Firm Foundations and the Role of Financing Constraints

Improving the economic conditions for small and medium sized firms as well as start-ups is high on the agenda of policy makers. In this paper we discuss some policy options for fostering the creation of new enterprises. The discussion focuses on measures which aim at helping start-ups to overcome liquidity constraints. In order to provide the background for this discussion the paper provides some new empirical results on the determinants of firm foundations as well as some stylised facts on the occurence of liquidity constraints in West-Germany. We analyse the regional distribution of start-up intensity and offer several hypotheses to explain this distribution. To a large extent, the regional distribution of start-ups can be explained by the existing industry structure, regional human capital as well as the regional public traffic infrastructure. Moreover, we show that liquidity constraints occur more often in small and young firms.     

Affective commitment and customer loyalty in crowdsourcing: antecedents,interdependencies, and practical implications

Crowdsourcing, the outsourcing of previously internal processes within the corporate value chain to an external crowd of people, has become increasingly popular in retail. In applying this practice, retailers aim not only at improving the effectiveness and efficiency of their value creation process, but also at increasing the affective commitment and loyalty of their customers. Surprisingly, the effects of crowdsourcing on affective commitment and customer loyalty, and the factors influencing these objectives have hardly been researched. This paper closes this research gap. Through expert interviews and experimental studies, it comes to the conclusion that especially satisfaction with the crowdsourcing process and sense of virtual community are relevant factors impacting affective commitment and customer loyalty. The paper concludes with recommendations for optimizing these factors in retail practice.     

Modelling gold futures: should the level of speculation inform our choice of variables?

Prior literature provides conflicting evidence about the impact of speculation on gold futures returns, volatility, and the relationship between market fundamentals and prices. In this paper, we exploit trade volume information to determine the most appropriate family of factors to adopt when modelling gold futures. Using the Disaggregated Commitment of Traders report, we find that extreme levels of speculation are informative in that they signify a shift in the relative modelling accuracy of macroeconomic and latent factors. A simple composite prediction framework, incorporating the changing level of speculation, empirically demonstrates the uncovered phenomenon and offers improved predictive accuracy for gold futures prices. Furthermore, our findings are shown to be robust to alternative latent and macroeconomic model specifications.     

Contracting on litigation

Two risk‐averse litigants with different subjective beliefs negotiate in the shadow of a pending trial. Through contingent contracts, the litigants can mitigate risk and/or speculate on the trial outcome. Contingent contracting decreases the settlement rate and increases the volume and costs of litigation. These contingent contracts mimic the services provided by third‐party investors, including litigation funders and insurance companies. The litigants (weakly) prefer to contract with risk‐neutral third parties when the capital market is transaction‐cost free. However, contracting with third parties further decreases the settlement rate, increases the costs of litigation, and may increase the aggregate cost of risk bearing.     

Work values of the next generation of business leaders in Shanghai, Tokyo, and Seoul

Understanding the work values of the current and future workforce is essential for designing a human resource management system that attracts, motivates, and retains talent. This study provides an updated, in-depth analysis of the work values of the next generation of business leaders in the commercial centers of China, Japan, and Korea. Although previous research has often clustered these countries together and labeled them Confucian Asia, survey results from more than 700 respondents reveal striking differences in work values across countries. The Chinese are more individualistic and career oriented, whereas the Japanese are more risk averse and work oriented, and the Koreans are often somewhere in-between. We argue that the value differences can be largely explained by different economic influences in these three countries. This study enhances our understanding of crossvergence theory by distinguishing economic influence in the economic development stage, economic growth, and inward foreign direct investments. While these economic indicators might be related, their influences on work values could be conflicting. The findings suggest that that each economic indicator has a unique effect on the development of work values.     

Eine Bewertung verschiedener Kapazitätsmechanismen für den deutschen Strommarkt

This article examines the economic impacts of an implementation of different capacity mechanisms in the German market for electricity. We discuss selective mechanisms that address only newly installed capacity, as well as global mechanisms. Whenever appropriate, we give examples from international experience. We show that global mechanisms—contrary to selective mechanisms—can incentivize efficient investment decisions. However, due to the regulatory intensity of such mechanisms we advise not to take such measures unless a clear need is indicated.     

The term structure of systematic and idiosyncratic risk

We study the term structure of variance (total risk), systematic, and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little indication of a time-varying term premium. Turning the focus to individual stocks, we cannot reject the expectations hypothesis for systematic variance, but we strongly reject it for idiosyncratic variance. Our results are robust to jumps and potential statistical biases.