Second‐Mover Advantages with Asymmetric Costs and Information Updates: A Product Life Cycle Perspective

Two firms with asymmetric costs engage in a Stackelberg game under multiple levels of uncertainty with information updating. A product life cycle perspective is employed to reveal when and why a second‐mover may have an advantage. At early stages in the product life cycle, when uncertainty is the dominating factor, the impact of uncertainty may be either positive or negative. As a result, the Stackelberg leader faces the possibility of either overshooting or losing its market leadership position to the second‐mover. In later market stages, when cost is more important, a process‐innovating second‐mover may accrue higher profits. Copyright © 2011 John Wiley & Sons, Ltd.     

Preparing for higher inflation: Portfolio solutions using U.S. equities

Investors have always been interested in reducing inflation risk in their portfolios. However, investors face different types of inflation than those measured by the Consumer Price Index (CPI). Moreover, different asset classes can be used to hedge portfolio inflation. In this paper, we show how individual equities can be used to construct equity portfolios sensitive to customized inflation targets. We illustrate portfolios for three types of inflation: US headline CPI, Forbes Cost of Living Extremely Well Index, and the US Medical Care Price Index. We also show how alternative weighting schemes, such as minimum volatility and maximum inflation beta, can be used to construct inflation‐hedged portfolios.     

Understanding Post‐Euro Law‐of‐One‐Price Deviations

We put together a unique panel of thousands of good‐level prices before and after the euro to compare the determinants and understand the evolution of goods price dispersion across Europe over time. We find that tradeability and nontraded inputs play a significantly smaller role for cross‐country price dispersion after the adoption of the euro, and for Eurozone economies as compared to European Union ones. We then compare the distributions of law‐of‐one‐price (LOP) deviations over time to understand how the degree of integration across European economies changed after the euro. Our tests reveal that the distributions after the euro are typically significantly different from those before, consistent with a greater degree of integration. Utilizing our unique panel data set to trace the location of individual goods in the distribution of LOP deviations, we ask how the price advantage or disadvantage evident in these price distributions evolves over time, and whether goods characteristics play a role for the persistence of these LOP deviations. LOP deviations for these goods are highly correlated over 5‐ or 10‐ year horizons, and correlations remain significantly high over longer horizons. These correlations are greater for homogeneous as compared to differentiated goods and vary across countries. Finally, for most of these European economies and goods, price advantage is typically revealed to be more persistent than price disadvantage.     

CO‐INTEGRATING VAR MODELS AND ECONOMIC POLICY

This paper surveys some relevant contributions to the economic literature on co‐integrating vector autoregressive (VAR) models [vector error correction mechanisms (VECMs)], emphasizing their usefulness for economic policy. It further discusses some theoretical aspects that are necessary for a complete understanding of their potential. The theoretical introduction of the co‐integrating VAR model is followed by an illustration of its applications to monetary policy, fiscal policy and exchanges rates as well as in establishing the effects of structural bilateral shocks between countries (the so‐called global VAR, or GVAR, models). Special attention is paid to the VECM capacities of being used in conjunction with dynamic stochastic general equilibrium models and of jointly specifying the short‐ and long‐run dynamics, thus representing the steady‐state of economic systems (by means of the co‐integration relations) and the short‐run dynamics around it.     

DEMAND,CUSTOMER BASE‐LINE AND DEMAND RESPONSE IN THE ELECTRICITY MARKET: A SURVEY

The increasing use of demand‐side management, as a tool to reliably meet electricity demands at peak time, has stimulated interest among researchers, consumers and producer organiza‐tions, managers, regulators and policymakers. This research reviews the growing literature on models which are used to study demand, customer base‐line (CBL) and demand response in the electricity market. After characterizing the general demand models, the CBL, based on which the demand response models are studied, is reviewed. Given the experience gained from the review and existing conditions, the study combines an appropriate model for each case for a possible application to the electricity market; moreover, it discusses the implications of the results. In the literature, these aspects are studied independently. The main contribution of this survey is attributed to the treatment of the three issues as sequentially interdependent. The review is expected to enhance the understanding of the demand, CBL and demand response in the electricity market and their relationships. The objective is conducted through a combination of demand and supply side managements in order to reduce demand through different demand response programs during peak times. This enables electricity suppliers to save costly electricity generation and at the same time reduce energy vulnerability.     

MEASURING VARIATIONS IN LIFETIME WELFARE EX ANTE AND EX POST: SOME EXPLORATORY CALCULATIONS

Whereas longevity‐adjusted consumption measures have become increasingly used as indicators of lifetime standards of living, it remained unnoticed that those measures, by relying on period – rather than cohort – life tables, constitute indicators of expected – rather than actual – lifetime standards of living. In order to estimate the actual gap between ex ante and ex post measures of lifetime welfare, this paper computes, for 19th‐century European economies, longevity‐adjusted consumption measures based on period and cohort life tables. It is shown that the gap between ex ante and ex post measures is statistically significant, and that attempts to reduce it are likely to be unsuccessful, because standards of living tend to exhibit, over temporal horizons as long as a human life, structural breaks, which make the ex ante measurement of lifetime welfare highly speculative.     

Does Multinationality Affect the Propensity to Innovate? An Analysis of the Third UK Community Innovation Survey

The paper is developed at the interface between internationalization and innovation studies. It utilizes data on innovation from the UK Community Innovation Surveys 3 and 2 (CIS3 and CIS2) to assess whether multinationality affects the innovation propensity of surveyed enterprises. The indicators of innovation propensity—our dependent variables—are taken from the following CIS sets of variables: innovation outputs; innovation inputs; innovation outcomes (patent applications); innovation continuity/sustainability. The latter element is considered to be the ability of the enterprise to sustain innovation over a long period of time and the relevant variable is derived from both CIS3 and 2 data. This allows the paper to introduce dynamic elements into the analysis. Four hypotheses are developed and tested. Our main hypothesis states that multinationality per se (i.e. being part of a multinational company network) affects the propensity to innovate. We also test for three sub‐hypotheses related to characteristics of multinationality: belonging to a group vs being independent; degree of multinationality; being part of a foreign vs domestic multinational. The results show that all those CIS enterprises that belong to a multinational corporation—whether UK or foreign—are more likely to exhibit innovation propensity; they are also more likely to engage in innovation activities on a continuous basis.     

Accomplice Witnesses and Organized Crime: Theory and Evidence from Italy

We develop an agency model of organized crime accounting for the main trade‐offs involved in the introduction of an accomplice‐witness program. We characterize the optimal policy and identify its main determinants in a framework where public officials can be dishonest. Our predictions are tested by using data for Italy before and after the introduction of the 1991 accomplice‐witness program. As predicted by the model and the earlier antitrust literature, the program appears to have strengthened deterrence and enhanced prosecution. Moreover, consistent with a novel prediction of our theory, the evidence suggests that the program efficacy is affected by the judicial system efficiency.     

High‐performance work systems and workplace performance in small,medium‐sized and large firms

This article draws on the Organisational Growth and Development (OGD) life cycle model to explore the relationship between high‐performance work systems (HPWS) and performance in firms of different size, thereby extending understanding of congruence or ‘best fit’ theory within strategic HRM debates. With reference to management control theory, economies of scale and the availability of specialist managerial skills, the article hypothesises that while an HPWS–performance relationship might exist in small, medium‐sized and large firms, the relationship will be stronger in large firms than in both small and medium‐sized firms, and stronger in medium‐sized firms than in small firms. Analysis of data from the British Workplace Employment Relations Survey demonstrates, however, that there is no association between HPWS and workplace performance in medium‐sized firms, in contrast to the positive relationship between HPWS and performance found in large firms and between HPWS and labour productivity in small firms.     

Sense‐giving in health care: the relationship between the HR roles of line managers and employee commitment

In this article, we examine line manager prioritisation of HR roles and the consequences for employee commitment in a health‐care setting. Our analysis is based on a quantitative, multi‐actor study (509 employees and 67 line managers) in four Dutch hospitals. Using sense‐giving as a theoretical lens, we demonstrate that, in addition to the effects of high commitment HRM, prioritising the Employee Champion role alone and the Employee Champion and Strategic Partner roles in combination is associated with higher employee commitment. We argue that through performing roles that are evocative of deep‐seated values, such as excellent patient care and concern for others, line managers can have a positive effect on staff attitudes. In a sector often beleaguered by staff turnover, exhaustion and burnout, we offer an important, empirically based framework that has the potential to improve employee commitment and, from there, enhance performance.