Dynamic Seemingly Unrelated Cointegrating Regressions

We propose the parametric Dynamic Seemingly Unrelated Regression (DSUR) estimator for simultaneous estimation of multiple cointegrating regressions. DSUR is efficient when the equilibrium errors are correlated across equations and is applicable for panel cointegration estimation in environments where the cross section is small relative to the available time series. We study the asymptotic and small sample properties of the DSUR estimator for both heterogeneous and homogeneous cointegrating vectors. We then apply the method to analyse two long-standing problems in international economics. Our first application revisits the estimation of long-run correlations between national investment and national saving. Our second application revisits the question of whether the forward exchange rate is an unbiased predictor of the future spot rate.     

Linking Product Development Outcomes to Market Valuation of the Firm: The Case of the U.S. Pharmaceutical Industry*

The purpose of this research was to examine empirically the effects of new product development outcomes on overall firm performance. To do so, first product development and finance literature were connected to develop three testable hypotheses. Next, an event study was conducted in order to explore whether the changes in the stock market valuation of firms are influenced by the outcomes of efforts to develop new products. The pharmaceutical industry was chosen as the empirical context for the present study's analysis largely because the gate‐keeping role played by the Food and Drug Administration (FDA) provides a specific event date on which to focus the event study methodology. As such, this study's events were dates of public announcements of the FDA decisions to approve or to reject the New Drug Applications submitted by the sponsoring firms. Consistent with the efficient market hypothesis, this study's results show that market valuations are responsive strongly and cleanly to the success or failure of new product development efforts. Hence, one of this study's key results suggests that financial markets may be attuned sharply to product development outcomes in publicly traded firms. This study also finds that financial market losses from product development failures were much larger in magnitude than financial market gains from product development successes—indicating an asymmetry in the response of financial markets to the success and failure of new product development efforts. Hence, another implication of this study's results is that managers should factor in a substantial risk premium when considering substantial new development projects. The present study's results also imply that managers should refrain from hyping new products and perhaps even should restrain the enthusiasm that the financial community may build before the product fully is developed. The effect on firm value is severe when expectations about an anticipated new product are not fulfilled. Managers in effect should take care to build reasonable and realistic expectations about potential new products.     

Who enjoys ‘TRIPs’ abroad? An empirical analysis of intellectual property rights in the Uruguay Round

Abstract.  Analysis of the Uruguay Round is extended by quantifying the impact of the TRIPs agreement. The static costs of raising the standards of patent protection are captured by the transfers of income between countries, with the majority of countries estimated to make net payments abroad, the United States being a major beneficiary. To offset these transfers the model provides estimates of the dynamic benefits from the greater incentive to innovate, revealing that there is potential for all countries to benefit from the TRIPs agreement in the long run. However, the distribution of these benefits is highly skewed towards developed countries. JEL classification: O34, F43     

A comparison of ranking,rating and reservation price measurement in conjoint analysis

This paper empirically compares the traditional preference measures of ranking and rating in conjoint analysis with a direct monetary measure of product value — reservation prices. Experimental results are as expected. While reservation prices do very well in terms of fit, they are inferior in terms of predicting choice on a holdout sample. In addition, surprisingly little difference is found in the performance of ranks and ratings.     

Accessing other people’s technology for non–profit research

As patents and other forms of intellectual property become more pervasive in the next generation of biotechnologies, designing policies and practices to ensure sufficient freedom to operate (i.e., the ability to practice or use an innovation) will be crucial for non–profit research agencies, especially those intent on developing technologies destined for commercial release. Are non–profit organisations exempt from intellectual property claims? What constitutes infringement of a patent? How does a non–profit establish its freedom to operate? We address these issues in this paper and evaluate various options for accessing other people’s technologies. Options include cross–licensing agreements, research–only or cost–free licences, market segmentation strategies, mergers or joint ventures, and patent pooling or clearinghouse mechanisms. Responding creatively to the new intellectual property environment will have far reaching consequences for the future of non–profit research.     

Innovation Leaders: How Senior Executives Stimulate, Steer, and Sustain Innovation by Jean-Philippe Deschamps

I am honored to have been chosen as the Journal of Product Innovation Management's ( JPIM 's) new book review editor. First and foremost, I want to thank Preston Smith for making the transition an easy one. Preston's experience and insights have helped bring me up the learning curve. His patience was much appreciated.
Second, managing the book review process is certainly more complicated than I had imagined but is fascinating nonetheless. As in the development of any product or service there are many people involved in the creation process, and considerable planning takes place prior to actual publication.
Last but not least is my admiration for our JPIM book reviewers. The care and effort taken to create the quality book reviews that meet JPIM 's high standards requires critical thought and experience in new product development. We will continue to make our book reviews insightful, critical, and practical for you, our readers.
Books reviewed in this issue:

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  Innovation Leaders: How Senior Executives Stimulate, Steer, and Sustain Innovation
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  Understanding A3 Thinking: A Critical Component of Toyota's PDCA Management System
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  Value Merchants: Demonstrating and Documenting Superior Value in Business Markets