MULTIPRODUCT FIRMS AND TRADE LIBERALIZATION Bernard, Andrew B.; Redding, Stephen J.; Schott, Peter K.
The Quarterly journal of economics,
08/2011, Letnik:
126, Številka:
3
Journal Article
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This article develops a general equilibrium model of multiple-product, multiple-destination firms, which allows for heterogeneity in ability across firms and in product attributes within firms. Firms ...make endogenous entry and exit decisions and each surviving firm chooses optimally the range of products to supply to each market. We show that the resulting selection, across and within firms, provides a natural explanation for a number of features of trade across firms, products, and countries. Using both time-series changes in trade policy and cross-section variation in trade, we provide empirical evidence in support of the predictions of the model.
Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing - the relationship between the price of a property and the term ...of ownership - over a 100 years and derive implied discount rates. For our empirical analysis, we compile a unique historical data set (1987-92) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples, we find that leasehold prices are consistent with a time declining schedule and low long-term discount rates in housing markets.
This paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules. Using Taylor's rule as an example, I demonstrate ...that real-time policy recommendations differ considerably from those obtained with ex post revised data. Further, estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the Federal Reserve in real time. These results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules.
The rapid internationalization of markets for venture capital is expanding the funding alternatives available to entrepreneurs. For venture capital firms, this trend spells intensified competition in ...markets already at or past saturation. At issue for both entrepreneurs and venture capital firms is how and when venture capitalists (VCs) can provide meaningful oversight and add value to their portfolio companies beyond the provision of capital. An important way VCs add value beyond the money they provide is through their close relationships with the managers of their portfolio companies. Whereas some VCs take a very hands-off approach to oversight, others become deeply involved in the development of their portfolio companies.
Utilizing surveys of VCs in the United States and the three largest markets in Europe (the United Kingdom, the Netherlands, and France), we examined the determinants of interaction between VCs and CEOs, the roles VCs assume, and VCs' perceptions of how much value they add through these roles. We examined the strategic, interpersonal, and networking roles through which VCs are involved in their portfolio companies, and we analyzed how successful such efforts were. By so doing we were able to shed light on how and when VCs in four major markets expend their greatest effort to provide oversight and value-added assistance to their investment companies.
Consistent with prior empirical work, we found that VCs saw strategic involvement as their most important role, i.e., providing financial and business advice and functioning as a sounding board. They rated their interpersonal roles (as mentor and confidant to CEOs) as next in value.
Finally, they rated their networking roles (i.e., as contacts to other firms and professionals) as third most important. These ratings were consistent across all four markets. VCs in the United States and the United Kingdom were the most involved in their ventures, and they added the most value. VCs in France were the least involved and added the least value; VCs in France appeared to be least like others in terms of what factors drove their efforts. Our theoretical models explained a greater proportion of variance in governance and value added in the United States than elsewhere. Clear patterns of behavior emerged that reflect the manner in which different markets operate. Among the European markets, practices in the United Kingdom appear to be most like that in the United States.
Determinants of Governance (Face-to-Face Interaction)
We operationalized VC governance or monitoring of ventures as the amount of face-to-face interaction VCs had with venture CEOs. We found some evidence that VCs increase monitoring in response to agency risks, but the results were mixed. Lack of experience on the part of CEOs did not prompt significant additional monitoring as had been predicted. A more potent determinant was how long the VC-CEO pairs worked together; longer relationships mitigated agency concerns and reduced monitoring. Contrary to expectations, perceived business risk in the form of VCs' satisfaction with recent venture performance had little impact on face-to-face interaction. Monitoring was greatest in early stage ventures, indicating that VCs respond to high uncertainty by increased information exchange with CEOs. We measured two types of VC experience and found different patterns for the two. Generally speaking, VCs with greater experience in the venture capital industry required less interaction with CEOs, whereas VCs with greater experience in the portfolio company's industry interacted more frequently with CEOs than did VCs without such experience.
Determinants of Value Added
We argued that VCs would most add value to ventures when the venture lacked resources or faced perceived business risks, when the task environment was highly uncertain, and when VCs had great investing and operating experience. Contrary to expectations, VCs added most value to those ventures already performing well. As we had predicted, VCs did add relatively more value when uncertainty was high: e.g., for ventures in the earliest stages and for ventures pursuing innovation strategies. Finally, we found that VCs with operating experience in the venture's focal industry added significantly more value than those with less industry-specific experience. These results are consistent with anecdotal evidence that entrepreneurs have a strong preference for VCs with similar backgrounds as their own. We found no evidence that experience in the venture capital industry contributed significantly to value added. Together, these results suggest that investigations of the social as well as economic dimensions of venture building may prove a fruitful avenue for future study. Overall, the results showed that value-added is strongly related to the amount of face-to-face interaction between VC-CEO pairs and to the number of hours VCs put in on each individual venture.
Implications for Venture Capitalists
The competition for attractive investments is heating up as economies become more globalized. Thus, the pressure on venture capital firms to operate both efficiently and effectively is also likely to build. It is as yet unclear whether the recent trend toward later stage, safer investments will continue, and how those venture capital firms following this path can differentiate themselves from other sources of capital. Venture capital firms that are able to choose the appropriate bases for determining governance effort and the appropriate roles for delivering added value to their portfolio companies will be those most likely to survive.
In the largest, most robust markets (i.e., the United States and the United Kingdom), more effort is expended by venture capitalists to deliver something of value beyond the money. This suggests that the tradeoff preferred by those succeeding is to be more rather than less involved in their investments. Our results indicate that VCs clearly economize on the time they devote to involvement in their portfolio companies. However, our results also indicate that they do this at the great peril of producing value insufficient to justify the cost of their product.
Implications for Entrepreneurs
Our findings provide two important insights for entrepreneurs. First, they show that where and when they obtain venture capital is likely to have an impact on the extent and nature of effort delivered by their venture capital investors. It appears that on average entrepreneurs receiving venture capital in the United States and the United Kingdom will be more closely monitored and will receive more value-adding effort from their VCs than will those in France or the Netherlands. Needless to say, entrepreneurs should consider their preferences for level and type of involvement from their investors as they consider their choice of partners. In France, for example, VCs put great emphasis on their financial role in comparison with other roles, but they contribute much less than VCs elswhere via other strategic, interpersonal, and networking roles.
The second key implication of our findings is that entrepreneurs may be able to gauge what roles VCs will see as most important, when VCs are more or less apt to become involved in their companies, and when they believe they can most add value. Such knowledge may help CEOs anticipate VC activity, be aware of the parameters of VCs' preferences, communicate their own preferences, and negotiate the timing and extent of interaction. For example, although our results indicate that geographic distance significantly limits face-to-face interaction, it appears to have less impact on the amount of value added.
Implications for Researchers
Much more can be learned about the relative efficiency and effectiveness of alternative governance arrangements. Little is known about how formal structures such as contract covenants and board control work in conjunction with informal oversight and interaction. Even less is known about how value is added and how it is best measured. Although this study took a step toward developing a model of the circumstances under which value is added, the theory and its operationalization await further development.
A voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using ARCH and stochastic volatility models. While most of these studies have documented ...highly significant in-sample parameter estimates and pronounced intertemporal volatility persistence, traditional ex-post forecast evaluation criteria suggest that the models provide seemingly poor volatility forecasts. Contrary to this contention, we show that volatility models produce strikingly accurate interdaily forecasts for the latent volatility factor that would be of interest in most financial applications. New methods for improved ex-post interdaily volatility measurements based on high-frequency intradaily data are also discussed.
Previous theoretical research has argued that national cultural distance hinders cross-border acquisition performance by increasing the costs of integration. This article tests the alternative ...hypothesis that national cultural distance enhances cross-border acquisition performance by providing access to the target's and/or the acquirer's diverse set of routines and repertoires embedded in national culture. Using a multidimensional measure of national cultural distance and controlling for other effects, we examine a sample of 52 cross-border acquisitions that took place between 1987 and 1992, and find a positive association between national cultural distance and cross-border acquisition performance.
This article tests whether amnesty, a provision of the 1986 Immigration Reform and Control Act, affected the labor market outcomes of the legalized population. Using a quasi‐experimental framework, ...we find that employment fell, unemployment rose, and wage growth rates were higher for newly legalized men after the implementation of the amnesty program. For women, employment fell, transitions out of the workforce increased, and wages grew at a faster rate among the newly legalized population.
The cost of expanding public sector health programs depends critically on the extent to which public eligibility will cover just the uninsured, or will crowd out existing private insurance coverage. ...We estimate the extent of crowd-out arising from the expansions of Medicaid to pregnant women and children over the 1987-1992 period. We estimate that approximately 50 percent of the increase in Medicaid coverage was associated with a reduction in private insurance coverage. This occurred largely because employees took up employer-based insurance less frequently. There is also some evidence that employers contributed less for insurance and that workers dropped coverage of dependents.
This paper compares the performance of U.K. plants that were acquired by the foreign-owned sector during 1987-1992 with other comparable subgroups of plants operating at the same time (including ...plants acquired by U.K.-owned companies). The principal aim is to consider the types of plants that were acquired and whether after acquisition they performed above or below average when compared to other manufacturing plants. The results show that foreign-owned enterprises acquired the most-productive plants previously operated by U.K. enterprises. After acquisition, there is some evidence that productivity declined, which would be consistent with difficulties associated with assimilating these established plants into the new organization.
By looking through the prism of the West's involvement in the breakup of Yugoslavia, this book presents a new examination of the end of the Cold War in Europe. Incorporating declassified documents ...from the CIA, the administration of George H.W. Bush, and the British Foreign Office; evidence generated by The Hague Tribunal; and more than forty personal interviews with former diplomats and policy makers, Glaurdić exposes how the realist policies of the Western powers failed to prop up Yugoslavia's continuing existence as intended, and instead encouraged the Yugoslav Army and the Serbian regime of Slobodan Milošević to pursue violent means.
The book also sheds light on the dramatic clash of opinions within the Western alliance regarding how to respond to the crisis. Glaurdić traces the origins of this clash in the Western powers' different preferences regarding the roles of Germany, Eastern Europe, and foreign and security policy in the future of European integration. With subtlety and acute insight,The Hour of Europeprovides a fresh understanding of events that continue to influence the shape of the post-Cold War Balkans and the whole of Europe.
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