Egalitarianism and international investment

This study identifies how country differences on a key cultural dimension—egalitarianism—influence international investment flows. A society's cultural orientation toward egalitarianism is manifested by intolerance for abuses of market and political power and a desire for protecting less powerful actors. We show egalitarianism to be based on exogenous factors including social fractionalization, dominant religion circa 1900, and war experience from the 19th century. We find a robust influence of egalitarianism distance on cross-national flows of bond and equity issuances, syndicated loans, and mergers and acquisitions. An informal cultural institution largely determined a century or more ago, egalitarianism exercises its effect on international investment via an associated set of consistent contemporary policy choices. But even after controlling for these associated policy choices, egalitarianism continues to exercise a direct effect on cross-border investment flows, likely through its direct influence on managers' daily business conduct.     

The Return of the Size Anomaly: Evidence from the German Stock Market

This paper examines the size effect in the German stock market and intends to address several unanswered issues on this widely known anomaly. Unlike recent evidence of a reversal of the size anomaly this study documents a conditional relation between size and returns. I also detect strong momentum across size portfolios. The results indicate that the marginal effect of firm size on stock returns is conditional on the firm's past performance. I use an instrumental variable estimation to address Berk's critique of a simultaneity bias in prior studies on the small firm effect and to investigate the economic rationale behind firm size as an explanatory variable for the variation in stock returns. The analysis in this paper indicates that firm size captures firm characteristic components in stock returns and that this regularity cannot be explained by differences in systematic risk.     

R&D-induced industry polarization and shake-outs

We consider the standard two-stage game of R&D and Cournot competition with ex ante identical firms but depart from the literature in assuming that R&D is characterized by mildly, instead of strongly, decreasing returns to scale. We establish that only extreme R&D levels are possible at equilibrium, and that for a broad range of parameters, equilibria are asymmetric in R&D levels, possibly leading one firm to endogenously exit. This provides a simple link between returns to scale in R&D and industry polarization, including shake-outs. A novelty is that exit may be triggered by positive opportunities in a strategic setting. Given the original nature of our R&D equilibrium, a complete welfare analysis is conducted, including a possible role for R&D subsidies.     

Assessing value-in-use: A conceptual framework and exploratory study

Developing approaches for understanding customer perceived value is a priority for managers and scholars alike. A conceptual framework for assessment of value-in-use is proposed and explored within the context of a maintenance service provider. In contrast to value models in previous empirical research, the framework includes assessment not just of provider attributes but also of the customer's usage processes, as well as customer evaluations of the value-in-use they obtain. Interviews with members of a cross-disciplinary buying group provide support for the framework, including the observations that individuals can assess the quality of their usage processes and that they can articulate value-in-use at both organisational and individual levels; the further concept of network quality also emerges from the data. Assessment of usage process quality as well as service quality evolves as the customer's goals evolve. Practitioners may wish to elicit usage process quality and value-in-use as well as service quality. Research directions include scale development for both usage process quality and value-in-use.     

Nature or nurture: What determines investor behavior?

Using data on identical and fraternal twins’ complete financial portfolios, we decompose the cross-sectional variation in investor behavior. We find that a genetic factor explains about one-third of the variance in stock market participation and asset allocation. Family environment has an effect on the behavior of young individuals, but this effect is not long-lasting and disappears as an individual gains experience. Frequent contact among twins results in similar investment behavior beyond a genetic factor. Twins who grew up in different environments still display similar investment behavior. Our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs. We attribute the genetic component of asset allocation—the relative amount invested in equities and the portfolio volatility—to genetic variation in risk preferences.     

Boldly going where no brain has gone: Futures of evolutionary cognitive neuroscience

Evolutionary cognitive neuroscience (ECN) is a new discipline that employs methodology from cognitive neuroscience to study, in vivo, the proximate mechanisms of putative evolved psychological/cognitive adaptations. The formalized discipline is less than five years old, but has already generated a plethora of research as well as extended our understanding of the evolved nature of the mind/brain. Here we briefly recapitulate the antecedents to an evolutionarily informed cognitive neuroscience, attempt to fit ECN into a broader evolutionary psychology framework that seeks to account for evolved adaptations to recurrent problems faced by our ancestors, and discuss the futures of this newly formed discipline by expounding on methodological techniques and theoretical accounts that may pervade our future. We believe, as the Nobel laureate Nikko Tinbergen has suggested, that a complete understanding of the evolved nature of behavior and cognition (i.e., evolved cognitive adaptations) can only come from investigations at both the proximate and ultimate levels and, thus here, we attempt to cast ECN as the proximate sister discipline to evolutionary psychology. When taken together these two disciplines have the potential to uncover how and why the mind works.     

Living in the age of emotional rationality: Wendell Bell, social media and the challenges of value change

When the change process accelerates, the meaning of the logic of cause and effect in living through this blurring reality clearly diminishes. We have to tell the story of our reality and future both to ourselves and to society with new concepts, words and metaphors. While the importance of instant experience and transience grows, our in-depth understanding of the logic of time gradually crumbles away. The fervency of action widens the limits of reality in a fundamental way, even though our personal human capacity to receive and handle information and experience emotions and events has not changed in the one million years of human history.The present is swelling over the past and the future. The social media transforms into one big global amplifier through which emotional experience is transmitted and strengthened. The asset of collective experiences is that they are universal, they are private and felt on an individual level, and yet they can simultaneously be shared by the others. However, one might also say that even though the growth of information produces more and more different value contents for us to choose from, this freedom of choice is still rather spurious.With the traditional norms, models of action, habits and attitudes we can no longer cope in this totally new reality. We live in an age of controversies which emphasizes emotions with public intimacy and privacy with a realtime audience. We are enchanted by creativity and innovativeness and our decisions have to be made quickly, efficiently and in a short-term basis. We cannot freely consider our values, but in order to cope, we have to try to behave in a way which is the most target-oriented, and at the same time, the tools and methods to cope in this rapidly changing reality are still scarce. Therefore we have to weigh the efficiency and suitability of the means in relation to the objective also in such situations where we cannot make proper value assessments. Emotional universality can become, or at least with the help of skilled media PR professionals, it can be used as a means to commercialize our emotions, or it can help us in the process of building universal values.