The outsourcing of R&D through acquisitions in the pharmaceutical industry

We examine the performance of 160 pharmaceutical acquisitions from 1994 to 2001 and find evidence that on average acquirers realize significant positive returns. These returns are positively correlated with prior acquirer access to information about the research and development activities at target firms and a superior negotiating position. A unique Desperation Index is employed to determine the current status of a firm's internal productivity. We find that firms experiencing declines in internal productivity or which are more desperate are more likely to engage in an outsourcing-type acquisition in an effort to replenish their research pipelines.     

Disclosure and the cost of equity in international cross-listing

In this paper, we examine the relationship between disclosure level and the cost of equity capital for a sample of international firms cross-listing on the New York Stock Exchange. Increased disclosure has the potential to reduce information asymmetry, reduce the cost of financing and increase analyst following. Using an international asset pricing model, we find that listing firms experience a decrease in both disclosure risk and systematic risk while matching firms do not. Further, we find that the magnitude of the decrease is related to three types of disclosure: accounting standards; analyst following; and exchange/regulatory investor protection. Our results suggest that increased disclosure through accounting standards is beneficial to investors and that disclosure can be accomplished through information intermediaries, e.g., analyst following. For firms with the lowest levels of disclosure prior to cross-listing, all three types of disclosure appear to be valuable.

Economic and financial crises and the predictability of U.S. stock returns

We argue that the use of publicly available and easily accessible information on economic and financial crises to detect structural breaks in the link between stock returns and macroeconomic predictor variables improves the performance of simple trading rules in real time. In particular, our results suggest that accounting for structural breaks and regime shifts in forecasting regressions caused by economic and financial crises has the potential to increase the out-of-sample predictability of stock returns, the performance of simple trading rules, and the market-timing ability of an investor trading in the U.S. stock market.     

Predicting European Takeover Targets

This article extends the Palepu (1986) acquisition likelihood model by incorporating measures of a technical nature, e.g. momentum, trading volume as well as a measure of market sentiment. We use the proposed model to predict takeover targets in a large sample of European and cross‐border merger and acquisition deals and validate its performance on an in‐ and out‐of‐sample basis. The robustness of the proposed model is investigated across several dimensions. In addition we explore the ability of the model to form the basis of successful takeover timing investment strategies. The results of our empirical analysis suggest that the proposed model predicts European takeover targets with relatively high accuracy and is able to determine portfolios that earn significant returns which are not explained by conventional risk factors.     

Valuation uncertainty,home and host market uncertainty,and cross-border seasoned equity offerings

This study examines how market timing can affect host market reaction to cross-border seasoned equity offerings (SEOs), an event generally viewed unfavorably by investors. We assume that firms engage in market timing in response to valuation uncertainty (VU), home market uncertainty (HMU) and/or host market uncertainty (HSU), and that raising capital abroad faces higher scrutiny costs and familiarity bias from host market investors. We conjecture that timing strategies provide signals that vary in strength to host market investors and that dual-timing strategies may strengthen an existing signal. Our hypotheses are tested on a sample of 190 cross-border SEOs that were issued on the U.S. stock market between 1990 and 2017 by firms from 29 countries. Using event study methodology, we find that market timing based on VU is negatively related to host market valuation and that a dual-timing strategy with HMU or HSU generally produces a stronger signal. Our results have practical relevance for stock markets that suffer from high uncertainty; we estimate that a high VU firm with a $1 billion valuation suffers a drop of $31.3 million in market valuation during a high host market uncertainty (high HSU) compared with low host market uncertainty (low HSU).     

External cooperation and entrepreneurial orientation in industrial clusters

ABSTRACT

The aim of this paper is to examine the relationship between external cooperation and entrepreneurial orientation (EO). This relationship is explored in cluster environment, wherein entrepreneurial organizations compete and cooperate simultaneously to pursue opportunities. The following hypothesis is tested: External cooperation is positively correlated with entrepreneurial orientation. The hypothesis is tested with a correlation analysis on a sample of 77 small-sized enterprises operating in the Malopolska region in Poland, wherein several clusters are active. Additionally, the regression analysis is conducted to examine the associations between inter-organizational cooperation and EO dimensions. The findings confirm that external cooperation is positively correlated with EO. This observation is confronted with a pro-competitive approach that is a constitutional element of the entrepreneurship concept. Moreover, the findings show that the correlation between external cooperation and a firm’s performance is stronger than between some other EO dimensions and performance. Additionally, the findings show the important role of relationships between organizations and their clients. In the paper, several remarks for development of the theory are discussed, including the need for incorporating inter-organizational cooperation into a set of entrepreneurial traits and reflecting it in entrepreneurial orientation scales. The findings confirm the importance of that direction of theory development that focuses on inter-organizational collaboration in the context of entrepreneurship.     

Directional duality theory Directional duality theory

In this paper we introduce a complete duality theory based on directional distance functions. This duality theory parallels the duality theory based on radial distance functions in Färe and Primont (1995).     

HUMAN CAPITAL AND CONVERGENCE: A PRODUCTION‐FRONTIER APPROACH*

Using nonparametric, production‐frontier methods, we decompose labor productivity growth into components attributable to technological change (shifts in the world production frontier), technological catch‐up (movements toward or away from the frontier), and physical and human capital accumulation (movements along the frontier). We find that (1) technological change is decidedly nonneutral, (2) productivity growth is driven primarily by physical and human capital accumulation, (3) the increased international dispersion of productivity is explained primarily by physical capital accumulation, and (4) international polarization (the shift from a unimodal to a bimodal distribution) is brought about primarily by efficiency changes (technological catch‐up).     

Asymmetric information as a barrier to knowledge spillovers in expert markets

This paper investigates barriers to effective knowledge spillovers for markets in which the product can be characterized as a credence good, i.e. its complexity impedes the evaluation of quality by customers both ex-ante and ex-post. We focus on the German market for energy efficiency consultants, as an emerging and subsidized sector in which the service offered has strong credence good properties. Based upon in-depth interviews with stakeholders, we analyze the determinants and barriers to knowledge spillovers. We find that the incentive to foster spillovers to increase suppliers’ knowledge is limited by the difficult commercialization of additional capabilities. The implementation of a public certification scheme has failed to increase the sectoral knowledge spillovers. By contrast, the participation in formal knowledge networks has been more effective in prompting companies to foster knowledge spillovers, which has also led to a higher degree of specialization. We conclude that access to certification schemes should be further restricted to increase market transparency and private networks should be supported to achieve the aim of increasing knowledge spillovers.     

Variety in the video game industry: An empirical study of the Wundt curve

This study analyzes the effect of variety on consumer utility using historical behavioral information for 1,397 consumers participating in 729,049 unique rounds of play. We show that consumers generally exhibit a preference for variety as part of their gameplay utility. The relationship between variety and utility is nonlinear and follows, at least for some types of variety, an inverted u‐shape as predicted by the Wundt curve. Our results represent the first such evidence on the importance of variety in video gaming, which has significant implications for consumption through optimization of gameplay utility to satisfy the demand for variety.