factors which can create a more robust link however few of these studies explore the role of environmental research and development r d investment using micro level data this paper investigates how environmental r d affects the cep cfp relationship from the perspective of global climate change and an international environmental agreement we develop a fixed effect model for estimation analyzing a panel dataset of 362 firms from 2003 to 2010 we find that carbon emissions persistently decrease firm value we also find that the market penalizes firms negative environmental performance more consistently than its positive performance further analysis indicates that corporate efforts to comply with international environmental agreements such as the kyoto protocol are not a binding constraint on firm performance

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

how do foreign firms patent in emerging economies with weak appropriability regimes archetypes and motives abstract foreign firms patent in emerging economies with weak appropriability regimes at an increasing rate this phenomenon constitutes a paradox since in such a setting foreign firms should have weak incentives to patent in an attempt to resolve this paradox we conducted an inductive analysis of 11 foreign firms that patent in such a setting using the case of china as our empirical context we identify four archetypes of foreign firms and three key antecedents the interaction of which determines which archetype a firm can be subsumed under our study complements the developed economy focus of the extant appropriation literature by adding an international perspective we extend previous econometric studies by identifying salient factors on the firm level that determine the extent to which a foreign firm patents in emerging economies with a weak appropriability regime highlighting that the extent of a firm s motivation to maintain its freedom to operate can supersede imitability concerns we also comment on the practical implications of these contributions for managers of foreign firms highlighting a structural conflict of interest between foreign firms from developed economies and the development goals of an emerging economy we point to the generalizability of our results to a wide range of other emerging economies worldwide

licensing the market for technology abstract in technology based industries incumbent firms often license their technology to potential competitors such a strategy is difficult to explain within traditional models of licensing this paper extends the literature on licensing by relaxing the assumption of a monopolist technology holder competition in the market for technology induces licensing of innovations and incumbent firms may find it privately profitable to license although their joint profits may well be higher in the absence of any licensing a strong testable implication of our model is that the number of licenses per patent holder decreases with the degree of product differentiation

quality awards and the market value of the firm an empirical investigation this paper empirically investigates the impact of winning a quality award on the market value of firms by estimating the mean abnormal change in the stock prices of a sample of firms on the date when information about winning a quality award was publicly announced we note that the abnormal returns generated by the quality award winning announcements provide a lower bound for the impact of implementing an effective quality award improvement program our results show that the stock market reacts positively to quality award announcements statistically significant mean abnormal returns on the day of the announcements ranged from a low of 0 59 to a high of 0 67 depending on the model used to generate the abnormal returns the reaction was particularly strong for smaller firms mean abnormal returns ranged from low of 1 16 to a high of 1 26 and for firms that won awards from independent organizations such as malcolm baldrige philip crosby etc mean abnormal returns ranged from a low of 1 31 to a h

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

reviewing the business case for corporate social responsibility new evidence and analysis this study complements previous empirical research on the business case for corporate social responsibility csr by employing hitherto unused data on corporate social performance csp and proposing statistical analyses to account for bi directional causality between social and financial performance by allowing for differences in the importance of single components of csp between industries the data in this study overcome certain limitations of the databases used in earlier studies the econometrics employed offer a rigorous way of addressing the problem of endogeneity due to simultaneous causality although the study s results provide no evidence that there is a generic or universal business case for csr they indicate that there is a strong link between single stakeholder related issues of csr and financial performance however the analysis does not establish causality within these relationships

event study methodologies and the size effect abstract this study of 862 press recommendations demonstrates that the size effect can distort longer term performance measures and hence event studies relative to similar sized companies post publication performance is neutral however market adjustments the capm and market model with equally or capitalization weighted indexes all produce biased results event studies are most exposed to such bias when the measurement interval is long event securities differ systematically in size or weighting from the index constituents the size effect is large and or volatile and when capm type methodologies are used these distortions are avoided by explicitly controlling for size

informal regulation of pollution in a developing country evidence from india abstract recent policy discussions recognise the limitations of formal regulations to stem pollution in developing countries as a result there is a growing interest in the potential of informal regulations to achieve environmental goals in india many polluting industries fall under the rubric of the unorganised sector in such a context localised pollution may be influenced by discussions and reports on pollution in the vernacular press this study attempts to test the hypothesis that the press can act as an informal agent of pollution control this hypothesis is tested using monthly water pollution data from four hot spots in the state of gujarat india for the period 1996 to 2000 the results show that the press can function as an informal regulator if there is sustained interest in news about pollution however not all pollution agents are affected by pollution news press coverage appears to mainly influence industrial estates with a mix of small medium and large industries

hotelling s competition with demand location uncertainty abstract firms product variety choices are examined in a differentiated products model where the range of consumers preferences is an unknown strict subset of the range of potential innovations it is found that the firms locating sequentially will follow the basic pattern of locations found by neven international journal of industrial organization 1987 5 419 434 the uncertainty however generally causes a greater more symmetric amount of differentiation among varieties as firms gamble on finding a market niche with less fierce competition for a sufficiently large pool of potential entrants some firms will lose this gamble and will fail

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

asymmetric information and public economics the mirrlees vickrey nobel prize this paper surveys the contributions of nobel laureates james mirrlees and william vickrey to the study of asymmetric information in economics particularly as they relate to problems in public economics it discusses and interprets mirrlees s work on optimal income taxation and relates it to previous work on optimal distribution of income including that of vickrey it also describes vickrey s fundamental contribution to auction theory and its importance for the more general field of preference revelation it also includes an evaluation of the prize winners work in other areas of public economics particularly on optimal indirect taxation and marginal cost pricing

what can we learn from simulating a standard agency model abstract for typical parametrizations of the standard bell journal of economics 10 1979 74 agency model this paper demonstrates that the set of first order conditions characterizing the optimal contract can be reduced to a single equation a problem of investment financing under moral hazard is used to illustrate the reduced form equation s usefulness in quantitative applications when the agent has cara preferences over consumption it is shown that any exogenous limit on the penalties for low output is always binding

the reputational penalties for environmental violations empirical evidence abstract this paper examines the sizes of the fines damage awards remediation costs and market value losses imposed on companies that violate environmental regulations firms that violate environmental laws suffer statistically significant losses in the market value of firm equity the losses however are of similar magnitudes to the legal penalties imposed and in the cross section the market value loss is related to the size of the legal penalty thus environmental violations are disciplined largely through legal and regulatory penalties not through reputational penalties

global and local players in a model of spatial competition abstract we analyze equilibrium configurations of hotelling location games where some players compete on several markets with the same product such global players tend to lower product diversity across markets the model is consistent with recent empirical findings on preference externalities

stock dividends stock splits and signaling this paper provides evidence that firms signal their private information about future earnings by their choice of split factor split factors are increasing in earnings forecast errors after controlling for differences in pre split price and firm size furthermore price changes at stock dividend and split announcements are significantly correlated with split factors holding other factors constant and with earnings forecast errors these correlations suggest that management s choice of split factor signals private information about future earnings and that investors revise their beliefs about firm value accordingly the analysis also suggests however that announcement returns are significantly correlated with split factors after controlling for earnings forecast errors this suggests that earnings forecast errors measure management s private information about future earnings with error that split factors signal other valuation relevant attributes or that a signaling explanation is incomplete researchers have long puzzled over the role of stock splits and stock dividends a stock dividend or split increases the number of equity shares outstanding but has no effect on shareholders proportional ownership of shares it is therefore puzzling that firms engage in these transactions and even more so that stock prices rise on average when these transactions are announced as grinblatt masulis and titman 1984 document the significant positive announcement effects led grinblatt masulis and titman hereafter gmt to hypothesize that firms signal information about their future earnings or equity values through their split decisions to date this hypothesis has met with limited support gmt conclude that the announcement returns cannot be explained by forecasts of imminent increases in cash dividends because they observe similar stock price behavior in firms that do not pay dividends our study provides further evidence on the signaling hypothesis by testing whether stock dividends and splits convey information about future earnings and by testing whether the split factor itself is the signal the notion that the split factor may act as a signal has institutional as well as theoretical support practitioners have long contended that the purpose of stock splits is to move a firm s share price into an optimal trading range baker and gallagher 1980 who surveyed chief financial officers of firms that split their shares report that 94 of their sample indicated their stock splits moved their

pricing patterns as outcomes of product positions prior empirical work shows that different markets are characterized by different pricing patterns such as bertrand nash pricing or stackelberg leader follower pricing the author considers a duopolistic market where ex ante identical firms sequentially position their products prior to competing on prices in a single or multiperiod setting and show that the unique equilibrium outcome involves 1 firms choosing stackelberg pricing over bertrand nash pricing and 2 the positioning first mover acting as the price leader an attractive property of this model is that the ex post larger firm acts as the price leader which is consistent with prior empirical evidence copyright 1999 by university of chicago press

beyond does it pay to be green a meta analysis of moderators of the cep cfp relationship review of extant research on the corporate environmental performance cep and corporate financial performance cfp link generally demonstrates a positive relationship however some arguments and empirical results have demonstrated otherwise as a result researchers have called for a contingency approach to this research stream which moves beyond the basic question does it pay to be green and instead asks when does it pay to be green in answering this call we provide a meta analytic review of cep cfp literature in which we identify potential moderators to the cep cfp relationship including environmental performance type e g reactive vs proactive performance firm characteristics e g large vs small firms and methodological issues e g self report measures by analyzing these contingencies this study attempts to provide a basis on which to draw conclusions regarding some inconsistencies and debates in the cep cfp research some of the results of the moderator analysis suggest that small firms benefit from environmental performance as much or more than large firms us firms seem to benefit more than international counterparts and environmental performance seems to have the strongest influence on market measures of financial performance

information asymmetry and asset prices evidence from the china foreign share discount we examine the effect of information asymmetry on equity prices in the local a and foreign b share market in china we construct measures of information asymmetry based on market microstructure models and find that they explain a significant portion of cross sectional variation in b share discounts even after controlling for other factors on a univariate basis the price impact measure and the adverse selection component of the bid ask spread in the a and b share markets explains 44 and 46 of the variation in b share discounts on a multivariate basis both measures are far more statistically significant than any of the control variables the extent of information asymmetry in the international equity market has become a very important topic the question of whether domestic investors have better information than foreign investors has also become increasingly controversial for instance a few papers argue that domestic investors have a linguistic and cultural advantage brennan and cao 1997 choe kho and stulz 2001 and hau 2001 others argue that foreign investors have an informational advantage because they possess a significant amount of investment experience and expertise seasholes 2000 grinblatt and keloharju 2000

two stage perfect equilibrium in hotelling s model hotelling i 929 suggests that his spatial competition model can be used to describe a wide range of differentiation problems he points to the selection of product variety within an industry as a potential application most of the subsequent work in his tradition has taken the equivalence of the two problems for granted in this note we look more closely at this equivalence we distinguish between two types of differentiated products according to the variety of preferences assumed with respect to those products building on this distinction we recognize that the demand faced by a firm locating on hotelling s line is analogous to the demand faced by a firm selecting a horizontally differentiated product it should be emphasized thus that the equivalence between the geographical and the product selection problem is by no means general and relies on specific assumptions about consumers preferences next we formulate a small model close to hotelling s one in which firms select a horizontally differentiated product within this model it will be shown that a pure strategy price equilibrium exists for every pair of products this statement is to be contrasted with the results of d aspremont et al i979 who have shown that in the original hotelling s setting an equilibrium fails to exist when firms are too close together 1 in addition we will examine the product selection problem faced by firms in a two stage game in the first stage each firm selects a product in the second stage the firm defines a price for its product we will seek the existence of a perfect equilibrium in this game a perfect equilibrium in this context can be viewed as a nash equilibrium in a game in which firms select a product aware of the non cooperative price equilibrium that will occur for each of their choices it will be shown that contrary to hotelling s principle the two firms will maximise their differentiation i e firms will locate at opposite ends of the market

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

managing valuable knowledge in weak ip protection countries although knowledge assets provide multinational corporations mncs with competitive advantages in foreign markets it can be difficult for firms to protect their knowledge in foreign countries especially countries with weak intellectual property ip protection building on and extending the knowledge management institutional theory and expatriate literatures this article explores whether home country expatriates can substitute for weak ip protection and drive an increase in more and more valuable knowledge transfers to foreign operations located in weak ip protection countries because of their ties to headquarters knowledge of parent firm assets priorities and routines and activities in local operations i argue that home country expatriates can transform the local operation to offer higher protection for parent firm knowledge in weak ip countries in ways that local managers cannot the results from a comprehensive panel of us multinationals suggest that home country expatriates can substitute for weak ip protection but that this effect is contingent on the manufacturing and knowledge capabilities of foreign operations for higher value parent firm knowledge transfers overall this article extends our understanding of the global management and protection of knowledge by mncs by exploring how organizational practices can buffer country level institutional deficiencies for firm knowledge

the impact of environmental regulations on industry productivity direct and indirect effects abstract the paper develops an approach to measuring the impact of environmental regulations on total factor productivity growth which is less restrictive than a simple growth accounting approach environmental regulations have a direct impact on productivity growth due to the diversion of resources toward required abatement capital there can be a further indirect effect however as conventional inputs and production processes are changed in response to requirements to purchase abatement capital we estimate this indirect effect using a flexible functional form cost function total factor productivity and the direct and indirect productivity effects of environmental regulations are presented for five polluting industries we find that the indirect effect can be either positive or negative and in all industries is energy using the net impact of environmental regulations on total factor productivity growth is fairly small given that these are the most polluting industries they account for about 10 30 of the productivity decline of the 1970s in these industries

the corporate social performance financial performance link strategic managers are consistently faced with the decision of how to allocate scarce corporate resources in an environment that is placing more and more pressures on them recent scholarship in strategic management suggests that many of these pressures come directly from sources associated with social issues in management rather than traditional arenas of strategic management using a greatly improved source of data on corporate social performance this paper reports the results of a rigorous study of the empirical linkages between financial and social performance corporate social performance csp is found to be positively associated with prior financial performance supporting the theory that slack resource availability and csp are positively related csp is also found to be positively associated with future financial performance supporting the theory that good management and csp are positively related 1997 by john wiley sons ltd