Research and Development Activity and Expected Returns in the United Kingdom

Fama and French (1992) show that size and book-to-price dominateCAPM beta and other variables such as the price-earnings ratioand dividend yield in explaining the cross-section of US stockreturns. Comparable evidence for the UK points to a book-to-priceeffect, but not a size effect (Chan and Chui, 1996; Strong andXu, 1997). In this paper, our first contribution is to showthat a measure of research and development (RD) helps explaincross-sectional variation in UK stock returns. Our cross-sectionalresults on the association between stock returns and RD areconsistent with recent US evidence reported by Lev and Sougiannis(1996, 1999) and Chan, Lakonishok and Sougiannis (2001).Famaand French (1993, 1995, 1996) also show that a three-factormodel captures a high proportion of the time series variationin portfolio returns, again for the US. Our second contributionis to show, for the UK, that a modification to the three-factormodel to take account of RD activity can significantly enhancethe explanatory power of the three-factor model. We show that,as a practical matter, estimated risk premia based on the modifiedthree-factor model can differ considerably from risk premiaestimated using the CAPM or the three-factor model. In particular,risk premia for industries in which few firms undertake RD activitiestend to be over-estimated.     

Corporate Performance: Does Ownership Matter? A Comparison of Foreign- and Domestic-Owned Firms in Greece and Portugal

The paper investigates whether multinational corporations (MNCs) operating in Portugal and Greece perform differently than domestic firms. Departures from normality of firms’ profitability motivated the use of quantile regression. The results suggest that ownership ties do not make a significant difference with respect to performance of firms in Portugal. Results are similar for firms in Greece. Only when firms in the upper quantiles of gross profits are compared, MNCs are found to significantly perform better than domestic firms. MNCs have to compensate for their liability of foreigness that in spite of their technological advantages they cannot persistently outperform domestic rivals.JEL Classifications: F23, L10, L60, C21     

The process of applied technology forecasting : A study of executive analysis, anticipation, and planning

The objective of this research is a study of technology forecasting not only as a discipline but also as an executive responsibility by applying the information processing theory to this task. A protocol analysis from Ericsson and Simon, modified for this study, was used for the analysis of interview data of top executives from the magnetic resonance imaging industry and their superconducting magnet suppliers, when they had to face a specific technological event. The technological event is the breakthrough discovery of ceramic superconducting materials in 1986, and the fast technological progress that followed between 1987 and 1989. This paper illustrates the processes through which senior executives collect information, process it, and develop plans and predictions in the context of “hard” uncertainty. We use cognitive and strategic decision-making research to develop a normative typology of executive decision making in similar contexts.     

Building brand equity with cause-related marketing: A comparison with sponsorship and sales promotion

Building brand equity is a key objective for a range of communication activities; however, greater understanding is required on how different communication options compare in their impact on consumer response to a brand. In particular, firms are increasingly using cause-related marketing (CRM) to achieve business as well as social objectives, yet there has been limited research comparing the effectiveness of this strategy to other communication methods that may achieve similar brand-related outcomes. Using an experimental design, we examine consumer attitudes toward CRM and CRM's impact on brand attitude compared with two other communication options: sponsorship and sales promotion. Our results show that consumers respond more positively to CRM and that this strategy can be more effective in achieving brand-related objectives. However, consumers must perceive that the partnered cause fits with the brand. In fact, perception of fit plays a more critical role in determining the impact of CRM than in the impact of sponsorship or sales promotion. These findings suggest that when firms are considering their communication mix, CRM can be a more effective way of developing favorable brand associations, but managers must associate with causes that consumers will perceive to fit with the brand. Furthermore, this fit should be communicated.     

Foreign firm entry in an open economy: the case of Portugal

The purpose of this paper is to analyse the entry process of foreign direct investment (FDI) in Portuguese industrial sectors. Portugal presents an interesting case where firms enter to take advantage of export opportunities. The results suggest that foreign firms possess the ability to overcome existing entry barriers that affect domestic firms. Apparently, foreign firms have different expectations about profitability than domestic firms, possibly due to foreign firms’ export-orientation to the rest of the European Union (EU). They appear to desire industries where other foreign firms have clustered. Above all, it appears that these foreign firms enter industries to exploit Portugal's chief location advantage in Western Europe: low wages. Portugal's FDI experience is relevant to other countries that have opened their economies to greater trade and investment and attracted export-oriented firms.