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.     

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.     

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:

• •

  Innovation Leaders: How Senior Executives Stimulate, Steer, and Sustain Innovation
• •

  Understanding A3 Thinking: A Critical Component of Toyota's PDCA Management System
• •

  Value Merchants: Demonstrating and Documenting Superior Value in Business Markets

     

Does a Crisis Matter? Forest Policy Responses to the Mountain Pine Beetle Epidemic in British Columbia

“[a]n epidemic of catastrophic proportions”?Larry Pedersen, Chief Forester in 2003, in describing the impact of the outbreak. What factors are responsible for the introduction of new policies (especially those involving substantive change) is a phenomenon that is still poorly understood. Researchers have identified policy windows where a confluence of events, such as a change in government, the emergence of a new issue, and ongoing policy processes, come together to create the opportunity for new policy development. Natural disasters can open such policy windows by drawing attention to an issue and mobilizing political will. Yet at the same time, even if policy windows do open, they may not result in effective policy development. The institutional setting in which such policies are developed also plays a key role. In the case of the Canadian forest sector, the combination of public resources and private capital make policy development especially challenging. Although the scale of the Mountain Pine Beetle epidemic in British Columbia is unprecedented, and will change the nature of the forest resource (and by extension the industry and communities that rely upon it), the policy response has been limited to short‐term measures. Although some policy reform was introduced, policy makers have yet to address the question of whether more fundamental changes are required in order to address the full consequences of the epidemic. La détermination des facteurs responsables de l’introduction de nouvelles politiques (particulièrement celles qui comportent des changements substantiels) demeurent un phénomène mal compris. Des chercheurs ont déterminé des fenêtres d’opportunité politique où divers événements, tels qu’un changement de gouvernement, l’émergence d’une nouvelle préoccupation et des processus politiques continus, convergent pour créer l’occasion d’élaborer de nouvelles politiques. Les catastrophes naturelles peuvent créer ces fenêtres d’opportunité politique en attirant l’attention sur une préoccupation et en mobilisant la volonté politique. Pourtant, même si des fenêtres d’opportunité politique s’ouvrent, elles peuvent ne pas se solder par l’élaboration de politiques efficaces. Le cadre institutionnel dans lequel ces politiques sont élaborées joue aussi un rôle important. Dans le cas du secteur forestier canadien, la combinaison de ressources publiques et de capitaux privés rend l’élaboration de politiques particulièrement délicate. Bien que l’étendue de l’épidémie de dendroctone du pin ponderosa en Colombie‐Britannique soit sans précédent et modifiera la nature de la ressource forestière (et par extension, l’industrie et les collectivités qui en dépendent), la réaction politique s’est limitée à des mesures à court terme. Malgré une certaine réforme des politiques, les décideurs doivent s’interroger sur la nécessité d’apporter ou non des changements fondamentaux supplémentaires pour surmonter les conséquences de l’épidémie.     

Australia's coal seam gas boom and the LNG entry result

Queensland experienced extraordinary growth in booked 2P coal seam gas (CSG) reserves, rising from 3,400 PJ in 2005 to 41,200 PJ in 2013. Given annual domestic consumption of ca. 700 PJ/a, 2P reserves rapidly shifted from 14 to 72 years supply. Profit‐maximising firms sought to speed up commercialisation of reserves through the development of three liquefied natural gas (LNG) export plants at Gladstone. In this article, we present forecasts of Australia's east coast interconnected gas system with daily resolution using our dynamic partial equilibrium model. Modelling results show the rapid development of LNG plants combined with restrictive CSG development policies in NSW may result in unserved load from 2016. Relaxing development constraints or delaying construction of one LNG terminal by 1 year could have avoided the risk of Unserved Load events in the domestic gas market. Lessons can be learned from this CSG‐LNG boom scenario. Facilitating new gas supplies is the most efficient way of alleviating the impacts of the CSG‐LNG boom on domestic markets in the medium term. In the long‐term, Australian policymakers may consider the merits of a National Net Benefits Test to maximise welfare through appropriate coordination – as is done by policymakers in the USA – as opposed to protecting local industries through ‘domestic gas reservation policies’.