The Kornai effect with partial bailouts and taxes

The model examines Kornai's observation that in the presence of bailouts, firms' demand for inputs will be greater than would otherwise be the case. This conjecture is examined in a model in which both revenue and cost uncertainty are present and in which firms making losses are partially subsidized and firms making positive profits are partially taxed. The Kornai effect is more prevalent the greater the subsidy rate, the smaller the tax rate and the greater the variance of the random variables through which uncertainty manifests itself. In the case of strongly positively correlated cost and revenue uncertainty, the absolute incidence of the Kornai effect is small.     

Productivity,employment and labor demand in Polish industry in the 1980s: Some preliminary results from enterprise-level data

The paper uses annual data from a panel of 334 Polish industrial enterprises over the period 1983–1988 to test empirically a simple neoclassical approach to the socialist labor market. First, an enterprise production function is estimated. The paper finds that for most enterprises, the resulting estimated marginal product of labor exceeds the wage paid by the enterprise by a considerable margin, suggesting general excess demand for labor. The paper then looks at how the difference between the MPL and the wage is related to the rate of change of employment, and finds that firms where the MPL is higher than the wage — firms which in a neoclassical model would have a large excess demand for labor — do not shed labor any more slowly than other firms.     

Innovation and internationalization: the case of Italy

The aim of this paper is to analyze the impact of international activities on knowledge output. For this purpose, we employ a dataset containing exclusively qualitative information about a sample of small and medium Italian manufacturing firms. In the econometric analysis, a probit model is used. The results of the estimations highlight that firms active in international markets generate more knowledge than their counterparts which sell in the national market only. There are two possible explanations of this result. First, globally engaged firms employ more knowledge inputs, such as higher innovation expenditures. Second, international firms are more innovative because they can access to a larger flow of ideas from external sources.     

Does knowledge diffusion between university and industry increase innovativeness?

This paper presents an econometric analysis of the impact of collaboration with universities on the innovative output of firms. We also illustrate the differences that emerge from robustness checks, based on different matching estimators and samples. Our findings strongly suggest that university collaboration has a positive influence on the innovative activity of large manufacturing firms. In contrast, there appears to be an insignificant association between university collaboration and the average service firm’s innovation output.     

Technology utilization — The new corporate challenge

Technology transfer and utilization is a process that has a profound impact on the survival of the firm, particularly in today's high technology market where technological changes are rapid and often dramatic. The market place both locally and internationally is replete with business failures resulting from the inability of firms to maintain a competitive edge in technology utilization and/or transfer. We contend that many such failures could be avoided by establishment of in-house programs developed specifically to address the utilization and transfer of technologies associated with the firm. This paper proposes a general methodology to identify and establish such an in-house program regardless of the technology area of interest. Once implemented such program can be used as engines of technological innovation by working in an active versus reactivemode.     

Modernizing small manufacturers in Japan: The role of local public technology centers

Japan's hundreds of thousands of small manufacturing enterprises not only provide high-quality inputs to large Japanese companies, but also are becoming innovators and growth generators in their own right. In addition to help from larger customers, small Japanese companies can call upon an array of public support mechanisms, including about 170 local Kohsetsushi examination and technology centers which provide research, testing, training, and guidance for firms with under 300 employees. With their intensive geographical coverage, broad range of technical services, and nominal fees, these centers offer small Japanese firms a readily available and effective source of assistance to improve their manufacturing operations, technology, and products. After reviewing the changing context for small manufacturers in Japan, the article examines the role of local Kohsetsushi centers in small firm modernization. This article considers the history, organization, and services of the Kohsetsushi system, explores the operation of five case study centers, and discusses how small Japanese firms benefit from Kohsetsushi services. Finally, there is an assessment of the strengths and weaknesses of the Kohsetsushi system.     

BANK-FIRM RELATIONSHIP AS A STRATEGIC COMMITMENT IN A DUOPOLISTIC ENVIRONMENT

By using a three-stage game, this paper shows that an investmentin the banking sector may commit a duopolistic firm to a moreaggressive output stance. This aggressiveness is translatedby an outward shift in the firm's reaction function, thus increasingits own output and decreasing its rival's output. While it isindividually beneficial for a firm to invest in a banking business,both firms taken together in a duopoly industry are made worse-offby such an investment, because they produce too much. Firmsare caught in a financial version of the prisoner's dilemma.     

Innovation capital

In this paper we compare the relationship between a firm’s innovation capital and the likelihood that a firm will commercialize an invention. Our index of innovation capital is the product of the firm’s human capital, social capital, and reputational capital. We find from our empirical experiment, which uses Small Business Innovation Research data, that innovation capital is a statistically more important entrepreneurial input to the innovation output of commercialization than any of its components.     

Corruption and hold-up: the role of intermediaries

Corrupt contracts are illegal and, therefore, vulnerable to hold-up. That is, a bureaucrat who has accepted a bribe from a firm in exchange for a license may still choose not to grant the firm that license (hold-up). This paper develops a model to study the role that intermediaries play in preventing hold-up. There are two types of firms, good firms that are legally entitled to receive a license, and harmful firms that are not. Without intermediaries only good firms enter the market, and harmful firms do not enter because of hold-up. Intermediaries are legally permitted to help firms reduce their navigation costs of obtaining licenses. Thus, intermediaries increase entry of good firms. However, by utilizing the legal aspects of their transaction with good firms as leverage against the bureaucrat, intermediaries can prevent hold-up among harmful firms. Thus, intermediaries increase participation by both good and harmful firms and their welfare costs are ambiguous. Data obtained from occurrences of violations of the Foreign Corrupt Practices Act are broadly consistent with our model.     

The Strategic Use of Demand‐side Diversity Pressure in the Solicitors' Profession

There has been a long line of official initiatives seeking to address the poor record of the solicitors' profession on diversity. One of the latest, the Law Society's 2009 Diversity Charter and Protocol, attempts to harness client pressure as a way of bringing about change. The objective of the paper is to assess this strategic use of ‘demand‐side diversity pressure’ in the solicitors' profession, contextualizing the strategy and using different perspectives to assess it. The paper first considers the strategy as a development of ‘business case’ arguments for diversity and explores the implications of scholarly objections to this approach. Secondly, the paper uses empirical data from the City law firm sector to explore the nature and practical effects of demand‐side diversity pressures within law firms. I conclude by considering the prospects of the Law Society's scheme having a meaningful effect, factoring in the possible effects of the ongoing global economic crisis.     

Insider-controlled Firms in Russia

Privatisation Vouchers in Russia were heavily invested in the holders' own firms. Using data from a recent survey, we show that insider control in firms privatised in 1992-4 through the voucher process (as distinct from the earlier leased buy-out method) is insecure and dependent on managers' support. For employees, investment in insider control appears to have been motivated by employment income insurance rather than expected excess returns on the equity. Managers are predominantly the same individuals as before privatisation and display considerable hostility to outside investors, probably because they fear dismissal should outsiders gain control. Despite insider control, firms are shedding labour quite rapidly through voluntary resignations. Employment dynamics appear to be unrelated to insider equity ownership.     

Rationing,defective inputs and Bayesian updates under central planning

The enterprise manager anticipates that he will be rationed in his input markets and is required to meet an output target. In order to avoid a penalty for missing the output target, he can purchase the inputs at an earlier time, when rationing is not in effect, but then he must incur an inventory cost. The inputs themselves are defective with a known mean rate but unknown variability; the manager has a prior density over this parameter. He can solve the relevant expected-cost minimisation problem in three ways: (a) by simultaneously determining the optimal amounts to be ordered on the two dates, (b) by dynamic programming, and (c) by dynamic programming combined with Bayesian learning. The paper investigates the properties of the optimal solution under the three scenarios with respect to variations in the defective rate, the level of uncertainty and the relative costs of inventories and of missing the target.     

Patent cross-licensing,the influence of IP interdependency and the moderating effect of firm size

This paper analyzes technological interdependency as the key factor for companies’ motivation to engage in cross-licensing transactions. It gives evidence on how the incentive effects for mutual technology transfers vary by firm size and the degree to which a firm has to rely on its competitors’ intellectual property (IP dependency). Even though IP dependency exists also among smaller firms, cross-licensing has previously only been analyzed for large firms. This paper fills this gap in the empiric literature using original survey data among German manufacturing companies. Findings suggest that the influence of firm size and IP dependency on the use of cross-licensing can not be regarded separately. While the effect of IP dependency on the relevance of cross-licensing itself has a clear positive effect this seems to be true to a higher extent for small firms and decrease for larger companies. A possible reason for the interaction effect between these two factors is that larger firms have better odds of achieving a technological workaround which can serve as an alternative to in- or cross-licensing; furthermore small high tech firms might need to explicitly use cross-licensing to secure the freedom to operate while a large firm’s patent portfolio itself can serve as an implicit insurance by posing a threat which prevents other technology holders to file patent infringement cases.     

An Economic Justification for Open Access to Essential Medicine Patents in Developing Countries

This paper offers an economic rationale for compulsory licensing of needed medicines in developing countries. The patent system is based on a trade-off between the "deadweight losses" caused by market power and the incentive to innovate created by increased profits from monopoly pricing during the period of the patent. However, markets for essential medicines under patent in developing countries with high income inequality are characterized by highly convex demand curves, producing large deadweight losses relative to potential profits when monopoly firms exercise profit-maximizing pricing strategies. As a result, these markets are systematically ill-suited to exclusive marketing rights, a problem which can be corrected through compulsory licensing. Open licenses that permit any qualified firm to supply the market on the same terms, such as may be available under licenses of right or essential facility legal standards, can be used to mitigate the negative effects of government-granted patents, thereby increasing overall social welfare.     

Insider Privatisation and Restructuring Incentives

In the literature on privatisation and restructuring it is a generally held belief that manager owned firms will be restructured more rigorously than worker owned companies. This gives the clear recommendation that property rights and control rights should be allocated to managers in the process of (insider-) privatisation. One of the implied arguments is, that managers' career concerns will make them eager to prove their ability by improving company efficiency. The present model shows that in the transition context managers' career concerns might result in the opposite effect. If the bulk of job opportunities are in worker controlled firms, the managers of the few manager controlled firms will want to appear soft on excess labour capacity – hence, restructure less harshly – in order to improve their career opportunities.     

When Social Norms and Pressures Are Not Enough: Environmental Performance in the Trucking Industry

Why do some business firms and not others work hard to advance regulatory values such as environmental protection and comply with regulations? Previous research indicates that business firms are influenced in that regard by a number of variables—not merely the perceived likelihood of legal punishment but also the risk of negative reactions by societal actors (which we call “social license pressures”) and the intensity of managers' commitment to norms of law‐abidingness and environmentalism. This article reports on a study of control of diesel emissions in the trucking industry, a highly competitive market with many small firms, mobile pollution sources, expensive “best control technologies,” and weak regulatory demands. In contrast to findings in studies of large firms, we found that social license pressures on small trucking firms are minimal. Trucking companies' environmental performance—good and bad—flows from managers' economic choices, which are influenced by their particular market niche. In such highly competitive, small‐firm market contexts, these findings imply, significant improvement in environmental performance is not likely without strong direct regulatory pressures.     

Risk management and regulation compliance with tradable permits under dynamic uncertainty

In this paper, we explore the effects of dynamic uncertainty on the risk management of regulated industries and emission market. We consider as major sources of uncertainty the stochastic growth of demand for the industry output (e.g. electric energy) and the ensuing lack of information on the pollution levels of individual firms, their behavior and the behavior of the regulator. These sources of uncertainty are common in pollution permit trading as not only does the market respond to the volatility of fundamentals but also to the vagaries of the institutional structure, created by public policy and enforced through regulation. The paper shows that in the presence of strategic behavior on the part of the agents involved, even though both the level and the volatility of output increases over time, trading of permits is a highly effective instrument of risk management, since it allows the firms to pool the risks arising from the volatile environment, thereby simplifying enforcement, reducing emissions and improving resource allocation. Moreover, uncertainty plays a subtle influencing role, since on one hand it broadens the regulator’s deterrent power over potential polluters, while on the other it reduces the expected value of the sanction for the individual firm.     

Firm innovation in policy-driven parks and spontaneous clusters: the smaller firm the better?

Mixed evidence has been found regarding how locating in a cluster or a park affects firms?? performance. This paper investigates how locating in different types of clusters and parks interacted by firm size or in-house R&D capability affects a firm??s innovation. Empirically testing the research hypotheses by the data of 165 Taiwan??s manufacturing firms in the information and communication technology sector and taking policy-driven parks (e.g., science parks and industrial parks) and spontaneously clusters as examples, we find that in emerging economies, firms with inferior in-house R&D capability gain more innovation benefits by locating in a science park or a spontaneous cluster while smaller firms gain more innovation benefits by locating in an industry park or a spontaneous cluster. Moreover, our findings also suggest that locating in a science park, smaller firms benefit more than larger firms in terms of innovation performance whereas larger firms benefit more than smaller firms in terms of market performance. The findings suggest that in emerging economies, compared to larger firms, smaller firms are less influenced by negative spillover effect when locating in clusters or parks.     

“Fitting in” and “opting out”: exploring how law students self-select law firm employers

In this paper we draw on interviews with 15 law students at the University of Birmingham in the UK to explore the extent to which law students critically self-evaluate themselves against their perceptions of the preferences of elite law firms. While our conclusions are necessarily tentative, we show how some law students “opt out” of applying to certain law firms where they perceive there is no fit between themselves and that law firm. Equally, our data also shows that some students recognise that, despite not having a supplementary fit with a firm (i.e. they can see that they do not “match” that firm’s current crop of lawyers or what they think is the firm’s culture), they realise that they can instead be a complementary fit for the firm, and hence realise that their potential to add something “new” to the law firm (by way of increasing diversity) can secure them a vacation scheme placement or a training contract. Finally, a proportion of students play “the numbers game” and despite determining a law firm “misfit”, still proceed to apply to as many law firms as possible as they thought that more applications meant a higher chance of success.     

The Role of Symmetry between the Revenue and the Expenditure Side of the Government Budget in the Debate about the Potential Negative Effects of Tax Competition

The effects of capital tax competition are reconsidered in this paper incorporating the argument that the expenditure structure of public budget should reflect its revenue structure. The paper offers a small open economy model where capital and labour tax revenues are used exclusively on the provision of public inputs. It is shown that if the revenue side of the government budget exactly matches the expenditure side that is if industrial public goods are financed by both private production factors with the weights reflecting the contributions of public inputs to the private factor productivity then public inputs are provided optimally even in the presence of tax competition.