A new business model?

The paper delivers an analysis of the “New Economy” focussing on the roles of new business models, the capital market and venture capital. The capital market created a double standard in the 1990s: A high return on capital was required from old economy firms whereas money was thrown at new economy firms which had a business idea that stimulated the fantasies of financial investors but no earnings. Through the gradual burst of the tech stock bubble since spring 2000 it has come to the eyes of the public that many new economy start ups were unable to recover their costs. This paper shows that business models related to the internet can only work under certain conditions. The sectoral distribution of power, for example, determines the prospects of the single firms to realise e-commerce in a profitable way. Digital technologies do not necessarily enhance profitability. On the contrary, they can increase competition and lead to lower profit rates. The limitation of competition appears to be a central condition of successful cost recovery. The venture capital cycle has been an important driving force of the new economy boom, but it can also be momentum of a longer crisis. Enormous amounts of money have been channeled to new economy start ups hoping that successful IPOs will one day give venture capitalists a high return. But the burst of the bubble has brought down the IPO activity and interrupted the valorisation cycle of venture capital. Financial investors have reacted to the crisis by shifting their capital to even riskier investments, as the come-back of hedge funds indicates. --

2008 State New Economy Index: Benchmarking Economic Transformation in the States

Scores and ranks states' economic structures on their competitiveness in the New Economy, as measured by the prominence of knowledge jobs, globalization, economic dynamism, transformation to a digital economy, and capacity for technological innovation

2010 State New Economy Index

Measures states' economic structures on twenty-six indicators of their competitiveness in the New Economy: the prominence of knowledge jobs, globalization, economic dynamism, transformation to a digital economy, and technological innovation capacity

Freezing Innovation: How the Platform Competition and Opportunity Act Will Freeze Funds in the Tech Start-Up Market

The rise of technological giants like Amazon, Apple, Google, and Facebook motivated the House Judiciary Committee to pass a slew of new antitrust legislation bills to curb these companies’ considerable market power. The Platform Competition and Opportunity Act proposes to significantly cut a dominant online platform’s ability to continue growing by deeming certain acquisitions presumptively unlawful. The Act shifts the burden to the acquiring company to prove the proposed transaction would not be anticompetitive by eliminating a potential competitor. In an effort to protect competition, the Act has good intentions to protect start-up companies that are fearful of being acquired by big tech companies. However, severely limiting transactions in the tech industry could have significant ramifications for both the start-up companies and the consumers it seeks to protect. Venture capital firms play a crucial role in developing a start-up company by providing considerable capital at the onset. Part of the evaluation process for start-up companies involves valuing the exit opportunities, like acquisitions. Eliminating this option will decrease the value of start-up companies and cause a domino effect detrimental to innovative development. Venture capital firms will be even more selective in their investing, entrepreneurs will be hesitant to enter the market, and, with less ideas funded, innovation will freeze

Special Purpose Acquisition Companies deal announcement market reaction and performance : Empirical evidence from the U.S. SPACs during 2020 - 2021

The special purpose acquisition company (SPAC) boom has been highly active since the beginning of 2020. Yet, SPACs are studied quite narrowly. The study aimed to examine how the market reacts when SPAC makes the deal announcement and to find out possible abnormal returns during the event. The study was performed for 40 SPACs. Abnormal returns were calculated for the event study, +/-3 days from the deal announcement. Also, abnormal returns were calculated for 1 week -, 2 weeks -, and one month from the announcement. The returns were risk-adjusted by the S&P500 index for the same periods for each SPAC. K-means clustering was executed for the SPACs by using min, max, and mean returns as explanatory variables and abnormal returns as target variables. The observation periods for the clusterings were a deal announcement day, 1-week -, 2 weeks -, and 1-month -post-announcement days. The results indicate that most of the SPAC companies had similar behavior between the observation periods and different explanatory variables. Yet, there were no similarities inside the clusters, and the two dummy variables, deal value, and SPAC’s target company industry could not either explain the abnormal returns during the observation periods. The study included two hypotheses: H1 assumed that SPACs do not generate abnormal returns on the day after the announcement date. H2 instead assumed that SPACs generate abnormal returns on the announcement date. Based on the results, H1 and H2 both were accepted. Also, it should be noted that the amount of available data for this thesis is quite narrow due to timeliness and data limitations. As a further research proposal, the number of samples should be raised, and the observation period should be increased after the data is available in order to create more significant results

The Geography of the New Economy

As discussions of the New Economy become increasingly common, it is also clear that there the term requires some clarification. There’s a macroeconomic version, able to keep on growing rapidly without inflation, and there’s a microeconomic version, apparently driven by a new kind of firm. There’s the digital version, likely to be identified with an Information Age. Then there are variants that focus on management, labor relations, sustainable development, and other topics as well. What most new-economy approaches have in common is the idea that computers and in particular networked PCs have changed things in a fundamental way. That is the common denominator we will encounter as we look at the macro, micro, and digital versions of the new economy hypothesis in turn.https://researchrepository.wvu.edu/rri-web-book/1030/thumbnail.jp

A new business model?

"The paper delivers an analysis of the 'New Economy' focussing on the roles of new business models, the capital market and venture capital. The capital market created a double standard in the 1990s: A high return on capital was required from old economy firms whereas money was thrown at new economy firms which had a business idea that stimulated the fantasies of financial investors but no earnings. Through the gradual burst of the tech stock bubble since spring 2000 it has come to the eyes of the public that many new economy start ups were unable to recover their costs. This paper shows that business models related to the internet can only work under certain conditions. The sectoral distribution of power, for example, determines the prospects of the single firms to realise e-commerce in a profitable way. Digital technologies do not necessarily enhance profitability. On the contrary, they can increase competition and lead to lower profit rates. The limitation of competition appears to be a central condition of successful cost recovery. The venture capital cycle has been an important driving force of the new economy boom, but it can also be momentum of a longer crisis. Enormous amounts of money have been channeled to new economy start ups hoping that successful IPOs will one day give venture capitalists a high return. But the burst of the bubble has brought down the IPO activity and interrupted the valorisation cycle of venture capital. Financial investors have reacted to the crisis by shifting their capital to even riskier investments, as the come-back of hedge funds indicates." (author's abstract)"Die Autoren liefern einen Beitrag zum Verständnis der 'New Economy', indem sie die Bedeutung neuer Geschäftsmodelle, nämlich des Kapitalmarkts und des Risikokapitals, herausarbeiten. Der Kapitalmarkt operierte in den 1990er Jahren mit zweierlei Maß: Von Unternehmen der 'Old Economy' wurden hohe Kapitalrenditen gefordert, während Unternehmen der 'New Economy' es leicht hatten, Geld zu bekommen, sofern sie nur eine Geschäftsidee hatten, die die Phantasie der Finanzinvestoren stimulierte. Durch den Kursverfall der 'Technologieaktien' seit dem Frühjahr 2000 wurde deutlich, daß viele 'Start-up'-Unternehmen der New Economy unfähig waren, ihre Kosten zu decken. Die Autoren zeigen, daß Geschäftsmodelle, die sich auf das Internet beziehen, nur unter bestimmten Bedingungen profitabel sind. Die sektorale Machtverteilung entscheidet beispielsweise über die Chancen von Unternehmen, den E-Commerce in profitabler Weise zu nutzen. Digitale Technologien können auch die Konkurrenz verschärfen und zu sinkenden Profitraten führen. Die Begrenzung der Konkurrenz ist eine zentrale Voraussetzung erfolgreicher Kostendeckung. Der Zyklus der Risikokapitalinvestitionen war eine wichtige Triebkraft des New- Economy-Booms, aber er könnte sich ebenso als Moment einer länger andauernden Krise erweisen. Enorme Beträge wurden in der Hoffnung in die 'Start-ups' der New Economy gelenkt, daß erfolgreiche Börsengänge den Risikokapitalisten eines Tages hohe Gewinne bescheren würden. Seitdem die spekulative Blase an den Aktienmärkten geplatzt ist, gibt es kaum noch Börsengänge, so daß der Verwertungszyklus des Risikokapitals unterbrochen ist. Finanzinvestoren haben auf die Krise reagiert, indem sie ihr Kapital auf noch riskantere Investments verlagert haben, wie das Comeback der Hedgefonds zeigt." (Autorenreferat