The Link between Institutional and Economic Integration: Insights for Latin America from the European Experience

The European experience illustrates that institutional integration interacts with economic integration at the regional level. In this paper we ask how economic and institutional integration are linked and whether there is a causal link between the two. We present an original indicator of institutional integration and study how it developed vis-à-vis diverse measures of economic integration. In particular, we ask what insights can be drawn from the European process of regional integration, which started in the 1950s, for regional integration in Latin America today. We find that Latin America is currently less economically integrated not only than the European Union today, but for certain economic variables even than the European Union in the 1960s. A VAR analysis illustrates that the link between institutional and economic integration has worked both ways throughout the European experience. There is also evidence that stronger institutional integration has indeed led to deeper economic integration.     

Identifying the global transmission of the 2007–2009 financial crisis in a GVAR model

The paper analyses and compares the role that the tightening in liquidity conditions and the collapse in risk appetite played for the global transmission of the financial crisis. Dealing with identification and the large dimensionality of the empirical exercise with a Global VAR approach, the findings highlight the diversity of the transmission process. While liquidity shocks have had a more severe impact on advanced economies, it was mainly the decline in risk appetite that affected emerging market economies. The tightening of financial conditions was a key transmission channel for advanced economies, whereas for emerging markets it was mainly the real side of the economy that suffered. Moreover, there are some striking differences also within types of economies, with Europe being more adversely affected by the fall in risk appetite than other advanced economies.     

Structural Change in Advanced Nations: A New Set of Stylised Facts*

We provide new evidence on patterns of structural change in advanced economies, reconsidering the stylised facts put forward by Kaldor (1963) , Kuznets (1971) , and Maddison (1980) . Since 1980, the services sector has overwhelmingly predominated in the economic activity of the European Union, Japan, and the US, but there is substantial heterogeneity among services. Personal, finance, and business services have low productivity growth and increasing shares in employment and GDP. By contrast, shares of distribution services are constant, and productivity growth is rapid. We find that the labour share in value‐added is declining, while the use of ICT capital and skilled labour is increasing in all sectors and regions.     

Purchasing Power Parities for Industry Comparisons Using Weighted Elteto–Koves–Szulc (EKS) Methods

This study has three main objectives. First, it develops a generalization of the commonly used EKS method to multilateral price comparisons. It is shown that the EKS system can be generalized so that weights can be attached to each of the link comparisons used in the EKS computations. These weights can account for differing levels of reliability of the underlying binary comparisons. Second, various reliability measures and corresponding weighting schemes are presented and their merits discussed. Finally, these new methods are applied to an international data set of manufacturing prices from the ICOP project. Although theoretically superior, it appears that the empirical impact of the weighted EKS method is generally small compared to the unweighted EKS. It is also found that this impact is larger when it is applied at lower levels of aggregation. Finally, the importance of using sector specific PPPs in assessing relative levels of manufacturing productivity is indicated.     

The influence of executive cognition on competitive dynamics

Prior competitive dynamics research has drawn on theories of information processing to model the subjective antecedents of executives' retaliation choices. This prior work has made great progress in developing our understanding of the retaliation choices most firms will make to a given type of attack. What the information processing perspective has not been able to do is explain firm‐specific behavior to predict which competitive moves individual firms will challenge, or explain why individual firms differ in the types of actions that they are most likely to challenge. The goal of this paper is to sharpen the theoretical and empirical focus on predicting firm‐level retaliation proclivities. We leverage managerial cognition research to examine the relationship between firm‐level differences in the cognitive frameworks that executives possess, and firm‐level differences in whether and how quickly firms challenge a market move. Results from a longitudinal study of the airline industry suggest that the addition of a cognitive perspective provides important insights into competitive retaliation. Copyright © 2010 John Wiley & Sons, Ltd.     

Optimal portfolio choice with wash sale constraints

We analytically solve the portfolio choice problem in the presence of wash sale constraints in a two-period model with one risky asset. Our results show that wash sale constraints can heavily affect portfolio choice of investors with unrealized losses. The trading behavior of such investors is to a large extent driven by the desire to realize those losses, either immediately by sharply decreasing the holding of assets carrying unrealized losses, or indirectly by increasing such holdings in order to prepare for a decrease in a future period to earn the tax rebate payment. Our findings are robust to increasing the number of trading dates and introducing a second risky asset and a correlation structure.     

Collaborative Prototyping: Cross‐Fertilization of Knowledge in Prototype‐Driven Problem Solving

This paper presents an inductive study that shows how collaborative prototyping across functional, hierarchical, and organizational boundaries can improve the overall prototyping process. Our combined action research and case study approach provides new insights into how collaborative prototyping can provide a platform for prototype‐driven problem solving in early new product development (NPD). Our findings have important implications for how to facilitate multistakeholder collaboration in prototyping and problem solving, and more generally for how to organize collaborative and open innovation processes. Our analysis reveals two levels of prototyping. Besides the more formal managerial level, we identify the informal designer level, where the actual practice of prototyping takes place. On this level, collaborative prototyping transforms the act of prototyping from an activity belonging exclusively to the domain of design engineers to an activity integral to NPD, with participants from within the organization (different functions and managers) and from outside (consultants and users). In effect, this collapses the discrete steps in the prototyping process (at the managerial level) to an essentially continuous process of iterative problem solving (at the designer level) that is centered around the collaborative prototype, which allows participants to see their suggestions implemented and exposing them to the design constraints. The study, moreover, shows how, at various stages of the prototyping process, the actual prototype was used as a tool for communication or development, thus serving as a platform for the cross‐fertilization of knowledge. In this way, collaborative prototyping leads to a better balance between functionality and usability; it translates usability problems into design changes, and it detects emerging usability problems through active engagement and experimentation. As such, the collaborative prototype acts as a boundary object to represent, understand, and transform knowledge across functional, hierarchical, and organizational boundaries. Our study also identifies some constraints in involving the appropriate stakeholders at the right time. The paper specifically elaborates on the role of users in collaborative prototyping, which is important in order to cover all phases of the problem‐solving cycle but triggers an interesting challenge due to the “reverse empathy” that a user may develop for the design constraints—parallel to the designer empathy for the user context. Finally, our study shows that despite the continuous nature of the (designer) practice of prototyping, there are certain windows of opportunities (at the managerial level) during which the collaborative prototyping approach actually leads to changes in the product design.     

Leveraging External Sources of Innovation: A Review of Research on Open Innovation

This paper reviews research on open innovation that considers how and why firms commercialize external sources of innovations. It examines both the “outside‐in” and “coupled” modes of open innovation. From an analysis of prior research on how firms leverage external sources of innovation, it suggests a four‐phase model in which a linear process—(1) obtaining, (2) integrating, and (3) commercializing external innovations—is combined with (4) interaction between the firm and its collaborators. This model is used to classify papers taken from the top 25 innovation journals, complemented by highly cited work beyond those journals. A review of 291 open innovation‐related publications from these sources shows that the majority of these articles indeed address elements of this inbound open innovation process model. Specifically, it finds that researchers have front‐loaded their examination of the leveraging process, with an emphasis on obtaining innovations from external sources. However, there is a relative dearth of research related to integrating and commercializing these innovations. Research on obtaining innovations includes searching, enabling, filtering, and acquiring—each category with its own specific set of mechanisms and conditions. Integrating innovations has been mostly studied from an absorptive capacity perspective, with less attention given to the impact of competencies and culture (including “not invented here”). Commercializing innovations puts the most emphasis on how external innovations create value rather than how firms capture value from those innovations. Finally, the interaction phase considers both feedback for the linear process and reciprocal innovation processes such as cocreation, network collaboration, and community innovation. This review and synthesis suggests several gaps in prior research. One is a tendency to ignore the importance of business models, despite their central role in distinguishing open innovation from earlier research on interorganizational collaboration in innovation. Another gap is a tendency in open innovation to use “innovation” in a way inconsistent with earlier definitions in innovation management. The paper concludes with recommendations for future research that include examining the end‐to‐end innovation commercialization process, and studying the moderators and limits of leveraging external sources of innovation.