Banking business models and risk: Findings from the ECB's comprehensive assessment

We use the results of the ECB's comprehensive assessment to evaluate the importance of the bank business model on risk assessment and the persuasive effectiveness of different supervisory styles on banks’ recapitalization. Our analysis reveals inconsistencies in the information content provided by the various regulatory measures used for assessing bank stability. Moreover, opposite to CET1 ratio, the leverage ratio provides assessments on business models more consistent with a market-based measure of bank risk exposure and Z-SCORE. Accounting for several control variables both at the bank and country level, we also find evidence that the effectiveness of the supervisory action depends on the specific type of supervisory model. In particular, countries adopting the hybrid model seem more effective in persuading banks to recapitalize preventively. Differently, countries adopting the integrated and the sectorial model seem less effective in their requests.     

On the economics of R&D and technological collaborations: Insights and results from the project colline

Research collaborations involve co-production and exchange of knowledge across organisational boundaries. They involve governance of intellectual property rights and partners' use of collectively produced knowledge. The principal findings arise from case studies of consortia governance in biotechnology and software and substantial variety in arrangements is identified. This variety may be explained by the appropriability of knowledge in particular research domains as well as by the nature of the knowledge generated. Consequences of governance rules are explored for European research consortia and for collective standards making activities. The analysis indicates several policy conclusions: government policy has an important role in overcoming market failures in consortia formation; adoption of any uniform intellectual property rights model for consortia would be likely to reduce research productivity; policies aimed at stimulating consortia formation must take account of the nature of knowledge that is to be exchanged.     

Technical change, prices and communications technology: Insights from the Local Area Networking industry

We use hedonic regressions to analyse price changes in two categories of Local Area Networking (LAN) equipment: hubs and switches. Constant quality price indexes are constructed from the regressions and contrasted with available indexes constructed for the same type of equipment. We find that prices fell at an average annual rate between 22% and 33% during the 1990s. The results suggest that beside falling prices of inputs (i.e. semiconductors), technical change in the LAN equipment may be responsible for the decrease in the prices of communication equipment during the 1990s.     

Explaining ERM realignments: Insights from optimising models of currency crises

This paper attempts to provide empirical evidence on the determinants of the realignments throughout the European exchange rate mechanism (ERM). Motivated by the implications of optimising currency crisis models, we relate the probability of “crises” to a set of macroeconomic fundamentals. By using a conditional binominal logit model we show that regime switches are strongly influenced by movements in industrial production, foreign interest rates, competitiveness and imports as well as in foreign exchange reserves. These findings are consistent with the general propositions of recent currency crises models.     

Knowledge shifts and the business cycle: When boom turns to bust

Informational cascades can be used to augment the existing Austrian business cycle theory. As first-order users of knowledge know the direct causes of a price change, they transmit this knowledge to second-order users through the price system. Banks with direct knowledge of the sources of the fresh liquidity during a credit-induced boom have knowledge of the boom’s artificial and unsustainable nature. Higher order users lack this direct knowledge and hence continue investing largely ignorant of underlying developments. When first-order users of knowledge sense the boom has run its course, they exit the market, sending a strong signal to higher order knowledge users that the boom has ended—a fragile situation built upon an informational cascade begins collapsing. Simultaneously, the boom is characterized by an influx of capital and knowledge into the financial sector owing to increased profits relative to the real economy stemming from Cantillon effects surrounding the credit injection. As knowledge pertaining to real production has also exited, the bust commences with a misallocated productive structure requiring equilibration to become consistent with consumers’ wants. Actions which inhibit this knowledge from returning to the productive structure will unnecessarily lengthen the time to recovery.     

Plucking models of business cycle fluctuations: Evidence from the G-7 countries

Friedman's `plucking' model, in which output cannot exceed a ceiling level but is occasionally plucked downward by recessions, is tested using Kim and Nelson's formal econometric specification on output data from the G-7 countries. Considerable support for the model is obtained, leading us to conclude that during normal periods, output seems to be driven mostly by permanent shocks, but during recessions and high-growth recoveries, transitory shocks dominate. During these periods macroeconomic models that emphasise demand-oriented shocks, rather than real business cycle type models, may thus be more appropriate. First Version Received: September 2000/Final Version Received: May 2001     

Labor market dynamics over the business cycle: evidence from Markov switching models

This paper explores the evolution of the U.S. labor market across the business cycle and specifically the relationship between the unemployment rate and the average duration of unemployment. Labor market recoveries have long been thought of as lagging recoveries in broad economic activity. In particular, the unemployment rate peaks several months after official business cycle troughs and the average duration of unemployment lags further behind. Using estimates from Markov switching models of the unemployment rate, average duration of unemployment, jobless claims, and the exhaustion rate of regular unemployment insurance, this paper dates contractionary and expansionary phases of various aspects of the labor market and their relationship to the official phases of the business cycle. Evidence from these models suggests that inflows into unemployment recover almost contemporaneously with broad economic activity, while outflows recover almost a year after the end of official recessions. The differential timing in the recoveries of unemployment inflows and outflows, which is not a characteristic of most macro models of the labor market, accounts for the observed pattern between the unemployment rate and average duration of unemployment. Finally, when comparing the phases of the labor market to periods where Congress extends unemployment insurance benefits, it appears that policymakers target periods where the job finding rate is low, rather than periods where the stock of unemployed workers is high.     

Vertical integration,escalating commitment and technological performance: evidence from firms in the US computer industry

We set out in this study to analyse the impact on the technological performance of firms arising from their vertical integration, along with their escalating commitment to capital investment. Our findings reveal a positive relationship between vertical integration and the technological performance of such firms. A positive correlation is also found to exist between vertical integration and escalating commitment to capital investment; in other words, a firm's rising commitment to its capital investment may well strengthen the positive effects of vertical integration on the technological performance of the firm. More importantly, the interactive effects on technological performance will tend to differ, largely dependent on the type of vertical integration. The findings of this study also indicate that vertical integration can effectively neutralise the threat to exit barriers resulting from a firm's escalating commitment to its prior investment.     

Understanding the disruptive business model innovation of E-business microcredit: a comparative case study in China

This paper uses an in-depth case study approach to compare and analyze e-business microcredit firms and traditional bank business models in China, employing a business model template redefined as an analytical tool. The results suggest that the EMF business model has typical disruptive innovation characteristics, shedding new light on the definition and criteria of disruptive business model innovation as little research has done on its systematic analysis. This study also presents a holistic conceptual framework for four triggers constituting their business model difference, inclusive of non-mainstream customer positioning, inclusive platform-based infrastructure, platform-based leveraged capability, and user experience-centered value proposition.     

Structural and geographical patterns of knowledge networks in emerging technological standards: evidence from the European GNSS industry

The concentration and dispersion of innovative activities in space have been largely explained and evidenced by the nature of knowledge and the geographical extent of knowledge spillovers. One of the empirical challenges is to go beyond this by understanding how the geography of innovation is shaped by particular structural properties of knowledge networks. This paper contributes to this challenge, focusing on the particular case of global navigation satellite systems at the European level. We exploit a database of R&D collaborative projects based on the fifth and sixth European Union Framework Programs, and apply social network analysis in economic geography. We study the properties both of the network of organizations and the network of collaborative projects. We show that the nature of the knowledge involved in relationships influences the geographical and structural organizations of the technological field. The observed coexistence of a relational core/periphery structure with a geographical cluster/pipeline one is discussed in the light of the industrial and geographical dynamics of technological standards.     

Roadmapping a disruptive technology: A case study: The emerging microsystems and top-down nanosystems industry

If technological roadmapping is important in the process of rapid technology commercialization, and if a method tailored to roadmapping nascent disruptive technologies does not exist, and if these very same disruptive technologies portend to be the future economic engines for firms, countries, and regions, then there is cause for concern. This article seeks to shed some light on the process in industrial disruptive technology roadmapping by focusing on the fundamental differences between sustaining and disruptive technologies. This article investigates the utility of theoretical and practitioner traditional technology roadmapping tools in an international industrial roadmapping effort focusing on microtechnology and top-down nanotechnology. I then modify the traditional technology roadmapping approaches generating a model for an industrial worldwide disruptive technology roadmapping process. I utilize the International Industrial Microsystems and Top-Down Nanosystems Roadmap (IIMTDNR) effort, which included nearly 400 people, from nearly as many firms, from over five continents and was developed over a 5-year period. The IIMTDNR process is used to provide the basis for a model for a commercial disruptive technology roadmapping process.     

The semiconductor silicon industry roadmap: Epochs driven by the dynamics between disruptive technologies and core competencies

The resource-based perspective has done much to identify idiosyncratic firm attributes that may be a principal source of competitive advantages. Unfortunately, there has been little systematic industry evidence to support the strategic importance of core competence, nor has there been much work on the temporal or cumulative nature of core capabilities within an industrial setting. Further, little or no research has been performed demonstrating how the advent of technological discontinuities or disruptive technologies plays a part in creating epochs in technology competency development and the roadmap of an industry. In this study, we analyze the evolutionary and cumulative nature of core capabilities and their interactions with technological discontinuities from a market-driven perspective. We have studied the evolution of 167 firms through the 50-year history of the semiconductor silicon industry. Over time, there were several structural shifts in the necessary competencies through the advent of disruptive technologies. In the last 30 years, however, the change in the required competencies has been more cumulative in nature. We summarize this in a roadmap detailing the epochs in the semiconductor silicon industry.     

The global business revolution, the cascade effect, and the challenge for firms from developing countries

The global business revolution since the 1980s has witnessedan unprecedented degree of industrial consolidation and concentrationof business power at a global level. Firms with powerful, globallyrecognised technologies and/or brands constitute the ‘systemsintegrators’ at the apex of extended supply chains. Thispaper examines the supply chains in four different sectors:aerospace, telecommunications, automobiles and beverages. Itfinds that these sectors have striking similarities in the wayin which the core systems integrators have stimulated industrialconcentration across the whole supply chain. This ‘cascadeeffect’ has profound implications for firms from developingcountries in catching up at the firm level.     

How technological innovation affects the structure of an industry: entrepreneurship evolution in the biotechnology and pharmaceutical industry since 1980

Challenges faced by the biotechnology and pharmaceutical industry, including reduced R&D productivity and the expiration of drugs that are high in demand, are recently being addressed through technological innovation. Such innovations are highly likely to change the structure and functioning of the industry. Since 2000, biotechnology and pharmaceutical companies have actively made strategic alliance, and technological innovations have changed the source of innovation from R&D to entrepreneurship within the industry. In this study, we identify the evolution of entrepreneurship and discuss the changes caused by technological advancements since 1980 by analysing patterns of exporting and acquiring technology data from Medtrack. Over difference period, biopharmaceutical firms have gained new knowledge and improved technology, and have implemented this newly acquired knowledge and innovation to introduce drugs to the market.     

Challenging the dominant logic in the healthcare industry: the case of precision medicine

The study on the impact of precision medicine (PM) in its surrounding political and business milieu has burgeoned in recent years. Recent advances in biomedical sciences suggest that PM has the potential to fundamentally alter the existing business logic in the healthcare landscape and the relationship between how medical care is delivered and organised. While barriers and policy challenges to the introduction of pharmacogenomics into healthcare system are widely noted, relatively little is known about whether and to what extent PM alters or even destroys the dominant logics of the pharmaceuticals and diagnostics industry, which constitute the core segment of the PM. In this paper, the shifting nature of dominant logic in the field of PM is studied by means of qualitative analysis. Several dimensions are identified to help develop a better understanding of changing business models and collaborative network structures.     

Indigenous technological capabilities,emerging market firms and the aerospace industry

While emerging market economies have developed significant technological capabilities and increased their share of global value-added in aerospace, they have done so largely through utilising foreign direct investment (FDI) and offset arrangements to enter supply chains that remain dominated by European and American firms. The paper examines whether emerging markets are developing indigenous technological capability in aerospace technologies. Drawing on patent data from the Thomson Innovation database, the study seeks to understand whether anchor tenant capability is indeed forming in emerging markets. A tech-mining method is applied. The study suggests that China, in particular, has dramatically increased its innovative capacity in the area. However, the data also demonstrate the significant advantages enjoyed by incumbent firms from Europe and the USA, suggesting that the complexity of aircraft R&D remains a formidable barrier that can only be surmounted by determined government policies and anchor firms equipped with substantial innovation capabilities.     

Profit margins and business cycles in the Brazilian industry: a panel data study

The paper investigates the relationship between profit margins and business cycle in the Brazilian industry during the 1992–1998 period, taking as reference a dynamic panel data model founded around a conjectural variation framework. The empirical results indicate procyclical behaviour of profit margins for the aggregate business cycle but is less clear in the case of sector-specific business cycle variables. Among the most robust results, one can highlight the roles of lagged profitability and import intensity and the negligible role of union density. Schmalensee in (American Economic Review 75, pp. 341–51) outlined three theoretical interpretations associated with the empirical model (classical, revisionist and managerial). Econometric tests on the related restrictions do not allow one to exclusively legitimate any of the three interpretations.     

Default correlation: rating,industry ripple effect,and business cycle

For a well-diversified bond portfolio, default risk over the investment horizon is known as the major risk and the risk is largely from correlated defaults. While plenty of theoretical work about default correlation has been developed, empirical studies on default correlation have not made much progress in the past two decades. In this paper, we fill this void in the literature by thoroughly investigating how default correlation changes across different bond ratings, over different time horizons, and across different industries over the sample period of 1970 to 2014. In particular, we examine how rating-based default correlations change before, during, and after recessions. More importantly, we reveal the ‘industry ripple effect’ that default correlations are low within upstream industries but become higher within downstream industries along the structure of the supply chain. Also, default correlations are relatively high between upstream industries and downstream industries.