Motivations and barriers of foreign R&D activities in China

The continued growth of the Chinese economy accompanied with the expansion of international investment in China has led to an increase in foreign research and development (R&D) activities in the country. Aside from the rising importance of R&D internationalization, research on foreign R&D in China has been neglected in the past due to its emerging status. In this article we examine drivers and barriers for conducting R&D in China. The focus of our research is on transnational companies typically characterized by decentralized R&D activities. Our research is mainly based on qualitative interviews with senior R&D managers. The success of foreign R&D activities in China strongly depends on the realistic estimation of its advantages and the proper identification and handling of barriers.     

Reviewing Oates' insights in a repeated game setting

This paper analyzes the optimal assignment of public good policies to layers of a federal system in a repeated game setting. Under a centralized regime, public goods are financed jointly across regions, and a federal legislature decides on the regional quantities. Under a decentralized regime, public goods are financed locally, and governments play a non-cooperative provision game. We find that a centralized (decentralized) regime is more likely to provide the efficient public good policies in case spillovers are small (large). Received: September 2003, Accepted: October 2004 JEL Classification: H11, H41 I wish to thank Clemens Fuest, Anke Kessler, Christoph Lülfesmann, and an anonymous referee for valuable comments on this paper. Financial support by the DFG (SPP 1142) is gratefully acknowledged.     

Entry and Exchanges of Cost Information

The literature on exchanges of information has ignored firms' entry decisions. Yet, the Federal Trade Commission recently expressed concerns that exchanges of information in business-to-business electronic platforms would adversely impact entry and, thus, consumers. When entry decisions are endogenized in a competitive Cournot model with cost uncertainty, we find results that contrast sharply with current thinking on the welfare consequences of information sharing.     

Designing trust

The decision making process in technological development, with its underlying suppositions of certainty and controllability, contributes to fomenting social resistance to technology rather than trust among social actors. Those underlying suppositions are in disaccord with values and world views expressed by the new social movements. These movements, which form part of today’s civil society and are critical of many modern technologies, tend to hold an implicit view of technology as a social experiment under uncertainty. The tendency of the current design activity of basing design decisions on criteria, like engineering efficiency, defined as objective, is contributing to this lack of trust in the very process of decision making, which many social actors are currently demonstrating. Technology, however, depends on sustained public trust. Future technology design has therefore to take into account, as one of its basic functions, the creation of trust among actors.     

The effects on investment incentives of an allowance for corporate equity tax system: the Belgian case as an example

The Modigliani–Miller theorem serves as the standard finance paradigm on corporate capital structure and managerial decision making. Implicitly, it is assumed that the market possesses full information about the firm. However, if firm managers have insider information, they may attempt to ‘signal’ changes in the firm’s financial structure and, in competitive equilibrium, shareholders will draw deductions from such signals. Empirical work shows that the value of underlying firms rises with leverage because investors expect such firms to implement positive NPV projects. We empirically examine this view using a sample of debt issue announcements by publicly traded firms listed on the London Stock Exchange. We argue that the timing of debt issues is fundamental in determining the relationship between leverage and risk-adjusted returns. We show that an announcing firm’s intrinsic value may not rise depending on when management publicly ‘signals’ changes in their firm’s capital structure. Specifically, we show that risk-adjusted returns rise positively for firms that make debt announcements during normal economic conditions while they tend to decline for firms making debt announcements during recessionary periods. During recessionary periods, market risk and loss aversion rise and investors focus less on the potential growth of debt announcing firms and focus more on potential losses instead. We conclude that the timing of new debt is of paramount importance and managers’ inability to prudently time such announcements can lead to exacerbated levels of systematic risk coupled with a significant erosion in shareholder wealth.     

The EC‐LQO five‐factor framework: An alternative lens for business model innovation in highly knowledge‐intensive industries

Growing technological complexity continues to drive firms to interact with the external innovation environment to achieve firm success. However, industries' complexities and the business model concept's underlying ontology have limited research on modeling the key factors that enable this interface. In this study, results of an empirical analysis of a unique dataset of 102 biopharmaceutical companies broadly support the EC‐LQO five‐factor framework as a useful tool to guide business model innovation for highly knowledge‐intensive environments.     

Power politics and princely debts: why Germany's common currency failed, 1549–56†

Using new sources, this article examines how in the years around 1550 Charles V and the imperial estates came close to creating a common currency for the Holy Roman Empire. The article analyses whose interests prevailed in the negotiations and how, despite the resistance of some important actors, the Imperial diet of 1551 was able to unanimously agree on the currency bill. It also analyses why the common currency still failed: This was the case because of the desire of many princes to ease the repayment of their debts by establishing a bimetallic currency, and even more importantly because of Charles V's attempt to weaken the Elector of Saxony by undervaluing the taler. In this, Charles exploited the diet's implicit ex‐ante agreement with him to set the rates at which old money was allowed to continue in circulation. His manipulations provoked resistance, raised the costs of implementing the common currency, and caused its failure.