Rules for Growth: Promoting Innovation and Growth Through Legal Reform

The United States economy is struggling to recover from its worst economic downturn since the Great Depression. After several huge doses of conventional macroeconomic stimulus - deficit-spending and monetary stimulus - policymakers are understandably eager to find innovative no-cost ways of sustaining growth both in the short and long runs. In response to this challenge, the Kauffman Foundation convened a number of America’s leading legal scholars and social scientists during the summer of 2010 to present and discuss their ideas for changing legal rules and policies to promote innovation and accelerate U.S. economic growth. This meeting led to the publication of Rules for Growth: Promoting Innovation and Growth Through Legal Reform, a comprehensive and groundbreaking volume of essays prescribing a new set of growth-promoting policies for policymakers, legal scholars, economists, and business men and women. Some of the top Rules include: • Reforming U.S. immigration laws so that more high-skilled immigrants can launch businesses in the United States. • Improving university technology licensing practices so university-generated innovation is more quickly and efficiently commercialized. • Moving away from taxes on income that penalize risk-taking, innovation, and employment while shifting toward a more consumption-based tax system that encourages saving that funds investment. In addition, the research tax credit should be redesigned and made permanent. • Overhauling local zoning rules to facilitate the formation of innovative companies. • Urging judges to take a more expansive view of flexible business contracts that are increasingly used by innovative firms. • Urging antitrust enforcers and courts to define markets more in global terms to reflect contemporary realities, resist antitrust enforcement from countries with less sound antitrust regimes, and prohibit industry trade protection and subsidies. • Reforming the intellectual property system to allow for a post-grant opposition process and address the large patent application backlog by allowing applicants to pay for more rapid patent reviews. • Authorizing corporate entities to form digitally and use software as a means for setting out agreements and bylaws governing corporate activities. The collective essays in the book propose a new way of thinking about the legal system that should be of interest to policymakers and academic scholars alike. Moreover, the ideas presented here, if embodied in law, would augment a sustained increase in U.S. economic growth, improving living standards for U.S. residents and for many in the rest of the world

The Returns to Hedge Fund Activism

Hedge fund activism is a new form of investment strategy. Using a large hand-collected dataset from 2001 to 2006, we find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. The abnormal stock return upon announcement of activism is approximately 7 percent, with no reversal during the subsequent year. Target firms experience increases in payout and operating performance and higher CEO turnover after activism. We find large positive abnormal return to hedge fund activists, which is higher than the return to other equity-oriented hedge funds

The Returns to Hedge Fund Activism

Hedge fund activism is a new form of investment strategy. Using a large hand-collected dataset from 2001 to 2006, we find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. The abnormal stock return upon announcement of activism is approximately 7 percent, with no reversal during the subsequent year. Target firms experience increases in payout and operating performance and higher CEO turnover after activism. We find large positive abnormal return to hedge fund activists, which is higher than the return to other equity-oriented hedge funds