The Regime-Dependent Determination of Credibility: A New Look at European Interest Rate Differentials

Abstract. With persistence in macroeconomic variables two aspects of exchange rate credibility emerge whose relative importance varies over time. Both aspects have opposite implications for the relation between fundamentals and credibility. Hence, the effect of policy measures on interest rate differentials becomes ambiguous. In this paper a Markov-switching VAR that allows for parameter shifts across regimes is employed to test the hypothesis of regime-dependent determination of credibility for major EMS currencies. Regime-dependent impulse response functions reveal substantial differences in the response of spreads to macroeconomic shocks across regimes.     

Resource Curse or Not: A Question of Appropriability*

Whether natural resources are good or bad for a country's development are shown to depend on the interaction between institutional setting and, crucially, the types of resources possessed by the country. Some natural resources are, for economical and technical reasons, more likely to cause problems such as rent‐seeking and conflicts than others. This potential problem can, however, be countered by good institutional quality. In contrast to the traditional resource curse hypothesis, we show the impact of natural resources on economic growth to be non‐monotonic in institutional quality, and increasingly so for certain types of resources. In particular, countries rich in minerals are cursed only if they have low‐quality institutions, while the curse is reversed if institutions are sufficiently good. Furthermore, if countries are rich in diamonds and precious metals, these effects—both positive and negative—are larger.     

Adapting consumer products to lesser-developed markets

Different types of modern consumer products require substantially different amounts and types of adaptation in preparing them for marketing in Lesser-Developed Countries (LDCs). This study reports conclusions drawn from an empirical study of 174 products marketed by 61 subsidiaries of multinational corporations operating in 22 different LDCs. Some product categories, such as foods and drinks, require adapting to fit them more appropriately for LDC marketing conditions. Other categories, such as cosmetics, undergo few adaptations, as their makers seek to reap the benefit of their products' established images in LDCs. Still other categories, such as pharmaceuticals, undergo minimal adaptations, because of the substantial advantages their makers attach to global standardization.     

Selecting Winning New Product Projects: Using the NewProd System

Separating probable winners from probable losers is the goal of the new product screening task, and Professor Robert G. Cooper has developed a model that does this with remarkable success. In this article, he reviews various approaches to new product screening and then presents the basics of the NewProd model. NewProd now has a history of use in industry that seems to be fulfilling its original research promise. Professor Cooper shows how managers can build their own screening models and outlines how such models can contribute in an important way to better new product selection decisions. Over the years, Professor Cooper has conducted a series of major research projects that have aimed at improvements in the new product process. Their hallmark has been managerial relevance and a sound theoretical foundation. This article, the third that Professor Cooper has published in JPIM , is in the same tradition.     

On the Segregation of Genetically Modified,Conventional and Organic Products in European Agriculture: A Multi‐market Equilibrium Analysis

Evaluating the possible benefits of the introduction of genetically modified (GM) crops must address the issue of consumer resistance as well as the complex regulation that has ensued. In the European Union (EU), this regulation envisions the co‐existence of GM food with conventional and quality‐enhanced products, mandates the labelling and traceability of GM products and allows only a stringent adventitious presence of GM content in other products. All these elements are brought together within a partial equilibrium model of the EU agricultural food sector. The model comprises conventional, GM and organic food. Demand is modelled in a novel fashion, whereby organic and conventional products are treated as horizontally differentiated but GM products are vertically differentiated (weakly inferior) relative to conventional ones. Supply accounts explicitly for the land constraint at the sector level and for the need for additional resources to produce organic food. Model calibration and simulation allow insights into the qualitative and quantitative effects of the large‐scale introduction of GM products in the EU market. We find that the introduction of GM food reduces overall EU welfare, mostly because of the associated need for costly segregation of non‐GM products, but the producers of quality‐enhanced products actually benefit.     

Exports in the strategy of multinational enterprises

Using data from a sample of 329 multinational firms, this paper analyses the impact of increases in foreign production on exports from the parent firm. The relationship between internal exports and foreign production is positive at all feasible levels of foreign production, although the impact on extra-group exports may be negative. These effects may be swamped by changes in relative international competitiveness between firms of the same nationality and industry group. The importance of these findings for multinational firms is that anticipation of these effects can reduce costs of reallocation of resources for the parent, firm and the results illustrate the wide remaining scope for further internationalization even among the world's largest firms. The impact of foreign production on home country employment is likely to remain positive so long as the firm's international competiveness can be improved.     

Private value of European patents

I examine the joint patent designation-renewal behavior of the European Patent Office (EPO) patent applicants during 1978-1996, using both nonparametric techniques and a parametric model. The European patents granted through the EPO are substantially more valuable than those through the national route. Value distribution of patents is highly skewed, and even more so for the EPO patent families. The value of patent rights increases with the economic size of the country and exhibits modestly increasing returns to scale. Model estimation also reveals significant institutional differences across EPO member countries in patent protection.     

From Experience: Demystify Creativity, Enhance Innovation

Creativity need not be a chance occurrence. The authors of this article believe there is a technology that facilitates creativity. It is a technology that can be learned and applied and managed. They describe the specific steps that they followed in helping a group of R&D professionals learn, apply, and manage the creative processes in the lab. It is a story of practical steps that dealt with the everyday realities of managing in a large corporation.