Jean Tirole,Nobel Prize Winner

The Royal Swedish Academy of Sciences awarded the Nobel Prize in Economic Sciences for 2014 to Jean Tirole, Toulouse School of Economics (TSE), Toulouse, France ‘for his analysis of market power and regulation’. What commonly characterizes Jean Tirole's work is a combination of rigorous scientific analysis of markets and provision of useful scientific insights and policy guidance for regulation and competition policy in such markets. This paper focuses on two of Tirole's papers, both co-written with Jean-Charles Rochet, which probably best exemplify his policy-oriented research. It summarizes and then explains how the theory that these papers develop led to the implementation of a new policy regulating the payment card industry in the European Union.     

Does it matter where you invest? The impact of foreign direct investments on domestic job creation and destruction

This study examines how foreign direct investment (FDI) affects domestic employment by using unique division-level data of Japanese firms. Contrary to most previous studies focusing on the effect of FDI on net employment growth, we decompose it into job creation (JC) and job destruction (JD) for each individual firm. We find that FDI destination plays an important role: FDI to Asia increases JC, whereas FDI to Europe/North America decreases it; furthermore JD decreases, regardless of FDI destination. A frictional search-and-matching model with heterogeneous jobs can explain the differential effects. The model provides additional predictions on JC and JD by job type, which are also empirically confirmed.     

Dynamic managerial capabilities: Scale development and validation

Studies on dynamic managerial capabilities still have a rather theoretical nature, and there is great difficulty in finding a valid, reliable instrument to measure this construct. The present study contributes to solving this problem: It aims to develop and validate a scale to measure dynamic managerial capabilities. In this investigation, we develop a scale for three factors related to dynamic managerial capabilities: human capital, managerial cognition (already described in the literature), and relationship networks. The prominent finding in this research is the factor that is referred to here as relationship networks.     

A saddlepoint approximation to the distribution of the sum of independent non‐identically uniform random variables

Calculating the probability of the corresponding significance point is important for finite sample sizes. However, it is difficult to evaluate this probability when the sample sizes are moderate to large. Under these circumstances, consideration of a more accurate approximation for the distribution function is extremely important. Herein, we performed a saddlepoint approximation in the upper tails for the distribution of the sum of independent non‐identically uniform random variables under finite sample sizes. Saddlepoint approximation results were compared with those for a normal approximation. Additionally, the order of errors of the saddlepoint approximation was derived. © 2014 The Authors. Statistica Neerlandica © 2014 VVS.     

Do vertical spillovers differ by investors’ productivity? Theory and evidence from Vietnam

Developing countries are eager to host foreign direct investment to receive positive technology spillovers to their local firms. However, what types of foreign firms are desirable for the host country to achieve spillovers best? We address this question using firm‐level panel data from Vietnam to investigate whether foreign Asian investors in downstream sectors with different productivity affect the productivity of local Vietnamese firms in upstream sectors differently. Using endogenous structural breaks, we divide Asian investors into low‐, middle‐, and high‐productivity groups. The results suggest that the presence of the middle group has the strongest positive spillover effect. The differential spillover effects can be explained by a simple model with vertical linkages and productivity‐enhancing investment by local suppliers. The theoretical mechanism is also empirically confirmed.     

The winner–loser effect in Japanese stock returns

This study examines the winner–loser effect using stocks listed on the Tokyo Stock Exchange (TSE) from 1975 to 1997. We uncover significant return reversals dominating the Japanese markets, especially over shorter periods such as 1 month. No momentum effect is observed, however. The 1-month return reversal remains significant even after adjusting for firm characteristics or risk. While the 1-month return reversal is not related to industry classification, it is partially a result of higher future returns to loser stocks with low trading volume. Our results show that investor overreaction may be a possible explanation for the 1-month return reversal in Japan.     

Usefulness of the Information Contained in the Prediction Sample for the Spatial Error Model

A recent study proposed an estimation approach that uses data on the independent variables and location for the prediction sample, and suggested that it may improve estimation and prediction. This is an incomplete data approach following an iterative process along the lines of the EM algorithm. The present study compares this approach with a partial data approach that uses only data on the dependent and independent variables and location for the estimation sample. Our Monte Carlo experiments show that unless the estimation and prediction samples constitute the whole population and the data generating model is used as the data fitting model, the incomplete data approach is not guaranteed to be superior to the partial data approach.     

ON SURRENDER AND DEFAULT RISKS

This paper examines certain types of saving institutions or insurance companies that are subject to surrender and default risks, in a stochastic interest rate context. In the setting under study, investors are endowed with an option to surrender. The goal of the paper is to study how this option impacts the default risk of the issuing company and the value of the contracts it issues. Surrender risk has been extensively studied in arbitrated markets, using trees or least‐squares Monte Carlo methods for valuations, although practitioners often rely on econometric methods. We deal with surrender risk in a third way, assuming policyholders have sets of information and preferences that differ from those of financial market agents, but without relying on econometric methods. In particular, policyholders are supposed to be only partially rational (at least in the financial sense). This is done by modeling surrender risk through a Cox process correlated to the assets and interest rate dynamics. The paper provides formulas for the dynamics of the assets of the issuing firm (these dynamics drive the default time of the company), and for the valuation of liabilities and equity. A numerical illustration is provided.     

Entrepreneurial processes in social contexts: how are they different, if at all?

Scholars have compared and contrasted commercial and social entrepreneurship along a variety of dimensions, suggesting that entrepreneurial antecedents and outcomes differ within a social context. However, little is known about whether entrepreneurial processes differ within social contexts. In this paper, we ask to what extent the antecedents and outcomes that make social entrepreneurship unique influence entrepreneurial processes. Using an inputs–throughputs–outputs framework, we assess the relationship between four antecedents (social mission/motivation, opportunity identification, access to resources/funding, and multiple stakeholders) and three outcomes (social value creation, sustainable solutions, and satisfying multiple stakeholders) to the dimensions of entrepreneurial orientation (innovativeness, proactiveness, risk-taking, competitive aggressiveness, and autonomy) (Lumpkin and Dess, Acad Manag Rev 21(1):135–172, 1996). Our analysis suggests that many entrepreneurial processes remain essentially the same or are affected only slightly. However, autonomy, competitive aggressiveness, and risk-taking are influenced to some extent by the presence of multiple stakeholders and access to resources/funding. Entrepreneurial processes may also differ when applied to efforts to satisfy multiple stakeholders and achieve sustainable solutions. We subsequently discuss the implications of our analysis for future social entrepreneurship research and practice.