The effect of science and technology parks on a firm’s performance: a dynamic approach over time

We argue that the benefits provided by locations inside science and technology parks evolve over time. Firms inside parks can improve performance due to certain advantages related to knowledge spillovers and shared resources that can be particularly useful in earlier stages of the industry life cycle. In these industries, local knowledge sharing is particularly useful because no standards are clearly established, as we have confirmed in a sample of 12,800 firms from the PITEC database, located either on- or off-park. We also find that young firms can benefit more from the park than more established businesses in terms of both business growth and innovative capacity. Although older firms have greater experience and investments that would increase their capacity to absorb external knowledge, their associated rigidities prevent them from incorporating changes into their structures.     

Commercial loan borrower’s optimal borrowing and prepayment decisions under uncertainty

We model a firm which faces continuing stochastic money needs and fluctuating interest rates. The borrower minimizes the expected present value of the sum of interest payments and prepayment penalty costs subject to a liquidity constraint. Since contingent opportunities are absent from the model, we find (i) the firm should not inventory cash, (ii) the firm should prepay the maximum amount possible if it prepays at all.     

The effect of a wife’s retirement on her husband’s mental health

This article examines the effect of wives’ retirement on their husband’s mental health in Australia. By exploiting the exogenous variations in women’s retirement induced by the age pension qualifying ages, we find that spousal retirement status has a positive impact on the mental health of older men. This beneficial impact is found to strengthen with wives’ time spent in retirement. We show that wife’s retirement affects the constituents of her husband’s mental well-being in different ways. We also have identified four channels for the positive linkage between older women’s retirement and the mental health of their spouse.     

The allocation of PhD enrolment quotas in China’s research-oriented universities based on equity and efficiency principles

PhD enrolment quota allocation proves the key concern for China’s universities to promote institutional reform and improve research level, and it is often characterized by the zero sum game among schools within a university. Therefore, this article develops a new indicator system for PhD enrolment quota allocation and efficiency evaluation in China, and then it reallocates the quotas considering the preferences of decision-makers and the efficiency based on the historical data during 2011–2015 in a research-oriented university in China. The results indicate that, first, the preferences of decision-makers in the university for article publications and research funds may significantly affect the allocation of PhD enrolment quotas among schools. Second, when the linear combination weighting method is used, the overall efficiency for PhD enrolment allocation proves the highest, among various weighting methods concerned. Finally, to improve the overall efficiency of the 19 schools, five social science schools and four engineering schools have to cut their PhD enrolment quotas; among them, three engineering schools should reduce the largest redundant quotas sharply. The methods and results in this article are conducive to the allocation of education resources which have the zero sum feature and are often accompanied with undesirable outputs.     

The effect of sample size on European Union’s renewable energy investment drivers

Macroeconomic modelling results based on relatively varying sample sizes may lead to incoherent results. Such effects have not been adequately understood in the renewable energy literature regarding the European Union (EU). This study focuses on the comparison of results obtained for renewable energy investment drivers (for solar and wind energy investments) on different samples of EU countries, including all EU-27, former EU-15 and 11 high renewable investment EU countries. The study used a random effect panel data modelling approach over the period 1995–2011 for studying the impact of the levelized cost, regulation perception, carbon emissions and climatic condition on wind and solar investments over the three samples. The results demonstrate the importance of trustable regulation schemes to ensure that regulation will not have a significant negative effect on investment, showing also the need to further extend the model to include support schemes as fundamental drivers for investment.     

The effect of communication and energy services reform on manufacturing firms’ innovation

Upstream services liberalization improves the efficiency and cost of communication and energy services, reducing the marginal costs of downstream manufacturing firms through input-output linkages. This study explores one possible mechanism behind this finding: innovation. I investigate the effects of communication and energy services reform in India in the mid-1990s on downstream manufacturing firms’ decisions to invest in R&D. The empirical analysis uses manufacturing-firm level data and regulation indicators in the communications and energy service sectors. The liberalization of services in India had a positive effect on manufacturing-firm innovation. These results are concentrated on firms in the middle of the initial productivity distribution. The main channel is the elimination of entry barriers into the communication sector.     

The reduction cost of nonperforming loan: evidence from China’s commercial bank

The nonperforming loans (NPLs) are co-generated by creating the profit in a bank, and this article build a joint production model to measure the reduction cost of nonperforming cost. By using a data set of China’s 13 commercial banks, the conclusions show that the reduction cost of NPLs is lower, which suggests that it is not a good choice for China’s commercial bank to hold the NPLs.     

A model for measuring and ranking a firm’s patent portfolio

ABSTRACT

Patent quality (PQ) is a critical and complex factor of a firm’s patent strategy. We posit that the existing PQ models and their methodological approaches are limited in their ability to address the multiple priorities of PQ – a firm’s strategic intentions, its stakeholders and balancing technology superiority and legal validity. We advance PQ literature by identifying the fourth generation of strategic PQ indicators and propose a hybrid multi-criteria model, based on AHP–TOPSIS, for patent portfolio measurement. The proposed PQ model provides a simple template that can guide the decisions of patent managers pursuing high quality patent portfolios. We test the PQ model by applying it in two sectors: 3G WCDMA telecommunications and biotechnology.     

The effects of old and new media on children’s weight

Childhood obesity rates have recently been rising in many countries. It has been suggested in the literature that changes in children’s media exposure may contribute to explaining this trend. I investigate whether or not this hypothesis is supported by data. I contribute to the literature by focusing not only on television but also on new media – computers and video games. The Child Development Supplement to the Panel Study of Income Dynamics is used for the analysis. To address the endogeneity of children’s media exposure, I use dynamic and panel data models. This is another improvement upon the existing literature. Additionally, an extensive list of control variables is included in the regressions. I find that video game playing or computer use has no effect on children’s body weight. On the other hand, television viewing may increase children’s body weight slightly.     

Household’s optimal mortgage and unsecured loan default decision

How do households make optimal borrowing and default decisions when they have the option to borrow in multiple ways? In this paper, I analyze households’ optimal mortgage and unsecured loan borrowing and default decisions in the context of the recent recession. I model households as able to default on mortgage debt to walk away from capital losses, at the price of foreclosure. However, a household can also default on unsecured debt to maintain its home, in exchange for a longer exclusion from credit markets following default. Depending on the costs of each alternative, financially constrained households exhibit heterogeneity in optimal default decisions.Next, I analyze how mortgage loan modification policies, after a sudden drop in house prices, affect household choices in the mortgage and unsecured loan markets. The quantitative exercise shows that the government-driven mortgage modification program, initiated in 2009, reduces the mortgage default rate by 0.27% points. However, this increases the unsecured loan charge-off rate by 0.66% points.     

Endogenous product versus process innovation and a firm’s propensity to export

This article provides an empirical analysis of the effects of new product versus process innovations on export propensity at the firm level. Product innovation is a key factor for successful market entry in models of creative destruction and Schumpeterian growth. Process innovation helps securing a firm’s market position given the characteristics of its product supply. Both modes of innovation are expected to raise a firm’s propensity to export. According to new trade theory, we conjecture that product innovation is relatively more important in that regard. We investigate these hypotheses in a rich survey panel data set with information about new innovations of either type. With a set of indicators regarding innovation motives and impediments and continuous variables at the firm and industry level at hand, we may determine the probability of launching new innovations and their impact on export propensity at the firm level through a double treatment approach.     

The true effect of students’ employment on the duration of studies

We examine the effect of the first-degree students’ employment on the prolongation of their studies. When employing a popular instrumental variable, the regional unemployment rate, we find a negative impact of students’ employment on duration of studies. Then, adding a predetermined IV – the individual’s employment prior to the beginning of academic studies – turns the estimate positive. Furthermore, we find that the relationship between the extent of students’ employment and duration of their studies depends on their age: among the younger students (aged 22–26), the extent of employment has no effect on the duration of studies, while among the older students, the effect is positive and statistically significant.     

How does knowledge network affect a firm’s explorative innovation? The contingent role of R&D collaborations

Innovation is a process of knowledge recombination [Fleming, L. 2001. “Recombinant Uncertainty in Technological Search.” Management Science 47: 119 p]. Extant literature highlights the importance of a firm’s knowledge base for innovation, while little is known about the structure of a firm’s knowledge base and how it affects the firm’s explorative innovation. Based upon the perspective of network analysis, we portray a firm’s knowledge base as an intra-organisational knowledge network and examine the effects of two structural features of the network – density and centralisation – on the firms’ exploratory innovation. Using a manual collected dataset of 738 Chinese automobile manufacturers, we find that a firm explores fewer new knowledge elements when the firm holds a dense knowledge network or a centralised knowledge network. More importantly, with the increase of a firm’s R&D collaborations with external actors, the negative effect of density is mitigated while the negative effect of centralisation is reinforced. Both theoretical and practical implications are discussed.     

Monopoly power and the firm’s valuation: a dynamic analysis of short versus long-term policies

Summary. Recent anti-trust cases exacerbated the concerns of investors regarding the effects of a firms monopoly power on its production choice, shareholder value, and the overall economy. We address this issue within a dynamic equilibrium model featuring a large monopolistic firm whose actions not only affect the price of its output, but also effectively influence the valuation of its stock. The latter renders time-inconsistency to the firms dynamic production choice. When the firm is required to pre-commit to its strategy, the ensuing equilibrium is largely in line with the predictions of the textbook monopoly model. When the firm behaves in a time-consistent manner, however, the predictions are strikingly at odds. The trade-off between current profits and the valuation of future profits induces the firm to increase production beyond the competitive benchmark and cut prices. This policy may result in destroying shareholder value, and does indeed fully wipe out the firms profit in the limit of the decision-making interval shrinking to zero, in line with the Coase conjecture.Received: 23 December 2003, Revised: 1 March 2004, JEL Classification Numbers: D42, D51, D92, E20, G12.Correspondence to: Anna PavlovaWe thank Steve Spear and the anonymous referees for helpful suggestions. We are also grateful to Franklin Allen, Dave Cass, Peter DeMarzo, Bernard Dumas, Ron Giammarino, Rich Kihlstrom, Leonid Kogan, Branko Urosevic, Dimitri Vayanos, seminar participants at Boston University, University of Colorado at Boulder, Columbia University, MIT, University of Pennsylvania, Princeton University, American Finance Association Meetings, and European Finance Association Meetings for valuable comments. All errors are solely our responsibility.     

The effect of nonreciprocal preferential trade agreements on benefactors’ exports

Over the last decades, developed countries have provided developing countries with preferential market access via trade policies in the form of nonreciprocal preferential trade agreements (NRPTAs). Despite the lack of reciprocity of this kind of agreements, certain criteria for designating eligible countries refer to the commercial interests of benefactor countries. This paper examines for the first time the effect of NRPTAs on benefactors’ exports to beneficiary countries. Using recent developments in the econometric analysis of the gravity equation, we find robust evidence that nonreciprocal agreements have had an economically significant effect on exports not only for beneficiary countries but also for benefactor countries.     

Shatterbelts and conflict behaviour: The effect of globalisation on ‘high risk’ states

This article ties together seemingly disparate literatures (those of globalisation and ‘shatterbelt states') as a means of investigating the changing conflict behaviour of high‐risk states. The objective of this research is to ascertain empirically whether the circumstances that generate aggression by high‐risk states are the same as those for others. In addition, by examining how conflict behaviour has changed over time, and in conjunction with trade openness, these tests speak to the importance of economic interdependence as a mitigating counterforce to aggressive tendencies. The results indicate that domestic instability and fragmentation are more directly tied to high‐risk state behaviour than are systemic influences. In contrast, the probability that low‐risk states originate or participate in conflicts, and resort to violence, is tied to international factors. Surprisingly, increased repression seems to result from the opposite circumstances. For high‐risk states, changes in repressive behaviour are tied to the external environment while low‐risk states seem prone to change levels of repression in conjunction with their internal conditions. Lastly, and most importantly, trade openness has an important pacifying effect on high‐risk states, but appears to be irrelevant to the conflict behaviour of all others. Globalisation, it appears, mitigates the violence that is often initiated by high‐risk states. These results offer important preliminary evidence for understanding high risk‐states and the strategies that may reduce their aggressiveness.     

The effects of inflation targeting on Okun’s law

This article provides the first empirical evidence that the adoption of inflation targeting (IT) matters for the extent of tradeoff between unemployment and output, that is Okun’s law. Our full sample results indicate that IT leads to a more negative Okun’s coefficient, suggesting that, for a given reduction of output, the introduction of IT is associated with a higher unemployment rate. Subsample analyses reveal that the whole sample results are mainly driven by the industrial subsample outcomes, not the developing counterparts. Our findings point out that IT not only influences macroeconomic variables per se but also affects the relationship between/among macroeconomic variables.     

Time is money: The effect of clock speed on seller’s revenue in Dutch auctions

We study the role of timing in auctions under the premise that time is a valuable resource. When one object is for sale, Dutch and first-price sealed bid auctions are strategically equivalent in standard models, and therefore, they should yield the same revenue for the auctioneer. We study Dutch and first-price sealed bid auctions in the laboratory, with a specific emphasis on the speed of the clock in the Dutch auction. At fast clock speeds, revenue in the Dutch auction is significantly lower than it is in the sealed bid auction. When the clock is sufficiently slow, however, revenue in the Dutch auction is higher than the revenue in the sealed bid auction. We develop and test a simple model of auctions with impatient bidders that is consistent with these laboratory findings.

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Realized EquiCorrelation: a bird’s-eye view of financial stress on equity markets

This article addresses the issue of measuring the level of aggregate financial stress on stock markets, which is a central issue for investors and policy-makers. To this end, Realized EquiCorrelation (REC) is obtained by plugging realized volatility as an input into the Dynamic EquiCorrelation (DECO) model where both the continuous and jump components of realized volatility are considered. An application is provided for the 20 major stock markets over January 2000–May 2014 using intra-day data. The results remarkably pick up financial stress periods.