National distances,international experience,and venture capital investment performance

This study examines how the performance of cross-border venture capital investments is affected by national institutional and cultural distances between the environments of venture capitalists (VCs) and investee ventures. We propose that institutional and cultural distances will decrease VCs' effectiveness in conducting venture capital activities and negatively affect investment performance in terms of exit success, and obtain supportive evidence while controlling for geographic distance. We further analyze how VCs can use their international experience to mitigate the negative consequences of national distances. We find that while broad international experience in diverse countries attenuates the deleterious effects of institutional distance in a significant way, it does not have a similar impact in attenuating the negative effects of cultural distance.     

Island of Peace or Island of War: Tourist Guiding

The role of tour guides in conveying information, offering explanations, and developing narratives has become a contemporary research theme. The guide is introduced as a translator of the culture, who has the crucial task of selecting, glossing, and interpreting sights. The study will examine how the Island of Peace—a border site between former adversaries, Israel and Jordan, is introduced to Israeli tourists by Israeli guides and what messages the guides deliver to their captive audience. Based on participant observation of the guided tours in the site the article will show that the guides’ narratives and messages in many cases do not portray the site as a site of peace (as its name suggests), but mostly as a site with a past of tension and conflict.     

Droughts and farms’ financial performance: a farm‐level study in New Zealand

We quantify the impacts of droughts in New Zealand on the profitability of dairy, sheep and beef farms using a comprehensive administrative database of all farms in New Zealand. For dairy farms, we found that drought events have positive impacts on dairy farms’ revenue and profit in the year of the drought. This effect is most likely attributable to drought‐induced increases in the export price of milk solids, as New Zealand is the market maker in this global market and almost all domestic dairy production is exported. All of these quantified impacts, however, are not very large, suggesting that, at this point in time, droughts have a fairly moderate impact on New Zealand dairy and sheep–beef businesses.     

Foreign direct investment and the correlation between cost and revenue

This paper studies irreversible investment in the presence of uncertain revenue and uncertain cost of production. Using methodology of real options, we find the threshold markup of price over cost that triggers investment. When the processes for revenue and cost are negatively correlated, the standard result that uncertainty delays investment always holds. However, when these two processes are positively correlated, greater uncertainty of revenue or cost might accelerate investment. As less correlated cost and revenue, vertical FDI is less desirable than producing at home, but horizontal FDI that brings production to the output market is an advantage.     

Competing Theories of Financial Anomalies

We compare two competing theories of financial anomalies: "behavioral"theories built on investor irrationality, and "rational structuraluncertainty" theories built on incomplete information aboutthe structure of the economic environment. We find that althoughthe theories relax opposite assumptions of the rational expectationsideal, their mathematical and predictive similarities make themdifficult to distinguish. Even if irrationality generates financialanomalies, their disappearance still may hinge on rational learning—thatis, on the ability of rational arbitrageurs and their investorsto reject competing rational explanations for observed pricepatterns.     

Declining prices and optimality when costs follow an experience curve

There is a widely held notion that as production costs decline with experience, prices should follow more or less in parallel. Although this notion has been an important factor in estimating experience curves and in formulating corporate strategies, we show that it is generally inconsistent with published multiperiod optimal pricing models. The paper then goes on to demonstrate that this apparent conflict can be reconciled by allowing the demand process to exhibit increasing price elasticity over time. Since this demand characteristic is very plausible for innovative products, we suggest it be incorporated into optimal pricing models.     

Introduction of microcomputers at an academic institute— Study of an innovative process

In the following study the process of microcomputer adoption and diffusion at an academic institute is described and the implications of this innovation for faculty and students are assessed. The individual acquisition data are analyzed using the Mansfield diffusion model. In addition, I report a case study describing the centralized purchase decision-making process at the institute, and conclude with a longitudinal empirical study that examines the development of microcomputer uses and users' attitudes over a period of 1 year. The results show mainly that the adoption process is quite slow, although the response of the users is generally found to be quite favorable.     

Liquidation triggers and the valuation of equity and debt

Many bankruptcy codes implicitly or explicitly contain net-worth covenants, which provide the firm’s bondholders with the right to force reorganization or liquidation if the value of the firm falls below a certain threshold. In practice, however, default does not necessarily lead to immediate change of control or to liquidation of the firm’s assets by its debtholders. To consider the impact of this on the valuation of corporate securities, we develop a model in which liquidation is driven by a state variable that accumulates with time and severity of distress. We model a dynamic grace period for the liquidation event. Recent or severe distress events may have greater impact on the liquidation trigger. Our model can be applied to a wide array of bankruptcy codes and jurisdictions.     

Strategic trade policy with endogenous choice of quality and asymmetric costs

This paper examines strategic trade and joint welfare maximizing incentives towards investment in the quality of exports by an LDC and a developed country. Firms first compete in qualities and then export to an imperfectly competitive, third country market. Under Bertrand competition, unilateral policy involves an investment subsidy by the low-quality LDC and an investment tax by the developed country, whereas jointly optimal policy calls for the reverse so as to reduce price competition by increasing product differentiation. Under Cournot competition, unilateral policy is also reversed from the Bertrand outcome, but jointly optimal policy involves a tax in both countries.     

A viable and cost-effective weather index insurance for rice in Indonesia

The potentially adverse effects of droughts on agricultural output are obvious. Currently, Indonesian rice farmers have little financial protection from climate risk via catastrophic weather risk transfer tools. Done well, a weather index insurance (WII) program can not only provide resources that enable recovery, but can also facilitate the adoption of prevention and adaptation measures and incentivize risk reduction. However, implementations of WII programs have faced difficulties because of basis risk—among several other obstacles. Here, we quantify the applicability, viability, and likely cost of introducing a WII for droughts for rice production in Indonesia. To reduce basis risk, we construct district-specific indices that are based on the estimation of Panel Geographically Weighted Regressions models. With these spatial models, and detailed district level data on past agricultural productivity and weather conditions, we identify an algorithm that can generate an effective and actuarially sound WII in some districts but not in others. We then measure its effectiveness in reducing income volatility for farmers by reducing this basis risk, at the district level. We end by calculating an actuarially robust and welfare-enhancing price for this scheme and prioritize the districts in which it can be implemented.