Business and University Technical Research Cooperation: Some Important Issues

As their product life cycles continue to shorten even further, high-tech firms can be expected to seek more external product research and development assistance. At the same time, as university budgets tighten, aggressive universities will seek more industry funds. These trends lead Don Snyder and David Blevins to predict more business–university cooperation. A nationwide U.S. survey indicates that universities that successfully attract industry funds promote both their willingness and capability to develop new commercial products. They do not insist on a minimum project size and are willing to delay publication of research results. There are, however, some ethical issues that need resolution. Commercial laboratories operated on a for-profit basis have questioned such ventures, citing unfair competition and an inappropriate interpretation of the role of universities.     

The new US farm policies

This article is an early assessment of the agricultural policies of the Carter administration, particularly as they relate to Western Europe. The author examines emerging US farm policy with regard to: price and production, grain reserves, attitude toward the Common Agricultural Policy of the EEC, trade in agricultural products, and commodity agreements.     

Turning New Product Development into a Continuous Learning Process

Product developers understand the difficulties of trying to hit a moving target from atop a runaway train. Competitors come and go, technological change occurs at an ever-increasing rate, customer wants and needs are constantly shifting, and a product's life cycle may be shorter than its development time. We can't meet these challenges with a methodical, step-by-step approach to product development. In such a fast-paced environment, product development must be transformed into a continuous, iterative, learning process focused on customer value. G. David Hughes and Don C. Chafin describe one means for making this transformation: the value proposition process (VPP). The objectives of this development approach are continuous learning, identifying the certainty of knowledge used for decision-making, building consensus, and focusing on adding value. The VPP consists of a framework of continuous planning cycles, called the value proposition cycle (VPC), and an integrated screening methodology, called the value proposition readiness assessment (VPRA). The VPC comprises four iterative loops, addressing the following activities: Capturing the market value of the proposition (Does the customer care?); Developing the business value (Do we care?); Delivering a winning solution (Can we beat the competition?); and, Applying project and process planning (Can we do it?). Somewhat akin to stage-gate methods (but with the added dimension of continuous cycling), the VPRA involves screens along each loop in the VPC. This screening methodology summarizes the company's critical success factors, allowing the project team to assess the success potential of a new product idea. Each screen involves a structured set of questions. For each question, respondents provide three measures: their evaluation of that success factor's favorability to the company's position, the certainty of their evaluation, and their estimate of the relative importance of that success factor. Rather than building a model that computes a weighted-sum score for predicting the success of a new idea, the VPRA serves as a consensus facilitator, allowing team members to see how closely they agree. The certainty measures help the team identify knowledge gaps, and the importance measures help the team set priorities for successive iterations of the VPRA.     

Share Option Rewards and Managerial Performance: an Abnormal Performance Index Model

Managerial share option schemes are widely used as a means of motivating and rewarding corporate performance. Such schemes normally adopt a static exercise price; when additional exercise criteria are employed they are often based on earnings per share. A static exercise price does not adjust for economic changes outside the control of management, and earnings per share hurdles have similar limitations. This paper presents a ‘phantom’ managerial option based on relative performance, together with a pricing model for the valuation of the option. The option is developed and demonstrated using an abnormal performance index. It offers a structure which could be used for different forms of performance measurement, and resolves some important criticisms of the reward and incentive effects of traditional schemes.     

Underlying Dimensions and Communications Strategies of the Advertising Agency-Client Relationship

The alcohol industry is increasingly dependent upon slick advertising and innovative promotional methods both to maintain existing profit levels and to penetrate new markets. In spite of the ‘tightening’ of codes of practice, vulnerable groups are still targeted with impunity and the influence which the portrayal of such images has upon children, for example, is excused as inadvertent or accidental. The social cost of excessive and inappropriate drinking can be seen in both general and personal terms. It is because of the latter that public opinion is beginning to move against present levels of promotion and calls for a ban on certain forms of advertising are likely to receive support. More stringent controls are almost inevitable in spite of the challenge which will be presented by satellite broadcasting and other forms of electronic media. The drinks and advertising industries should begin now to explore the potential of constructive compromise.     

Customer account relationships and e-retail banking usage<Superscript>1</Superscript>

Financial institutions are actively developing new electronic banking products for their retail customers. To date, the market leaders have drawn a disproportionably higher share of e-retail banking customers. In response, smaller institutions have become quite active in exploring ways to participate profitably in online banking. A major influence is from a customer relationship management (CRM) perspective, where institutions try to limit the outflow of current customers and direct high-value customers to potential products from a multi-product service offering array. These efforts can succeed only if retail bank marketers focus the promotion of the new products and services that can utilise this channel toward those customers who are most likely to find them attractive. The first aim of this study was to examine the role that online and electronic banking play in defining the customer's primary financial relationship. The analysis of 701 retail customers of a financial institution presented in this study suggests that banks and other institutions are highly vulnerable to loss of customers to rivals with extensive online services. A second aim was to examine to what extent information on banking relationships is able to extend CRM analysis beyond that offered by typical demographic and income data. Current customer account relationships are found to be highly predictive of use of electronic services use in general. And, interest in the use of specific online services is related to differing customer relationships in addition to ordinary demographic and balance information. These findings can be useful for retail banking in identifying potential high-value users from a customer relationship management perspective.     

Why good accountants do bad audits

On July 30, President Bush signed into law the Sarbanes-Oxley Act addressing corporate accountability. A response to recent financial scandals, the law tightened federal controls over the accounting industry and imposed tough new criminal penalties for fraud. The president proclaimed, "The era of low standards and false profits is over." If only it were that easy. The authors don't think corruption is the main cause of bad audits. Rather, they claim, the problem is unconscious bias. Without knowing it, we all tend to discount facts that contradict the conclusions we want to reach, and we uncritically embrace evidence that supports our positions. Accountants might seem immune to such distortions because they work with seemingly hard numbers and clear-cut standards. But the corporate-auditing arena is particularly fertile ground for self-serving biases. Because of the often subjective nature of accounting and the close relationships between accounting firms and their corporate clients, even the most honest and meticulous of auditors can unintentionally massage the numbers in ways that mask a company's true financial status, thereby misleading investors, regulators, and even management. Solving this problem will require far more aggressive action than the U.S. government has taken thus far. What's needed are practices and regulations that recognize the existence of bias and moderate its effects. True auditor independence will entail fundamental changes to the way the accounting industry operates, including full divestiture of consulting and tax services, rotation of auditing firms, and fixed-term contracts that prohibit client companies from firing their auditors. Less tangibly, auditors must come to appreciate the profound impact of self-serving biases on their judgment.     

The effect of changes in Japanese consolidation policy on analyst forecast error

Our broad research objective is to investigate whether convergence towards international standards improves the decision usefulness of information. Recent changes in Japanese consolidated reporting practices to better align with international standards provide an excellent setting to investigate this research objective. Specifically, we examine the effect of changes in Japanese consolidation policy on financial analysts’ perceptions of the persistence of subsidiary earnings. Previous research provides evidence that, prior to the change in consolidation policy, consolidated financial information was not used efficiently in the Japanese capital market. Prior research finds a positive relation between subsidiary earnings and future stock returns in Japan, indicating that investors underestimate the persistence of subsidiary earnings. Consistent with prior research using stock returns, we find that financial analysts also underestimate the persistence of subsidiary earnings in Japan. We document a significant positive relation between subsidiary earnings and future forecast errors of consolidated earnings. However, following the changes in consolidation policy in Japan, we find that financial analysts no longer underestimate the persistence of subsidiary earnings. Changes in Japanese consolidation policy in conformance with international standards increase decision usefulness by improving the ability of financial analysts to predict overall firm performance. One limitation of our research design relates to the adoption of mandated accounting policy changes by all sample firms in the same calendar time. This makes it difficult to control for the impact of correlated omitted variables. While this concern can never be completely eliminated, we provide additional tests that examine sample partitions by firm size and industry. These additional tests support the primary findings that Japan’s efforts to converge consolidation rules with international standards have improved analysts’ consolidated earnings forecasts.     

The valuation and behavior of black-scholes options subject to intertemporal default risk

This paper addresses the valuation and behavior of European options subject to intertemporal writer default risk. The framework allows the timing of default and recovery value to be uncertain. Default is said to occur if the writer's creditworthiness violates a specified critical level-both stochastic. Various recovery scenarios are considered including linking recovery to the moneyness of the option at the time of default. In an application of the model, it is estimated that current customer margin requirements for exchange-traded options are set far in excess of the fair market value.     

Are There Hot Hands Among Mutual Fund Houses in Hong Kong?

This paper examines the short-term performance persistence of thirty-two fund houses in Hong Kong during January 1986 to December 1995. We compute fund house returns using averages of all equity funds in each house. Then we evaluate their hot hand performance using the median return as benchmark on a rolling monthly basis. The results show that there were only two 'hot hand' fund houses. Findings using annual returns confirm the non-existence of a hot hand phenomenon. However, we find a strong correlation between conditional and unconditional probabilities of winning repeatedly in consecutive months