Quality Competition and Social Welfare in Markets with Partial Coverage: New Results*

We use a vertical product differentiation model under partial market coverage to study the social welfare optimum and duopoly equilibrium when convex costs of quality provision are either fixed or variable in terms of production. We show the following new results. First, under fixed costs, the social planner charges a uniform price for the single variant that just covers costs of quality provision. Like the duopoly equilibrium, this socially optimal pricing entails a partially uncovered market, but a smaller share of the market is served compared with the duopoly equilibrium. Second, for the variable cost case, it is socially optimal to provide both high‐ and low‐quality variants, but market shares need not be equal. This differs from the result in fully covered markets. Third, in the duopoly equilibrium, the quality spread is too wide under variable costs relative to the social optimum. Under fixed costs, the duopoly produces two variants, but quality is too low relative to the social optimum, which has only one variant.     

Business models for material efficiency services: Conceptualization and application

Despite the abundant research on material flows and the growing recognition of the need to dematerialize the economy, business enterprises are still not making the best possible use of the many opportunities for material efficiency improvements. This article proposes one possible solution: material efficiency services provided by outside suppliers. It also introduces a conceptual framework for the analysis of different business models for eco-efficient services and applies the framework to material efficiency services. Four business models are outlined and their feasibility is studied from an empirical vantage point. In contrast to much of the previous research, special emphasis is laid on the financial aspects. It appears that the most promising business models are ‘material efficiency as additional service’ and ‘material flow management service’. Depending on the business model, prominent material efficiency service providers differ from large companies that offer multiple products and/or services to smaller, specialized providers. Potential clients (users) typically lack the resources (expertise, management's time or initial funds) to conduct material efficiency improvements themselves. Customers are more likely to use material efficiency services that relate to support materials or side-streams rather than those that are at the core of production. Potential client organizations with a strategy of outsourcing support activities and with experience of outsourcing are more keen to use material efficiency services.     

Generalized Forecast Error Variance Decomposition for Linear and Nonlinear Multivariate Models

We propose a new generalized forecast error variance decomposition with the attractive property that the proportions of the impact accounted for by innovations in each variable sum to unity. Our decomposition is based on the generalized impulse response function, and it can easily be obtained by simulation. The new decomposition is illustrated in an empirical application to US output growth and interest rate spread data.     

BAYESIAN MODEL SELECTION AND FORECASTING IN NONCAUSAL AUTOREGRESSIVE MODELS

In this paper, we propose a Bayesian estimation and forecasting procedure for noncausal autoregressive (AR) models. Specifically, we derive the joint posterior density of the past and future errors and the parameters, yielding predictive densities as a by‐product. We show that the posterior model probabilities provide a convenient model selection criterion in discriminating between alternative causal and noncausal specifications. As an empirical application, we consider US inflation. The posterior probability of noncausality is found to be high—over 98%. Furthermore, the purely noncausal specifications yield more accurate inflation forecasts than alternative causal and noncausal AR models. Copyright © 2010 John Wiley & Sons, Ltd.     

The effect of governance modes and relatedness of external business development activities on innovative performance

This study examines how different governance modes for external business development activities and venture relatedness affect a firm's innovative performance. Building on research suggesting that interorganizational relationships enhance the innovative performance of firms, we propose that governance modes and venture relatedness interact in their effect on innovative performance. Analyzing a panel of the largest firms in four information and communication technology sectors, we find that degree of relatedness for corporate venture capital investments, alliances, joint ventures, and acquisitions influences their impact on innovative performance. Copyright © 2008 John Wiley & Sons, Ltd.     

OECD organisational discourse, peer reviews and sustainable development: An ecological-institutionalist perspective

As part of the recent ‘ideational turn’ in research on international organisations, the study of organisational discourse has gained popularity. Yet ecological economics has thus far paid little attention to the role of organisations as sites for the discursive battles over the meaning of sustainable development. For an international organisation without regulatory powers, such as the OECD (Organisation for Economic Co-operation and Development), discourse is the main vehicle for policy influence, but it also plays a key role in (re)defining the organisation's identity and authority. The OECD's organisational discourse has been strongly dominated by ‘modern mainstream economics’, and has given little room for marginalised discourses. This paper compares, from the perspective of institutionally oriented ecological economics (IOEE), and borrowing from critical discourse analysis, the experience from attempts to integrate the concept of sustainable development within two OECD peer review mechanisms - the Economic Surveys and the Environmental Performance Reviews. The extent to which the respective conceptions of sustainable development in the two reviews are in line with the principles of IOEE and the reasons for the apparent failure of sustainable development discourse to gain foothold within the organisation are analysed.     

Acquiring financial resources from foreign equity capital markets: An examination of factors influencing foreign initial public offerings

An increasing number of firms are making initial public offerings in foreign markets to circumvent constraints in the availability of capital and to provide an exit for their investors. However, previous research on foreign initial public offerings and their determinants is very limited. In this paper, we contribute to this literature by demonstrating that international experience of the management team and pre-IPO ownership by foreign investors are positively related to foreign initial public offerings. We test our hypotheses using data on initial public offerings of European companies from 1991–2001. The results support our hypotheses. The findings have important implications for entrepreneurs, investors, and public policy.     

Personal Guarantees,Loan Pricing,and Lending Structure in Finnish Small Business Loans

This study analyzes the role of personal guarantees and collateral in the context of two different lending structures: one transaction and the other relationship based. The Finnish bank data, which were uniquely accessible for the study, enabled an exploration of credit files with specific details of the characteristics of the lending relationship during the period 1995–2001. According to the empirical results, the use of personal guarantees is an indication of transaction‐based lending. Personal guarantees seem to increase the loan premium in transaction‐based loans more than in relationship‐based loans. Close ties between a bank and a firm seem to be a desirable basis for small and medium‐sized enterprise bank lending.     

What Drives Micro-Angel Investments?

Despite of the significant role of informal venture capital in the financing of new entrepreneurial ventures, there is little research explaining the factors determining the propensity of individuals to make microangel investments. Building on two theoretical frameworks, a social psychological theory of planned behavior and an economic theory on the determinants of demand for risky assets in household portfolios, we develop a set of hypotheses predicting the propensity of individuals to make informal investments in new businesses owned by others. In our analysis we test whether the determinants of micro-angel investments are similar when investing in a business owned by a close family member versus more distant business. The hypotheses are tested using data from 6007 interviews of Finnish adults carried out in the Global Entrepreneurship Monitor program in 2000–2002. The findings show that the theoretical frameworks have more power in explaining investments in firms not owned by close family members. The study provides new understanding of the differences in the drivers of different types of micro-angel investments.     

Driven by aspirations,but in what direction? Performance shortfalls,slack resources,and resource‐consuming vs. resource‐freeing organizational change

Research summary : Prior literature drawing on the behavioral theory of the firm has not considered how resource constraints impact the direction of organizational change in response to performance shortfalls relative to aspirations. We argue that decreasing financial resources resulting from substantial performance shortfalls and the absence or availability of slack resources together affect the emphasis on different types of organizational change in response to performance shortfalls. Using data on the acquisition and divestment behavior of 530 companies in the information and communications technology sector from 1992 to 2014, we find that the frequency of resource‐consuming acquisitions and of resource‐freeing divestments are affected differently by performance below aspirations and that these relationships are moderated by the level of financial slack. Managerial summary : This paper examines whether firms respond to performance shortfalls with acquisitions or divestments. We argue and show that the closer the firm is to the aspired level of performance, the more likely it is to respond with resource‐consuming acquisitions to close the performance gap, whereas the further it is from aspired performance, the more likely the firm is to respond with divestments to free resources. Financial slack weakens these relationships between performance relative to aspirations and acquisitions or divestments such that it increases the likelihood of a response through acquisitions while it reduces the likelihood of a response through divestments. Copyright © 2016 John Wiley & Sons, Ltd.