Auditor monitoring and verification in financial contracts: evidence from earnouts and SFAS 141(R)

We study how monitoring and verification of accounting-based performance benchmarks influences the design and efficiency of earnout contracts. Earnouts are commonly used to resolve agency conflicts arising in mergers and acquisitions, but these contracts create measurement and other agency problems when contingent payments are tied to future accounting-based performance. Exploiting changes in auditor monitoring of earnouts that arose as\ a consequence of SFAS 141(R), we find that acquisition contracts are more likely to incorporate accounting-based earnouts and that contingent payments tied to accounting-based performance benchmarks make up a larger portion of the consideration when acquiring firms have high-quality auditors. We also find that market reactions to announcements of earnout deals are more positive after SFAS 141(R) for acquisitions most susceptible to disputes over accounting-based performance metrics and these results are more pronounced for acquiring firms with high-quality auditors. By exploiting the features of this unique setting, we illuminate the role of monitoring and verification of accounting information in financial contracts.     

Evaluating the risk of patent infringement by means of semantic patent analysis: the case of DNA chips

In this paper, we are going to present a method for detecting the risks of patent infringement by evaluating similarities between patent documents on the basis of semantic patent analysis. This approach enables the user to visualize similarities in the contents on a semantic patent map by means of multi‐dimensional scaling. The effectiveness of the semantic patent map has already been demonstrated by Dressler (2006) with regard to patents of seal technology, in which documents are commonly kept short and the extracted contents are concise. This paper will open out to the field of biotechnology, where patents can easily comprise several hundreds of pages. The method presented here conveys an interdisciplinary approach and combines computer‐aided natural language processing with domain‐specific expertise of biochemical processes. This is illustrated by an authentic case of infringement involving two manufacturers of DNA chips. Our experiment will show how the infringement case is visualized on a patent map based on semantic patent analysis. This experiment can be compared with the search for a needle in a haystack, the two competitive patents representing significantly conflicting ‘needles.’ From an approximate number of 4,000 patents in the current US Class 435/6, a set of patents was selected that included the ‘needles’ mentioned. This paper will point out how such mutual interference can be detected by way of semantic patent analysis, and what advice may be given to R&D managers who are faced with the risk of patent infringement.     

Reviewing the Field of External Knowledge Search for Innovation: Theoretical Underpinnings and Future (Re-)search Directions

The field of external knowledge search for innovation has a long tradition and has inspired several schools of thought resulting in a rich and burgeoning body of research. However, the field suffers from two key limitations. First, the pluralism of research across multiple disciplines impedes our attention to the field as a whole, including its intellectual structure and core ideas. Second, recent developments in the business environment and key new ideas in the field complement taken-for-granted approaches and provide new opportunities for knowledge search. Based on a systematic co-citation analysis, we provide a reflective review of the literature and make several contributions. We integrate existing research across disciplines and offer a synthesis of a fragmented research landscape to present a global view of the field. Moreover, we propose a novel external search concept and introduce the idea of “decoupled search.” Leveraging our synthesis and conceptualization further, we recommend future research directions for the entire field of external knowledge search for innovation.     

Maximizing your return on people

Though most traditional HR performance metrics don't predict organizational performance, alternatives simply have not existed--until now. During the past ten years, researchers Laurie Bassi and Daniel McMurrer have worked to develop a system that allows executives to assess human capital management (HCM) and to use those metrics both to predict organizational performance and to guide organizations' investments in people. The new framework is based on a core set of HCM drivers that fall into five major categories: leadership practices, employee engagement, knowledge accessibility, workforce optimization, and organizational learning capacity. By employing rigorously designed surveys to score a company on the range of HCM practices across the five categories, it's possible to benchmark organizational HCM capabilities, identify HCM strengths and weaknesses, and link improvements or back-sliding in specific HCM practices with improvements or shortcomings in organizational performance. The process requires determining a "maturity" score for each practice, based on a scale of 1 (low) to 5 (high). Over time, evolving maturity scores from multiple surveys can reveal progress in each of the HCM practices and help a company decide where to focus improvement efforts that will have a direct impact on performance. The authors draw from their work with American Standard, South Carolina's Beaufort County School District, and a bevy of financial firms to show how improving HCM scores led to increased sales, safety, academic test scores, and stock returns. Bassi and McMurrer urge HR departments to move beyond the usual metrics and begin using HCM measurement tools to gauge how well people are managed and developed throughout the organization. In this new role, according to the authors, HR can take on strategic responsibility and ensure that superior human capital management becomes central to the organization's culture.     

Youssef Cassis and Ioanna Pepelasis Minoglou, eds. Entrepreneurship in Theory and History

In a paper delivered during the founding of Harvard's ResearchCenter in Entrepreneurial History, Joseph Schumpeter commented,"Personally, I believe that there is an incessant give and takebetween historical and theoretical analysis and that, thoughfor the investigation of individual questions it may be necessaryto sail for a time on one tack only, yet on principle the twoshould never lose sight of each other" [Joseph Schumpeter, "EconomicTheory and Entrepreneurial History," in Change and the Entrepreneur(Cambridge: Harvard University Press, 1949), p. 264]. With thenotable exception of the theoretically inspired work producedat the Research Center in the early 1950s, historians largely     

The trend in female labour force participation: what can be expected for the future?

This study investigates the increase in the labour force participation rate of women. We estimate a binary age–period–cohort model for a sample of Dutch women born between 1925 and 1986. The results indicate that the increasing level of education and the diminishing negative effect of children have played an important role. Moreover, we find important unobserved cohort effects for pre-1955 generations, which is in line with results of studies on social norms. It is shown that the growth in female participation is likely to slow down in the near future, as such cohort effects are not relevant for younger generations.     

Can experimental measures of sensitivity to social pressure predict public good contribution?

Public good contributions may be affected by the social demand to contribute that is implicit in them. Sensitivity to social pressure predicts behavior in paired dictator and money burning games; the evidence for effects on public good contribution is mixed.     

Comparative effectiveness of standard endotracheal tubes vs. endotracheal tubes with continuous subglottic suctioning on ventilator-associated pneumonia rates

Ventilator-associated pneumonia (VAP) accounts for the majority of nosocomial pneumonias, which may increase intensive care and prolonged hospital stays. Endotracheal tubes allowing continuous subglottic suctioning may reduce VAP; however, they are more expensive than standard endotracheal tubes not allowing continuous suctioning. he objective of this study was to measure the comparative costs associated with continuous subglottic suctioning endotracheal tubes (CSS-ETT) versus standard endotracheal tubes (S-ETT) among intubated patients and whether cost differential is offset by the occurrence of VAP in patients receiving either type of intubation. A retrospective chart review was conducted for 154 intubated adult patients (77 = S-ETT; 77 = CSS-ETT). The S-ETT group had one case of VAP; the CSS-ETT group had none. The mean total hospital charges were higher for the S-ETT group ($103,600; CSS-ETT= $88,500) (p = 0.3). Although the average number of intubation days and ICU days were greater for the CSS-ETT group, there were no cases of VAP compared to the S-ETT group. ased upon the one S-ETT VAP case and the VAP attributable costs, it is cost effective to use the CSS-ETT.