The Lindahl equilibrium in Schumpeterian growth models

The main motivation of the paper is to determine the social value of innovations in a standard scale-invariant Schumpeterian growth model, which explicitly introduces knowledge diffusion over a Salop (Bell J Econ 10(1):141–156 1979) circle. The social value of an innovation is defined as the optimal value of the knowledge inherent in this innovation. We thus have to price optimally knowledge. For that purpose, contrary to what is done in standard growth theory, we complete the markets using Lindahl prices for knowledge. The Lindahl equilibrium, which provides the system of prices that sustains the first-best social optimum in an economy with non rival goods, appears as a benchmark. First, its comparison with the standard Schumpeterian equilibrium à la Aghion and Howitt (Econometrica (60)2:323–351 1992) enables us to shed a new light on the issue of non-optimality of the latter. Second, the Lindahl equilibrium also allows us to revisit the issue of R&D incentives in presence of cumulative innovations. Finally, this benchmark may be a first step to understand how knowledge is exchanged in new technology sectors.     

Is prior director experience valuable?

Previous studies have investigated the effectiveness of directors in performing their monitoring and advising functions by examining characteristics such as independence, qualifications and professional expertise. In this study, we propose a more direct measure of director effectiveness – prior experience as a director. Using hand‐collected data from Australia, we find that both the depth (number of prior years) and breadth (number of current directorships) of a new appointee’s director experience is valued by shareholders at appointment. In particular, the market reaction is highest for appointees with the most prior director experience (two or more other current directorships in listed companies and four or more years of director experience) and when experienced appointees join less‐experienced boards.     

ASEAN‐5 bond market development: Where does it stand? Where is it going?

Since the late 1990s' Asian crisis, ASEAN‐5 countries have expended considerable effort in developing their bond markets. However, the size of these markets relative to GDP has hardly changed. Can we explain this? And does it mean that domestic markets have not, in fact, developed? The article argues that bond market growth has been held back by a sharp fall in business investment, which has left firms with little need for bond borrowing. Even so, markets have developed in other ways, to such an extent that substantial amounts of foreign portfolio investment have begun to flow into ASEAN‐5 bonds. These developments have important ramifications. With the investor base growing and infrastructure investment likely to rise, ASEAN‐5 bond markets could expand rapidly, holding out the prospect that the region could finally achieve ‘twin engine’ financial systems in the near future.     

Using Limited Information to Support the Decision to Launch a New Product in the Fruit Juice Market: A Teaching Case Study

Fresh Juice Incorporated (FJI) is in the process of determining whether it should launch a new fruit juice, Genetically Enhanced (GE) Juice. The GE Juice meets consumers' demands for a tasty, nutritious product and it would be the first new juice product in the last fifteen years. Before FJI decides to launch GE Juice, it must analyze the uncertainty surrounding market size, market share, and price of GE Juice. Finally, if FJI decides to launch GE Juice, then they must decide if they will bottle the juice themselves or outsource this process. This case teaches students how to discuss the strategic implications of launching a new product and develop a net present value and financial feasibility simulation model given limited information.     

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