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

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

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

money and contracts this paper presents a novel interpretation of the fact that high nominal interest rates accompany low levels of real gnp it constructs a model in which money and bonds are both held as a result of legal restrictions on the banking system open market operations may increase the equilibrium rate of interest and raise the cost of credit this increase in the cost of credit causes firms to write labour contracts in which layoffs occur more frequently the nature of optimal labour contracts is derived explicitly from assumptions about the information that is available to firms and to workers

the stolper samuelson theorem under decreasing returns to scale abstract the necessary and sufficient condition for the stolper samuelson theorem is derived under decreasing returns to scale this result is interpreted by separating a factor intensity effect and a scale effect and by using the elasticities of substitution and the factor demand elasticities

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

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

econometric analysis of bank lending and business cycles in south africa this article examines econometric relationships between bank lending and business cycle in south africa two long run economic relationships are hypothesized between total credit and the variables namely coincidental indicators spread between lending and borrowing rates money supply stock price index inflation and banking sector specific factors included in the model of these variables only coincident indicators changes in money supply as well as capital and reserve are found to exert some influence on short run total credit availability

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

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

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

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

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

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

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

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

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

technical progress terms of trade and welfare under variable returns to scale the implications of variable returns to scale vrs have been extensively studied by trade theorists e g batra 1968 jones 1968 kemp and negishi 1970 and eaton and panagariya 1979 it is however notable that virtually no efforts have been made to examine the welfare implications of growth for an open economy in the presence of vrs the only exception is a recent study by eaton and panagariya 1982 they derived sufficient conditions for growth rising either from factor accumulation or technical progress to improve the welfare of a small country characterized by vrs 1 the purpose of this paper is to analyse the welfare implications of economic growth identified specifically with hicks neutral technical progress for a small as well as a large country in the presence of vrs we obtain several alternative sufficient conditions for growth to be welfare increasing in addition the effects of growth on the terms of trade in the case of a large country as well as the effect of technical progress in both countries on the terms of trade are examined

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

assessing the competition in angola s banking industry abstractthis article analyses the level of competition in angola s banking industry using the panzar rosse model with data from 2005 to 2014 competition is a vital aspect of the banking market and therefore it is central to policy making the results reveal that angola banking competition is monopolist and therefore lower competition is found in angola banks policy implication is derived

returns to scale in canadian manufacturing an interprovincial comparison this paper measures the degree of returns to scale at the two digit standard industrial classification sic in canadian manufacturing employing both gross output and value added data using a model developed by r j caballero and r k lyons the study distinguishes between internal and external returns to scale the caballero and lyons model is extended by disaggregation to the provincial level in order to measure the returns to scale of geographic provincial concentration the empirical results suggest that in canada there are increasing returns that are primarily national rather than internal to the province or the industry

revisiting the stolper samuelson and rybczynski theorems with production externalities by using duality theory this paper reexamines the validity of the stolper samuelson and rybczynski theorems with intra and or interindustrial externalities in particular the author states conditions for the validity of both theorems in terms of the patterns of production externalities and price output responses this paper also examines the second and third assumptions of r w jones 1968 to show that they are equivalent without interindustrial externalities with the assumption the normal price output response is a necessary and sufficient condition for the validity of the theorems while without it the normal price output response is a necessary condition

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

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

the design of bank loan contracts the unique characteristics of bank loans emerge endogenously to enhance efficiency in a model of renegotiation between a borrower and a lender in which there is the potential for moral hazard on each side of the relationship firm risk is endogenous and renegotiated interest rates on the debt need not be monotone in firm risk the initial terms of the debt are not set to price default risk but rather are set to efficiently balance bargaining power in later renegotiation loan pricing may be nonlinear involving initial transfers either from the borrower to the bank or front the bank to the borrower article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

financial development and economic growth the role of stock markets utilizing time series methods and data from five developed economies we examine the relationship between stock market development and economic growth controlling for the effects of the banking system and stock market volatility our results support the view that although both banks and stock markets may be able to promote economic growth the erects of the former are more powerful they also suggest that the contribution of stock markets on economic growth may have been exaggerated by studies that utilize cross country growth regressions

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

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

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

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

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

implicit contracts with asymmetric information and bankruptcy the effect of interest rates on layoffs this paper develops a model in which a firm writes labour contracts with workers and debt contracts with creditors firms have more information than do the owners of the factors of production and they are also subject to limited liability we show that if the limited liability constraint is binding then the employment level is inefficient relative to a situation of symmetric information the firm is then embedded into a partial equilibrium model in which the real rate of interest is exogenously determined we show that increases in the real rate of interest increase the inefficiency of the optimal employment contract and lead to layoffs in more states of nature than would occur at lower real interest rates recent literature in the area of implicit contracts has shown considerable interest in the assumption of asymmetric information henceforth a i papers by azariadis 1982 green and kahn 1982 and grossman and hart 1981 have all shown that a i will interfere with optimal risk sharing but although these models produce non walrasian outcomes it is not clear that they are capable of explaining the observed variations in employment over the business cycle in the absence of a link between the level of employment and other macroeconomic variables these new versions of contract theory are open to the charge that they are presenting a complicated explanation of frictional unemployment one potential link between variations in output and variations in intertemporal prices is suggested by models which explicitly allow for the possibility of bankruptcy sappington 1983 has shown that bankruptcy will generate inefficient outcomes even between risk neutral agents and farmer 1984 has shown that if sappington type contracts are incorporated into a macroeconomic structure then the resulting model predicts that bankruptcies will vary countercyclically over the business cycle although bankruptcy is important however it is unlikely that bankruptcies alone will account for all of the output loss during a recession the purpose of this paper is to show that the assumptions of a i and limited liability will generate a model in which the employment level is inefficient and in which the magnitude of this inefficiency varies systematically with the expected real rate of interest this model predicts that the observed increase in the incidence of layoffs during recessions is directly attributable to the effects of high interest rates on aggregate supply some evidence of the phenomenon to be explained is presented below

a note on the neoclassical ambiguity and the specific factor production model under variable returns to scale abstract this note investigates the relationship between commodity price changes and factor rewards in a specific factor production model that admits variable returns to scale the principal result is that in the presence of variable returns to scale the so called neoclassical ambiguity may be resolved without resorting to detailed knowledge of the mobile factor s preferences that is to say the effect of a commodity price change may as it does with the returns to those factors specific to each industry raise or lower the real reward of the mobile factor in terms of either commodity depending only on the characteristics of the technology

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

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

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

estimation of limited dependent variable models with dummy endogenous regressors applied economists have long struggled with the question of how to accommodate binary endogenous regressors in models with binary and nonnegative outcomes i argue here that much of the difculty with limited dependent variables comes from a focus on structural parameters such as index coefcients instead of causal effects once the object of estimation is taken to be the causal effect of treatment several simple strategies are available these include conventional two stage least squares multiplicative models for conditional means linear approximation of nonlinear causal models models for distribution effects and quantile regression with an endogenous binary regressor the estimation strategies discussed in the article are illustrated by using multiple births to estimate the effect of childbearing on employment status and hours of work

the theory of tariffs under variable returns to scale and inter industrial externalities the theory of nominal tariff in general and the well known metzler paradox in particular have been rigorously developed by metzler 14 jones 13 johnson 12 and batra 1 ch 5 among others the analysis has been typically conducted under the strong assumption that the economy is devoid of any inter industrial and or intra industrial externalities some aspects of inter industrial externalities which have played a major role in the development of welfare economics in the past three decades have been explored by chang 3 and herberg kemp and tawada 11 and the implications of intra industrial variable returns to scale which are external to the firms have been examined by eaton and panagariya 7 8 panagariya 9 parai 10 choi and yu 4 5 and beladi 2 many of the standard trade theories have been shown to be significantly affected by the presence of either type of the externalities it is notable that the implications of the externalities for the tariff theory however have not been studied the purpose of this paper thus is to examine several aspects of the standard theory of tariffs in a framework allowing various production externalities specifically we will explore the effects of a change in the tariffs and or the terms of trade on the import demand as well as the effects of tariff on the terms of trade and the domestic price ratio several interesting results emerge from this analysis for example in contrast to the conventional results an improvement in the terms of trade for a given tariff may dampen the import demand and a higher tariff for a given terms of trade may raise it an increase in the tariff rate need not improve the terms of trade and hence may raise the domestic price ratio of the importable good by more than the tariff rate although the presence of inter industrial and intraindustrial externalities does not affect the sufficient condition for the metzler paradox it does modify a necessary condition for the paradox this paper is organized as follows section ii delineates the assumptions and the model section iii examines the effects of tariffs and or the terms of trade on import demands section iv

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

increasing returns and the specific factors model in recent years trade theorists have been increasingly interested in the role of economies of scale in international trade models yet the literature to date seems to lack a simple treatment of income distribution and related issues in the presence of economies of scale the present paper attempts to fill this gap by incorporating increasing returns to scale irs into the standard specific factors model trade theorists have begun to view the specific factors model as the favored vehicle for analyzing the economy wide effects of changes in commodity prices factor endowments and other exogenous variables the strongest case in favor of this model has been presented by neary 16 who argues that the model provides a rigorous general equilibrium foundation for partial equilibrium analysis as far as the supply side of the economy is concerned whereas with icm partial equilibrium reasoning will frequently be misleading 2 he further conjectures that icm is the source of all the paradoxes which are peculiar to international trade theory with the exception of those which arise from the failure to adopt first best policies in light of these views in the literature it is of interest to investigate how robust the predictions of the specific factors model are in the presence of economies of scale the analysis in this paper has important implications for the literature on irs as well as that on the specific factors model the more important of these implications may be summarized as follows first in a small open economy characterized by national intraindustry irs the condition for local dynamic stability is equivalent to the condition for a normal output price response 3 moreover in contrast with the findings of the irs models based on free intersectoral mobility of all factors as exemplified in herberg and kemp 6 this condition may be satisfied everywhere along the production possibilities frontier second stability of an equilibrium in the presence of irs is not sufficient to guarantee the validity of many results of the standard specific factors model responses of a small

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

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

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

further implications of variable returns to scale abstract among those trade theorists who have studied the implications of variable returns to scale it has been almost standard practice to suppose that the variability of returns in each industry is generated by technical intra industrial externalities in the present paper inter industrial as well as intra industrial externalities are admitted the topology of the set of production possibilities and of the locus of competitive outputs as well as the robustness of several standard trade theorems are examined

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

a note on externalities and taxation the purpose of this paper is to explore the distributional aspects of a tax that is imposed in order to correct the detrimental effects of a production externality in the framework of a two sector general equilibrium model we show that harberger s classic results of tax incidence may change considerably because of the presence of the externality we also show that the tax is effective in reducing the detrimental effect of the externality although the return of the taxed factor may rise relative to the return of the untaxed factors

do measures of monetary policy in a var make sense no in many vector autoregressions vars monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the u s federal reserve s reaction function furthermore the residuals from these regressions show little correlation across various vars or with funds rate shocks that are derived from forward looking financial markets my results provide a sharp critique of current monetary vars

routinization of innovation in german manufacturing the david goliath symbiosis revisited small and medium sized firms frequently are viewed as the drivers of radical innovation however they often do not have the focus and commitment necessary for improving and extending the innovation tasks better accomplished by routinized large firms using a uniquely rich industry level data set for german manufacturing industries during 1991 2004 this article finds evidence for this david goliath symbiosis although small and medium sized firm innovation rates can explain the within industry variation of productivity growth it is the large firm process innovation rate that explains differences in the level of productivity growth between industries i e differences in the degree of routinization of innovation

factor demand and substitution under decreasing returns to scale an application to the rybczynski theorem in the first part of this paper the elasticity of substitution and factor demand are determined under decreasing returns to scale by applying the properties of homogeneous functions elasticities of marginal products with respect to factor uses are shown to be useful when determining the elasticity of factor substitution and factor demand elasticities second the results are applied to the theorem developed by rybczynski 1955 according to which an increase in the endowment of one factor while the endowment of the other factor and commodity prices remain unchanged will increase production of the good intensive in this factor and will reduce production of the good intensive in the other factor this theorem has been developed within the context of a two good two factor model under constant returns to scale in the more general case under variable returns to scale the conditions for the rybczynski theorem have been derived by jones 1968 panagariya 1980 and herberg kemp and tawada 1982 the case of variable returns to scale includes both decreasing and increasing returns to scale in this paper however we assume the simple model under decreasing returns to scale formulated by hansson and lundahl 1983 we interpret the necessary and sufficient conditions for the rybczynski theorem using the elasticities of substitution and the factor demand elasticities and derive the condition under which expansion can occur in both sectors

why bank credit policies fluctuate a theory and some evidence in a rational profit maximizing world banks should msdntain a credit policy of lending if and only if borrowers have positive net present value projects why then are changes in credit policy seemingly correlated with changes in the condition of those demanding credit this paper argues that rational bank managers with short horizons will set credit policies that influence and are influenced by other banks and demand side conditions this leads to a theory of low frequency business cycles driven by bank credit policies evidence from the banking crisis in new england in the early 1990s is consistent with the assumptions and predictions of the theory

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

some evidence on the empirical significance of credit rationing this paper examines the credit rationing debate using detailed contract information on over one million commercial bank loans from 1977 to 1988 while commercial loan rates are sticky consistent with rationing this stickiness varies with loan contract terms in ways that are not predicted by equilibrium credit rationing theory in addition the proportion of new loans issued under commitment does not increase significantly when credit markets are tight despite the fact that borrowers without commitments can be rationed whereas commitment borrowers are contractually insulated from rationing overall the data suggest that equilibrium rationing is not a significant macroeconomic phenomenon

the positive theory of production externalities under perfect competition abstract aggregate cost and factor demand functions are used to develop a local envelope function which is applied in a general equilibrium model with production externalities to shed new light on the relationship between the true economy marginal costs and outputs this relationship induces a structure to the relationship between actual prices and outputs by means of the assumption of no factor demand reversals associated with externality effects we also provide generalisations of the stolper samuelson and rybczynski theorems highlighting the role of the externality effects

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

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

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