integrative capabilities vertical integration and innovation over successive technology lifecycles the analysis presented here provides a new explanation for why vertically integrated and specialized firms may continue to coexist as industries evolve especially during time periods when conditions unequivocally favor lower cost specialized firms in contrast to the common view that firms should match their organizational form to the prevailing nature of technology vertically integrated firms may rationally choose to stay integrated and bear the sunk costs of developing integrative capabilities as well as the ongoing costs of maintaining them even when they lose money during some time periods due to competition from lower cost specialized firms in particular in industries characterized by successive systemic innovations which entail interdependence across stages of production some firms may remain vertically integrated to maintain their capability to innovate over multiple cycles of technological innovation the results hinge on the sunk costs of long lived investments in integrative capabilities an extension to the analysis suggests that vertically integrated firms may retain their organizational form to pioneer systemic innovations in other industries including industries not subject to frequent technology lifecycles providing another explanation of product market diversification and market entry over time

on sharks trolls and their patent prey unrealistic damage awards and firms strategies of being infringed abstract patent trolls or sharks are patent holding individuals or often small firms who trap r d intensive manufacturers in patent infringement situations in order to receive damage awards for the illegitimate use of their technology while of great concern to management their existence and impact for both corporate decision makers and policy makers remains to be fully analyzed from an academic standpoint in this paper we show why patent sharks can operate profitably why they are of growing concern how manufacturers can forearm themselves against them and which issues policy makers need to address to do so we map international indemnification rules with strategic rationales of small patent holding firms and large manufacturers within a theoretical model our central finding is that the courts unrealistic consideration of the trade offs faced by inadvertent infringers is a central condition for sharks to operate profitably

competition and entrepreneurs human capital in small business longevity and growth abstract an analysis of data on a sample of small scale manufacturers shows that a business is less likely to survive and grows slower the smaller the average price cost margin in the industry in which it operates the probability of survival is also smaller in import competing industries so is the mean growth rate among survivors we interpret this as evidence that small businesses are less likely to survive and grow slower in industries where the pressure of competition is stronger given competitive pressure and establishment characteristics the probability of business survival and the expected growth rate conditional on survival both increase with entrepreneurial human capital this is in the sense that the probability of business survival increases with the number of years of schooling and the number of years of business experience of the entrepreneur as does the expected growth rate conditional on survival these results are consistent with another finding that unobservable influences on business

patent trolls on markets for technology an empirical analysis of npes patent acquisitions abstract patent trolls or npes appropriate profits from innovation solely by enforcing patents against infringers they are often characterized as relying on low quality patents an assessment that if correct would imply that eradicating such patents would effectively terminate the npe business in this paper we shed light on this issue by empirically analyzing npes patent acquisitions we draw on a unique dataset of 392 u s patents acquired by known npes between 1997 and 2006 which we compare to three control groups of 784 u s patents each acquired by practicing firms we find that the probability that a traded patent is acquired by an npe rather than a practicing entity increases in the scope of the patent in the patent density of its technology field and contrary to common belief in the patent s technological quality our findings thus support recent theoretical propositions about the npe business model showing that npes procure patents that are more likely to be infringed harder to substitute for and robust to legal challenges the fact that npe acquired patents are of significantly higher quality than those in the control group implies that elevating minimum patent quality will not put an end to the npe business and suggests that this business is sustainable in the long run we furthermore discuss the fact that npes are peculiar players on markets for technology insofar as they are solely interested in the exclusion right not in the underlying knowledge we posit that transactions involving npes may only be the tip of the iceberg of patent only transactions a conjecture with strong implications for the efficiency and the study of markets for technologies managerial and policy implications are discussed

measuring the default risk of small business loans a survival analysis approach in this paper we report that although medium maturity loans originated under the sba 7 a loan guarantee program are targeted to small firms that fail to obtain credit through conventional channels the default experience is comparable to that of a large percentage of loans held by larger commercial banks we establish that the default behavior of these loans is time sensitive as a loan seasons the likelihood of default increases initially peaks in the second year and declines thereafter using a discrete time hazard framework we show that the likelihood of default is conditional on borrower lender and loan characteristics and changes in economic conditions

tribunal specialization and institutional targeting in patent enforcement recent scholarship on nonmarket strategies has sought to understand organizational decisions to target specific institutional venues for nonmarket actions we contribute to this emerging literature by studying institutional targeting between specialized and general purpose tribunals which are available to resolve disputes in a number of settings whereas prior work on institutional targeting has primarily focused on the differences in the policy preferences of public actors and the susceptibility of policy positions to influence activities we focus on the differences in expertise and procedural flexibility that typically accompany tribunal specialization we develop a theory about targeting decisions forum shopping in such contexts which suggests two main drivers of tribunal targeting expected settlement and expected returns drawing on these mechanisms we formulate hypotheses linking tribunal targeting decisions to firm level attributes such as market strategic stakes institutional distance from competitors and tribunal specific capabilities our hypotheses are tested using a novel data set of patent enforcement against u s imports which also sheds light on nonmarket strategies in patents

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

an explanation of the life span of new french firms in contrast to previous studies on firm survival which tend to focus on features related to the structure of the firms and their area of activity our aim here is to widen the perspective usually adopted in the field taking into account a larger and more qualitative set of variables among these variables features related to the individual characteristics of the entrepreneur to the context of entrepreneurship and to the insertion in entrepreneurial networks are significant to explain the life span of new firms the empirical material is drawn from two surveys which provide detailed data about a group of new firms created in france in 1994 and closed down before 1997 or still running in 1997 our empirical approach on qualitative data is based on data analysis methods linear discriminant analysis barycentric discriminant analysis analysis of variance according to the characteristics of the entrepreneur the main explanatory factors for the survival of new firms are the fact that they are entrepreneurs who have taken over firms that they have acquired during their previous occupational activity an experience in the same branch of activity and that they experience a successful integration into the entrepreneurial networks these three factors show that the survival of young firms is indirectly conditioned by the existence of an initial custom by the mastery of a job and by the know how in the entrepreneurial function

firm and product life cycles and firm survival on average roughly 5 10 percent of the firms in a given market leave that market over the span of a single year at least so data for a broad range of industries in several economies tell us what is it other than random shocks that determines the probability of survival for a firm in a given market we start by decomposing the forces that affect survival into industry and firm attributes industry attributes we hypothesize encompass variables that exert their influence both over time and across markets the variables that operate over time are defined by the life cycle of the industry life cycles of the industry affect mainly the characteristics of demand and the rate and form of technical change variations across firms we hypothesize arise mainly from learning by doing darwinian survival of the fittest and the obsolescence of initial endowments these variables are linked to the life cycle of the firm how these industry and firm life cycles define patterns of survival is the story

effect of credit guarantee policy on survival and performance of smes in republic of korea this study evaluates the effect of credit guarantee on smes at the firm level to estimate the effect of credit guarantee we analyze relations between credit guarantee the survival of guaranteed firms and their productive performance the result indicates that credit guarantee frequency enabled guaranteed firms to achieve good performances in general on the contrary the effect of guarantee amounts is ambiguous in that there is difference between the contemporary effect and the lagged effect therefore we conclude that credit guarantee satisfied partially its goal to alleviate smes difficulty in acquiring finance and to stabilize employment

how valuable is patent protection estimates by technology field i present evidence on the private value of patent rights in france for different technology fields and nationalities of ownership using nonparametric techniques and a parametric model of patent renewal i find that the distribution of the value of patent rights is highly skewed that patent protection is a significant but not the major source of private returns to r d and that these characteristics vary across technology fields i compute the r d cash subsidy that is equivalent to the value of patent rights measure the variations in value of time technology fields and nationalities and show that these differences are correlated with patent grant rates

corporate science in the patent system an analysis of the semiconductor technology corporate scientific publications are often presented as a strategic means for firms to create prior art with the objective to prevent others from patenting related inventions this presumes that corporate publications enter the pool of prior art which is relevant to judge the novelty of patent applications at the patent office and that corporate science has the power to block patent applications this paper analyses for the first time whether the presumed mechanism behind corporate publications as a means to preempt patents works with focus on the semiconductor technology our results show that scientific publications by corporations challenge the novelty of patent applications at the european patent office epo significantly more than other pieces of prior art detailed information from the epo patent examination procedure allows us to show that corporate publications threaten the novelty of patent applications if combined with other pieces of prior art like patents rather than as standalone documents this supports the view that corporate scientific publishing can be an effective means for firms to protect their freedom to operate if used as a complementary part of a firms overall ip protection strategy as proposed by scholars in the field of law and management science

economic failure and the role of plant age and size this paper introduces a large scale administrative panel data set on corporate bankruptcy in germany that allows for an econometric analysis of involuntary exits where previous studies mixed voluntary and involuntary exits approximately 83 of all bankruptcies occur in plants with not more than 10 employees and 61 of all bankrupt plants are not older than 5 years the descriptive statistics and regression analysis indicate substantial negative age dependence with respect to bankruptcy risk but confirm negative size dependence for mature plants only our results corroborate hypotheses stressing increasing capabilities and positional advantage both predicting negative age dependence with respect to bankruptcy risk due to productivity improvements the results are not consistent with the theories explaining age dependence via imprinting or structural inertia

the scope of imf conditionality international organizations are governed by two parallel sets of rules formal rules which embody consensual procedures and informal rules which allow exceptional access for powerful countries a new data set drawn from the imf s records of conditionality provides an opportunity to study the bargaining process within an important international organization and answer questions about the institution s autonomy i find evidence of u s influence which operates to constrain condition ality but only in important countries that are vulnerable enough to be willing to draw on their influence with the united states in ordinary countries under ordinary circumstances broad authority is delegated to the imf which adjusts conditionality to accommodate local circumstances and domestic political opposition the imf has refrained from exploiting the vulnerability of particular countries to maximize the scope of conditionality international organizations have become increasingly important actors in inter national politics they have proliferated have expanded in membership have acquired new legal enforcement powers and have extended their reach into the details of domestic political economy in their member states af ew including the international monetary fund imf or simply the fund command significant resources and wield considerable authority some critics have argued that these international organizations are sufficiently autonomous to create a democratic def icit at the international level as they pursue a vision of undemocratic liberal ism 1 other critics have argued that international organizations are nothing more than instruments in the hands of powerful states 2 these critiques of course cannot simultaneously be true and both run into difficulties the puzzle that the rogue agency view cannot explain is why the principals have chosen to delegate so much authority in principal agent terms this view posits that both screening and monitoring have failed the principals are unable to select agents with preferences similar to their own and are unable

share price and mortality an empirical evaluation of newly listed nasdaq stocks abstract we examine a sample of 5896 stocks listed on nasdaq between 1974 and 1988 to see whether the price per share has significant statistical power in forecasting subsequent returns and attrition rates consistent with anecdotal evidence we document a higher mortality rate for lower priced stocks than for higher priced issues surprisingly mortality is not related to market capitalization our results also hold for subsamples partitioned by industry and issue year on average investors are not adequately compensated for this additional mortality risk earning lower risk adjusted rates of return on portfolios of lower priced shares than on portfolios of higher priced shares

business failure of new firms an empirical analysis using a multiplicative hazards model abstract this paper investigates business failure of new firms using a multiplicative hazards model we estimate the determinants of business failure among new manufacturing firms in tokyo during the period 1986 to 1994 it is found that a new firm without sufficient capital or a sufficient size has a higher risk of business failure it is also found that the new firm tends to have more difficulty surviving in an industry characterized by a high entry rate with respect to the timing of entry the new firm that entered just before or after the collapse of the so called bubble economy has been more likely to fail furthermore we estimate a regression model based not only on age but also on calendar time by using a regression model based on calendar time it is found that the firm s age has been related to business failure

letting rivals come close or warding them off the effects of substitution threat on imitation deterrence a resource based theory postulate is that firms must defend their resources against imitation to sustain competitive advantage however by deterring imitation firms may induce rivals to create su

decomposition of new venture growth into firm age survey period and vintage effects firm data are accumulated on a yearly basis in view of the linear relationship of firm age foundation year survey year the fluctuations of firm data classified by age and period cannot be decomposed into age period and cohort foundation year effects three decomposition methods are briefly reviewed and applied to japanese data on new ventures founded since 1995 regarding sales and employment growth the age effect is the largest with a downward trend and the cohort effect is negligible regarding labour productivity the age effect indicates upward movements and the cohort effect is negligible the reason of the negligible cohort effect is discussed

a survey of the economics of patent systems and procedures the last several decades have seen increases in patenting activity worldwide as well as growing issues related to patent quality in response to these quality issues a recent patent literature has emerged that investigates the behavior and incentives of patent examiners applicants and third parties in this paper we provide an overview of patent procedures patent systems and a survey of the new economic literature on patent systems both theoretical and empirical papers are considered policy implications coming from this literature are presented

interest rates and credit risk this paper explores the effects of shifts in interest rates on corporate leverage and default we develop a dynamic model in which the relationship between firms and their outside financiers is affected by a moral hazard problem and entrepreneurs initial wealth is scarce the link between leverage and default risk comes from the lower incentives of overindebted entrepreneurs to guarantee firm survival the need to finance new investment with outside funding pushes firms leverage ratio above some state contingent target towards which they gradually adjust through earnings retention the dynamic response of leverage and default to interest rate rises and cuts is both asymmetric and heterogeneously distributed across firms both rises and cuts increase the aggregate default rate in the short run however a higher interest rate reduces firms target leverage and hence produces lower default rates in the longer run this helps rationalize some evidence regarding the risk taking channel of monetary policy

demand as a source of entry and the survival of new semiconductor firms the performance of new companies coming from the demand side of the semiconductor industry is examined and compared with the performance of entrants coming from the semiconductor industry itself and with other types of entrants by using a dataset of more than 1000 start ups founded between 1997 and 2007 around the world the article shows that start ups with a background in application sectors survive longer than spin offs from the semiconductor industry itself or than inexperienced firms founded by people previously active in university or other industries these results point strongly to the major role of demand not just as a source of innovations but also as a major driver of entry into an industry and of successful performance of new firms copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

litigation and settlement an empirical approach litigants in civil lawsuits involving monetary damages often find an out of court settlement preferable to a trial most theoretical models of settlement choice employ an expected utility maximizing framework that emphasizes the importance of risk preferences litigation costs and the distribution of trial awards an empirical model of settlement choice is used to examine whether the variables prominent in the theoretical literature are statistically useful in explaining the occurrence and monetary value of settlements estimates from a sample of civil filings provide new empirical evidence of how the legal system affects the behavior of litigants during the settlement process copyright 1989 by mit press

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

the ghost of financing gap testing the growth model used in the international financial institutions abstract the harrod domar growth model supposedly died long ago still today economists in the international financial institutions ifis apply the harrod domar model to calculate short run investment requirements for a target growth rate they then calculate a financing gap between the required investment and available resources and often fill the financing gap with foreign aid the financing gap model has two simple predictions 1 aid will go into investment one for one and 2 there will be a fixed linear relationship between growth and investment in the short run the data soundly reject these two predictions of the financing gap model

characteristics of patent litigation a window on competition 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 mid 1980s 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 copyright 2001 by the rand corporation

determinants of cross border intellectual property rights enforcement the role of trade sanctions with growing trade in a global economy the desire for trade protection becomes increasingly important one aspect of trade protection that has risen to the forefront is the protection of intellectual property rights ipr across national borders this article analyzes the determinants of u s filed investigations for alleged ipr cross border violations using the complete set of section 337 investigations conducted by the u s international trade commission usitc by analyzing political institutional and economic variables in an industry level model we find evidence that investigations are more frequent in industries that face intense import competition among ipr protected goods in addition greater technology access to u s patents by respondent firms is found to increase filings especially in countries where corruption levels are higher

patents and the survival of internet related ipos abstract we examine the effect of patenting on the survival prospects of 356 internet related firms that made an initial public offering on the nasdaq at the height of the stock market bubble of the late 1990s by march 2005 almost 2 3 of these firms had delisted from the exchange changes in the legal environment in the us in the 1990s made it much easier to obtain patents on software and ultimately on business methods though less than 1 2 of the firms in our sample obtained or attempted to obtain patents for those that did we hypothesize that patents conferred competitive advantages that translate into higher probability of survival though they may also simply be a signal of firm quality controlling for other determinants of firm survival patenting is positively associated with survival quite different processes appear to govern exit via acquisition compared to exit via delisting from the exchange due to business failure firms that applied for more patents were less likely to be acquired though if they obtain unusually highly cited patents they may be a more attractive acquisition target these findings do generally not hold true for business method patents which do not appear to confer a survival advantage

the economic and political determinants of imf and world bank lending in the middle east and north africa mena assumes both political and economic significance politically it is arguably the epicentre of world crisis chronically war prone and the site of the world s most protracted conflicts hinnebusch 2003 p 1 economically it owns the bulk of the world s oil reserves driving in particular the usa economic engine in light of the region s geopolitically and economically strategic position in the world economy it is clear that economic and political factors are inextricably linked when it comes to the manner in which the west particularly the usa responds to the region s needs

delegation to international organizations agency theory and world bank environmental reform current international relations theory struggles to explain both the autonomy and transformation of international organizations ios previous theories either fail to account for any io behavior that deviates from the interests of member states or neglect the role of member states in reforming io institutions and behavior we propose an agency theory of ios that can fill these gaps while also addressing two persistent problems in the study of ios common agency and long delegation chains our model explains slippage between member states interests and io behavior but also suggests institutional mechanisms staff selection monitoring procedural checks and contracts through which states can rein in errant ios we evaluate this argument by examining multiple institutional reforms and lending patterns at the world bank from 1980 to 2000

paying a visit the dalai lama effect on international trade is political compliance a precondition for healthy trade relations with china the chinese government frequently threatens that meetings between its trading partners officials and the dalai lama will be met with animosity and ultimately harm trade ties with china we run a gravity model of exports to china from 159 partner countries between 1991 and 2008 to test the extent to which bilateral tensions affect trade with autocratic china in particular we investigate empirically whether countries that receive the dalai lama despite china s opposition experience a significant reduction of their exports to china in order to account for the potential endogeneity of meetings with the dalai lama the number of tibet support groups and the travel pattern of the tibetan leader are used as instruments our empirical results support the idea that countries officially receiving the dalai lama at the highest political level are punished through a reduction of their exports to china however this dalai lama effect is only observed for the hu jintao era and not for earlier periods furthermore we find that this effect is mainly driven by reduced exports of machinery and transport equipment and that it disappears two years after a meeting took place

entry and patenting in the software industry to what extent are firms kept out of a market by patents covering related technologies do patents held by potential entrants make it easier to enter markets we estimate the empirical relationship between market entry and patents for 27 narrowly defined categories of software products during the period 1990 2004 controlling for demand market structure average patent quality and other factors we find that a 10 increase in the number of patents relevant to market reduces the rate of entry by 3 8 and this relationship intensified following expansions in the patentability of software in the mid 1990s however potential entrants with patent applications relevant to a market are more likely to enter it finally patents appear to substitute for complementary assets in the entry process because patents have both greater entry deterring and entry promoting effects for firms without prior experience in other markets this paper was accepted by bruno cassiman business strategy

us politics and world bank ida lending this paper studies the role of us political factors in the allocation of world bank concessional lending where us political interests are proxied by voting similarity in the united nations general assembly on issues identified as important by the us department of state in contrast to previous studies we find that the us exerted a significant influence on ida lending during the period 1993 2000 we demonstrate that the influence was both statistically as well as economically significant finally we demonstrate that our result is robust with respect to the omission of the ida country performance rating index

the dynamics of the transfer and renewal of patents this article explores new data on the transfer and renewal of u s patents and interprets this new evidence using a model of patent transfers and renewal we find that the proportion of transferred patents is large and differs across technology fields and especially type of patentees we also find that the probability of a patent being traded depends on a number of factors the age of the patent the number of citations received by a given age the patent generality and whether the patent has been previously traded or not these findings are consistent with the predictions of a model of patent transfers and renewals

optimal consumption investment policies with undiversifiable income risk and liquidity constraints abstract this paper examines the continuous time optimal consumption and portfolio choice of an investor having an initial wealth endowment and an uncertain stream of income from non traded assets the income stream is not spanned by traded assets and the investor is not allowed to borrow against future income so the financial market is incomplete we solve the corresponding stochastic control problem numerically with the markov chain approximation method prove convergence of the method and study the optimal policies in particular we find that the implicit value the agent attaches to an uncertain income stream typically is much smaller in this incomplete market than it is in the otherwise identical complete market our results suggest that this is mainly due to the presence of liquidity constraints

potential entrepreneurship in japan the aim of this paper is to investigate the potential for entrepreneurship in japan using the employment status survey which is the only government administered survey that includes questions about the desire to become an entrepreneur we find that there are still a number of potential entrepreneurs in japan despite a recent decline in the number of new firms being established we also find that there is a large regional variation in the distribution of entrepreneurial potential with clustering into a few regions and the level in tokyo being exceptional further using panel data on 47 prefectures from 1982 to 1997 we examine the determinants of entrepreneurial potential the estimation results show that the price cost margin market size market growth and the unemployment rate have positive effects on the potential for entrepreneurship

patents and cumulative innovation causal evidence from the courts cumulative innovation is central to economic growth do patent rights facilitate or impede such follow on innovation this paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent as measured by later citations we exploit random allocation of judges at the u s court of appeal for the federal circuit to control for the endogeneity of patent invalidation we find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent on average but the impact is highly heterogeneous patent rights appear to block follow on innovation only in the technology fields of computers electronics and medical instruments moreover the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators suggesting that patents may impede the democratization of innovation

can poor countries lobby for more us bilateral aid summary this article explores if countries can lobby the us government for the allocation of us bilateral foreign aid we consider an informational lobby model where lobbying has two effects first a direct effect by informing us policymakers about their countries needs second an indirect effect on policymakers by informing them about common interests in economic or geopolitical terms the lobbyist thus influences the decisions about the allocation of aid resources we estimate the effect of the recipient country s lobbying agents in obtaining foreign aid the econometric results show that lobbying positively affects the amount of bilateral aid received

optimal consumption and portfolio policies when asset prices follow a diffusion process abstract we consider a consumption portfolio problem in continuous time under uncertainty a martingale technique is employed to characterize optimal consumption portfolio policies when there exist nonnegativity constraints on consumption and on final wealth we also provide a way to compute and verify optimal policies our verification theorem for optimal policies involves a linear partial differential equation unlike the nonlinear partial differential equation of dynamic programming the relationship between our approach and dynamic programming is discussed we demonstrate our technique by explicitly computing optimal policies in a series of examples in particular we solve the optimal consumption portfolio problem for hyperbolic absolute risk aversion utility functions when the asset prices follow a geometric brownian motion the optimal policies in this case are no longer linear when nonnegativity constraints on consumption and on final wealth are included by these examples one can see that our approach is much easier than the dynamic programming approach

optimal consumption and investment under time varying liquidity constraints we study consumption and investment decisions given realistic time varying constraints on borrowing we first consider the case where borrowing is constrained by a maximum debt to income ratio we then consider collateral borrowing with a maximum loan to value ratio the resulting implications for optimal policies differ considerably from those obtained in the existing literature based on fixed borrowing limits but are consistent with those documented in the empirical literature

interdependency competition and industry dynamics asystematic understanding of industry dynamics is critical to strategy research because individual firm performance dynamics both reflect and affect change at the industry level descriptive research on industry dynamics has identified a dominant pattern where prices fall output rises and the number of firms rises and then falls over time several models have been advanced to explain these patterns with a particular focus on explaining why a shakeout in the number of firms occurs in the most prominent models shakeout is generated by rising realized heterogeneity among firms that either is assumed to be unrecognized but determined ex ante or is generated by stochastic innovation outcomes coupled with convex adjustment costs and scale advantages in innovation and learning in this paper we develop an alternative model where heterogeneity develops among firms over time leading to a shakeout because firms must make choices about highly interdependent productive activities where the ideal combinations cannot be easily deduced or imitated by combining two established models a cournot model of competition with an nk model of interdependency in production activities we are able to advance an alternative explanation for the observed patterns of industry behavior including shakeout we show that variation in the potential for interdependency in activities among industries is able to explain varying levels of shakeout as well as differing patterns of entry and exit among industries notably the model generates several empirical predictions not apparent in past research and several that directly conflict with the results of prominent alternative models of industry dynamics specifically we show that when the potential for interdependency within an industry is low entry slows down and incumbent survival is all but assured whereas in industries where the potential for interdependencies is high shakeouts are severe and the rates of entry and exit remain high over longer time periods with decreasing survival rates for incumbents

optimal asset allocation with fixed term securities we investigate the optimal asset allocation of an investor who can invest in a fixed term security that is only traded at time 0 using a generalized martingale approach we solve the investor s optimal portfolio problem determine the optimal allocation to fixed term securities and provide a representation of trading strategies in terms of a liquidity related derivative we apply our approach to two benchmark scenarios fixed term fixed rate bank deposits and unspanned closed end securities that can only be traded at time 0 we show that both can be key parts of the investor s optimal asset mix and we investigate the dependence of optimal allocations to fixed term investments implied liquidity premia and other characteristics on the underlying model parameters

always vote for principle though you may vote alone explaining united states political support for multilateral development loans summary what motivates the u s when casting votes and to what degree does its formal influence matter in final outcomes in multilateral development banks we first assess the formal influence of the u s on final decisions and find that 64 of projects lacking u s support were nevertheless approved suggesting u s influence is not as strong as previously thought we then test several hypotheses explaining how the u s votes on projects in mdbs we find recipient need is strongly related to u s support and some evidence for both economic and political factors such as trade relations and human rights

venture capital and the macroeconomy i develop a model of venture capital vc intermediation that quantitatively explains central empirical facts about vc activity and can evaluate its macroeconomic relevance the impact of vc backed innovations is significantly larger than suggested by observed aggregate venture exit valuations even after accounting for large exposures to systematic and uninsurable idiosyncratic risks the risk properties of venture capital play a quantitatively important role in both explaining empirical regularities and shaping the value of ventures contributions to economic growth the model is analytically tractable and yields exact solutions despite the presence of matching frictions imperfect risk sharing and endogenous growth received january 16 2018 editorial decision november 7 2018 by editor stijn van nieuwerburgh

new firm survival new results using a hazard function a limitation of audretsch s 1991 study of new firm survival was the level of aggregation to industries this precluded linking establishment specific characteristics such as organizational structure and size to post entry performance the purpose of this paper is to relate the post entry performance of individual establishments not only to their technological and market structure environments but also to establishment specific characteristics we do this by estimating a hazard duration function for more than 12 000 individual establishments in u s manufacturing started in 1976 by tracking their subsequent performance over a ten year period we conclude that establishment specific characteristics which audretsch was not able to capture in his earlier study play an important role in shaping the exposure to risk confronting new establishments copyright 1995 by mit press

the probability of exit a firm may leave an industry in at least three ways through merger voluntary liquidation or bankruptcy there are important economic differences between forms of exit yet previous work has treated exits as homogeneous this article develops a model of the relation between the forms of exit and uses it to guide selection of simple estimated statistical models an empirical example from the cotton textile industry demonstrates the arguments the results in this data are that the form of exit is not related to profitability that there is some heterogeneity across forms of exit and that information about the characteristics of the firm alone is not sufficient to predict all forms of exit

forecasting bankruptcy more accurately a simple hazard model i argue that hazard models are more appropriate than single period models for forecasting bankruptcy single period models are inconsistent while hazard models produce consistent estimates i describe a simple technique for estimating a discrete time hazard model i find that about half of the accounting ratios that have been used in previous models are not statistically significant moreover market size past stock returns and idiosyncratic returns variability are all strongly related to bankruptcy i propose a model that uses both accounting ratios and market driven variables to produce out of sample forecasts that are more accurate than those of alternative models copyright 2001 by university of chicago press

the survival and growth of new establishments in sweden 1987 1995 the aim of the study is to examine the survival of new establishments and to identify factors affecting their survival probability and their employment growth this study uses a unique data set on all new establishments that were created in sweden 1987 and 1988 with the exception of the construction industry the results show among others that i new establishments face a high risk of closing down ii the probability of establishment survival increases with the age and size of the establishment iii variables that are assumed to measure access to resources being a part of a multi unit firm and being new due to merger or dispersal have a positive effect on survival iv the number of employees at the start up year has a negative effect on the employment growth and v demographic and educational factors are important in explaining survival and growth

a dynamic stochastic analysis of international patent application and renewal processes abstract this paper formulates a dynamic stochastic model to examine the joint patent application and renewal behaviors under an international patent protection regime the framework makes it possible to utilize both the cross sectional multi country application and the time series patent renewal dimensions of available international patenting data to estimate the private value of patent protection and allows us to distinguish more aspects of patent returns the evolution dynamics of the value of european patents in pharmaceutical and electronics industries are examined estimation results indicate that pharmaceutical patents are endowed with higher initial returns thus their owners tend to seek patent protection in more countries than electronics patent holders however pharmaceutical patents become obsolete at a much faster pace than electronics patents and consequently they have lower renewal rates and shorter lives

hedging in incomplete markets with hara utility in the context of merton s original problem of optimal consumption and portfolio choice in continuous time this paper solves an extension in which the investor is endowed with a stochastic income that cannot be replicated by trading the available securities the problem is treated by demonstrating using analytic and in particular viscosity solutions techniques that the value function of the stochastic control problem is a smooth solution of the associated hamilton jacobi bellman hjb equation the optimal policy is shown to exist and given in a feedback form from the optimality conditions in the hjb equation at zero wealth a fixed fraction of income is consumed for large wealth the original merton policy is approached we also give a sufficient condition for wealth under the optimal policy to remain strictly positive

pioneering inventors or thicket builders which u s firms use continuations in patenting why do firms use continuations in the prosecution of their patents motivated by the widespread use of continuations by u s firms and the prominence of this procedure in u s patent policy debates we investigate the influence of corporate and patent characteristics on the use of continuations we employ novel data on applicants and their filings of three types of continuations the continuation application cap the continuations in part cip and divisions during 1981 2000 to distinguish among the motives for continuing patents we find that cips are disproportionately filed by research and development intensive firms that patent heavily and that these continuations are more common in chemical and biological technologies patents issuing from cips cover relatively important inventions and their use appears consistent with a strategy of protecting pioneering inventions in contrast caps and divisions are associated with less important patents assigned to capital intensive firms particularly in computer and semiconductor fields and appear to be used in defensive patenting strategies we analyze the effects of the 1995 change in patent term and find that the act reduced continuations overall and shifted the output of continuations toward less important patents

patents and patent policy a patent is the legal right of an inventor to exclude others from making or using a particular invention this right is sometimes termed an intellectual property right and is viewed as an incentive for innovation this article surveys the evidence on patent effectiveness in encouraging innovation and reviews the current controversies in patent policy

nontraded assets in incomplete markets pricing and portfolio choice this paper examines portfolio choice and asset pricing when some assets are nontraded for instance when a country cannot trade claims to its output on world capital markets when a government cann

the struggle to survive in the r d sector implications for innovation and growth by allowing for investment activities by research and development r d firms to prevent product obsolescence we show that if legal patent protection is too strong a higher r d subsidy rate delivers insufficient investments for survival in the r d sector depressing innovation and growth in the long run

small business survival and sample selection bias analyses of small business and the factors affecting their survival are fairly common in the research literature the level of research interest may stem from the fact that in the us only about half of all new small businesses survive after 4 years headd 2003 however research attempting to understand the phenomenon that employs data using only information from and about surviving firms may lead to erroneous conclusions regarding the factors that influence firm survival and failure in this paper we provide evidence that omitted information about the firms that disappear from the research data over time leads to biased coefficient estimates comparing the heckman two step estimation approach of switching regression models to a semi parametric cox hazard model the accelerated failure time aft model we conclude that the cox atf approach is the most appropriate model for firm survival analysis

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

explicit solutions to an optimal portfolio choice problem with stochastic income abstract this paper solves in closed form the optimal portfolio choice problem for an investor with negative exponential utility over terminal wealth facing imperfectly hedgeable stochastic income the returns on income and the stock are imperfectly correlated so the market is incomplete we identify how an investor adjusts their merton rev econ statist 51 1969 247 portfolio of the stock and riskless asset via an intertemporal hedging demand in reaction to the stochastic income under general assumptions on the process governing the income the sign of the hedging demand is the opposite of the sign of the correlation between the income and stock the optimal portfolio in the stock is long stock if the risk premium is positive and correlation negative and short if these signs are reversed specializing in turn to normally distributed income and lognormally distributed income with or without mean reversion the effect of a number of parameters on the optimal portfolio in the stock can be studied when the risk premium on the stock and correlation have opposite signs the optimal portfolio decreases in magnitude with risk aversion unhedgeable variance of income and time and increases in magnitude with the magnitude of correlation under both the lognormal without mean reversion and normal models for income these relationships do not necessarily hold if the signs on the risk premium and correlation are the same in particular the optimal portfolio is not necessarily monotone in risk aversion violating well known static results in models without income when income follows a lognormal model with mean reversion more complicated behavior can occur for instance the optimal portfolio does not have to be monotonic in time regardless of the signs of correlation and the risk premium

the greener the better job creation effects of environmentally friendly technological change this article investigates the link between environment related innovation and job creation at firm level employing italian data on 4507 manufacturing firms matched with patent records for the period 2001 2008 we test whether green innovation measured by the number of environment related patents has a positive effect on long run employment growth that is specific with respect to non environmental innovation results show a strong positive impact of green innovation on long run job creation substantially bigger than the effect of other innovations our findings are robust to a number of additional tests including controls for patents quality and cost differential between generic and green innovation and endogeneity

does foreign aid increase foreign direct investment summary we examine the idea that aid and foreign direct investment fdi are complementary sources of foreign capital we argue that the relationship between aid and fdi is theoretically ambiguous aid raises the marginal productivity of capital when used to finance complementary inputs like public infrastructure and human capital investments but aid may crowd out private investments when it comes in the shape of pure physical capital transfers empirically we find that aid invested in complementary inputs draws in fdi while aid invested in physical capital crowds it out the paper shows that the composition of aid matters for its overall level of efficiency

patent enforcement a review of the literature without the confidence that patent rights can be enforced quickly and efficiently when needed the patent system will not stimulate innovation for this reason governments academics international institutions and the private sector have poured significant resources into gathering and analysing statistics on patent enforcement over the last two decades this paper reviews these studies and finds that while infringement is relatively common much enforcement occurs informally and less than 1 2 of patents incur litigation new strategic uses of the enforcement system especially by nonpracticing entities are the major emerging enforcement issue especially in the united states while the old problem of litigation costs attracts the lion s share of empirical attention it has produced remarkably few solutions to date

spatial agglomeration and firm exit a spatial dynamic analysis for italian provinces the paper investigates the effect of spatial agglomeration on firm exit in a dynamic framework using a large dataset at the industry province level for italy 1998 2007 we estimate a spatial dynamic panel model via a gmm estimator and analyze the short run impact of specialization and variety on firm exit specialization negatively affects firm exit rates in the short run the effect is particularly significant for low tech firms the impact of variety on firm mortality rates at the industry level is instead less clear although still negative and significant for low tech firms

global horse trading imf loans for votes in the united nations security council we investigate whether temporary members of the united nations security council receive favorable treatment from the international monetary fund imf using panel data for 197 countries over the period from 1951 to 2004 our results indicate a robust positive relationship between temporary security council membership and participation in imf programs even after accounting for economic political and country specific factors there is also evidence that security council membership reduces the number of conditions included in imf programs imf loans seem to be a mechanism by which the major shareholders of the fund can win favor with voting members of the security council

the survival of new plants start up conditions and post entry evolution abstract this paper examines the longevity of entrants we find size to be an important determinant of the chances of survival this being particularly relevant to de novo entrants as compared with entry by established firms current size is also found to be a better predictor of failure than initial size moreover our findings indicate that after controlling for size differences past growth matters for survival suggesting a partial adjustment process for firm size in the post entry period finally new plants are more likely to live longer if they enter growing industries or industries with little entry activity

shopping for development multilateral lending shareholder composition and borrower preferences this paper proposes two theoretical considerations regarding multilateral development banks mdbs the first is that mdb activities are increasingly driven by the growing economic strength of many developing countries the second is that categorizing mdbs according to the balance of power among shareholders helps explain why countries might prefer one or another mdb we compare three different mdbs operating in latin america one dominated by nonborrowers world bank another controlled by borrowing countries andean development corporation caf and a third more evenly split between borrowers and nonborrowers inter american development bank iadb qualitative and statistical analysis suggests that demand factors play an important role in mdb lending

knowledge disclosure as intellectual property rights protection abstract we consider the problem of an inventor who discloses knowledge under the threat of a rival who may patent a competing idea disclosure diminishes the probability that the rival has of receiving a patent legal externality but it also decreases the rival s marginal r d cost knowledge externality our results reveal that i when the knowledge externality is large small relative to the legal one an increase decrease in the patentability standard leads to higher disclosure and promotes r d and ii if subsequent research creates positive external effects the patentability standard should be set to promote further disclosure and r d in equilibrium the impact on the equilibrium configuration of changes in market profits is also examined

optimal consumption and equilibrium prices with portfolio constraints and stochastic income abstract this paper examines the intertemporal optimal consumption and investment problem in the presence of a stochastic endowment and constraints on the portfolio choices short sale and borrowing constraints as well as incomplete markets can be modeled as special cases of the class of constraints we consider existence of optimal policies is established under fairly general assumptions on the security price coefficients and the individual s utility function this result is obtained by using martingale techniques to reformulate the individual s dynamic optimization problem as an equivalent static one an explicit characterization of equilibrium risk premia in the presence of portfolio constraints is also provided in the unconstrained case this characterization reduces to consumption based capital asset pricing model journal of economic literatureclassification numbers g11 g12 c61 d52 d91

what determines the survival of internet ipos this article examines whether the variables that are significant in noninternet initial public offering ipos play a similar role for internet ipos to this end we analyse the determinants of survival of internet firms that have gone public at the nasdaq stock exchange from december 1996 through february 2001 financial and nonfinancial data published in the ipo prospectuses are examined for our analysis we use the semiparametric cox proportional hazard model and estimate the effect of these variables on the trading survival time using the parametric log logistic survival model it appears that the average operating history of internet ipos is remarkably small compared to noninternet ipos namely 2 4 and 10 years respectively furthermore we find that the average number of risk factors for internet ipos is four times higher than the number reported for noninternet ipos the results of the parametric analysis correspond to the semiparametric results our findings hold under a number of different mo