The design of vertical R&D collaborations

Suppliers play a major role in innovation processes. We analyze ownership allocations and the choice of R&D technology in vertical R&D cooperations. Given incomplete contracts on the R&D outcome, there is a tradeoff between R&D specifically designed towards a manufacturer (increasing investment productivity) and a general technology (hold-up reduction). We find that the market solution yields the specific technology in too few cases. More intense product market competition shifts optimal ownership towards the supplier. The use of exit clauses increases the gains from the collaboration. JEL Classification: L22, L24, O31, O3

Labor market pooling and human capital investment decisions

"Of the typically cited agglomeration advantages labor market pooling receives strong empirical support - yet remains under-explored theoretically. This paper presents a model of human capital formation in an imperfectly competitive, pooled local labor market with heterogeneous workers and firms. Firms produce for a competitive output market with differing technologies, thus requiring diverse skills. In anticipation of firm behavior, workers choose between specializing into specific skills and accumulating general human capital. While labor market pooling provides static efficiency gains, our approach also suggests that there are long-term effects: under a diversified industrial structure, industry-specific shocks lead to a labor market pooling advantage which raises the incentive for workers to acquire both general and specific human capital. This will not only strengthen a region's capability to adapt to change but will also contribute to higher growth." (Author's abstract, IAB-Doku) ((en))regionaler Arbeitsmarkt, Ballungsraum, Regionalverflechtung, Arbeitsmarktstruktur, Region, Humankapital, Bildungsinvestitionen, Allgemeinbildung, Fachkenntnisse, Qualifikationsstruktur, matching, Arbeitslosigkeit, Beschäftigungseffekte, Regionalökonomie, Bildungsökonomie

The influence of buy-side analysts on mutual fund trading

We present evidence of the impact of buy-side analysts on the behavior and performance of fund managers. Using data provided by a large global asset manager, we relate buy-side analysts' recommendations to fund transactions on a daily basis. Our results show that buy-side analysts have a significant influence on trading decisions: Fund managers almost certainly follow recent recommendation revisions in their trades. Fund flows and sell-side recommendations matter as well, but to a lesser extent. Positive abnormal returns to buy-side analysts' revisions are also reflected in the performance of mutual fund trades: trades triggered by buy-side recommendations have higher returns than other trades. --buy-side analysts,analyst recommendations,mutual funds,investment decisions,investment performance

Human capital formation under product market uncertainty

The paper presents a microeconomic model of human capital formation in a local labour market, with heterogeneous workers and firms, when product markets are characterised by price uncertainty. We analyse a setting where firms are hit by demand shocks determining either a good or a bad state. Firms produce for a competitive output market with differing technologies, thus requiring diverse skills. In anticipation of firm behaviour, workers choose between specialising into a certain type of skills, and accumulating general skills. We thus look at the endogenous determination of the level of both horizontally differentiated and general human capital. Our findings suggest that, with equal probability on each shock scenario, a higher output price (booming industry) will raise the return to both general and specific human capital. Labour market size (skill diversification) however, has a differential impact. As the market is enlarged, workers are likely to form more general human capital at the expense of directly productive human capital. We then investigate a specific shock probability structure and find that under more symmetric shocks the incentive to invest in either kind of human capital is weaker. Interpreting the symmetry of shocks as an indicator of the degree of regional industrial specialisation, we infer that, everything else being constant, specialised regions will be less flexible in their response to structural change and also less productive. Bearing in mind the importance of human capital for economic growth, adverse effects on the growth rate of specialised regions may follow

The Influence of Buy-side Analysts on Mutual Fund Trading

We present evidence of the impact of buy-side analysts on the behavior and performance of fund managers. Using data provided by a large global asset manager, we relate buy-side analysts' recommendations to fund transactions on a daily basis. Our results show that buy-side analysts have a significant influence on trading decisions: Fund managers almost certainly follow recent recommendation revisions in their trades. Fund flows and sell-side recommendations matter as well, but to a lesser extent. Positive abnormal returns to buy-side analysts' revisions are also reflected in the performance of mutual fund trades. Trades triggered by buy-side recommendations have higher returns than other trades

IP-for-IP or Cash-for-IP? R&D Competition and the Market for Technology

We analyze how firms might benefit from trading restrictions in the market for technology. We show that restricting trade to reciprocal exchange (“IP-for-IP” barter instead of cash transactions), as in cross-licensing agreements, alters the allocation of R&D resources and reduces overinvestment in R&D. The tighter are the trading restrictions, the higher are the costs that are due to forgone gains from trade. Our analysis of the trade-offs involved shows that firms benefit from IP-for-IP restrictions, compared to both free trade and no trade environments, in industries where: (1) firms differ in their capabilities to commercialize IP; and (2) patent complementarities exist

Firms, Nonprofits, and Cooperatives: A Theory of Organizational Choice

We formalize the difference between firms, nonprofits, and cooperatives and identify optimal organizational choice in a model of quality provision. Firms provide lowest and nonprofits highest levels of quality. Efficiency, however, depends on the competitive environment, the decision making process among owners and technology. Firms are optimal when decision making costs are high. Else, firms are increasingly dominated by either nonprofits or cooperatives (depending on the incremental costs of quality production). Increased competition improves relative efficiency of firms and decreases relative efficiency of nonprofits

Real Options Valuation of Highly Uncertain Investments: Are UMTS-Licenses Worth their Money?

We adopt a real options approach to analyse the value of recently auctioned UMTS- licenses, focussing on Germany as the largest European market. For that purpose we develop a real options model with an abandonment as well as a growth option. Not having an appropriate underlying security of the options, we pursue an indirect approach by assuming a stochastic process for the number of mobile phone users. As we also take account of the optimal option exercise, we have to rely on numerical analysis rather than on closed form solutions. Our real options model enables us to value the flexibility inherent in the UMTS investments. On the basis of a sensitivity analysis it turns out that two variables are crucial for a positive expected value of the investments: the initial customer base of a mobile phone company as well as the realised net cash °ows per user

Labor Market Pooling and Human Capital Investment Decisions

Labor market pooling is considered one of the advantages of agglomerations. This paper presents a model of human capital formation in an imperfectly competitive, pooled local labor market with heterogeneous workers and firms. Firms produce with different technologies requiring diverse skills. Workers specialize into specific skills and accumulate general human capital. While labor market pooling provides static efficiency gains, our results also imply positive long-term effects: Under a diversified structure, firm-specific shocks increase workers' incentives to acquire both general and specific human capital. This not only raises productivity but also strengthens a region's capability to adapt to change

Firms, Nonprofits, and Cooperatives: A Theory of Organizational Choice

We formalize the difference between profit-maximizing firms, nonprofits, and cooperatives and identify optimal organizational choice in a model of quality provision. Firms provide lowest and nonprofits highest levels of quality. Efficiency, however, depends on the competitive environment, the decision making process among owners and technology. Firms are optimal when decision making costs are high. Else, firms are increasingly dominated by either nonprofits or cooperatives. Increased competition improves relative efficiency of firms and decreases relative efficiency of nonprofits