Co‐creation in Radical Service Innovation: A Systematic Analysis of Microlevel Processes

This empirical paper presents the results of a detailed case‐study investigation of co‐creation in radical service innovation. The rationale for the paper is that detailed interventions must be tracked to offer a realistic account of how co‐creation occurs. This provides a strong empirical contribution to the emerging body of scholars developing the co‐creation paradigm, predominantly characterized by conceptual advances in service‐dominant logic. Our focus is on radical service innovation, which is disruptive in the sector. The overall aim of the paper is to unravel the nature of microlevel processes of co‐creation in radical service innovation. The study adopts sequential analysis to examine co‐creation. Patterns of sequences of actions and interactions associated with 40 incremental developments, involving multiple actors, are investigated. These co‐created innovative developments underpin the emergence of a radical telematics‐based motor insurance service. The findings suggest that the co‐creation path is not simple or uni‐faceted, and the paper unravels the nature of complex patterns of activities and interactions, Our in‐depth systematic analysis illuminates a combination approach with two main patterns of sequences: one dominated by ad‐hoc and enduring independent innovation activities by network actors and one dominated by lead‐firm innovation and interaction activity. The findings advance knowledge of the way co‐creation occurs in radical service innovation. The study results suggest that managerial attention be placed to, first, finding ways to induce independent innovative behavior from network partners and, second, to the development of interaction mechanisms to foster sharing and visualization of such innovation advances.     

On the robustness of risk-based asset allocations

Since the subprime crisis, portfolios based on risk diversification are of great interest to both academic researchers and market practitioners. They have also been employed by several asset management firms and their performance appears promising. Since they do not rely on estimates of expected returns, they are assumed to be robust. The same argument holds for minimum variance and equally weighted portfolios. In this paper, we consider a Monte Carlo simulation, as well as an empirical global portfolio dataset, to study the effect of estimation errors on the outcomes of two recently proposed asset allocations, the equally weighted risk contribution (ERC) and the principal component analysis (PCA) portfolio. The ERC portfolio is more robust to changes in the input parameters and has a smaller estimation error than the Markowitz approaches, whereas the PCA portfolio is even more unstable than the classical approaches. In the worst-case scenario, neither approach delivers what it promises. However, in every case the resulting return?Crisk relationship is dominated by the Markowitz approaches.     

Aid and the Soft Budget Constraint

The author applies the theory of the soft budget constraint to explain some stylized facts regarding the outcomes and practice of international aid, including ineffectiveness, white elephants, and volatility. The soft budget constraint can also make aid counterproductive. Nonetheless, actual aid institutions may be constrained optimal responses to soft budgets and commonly suggested reforms such as improved donor coordination in aid, focus on fewer countries and projects, and less volatility of aid may lower the effectiveness of aid. The soft budget is also consistent with conservative project selection and the recent focus on "ownership."     

PRICING CORPORATE SECURITIES UNDER NOISY ASSET INFORMATION

This paper considers the pricing of corporate securities of a given firm, in particular equity, when investors do not have full information on the firm's asset value. We show that under noisy asset information, the pricing of corporate securities leads to a nonlinear filtering problem. This problem is solved by a Markov chain approximation, leading to an efficient finite-dimensional approximative filter for the asset value. We discuss several applications and illustrate our results with a simulation study.     

Incentives and innovation? R&D management in Germany’s chemical and electrical engineering industries around 1900

The allocation of intellectual property rights between firms and employed researchers causes a principal-agent problem between the two parties. We investigate the working contracts of researchers employed by German chemical and electrical engineering firms at the turn of the 20th century and show that the firms were aware of the principal-agent problem and offered performance-related compensation schemes to their scientists. We show that past bonuses are positively correlated with current patenting, whereas past total income is negatively associated with current patenting. Thus, we discover a trade-off between level and structure of compensation on the one hand and patenting activity on the other.     

The Institutional Context of an ‘Empirical Law’: The Wage Curve under Different Regimes of Collective Bargaining

The wage curve postulates that the wage level is a decreasing function of the regional unemployment rate. In testing this hypothesis, most studies have not taken into account that differences in the institutional framework may have an impact on the existence (or the slope) of a wage curve. Using a large‐scale linked employer–employee dataset for Western Germany, this article provides a first direct test of the relevance of different bargaining regimes (and of works councils) for the existence of a wage curve. In pooled regressions for the period 1998 to 2006, as well as in worker‐level or plant‐level fixed‐effects estimations, we obtain evidence for a wage curve for plants with a collective bargaining agreement at firm level. The point estimates for this group of plants are close to the ?0.1 elasticity of wages with respect to unemployment postulated by Blanchflower and Oswald. In this regime, we also find that works councils dampen the adjustment of wages to the regional unemployment situation. In the other regimes of plants that either do not make use of collective contracts or apply sectoral agreements, we do not find a wage curve.