The Impact of Thin‐Capitalization Rules on External Debt Usage – A Propensity Score Matching Approach

Thin‐capitalization rules (TCRs) aim at limiting the tax advantage of internal debt financing by restricting the tax deductibility of the corresponding interest expenses. This article examines how subsidiaries of multinational firms respond to a change in the German thin‐capitalization legislation. The empirical analysis not only demonstrates that the TCR effectively restricts internal debt financing, it also suggests that firms are able to avoid taxation of interest by substituting external for internal debt. The empirical approach applies propensity score matching techniques and exploits the German tax reform 2001 to solve endogeneity problems.     

Those Who Know,Do. Those Who Understand,Teach. Disseminative Capability and Knowledge Transfer in the Automotive Industry

Innovations in the automotive industry are increasingly building on contributions from different technological fields. Correspondingly, firms in this industry more than ever tend to form research and development (R&D) alliances that aim at innovating new products through integrating separate fields and transferring knowledge. While, in symmetrical R&D alliances, each partner intends to ultimately maintain their distinctive and specialized knowledge base, overlapping knowledge facilitates cooperation and ultimately alliance success. Thus, the capability for knowledge transfer between partners is crucial in such R&D alliances. The literature provides ample evidence that such knowledge transfer is more likely to succeed if the recipient firm has absorptive capability. However, whereas the characteristics of the knowledge transfer process and the recipient firm are well understood, limited attention has so far been given to the issue of the knowledge source firm's ability to transfer knowledge to R&D alliance partners. This study focuses on the impact of source firm capability on successful knowledge transfer in R&D alliances. The study develops a theoretical framework of disseminative capability consisting of five dimensions and tests it on a sample of 59 projects in R&D alliances in the automotive industry. To ensure content validity and avoid common source bias, data were collected from both alliance partners. To test the hypotheses, multiple regression analyses were performed. The results reveal that the source firm's disseminative capability including the attainment of expert knowledge, assessing the recipient firm's knowledge base, and encoding knowledge are positively related to knowledge transfer success, while, surprisingly, detaching knowledge and support of knowledge application in the recipient firm are negatively related. Intentionally or unintentionally, disseminating knowledge across firm boundaries is widely perceived as detrimental to a firm's competitive advantage. Accordingly, the literature tends to downplay disseminative capability as an important means of exploiting external knowledge in collaborative settings. By demonstrating potential benefits for the source firm to transfer knowledge to the allying R&D partner firm, this paper reinvigorates the collaborative dimension in knowledge transfer. Further, the paper is the first of this kind to theoretically explain and empirically show that dimensions of disseminative capability of collaborators in R&D alliances are important for knowledge transfer, whereas disseminative capability is the complementary inverse of an organization's absorptive capacity.     

Institut für Kommunikationswissenschaft in Jena gegründet

Ohne Zusammenfassung     

Bundling in banking — A powerful strategy to increase profits

Banks can learn valuable lessons from the bundling models developed successfully in other industries. Bundling core banking products with additional services allows banks to differentiate themselves in a generally homogenous sector. Bundling also increases sales across product areas and aids customer lock-in. This paper provides an overview of how to create attractive and profitable bundles through a systematic, multi-stage approach to customer segmentation, targeting and product positioning.     

Can a margin squeeze indicate the need for deregulation? The case of fixed network voice telephony markets

In the beginning of fixed network liberalisation in Europe in the late 1990s, the main concern of regulators was to lower retail call prices. This was done by introducing wholesale regulation and promoting service-based competition. Some years later, the concern of some regulators turned from too high retail call prices to too low call prices, which might ‘squeeze’ entrants out of the market. This paper looks at a simple model in which this development is explained by increasing competitive pressure from an ‘outside opportunity’, most notably mobile telephony and cable. It is concluded that a margin squeeze is not necessarily used by the incumbent as a device to drive competitors out of the market and to increase market power but can also result from increased inter-modal competition. If this is the case, it is argued that the appropriate response would be deregulation or – under particular circumstances – a switch from cost-oriented access prices to alternatives such as retail-minus or capacity-based interconnection.     

INCORPORATING RISK AND AMBIGUITY AVERSION INTO A HYBRID MODEL OF DEFAULT

It is well known that purely structural models of default cannot explain short‐term credit spreads, while purely intensity‐based models lead to completely unpredictable default events. Here we introduce a hybrid model of default, in which a firm enters a “distressed” state once its nontradable credit worthiness index hits a critical level. The distressed firm then defaults upon the next arrival of a Poisson process. To value defaultable bonds and credit default swaps (CDSs), we introduce the concept of robust indifference pricing. This paradigm incorporates both risk aversion and model uncertainty. In robust indifference pricing, the optimization problem is modified to include optimizing over a set of candidate measures, in addition to optimizing over trading strategies, subject to a measure dependent penalty. Using our model and valuation framework, we derive analytical solutions for bond yields and CDS spreads, and find that while ambiguity aversion plays a similar role to risk aversion, it also has distinct effects. In particular, ambiguity aversion allows for significant short‐term spreads.     

Intercultural Discourse Ethics: Testing Trompenaars' and Hampden-Turner's Conclusions about Americans and the French

Are culture driven ethical conflicts apparent in the discourse of the protagonists? A multi-year, multi-cultural study of managers by Trompenaars and Hampden-Turner resulted in two conclusions relevant to business ethics. The first is that intercultural business conflicts can often be traced to a finite set of cultural differences. The second is that enough similarities exist between cultures to provide the grounds for conflict resolution. The research reported here gives credence to their study when applied to an ethical conflict viewed from French and American perspectives.     

The Liberalisation of Rail Transport in the EU

On 1 January 2007 the European rail freight market, which has long suffered from fragmentation and a declining share of total transport services, will be fully opened to competition. What will be the consequences for the transport sector and the economy as whole? What further measures are needed to stabilise or increase the railways' share in the freight market? * Member and speaker of the EPP-ED Group (Christian Democrats) in the Committee on Transport and Tourism; rapporteur of the European Parliament responsible for railway issues. ** Views expressed here are not those of NDU or Minnesota.