Degree of Multinationality and Financial Performance: A Study of U.S.-Based Multinational Corporations

This paper examines the marginal benefits that accrue to U.S.-based multinational corporations through increased international investment. Specifically, the study seeks to determine if increased degrees of multinationality produce additional benefits for multinational firms in terms of excess returns and/or reduced risk. The results indicate that during the period studied, the degree of multinationality did not have a significant influence on the risk and return performance of the sample firms. Thus, the study supports the findings of Qian (1996) and Siegel et al. (1995, 1995A) who report that the advantages enjoyed by multinational corporations may be going away.     

PRICE‐ADMISSIBILITY CONDITIONS FOR ARBITRAGE‐FREE LINEAR PRICE FUNCTION MODELS FOR THE TERM STRUCTURE OF INTEREST RATES

To assure price admissibility—that all bond prices, yields, and forward rates remain positive—we show how to control the state variables within the class of arbitrage‐free linear price function models for the evolution of interest rate yield curves over time. Price admissibility is necessary to preclude cash‐and‐carry arbitrage, a market imperfection that can happen even with a risk‐neutral diffusion process and positive bond prices. We assure price admissibility by (i) defining the state variables to be scaled partial sums of weighted coefficients of the exponential terms in the bond pricing function, (ii) identifying a simplex within which these state variables remain price admissible, and (iii) choosing a general functional form for the diffusion that selectively diminishes near the simplex boundary. By assuring that prices, yields, and forward rates remain positive with tractable diffusions for the physical and risk‐neutral measures, an obstacle is removed from the wider acceptance of interest rate methods that are linear in prices.     

Exploiting the Chaos: Terrorist Target Choice Following Natural Disasters

This article explores the differences between transnational and domestic terrorism, further differentiating by private versus government targets, to estimate the effect of exogenous catastrophic shocks on a country's level of domestic and transnational terrorism. The empirical analysis uses detailed data on terrorism, natural disasters, and other relevant controls for 176 countries from 1970–2007 to illuminate several key disparities in a postdisaster target choice of terrorists. The results indicate that natural disasters incite both transnational and domestic terrorism; however, evidence is found for dissimilar motivations between the two. While both types of terrorism increase after disasters, transnational attacks against the government increase immediately following the disaster, suggesting an impetus to exploit weakened “hard” targets during the chaos. Conversely, domestic terrorism against the government takes longer to manifest, suggesting a period of time for which the public recovers and assesses the government's response.     

Toward a theory of customer engagement marketing

Customer engagement marketing—defined as a firm’s deliberate effort to motivate, empower, and measure customer contributions to marketing functions—marks a shift in marketing research and business practice. After defining and differentiating engagement marketing, the authors present a typology of its two primary forms and offer tenets that link specific strategic elements to customer outcomes and thereby firm performance, theorizing that the effectiveness of engagement marketing arises from the establishment of psychological ownership and self-transformation. The authors provide evidence in support of the derived tenets through case illustrations, as well as a quasi-experimental field test of the central tenet of engagement marketing.     

Money, Monetary Policy, and Central Banking

Anna Schwartz's insights and careful analysis of the forces shaping institutions have contributed greatly to our understanding of money, central banks, and monetary policy. We discuss these contributions in the context of three issues. The first concerns governments' role in money. First, we focus on Anna's contribution to our understanding of the quality of money. In this context, we consider how the acceleration of globalization and developments in information technology has, as an external development, forced improvements in institutions and social arrangements. The second issue concerns the potential for currency boards to serve as an intermediate institution in the evolution toward and, perhaps now, away from so many central banks and sovereign monetary authorities. Finally, we turn our attention to current issues in the implementation of monetary policy.     

The effects of the frequency of spatially proximate and distant interaction on innovation by Irish SMEs

This paper tests whether more frequent interaction at different spatial levels has a positive effect on the innovation performance of small- and medium-sized enterprises (SMEs) in the South-West and South-East of Ireland. Based on an original survey, it finds that more frequent interaction generally increases innovation likelihood, but at a diminishing rate, thus suggesting a trade-off between resources dedicated to transforming knowledge into new products and processes. Spatially distant interaction is found to be at least as valuable as proximate interaction, which questions the received wisdom that the best sources of knowledge are regional. Given the value of distant interaction, the results indicate that regional lock-in may be an obstacle to superior innovation performance of SMEs.     

Product Design: Preference for Rounded versus Angular Design Elements

Two experiments tested whether a general relative preference for objects with rounded rather than angular form (Bar & Neta, 2006, 2007) can be applied in the context of the design of consumer products. Images of product packaging—a chocolate product (Experiment 1) and water and bleach bottles (Experiment 2)—were manipulated with regard to the shape of both contour and graphics. There was a preference for rounded designs that extended to self‐report purchase likelihood—with additive effects of contour and graphics shape that could not be accounted for by design typicality or perceived ease of use.     

A Cautionary Note on Designing Discrete Choice Experiments: A Comment on Lusk and Norwood's "Effect of Experiment Design on Choice-Based Conjoint Valuation Estimates"

Recent Monte Carlo work on choosing experimental designs for discrete choice experiments seemed to greatly simplify this choice for applied researchers. It suggested that ( a ) commonly used designs can generate unbiased estimates for indirect utility function specifications with main effects only and main effects plus higher order terms, and ( b ) random designs are more efficient than main effects designs. We show that these results are very specific to the particular indirect utility specifications studied and do not generalize well. We further show that conclusions drawn concerning random designs are problematic and potentially dangerous for applied researchers.     

Recent Progress on Endogeneity in Choice Modeling

We describe recent progress in several areas related to endogeneity, including: choice set formation and attention to attributes; interactions among decision-makers; respondents' strategic behavior in answering stated preference choices; models of multiple discrete/continuous choice; distributions of willingness-to-pay; and methods for handling traditionally endogenous explanatory variables.     

Underpricing, Overhang, and the Cost of Going Public to Preexisting Shareholders

Abstract:  IPO underpricing has been extensively studied; however, its impact on the wealth of preexisting shareholders has not been closely examined. We address the question of whether or not periods of high underpricing adversely affect preexisting shareholders. We find that high levels of underpricing are associated with increased share retention, which effectively offsets much of the potential cost. Overall, we find that the percentage of shareholder wealth lost is surprisingly stable over time, unlike underpricing itself. We also find that many factors known to be related to underpricing are not significant determinants of the cost of going public to preexisting owners.