Exploring Robust Design Capabilities,Their Role in Creating Global Products,and Their Relationship to Firm Performance*

With the increasing desire for products suitable for widely varying markets worldwide, this study offers insight into capabilities associated with successful robust design in global product markets. These robust design capabilities (i.e., the possibility for success under varying circumstances or scenarios) are a potential organizational response to rapid change and uncertainty, which also improve the likelihood of product acceptance on a global basis. From literature, executive interviews, and anecdotal evidence, four capabilities associated with robust product design are derived: (1) functional; (2) aesthetic; (3) technological; and (4) quality based. A model is proposed and an empirical test conducted that considers the moderating influence of environmental uncertainty on the relationship between these robust capabilities and firm performance. The findings suggest that the use of robust design capabilities are affected by uncertainty and have an important influence on firm performance and speed to market. Specifically, the product development process tends to be characterized by aesthetic and technological robust design capabilities in more certain environments and functional robust design capabilities in more uncertain environments when seeking to improve firm performance. Alternatively, technological design capabilities in more certain environments and functional design capabilities in more uncertain environments are associated with improved speed to market.     

MONOTONICITY AND CONVEXITY OF OPTION PRICES REVISITED

The Black-Scholes option price is increasing and convex with respect to the initial stock price. increasing with respect to volatility and instantaneous interest rate, and decreasing and convex with respect to the strike price. These results have been extended in various directions. In particular, when the underlying stock price follows a one-dimensional diffusion and interest rates are deterministic, it is well known that a European contingent claim's price written on the stock with a convex (concave. respectively) payoff function is also convex (concave) with respect to the initial stock price. This paper discusses extensions of such results under more general settings by simple arguments.     

Perfect hedging under endogenous permanent market impacts

We model a nonlinear price curve quoted in a market as the utility indifference curve of a representative liquidity supplier. As the utility function, we adopt a \(g\)-expectation. In contrast to the standard framework of financial engineering, a trader is no longer a price taker as any trade has a permanent market impact via an effect on the supplier’s inventory. The P&L of a trading strategy is written as a nonlinear stochastic integral. Under this market impact model, we introduce a completeness condition under which any derivative can be perfectly replicated by a dynamic trading strategy. In the special case of a Markovian setting, the corresponding pricing and hedging can be done by solving a semilinear PDE.     

Valuation of a Credit Swap of the Basket Type

This article provides a simple model to value a credit swap ofthe basket type. Unlike the previous literature, we considerthe joint survival probability of occurrence times of creditevents in terms of stochastic intensity processes under the assumptionof conditional independence. Based on the joint survival probability,such a credit swap can be valued under the risk-neutral valuationframework. Assuming that the default intensity processes followthe extended Vasicek model with a correlation structure, an analyticexpression of the valuation formula is derived. Some numericalexample is given to demonstrate the usefulness of our model.     

Outsourcing and its implications for market success: negative curvilinearity,firm resources,and competition

Over the past few decades, outsourcing has become a widely used and researched means for firms to change their performance. In this article, we attempt to link outsourcing to the market success of firms, specifically their market share. We argue that although firms may be able to increase their market share through outsourcing, this is only true up to a point, beyond which market share actually decreases as a consequence of further outsourcing. There is, in other words, a negatively curvilinear (inverted U-shape) relationship between outsourcing and market share. We also hypothesize that the outsourcing–market share relationship is moderated negatively by both the strength of firm resources and the extent of competition in a firm’s market. We empirically confirm these arguments through a panel data analysis containing over 19,000 observations on manufacturing firms and offer some case examples to illustrate the mechanisms driving these results. Finally, we discuss implications for marketing research and practice.     

Equilibrium returns with transaction costs

We study how trading costs are reflected in equilibrium returns. To this end, we develop a tractable continuous-time risk-sharing model, where heterogeneous mean–variance investors trade subject to a quadratic transaction cost. The corresponding equilibrium is characterized as the unique solution of a system of coupled but linear forward–backward stochastic differential equations. Explicit solutions are obtained in a number of concrete settings. The sluggishness of the frictional portfolios makes the corresponding equilibrium returns mean-reverting. Compared to the frictionless case, expected returns are higher if the more risk-averse agents are net sellers or if the asset supply expands over time.     

A positive interest rate model with sticky barrier

This paper proposes an efficient model for the term structure of interest rates when the interest rate takes very small values. We make the following choices: (i) we model the short-term interest rate, (ii) we assume that once the interest rate reaches zero, it stays there and we have to wait for a random time until the rate is reinitialized to a (possibly random) strictly positive value. This setting ensures that all term rates are strictly positive.

Our objective is to provide a simple method to price zero-coupon bonds. A basic statistical study of the data at hand indeed suggests a switch to a different mode of behaviour when we get to a low level of interest rates. We introduce a variable for the time already spent at 0 (during the last stay) and derive the pricing equation for the bond. We then solve this partial integro-differential equation (PIDE) on its entire domain using a finite difference method (Cranck–Nicholson scheme), a method of characteristics and a fixed point algorithm. Resulting yield curves can exhibit many different shapes, including the S shape observed on the recent Japanese market.     

Gaining from vertical partnerships: knowledge transfer,relationship duration,and supplier performance improvement in the U.S. and Japanese automotive industries

We study sources of operational performance improvement in supplier partnerships. We argue that supplier performance will benefit most where time‐bound relational assets have developed between a buyer and supplier and the firms exploit the resulting communication efficiency by transferring productive knowledge. We examine the effects of two forms of knowledge exchange together with the prior duration of the buyer–supplier relationship. We find similar interaction patterns in two survey samples of Japanese and U.S. automotive suppliers. The effect of ordinary technical exchanges on supplier performance improvement does not vary with relationship duration. The effect of higher‐level technology transfer, however, grows more positive as relationship duration increases. Other results show relevant contrasts consistent with heterogeneous sourcing behavior between the two countries. The findings highlight the role of relational assets and show that it is important to distinguish between simple techniques and higher‐level technological capabilities when studying interfirm relationships. This research extends the literatures on knowledge transfer, buyer–supplier partnerships, and the performance dynamics of interfirm and intrafirm relationships in general. Copyright © 2002 John Wiley & Sons, Ltd.