A longitudinal study of the cause and consequences of changes in diversification in the U.S. pharmaceutical industry 1977–1986

The paper hypothesizes that diversification by firms based in the pharmaceutical industry during the 1977-86 time period was primarily undertaken to reduce the risks associated with being dependent upon a technologically dynamic environment. Consistent with this non-efficiency motive for diversification, declining economic performance is predicted. A longitudinal empirical analysis provides support for these propositions.     

An Analysis of Differences in Earnings Between Small and Large Commercial Banks

This paper introduces a simple, yet rich, measure of efficiency changes based on the revenue-generating-ability (RGA) principle. Using this principle, we explain the connections between efficiency changes and the variables, such as pretax profits, interest expense, non-interest expense, profit margins, loan loss provision, and asset quality. These connections are used to explain earnings differences between small and large commercial banks.     

Noise Trading and the Management of Operational Risk; Firms,Traders and Irrationality in Financial Markets*

abstract Efficient market models cannot explain the high level of trading in financial markets in terms of asset portfolio adjustment. It is presumed that much of this excessive trading is irrational ‘noise’ trading. A corollary is that there must either be irrational traders in the market or rational traders with irrational aberrations. The paper reviews the various attempts to explain noise trading in the finance literature, concluding that the persistence of irrationality is not well explained. Data from a study of 118 traders in four large investment banks are presented to advance reasons why traders might seek to trade more frequently than financial models predict. The argument is advanced that trades do not simply occur in order to generate profit, but it does not follow that such trading is irrational. Trading may generate information, accelerate learning, create commitments and enhance social capital, all of which sustain traders' long term survival in the market. The paper treats noise trading as a form of operational risk facing firms operating in financial markets and discusses approaches to the management of such risk.     

More thinking on research methods for the resource‐based perspective

We re‐examine the benefits of using a broader set of research methods to address key questions associated with the resource‐based view (RBV) of the firm. In responding to Levitas and Chi, we consider how research inside organizations can complement and augment research relying on secondary data. Copyright © 2002 John Wiley & Sons, Ltd.     

Do Gold Market Returns Have Long Memory?

This study examines the long memory behavior in gold returns during the post-Bretton Woods period using a new rescaled range technique. Unlike the conventional rescaled range analysis, the new rescaled range analysis is robust to short-term dependence and conditional heteroscedasticity found in the gold data. Statistical results suggest that the long memory behavior in gold returns is rather unstable. When only few observations corresponding to major political events in the Middle East, together with the Hunts event, in late 1979 are omitted, little evidence of long memory can be found.     

Innovative productivity and returns to scale in the pharmaceutical industry

This study shows that firms in the pharmaceutical industry experience decreasing returns to scale in R & D as the level of R & D expenditures rises. The paper presents the results of our study of the innovative output of 16 pharmaceutical firms over a 19 year period. Given the strong correlation between R & D budgets and firm size, our study suggests the wave of mergers in the industry may yield less innovative productivity than managers expect.     

Endogenous Growth and Negative Externalities

Received March 5, 2001; revised version received August 5, 2002 Published online: April 30, 2003     

Are differences in firm size transitory or permanent?

An Erratum for this article has been published in Journal of Applied Econometrics 18(2) 2003, 249 Previous empirical work on corporate growth rates using cross‐section or short‐panel econometric techniques suggests that growth rates are random but that some degree of mean reversion exists. This means that size differences between firms are transitory. Another, more natural way to explore the long‐run distribution of firm sizes is to examine data on the growth of particular firms over long periods of time. Using a sample of 147 UK firms observed continually for more than 30 years, our conclusions are that growth rates are highly variable over time and that differences in growth rates between firms do not persist for very long. Further, firms show no tendency to converge to either a common size or to a pattern of stable size differences over time. These results are compared and contrasted with standard approaches that suggest that firms reach and maintain stable positions in a skewed size distribution. Copyright © 2002 John Wiley & Sons, Ltd.