Standard Oil as a Technological Innovator

A century ago, in 1911, the U.S. Supreme Court issued its path-breaking decision in the monopolization case against the Standard Oil Companies. Standard pleaded inter alia that its near-monopoly position was the result of superior innovation, citing in particular the Frasch-Burton process for refining the high-sulfur oil found around Lima, Ohio. This paper examines the role of Hermann Frasch in inventing and developing the desulfurization process, showing that Standard failed to recognize his inventive genius when he was its employee and purchased his rights and services only after he had applied it in his own Canadian company.     

Unter der Tarnkappe

The article deals with the question of whether the economic interests of media companies have an effect on the quality of their media coverage. Such an effect would violate professional journalistic standards. As a case study, we analyze media coverage on the abortive acquisition of the ProSiebenSat.1 Media AG by the Axel Springer Verlag, comparing Springer-owned and competitor-owned newspapers. The professional journalistic standards of relevance, neutrality, balance and transparency are applied to measure the quality of the media coverage. Results show systematic differences in the presentation and evaluation of the acquisition between the two media groups, in line with their economic interests. Springer newspapers apply a two-level strategy: On the one hand, they publish fewer and more neutral articles than the competitors’ newspapers — they obviously do not want to draw attention to the topic. On the other hand, they try to influence public discussion covertly by using »opportune witnesses« and «volatile issues«. The media coverage of both newspaper groups — Springer and competitors — can be explained by their economic interests. This assertion is supported by both theoretical assumptions and empirical findings.     

Responsible Leadership in Global Business: A New Approach to Leadership and Its Multi-Level Outcomes

The article advances an understanding of responsible leadership in global business and offers an agenda for future research in this field. Our conceptualization of responsible leadership draws on deliberative practices and discursive conflict resolution, combining the macro-view of the business firm as a political actor with the micro-view of leadership. We discuss the concept in relation to existing research in leadership. Further, we propose a new model of responsible leadership that shows how such an understanding of leadership can address the challenges of globalization. We thereby propose positive outcomes of responsible leadership across levels of analysis. The model offers research opportunities for responsible leadership in global business.     

Technology Flows Matrix Estimation Revisited

This paper revisits the methodological problems of estimating matrices showing how technological advances--measured by industry research and development outlays--flow from industries of origin to using industries. An early effort relied upon the analysis of 15 112 US patents. Several alternative methods are explored to address methodological questions concerning the choice of carrier matrices, the handling of diagonal elements, and the treatment of capital goods flows. Technology flow matrices estimated using diverse combinations of assumptions are tested for goodness-of-fit relative to the original patent-based matrix and for their ability to "predict' productivity growth in Solowian regression equations. Although some anomalies emerge, the best results are obtained using combined first-order transactions and capital flows matrices with diagonal elements adjusted to reflect the ratio of internal process to all R&D spending. However, flow data compiled using the Leontief inverse matrix add explanatory power in productivity growth regressions.     

Divisional sell-off: A hazard function analysis

For a sample of roughly 450 companies, hazard function estimation is used to determine the environmental and organizational variables precipitating the ‘sell-off’ of divisional units. The sample focuses on 285 ‘lines of business’ fully divested between 1975 and 1981, comparing them to 2157 retained lines. The most powerful sell-off predictor was prior profitability at the line of business level; the lower profits, the higher the sell-off probability. Also, divestiture was more likely, the lower company-wide profitability, the lower a line's market share, the lower the line's R&D/sales ratio, and in the aftermath of a company chief executive officer change. Units previously acquired in conglomerate mergers were more likely to be sold off than original units. On the buyer's side of the sell-off market, large companies acquiring other firms' divested units tended to improve the units' profit performance, but not enough, on average, to realize a normal return on their investments.     

Intersectoral efficiency between agriculture and industry in six C.M.E.A. countries: Introducing a simple equilibrium model

The purposes of this paper is to show how the long-run preferences for industry and agriculture of the planning bodies in six C.M.E.A. countries can be analyzed by using data on factor allocations in these sectors. Indicative results describing these preferences are obtained and existing inefficiencies in labor allocation and the relative domestic prices of industrial and agricultural goods are discussed. The conclusions suggest that the preferences of the planning bodies have stayed completely constant over 1950–1980 only in the case of the GDR, and that allocations of labor and domestic price ratios have mostly been far from optimal over that period in the countries that were analyzed.The author wishes to thank Prof. Paul Jones of the University of New Mexico Economics Department, Prof. R. E. Campbell of the Indiana University Economics Department and an anonymous reviewer for helpful comments on this paper.     

Algorithmic portfolio choice: lessons from panel survey data

Automated asset management offerings algorithmically assign risky portfolios to individual investors based on investor characteristics such as age, net income, or self-assessment of risk aversion. Using new German household panel data, we investigate the key household characteristics that drive private asset allocation decisions. This information allows us to assess which set of variables should be included in algorithmic portfolio advice. Using heavily cross-validated classification trees, we find that a combination of household balance sheet variables—describing the ability to take risks (e.g., net wealth)—and household personal characteristics—describing the willingness to take risks (e.g., risk aversion)—best explain the cross-sectional variation in household portfolio choice. Our empirical evidence is in line with models of portfolio choice under decreasing relative risk aversion and fixed investment costs. The results suggest the utility of a more holistic modeling of household characteristics. Including background risks in the form of household leverage not only makes investment sense, but is also the new regulatory reality under MIFID II rules. Robo-advisors are strongly advised to act accordingly.     

A note on portfolio choice for sovereign wealth funds

The current vast account surpluses of commodity-rich nations, combined with record account deficits in developed markets (the United States, Britain) have created a new type of investor. Sovereign wealth funds (SWF) are instrumental in deciding how these surpluses will be invested. We need to better understand the investment problem for an SWF in order to project future investment flows. Extending Gintschel and Scherer (J. Asset Manag. 9(3):215–238, 2008), we apply the portfolio choice problem for a sovereign wealth fund in a Campbell and Viceira (Strategic Asset Allocation, 2002) strategic asset allocation framework. Changing the analysis from a one to a multi-period framework allows us to establish a three-fund separation. We split the optimal portfolio for an SWF into speculative demand as well as hedge demand against oil price shocks and shocks to the short-term risk-free rate. In addition, all terms now depend on the investor’s time horizon. We show that oil-rich countries should hold bonds and that the optimal investment policy for an SWF as a long-term investor is determined by long-run covariance matrices that differ from the correlation inputs that one-period (myopic) investors use.