Security Deposits, Adverse Selection and Office Leases

Our focus in this article is on the extent to which security deposits allow landlords to contract on the intensity with which tenants utilize office space. Much existing discussion recognizes that landlords expect some tenants to be more opportunistic than others, but that landlords often cannot predict a tenant's future behavior. As a consequence, landlords will charge all tenants, both low-utilization and high-utilization ones, a rental externality premium. This rental externality premium gives low-utilization tenants (or tenants with better credit quality than the market perceives) a strong incentive to sort themselves out. Our findings suggest that office rental contracts with large up-front security deposits are one way in which different tenant types can sort themselves out. Such contracts reduce landlord uncertainty and imply rental discounts in excess of the foregone interest on the deposit monies.     

Independent boards and innovation

Much research has suggested that independent boards of directors are more effective in reducing agency costs and improving firm governance. How they influence innovation is less clear. Relying on regulatory changes, we show that firms that transition to independent boards focus on more crowded and familiar areas of technology. They patent and claim more and receive more total future citations to their patents. However, the citation increase comes mainly from incremental patents in the middle of the citation distribution; the numbers of uncited and highly cited patents—arguably associated with riskier innovation strategies—do not change significantly.     

Improving the Cost-Effectiveness of Ecosystem Management: An Application to Waterfowl Production

Species conservation is an important global policy issue. The design of cost-effective species conservation programs requires resource managers to choose from a suite of conservation activities and sites. This article determines cost-effective conservation strategies for waterfowl using a bioeconomic modeling framework, which is developed using a biological simulation model for waterfowl and regression analysis. The model accounts for ( a ) a broad range of land-use and direct wildlife conservation activities, ( b ) the effect of landscape heterogeneity, and ( c ) interactions between conservation activities. Results indicate that accounting for the three factors listed above can improve the cost-effectiveness of waterfowl conservation on agricultural land.     

Trade Intermediation and the Organization of Exporters

Empirical papers show that successful exporting firms either use unaffiliated foreign trade intermediaries or own foreign wholesale subsidiaries. However, conventional trade theory models assume that producers can directly access foreign consumers. We introduce intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties' perceived quality and tradability. Trade intermediation is prone to frictions owing to the absence of enforceable cross‐country contracts while own wholesale subsidiaries require additional capital investment. The sorting pattern of firms depends on their degree of competitive advantage; the equilibrium prevalence of intermediation in the industry depends negatively on the heterogeneity among producers, and the market‐specificity of goods, and positively on expropriation risk. Using sectoral US export data by destination country, we confirm the empirical validity of these predictions.     

Introduction: Biotechnology in Comparative Perspective – Regional Concentration and Industry Dynamics

Small Business Economics -     

Constructing useful theory: The case of Six Sigma

Organizational practices related to Six Sigma are believed to have resulted in improved organizational outcomes. The academic community, however, continues to lack understanding of the constructs and causal relationships underlying Six Sigma. Hence, discussion of Six Sigma is buffeted by anecdotal experience reported from practice. We evaluate Six Sigma through the lens of literature on theory development to explain why the Six Sigma constructs, assumptions, and causal relationships are inconsistent with theory development principles. Dr. Anilkumar N. Kharkar has retired from Corning Incorporated.     

数字世界：亚洲公司拒绝边缘化

在这个被称为“扁平”的世界中，西方公司仍处在主导地位。成功的亚洲公司不禁要思考，自己走向全球的可能性有多大？我刚从日本札幌市举行的移动互联网会议回来，日本企业家已经意识到这一挑战，随后我要在美国华盛顿特区做题为“亚洲在移动社交网络上教会我们什么？”的演讲，现在我们来探讨一下亚洲在数字世界中全球化的可能性吧。     

A Comparison of Nonparametric Methods to Measure Efficiency in the Savings and Loan Industry

Using data on 1,360 savings and loan (S&L) institutions, we compare two non-parametric methods for measuring efficiency: data envelopment analysis (DEA) and algebraic methods based on Varian (1984). We show that both methods are vulnerable to measurement error, although both theoretically and empirically we find the Varian-style measures to be less vulnerable. Because we have data on the future insolvency of our S&Ls, we can directly compare the two methods by seeing which does a better job of predicting insolvency (working under the hypothesis that efficiency and insolvency should be negatively correlated). We find that various measures perform very similarly, except for the technical efficiency measure in DEA. Importantly, this last measure frequently yields the implausible result that efficiency and insolvency are positively correlated, possibly because it does not account for factor prices.     

Competitive pressure,innovation and trade protection: Evidence from US patent data

Recent theoretical models have suggested that the relationship between competition and innovation may best be characterised as an inverted‐U shape: firms in industries with low levels of competition are more likely to innovate in the wake of increased competition as they attempt to escape competition, while those in highly competitive industries will decrease innovation in the wake of increased competition as the profit incentive to innovate dissipates. Results from other studies have found positive as well as negative relationships between innovation and competition. In a parallel literature, trade economists have produced conflicting results regarding the impact of trade liberalisation on innovation. One stream of research has shown that increased access to imported intermediate goods increases productivity, suggesting a positive relationship between imports and innovation. Others have hypothesised that firms may use the technology embodied in intermediate inputs as a substitute for domestic innovation. In this paper, we merge these divergent literatures and investigate whether innovation, as measured by the production of patents by US manufacturers, has been impacted by market competition and tariff reductions. Our empirical findings indicate that insulation from imports in the form of higher tariffs on final goods was associated with innovation until the late 1980s, while falling tariffs on intermediate goods appear to have facilitated innovation during the 1990s. We also find evidence of the inverted U‐shaped relationship between market competition and innovation.     

Approximations in power transmission planning: implications for the cost and performance of renewable portfolio standards

Renewable portfolio standards (RPSs) are popular market-based mechanisms for promoting development of renewable power generation. However, they are usually implemented without considering the capabilities and cost of transmission infrastructure. We use single- and multi-stage planning approaches to find cost-effective transmission and generation investments to meet single and multi-year RPS goals, respectively. Using a six-node network and assuming a linearized DC power flow, we examine how the lumpy nature of network reinforcements and Kirchhoff’s Voltage Law can affect the performance of RPSs. First, we show how simplified planning approaches that ignore transmission constraints, transmission lumpiness, or Kirchhoff’s voltage law yield distorted estimates of the type and location of infrastructure, as well as inaccurate compliance costs to meet the renewable goals. Second, we illustrate how lumpy transmission investments and Kirchhoff’s voltage law result in compliance costs that are nonconvex with respect to the RPS targets, in the sense that the marginal costs of meeting the RPS may decrease rather than increase as the target is raised. Thus, the value of renewable energy certificates (RECs) also depends on the network topology, as does the amount of noncompliance with the RPS, if noncompliance is penalized but not prohibited. Finally, we use a multi-stage planning model to determine the optimal generation and transmission infrastructure for RPS designs that set multiyear goals. We find that the optimal infrastructure to meet RPS policies that are enforced year-by-year differ from the optimal infrastructure if banking and borrowing is allowed in the REC market.