Accounting for Intangibles: Can Capitalization of R&D Improve Investment Efficiency?

This paper investigates the potential for accounting rules to mitigate under-investment induced by myopic managerial incentives. It exploits the difference within US GAAP requiring the capitalization of some research and development (R&D) costs in software development but proscribing the capitalization of R&D in other industries. We first investigate whether other hi-technology firms with no capitalization of R&D costs suffer higher levels of under-investment in myopic settings relative to software development firms. Second, we investigate whether the capitalization rule assists in mitigating under-investment within the software development industry, and whether this comes at the cost of over-investment in the presence of financial flexibility. Our findings are consistent with the mitigation of under-investment in the software development setting but we find no evidence of over-investment in the presence of high financial flexibility. Other hi-tech firms that cannot capitalize R&D costs suffer higher levels of under-investment relative to software development firms. Finally, we find that the ability to capitalize for the sample of software firms does reduce the probability of cutting R&D investment when managers are under earnings pressure. The findings in this paper are relevant to standard setters seeking to understand the costs imposed by (understandably) conservative accounting rules, and how verification of points of feasibility alongside less conservative accounting can prevent dysfunctional investment outcomes. This is the first study to consider whether the ability to (justifiably) capitalize the costs of internally generated intangibles can improve investment efficiency (the allocation of resources).     

The role of entrepreneurial risk in financial portfolio allocation

Small Business Economics - Entrepreneurs or small business owners are confronted by a number of risks in their business activities. Previous literature suggests that entrepreneurs balance...     

From Big Bang to Big Crash: The Early Origins of the UK’s Finance-led Growth Model and the Persistence of Bad Policy Ideas

Using newly declassified documents from the British Public Records Office, we argue that the finance-dependent growth regime that typified the UK economy in the period up to the Great Crash of 2008 has much deeper roots than is commonly realised. We use these documents to demonstrate that the growth of finance was integral to the Thatcher revolution, tying together mortgage markets, household debt, and boom-bust cycles as early as the mid-1980s. We also show how policy-makers in this period were aware of all the weaknesses of this growth model, to the point that they effectively diagnosed what would happened in 2008, back in 1987. We argue that selecting for a finance-led growth model as the preferred growth model so early effectively rendered other possible growth models for the UK unattainable. The result was the shift from an economy characterised by ‘stop-go’ cycles in the post-war period to an economy characterised by recurrent ‘boom-slump-austerity-reset’ cycles in the Thatcher and post Thatcher periods. The 2008 crisis did not change this highly unstable mode of accumulation.     

A case study on collective cognition and operation in team-based computer game design by middle-school children

This case study examined team-based computer-game design efforts by children with diverse abilities to explore the nature of their collective design actions and cognitive processes. Ten teams of middle-school children, with a high percentage of minority students, participated in a 6-weeks, computer-assisted math-game-design program. Essential processes of collective design cognition and operation emerged from the data: (a) collective exploration of design constraints during problem framing, (b) aggregation of identity, experience, and memory for collective solution generation, and (c) development of coalition and task interdependence during design execution. Salient contexts supporting collective design included team-role fulfillment with presence of leadership and scaffolding for mutuality in design talk. The study findings also indicated perceived learning of school children during collaborative math-game design.     

绝处逢生

上次我们说的是＂我若为我,我是何人＂在创业中的体现,这次我们来讲讲在逆境中,人怎样改变自己的命运,来实现对自己与社会的责任。本来《圣经》没有书写下来,而都是口口相传的。最后写下来的只是原来《圣经》的一部分,其它的大都失传了,所以口授的《圣经》（密西拿）在犹太教当中也占有非常重要的地位。上次提到的生活在公元前一世纪的拉比沙迈（Shamai）与大祭司希列尔（Hilel）是他们那一代唯一口授《圣经》的人,犹太人将后来收集起来的他们的话看作是含有某种神秘色彩的智慧。希列尔有一句非常著名的话：＂我不为我,谁人为我？我若为我,我是何人？若非现在,     

Here it comes: defined contribution health care

The Patient Protection and Affordable Care Act includes provisions to make the individual health insurance marketplace one where all Americans, including those with preexisting health conditions, can obtain affordable coverage. At the same time, the act has failed to address, in any significant way, many of the underlying flaws in the current U.S. health care system that have caused costs to spiral out of control. The combination of persistent U.S. health care cost increases and a viable individual health insurance marketplace will cause a sea change in employer-sponsored health care offerings that is similar to that seen among employer-sponsored retirement benefit plans: movement away from defined benefit approaches and toward defined contribution designs. Although the authors show parallels between the evolution of employers' health care and retirement offerings, they explain why certain key developments will need to occur before defined contribution approaches become as prevalent in employer-sponsored health care plans as they are in today's employer-sponsored retirement plans.     

On the superiority of fixed fee over auction in asymmetric markets

It is well known that selling licenses for the use of a cost-reducing innovation by auction yields a higher revenue compared to fixed fee in a symmetric Cournot industry. In this note we show that this result can be reversed in an asymmetric Cournot industry, i.e., the fixed fee policy can generate a strictly higher revenue than the auction policy in an industry where prior to the innovation firms are cost-asymmetric.     

Price control and advertising in franchising chains

This study investigates how franchising chains use advertising to enhance coordination and improve their control over prices set at franchised outlets. We argue that chains use price advertising to inform customers about their desired prices, thereby influencing franchisees to adopt the advertised prices although they are not contractually required to do so. We test our hypotheses using rich outlet‐level price data collected before and after a U.S. nationwide advertising campaign by McDonald's. Our findings indicate that advertising is an effective mechanism that franchising chains use to improve their control over franchisees, enhance uniformity, and reduce franchisee free‐riding. Copyright © 2013 John Wiley & Sons, Ltd.