Management Skills Difference between Low and High R&D Concentration Firms

The article shows that in firms with high R&D concentration management involvement in R&D issues is high. That involvement shows that the management team has a crucial part in the role of R&D in these firms. It requires that the management develop the skills and intuition required to deal with R&D issues in addition to the internal routines in the firms. In low R&D concentration firms that requirement does not exist. The environment does not encourage the wasteful practice of developing unnecessary skills. However, when moving firms from the Low end of R&D concentration to the High end, in parallel to the development of the required internal routines, and the creation of the infrastructure, new skills have to be developed in the management team. Further, the article shows that firms with high R&D concentration involved in Collaborative research tend to copy management organs and routines from their structure to the consortia they form. This tendency presents another difficulty for firms with low R&D concentration when they come to join such consortia or programs. As this is only a preliminary research into these aspects as they are demonstrated in collaborative research consortia, the article ends with recommendations for future research.R&D; research; statistics; concentration management; development.

Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach

Efficiency is considered a key factor when evaluating a bank's performance. Moreover, efficiency enhancement is an explicit policy objective in the Single Market Directive of the European Commission. But efficiency improvements may come at the expense of deteriorating bank profits and excessive risk-taking. Both the quantitative effects and dynamic reactions of performance in response to efficiency improvements remain often unclear on both theoretical and empirical grounds. We analyze the dynamic relations between efficiency and performance in the German banking market. To this end we use panel data for all German banks for the years from 1993 to 2004 and estimate impulse response functions (IRF) derived from a vector autoregressive model. The IRF estimate the response of a shock in efficiency on profits or default probabilities. The former is estimated with stochastic frontier analysis, the latter is estimated with a hazard rate model. The results indicate that a positive unit shift in efficiency reduces the probability of default and increases profits. On the one hand, we find evidence that the long-run impact of profit efficiency on risk is larger than for cost efficiency. However, cost efficiency impacts with a shorter time lag on the probability of default. On the other hand, cost efficiency has on average a slightly larger impact on profits than profit efficiency. --Bank performance,efficiency,bank failure,vector autoregression,performance forecast

A reappraisal of the evidence on PPP: a systematic investigation into MA roots in panel unit root tests and their implications

Panel unit root tests of real exchange rates – as opposed to univariate tests – usually reject non-stationarity. These tests, however, could be biased if the real exchange rate contained MA roots. Indeed, two independent arguments claim that the real exchange rate, being a sum of a stationary and a non-stationary component, is possibly an ARIMA (1, 1, 1) process. Monte Carlo simulations show, how systematic changes in the parameters of the components, of the test equation and of the correlation matrix affect the size of first and second generation panel unit root tests. Two components of the real exchange rate, the real exchange rate of a single good and a weighted sum of relative prices, are constructed from the data for a panel of countries. Computation of the relevant parameters reveals that panel unit root tests of the real exchange rate are severely oversized, usually much more so than simple ADF tests. Thus, the evidence for PPP from panel unit root tests may be merely due to extreme size biases. --panel unit root test,purchasing power parity,real exchange rate,Monte Carlo simulation

Common Knowledge of Rationality and Market Clearing in Economies with Asymmetric Information

Consider an exchange economy with asymmetric information. What is the set of outcomes that are consistent with common knowledge of rationality and market clearing? To address this question we define an epistemic model for the economy that provides a complete description not only of the beliefs of each agent on the relationship between states of nature and prices but also of the whole system of interactive beliefs. The main result, theorem 1, provides a characterization of outcomes that are consistent with common knowledge of rationality and market clearing (henceforth, CKRMC outcomes) in terms of a solution notion - Ex - Post Rationalizability - that is defined directly in terms of the parameters that define the economy. We then apply theorem 1 to characterize the set of CKRMC outcomes in a general class of economies with two commodities. CKRMC manifests several intuitive properties that stand in contrast to the full revelation property of Rational Expectations Equilibrium: In particular, we obtain that for a robust class of economies: (1) there is a continuum of prices that are consistent with CKRMC in every state of nature, and hence these prices do not reveal the true state, (2) the range of CKRMC outcomes is monotonically decreasing as agents become more informed about the economic fundamentals, and (3) trade is consistent with common knowledge of rationality and market clearing even when there is common knowledge that there are no mutual gains from trade.common knowledge, rationality, rationalizability, rationalizable expectations

Gifted Children’s Representations of Learner Identities

Elementary and secondary students identified as gifted produced representations of themselves as readers, writers, and mathematicians and were interviewed about what they chose to represent. Interviews indicated a developmental pro-gression in the way academic learning is understood, a progression that also was evident in their representations. Action-based understanding of academic learn-ing in early childhood progresses to increasingly complex integration of mental activity and knowledge of self-as-learner with descriptions of learning activities in middle childhood. Adolescence is marked by views of learning as transforma-tive and emergent recognition of the nature of knowledge as important in learning. The representations showed similar developmental characteristics, but also offered complementary, creative views of the students’ learning identities

Do banks diversify loan portfolios? A tentative answer based on individual bank loan portfolios

Theory of financial intermediation gives contradicting answers to the question whether banks should diversify or focus their loan portfolios. Our aim is to find out which of the two strategies is predominant in the German banking market. To this end we measure diversification for all German banks in the period from 1993 to 2002. As measures we use a broad set of heuristic approaches which capture the deviation of a bank's portfolio from a specified benchmark. Conceivable benchmarks are naive diversification across all industries or, alternatively, the economy's industry structure. With this framework our analysis comprises the widespread measures of concentration, like the Hirschman-Herfindahl index, but also the less known and in this context innovative group of distance measures. We find that different statistical measures of diversification may indicate contradicting results on the individual bank level. Since distance measures are more appealing from a theoretical point of view, the common practice to rely on measures of concentration only in the debate about diversification and focus, may be misleading. We further find that, despite these differences on the individual bank level, both approaches reveal that the majority of banks significantly increased loan portfolio diversification over the last decade. This tendency is especially driven by the large number of credit cooperatives and savings banks. However, some banks (especially regional banks and subsidiaries of foreign banks) reveal a strategy that seems to be more focused on certain industries. --bank lending,loan portfolio,portfolio theory,diversification,concentration measures,distance measures,focus

Disclosure and choice

An agent chooses among projects with random outcomes. His payoff is increasing in the outcome and in an observer's expectation of the outcome. With some probability, the agent can disclose the true outcome to the observer. We show that choice is inefficient: the agent favors riskier projects even with lower expected returns. If information can be disclosed by a challenger who prefers lower beliefs of the observer, the chosen project is excessively risky when the agent has better access to information, excessively risk{averse when the challenger has better access, and efficient otherwise. We also characterize the agent's worst-case equilibrium payoff