Technology changes market boundaries

In the future, the microelectronics driven coalescence of product features and the blurring of market boundaries will lead to growing competition from products and technologies outside the firm's traditional realm of competitors. Further, this “Blindside Competition” can be expected to grow both in scope and impact during the 1980s. Nonetheless, firms which are able to identify the nature of blindside threats can reposition themselves to exploit the ever growing array of market opportunities created by technology. In this article, we identify the forces of microelectronics which are driving blindside competition, and suggest that as a result, adjustments in market orientation will be required.     

High-tech R&D subsidies Estimating the effects of Sematech

Sparked by concerns about their shrinking market share, 14 leading U.S. semiconductor producers, with the financial assistance of the U.S. government in the form of $100 million in annual subsidies, formed a joint R&D consortium — Sematech — in 1987. Using Compustat data on all U.S. semiconductor firms, we estimate the effects of Sematech on members' R&D spending, profitability, investment, and productivity. In so doing we examine two hypotheses: the ‘commitment’ hypothesis that Sematech obligates member firms to spend more on high-spillover R&D, and the ‘sharing’ hypothesis that Sematech reduces duplication of member R&D spending. Whereas the commitment hypothesis provides a rationale for the government subsidies, the sharing hypothesis does not. We find that Sematech induced members to cut their overall R&D spending on the order of $300 million per year, providing support for the sharing hypothesis.     

Risk and capital asset prices

This paper is an empirical examination of the statistical significance of the residual variance of individual assets as compared with the covariance of returns with various market portfolio proxies in predicting expected return. The data and analysis we present suggest that measures of covariance are no more significant than residual variance in predicting expected return. In this sense our paper is not supportive of the Sharpe-Lintner or Black versions of the capital asset pricing model.     

US telecommunications regulation: Will technology decide?

Twenty years ago, the telecommunications industry was an established regulated monopoly. But improvements in technology and reductions in costs have ripped apart the premises of natural monopoly and the economic rationale for public utility regulation. The authors review past US telecommunications policy and question the assumptions of the current search for a policy for the future. They believe that, for the industry to develop, institutions and restraints need to be removed.     

The Business Value of Process Flexibility

Promising to cope with increasing demand variety and uncertainty, flexibility in general and process flexibility in particular are becoming ever more desired corporate capabilities. During the last years, the business process management and the production/operations management communities have proposed numerous approaches that investigate how to valuate and determine an appropriate level of process flexibility. Most of these approaches are very restrictive regarding their application domain, neglect characteristics of the involved processes and outputs other than demand and capacity, and do not conduct a thorough economic analysis of process flexibility. Against this backdrop, the authors propose an optimization model that determines an appropriate level of process flexibility in line with the principles of value-based business process management. The model includes demand uncertainty, variability, criticality, and similarity as process characteristics. The paper also reports on the insights gained from applying the optimization model to the coverage switching processes of an insurance broker pool company.     

Forecast performance of WASDE price projections for U.S. corn

We conduct a comprehensive evaluation of the season‐average price projections for U.S. corn as published by the U.S. Department of Agriculture's World Agricultural Supply and Demand Estimates (WASDE), an important issue given reduced resources and increased program scrutiny within the Federal Government. This study is the first in the literature to evaluate the WASDE corn projections relative to futures adjusted forecasts throughout the forecasting cycle using a lengthy evaluation period (1980/81–2012/13). We find that WASDE projections provide lower RMSEs relative to futures adjusted forecasts for 9 of the 16 forecast periods, 4 of which are statistically different. Encompassing tests show that WASDE projections often provide incremental information not present in the futures adjusted forecasts. Composite forecasts based on futures adjusted forecasts and WASDE projections reduced the RMSEs over all forecast periods by an average 12–16%. Favorable average trading profits may be generated for some forecast months using WASDE projections. Overall, our results suggest that WASDE projections of the U.S. corn season‐average price provide useful information to the market and could enhance the efficiency of the agricultural sector.     

Energiewende und Übertragungsnetzausbau: Sind Erdkabel ein Instrument zur Steigerung der gesellschaftlichen Akzeptanz des Leitungsbaus? Eine empirische Untersuchung auf Basis der Kontingenten Bewertungsmethode

Transmission network development has led to protests throughout Germany. Many studies present underground cables as a means to increase public agreement to transmission line construction and network development. This paper verifies this thesis analyzing the willingness-to-pay of private households for underground cable employment, which allows for a distinct analysis of strategic behavior and opportunity costs that is omitted in classic questionnaire designs. The results of a contingent valuation study conducted in November and December 2012 in four regions of Germany, which are affected by transmission line development in different ways, are presented. At first glance, an analysis of 1.003 household responses confirms common findings with a majority of households favoring underground cables (about 60 %), albeit preferences vary strongly between sample regions. Willingness-to-pay, however, relativizes this result. A near share of 50 % of households voting for underground cables is not willing to accept an increase in electricity prices to finance respective projects (free riders). The fact that positive willingness-to-pay does not correlate positively with increasing lengths of underground cables in 60 % of cases underlines that underground cables are not supported unconditionally. All-in-all, a flat public approval of underground cable technology cannot be presumed based on WTP-evaluation. Preferences about underground cables and corresponding WTP are explained with demographic characteristics and attitudes using regression models. Fundamental thoughts on energy- and environmental policies do not serve to explain responses. Instead, regional factors and subjective opinions on how to finance such kind of infrastructure measures influence preferences for underground cables.