INNOVATION CYCLES AND LEARNING AT THE PATENT OFFICE: DOES THE EARLY PATENT GET THE DELAY?*

We study the relationship between the length of patent review and the importance of inventions. We build a simple model of the U.S. patent review process. Among the model predictions are that, controlling for a patent's position in a new technology cycle, more important innovations would be approved more quickly. Also, the approval delay is likely to decrease as an industry moves from the early stages of an innovation cycle to later stages. These predictions are in line with the evidence we obtain from a data set on U.S. patents granted in the field of genetically modified crops from 1983 to 1999. We also show that failing to account for the innovation lifecycle – as previous studies have done – is likely to bias upwards the estimates of the relationship between delay and importance.     

COMMENTS CONCERNING “ON THE PARK-THUESEN INDEX AND THE VALUE OF EARLIER UNCERTAINTY RESOLUTION”

Surveys find that the majority of firms utilize credit limits. However, most trade-credit models show a dichotomous result: either credit is granted or it is refused. In this paper, a single-period model of the trade credit-granting decision is developed which incorporates the portfolio effects of credit granting on the seller's cash inflows and therefore on its probability of cash stockout. In this model, the credit limit serves as a mechanism to control these portfolio effects and thus hedge against such stockouts.     

CUT‐THROAT FRINGE COMPETITION IN AN EMERGING COUNTRY MARKET: TAX EVASION OR THE ABSENCE OF MARKET POWER?*

Brazil's established soft‐drink firms recently lost ground to multiple low‐price entrants, with small‐scale operations and minimal advertising. While incumbents attributed such undercutting to entrants' lower costs from non‐compliance with the law, ‘generics’ counterargued that incumbents' high prices stemmed from unilateral market power rather than cost heterogeneity. By estimating a structural model, I can single‐handedly explain established brands' high prices through low equilibrium price elasticities of demand. Tax evasion in the fringe, while plausible, appears to be offset by higher procurement costs or less efficient scale. More generally, a competitive informal sector can alleviate the allocative distortions in certain concentrated industries.     

NOTE ON “EQUIVALENCE OF CASH FLOWS WHEN COMPOUNDING OCCURS LESS FREQUENTLY THAN THE CASH FLOWS”

The present worth (PW) and future worth (FW) decision criteria are to be found in virtually all current engineering economy textbooks. Although the relationships between the internal rate of return (IRR) criterion and PW has been widely discussed in the literature, there remains some misunderstanding as to similar relationships between PW and FW. Of particular importance is the interest rates at which PW and FW are maximized. It is shown here that the maximizing rates are not necessarily equal. This leads to the seemingly peculiar result that a change in the discount rate may decrease the PW while at the same time increasing the FW, or vice versa. Numerical, mathematical and intuitive arguments are presented.     

A Review of: ”THE IMPACT OF GOVERNMENT SUBSIDIES ON NDUSTRIAL MANAGEMENT” by Nachum Finger Praeger Publishers,Inc.1971 124pp. $12.50

Companies' attempts to adapt to today's technological capabilities and globally competitive environment have been greatly constrained by antiquated accounting systems. Improved management accounting systems can be designed:

1) for operational control, to motivate the learning and improvement activities for managers and employees, and to provide feedback on the efficiency of operating processes;

2) for activity-based costing, to calculate accurately the profitability of individual products and customers; and

3) for capital investment decisions, to guide decisions on acquiring advanced technological capabilities. The paper summarizes recent advances in all three applications.