Employment change in independent owner-managed high-technology firms in Great Britain

There is a growing volume of literature that points to the potential for small technology-based firms to achieve substantial employment growth. As a direct consequence of such work this sector of any economy has attracted increasing attention from national and local Governments concerned with finding ways of revitalising economically deprived localities and creating employment opportunities. This paper provides up-to-date empirical evidence surrounding the ability of small high-technology firms to create additional jobs in Great Britain. In addition, key founder and business characteristics are isolated which are significantly associated with employment change in growing high-technology firms over the 1986 to 1992 period. With respect to factors influencing these high levels of employment growth, a high firm size (in 1986) was found to act positively on employment growth, as was a graduate level education for the key founder. On the finance side firms which had access to and used a multiplicity of sources of start-up finance tended to grow faster. Futher, on the basis of our results we would suggest (and recommend) a Government policy which at the firm level actively encourages high-technology firm start-ups (who record higher rates of survival than firms in more conventional sectors) as well as providing support for existing high-technology firms who have already demonstrated the inclination and ability to grow in employment size.     

The Effects of Escalating Commitment on Ethical Decision-Making

Although scholars have invoked the escalation framework as a means of explaining the occurrence of numerous organizationally undesirable behaviors on the part of decision makers, to date no empirical research on the potential influences of escalating commitment on the likelihood of unethical behavior at the individual level of analysis has been reported in either the escalation or the ethical decision-making literatures. Thus, the main purpose of this project is to provide a theoretical foundation and empirical support for the contention that escalating commitment situations can induce unethical behavior in decision makers. An experimental research design utilizing a computerized investment task was administered to 155 undergraduate business majors as a means of assessing the hypotheses presented here. Results from a hierarchical logistic regression analysis found strong support for the contention that exposure to an escalation situation increases the likelihood of unethical behavior on the part of decision makers. Further, results also supported previous ethical decision-making findings by confirming the effects of locus of control (LOC) on ethical behavior. Specifically, the data indicated that individuals with an external LOC orientation were significantly more likely to select the unethical option than were individuals with an internal LOC orientation. Interestingly, support was not found for the effects of Machiavellianism or gender on ethical decision-making.     

Bridging the Gap between Interest Rates and Investments

The links between interest rates, cost of capital, hurdle rates, and capital allocation have been remarkably weak during the last few years. For instance, whereas the current yield on the World Government Bond Index is a paltry 1.2%, survey evidence suggests that the median reported investment hurdle rate of S&P 100 companies is as high as 18%. In this report, members of J.P Morgan's corporate finance advisory group explain why the cost of capital for most companies is unlikely to increase materially even if interest rates rise as projected. This suggests that companies have room to lower their hurdle rates. Moreover, as the authors argue, a reduction in hurdle rates is likely to be beneficial since excessively high hurdle rates can have the effect of reducing value by sacrificing profitable growth opportunities and increasing the firm's risk profile. The report concludes with a framework for corporate hurdle rates and capital allocation strategies designed to help companies make better investment decisions.     

How to make Dupire’s local volatility work with jumps

There are several (mathematical) reasons why Dupire’s formula fails in the non-diffusion setting. And yet, in practice, ad-hoc preconditioning of the option data works reasonably well. In this note, we attempt to explain why. In particular, we propose a regularization procedure of the option data so that Dupire’s local vol diffusion process recreates the correct option prices, even in manifest presence of jumps.     

Jacques Le Bourva's theory of endogenous credit-money ∗

About 30 years ago, Jacques Le Bourva published two little-known articles that clearly set out the present post-Keynesian theory of endogenous money developed by Kaldor and Moore. The main features of these two articles are presented, in particular Le Bourva's belief that reverse causation, rather than the instability of the velocity function, is the key objection to the quantity theory of money and the mainstream theory of inflation. Other features include a graphical and an algebraic pedagogical representation of the theory of endogenous money, the use of the Banking school's efflux/reflux mechanism, the dismissal of the money multiplier, and the impossibility of an excess supply of money. Le Bourva's theory of inflation also resembles that adopted by many post-Keynesians, in which price increases due to excessive wage demands and attempts by firms to raise their profit margins to finance investment.     

A transform approach to compute prices and Greeks of barrier options driven by a class of Lévy processes

In this paper we propose a transform method to compute the prices and Greeks of barrier options driven by a class of Lévy processes. We derive analytical expressions for the Laplace transforms in time of the prices and sensitivities of single barrier options in an exponential Lévy model with hyper-exponential jumps. Inversion of these single Laplace transforms yields rapid, accurate results. These results are employed to construct an approximation of the prices and sensitivities of barrier options in exponential generalized hyper-exponential Lévy models. The latter class includes many of the Lévy models employed in quantitative finance such as the variance gamma (VG), KoBoL, generalized hyperbolic, and the normal inverse Gaussian (NIG) models. Convergence of the approximating prices and sensitivities is proved. To provide a numerical illustration, this transform approach is compared with Monte Carlo simulation in cases where the driving process is a VG and a NIG Lévy process. Parameters are calibrated to Stoxx50E call options.     

Achieving brand loyalty through sponsorship: the role of fit and self-congruity

Managers increasingly seek to develop brand loyalty through sponsorship activities, though this relationship has not been solidly established. This article models and demonstrates the impact of sponsorship on brand loyalty. The studied concepts and relationships emerge from both the sponsorship and consumer-brand relationship literature. The experimental design relies on before and after measurements and multiple exposures to the sponsorship. Thus this study demonstrates that sponsorship exposure has a positive impact on brand affect, brand trust, and brand loyalty. The change in brand loyalty from before to after sponsorship exposure reflects two persuasion processes. First, self-congruity with an event enhances brand loyalty through event and brand affect. Second, perceived fit between the event and the brand has a positive effect on brand affect, through attitude toward the sponsorship, and on brand trust, such that it ultimately influences brand loyalty. Brand affect is identified as an important mediator of sponsorship effects.     

Market Share and Price in Dutch Home Care: Market Power or Quality?

The paper uses unique data on contracts concluded by providers of home care to evaluate the effect of provider market power on prices of home care services in the Netherlands. Since, at least in some regions, one or two providers dominate the market, there are concerns about the effect of providers’ market power on the pricing of home care services. Using data on contracted prices and quantities for 2004–2006, we find that providers with a larger market share are able to contract at a higher price. The effect remains after controlling for quality.