Advertising,Price and Quality in Self–regulating Professions: A Survey

This paper surveys the theoretical and empirical literature on the relationship between advertising, fees and quality in the self–regulating professions. Much of the literature is derived from the perspective of advertising as an information–enhancing device, helping to reduce the information asymmetry between professional and client. This is consistent with the majority of the empirical studies which suggest that advertising tends to have a downward effect on professional fees, with little if any adverse effect on quality. There are, however, important issues of method and measurement which may lessen the force of this conclusion     

Trends in British public investment

British public investment has declined sharply both as a share of GDP and as a share of government spending since the 1970s. Only part of this decline is explained by privatisation, which transferred some public investment to the private sector. More important was the very large and permanent reduction in public house‐building between the mid‐1970s and the early 1980s. Between the late 1980s and the early 1990s, the rate of public investment recovered somewhat, but after that time it declined again, reaching a record low in 1999. The most recent decline in public investment has affected a range of central government programmes, and it has not been significantly offset by investment under the Private Finance Initiative. The government now plans to increase investment spending, although levels look set to remain low by historical standards for some time to come.     

THE RELATIONSHIP BETWEEN THE BLACK MARKET AND OFFICIAL EXCHANGE RATES: AN EXAMINATION OF LONG-RUN DYNAMICS IN INDIA

This study is the first to use Johansen's cointegration approach for India in the analysis of the long‐term dynamics between the black and official exchange rates for the period 1953–1993. The study also estimates the long‐run elasticity of the official rate with respect to the black market rate. As monthly data over 40 years are used, and a more robust methodology is employed, the results are likely to be more reliable as compared with the earlier work on India. The results of our study suggest that while there is a long‐term relationship between the two rates, the direction of causality is from the black rate to the official exchange rate. This is plausible in the Indian context where policy has generally lagged behind events in the black market. The hypothesis of a constant black market premium is rejected, implying that there is a mismatch between the percentage change in the official exchange rate and the percentage change in the black market rate.     

Mountains in motion

While terraforming other planets is a common theme in science fiction, little attention has been given to terraforming our own Earth, to create greater landscape stability. This essay is an attempt to link themes from geology with human brain-body futures, in the spirit of Dator's dictum that any useful idea about the future should appear to be ridiculous. It opens the question of how we might, literally begin to ‘engineer’ a global consciousness.     

Does access to credit improve productivity? Evidence from Bulgaria1

Although it is widely accepted that financial development is associated with higher growth, the evidence on the channels through which credit affects growth at the microeconomic level is scant. Using data from a cross‐section of Bulgarian firms, we estimate the impact of access to credit, as proxied by indicators of whether firms have access to a credit line or overdraft facility, on productivity. To overcome potential omitted variable bias of Ordinary Least Squares (OLS) estimates, we use information on firms’ past growth to instrument for access to credit. We find credit to be positively and strongly associated with TFP. These results are robust to a wide range of robustness checks.     

The Innovation Value Chain in New Technology‐Based Firms: Evidence from the U.K.

Innovation is central to the survival and growth of firms, and ultimately to the health of the economies of which they are part. A clear understanding both of the processes by which firms perform innovation and the benefits which flow from innovation in terms of productivity and growth is therefore essential. This paper demonstrates the use of a conceptual framework and modeling tool, the innovation value chain (IVC), and shows how the IVC approach helps to highlight strengths and weaknesses in the innovation performance of a key group of firms—new technology‐based firms. The value of the IVC is demonstrated in showing the key interrelationships in the whole process of innovation from sourcing knowledge through product and process innovation to performance in terms of the growth and productivity outcomes of different types of innovation. The use of the IVC highlights key complementarities, such as that between internal R&D, external R&D, and other external sources of knowledge. Other important relationships are also highlighted. Skill resources matter throughout the IVC, being positively associated with external knowledge linkages and innovation success, and also having a direct influence on growth independent of the effect on innovation. A key benefit of the IVC approach is therefore its ability to highlight the roles of different factors at various stages of the knowledge–innovation–performance nexus, and to show their indirect as well as direct impact. This in turn permits both managerial and policy implications to be drawn.     

Who's in charge here? Co‐CEOs,power gaps,and firm performance

At the pinnacles of organizations, comparative tests of unity of command and shared command are nearly impossible because only one individual sits atop most organizations. In organizations led by co‐CEOs, however, such a test is possible because co‐CEOs can truly share power. But do they? Our research pits the unity‐of‐command principle against the shared‐command principle and finds overall support for the former, even within the co‐CEO context. Our sample of 71 co‐CEO pairs at publicly traded U.S. firms shows that increasing power gaps between co‐CEOs are positively associated with firm performance. This positive association wanes and turns negative, however, as power gaps become very large. We conclude that whatever benefits the co‐CEO structure might offer likely lie outside the shared command paradigm. Copyright © 2014 John Wiley & Sons, Ltd.     

Internal Versus External R&D: A Study of R&D Choice with Sample Selection

This paper extends previous analyses of the choice between internal and external R&D to consider the costs of internal R&D. The Heckman two-stage estimator is used to estimate the determinants of internal R&D unit cost (i.e. cost per product innovation) allowing for sample selection effects. Theory indicates that R&D unit cost will be influenced by scale issues and by the technological opportunities faced by the firm. Transaction costs encountered in research activities are allowed for and, in addition, consideration is given to issues of market structure which influence the choice of R&D mode without affecting the unit cost of internal or external R&D. The model is tested on data from a sample of over 500 UK manufacturing plants which have engaged in product innovation. The key determinants of R&D mode are the scale of plant and R&D input, and market structure conditions. In terms of the R&D cost equation, scale factors are again important and have a non-linear relationship with R&D unit cost. Specificities in physical and human capital also affect unit cost, but have no clear impact on the choice of R&D mode. There is no evidence of technological opportunity affecting either R&D cost or the internal/external decision.     

Measuring the effectiveness of non-price export promotion using a supply-side approach

In this paper we assess the effectiveness of the Market Promotion Program (MPP) in increasing U.S. exports and benefitting U.S. agricultural producers and food processors. Export shipments are linked to producer welfare using Kohli's (1978) profit maximization (GNP function) approach to modeling international trade. Using estimated profit functions in conjunction with a synthetic export demand function for processed agricultural products, we compute changes in farm and food processing sector profits that result from alternative own-price and advertising elasticities of export demand with and without the MPP subsidy. This approach allows us to investigate aggregate welfare effects of nonprice promotion without requiring the difficult task of estimating the export demand effects of market promotion activities for numerous commodities and importing countries. First version received: April 1999/Final version received: June 2000