Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C. Reid Title: Small Firms, Finance Gaps and Venture Capital Abstract: Exploratory data analysis on a new small firms database is reported upon. It emphasis statistical explanations of whether or not small firms experience funding shortages. Univariate probit estimators of the probability of experiencing funding shortages are reported upon. Control variables were grouped into three types: conventional economic (e.g. sales); attitudinal economic (e.g. attitude to easier trade credit); and technical (e.g. sectoral dummies). Several conventional economic variables had significant effects of which the most notable was part-time employment. A ten per cent increase in part-time employment reduces the probability of experiencing funding shortages by two and a half per cent. Some attitudinal variables were found to be important (e.g. easier trade credit). Regional effects were discovered but sectoral effects were not. Finally, multivariate probits are reported upon, and shown to be consistent with univariate probits. They indicate significant cross equation error correlations, but the general results of the univariate probits are substantiated Classification-JEL: G24, L26, M13, M21 Keywords: Scottish small firms; funding shortages; part-time work; trade credit; regional effects Handle: RePEc:san:crieff:9208 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9208.pdf File-Format: application/pdf Creation-Date: 1992-08 Template-type: ReDIF-Paper 1.0 Author-Name: Felix R. FitzRoy Title: Monopsony, Efficiency Wages and Minimum Wages Abstract: Monopsony models imply that wages must be raised whenever additional workers are hired, and firms have permanent vacancies at existing wages. There is no evidence for this in low-wage markets, and our case study indicates a permanent queue of applicants, so one popular explanation for the apparent lack of negative employment effects of minimum wages is unconvincing. Both convex adjustment costs and efficiency wage models with unemployment benefits and taxes, or a competitive model with compensating effort to maintain utility suggest that a positive employment effect of a small minimum wage is possible, but rather unlikely. Classification-JEL: J41; J42; J65 Keywords: Monopsony, Efficiency wage, Minimum wage, effort Handle: RePEc:san:crieff:9921 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Zoltan J. Acs Author-Name: Felix R. FitzRoy Author-Name: Ian Smith Title: High-Technology Employment and R&D in Cities: Heterogeneity vs Specialization Abstract: This paper uses data from high technology industry clusters in U.S. cities to establish a strong positive relationship between city, industry (and university) R&D and subsequent employment in the same industry and city. Perhaps surprisingly, in view of recent results that heterogeneity favors growth, we found no evidence for spillovers from R&D in any one high technology cluster to employment in any other. However, spillover benefits from specialization appear microeconomically plausible in our context, though the data panel is too short to obtain any conclusions regarding growth. Classification-JEL: J23; J44; O30 Keywords: High technology, Employment, R&D spillovers, Clusters Handle: RePEc:san:crieff:9920 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Author-Name: Julia A Smith Title: The Impact of Contingencies on Information System Development Abstract: Three tests of contingency theory are presented. The central hypothesis is that information system development is determined by contingencies. Data relate to the period 1994-98 for a sample of new Scottish micro firms. Contingency theory is tested by correlation, cluster and regression analysis. First, correlation analysis is applied to the timing of information system development and the timing of: severe cashflow crises; severe shortfalls of finance which seriously restrict strategic investment; and significant innovations. Second, cluster analysis is used to test the morphology suggested by contingency theory, of adaptive, running blind, and stagnant small firms. Third, regression analysis is used to test contingency theory in two forms. One explains a new weighted headcount measure of organizational form, and the other explains information system complexity. The three statistical methods used are generally supportive of contingency theory, suitably modified to a small firm context. Classification-JEL: D21; G33; L2; M21; M41 Keywords: Information Systems, Contingency Theory, Small Firms Handle: RePEc:san:crieff:9918 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9918.PDF File-Format: application/pdf Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Susanna Sallstrom Title: Interlocked Contracts Abstract: Brokers face a trade-off between searching for the buyer with the highest willingness to pay and the value of a higher turnover rate. For this reason the agent's interests will not coincide with those of the principal (seller), even if there is no cost of effort and the agent gets a proportional share of the sales price. In markets characterised by chain-transactions, a minimum-price clause therefore plays a crucial role. This is because a minimum price convexifies a flat-rate scheme, thus providing the agent with stronger incentives to behave in the interest of the prinipal. Classification-JEL: D81; L14 Keywords: Principal-agent, incentive scheme, interlocked contracts Handle: RePEc:san:crieff:9917 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: David McMillan Author-Name: Alan Speight Title: Return-Volume Dynamics in UK Futures Abstract: It is widely acknowledged in the financial literature that trading in asset markets is mainly induced by the arrival of new information. However, the contemporaneous and dynamic empirical relationship beween volume and returns in futures data, with attendant implications for futures market microstructure, remains largely unresolved due to the inconclusive nature of the extant empirical literature. The present paper examines these relationsips from the perspective of competing hypotheses in the context of data for three LIFFE futures contracts over a variety of intra-day frequencies. Results suggest the existence of not only a positive and contemporaneous relationship between absolute returns and volume, but also a bidirectional causal relationship for most series and frequencies, consistent with the sequential arrival of information hypothesis, but with different speeds of information dissemination across markets. Inspection of the relationship between volume and actual returns further reveals only limited evidence of a statistically significant contemporaneous or dynamic relation, but consistent with an inverse relationship between informational asymmetry and market efficiency. Classification-JEL: G12; G13 Keywords: Intra-Day Returns, UK Futures Contracts, Volume Handle: RePEc:san:crieff:9916 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Author-Name: Julia A Smith Title: Accounting for Risk: developing a new research agenda for risk appraisal in high-technology ventures Abstract: This work concerns the development of new methods of accounting for risk in high-technology ventures. The paper enquires into attitudes to risk and skills at risk management, in the relationship between high-technology firms and their venture capital backers. The basic prescription behind the proposed approach, building on work by the authors and co-workers [Reid (1996,1999), Reid, Terry and Smith (1997)], and other recent developments [e.g. Fiet (1995a,b)], is that as the venture capital industry matures, so should the techniques which high-technology firms and their venture capital backers use for risk management. If total risk is split up into innovation risk, business risk and agency risk, the main category of risk which hitherto the venture capitalist has sought to attenuate is agency risk. This has been addressed through improved management accounting systems, post-investment, and pre-commitment to the installation of such systems, pre-investment. However, success in this area has been incomplete, and attention to business and innovation risk has been severely limited. Lack of overall success in risk handling has, as a consequence, been a major cause of failure to provide adequate levels of outside finance for high-technology ventures, if appropriate yardstick comparison is made with US practise. This paper proposes a new research agenda, and a corresponding methodology, for investigating methods used for managing innovation, business and agency risks in investor-investee relations. Classification-JEL: C82; D8; D21; G24; L21; L84; M4; M13 Keywords: Risk management, high-technology firms, accounting systems, economic Handle: RePEc:san:crieff:9915 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9915.pdf File-Format: application/pdf Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Bruno Versaevel Title: The Production Franchise: An Unstable Organizational Choice Abstract: In this paper some determinants of discrete shifts from production franchise agreements to vertical integration are investigated from a new angle. Production franxhise agreements are considered as an organizational innovation for the diffusion of process and/or product innovations. A common agency model describes production franchising as a contractual device between agent (the production franchisor) ans multiple principals (the production franchisees) that operate on an exclusive segment of a given territory. The boundaries of the franchisenetwork are obtained as a non-cooperative solution. Sufficient conditions are obtained for the profitability of franchising production and or the reduction of the degree of appropriability of innovation benefits by industrial franchisors. This offers a new theoretical explanation for observed business practices. Classification-JEL: F23; L22 Keywords: Franchising, production, innovation, appropriability, common agency Handle: RePEc:san:crieff:9913 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: James S Jordan Title: Management Accounting in Activity Networks Abstract: Modern management accounting information systems trace cost to a greater level of detail than did their predecessors. Nonetheless, the basic ingredient of accounting information continues to be the measurable transaction, actual or budgeted, rather than the more subjective concepts of marginal cost or opportunity cost favored by economic theory. This paper studies the design of a management accounting information system that is constrained to use messages consisting of actual or proposed transactions, or reports compiled exclusively from such messages. The firm is modeled as a network of productive activities, some of which produce revenue while others produce goods or services used by other activities. The firm seeks a budget, that is, a proposed action for each activity, that maximizes profit. An accounting information system includes a performance measure for each activity, and each activity manager is assumed to act to maximise measured performance. Several accounting information systems are constructed and compared according to the profitability of the budgets they generate. Although accounting information is not sufficient to ensure profit-maximisation, activity-based costing (ABC) is shown to be useful in identifying products that should be dropped and internally produced inputs that should be purchased from external sources. An extension of ABC that includes a measure of internal opportunity cost is constructed and shown to be useful in allocating internally produced inputs. Classification-JEL: D21; M11; M41 Keywords: Management accounting, accounting information system, activity-based Handle: RePEc:san:crieff:9912 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Information and the Small Firm Abstract: This paper provides a critical survey of theory and evidence on information system (IS) development within the SME. It proceeds under five headings. First, the information needs of the SME are identified. Second, the use of information to guide decisions is considered. Third, the management accounting system (MAS) is examined as an example of operational IS within the SME. Fourth, the link between SME performance and IS development is considered, Fifth, methods of statistically estimating the performance link are examined. It is concluded that the MAS perspective is useful in that it both helps to formalise the characteristics of an IS, and suggests ways in which its design can best be directed at those monitoring and control functions which enhance performance. Classification-JEL: D8; D21; L1; M2; M4 Keywords: Small firms, information systems, management accounting, monitoring, Handle: RePEc:san:crieff:9911 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9911.pdf File-Format: application/pdf Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Susanna Sallstrom Title: Loyalty, Price Seeking and Protective Consummer Legislation Abstract: Consumer legislation such as laws against fraud, uniform standards and mandatory disclosure are imposed on market participants in order to ensure fair trade. One argument behind this legislation is that consumers are boundedly rational. I check the validity of this argument for spatially differentiated firms who decide on price and size. I propose two different ways of modeling bounded rationality: loyalty and different laws, I find that uniform standards need to be combined with mandatory disclosure to alleviate negative effects arising from bounded rationality. Each policy alone may be associated with a reduction in welfare. Classification-JEL: D18; D43; L15 Keywords: mandatory disclosure, uniform standards, bounded rationality Handle: RePEc:san:crieff:9910 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Author-Name: Falconer Mitchell Author-Name: Julia A. Smith Title: A Framework for Addressing Hypotheses Concerning Information System Development in Small Firms Abstract: This paper aims to establish the basis for a new approach to the performance of small and medium sized enterprises (SMEs). The proposed approach emphasises the potential of the SME'S information system (IS) for enhancing performance, through its deployment for superior monitoring and control. The role of information is considered within the frameworks of contingency, agency and markets vs. hierarchy theories. A methodology for testing such theories is developed. In doing so, it is argued, that the best empirical counterpart to the econoist's information set within a firm is the management accounting system (MAS). Under this assumption, it is argued, considerable advance can be made in testing theories which previously were either untestable or very hard to test. Classification-JEL: D21; D8; L1; M2; M4 Keywords: Small firms, information systems, management accounting, contingency Handle: RePEc:san:crieff:9908 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Zoltan J. Acs Author-Name: Catherine Armington Author-Name: Alicia Robb Title: Measures of Job Flow Dynamics in the U.S. Economy Abstract: This paper uses the new Longitudinal Establishment and Enterprise Microdata (LEEM) at CES to investigate gross and net job flows for the U.S. economy. Much of the previous work on U.S. job flows has been based on analysis of the Longitudinal Research Database (LRD), which is limited to establishments in the manufacturing sector. The LEEM is the first high-quality, nationwide, comprehensive database for both manufacturing and non-manufacturing that is suitable for measuring annual job flows. We utilize the LEEM data to measure recent gross and net job flows for the entire U.S. economy. We then examine the relationships between firm size and establishment age, and investigate differences resulting from use of two alternative methods for classification of job flows by size of firm and establishment. Cell-based regression alnalysis is used to help distinguish among the effects of age, firm size and establishment size on gross and net job flows in existing establishments. We find that gross job flow rates decline with age, and with increasing establishment size when controlling for age differences, whether initial size or mean size classification is utilized. Firm size differences contribute little or nothing additional when establishment size and age are controlled for. However, the relationship of net job grwoth to business size is very sensitive to the size classification method, even when data and all other methodology are identical. When mean size classification is used, the coefficient on establishment size for net job growth is generally positive, but when initial size is used, this coefficient is negative. These results shed light on some of the apparently conflicting findings in the literature on the relationship between net growth and the size of the business. Classification-JEL: C8; J6; L6; L8 Keywords: Longitudinal establishment microdata, gross job creation and job Handle: RePEc:san:crieff:9907 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Michael Funke Author-Name: Ralf Ruhwedel Title: Product Variety and Economic Growth-Empirical Evidence for the OECD Countries Abstract: Utilizing panel data for 19 OECD countries we find support for the hypothesis that a greater degree of product variety relative to the US helps to explain relative per capita GDP levels. The empirical work relies upon some direct measures of product variety calculated from 6-digit OECD export and import data. The econometric estimates indicate that the index of relative product variety is significantly correlated with relative per capita income levels. Classification-JEL: C23; F41; F43 Keywords: Product Variety, Economic Growth, Panel Data, OECD Countries Handle: RePEc:san:crieff:9906 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Author-Name: Julia A Smith Title: Information System Development in the Small Firm: tests of contingency, agency and markets & hierarchies approaches Abstract: This paper is designed to explore the nature of information system development in small and medium sized enterprises (SMEs), by appeal to three theories: contingency, agency and markets vs hierarchies. To address these theories empirically, use is made of new data which have been gathered from a sample of Scottish SMEs over a five-year period, 1994-1998. The structrue of this paper is as follows. First, the three theories under examination, contingency, agency and markets vs hierarchies, are briefly described. Second, an overview of the methodology is presented, looking at sampling, the database and summary statisics. Third, the contingency theory approach is explored on the data, both taxonomically (using cluster analysis) and inferentially (using regression analysis). Fourth, the agency approach is tested, using regression analysis. Finally, the markets vs hierarchies approach is tested, using regression analysis. The paper ends by concluding that the contingency approach is not a rival approach to the agency or markets vs hierarchies approaches, but may rather be regarded as incorporating, and supporting, elements of both. Classification-JEL: D21; D82; L21; L22; M41 Keywords: Information, Contingency, Agency, Markets and Hierarchy, Small Firms Handle: RePEc:san:crieff:9905 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9905.pdf File-Format: application/pdf Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Laurence Lasselle Author-Name: Serge Svizzero Title: Entry and Unemployment in a Union-Oligopoly Model Abstract: It is commonly acknowledged that a larger number of trade unions is associated with a higher level of employment. We demonstrate that this belief can be wrong, i.e. that the entry of trade unions can increase the number of unemployed workers. This result is stated in a multi-sector economy in which Cournotian trade unions incur no cost and have a nominal objective function. It is obtained when the labour demand function is sufficiently convex such that the trade unions' actions become strong strategic complements. In addition, we show that this counterintuitive result is consistent with a wide range of parameter values under a CES technology. Classification-JEL: D43; E24 Handle: RePEc:san:crieff:9904 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Eduardo Anselmo de Castro Author-Name: Chris Jensen-Butler Title: Regional Economic Inequality, Growth Theory and Technological Change Abstract: This theoretical paper examines the contributions of the neo-classical approach to the explanation of deep and persistent geographical inequalities in economic development. Central insights of each approach are combined in a model of regional economic inequality, here defined as differences in regional labour productivity. The model attempts to combine theoretical insights from approaches that are usually considered to be incompatible. At the core of the model are the concepts of embodied and disembodied technical change. These concepts are related to differences in regional socio-economic environments and they indicate avenues of explanation of regional differences in levels of labour productivity and the relative permanence of these differences. Disembodied technical progress is related to positive externalities and spillover effects, these being inherently spatial. The paper also indicates a formulation of the model that permits empirical operationalisation. Classification-JEL: R11; R12; O30; O33 Keywords: Regional inequality, technical change, regional production functions, Handle: RePEc:san:crieff:9903 Creation-Date: 1999-10 Template-type: ReDIF-Paper 1.0 Author-Name: Laurence Lasselle Author-Name: Serge Svizzero Title: A Note on the Dynamic Study of an OG Model with Competition à la Cournot Abstract: In an OG model with competition à la Cournot, we show the existence of a stable 2-cylcle (in prices and employment levels) in the forward dynamics with learning. Classification-JEL: D43 ; E24 ; E32 Keywords: Underemployment fluctuations, learning process, stability, price elasticity Handle: RePEc:san:crieff:9824 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Laurence Lasselle Author-Name: Serge Svizzero Title: Involuntary Unemployment and Income Feedback Effects Abstract: We study the link between involuntary unemployment and income feedback effects in a model with an imperfect product market. We provide a condition based on the demand such that full employment prevails when income feedback effects are neglected, while involuntary unemployment appears when they are integrated. Classification-JEL: D43 Handle: RePEc:san:crieff:9823 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Laurence Lasselle Author-Name: Serge Svizzero Title: Underemployment and Feedback Effects in an Overlapping Generations Model Abstract: This paper considers an economy with imperfect competition on the product markets. It studies the link between underemployment at all wages and feedback effects due to firms' activities. Since the economy is composed of local markets, we are able to endogenise the size of feedback effects. We then show that the price elasticity of the demand for good is a decreasing function of this size. These effects therefore influence firms' marginal revenues and also the condition of existence for underemployment. Despite the Keynesian results obtained in several static models, we strengthen a previous result demonstrated in an overlapping generations model with given price expectations: underemployment at all wages may only exist when the economy contains a single product market, i.e. when firms integrate all feedback effects in their programs. Thus, even when underemployment at all wages is due to excesssive firms' market-powers, feedback effects may not be considered as a major explanation of the former while they are positively correlated with the latter. Classification-JEL: D43; E24 Keywords: Imperfect competition, price elasticity, feedback effects Handle: RePEc:san:crieff:9822 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Susanna Sallstrom Title: Flexible Technology and Informative Experiments Abstract: Innovative firms have an incentive to invest in a flexible technology to employ more sophisticated experimentation strategies. Flexibility in terms of ability to differentiate and to alter quality at no cost is shown to solve the inadequate learning problem in a model with discontinuous demand. Experimentation with a flexible technology induces a bias in product selection towards more varieties and products of higher qualities. Over time products will become closer substitutes. Classification-JEL: C99; D24; D42; D83; L10 Keywords: Experimentation, flexible technology, vertical differentiation Handle: RePEc:san:crieff:9821 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Susanna Sallstrom Title: Fashion and Sales Abstract: Optimal pricing of horizontally differentiated durable goods is shown to yield a high and declining price. In particular we show that the initial price will be higher the higher the positive correlation in consumer tastes. If everybody learns which variety is fashionable before the seller sets the initial price, fashionable goods have a higher initial price, and are sold out at a larger discount. Fashionable goods are, however, less likely to show up on sale. These results are based on the assumption that there is asymmetric information about consumer preferences. It is also crucial that goods are produced to stock. Classification-JEL: D11; D42; D82; L11 Keywords: fashion, product differentiation, clearance sales Handle: RePEc:san:crieff:9820 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: New Business, New Life; A Perspective on Business and Economics, with Ilustrations from Small Business Inception Abstract: The theme of this paper is developed in three parts. The first is concerned with methodology. The case is argued for a 'grounded' approach to the analysis of business economics. The second is concerned with intellectual history. It argues that the great economists, such as Smith, used this method, and that the best business economists have followed this lead. The third is concerned with displaying how the method espoused and justified is applied to the theme of 'new business, new life'. It appeals to an empirical model of small firm survival, emphasising the complex of decisions undertaken by the entrepreneur. Classification-JEL: B12; B13; B21; B31; D21; D23; D4; L21; L22; M21 Keywords: business economics, grounded theory, small firms, complex decisions Handle: RePEc:san:crieff:9818 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9818.pdf File-Format: application/pdf Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Susanna Sallstrom Title: Quality Conscious Customers Give Rise to Non-Decreasing Prices Abstract: Uncertainty about a customer's reservation price for a good may be due to uncertainty about whether the customer values a costly attrbiute of the product or not. Depending on parameters, the seller will perform experiments in price and quality, or pure price or quality experiments. The price path if the seller experiments will be as follows: (i) constant or increasing if quality is constant; (ii) either sign if quality increases; (iii) decreasing if quality decreases. Classification-JEL: C72; D83; L15 Keywords: experiments, price and quality patterns Handle: RePEc:san:crieff:9817 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: David G McMillan Author-Name: Alan EH Speight Title: Temporal Aggregation, Volatiilty Components and Volume in HIgh Frequency UK Bond Futures Abstract: This paper examines volatility in UK Long Gilt and Short Sterling futures over several intra-day frequencies. Initial GARCH model estimates are found to exhibit remaining residual structure and to be inconsistent with theoretical temporal aggregation results for all frequencies other than the full day. Further estimates suggest that intra-day volatitlity is more adequately characterised by a component model which decomposes volatility into short-run effects which dominate intra-day periods and long-run effects which dominate inter-day horizons, and that such components are associated with the arrival of information flows as proxied by volume. This component volatility model is also able to account for all dependence in Long Gilt futures at frequencies of fifteen minutes and lower, and in Short Sterling futures at one hour and lower. Classification-JEL: G12; G13 Keywords: conditional variance, component model, intra-day data, temporal Handle: RePEc:san:crieff:9813 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Julia A Smith Title: Strategy Processes for Success Abstract: The paper contains an empirical analysis of the strategy processes followed by new small firms to achieve speedy growth and success. It draws upon new evidence gathered by face-to-face semi-structured interviews with the owner-managers of such firms. These interviews followed an agenda which investigated firm strategies in terms of environmental scanning, strategy formulation, strategy implementation and evaluation and controls. The paper appeals to 17 case studies of firms, constructed within this framework. Cluster analysis is used to split firms into groups of high, medium and low performers, using measures of growth, profitability and productivity. This primarily qualitative analysis is augmented by longitudinal quantitative evidence from the 150 firms from which the sub-sample of cases was selected. Thus qualitative work is supported by statistical inferences from the larger dataset. The new empirical evidence supports the main hypothesis that even very young firms, who use proactively formal strategic planning, will tend to perform better than those who follow, for example, a more 'visionary' or reactive approach to running the business. Classification-JEL: L21; M13; M21; O21 Keywords: micro-firm, strategy process, firm performance, strategic planning Handle: RePEc:san:crieff:9812 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Making Small Firms Work: Policy Dimensions and the Scottish Context Abstract: The basic framework of the discussion revolves around two samples of Scottish small firms for the periods 1985-88 and 1994-97. It is shown that both samples were drawn during similar (prosperous) phases of the macroeconomic cycle. Further evidence is advanced which indicates that grant and subsidy regimes have not been major determinants of survival and performance. However, the performance of small firms is shown to be better for the second sample period, compared to the first. If macroeconomic effects are neutral, and grant/subsidy regimes are insignificant, then reasons for performance differences, it is argued, must lie elsewhere. A plausible source of this is the insititutional framework. To this end, the evolution of institutional design for stimulating enterprises is documented and dated, and it is shown that the two sample periods fell within two distinct policy regimes. The first involved sectoral indicative planning, under the umbrella of the Scottish Development Agency (SDA), up until 1988. The second involving decentralised enterprise stimulation, under Scottish Enterprise (SE) from 1988 onwards. It is therefore suggested that at least part of the superior performance of small firms in the second sample period may be attributable to the new institutional framework, especially as modified by The Business Birth Rate Strategy. Classification-JEL: L1; L52; M2; M13; O21 Keywords: small firms, enterprise policy, business incubators, Scottish economy Handle: RePEc:san:crieff:9811 Creation-Date: 1998-10 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9811.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: The Application of Principal-Agent Methods to Investor-Investee Relations in the UK Venture Capital Industry Abstract: Principal-agent analysis is applied to contemporary evidence on venture capital investment. The investor (as principal) and investee (as agent) are analysed in terms of risk management, information handling and the trading of risk and information. Investors and investees were paired in 'dyads', with each party being subject to separate face-to-face interviews. The paper develops the appropriate principal-agent models for dealing with incentives for entrepreneurial effort and issues of information and monitoring. The way in which investees and investors seek contract optimality is then examined, using qualitative data. It is shown that the evidence provides striking confirmation of the applicability of the principal-agent model to the venture capital financing of mature small firms. The most crucial feature of contract optimality was perceived to be the propoer choice of capital structure. This established ownership entitlement, created incentives for effort, and apportioned risk eficiently. Many investor-investee relations were perceived to be at or close to contract optimality. These optima were specific to time and place situations and strongly reflected individual house-styles of investors. Investor reputations were strongly attached to house styles. Classification-JEL: D8; D21; G1; G24; L2; M1; M2; M4 Keywords: principal-agent model, entrepreneurship, mature small firms, venture capital, risk-bearing, information handling, contract optimality Handle: RePEc:san:crieff:9810 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9810.pdf File-Format: application/pdf Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Kalyan Chatterjee Author-Name: Hamid Sabourian Title: Multiperson Bargaining and Strategic Complexity Abstract: We investigate the effect of introducing costs of complexity in the a justification for stationary equilibrium strategies in the class of games where complexity costs matter. As is well-known, in this game every individually rational allocation is sustainable as a Nash equilibrium (also as a subgame perfect equilibrium if players are sufficiently patient and if n>2). Moreover, delays in agreement are also possible in such equilibria. By limiting ourselves to strategies that can be implemented by a machine (automaton) and by suitably modifying the definition of complexity for the purpose of analysing a single extensive form, we find that complexity costs do not reduce the range of possible allocations but they do limit the amount of delay that can occur in any agreement. In particular, we show that in any n-player game, for any allocation z, an agreement on z at any time period t can be sustained as a Nash equilibrium of the machine game with complexity costs if and only if in equilibrium, the machines implement stationary strategies. Finally, we also show that "noisy Nash equilibrium" with complexity costs sustain only the unique stationary subgame perfect equilibrium allocation. Classification-JEL: C72; C78 Keywords: Complexity costs, agreement delay, automata, noisy Nash equilibrium Handle: RePEc:san:crieff:9808 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix R FitzRoy Author-Name: Kornelius Kraft Title: Co-Determinatin and Efficiency Abstract: We present a new model of employee involvement with incomplete contracts and uncertain monitoring. Distributional considerations limit productivity and generate excessive monitoring under employee control, so co-determination can increase both efficiency and labour's share of the enterprise surplus. Our simple model suggests parity co-determination is optimal. We test the 1976 co-determination law with a panel of West German firm data. Although our samples contain severe recessions when labour hoarding costs of co-determination are highest, and are too short to capture the long run benefits, we find none of the adverse efficiency effects of co-determination or parity change claimed by critics. Classification-JEL: D2; J5; L2 Keywords: Co-determination, employee involvement, productivity Handle: RePEc:san:crieff:9807 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Carlos Alos-Ferrer Author-Name: Ana B. Ania Author-Name: Fernando Vega-Redondo Title: From Walrasian Oligopolies to Natural Monopoly: an Evolutionary Model of Market Structure. Abstract: We study a market for a homogeneous good in which firms adjust their production decisions on the basis of imitation, learning from own experience, and local experimentation. For any fixed set of firms (more than one), long run behaviour settles on a symmetric marginal-cost pricing equilibrium. When market entry and exit are allowed, we find a sharp effect of technology on long-run market structure. Specifically, we show that, under decreasing returns and some fixed cost, the market grows to "full capacity" at Walrasian equilibrium; on the other hand, if returns are increasing, the unique long run outcome involves a profit-maximising monopolist. Classification-JEL: C72; D43; L13 Keywords: Evolution, mutation, imitation, oligopoly Handle: RePEc:san:crieff:9805 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Bjarne Madsen Author-Name: Chris Jensen-Butler Title: Commodity Balance and Interregional Trade: Make and Use Approaches to Interregional Modelling Abstract: Institutional, or sector-by-sector, input-output tables have traditionally been used in regional and interregional modelling. The paper examines the origins of this tradition and argues instead both theoretically and empirically for the integration of Make and Use sub models in interregional models involving interregional trade, outlining the manned in which these can be integrated. Further, it is argued that structural form rather than reduced form models represent a sounder theoretical base. Finally, a Danish interregional model, LINE, based upon a SAM framework, employing these principles, is outlined and questions of data validity in this type of model are discussed. Classification-JEL: R15 Keywords: Interregional modelling, Input-output, Make and Use, Social Accounting Handle: RePEc:san:crieff:9804 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix R FitzRoy Author-Name: Ian Smith Title: Season Tickets and the Demand for Public Transport Abstract: In view of the rising external costs of private road transport, inducing motorists to shift to transport modes that generate fewer negative externalities is a major policy goal in many cities. This paper argues that if season tickets for public transport are cheap and attractive enough so that most car owners buy them, then holders face zero marginal pecuniary costs of use and a significant modal switch is plausible, provided that service frequency, speed and other quality attributes are adequate. Using a simple model, we show that this two part tariff or public transport club can generate welfare gains in the form of reduced car use as well as higher revenue. The model is tested with 25 years of data from four Swiss cities. Results from seemingly unrelated regression estimation indicate large season ticket effects on the demand for public transport. Classification-JEL: R41 Keywords: Public transport demand, Season tickets Handle: RePEc:san:crieff:9802 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: David G McMillan Author-Name: Alan E H Speight Title: Modelling the Risk Premium in the Black-Market Zloty-Dollar Exchange Rate Abstract: This paper tests for the presence of non-linear dependence in the black- market Polish zloty-dollar exchangeg rate. Using the GARCH-M model, we illustrate use of the Marquardt (1963) alternative to the Berndt, Hall and Hausman (1974) iterative nonlinear algorithm for estimation of such models, and discrimination between estimated models on the basis of the Brock and Potter (1993) test for conditional variance misspecification. We find evidence of a time-varying risk premium such that foreign speculators are compensated for increased exchange rate risk by depreciation which increases the dollar value of zloty holdings, and which is able to account for all of the apparent nonlinearity in the zloty. Classification-JEL: G12; F31 Keywords: Risk premium, GARCH-M model, black-market exchange rate Handle: RePEc:san:crieff:9801 Creation-Date: 1998-10 Template-type: ReDIF-Paper 1.0 Author-Name: Susanna Sallstrom Title: Technological Progress and the Chamberlin Effect Abstract: Technological progress in the economy has an impact on a monopolist's optimal choice of product quality by shifting either the demand or the cost curves. When quality is reduced in response to new technolgy we have a On the assumption that consumers with higher reservation prices for the good also value quality more on the margin, it is shown that quality is reduced in the following three cases: when technolgical progress results in a pure income effect which gives a production on a larger scale by shifting out the demand curve; when the increase in production volume is driven by reductions in marginal cost of producing an extra unit; and finally when there is an increase in total production volume due to a reduction in set-up costs of differentiating the good. There is a possibility that some customers will be harmed by a Chamberlin effect. Classification-JEL: O33; D42; D60 Keywords: quality, technolgical progress, vertical differentiation Handle: RePEc:san:crieff:9727 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Laurence Lasselle Author-Name: W Briec Title: Engodenous Fluctuations in an OLG Model with Production Abstract: We examine the OLG model of Reichlin (1986). By using the Helleman's method (1980), we show that the difference equation of the model can be locally studied from the Feigenbaum equation. We can then explain the existence of endogenous fluctuations acording to the productivity level and the coefficient of risk aversion. These fluctuations take the form of a period doubling bifurcation. Classification-JEL: C60; E32 Keywords: risk aversion, Feigenbaum equation, two-dimensional maps, renormalization Handle: RePEc:san:crieff:9726 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Bishnupriya Gupta Author-Name: Amit S Ray Title: Real Exchange Rates and Manufactured Exports: A Study of India's Exports to the USA Abstract: This paper presents an empirical analysis of India's exports of manufactured items to the USA. The paper identifies items at the SITC 3-digit level of disaggregation which could be considered potential exports from India to the US and econometrically estimates the role of real exchange rates in exploiting India's expor potential in these markets. In the list of potential rates we find both simple labor intensive manufactures (traditional and non-traditional) as well as technologically sophisticated products. For most of the items in both categories, India's real exchange rate appears to be a significant determinant of market share. The paper concludes that within the framework of India's new economic policy with a thrust on getting the exchange rate right, India can expect to improve its export performance in developed country markets. Classification-JEL: F14; O19 Keywords: Exchange rates and exports, market share Handle: RePEc:san:crieff:9725 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix R FitzRoy Author-Name: Ian Smith Title: Passenger Rail Demand in 14 Western European Countries: A Comparative Time Series Study Abstract: This paper provides the first time series estimates of national rail demand equations for 14 European countries over the period between 1968 and 1991. In addition to conventional price and income variables, the data set includes quality variables that proxy the generalized time costs of rail transport found to be important in micro studies. No long run equilibrium relationships can be detected between rail demand and its determinants, but first difference estimates of demand growth provide reasonable short run elasticities for price and quality variables for most countries. Classification-JEL: R41 Keywords: Rail Demand, European Railways Handle: RePEc:san:crieff:9724 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Andrew E Burke Author-Name: Felix R FitzRoy Author-Name: Michael A Nolan Title: Entrepreneurial Choice and Performance: A Re-Appraisal of Liquidity and Human Capital Constraints Abstract: A new theory of entrepreneurial effort demonstrates that reducing liquidity constraints may retard the performance of the self-employed. A two dimensional empirical approach then distinguishes the impact of human and financial capital on both the number and performance of the self-employed. This analysis supports the theory - exogenous financial capital (inheritance) increases the number of self-employed but not their income. It also finds an inverse U-shaped relationship between inheritance and numbers hired by the self-employed. Higher levels of education reduce the number of self-employed but enance their performance. The net effect of education on employment creation is positive. Classification-JEL: J23; M13 Keywords: Self-employment, entrepreneurship, employment, liquidity constraints Handle: RePEc:san:crieff:9723 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Dynamics of Small Business Financial Structure Abstract: A dynamic theory of the small firm is expounded, assuming entrepreneurs maximise business value over a finite time horizon. Its predicted trajectories for key financial variables depend on which of debt and equity are cheaper. The predictions are compared with empirical evidence constructed from three years of primary source data on one hundred and fifty new businesses. Evidence largely confirms predictions of the model, favouring a cheap equity view. As capital and sales rise steadily, debt is retired rapidly, except when interest rates on long-term debt are low. Dividends are usually deferred. Classification-JEL: D21; G32; L21 Keywords: Small firms, financial structure, gearing trajectory Handle: RePEc:san:crieff:9722 Creation-Date: 1997-10 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9722.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Small Firms' Actions and their Survival Probabilities Abstract: The small firm is viewed as taking a complex of actions to facilitate market place survival. Selection of such actions involves choice about markets, costs, strategy, finance, organisation, human capital and innovation. Probit models of survival over two years are estimated for a random sample of 150 new businesses for which field work evidence on complex actions is available. Although many actions are found to play at least some role in promoting survival of the small firm, a parsimonious empirical model is presented which emphasises just ten actions. this model indicates the pivotal imortance of reward to the entrepreneurial input, allied to a tight control of the overall wage bill, if the small firm is successful to negotiate the early stage of its life cycle. Classification-JEL: D21; D43; G21; J31; L2; M2; M13; P12 Keywords: small firms, complex actions, probit models, wage bill, entrepreneurial input Handle: RePEc:san:crieff:9721 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9721.pdf File-Format: application/pdf Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix R FitzRoy Author-Name: Ian Smith Title: Passenger Rail Transport: Demand and Quality in a European Panel Abstract: A panel of passenger rail data from 14 countries over 24 years is used to estimate a rail demand function for the first time at this level of aggregation. The data set includes quality variables that proxy the generalised time costs found to be important in micro studies. Robust estimates of the rail demand equation indicate much larger short and long run service quality elasticities than those for fares or cross-price elasticities, a ranking which is in agreement with estimates using highly disaggregated data. The overriding importance of service quality for stemming the declining modal shares of passenger rail transport in most countries is thus confirmed at the aggregate level. Classification-JEL: R41 Keywords: Rail demand, European railways Handle: RePEc:san:crieff:9720 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Julia A Smith Title: Accounting for Growth: Strategic Financial Management in the New Small Firm Abstract: The paper investigates financial management directed towards funding growth in the new small firm in Scotland. It makes appeal to two sources of first-hand data, gathered using fieldwork methods during the period 1993-97. The first evolved from interviews with 150 owner-managers of micro firms using an administered questionnaire (AQ); and the second, from a subset of 17 of these respondents, using a semi-structured interview schedule (SSI). The paper investigates: (1) aims and ambitions of owner-managers; (2) initial financial structure; (3) preferred alternatives for funding growth; (4) evolving financial structure; and (5) current position. It is shown that those owner-managers who start with a superior business idea and express that idea clearly and efficiently are also those who will attract more external funding, and subsequently perform better. In addition, they tend to have more sophisticated methods of managing finances and accounting information, using forecast figures rather than historical data, and working from sales and profit margins rather than merely cash flow. Classification-JEL: D21; G21; L21; M1; M41 Keywords: micro firm, accounting information, funding growth, strategic financial Handle: RePEc:san:crieff:9716 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Andrew E Burke Title: Legal Structure, Strategic Regulation and Dividing the Spoils from R&D in Intellectual Property Abstract: In this paper we examine the often neglected role of the nexus between law and economics in the context of assessing regulatory efficiency. Through some fairly straightforward conceptual exposition and an empirical analysis of the regulation of intellectual property in the USA, we demonstrate the ease in which legal nuances can deviate well motivated copyright and antitrust laws from their objective of optimising market performance. In particular, the paper illustrates the manner in which legal structure creates scope for the strategic manipulation of copyright and antitrust laws by various interest groups. It may also motivate international regulatory conflicts and races. This occurs when national regulators pursue a 'robbing Peter to pay Paul' approach to regulation, which seeks to minimise the price paid by domestic users of intellectual property, at the cost of increasing the price paid in foreign markets. This tendency is exacerbated if legal-access/litigation costs fall. The analysis, therefore, adds a further argument to the growing case for international regulatory co-operation in competition policy, as well as the need for a greater input by economists to legal design. Classification-JEL: K21; K40; L4; L51 Keywords: R&D, Regulation, Copyright, Antitrust, Competition law Handle: RePEc:san:crieff:9715 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Matthias Beck Title: Free Enterprise and Labour Law: The Case of Employee Termination and Managerial Rights in the United States Abstract: Today the United States is the last industrialised country that does not have a comprehensive system for the regulation of dismissals and redundancies. The relative neglect of dismissal protection can be attributed to the union-employer disputes over plant closures and redundancies. Initially US courts adhered to English employment law which had evolved in the context of a primarily agricultural, feudalistic society. In the mid 19th century, the adoption of 'employment-at-will' by US courts brought about a drastic rejection of older rules. Ultimately, however, the at-will system was not compatible with a modern society in which unions were to play a legitimate role. The evolving legislative responses, particularly the dismissal protection provided within the National Labor Relations Act, created a paradox. This paradox unravelled during the post-war years, when a series of court decisions made it clear that union claims for involvement in redundancy and termination decisions were incompatible with managerial interests. Pushed by a wave of disputes arising from plant closures, US courts, by the early 1980s, came to increasingly interpret legislation so as not to intefere with managerial rights. The ensuing series of court rulings highlights the tension between free market capitalism and the statutory regulation of redundancies, which was ultimately resolved in favour of employers. Classification-JEL: J53; K31 Keywords: Redundancies, Dismissals, Economic Regulation Handle: RePEc:san:crieff:9714 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: The Development and Survival of New Small Businesses: Empirical Evidence for Scotland 1994-97 Abstract: This paper has two goals. First, to provide an accurate characterisation of the new small firm in Scotland by reference to markets, finance, costs, business strategy, human capital, internal organisation and technical change. Second, to use these same features to discover salient differences between small firms which either survive or close, two or three years after inception. The empirical evidence is based on interview data from 150 entrepreneurs over a three year period. It was found that surviving firms were larger, better funded, lower geared, and more profit oriented. They also paid higher wages, and were both more attuned to, and realistic about, new technologies. The conclusion formed was that firms which survived generally displayed wider and deeper competencies than firms which closed. Classification-JEL: C81; D21; D92; L22; M21; R12 Keywords: micro firms, business inception, business development, survival rates Handle: RePEc:san:crieff:9712 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9712.pdf File-Format: application/pdf Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Julia A Smith Title: The Behaviour and Performance of Young Micro Firms: Evidence from New Businesses in Scotland Abstract: This paper is an empirical study, making appeal to firsthand evidence gathered by face-to-face interviews with the owner-managers of 150 small firms in Scotland. It investigates the performance of the micro firm in the early years of its life-cycle, by reference to four key behavioural characteristics: (i) strengths, weaknesses, opportunities and threats (SWOT) analysis; (ii) the gathering of trade intelligence on the firm's rivals; (iii) the use of information technology (IT) in the business; and (iv) financial form and the owner-manager's preferences as regards the form of their equity stake holding. Seven propositions, based on the evidence accumulated, are formulated and tested. These are illustrated by boxlots and cross-tabulations, and supported with chi-square statistics for testing measures of association. Taken together, the data provide an illuminating picture of the strategic behaviour of the young micro firm, and the subsequent effect that actions can have on firm performance. In particular, it is found that the use of IT in clusters of devices has a significant positive association with performance. Classification-JEL: C81; D21; L86; M21 Keywords: micro firms, performance measurement, SWOT analysis, information technology, Handle: RePEc:san:crieff:9711 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix FitzRoy Author-Name: Michael Funke Author-Name: Holger Strulik Title: In Search of Spillover Effects in West German Manufacturing Abstract: This paper first replicates Basu and Fernald's (1995) US results to find no externalities from aggregate West German manufacturing to gross industry output changes and approximately constant internal returns to scale. However, when we distinguish between upswings and downturns in aggregate activity, spillovers appear, associated with upswings. Finally we allow asymmetry in the industry production function and find increasing returns when inputs rise, but constant returns when inputs decline. The evidence for externalities is weaker under asymmetric input changes, but is not entirely removed. We conclude that asymmetries are important at both industry and aggregate level. Classification-JEL: D24; L60 Keywords: increasing returns to scale, external effects Handle: RePEc:san:crieff:9708 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Andrew E Burke Author-Name: Theodore To Title: Contesting Contestability and the Efficiency of Wages Abstract: The fundamental contribution of the paper is to contest the view that greater market contestability has non-negative effects on market performance. In a model where employees pose a threat of potential entry, we demonstrate that a reduction in barriers to entry causes no fall in industry price when incumbents are able to buy-off potential entry through higher wages. Over the longer term the analysis illustrates that increased market contestability can cause equilibrium industry price to be higher than that which would have occurred if entry bariers had persisted at their initial higher level. Correspondingly, the model indicates that investment in endogenous barriers to entry and wage ceilings on executive salaries may enhance market performance. Classification-JEL: L12; L13; K21; L41; L51 Keywords: barriers to entry, market contestability, antitrust regulation, executive Handle: RePEc:san:crieff:9707 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Bishnupriya Gupta Title: The International Tea Cartel in the Great Depression: The Response of Firms in India and Ceylon Abstract: We use data from an international sample of 349 British owned firms to analyze the effectiveness of the International Tea Agreements of 1930 and 1933. These agreements were effective in reducing output overall; however, there were significant regional differences in the extent of compliance, with the firms located in Eastern India reducing output to a greater extent than firms in Ceylon or South India. These differences can be attributed to differences in firm size and organizational structures in these regions. We also use archival material to argue that the failure to collude in 1931 and 1932 was mainly due to a bargaining conflict between established producers and the newer plantations of Java/Sumatra. Classification-JEL: L13; N50; N55 Keywords: Collusion, bargaining conflicts Handle: RePEc:san:crieff:9706 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Ethan Ligon Author-Name: Jonathan P Thomas Author-Name: Tim Worrall Title: Informal Insurance Arrangements in Village Economies Abstract: This paper studies insurance arrangements in village economies when there is complete information but limited commitment. Commitment is limited because only limited penalties can be imposed on households which renege on their promises. Any efficient insurance arrangements must therefore take into account that households will renege if the benefits from doing so outweigh the costs. We study a general model which admits aggregate and idiosyncratic risk as well as serial correlation of incomes. It is shown that in the case of two households and no storage the efficient insurance arrangement is characterized by a simple updating rule. An example illustrates the similarity of the efficient arrangement to a simple debt contract with occasional debt forgiveness. The model is then extended to multiple households in southern India to test the theory against three alternative models: autarky, full insurance, and a static model of limited commitment due to Coate and Ravaillon (1993). Overall, the model we develop does a significantly better job of explaining the data than does any of these alternatives. Classification-JEL: D1; G2; O13 Keywords: Village economy, efficient insurance, limited commitment Handle: RePEc:san:crieff:9705 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Partha Sen Title: Dynamic Efficiency in a Two-Sector Overlapping Generations Model Abstract: This paper looks at the conditions under which we may have welfare improving capital accumulation in two-sector two-period overlapping generations models. It is found that both the usual conditions of the rate of interest exceeding the population growth rate and profits exceeding investment may give misleading answers. Finally, there is also the possibility of asset bubbles, even with dynamic efficiency. Classification-JEL: D91; E44; O41 Keywords: Overacumulation, overlapping generations, dynamic efficiency, asset bubbles Handle: RePEc:san:crieff:9704 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Partha Sen Title: Asset Bubbles in a Monopolistically Competitive Macro Model Abstract: I look at the existence of asset bubbles in a monopolistically competitive dynamic macroeconomic model. The positive predictions of te model are very similar to Tirole's competitive model. But the welfare effects are very different - in that as capital gets crowded out, welfare falls. The monopolistically competitive sector contracts and the wage rate falls, lowering welfare. Classification-JEL: D9; E1; O41 Keywords: Monopolistic competition, bubble equilibrium, dynamic efficiency Handle: RePEc:san:crieff:9703 Creation-Date: 1997-10 Template-type: ReDIF-Paper 1.0 Author-Name: Matthias Beck Title: The Law and Economics of Dismissal Regulation - A Comparative Analysis of the US and UK Systems Abstract: This paper analyzes competing models of dismissal regulation from a Law and Economics perspective, using the contemporary US and UK dismissal regimes as a comparative benchmark. The regulation of dismissals in the UK and US differs widely in spite of their joint common-law tradition. Whereas the UK places great reliance on statutory law, the dismissal regime of the US emphasizes individual court action. Underlying these variations are broader differences which originate from historical trajectories of legal development as well as far reaching choices about economic governance. This paper revews the development and the key characteristics of the US and UK systems of dismissal protection. We then discuss some of the views which dominate the contemporary debate on dismissal protection. Analyzing conventional arguments for and against dismissal regulation, we conclude that, due to its focus on efficiency calculus, this debate has entererd a conceptual deadlock. This deadlock, we suggest, can be overcome by moving from arguments which are principally based on economic efficiency to a property rights view of job security. Classification-JEL: B25; J53; J58; J68; K12; K31; K41; K42 Keywords: Law and Economics, Unjust Dismissal, Property Rights Handle: RePEc:san:crieff:9621 Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: David Cobham Author-Name: Steve Williams Title: Hysteresis, the Phillips Curve and the Costs of Monetary Union Abstract: If actual unemployment affects the NAIRU through a hysterisis effect, the disinflation involved in reducing a country's inflation rate to that of its future partners in a monetary union could produce a long term cost to monetary union in the form of a lasting rise in the NAIRU. This note sets out a framework for analysing the likelihood of such an eventuality. Classification-JEL: E24; E31; F36 Keywords: Unemployment, Hysterisis, Phillips Curve, Monetary Union Handle: RePEc:san:crieff:9620 Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Author-Name: Julia A Smith Title: What Makes a New Business Start-Up Successful? Abstract: This paper seeks a good measure of new business performance, and then explains this measure by various dimensions of business strategy. Three criteria are used to create a one dimensional ordinal ranking of high, medium and low performance for new business starts: employment growth; return on capital employed;and labour productivity. It is shown that statistical cluster analysis provides a convincing separation of a sample of new business starts into high, medium and low performance categories, using a minimum distance criterion for clustering. An ordinal logit model (with selection) is then used to explain this performance ranking. The results indicate that many widely discussed features of small business strategy have little, or even negative, impact on performance. Of the numerous aims that owner managers may adopt (survival, growth etc), only one appears to have a major impact on performance; the pursuit of the highest rate of return on investment. Many entrepreneurial perceptions of their own capabilities appear false or unimportant, with the exception of organisational features and systems. Classification-JEL: L1; L2; M13; M21 Keywords: New businesses, performance, ordered logit with selection, cluster analysis Handle: RePEc:san:crieff:9618 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9618.pdf File-Format: application/pdf Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: Falconer Mitchell Author-Name: Gavin C Reid Author-Name: Nicholas G Terry Title: Venture Capital Supply and Accounting Information System Development Abstract: This study examines the origins and characteristics of information systems of entrepreneurial firms going through that stage in their life cycle when serious growth ambitions are fuelled by an infusion of external capital. It does so by investigating the consequences of venture capital intervention for the entrepreneurial firm as regards changing characteristics of its accounting information system (AIS). Data are presented on twelve investor-investee ‘dyads’ (i.e. matched pairs) in the UK venture capital industry. Weight of evidence is adduced in favour of five propositions, relating to: monitoring demands; internal change within the investee firm; the variety, extent and frequency of information change; the use of enhanced information for decision support; and the universalist influence of the investor. This evidence has implications for practitioners, as well as for future research on AIS development. Classification-JEL: G24; L21; M13; M41 Keywords: Venture Capital, Accounting Information System (AIS), Entrepreneurial Firm Handle: RePEc:san:crieff:9616 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9616.pdf File-Format: application/pdf Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: Andrew E Burke Title: A Synthesis of Recent Advances in the Economics of Entrepreneurship and Industrial Organisation from the Perspective of Competition Policy Abstract: Competition policy seeks to regulate markets in order to promote competition and economic welfare. In doing so it relies heavily on the economics of industrial organisation for guidance. However, within economics two fields of research have focused on the competitive process, namely the economics of industrial organisation and entrepreneurship. These differ at two important levels. In the first instance, the literature on entrepreneurship is almost exclusively concerned with dynamic competition whereas the vast bulk of industrial economics deals with static competition. Secondly, the economics of industrial organisation is mainly concerned with factors which affect the demand for enterprise while the literature on entrepreneurship mainly focuses on the suply of enterprise. This paper conducts a survey of these two literatures from the perspective of competition policy. It ilustrates how a consensus of opinion has gradually emerged from the evolution of these schools of thought. This facilitates a synthesis. On this basis the analysis concludes that competition policy would be enhanced in it broadened its scope to consider the role of the supply of enterprise, particularly in its use of the theory of constestable markets. In addition, the recognition of the trade-off between dynamic and static efficiency pose serious challenges for the formulation and practice of competition law. In particular, the empirical difficulties in arriving at unambiguous policy conclusions alongside the fact that most competition law was framed with static efficiency in mind, raises the likelihood that competition law may itself cause inefficiencies. The paper illustrates that the laissez faire versus regulation debate has been resolved at a conceptual level but that the difficulties associated with empirical analysis implies that in practice it will still be a source of contention in the execution of efficient competition policy. Classification-JEL: K21; K23; L50 Keywords: Enterprise, Entrepreneurship, Competition Law, Regulation, Survey Handle: RePEc:san:crieff:9612 Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: Andrew E Burke Title: Competition Law and Using Prices to Assess Firm Conduct: Some Conceptual Omissions Abstract: In this paper we conduct a re-appraisal of the robustness of tests relating the abuse of market power to measures of price-cost margins and bench mark pricing. We argue that these methods do not control for variations in the correlation between workers' reservation wages and productivity. In the absence of controlling for these effects, these techniques tend to wrongly diagnose an abuse of market power and to penalise firms who are relatively worse affected by the pattern of this correlation across comparison groups. Therefore, high profit firms escape the regulatory net while low profit firms are penalised. It is also found that employment turnover is a useful indicator of the extent to which firms are adversely affected by this factor. At a policy level, the analysis reveals that contrary to recent practice, profit comparisons should be considered in cases of price bench marking and price-wage margins. In addition, the analysis indicates that it is prudent to place the onus of exoneration on fims accused of an abuse of market power, rather than plaintiffs. The results are also relevant to studies which use wages to predict industry performance. Classification-JEL: K23; L40; L50 Keywords: Competition Policy, Price Bench Marking, Regulation Handle: RePEc:san:crieff:9610 Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: Leonard J. Mirman Author-Name: Manjira Datta Title: Dynamic Externalities and Policy Coordination Abstract: We introduce the possibility of trade in dynamic models with externalities and evaluate the consequences on the capital accumulation process, the market-clearing prices and policy making. We consider mixed economies characterized by a blend of strategic and nonstrategic sectors. An equilibrium exists in the bilateral monopoly game because the strategic planner incorporates the future utlity of the country and the presence of a nonstrategic sector in its decision making. Capital externality is one source of interdependence. Equilibrium price, a function of both outputs, is another. Policy coordination is advantageous only when preferences are dissimilar and an externality is present. Classification-JEL: C73; D90; E61 Keywords: Dynamic games, Externality, Policy coordination, Trade and Growth Handle: RePEc:san:crieff:9608 Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Capital Structure at Inception and the Short-Run Performance of Micro-Firms Abstract: This paper examines the financial structure and performance of a sample of 150 young micro-firms. Their average age is one and a half years; and their average size is three full-time employees. Short-run performance is measured over one year, in terms of continuing to trade, and the evidence is analysed using a split sample comparison, and probit analysis. The general finding is that financial structure is not a major determinant of performance in this, the very earliest, phase of the life-cycle of the micro-firm. Whilst it is possible to identify specific financial features which may favour survival (e.g. the availability of trade credit) or may threaten survival (e.g. the use of extended purchase commitments), conventional features of financial structure (e.g. assets, gearing) do not play a significant role. However, other (non-financial) explanations of early-stage survival are available, invluding the use of advertising and business planning, and the avoidance of precipitate product innovation. This suggests that market features and internal organisation of the micro-firm may dominate financial structure as determinants of survival in the very earliest phase of the life-cycle. Classification-JEL: D21; G32; G33; L21; M21 Handle: RePEc:san:crieff:9607 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9607.PDF File-Format: application/pdf Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Michael Funke Title: Wages and International Price Competitiveness: Germany vs U.K. Abstract: The standard bargaining model predicts that falling international price competitiveness should exert downward pressure on wages, in addition to the effect of current unemployment. Cointegration results with aggregate British and German data confirm the model for the U.K., but fail to reveal an effect on Germany's apparently declining competitiveness on wage growth. Some tentative explanations are offered. Classification-JEL: J31; J51; C23 Keywords: wages, trade unions, time series Handle: RePEc:san:crieff:9606 Creation-Date: 1996-10 Template-type: ReDIF-Paper 1.0 Author-Name: Andrew E Burke Title: Enterprise and Irish Economic Performance: Data Regularities and Issues for Research Abstract: The paper was written for ERNI's first conference on entrepreneurship in Ireland and was aimed at facilitating multi-disciplinary research on the subject. It conducts a synthesis of the current forms of economic thought on entrepreneurship and also carries out introductory empirical analysis of measures of Irish enterprise. the survey of entrepreneurial thought illustrates that it is more fruitful to analyse enterprise rather than searching for an archetypal entrepreneur. The empirical analysis finds that commonly used measures of Irish enterprise are heterogeneous and are not substitutable for analytical purposes. In terms of recommendations for future research the analysis supports a dis-aggregative approach which distinguishes between productive, unproductive and destructive enterprise. The latter is underpinned by the lack of robust correlation between measures of enterprise and economic performance. Meaningful research in the area necessitates the collection of new data and re-orientation of focus from new to existing firms. Classification-JEL: R10; O10; B20; A12 Keywords: entrepreneurship, enterprise, economic performance, Ireland Handle: RePEc:san:crieff:9520 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Andrew E Burke Title: How Effective are International Copyright Conventions in the Music Industry? Abstract: The paper is concerned with the issue of whether international copyright legislation is effective in curbing audio software counterfeiting. The paper finds that copyright conventions have not been effective in reducing audio counterfeiting to comparatively low levels. This result holds even when allowances are made for the duration of copyright convention membership and the specificity of the articles of the convention. Economic development is found to be the main determinant of low counterfeit levels. This would tend to support anecdotal evidence which indicates that economic development is a necessary condition for the active recognition of audio property rights by the general public, judiciary and police. It is also consistent with a view that pirate audio software, being an inferior good, has a more buoyant market in less developed economies. From a policy perspective the research would seem to suggest that the extensive efforts and copious attention to detail by legal experts has made little impact on counterfeit activity and is secondary in importance to the socio-economic environment in which these laws are being applied. Classification-JEL: D72; L82; O34 Keywords: music industry, law and economics, property rights, copyright Handle: RePEc:san:crieff:9516 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Angela J Black Title: Absolute and Relative Measures of Time-varying Risk Premia and the Predictability of Stock Returns Abstract: Recent evidence suggests that predictable components in excess stock and bond returns can be attributed to common risk factors which may be associated with macroeconomic conditions. This paper considers theoretical reasons which seem to support the view that a relative measure of risk premia may capture additional information about changing macroeconomic conditions. Time series regressions are executed on two UK stock indices and one UK bond index from January 1965 - December 1994. The results suggest that relative measures of risk premia account for more of the predictability in UK excess stock and bond returns that absolute measures of risk premia. Classification-JEL: G15 Keywords: risk premia, predictability, excess returns Handle: RePEc:san:crieff:9514 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Theodore To Title: Risk and Evolution Abstract: I examine a Knightian model of entrepreneurial risk and investment where in addition to the self-selection process for choosing entrepreneurs, there is an evolutionary selection process over the representation of various risk attitudes. Under a standard evolutionary dynamic, rather than converging to a population of risk-neutrals (fitness maximizers), the population converges to a stationary distribution where both risk-averse and risk-loving types are represented and where only the risk-loving types invest. Many types are represented in stationary population distributions because an evolutionary market environment protects and encourages diversity with different types specalizing in different activities and in the steady state each type earns, on average, the same objective payoff. Classification-JEL: C72; D81 Keywords: preference evolution, risk and uncertainty, theory of the entrepreneur Handle: RePEc:san:crieff:9513 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: David Cobham Author-Name: Ramesh Subramaniam Title: Corporate Finance in Developing Countries: New Evidence for India Abstract: Financing of corporate growth has generally not been paid much attention in the development economics literature. Recent analysis of the Emerging Markets Data Base of the International Financial Corporation suggests that corporate financing patterns in India, among a select group of other developing countries, are different from those in developed countries. Based on the data for a sample of the largest firms, these analyses provide evidence that Indian firms make more use of equity financing than firms in developed countries. These results have been used to argue in favour of investing heavily in the development of stock markets in developing firms. In this paper, we investigate the possibility that such an analysis could be too sample-specific in that the largest firms do not represent all of the Indian private corporate sector. Our analysis, based on sectoral and cumulative firm-level data for India, suggests that while firms do make a significant use of equity issues, the nature of equity financing may be different in an environment in which a number of firms are not listed on stock exchanges but may be issuing equity. The results show that bank loans and internal finance are more important sources of corporate financing. Sectoral and firm-level data from the United Kingdom are utilized o compare the behaviour of Indian firms with that of firms in developed countries, for which there is a rich literature on financing corporate growth. We conclude that India is not obviously very different from the low internal finance developed countries and that, since a large part of equity issues are by unlisted firms, the gains from the promotion of stock markets may be limited. Classification-JEL: G1; G3; O1 Keywords: corporate financing, firm-size effects, equity markets Handle: RePEc:san:crieff:9512 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Matthias Beck Author-Name: Charles Woolfson Title: The Hidden Deregulation of Britain's Offshore Oil Industry Abstract: Since 1990, following Lord Cullen's public inquiry into the Piper-Alpha disaster, the oil industry has spent approximately 2.6 billion pounds on safety improvements. The operators have co-operated with governmental authorities in the design of a new regulatory regime, based on the principles of goal- setting and self-regulation. This paper attempts a preliminary assessment of this regulatory system on offshore safety. We review industry responses to successive tranches of regulation, emanating both from the HSE and the European Union, and explore the tensions which have arisen between regulator in regulated industry. Our statistical analysis indicates that there have been no significant improvements in offshore safety conditions following the establishment of the new regulatory regime; a situation which we attribute to the industry's policy of introducing an agenda of hidden deregulation into the post Piper-Alpha reconstruction of offshore regulation. Classification-JEL: K23; D73; L50; L71; I18 Keywords: Deregulation, Occupational Safety, Law and Economics, Oil Industry Handle: RePEc:san:crieff:9511 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Frank H J Bunte Title: Variety and Quality Competition in a Horizontal Differentiation Model: a welfare analysis Abstract: This paper analyses decisions on quality and variety in a horizontal differentiation model following Hotelling (1929). Price instability does not occur, when firms recognise their mutual interdependence and respect each other's backyards. This argument is elaborated in the Hotelling scenario. Price stability is also avoided, when limit prices are set. this argument is elaborated in the limit price scenario. In the Hotelling scenario there is a tendency towards minimum differentiation, in the limit price scenario there is neither minimum nor maximum differentiation. In both scenarios the duopolists underinvest in quality improvement, since competition forces them to pass all surplus created to the consumers. Because the duopolists underinvest, both the social planner and the monopolist outperform them in terms of social welfare. Asymmetry in (initial) quality is widened through time: the leading firm invests more in R&D, the lagging firm invests less. Asymmetry is shown to be beneficial for both consumer surplus and industry profits. Classification-JEL: D6; L5; L13 Keywords: horizontal differentiation, minimum versus maximum differentiation, Handle: RePEc:san:crieff:9509 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Campbell G. Cowie Author-Name: Felix Fitzroy Title: Deregulation and the Demand for Scottish Bus Transport Abstract: In the ten years since the deregulation of the UK (outside London) bus industry, the success, or otherwise, of the transport policies of the UK Government have been debated intensely. This paper hopes to contribute to the debate by offering an analysis of the effect of deregulation on the Scottish bus industry. Included in this paper is an econometric model that isolates and illustrates the controversial deregulation factor, as well as a broader discussion of the failure of public trasport within the UK. Classification-JEL: L51; R41 Keywords: Brunel University Handle: RePEc:san:crieff:9508 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Author-Name: Nicholas G Terry Author-Name: Julia A Smith Title: Risk Management in Venture Capital Investor-Investee Relations Abstract: This paper provides an empirical analysis of risk handling arrangements adopted in the relationship between the venture capital investor and his investee. The theoretical framework adopted is principal-agent analysis, which views the investee as a risk averse agent entering into a risk sharing contract with the investor, a risk neutral (fully diversified) principal. The sample analysed is made up of twenty venture capital investors in the UK over the period 1992-93, and (where available) their corresponding investee(s). These investors accounted for about three quarters of venture capital activity in the UK over this period. The paper reports on evidence gathered by semi-structured interviews with investors and investees, on expected returns, portfolio balance, screening and risk sharing. Classification-JEL: D81; G23; L84 Keywords: venture capital, risk management, information asymmetry, investor-investee relations Handle: RePEc:san:crieff:9505 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9505.pdf File-Format: application/pdf Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gwendolyn C Morrison Author-Name: W Duncan Reekie Title: The Paradox of the Prescription Charge: Co-payments in British Pharmaceuticals Abstract: Prescriptions account for around 10% of UK National Health Service (NHS) expenditures. In an effort to control costs and to recoup expenditures government imposed prescription charges in 1951. Before their temporary abolition in 1965, charge income covered about 20% of costs. But both the charge and the proportion of the population exempted from paying it have increased substantially over the years. Consequently, although the charge has increased from 9% to 53% of the cost of the average script since 1978, total income from the charge has remained less than ten percent of total NHS prescription costs and consumption in the presence of other less easily controled factors such as an ageing population and unemployment. A patient co-payment such as the charge appears to be a significant determinant of health demand. Classification-JEL: I1 Keywords: prescription, prescription charge, user charge, NHS Handle: RePEc:san:crieff:9504 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gwendolyn C Morrison Title: Irreversible Indifference Curves, Reference Points, and the Practice of Eliciting Preferences from the Public Abstract: Over the last decade, evidence has accumulated in the mainstream economics literature indicating that, contrary to economic theory, indifference curves are irreversible. The methods in question - willingness to pay versus willingness to accept and standard gamble versus certainty equivalence - are frequently used by health economists. Clearly, these findings raise doubts about the results obtained using these methods. The purpose of this paper is, first, to bring such discrepancies to the attention of the health economists that employ these methods (or the health status indices obtained from these methods), and then to address some implications that these findings have on the practices of eliciting preferences regarding health and health care from the public. Classification-JEL: D6; D8; I1 Keywords: willingness to pay, willingness to accept, standard gamble, certainty equivalent, indifference curves Handle: RePEc:san:crieff:9502 Creation-Date: 1995-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Limit's to a Firm's Rate of Growth: the Richardsonian View and its Contemporary Empirical Significance Abstract: The work of the Oxford Economic Research Group under the chairmanship of George Richardson is taken as the starting point for a new analysis of the limits to small firm growth. Following Richardson's emphasis on costs of organisational change within the growing firm, caused by the need to train and assimilate new managerial recruits, a transactional efficiency explanation is developed emphasising three small business types: sole proprietorship; partnership; and private company. These types are identified from a contemporary database of new small firms, and their growth and performance characteristics are compared both by descriptive statistics and econometric evidence. The importance of business type to the growth/profitability trade-off relationship is confirmed, thus supporting Richardson's analysis. More complex organisational forms reduce short-term performance. A new finding is the additional importance of capital structure to this trade-off: higher geared firms experience lower growth and lower profits than lower geared firms. this effect can be explained by costs of debt servicing and exposure to risk. Classification-JEL: D2; L2; M2 Keywords: George Richardson, grounded theory, growth/profitability trade-off Handle: RePEc:san:crieff:9426 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9426.PDF File-Format: application/pdf Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Falconer Mitchell Author-Name: Gavin C Reid Author-Name: Nicholas G Terry Title: Post Investment Demand for Accounting Information by Venture Capitalists Abstract: The key conecpts of principal-agent analysis are utilised to investigate influences on venture capitalists' accounting information requirements as used in their dealings with investees. The findings are based on structured interviews held with twenty leading venture capitalists, managing funds which together comprise over three quarters of all UK venure capital funds. The results confirm that a number of the key concepts of principal-agent analysis are mirrored in the financial communication process between venture capital investors and their investees. They reveal the venture capitalists' appreciation of the dangers of moral hazard and information asymmetry. It is shown that, as a consequence, their information demands are designed to provide safeguards through bonding arrangements. These establish and define an information flow which can be utilised as the basis for frequent and regular monitoring of the investee. Classification-JEL: D8; G2; M4 Keywords: agency analysis, venture capital, accounting information Handle: RePEc:san:crieff:9424 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gwendolyn C Morrison Title: Values, Utilities, HYEs, and QALYs Abstract: This paper demonstrates that the HYE procedure yields health status values, not utilities as its creators claim. The difference between results from HYEs and the TTO technique is merely a product of the Standard Gamble/Certainty Equivalence disparity noted elsewhere in the literature. If utility is the unit with which treatments or health profiles are to be compared, then, it is argued, a scenario specific SG should be employed. In theory, this would yield utilities without making the restrictive assumptions of utility independence between health status and the restrictive assumptions of utility independence between helath status and duration, and the linearity of utility with respect to time, which must be made with respect to QALYs. Classification-JEL: I1; D8 Keywords: utility, value, healthy-years-equivalent, QALY Handle: RePEc:san:crieff:9423 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Michael Funke Title: Skills, Wages and Employment in Eastern and Western Germany Abstract: Disaggregated data from 30 two-digit manufacturing industies in the Eastern and Western parts of unified Germany are used to estimate employment from three skill categories of blue collar workers. Employment elasticities are uniformly higher in the East, and for unskilled labour. The former contradicts union claims that wages had little relevance for Eastern job losses, while the latter confirms the capital-skill complementarity hypothesis. Classification-JEL: J31 Keywords: skills, wages, employment Handle: RePEc:san:crieff:9422 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Fast Growing Small Entrepreneurial Firms and their Venture Capital Backers: an Applied Principal-Agent Analysis Abstract: First the empirical background of the UK venture capital industry is developed using a panel of major UK venture capital funds over the period 1988-92. Then a framework for applied principal-agent analysis is developed, focusing on risk management and information. Under risk management it explores attitude to risk, risk sharing and bearing, and the effects of risk bearing on effort. Under information handling, it explores information systems, information asymmetries between investor (venture capitalist) and investee (entrepreneur), and ways of attenuating them, and information variance and costs. Finally, the contract between investor and investee is seen as a device for 'trading' risk and information. The implications of this 'trading' for risk bearing, effort and efficiency are explored. The whole analysis is supported by a detailed case study which reflects current practice in the UK venture capital industry. Classification-JEL: D81; G23; L65; O32 Keywords: small firms, venture capital, principal-agent analysis, case study Handle: RePEc:san:crieff:9421 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9421.pdf File-Format: application/pdf Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Sandeep Bhargava Title: Disaggregated Investment and Corporate Performance: Evidence from a Panel of UK Firms Abstract: In recent work, De Long and Summers find a dominant role for investment in equipment to explain growth-differences across countries, and reject the standard Solow growth model. However, Auerbach et al reject these results in the OECD subsample of advanced industrial countries. In a different approach, Oulton and O'Mahony also find little support for the special importance of equipment using UK industry data. With a panel of large UK firms, we find equipment investment plays a major role in sales and profit growth, while other investment has weak and only partially significant effects. These surprising results suggest a misallocation of investment and some tentative policy conclusions. Classification-JEL: E22; G31; O40 Keywords: investment, growth, corporate performance, panel data Handle: RePEc:san:crieff:9420 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Ian Smith Author-Name: Zoltan Acs Title: High Technology Employment and University R&D Spillovers: Evidence from US Cities Abstract: Using 4 years of data from 37 American cities and 6 high technology groupings we present the first estimates of University R&D spillover effects on employment at this level of disaggregation, while controlling for prior innovations and state fixed effects. Wages and employments are strongly positively related, which can be explained in various ways. Consistent with studies showing R&D spillover effects on innovation at the state level, we find robust evidence that university R&D is a statistically significant determinant of city high technology employment and some evidence for employment effects of innovation. Classification-JEL: J23; J44; O30 Keywords: high technology, employment, R&D, knowledge externalities, clusters Handle: RePEc:san:crieff:9417 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gwendolyn C Morrison Title: Willingness to Pay and Willingness to Accept: have the differences been resolved? Abstract: This paper demonstrates that the results recently presented by Shogren et al (1994) are insufficient to reject the endowment effect as a significant cause of the divergence between willingness to pay (WTP) and willingness to accept (WPA) values. A more transparent means of testing for the presence of an endowment effect is discussed and the combined role that the endowment effect and the degree of substitutability may play in this disparity is illustrated. Finally, experimental evidence, drawn from the literature, is shown to support the argument that the endowment effect is a source of the persistent WTP/WTA disparity. Classification-JEL: D1; D6 Keywords: Willingness to pay, Willingness to accept, Endowment effect, Substitution effect Handle: RePEc:san:crieff:9416 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Martin Browning Author-Name: Ramesh Subramaniam Title: Gender Bias in India: Parental Preferences or Marriage Costs? Abstract: This paper presents an analysis of gender effects in intra-household allocation of resources among children over the life-cycle in India. We present a simple three-period model that considers two possible motives for differential allocation of resources: parental preferences (in favour of male children) or higher marriage costs of female children. If parents incur high marriage costs for female children, then in a life-cycle context the birth of a female child will have the same effect as a negative wealth-shock, leading to a reduction in current consumption to meet future expenditures. We show that the predictions under these two regimes depend on whether we look at total expenditures or expenditures on adult goods. Estimation results based on a unique panel of data from India show that wealth-effect dominates parental preferences in intra-household allocation of resources for the wealthy households in our sample. We find that the reverse holds for the unpropertied households. Our savings estimates match with the expenditures that the wealthy households incur for a daughter's marriage. Classification-JEL: D10; J16; O12 Handle: RePEc:san:crieff:9415 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9415.pdf File-Format: application/pdf Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Antony W. Dnes Title: Contracting-Out in Scotland: a Pilot Study Abstract: Some preliminary results are presented from a pilot study of the contracting-out of public services in Scotland. The results suggest that dispute resolution works smoothly and efficiently in these contracts but that there are increases in costs of administration at the bidding stage. Classification-JEL: L33 Handle: RePEc:san:crieff:9413 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Author-Name: Pamela A Siler Author-Name: Julia A Smith Title: Quality of Patenting in the UK Scientific Instruments Industry: Database Construction Abstract: This paper explains how a database of patent quality in the UK scientific instruments industry was constructed for the period 1981-90. A new and detailed decomposition of total patenting activity for the decade is reported upon for over ninety firms in the industry for this decade. This involves constructing patent families by exhaustively tracing all patent activity for the same invention over all patent regimes. The database is analysed in four ways: (i) differences between patenting and non-patenting firms; (ii) concentration and demand fragmentation; (iii) patenting and financial performance in 1986-87; (iv) optimal patenting firm size. Classification-JEL: L6; O3 Keywords: patent quality, database, scientific instruments Handle: RePEc:san:crieff:9412 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9412.pdf File-Format: application/pdf Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Early Life-Cycle Behaviour of Micro-Firms in Scotland Abstract: This paper reports on the behaviour of young (less than three years old) micro-firms (less than ten employees) in Scotland, with an emphasis on life-cycle effects. Two main tests were carried out. The first took Gibrat's Law (that growth is independent of size) as the null hypothesis, and a life-cycle effects model as the alternative. The Gibrat's Law model was rejected in favour of the life-cycle model. Smaller micro-firms grow faster than larger micro-firms. Robust non-linear variants of the life-cycle model were discussed and shown to display stable equilibrium characteristics which were consistent with the sample evidence. the second took a Classical simultaneous equations model as the null hypothesis, for which growth and profitability were mutually reinforcing. A Managerial model was set up as the alternative for which growth and profitability were in a trade-off relationship. The Classical model was rejected in favour of the Managerial. In the short-run, young micro-firms experience a trade-off between profitability and growth. The Managerial model was shown to imply a stable equilibrium, with characteristics consistent with sample evidence. Classification-JEL: L1; L2; M2 Keywords: Small firms, life-cycle, Scotland, growth-profit trade-off Handle: RePEc:san:crieff:9410 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9410.pdf File-Format: application/pdf Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Michael Funke Title: Capital-Skill Complementarity in West German Manufacturing Abstract: Capital-skill complementarity is tested for two different definitions of skill, using data from 32 West German manufacturing industries from 1975-1990. Using the Kmenta approximation for the CES function provides strong support for complementarity between white collar workers and capital. On the other hand, when "skill" is defined as skilled white collar and blue collar workers, we find essentially no evidence for complementarity. This surprising result suggests that the official classification of skilled production workers does not capture the planning activity most complementary to increasing capital intensity and technological progress. Classification-JEL: J31 Handle: RePEc:san:crieff:9408 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gwendolyn C Morrison Title: Consistency Within and Between Methods of Health Status Valuation: A Within Subjecy Examination of the Willingness to Pay and Standard Gamble Methods Abstract: In a priority setting context, the attainment of a desirable allocation of health care resources is dependent upon the accurate estimation of health gains produced by different treatments and services. Therefore, the detection of disparities between methods of obtaining these estimates has serious implications for the allocative process. Using data from a Department of Transport study into the value of preventing non-fatal road injuries, health status values for a set of injuries obtained using the standard gamble (SG) and willingness to pay (WTP) methods are examined. The results show that significant differences arise even when responses from both methods are obtained from the same individuals. Moreover, internal consistency checks built into the SG and WTP sections of the questionnaires reveal inconsistencies within these methods. Systematic inconsistencies, both within and between methods, are identified at the individual and aggregate level, and a model predicting these results is presented. SG and WTP responses are then adjusted - isolating the different components of the model - and the relative injury severities are recalculated accordingly. The recalculated SG and WTP results are then compared to determine whether the disparities within and between methods have been reduced or removed. Finally, suggestions regarding the application of these methods to various ends is discussed in the light of the results. Classification-JEL: B4; D8; D61; I1 Keywords: Willingness to pay, Standard Gamble, Health State Valuation Handle: RePEc:san:crieff:9407 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Ramesh Subramaniam Title: A Theory of Remittances Abstract: This paper presents a model of the determinants of urban to rural remittances in developing countries. While the literature on economic development is very rich in explaining migration behaviour, there is no formal theory of how remittances are determined. The framework here is similar to one in the literature on the economics of the family: the interaction between the rural family and the migrant is formalized as a simple game in which the migrant is assumed to be selfish. If remittances are used as investments in agricultural development, then migrants remit. It is shown that they remit only if their incomes fall within a certain interval, given the rural incomes. Remittances are non-monotonically related to the migrants' and rural incomes. Classification-JEL: D10; O12 Keywords: Altruism, Rotten and Smart Kid theorems, remittances, non-monotonicity, subgame perfect equilibrium, income intervals Handle: RePEc:san:crieff:9406 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Ramesh Subramaniam Title: Gender-Bias in Intra-household Allocation: The Importance of Household Fixed Effects Abstract: This paper presents an analysis of gender patterns in intra-household allocation of resources based on household level consumption data. Invoking the assuption that households seek to equalize the marginal utility of expenditures when they allocate resources over the life-cylcle, the paper provides a rationale for parental behaviour pertaining to the intertemporal allocation of goods among children. Estimation results based on panel data from India show that controlling for the unobserved household fixed effects is of crucial importance. Once allowance is made for fixed effects, the results indicate that there is no gender-bias in the allocation of resources. Classification-JEL: D10; J16; O12 Keywords: Intra-household allocation, marginal utility of wealth, wealth-shock, household fixed effects Handle: RePEc:san:crieff:9403 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Antony W. Dnes Title: Franchising, Externality and Dual Distribution Abstract: This paper examines dual distribution in franchising systems, which arises when franchisors simultaneously operate franchised and company-owned outlets. Dual distribution is explained in terms of non-separable externality, which increases the costs of franchising compared with separable externality. A model is developed to illustrate this explanation. Classification-JEL: L14; M21 Handle: RePEc:san:crieff:9402 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: John Beath Author-Name: Yannis Katsoulacos Author-Name: David Ulph Title: Game Theoretic Approaches Abstract: This paper discusses the use of game-theoretic methods in the study of technical change. It focuses on the role of two key incentives: the profit incentive and the competitive threat. These forces, which are outlined in Section 1, feature prominently in the discussion of Sections 2 and 3 on explicit models of innovation. However, we seek to show how an understanding of these effects also helps in the analysis of licensing and diffusion. These topics are covered in Sections 4 and 5. Section 6 concludes. Classification-JEL: C72; C73; D44; D45; L13; O31; O32; O33 Handle: RePEc:san:crieff:9401 Creation-Date: 1994-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Melanie Ward Title: Discrimination, Segregation and Firm Effects: Some U.K. Microevidence Abstract: In samples of employees from two firms, women are segregated in low-pay occupations and therefore receive lower returns on their (similar) educational qualifications than men. In the primary-sector, capital intensive, unionised firm, all wages are much higher. In the secondary-sector firm, rewarding qualifications and experience at the rates found in the primary firm would increase earnings (including fringe benefits) by about 80%, much more than the usual firm-size or industry differential. Classification-JEL: J3; J7; L2 Handle: RePEc:san:crieff:9319 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Zoltan J Acs Title: U.S. High Technology Clusters Abstract: It is well known that both "Silicon Valley" and "Route 128 Boston" owe much of their success ot the proximity of Stanford University and MIT. Knowledge spillovers from large research universities contribute to increasing returns, resulting in divergent development between clusters. This divergent growth has led ot the implementation of regional technology policies to close the gap. The purpose of this paper is to evaluate the growth of high technology clusters in the U.S. Classification-JEL: F1; H7; L0; L1; L6; O3; R3; R5 Keywords: Spillovers, clusters, high technology, development, research and development, regions, education, employment Handle: RePEc:san:crieff:9315 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Title: Coordination Failure and Multiple Equilibria in the Firm Abstract: Two components of work activity are considered: observed effort, which can be rewarded directly, and unobserved helping or communication in a team which increases productivity. Positivite spillovers from helping can generate multiple equilibria (as in imperfectly competitive macroeconomies). Under reasonable assumptions, a group incentive or share payment can block an inferior, low-cooperation equuilibrium, and complement peer-pressure to elicit a finite increase in cooperation and productivity, even when the team is large and the share, s1/n, is small. Thus we have a solution of the 1/n problem that has puzzled observers of the association between profit-sharing and productivity gains. Classification-JEL: D2; L2 Keywords: Peer-pressure, group incentive, profit-sharing, cooperation, team work Handle: RePEc:san:crieff:9312 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Jonathan Seaton Author-Name: Ian Walker Title: Corporate Research and Development in the UK: Spillovers and Credit Market Failure Abstract: This paper is concerned with testing for two related sources of market failure in UK R&D funding. First, there is a possibility of some credit market failure implying that there are some additional costs associated with external finance and that these costs are higher for R&D intensive firms. If this premium is high for such firms then the internal credit market created through retained profits becomes the more attractive source of funding. Second, we are concerned to test for the possibility that R&D is depressed by spillovers whereby the R&D activity of one firm affects the R&D decisions of another. The novelty of the paper lies in the use of UK microdata of quoted company accounts to estimate a model which allows for financial effects. The paper uses an empirical model of the financial decisions of firms to control for the bias associated with the endogeneity of the financial vairables in the R&D model. The findings suggest that spillovers may be relatively unimportant. However, even after controlling for its endogeneity, the analysis does suggest that the source of financing for the firm has real effects on R&D activity and this suggests credit market failure compounds the direct market failure associated with spillovers. Handle: RePEc:san:crieff:9310 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: The Survival of Small Business Enterprise Abstract: This paper considers three themes central to the survival of small business enterprise. Firstly, the incentive for entrepreneurship, which is discussed within a theoretical framework that draws on cooperative market games analysis, and finds a rationale for entrepreneurship in facilitating coalition formation. Secondly, the determinants of survival of a small firm, which is discussed whithin a statistical framework, providing estimates of the influence of key factors like gearing and product range on survival over a three year period. Thirdly, the political economy of enterprise stimulation, which looks at enabling institutions for fostering the inception and growth of small firms (like the Scottish Development Agency and Scottish Enterprise), considered from the standpoint of comparative institutional analysis. The treatment is informal, being based on an Inaugural Lecture, and is designed to be accesssible to the non-specialist. Handle: RePEc:san:crieff:9309 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp9309.pdf File-Format: application/pdf Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Ian Smith Title: The Demand for Public Transport: Some Estimates from Zurich Abstract: There is a great potential for public transport to play the key role in solving problems of urban congestion. The Swiss city of Zurich provides an example of a medium-sized city where a high quality service, declining real price levels and the promotion of season tickets has significantly raised the number of passenger trips by public transport. This paper presents some estimates of the effect of these factors on the demand for public transport use in Zurich. Handle: RePEc:san:crieff:9308 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Michael Funke Title: Real Wages, Investment and Employment - New Evidence From West German Sectoral Data Abstract: Non-Separable capital adjustment costs imply that investment directly affects the demand for labour and therefore justify not only the lagged dependent variable but also the presence of investment expenditures or Tobin's valuation ratio Q in labour demand estimation. On this basis we estimate a very parsimonious specification of demand for blue-collar workers in a panel of 32 west German industries, conditional on value added and common macroeffects. We find much larger short-run real wage employment elasticities than previous work, and robustly significant positive effects of investment or Tobin's Q on labour demand. Handle: RePEc:san:crieff:9305 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Title: Income-and Energy Taxation for Redistribution in General Equilibrium Abstract: In a 3-factor GE-model with a continuum of ability, the employed choose optimal labour supply, and equilibrium unemployment is determined by benefits funded by wage-and energy-taxes. Aggregate labour and the net wage may increase or decrease with taxation (and unemployment), and conditions for a reduction in redistributive wage-taxes to be Pareto-improving are derived. A small energy tax always raises the net wage, providing the wage tax is reduced to maintain constant employment and a balanced budget. High ability households prefer higher energy taxes when externalities are uniformly distributed and non-distorting. Keywords: Taxes, Redistribution, General Equilibrium, Welfare, Energy, Externalities Handle: RePEc:san:crieff:9304 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Antony W. Dnes Title: On The Wrong Tracks: the Government's Proposals for Rail Privatisation Abstract: This paper is a brief survey of the principal issues attached to the privatisation of British Rail. It is written non-technically and without footnotes to maximise potential readership. It is a summary of a much larger and more detailed paper, On the Wrong Tracks: the Government's Proposals for Franchising Passenger Rail, to be published by the David Hume Institute in April 1993. Classification-JEL: L33; L51 Handle: RePEc:san:crieff:9303 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Felix Fitzroy Author-Name: Zoltan J Acs Title: A Constitution for Privatized Eastern Enterprise Abstract: Western advisors of Eastern reform favour outside, stock-market ownership and control of large privatized enterprise. However, Japanese firms and their Western transplants are dominated by employee stakeholders as implicit residual owners. Their success, and political contraints, suggest a majority equity stake for (often-entrenched) Eastern empoloyees, closely linked to bank creditors with majority board membership and remaining equity. Residual-claimant status removes the incentive for redistributive wage claims (that have decimated East German employment) and maximises motivation for cooperative effort, supported by relational banking for efficient intervention, investment, control and restructuring in case of default. Classification-JEL: D23; G3; P5 Keywords: Privatization, Corporate Governance, Japanese firm, State-owned Enterprise, Eastern Europe Handle: RePEc:san:crieff:9302 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Antony W. Dnes Title: The Scope of Chadwick's Bidding Scheme Abstract: In this paper, I examine the scope of Chadwick's principle of contract management. I show that Chadwick targeted his bidding scheme at a number of social evils he perceived to be attached to unregulated cpmpetition and not just at decreasing-cost natural monopoly. I also show that his scheme requires a tax to be added in any application involving increasing costs. It may then be a useful form of regulation, depending upon the costs and benefits of contract management. Classification-JEL: L51 Handle: RePEc:san:crieff:9301 Creation-Date: 1993-10 Template-type: ReDIF-Paper 1.0 Author-Name: Antony W. Dnes Title: Franchising Passenger Rail Services Abstract: In this discussion paper I examine the UK Government's proposals for franchising passenger rail services. I show that autioning profitable routes to the highest bidder tends to redistribute rather than enhance welfare. This is also true for auctioning loss-making routes to the lowest bidder in subsidies. I show that an alternative auction scheme, based on Chadwick's proposals, is superior. Classification-JEL: L51 Handle: RePEc:san:crieff:9216 Creation-Date: 1992-10 Template-type: ReDIF-Paper 1.0 Author-Name: Lowell R Jacobsen Author-Name: Gavin C Reid Author-Name: Margo E Anderson Title: Extended Rivalry and Competitive Advantage in the New Small Firm Abstract: The strategic behaviour and growth of the new small firm is analysed using field work evidence. An assesment of extended rivalry, embracing suppliers, substitutes and customers, is undertaken to 'flesh-out' the appraisal of competitive advantage. Firms are grouped by low, medium and high concentration markets. In the low concentration cases, firms had struggled in imperfectly competitive, atomistic markets to achieve limited competitive advantage through product differentiation. In the medium concentration cases, firms were better placed to achieve competitive advantage by being niche players in a secure competitive fringe. In the high concentration cases, firms looked to achieve appreciable competitive advantage by targeting segments within exclusive and highly profitable markets. In no case was the outcome of the strategy adopted inevitable. Keywords: competition, new small firm, suppliers, substitutes, customers Handle: RePEc:san:crieff:9215 Creation-Date: 1992-10 Template-type: ReDIF-Paper 1.0 Author-Name: Paul C L Emberton Title: Politcal Parties and Macroeconomics: Evidence from the U.S. 1880-1948 Abstract: Tests of political theories of macroeconomic policy have concentrated on the post-WW2 sample period. These theories are here tested for historical robustness using evidence from the U.S.A. from the period 1880-1948. Although no evidence is found to support the political business cycle hypothesis, there is clear evidence of differences in monetary policy between Democrat and Republican administrations. In the period of the "classical" Gold Standard (pre WW1), policy is found to be tighter under Democrats, whereas the reverse is found for the later period. There is also weaker evidence for partisan differences in output growth during the early period, but much stronger evidence for the later period. Support for the rational expectations refinement of the partisan theory is not found. Classification-JEL: E60; N11; N12 Handle: RePEc:san:crieff:9214 Creation-Date: 1992-10 Template-type: ReDIF-Paper 1.0 Author-Name: Tatiana Damjanovic Author-Email: td21@st-andrews.ac.uk Author-Homepage: http://www.st-andrews.ac.uk/economics/staff/pages/t.damjanovic.shtml Title: Does More Progressive Tax Make Tax Discipline Weaker? Abstract: This paper investigates the relationship between the disparity in tax base and tax collection. I address the tax collection problem with traditional industrial organization approach. Thus, I model the "tax minimization" industry where the supplier helps taxpayers to avoid their tax liability. I find that lower income inequality as well as a less progressive tax code may result in a smaller number of tax payers committing to their tax duties. Finally, I question the reduction in the highest tax rate as a policy directed at the improvement of tax discipline. Classification-JEL: H21; H23; H26 Keywords: Endogenous prices, tax collection, inequality, tax progressivity. Creation-Date: 2005-02 Number: 0506 Handle: RePEc:san:crieff:0506 File-URL: http://www.st-andrews.ac.uk/crieff/dp0506.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Tatiana Damjanovic Author-Email: td21@st-andrews.ac.uk Author-Homepage: http://www.st-andrews.ac.uk/economics/staff/pages/t.damjanovic.shtml Title: A Simple Proof of Lorenz Dominance Criterion Abstract: This article provides a simple proof of the Lorenz dominance criterion for two non-decreasing income transformations. The criterion is extended the most general case, with only very mild restrictions on the form of initial income distribution or the properties of the income transformations. Classification-JEL: D63 Keywords: Inequality, Income transformation, Lorenz Dominance. Creation-Date: 2005-02 Number: 0505 Publication-Status: forthcoming in "mathematical Social Science" Handle: RePEc:san:crieff:0505 File-URL: http://www.st-andrews.ac.uk/crieff/dp0505.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Tatiana Damjanovic Author-Email: td21@st-andrews.ac.uk Author-Homepage: http://www.st-andrews.ac.uk/economics/staff/pages/t.damjanovic.shtml Title: On the Possibility of Pareto-improving Pension Reform Abstract: The aim of this paper is two-fold. First, it provides a simple framework for the analyses of the transitions between two steady states with different fiscal policies. This allows us to clarify the existing results on the possibility of Pareto-improving transitions from pay-as-you-go to fully funded pension systems. We show that the reduction in the marginal tax rate is a sufficient condition for the possibility of such pension reforms. Second, the paper investigates the features and the duration of the shortest Pareto-improving pension reform in an open economy. Classification-JEL: H21, H55, E62 Keywords: Pension reform, Pareto-improving transition, the shortest transition. Number: 0504 Handle: RePEc:san:crieff:0504 Creation-Date: 2005-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0504.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C. Reid Author-Email: gcr@st-andrews.ac.uk Author-Homepage: http://www.st-andrews.ac.uk/economics/staff/pages/g.reid.shtml Author-Name: Julia A. Smith Title: Realities of Long-Term Post Investment Performance for Venture-Backed Enterprises Abstract: This paper constructs a model of long-run performance for SMEs that have received venture capital backing. The model explains performance by financial structure. FAME data are used for estimating performance equations over the period 1989 to 2004 for UK businesses in their post-investment period. The econometrics uses robust techniques, including least absolute error (LAE) and Tukey trimean estimation. It is shown that the key determinants of performance (measured by ROSF) are profit margins and risk, with lesser, but significant, roles played by liquidity and gearing. The sample is used to identify consistently high performers, and chronic low performers. From the latter group, two detailed case studies illustrate how chronic low performance can emerge, in each case caused by failure to achieve technological milestones, and thereby failing, ultimately, to convince investors of potential company worth. Classification-JEL: G24: G32; L25; M13; O32 Keywords: Venture capital, investment performance, LAE estimation, research milestones Number: 0503 Handle: RePEc:san:crieff:0503 Creation-Date: 2005-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0503.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Arnab Bhattacharjee Author-Email: ab102@st-and.ac.uk Author-Homepage: http://www.st-andrews.ac.uk/economics/staff/pages/a.bhattacharjee.shtml Title: Models of Firm Dynamics and the Hazard Rate of Exits: Reconciling Theory and Evidence using Hazard Regression Models Abstract: This Paper considers empirical work relating to models of firm dynamics. It is shown that a hazard regression model for firm exits, with a modification to accommodate age-varying covariate effects, provides an adequate framework accommodating many of the features of interest in empirical studies on firm dynamics. Modelling implications of some of the popular theoretical models are considered and a set of empirical procedures for verifying theoretical implications of the models are proposed.The proposed hazard regression models can accommodate negative effects of initial size that increase to zero with age (active learning model), negative initial size effects that may increase with age, but stay permanently negative (passive learning model), conditional and unconditional hazard rates that decrease with age at higher ages, and adverse effects of macroeconomic shocks that decrease with age of the firm.The methods are illustrated using data on quoted UK firms. Consistent with the active learning model, the effect of initial size is significantly negative for a young firm and falls to zero with age.The hazard function conditional on size, other firm and industry-level characteristics, and macroeconomic conditions decreases with age only at higher ages, but shows the weaker property of Increasing Mean Residual Life over its entire life-duration. Instability in exchange rates affects survival of very young firms strongly, and the effect decreases to insignificant levels for older firms. Classification-JEL: C14, C34, C41; C52; D83; L16; L25 Keywords: Firm exit, Learning, Firm Dynamics, Non-proportional hazards, Hazard regression models Number: 0502 Handle: RePEc:san:crieff:0502 Creation-Date: 2005-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0502.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gary S. Shea Author-Email: gss2@st-and.ac.uk Author-Homepage: http://www.st-andrews.ac.uk/economics/staff/pages/g.shea.shtml Author-Workplace-Name: University of St. Andrews Author-Workplace-Homepage: http://www.st-andrews.ac.uk/economics/staff/staff.shtml Title: South Sea Company Subscription Shares and Warrant Values in 1720 Abstract: The values of the famous Subscription Shares issued by the South Sea Company in 1720 have to be split into two components before they can be understood. One component was a fractional claim upon one original share in the firm. The other component, however, was a bundle of share warrants. The information contained in share warrant values is potentially helpful in understanding the South Sea Bubble. Warrant values might also be especially sensitive to "events" and "news" and could provide new ways of marking the turning points in the South Sea Bubble and testing for efficiency of markets. The level and volatility of subscription share prices are both consistent with the hypothesis that the subscription shares were essentially share warrants. Classification-JEL: N23; G13 Keywords: South Sea Bubble, Royal African Company, arbitrage, market efficiency, call options Number: 0411 Handle: RePEc:san:crieff:0411 Creation-Date: 2004-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0411.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gary S. Shea Author-Email: gss2@st-and.ac.uk Author-Homepage: http://www.st-andrews.ac.uk/economics/staff/pages/g.shea.shtml Author-Workplace-Name: University of St. Andrews Title: Rational Pricing of Options during the South Sea Bubble: Valuing the 22 August 1720 Options Abstract: We present evidence of rational pricing South Sea Company liabilities and call options written on South Sea shares. A previously unstudied dataset on South Sea share options is presented. The Company's capital structure of the firm is redefined so that the application of modern financial economic theories can be applied to its valuation. We present evidence that a significant portion of South Sea equity liabilities was in the form of share warrants and conversion (from bonds to shares) privileges and should be so valued. Finally we present a model of the cross-sectional behaviour of share prices, South Sea Company debt and call option values. The model is calibrated and simulated in order to produce estimates of the required return on the Company’s debt and the volatility of the firm’s asset values. We conclude that the jointly estimated value of the firm, its constituent liabilities, third-party call option values and implied volatilities are consonant with rational pricing behaviour during the Bubble, although the model requires extension in several directions in order to present a more complete picture of the South Sea Bubble. Classification-JEL: N23; G13 Keywords: financial revolution in England, South Sea Company, call options, warrants, convertible bonds Number: 0410 Handle: RePEc:san:crieff:0410 Creation-Date: 2004-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0410.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Pedro S. Martins Title: Do Foreign Firms Really Pay Higher Wages? : Evidence from Different Estimators Abstract: We contribute to the literature on Foreign Direct Investment and labour markets by examining wage differentials between domestic and foreign firms, drawing on a large Portuguese matched employer-employee panel. Using OLS, the foreign-firm premium is large and significantly positive but falls substantially when firm and worker controls are added. Moreover, the premium also does not vary monotonically with foriegn control, increases along the wage distribution and is generally insignificant when using propensity score matching (PSM). Finally, using differnces-in differences (DID), we find lower wage growth for workers in domestic firms that are acquired by foreign investors, a result that holds when combining DID and PSM. Overall, our evidence suggests that the commonly-documented OLS premium cannot be interpreted as a casual impact. Classification-JEL: C23; F23; J31 Keywords: FDI, Wages, Matched Employer-Employee Data, Propensity Score Matching, Portugal Number: 0409 Handle: RePEc:san:crieff:0409 Creation-Date: 2004-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0409.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Pedro S. Martins Title: Firm-Level Social Returns to Education Abstract: Do workers benefit from the education of their co-workers? We investigate this question drawing on a panel of large Portuguese firms and their workers, using fixed effects and instrumenting average schooling in each firm-year with its lagged value and the lagged share of retirement-age workers. We find evidence of substantial firm-level social returns (at about 19%), much larger than standard estimates of private returns to education, and of sizeable returns accruing to less educated workers but not to their more educated colleagues Classification-JEL: J24; J31; I20 Keywords: Social Returns to Education, Education Spillovers, Matched Employer-Employee Data, Wages, Portugal. Number: 0404 Handle: RePEc:san:crieff:0404 Creation-Date: 2004-02 File-URL: http://www.st-andrews.ac.uk/crieff/010204.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C. Reid Author-Name: Julia A. Smith Title: A Coevolutionary Analysis of Organisational Systems and Processes: Quantitative applications to information system dynamics for small entrepreneurial firms in Scotland Abstract: We present a quantitative, dynamic analysis of coevolution in the new firm. Organisation is treated as a process, rather than a state, involving the simultaneous evolution of interacting systems within, and between, small firms and their environment. Our quantitative analysis uses primary-source, timeelapsed data, obtained by face-to-face interviews with entrepreneurs. We found a link between performance and micro-evolutionary experience. High performers were more innovative, more radical ‘change makers’, more willing to ‘wait and see’, and more willing to use ‘soft’ technologies than low performers. Classification-JEL: D21; D8; D92; M21; M41; O33 Keywords: Coevolution, accounting information system (AIS), small firms, performance, organisational form, innovation, ‘soft’ technology Number: 0402 Handle: RePEc:san:crieff:0402 Creation-Date: 2004-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0402.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Claudio Piga Author-Name: Joanna Poyago-Theotoky Title: Endogenous R&D Spillovers and Locational Choice with discriminatory pricing Abstract: We present a model of spatial price discrimination where R&D spillovers are endogenous as they depend on firms' location. We establish that both the distance between locations and R&D efforts are increasing functions of the transportation cost coefficient and show that there is a continuum of cases where firms will chose an intermediate location. The managerial implications from the model are discussed using examples of marketing behaviour by Internet retailers. Classification-JEL: O30; L13; D43; R10 Keywords: Endogenous spillovers; Quality-enhancing R&D; Location, Spatial price discrimination. Number: 0311 Handle: RePEc:san:crieff:0311 Creation-Date: 2003-11 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0311.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Claudio Piga Author-Name: Joanna Poyago-Theotoky Title: Endogenous R&D Spillovers and Locational Choice. Abstract: We present a three-stage game where two firms choose location, R&D and price, under the assumption that R&D spillovers depend on firms' location. That is, the closer firms are to each other, the greater the benefit they receive from their rivals' efforts in quality-enhancing R&D. We show that the distance between firms' location increases with the degree of product differentiation. Further, we find that minimal quality differentiation always occurs. Finally, investment in R&D is positively associated with the degree of product differentiation Classification-JEL: O30; L13; D43; R10 Keywords: Endogenous spillovers; Quality-enhancing R&D; Location. Number: 0310 Handle: RePEc:san:crieff:0310 Creation-Date: 2003-10 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0310.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Bernadette Power Author-Name: Gavin C. Reid Title: Performance, Firm Size and the Heterogeneity of Competetive Strategy for Long-lived Small Firms: A Simultaneous Equations Approach Abstract: This paper examines the relationship between firm size, competitive strategy and performance, for the long-lived small firm in Scotland. It uses structural modelling to test the hypothesis that small firms need to remain small if they are to be long-lived. In a three-equation simultaneous model, performance, size and the dimensions of the competitive strategy of the firm are jointly determined. Econometric estimates of the three equations are reported, using 2SLS and iterated 3SLS. A trade-off is found to exist between firm size and performance. Further, we find that to attain higher equilibrium values of performance, a varied competitive strategy needs to be adopted. Our prescription is that small firms need to adjust downwards in size, and to cultivate a more varied competitive strategy, if there the entrepreneurs are to have a positive influence on performance, thus promoting longevity of their firms. Classification-JEL: C42, D21; G33; L2; M13; M21 Keywords: Performance, Small Firms, Size, Competitive Strategy, Simultaneity Number: 0307 Handle: RePEc:san:crieff:0307 Creation-Date: 2003-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0307.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C. Reid Author-Name: Julia A. Smith Title: Co-evolution of Information Systems in Fast-Growing Small Firms Abstract: The paper examines the co-evolution of different dimensions of information systems for a sample of fast-growing small firms. The investigation uses primary source longitudinal empirical evidence. The data are taken from a large database on the lifecycle experience of one-hundred-and-fifty new business starts over a four-year period. They were collected by face to face interviews with owner-managers of small entrepreneurial firms. Interviews were conducted using an administered questionnaire that covered the agenda of markets, finance, costs, business strategy, the development of a management information system, human capital, organisation and technical change. This work uses primarily the data on management information systems. The basic approach used is to compare the attributes of the fastest and slowest paced firms, as identified by their growth rates. We then examine the evolution of these firms’ management information systems. The measures used to identify changes in systems include: capital investment techniques, such as return on investment, residual income, net present value, internal rate of return and payback period; methods for managing costs, like just-in-time management, activity-based costing, quantitative risk analysis, value analysis, strategic pricing and transfer pricing; and using computer applications for storing information, project appraisal, financial modelling, forecasting and sensitivity analysis. ‘Time lines’ are graphed to show the points at which various features of information systems are introduced (e.g. data storage, forecasting, sensitivity analysis), and derived techniques (e.g. ROI, ABC) implemented. Firms are dichotomised into highgrowth and low-growth groups. Comparisons are made within firms and across firms in terms of the co-evolution of different aspects of their accounting information systems. Classification-JEL: D21; D8; D92; M21; M41; O33 Keywords: Co-evolution, accounting information system (AIS),small firms Number: 0306 Handle: RePEc:san:crieff:0306 Creation-Date: 2003-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0306.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Moavia Alghalith Title: Production and Hedging Decisions in the Presence of Basic Risk: Note Abstract: Paroush and Wolf (1989) modeled output hedging in the presence of basis risk. They showed that (in the absence of scale shift) the optimal hedging and output fall in response to basis risk. However, they used a second-order Taylor's approximation of the utility function. Also, they did not show the impact of basis risk on the ratio of hedging to output (hedging as a fraction of output), which is a more relevant variable than the absolute change in either of the decision variables. The absence of such results constitutes a major gap in the hedging literature. Consequently, this note provides two extensions. First, it generalizes Paroush and Wolf's results (Propositions 1 and 2) by using a general utility function and general distributions. Second, it shows the impact of basis risk on the ratio of hedging to output. Classification-JEL: D8 Keywords: Cost uncertainty, forward market, futures market, hedging, input price uncertainty Number: 0303 Handle: RePEc:san:crieff:0303 Creation-Date: 2003-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0303.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Moavia Alghalith Title: Estimation and Econometric Tests Under Simultaneous Price and Output Uncertainty Abstract: This paper extends the existing estimation methods to allow empirical estimation and hypothesis testing under simultaneous price and output uncertainty. Classification-JEL: D21; D81. Keywords: Estimestimating equations, hypotheses testing, output uncertainty, price uncertainty, utility. Number: 0302 Handle: RePEc:san:crieff:0302 Creation-Date: 2003-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0302.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Moavia Alghalith Title: Empirical Analysis under Additive/Multiplicative Output Uncertainty Abstract: Empirical studies dealing with price uncertainty are abundant; for example, Arshanapalli and Gupta (1996) derived estimating equations by applying uncertainty analogues of Hotelling's lemma and Roy's identity to the indirect expected utility function (see Pope, 1980, and, Dalal 1990). However, their method is not applicable to the models with price and output uncertainty. Few empirical studies included both price and output uncertainty and focused on hedging. For example, Rolfo (1980) computed the ratio of hedge to expected output for cocoa producers. Lapan and Moschini (1994) calculated the same ratio for soya bean farmers. Assuming simultaneous price and output uncertainty, this paper empirically estimate the most two common forms of output risk: additive risk and multiplicative risk (see Honda,1983, and, Grant 1985). Then it empirically determines which form is more suitable. The theory does not provide a conclusive criteria for the choice between additive risk and multiplicative risk (see Honda,1983). Therefore, the choice should be empirical. Classification-JEL: D8 Keywords: Cost uncertainty, forward market, futures market, hedging, input price uncertainty Number: 0301 Handle: RePEc:san:crieff:0301 Creation-Date: 2003-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0301.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gerald Pech Title: Unique Equilibrium in a Currency Crisis Model with Heterogeneous Agents Abstract: This paper extends the currency crisis model of Morris and Shin to the case where players not only hold heterogenous beliefs but also differ in a characteristic feature such as individual transaction costs. It shows that there is a unique aggregate cut off point where the government abandons the peg which is supported by a continuum of individual switching points in the signals. The range of individual intervention levels is wide unless the noise vanishes. Classification-JEL: D82; F31 Keywords: global games, currency crisis Number: 0214 Handle: RePEc:san:crieff:0214 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0214.pdf File-Format: application/pdf Creation-Date: 2002-02 Template-type: ReDIF-Paper 1.0 Author-Name: Gerald Pech Author-Name: Bernhard Neumaerker Title: The Role of Beliefs for the Sustainability of the Fiscal Constitution Abstract: Why does the government not defect from the constitution? This article focuses on the dynamic restraints the government faces under the rule of law: violations against unconstitutional laws are not punished under the constitution. If a violating government cannot commit itself never to reinstall the constitution enforcing an unconstitutional law becomes difficult. Citizens' expectations to go unpunished when not complying may be self-fulfilling. Deriving the equilibrium of a global game we show that this mechanism is effectively deterring a government from defecting from a constitutionally permissible tax rate. Classification-JEL: K42; H26; E61; D7 Keywords: tax evasion, global games, self-fulfilling expectations, dynamic policy restraints Number: 0213 Handle: RePEc:san:crieff:0213 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0213.pdf File-Format: application/pdf Creation-Date: 2002-02 Template-type: ReDIF-Paper 1.0 Author-Name: Moavia Alghalith Title: The Derived Demand with Hedging Cost Uncertainty in the Futures Markets: Note and Extensions Abstract: Paroush and Wolf (1992) investigated a perfectly competitive firm which faces input price uncertainty in one input of its two-input production function. The main purpose of their study was to determine the impact of the technological relationship on the derived demand when the input is hedged in a forward or futures market. They found that the partial cross derivatives of the production function and the market structure of the futures price (upward or downward bias) affect the derived demand. This note provides two extensions. First, it generalises Paroush and Wolf's theorem by using general utility function (Theorem 1). Second, it adds a new theorem (Theorem 2) that shows the impact of adding basis risk on the optimal hedging. This theorem is equally important since hedging is a decision variable. Below is a description of Paroush and Wolf's model. Classification-JEL: D8 Keywords: Cost uncertainty, forward market, futures market, hedging, input price uncertainty Number: 0210 Handle: RePEc:san:crieff:0210 Creation-Date: 2002-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0210.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Moavia Alghalith Author-Name: Aredishir J. Dalal Title: The Choice Between Multiplicative and Additive Output Uncertainty Abstract: When modeling output uncertainty, the multiplicative specification is consistently chosen over the additive form, despite the latter being arguably intuitively more obvious. The rationale for this seems to be that when production risk is the only source of uncertainty, additive uncertainty does not reduce output below the certainty level, while multiplicative uncertainty does. We show that, regardless of the specification of output uncertainty, if hedging is absent and there is simultaneous price and output uncertainty, output is always lower than the situation in which one or both sources of uncertainty are absent. Thus, both models yield qualitatively identical results, i.e., adding a source of uncertainty reduces expected output. Therefore, additive uncertainty is indeed a reasonable a priori method of modeling production uncertainty Classification-JEL: D21; D81 Keywords: Multiplicative output uncertainty, additive output uncertainty, price uncertainty Number: 0209 Handle: RePEc:san:crieff:0209 Creation-Date: 2002-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0209.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Aredishir J. Dalal Author-Name: Moavia Alghalith Title: Competitive Firm Behaviour With Simultaneous Price and Output Uncertainty Abstract: While a competitive firm facing price uncertainty has been extensively studied, this is not so for output uncertainty. This paper analyzes the behavior of a competitive firm facing multiplicative output uncertainty, either with or without price uncertainty. We depict equilibrium and obtain comparative statics results with the aid of a diagram which exploits the properties of a covariance term present in the first order conditions. Comparative statics results are obtained for the model with output uncertainty and price certainty and for simultaneous price and output uncertainty (including two simple, specific cases). We first derive results based on the Arrow-Pratt coe?cients of risk aversion, and then supplement these with the Ross measure of relative risk aversion, since this proves useful in the presence of multiple sources of uncertainty. We are able to obtain the intuitively appealing inverse relationship between increases in risk (both price and output) or input prices, and the optimal expected output. However, expected output supply is an increasing function of (expected) price only for “low” levels of risk aversion, and in general the relationship is ambiguous. Classification-JEL: D21;D81 Keywords: Multiplicative output uncertainty, price uncertainty, comparative statics, Ross increasing relative risk aversion, quadratic utility, Stein's Lemma. Number: 0208 Handle: RePEc:san:crieff:0208 Creation-Date: 2002-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0208.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Bernadette Power Author-Name: Gavin C. Reid Title: Turbulence, Flexibility and Performance of the Long-lived Small Firm Abstract: This paper focuses on a new concern in the small firm’s literature, namely what makes a small firm stay in business for a long time. It reflects a change in economic policy, away from an emphasis on volume of start-ups to an emphasis on quality of start-ups. The basic hypothesis is that flexibility enhances the long run prospects of the small firm. This is explored by examining precipitating causes of organisational change within the small firm, and the consequential adjustments. The study is fieldwork based and uses evidence from face-to-face interviews with 63 owner managers of mature small firms in Scotland. New measures of flexibility and turbulence are used to explain the performance of mature small firms. These depend on our unique body of evidence from interviews with owner managers. Performance is measured using a Likert scale over 28 distinct attributes. Econometric estimates are reported on the relationship between flexibility, turbulence and performance. This is done in two forms. The first involves generalised least squares estimatation (with heteroskedastic adjustment) of the relationship between turbulence, four measures of flexibility, and performance. The second involves Heckman sample selection estimation, of this performance relationship. It is found that turbulence has a negative effect on performance. Further, this impact is relatively large. Next in importance are those flexibility factors which can be categorised as precipitating causes of organisational change (as opposed to consequential adjustments) within the mature small firm. Finally, trade-off relationships are found to exist between two of the measures of flexibility (viz. agility and speed). We believe that this trade-off relationship is worthy of further empirical investigation Classification-JEL: C42, D21; G33; L2; M13; M21 Keywords: Flexibility, Turbulence, Performance, Small Firms Number: 0207 Handle: RePEc:san:crieff:0207 Creation-Date: 2002-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0207.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C. Reid Title: Investor Conduct Towards New High Technology Firms: UK Evidence on How Risk is Managed Abstract: This paper uses statistical analysis to characterise ‘industry practice’, in terms of concordance of investors concerning appropriate practice. The evidence was gathered by field work methods in 2000-01, and refers to the practices of twenty UK venture capital investors, who accounted for the bulk of funds allocated to high technology investments in the UK. This paper has two parts: general and detailed statistical analysis. 1) In the first part, the main finding is of a coherent (and generally statistically significant picture) of investor conduct towards high-technology companies. Thus it is found that investors assign risk premia and expected values, and use risk classes. They adopt relatively short time horizons, but follow quite sophisticated procedures in investment appraisal. For example, they use sensitivity analysis, cash flow prediction, financial modelling, and decision trees. However, they miss out in some sophisticated areas of technical analysis, including Value at Risk (VaR), and simulation methods (including Monte Carlo methods). 2) The second part of the paper focuses on risk, factors influencing it, and innovation. Its aim is to discover if there is a kind of ‘industry standard’ or consensus about what is most important to investors in the high technology area. Largely, that turned out to be the case. The UK venture capitalists are agreed on what are high-risk and low-risk investments. They also agree on what are the key commercial factors affecting risk. However, when it comes to non-commercial factors, this consensus starts to crumble. Finally, so far as features of innovation are concerned, industry consensus starts to break down entirely. Thus, there do remain important areas in which investor practice is opaque. Therefore, there remains a need for further research into investor practice in the UK. Classification-JEL: G24; D81; L84; M21; L21 Keywords: Venture Capital, Risk Management, High-Technology, Fieldwork Number: 0206 Handle: RePEc:san:crieff:0206 Creation-Date: 2002-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0206.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C. Reid Author-Name: Julia A. Smith Title: Investor and Investee Conduct in the Risk Appraisal of High Technology New Ventures in the UK Abstract: This paper examines, in a high technology context, how investor and investee behave, and interact, in the face of risk. The evidence on which it is based was obtained by fieldwork methods, over the period 2000-2, examining a sample of UK investors and investees active in high technology areas. The paper focuses on four questions: how risky are investments; what affects risk most; what aspects of innovation affect risk; what non-financial factors affect risk most? It finds that there was general agreement between investors and investees about which investments were relatively more or less risky. However, investees were shown to be relatively more risk averse than investors, right across the spectrum of investee types. When it came to factors affecting risk most, there was a clear difference between investors and investees. Agency risk was largely the concern of the investor. Business risk was the investee’s first priority, and agency risk did not figure large in the investee’s mind. This suggests that this component of risk had successfully been shifted on to the investor. Business risk was also a clear concern of investors, but they placed more emphasis on matters like market opportunities and sales, than did investees. The paper concludes that investors and investees generally see risk in the same light, but, that when views differ, this is explicable either by function (producer/ funder) or by relative risk aversion. Classification-JEL: G24; D81; L84; M21; L21 Keywords: Venture Capital, Risk Management, High-Technology, Fieldwork Number: 0205 Handle: RePEc:san:crieff:0205 Creation-Date: 2002-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0205.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Fathi Fakhfakh Author-Name: Felix FitzRoy Title: Basic Wages and Firm Characteristics: Rent-sharing in Frensh Manufacturing Abstract: This paper shows that firm profits (and losses) are strongly related to individual hourly basic wages for most employees, as well as to the total earnings measures that have been used previously but are correlated with working time. Capital intensity is independently important without reducing the significance of profits as in other studies. Our estimated basic wage-profit elasticity of one to two percent in the presence of numerous individual and firm controls is of similar magnitude to the female collective bargain premium and the firm size-wage effect, and these effects are much smaller than previous estimates without firm-specific controls Classification-JEL: J3 Number: 0203 Handle: RePEc:san:crieff:0203 Creation-Date: 2002-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0205.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gerald Pech Title: Government Formation, Budget Negotiations and Re-election Uncertainty: The Cases of Minority and Majority Coalition Governments Abstract: This paper presents an analytical approach, which connects the form of a government and the level of expenditures, which it runs. It explains the findings on spending patterns of minority and majority coalition governments reported by the empirical literature. A government formation game is followed by budget negotiations in the cabinet and the parliament. The demand of a party in the parliament reflects her re-election prospects. In the absence of political risk, majority coalition and minority governments are predicted not to run different expenditure policies. With a rise in re-election uncertainty, a pre-existing coalition government faces risk of termination, in which case the probability that it is followed by a minority government with higher expenditures increases. Classification-JEL: H61; D78 Keywords: national budget, legislative cohesion, political economics Number: 0115 Handle: RePEc:san:crieff:0115 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0115.pdf File-Format: application/pdf Creation-Date: 2001-02 Template-type: ReDIF-Paper 1.0 Author-Name: K.J. Bernhard Neumaerker Author-Name: Gerald Pech Title: Why Does the Government Obey the Constitution? Theory and Application to Tax Evasion Abstract: Under a constitution, which establishes a state under the rule of law, violations of unconstitutional laws are not punished. We argue that this is the true strength of the constitution. In our model, citizens decide on whether or not to evade taxes. For this they have to infer their probability of getting fined. The belief that - after the government defected once - a switch back to the constitution occurs is shown to be self-fulfilling in a game with imperfectly observable reliability of the government. We show that this prospect can deter even an unwilling government from defecting at the outset. Classification-JEL: K42; H26; D7 Keywords: tax evasion, credibility, constitution, self-fulfilling expectations Number: 0113 Handle: RePEc:san:crieff:0113 Creation-Date: 2001-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0113.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C. Reid Author-Name: Julia A. Smith Title: How do Venture Capitalists Handle Risk in High-Technology Ventures? - some preliminary results Abstract: This paper presents new empirical evidence, obtained by fieldwork methods, on investor risk-handling practice in the UK venture capital industry. Its focus is on high-technology firms and the techniques their venture capital backers use for risk management. The active areas of risk management are explored under the headings of risk premia, investment time horizons, and sensitivity analysis. As an organising framework, risk is divided into ‘agency risk’, ‘business risk’ and ‘innovation risk’. Data were gathered by working through a semi-structured interview agenda in face-to-face meetings with the top venture capital deal-makers in the UK. They were questioned specifically on how they handled risks in high-technology ventures. The interview agenda covered: risk premia, investment time horizon, sensitivity analysis, expected values, cash flow prediction, financial objectives, decision making, and qualitative appraisal. The paper draws on evidence from all eight agenda items, but focuses on the first three. This paper finds that the three categories of risk identified as important, innovation, agency and business risk, have pervasive influences on investor conduct in the UK. Their form of influence was traced under the agenda headings of risk premia, investment time horizon, and sensitivity analysis. It was found that the riskiness of investment types (e.g. seed, MBO etc) could be clearly ranked by investors. These rankings were found to be generally consistent with principles of financial economics. Investors were also asked what factors were most important to their risk appraisals, for given high technology investments. Of a wide range of factors, it was found that the most important to risk appraisal could be directly related to our categories of ‘agency risk’ and ‘business risk’. It was found too that the time profiles of investments and their sensitivity to changed assumptions could be approached using our three risk categories. Of these, ‘innovation risk’ was thought to be particularly high, implying various forms of adaptation by investors, including setting very high hurdle rates of return and deploying radical stress tests of investment models. Classification-JEL: G24; D81; L84; M21; L21 Keywords: Venture Capital, Risk Management, High-Technology, Fieldwork Number: 0107 Handle: RePEc:san:crieff:0107 Creation-Date: 2001-02 File-URL: http://www.st-andrews.ac.uk/crieff/dp0107.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Felix FitzRoy Title: Incentives, Cooperation and Multiple Equilibria in The F Abstract: A model with observable productive effort and unobservable productive cooperation by individuals in a team or firm is developed here. Cooperation by coworkers increases job-satisfaction and productivity, and this complementarity interacts with incentives for observed effort. Multiple Nash equilibria in individual actions may arise, with perverse effects of incentive pay for observed effort in some cases. A small group incentive, even in a large team, can destabilise or block inefficient equilibrium with minimal cooperation, and generate a Pareto superior equilibrium, thus explaining observed effects of profit sharing and 'solving' the 1/N problem Number: 0106 Handle: RePEc:san:crieff:0106 Creation-Date: 2001-02 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin Reid Title: Flexibility in the Small Firm: the dynamics of market re-positioning and scale adjustment in the early stages of the life cycle Abstract: First, it looks at the re-positioning of their main product markets that firms undertake in the early life cycle, in an attempt to best exploit their niche advantages. The market extent variables used are: local, regional, Scottish, national, and international. A transition probability approach is taken, estimating the probability of moving from one market are to another in a unit period. In this way, it is possible to compare the long run equi librium of such a process, with the period by period adjustment. This examination of short run adjustment to a long period equilibrium provides insights into small firm flexibility as regards market area and niche exploitation. It is found that the speed of adjustment of small firms is relatively rapid, and they typically get close to the long period equilibrium in just a few periods of adjustment. This suggests high flexibility in the exploitation of market areas. Secondly, the paper estimates a model of the dynamics of small firm sales growth. This is a variant of a Gibrat’s law type of model. It is shown that rapid sales growth is often achieved in the early life cycle. This process is log-linear in size, dynamically stable, and implies a plausible value for the long run equilibrium size of the small firm. Over short periods, of just a few years, however, most small firms were yet still below their equilibrium sizes, though a systematic tendency towards equilibrium was observed. Thus pervasiv e flexibility was evident in small firm behaviour, both in terms of niche exploitation and growth. Greater flexibility was observed in niche exploitation, as compared to overall scale. Classification-JEL: D21; L11; M13; R32 Keywords: Markov chains, Gibrat's Law, flexibility, Scottish small firms Handle: RePEc:san:crieff:0105 Creation-Date: 2001-10 Template-type: ReDIF-Paper 1.0 Author-Name: David McMillan Title: Cointegrating Relationships between Stock Market Indices and Economic Activity: Evidence from US Data Abstract: Recent empirical evidence suggests that stock market returns are predictable from a variety of financial and macroeconomic variables. However, with a few exceptions relatively little evidence exists examining the presence of a long-run relationship between these variables. The present paper extends this research by considering whether a cointegrating vector exists between stock market indices and industrial production, inflation, money supply and interest rates. The results suggest positive evidence of cointegration between both S&P500 and DJIA indices and macroeconomic activity variables. The established relationship is positive and significant for industrial production and inflation, negative and significant for long-term interest rates, and negative but insignificant for money supply and short-term interest rates,. These results are consistent with the belief that changes in output which affect expected future cash flows have a positive affect on stock prices, that stocks act as an inflation hedge and that changes in the discount rate have an inverse effect on prices. Variance decompositions show that long-term rates explain a substantial amount of variability in stock prices, whilst short-term rates, industrial production and inflation also have some explanatory power. Handle: RePEc:san:crieff:0104 Creation-Date: 2001-02 Template-type: ReDIF-Paper 1.0 Author-Name: David McMillan Author-Name: Angela J Black Title: Non Linear Error Correction in Spot and Forward Exchange Rates Abstract: Recent research has increasingly suggested that exchange rates may be characterised by non-linear behaviour which results from the existence of market frictions. This paper examines whether such non-linear behaviour is evident, not in rates themselves, but in the adjustment of rates back to some fundamental equilibrium. Thus, we examine a series of six spot and forward exchange rates to see whether a non-linear error-correction model, which exhibits asymmetric adjustment back to equilibrium either in terms of the size of the deviation from equilibrium or the sign of the deviation outperforms either a random walk model for rates or a linear error-correction model. Our in-sample results suggest that the non-linear models outperform both the linear models, with evidence of significant sign and size threshold effects. Out-of-sample forecasts lend further support for the non-linear models. Classification-JEL: G12; G13 Keywords: Non-Linear Error-Correction, Forecasting, Spot and Forward Exchange Rates Handle: RePEc:san:crieff:0103 Creation-Date: 2001-02 Template-type: ReDIF-Paper 1.0 Author-Name: Baochun Peng Title: How Well Does the Market Allocate Entrepreneurs? Abstract: This paper offers a synthesis of two Schumpeterian views: that growth is driven by innovation, and that the level of financial market development affects the growth process. We adopt an endogenous growth model where growth is driven by R&D activities of entrepreneurs. Entrepreneurs must borrow to fund R&D, but heterogeneity and unobservability of entrepreneurial ability creates credit restriction. The extent of financial market development is defined as the number of high ability agents in the financial market. Having a more developed financial market facilitates the allocatin of resources to the innovation sector, at the same time reduces the number of entrepreneurs available to the innovation sector. We characterize equilibrium in the financial market, and find that market allocation of entrepreneurs only coincides with the growth maximising allocation when all value created by innovation are divided by entrepreneurs, otherwise the market allocation is typically not growth maximising, and low grow trap may exist. Classification-JEL: G20; M13; O16; O31 Keywords: Growth, Entrepreneurship, Financial market Handle: RePEc:san:crieff:0025 File-URL: http://www.st-andrews.ac.uk/crieff/papers/crieff0025.pdf File-Format: application/pdf Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: Baochun Peng Title: Is Entrepreneurship Always Good for Growth? Abstract: Entrepreneurship may not be good for growth. We study the role of entrepreneurship in the context of an endogenous growth model. the exercise of entrepreneurship has two features in our model: (i) Entrepreneurs do not carry out research, instead, they select projects from the researchers, and (ii) Entrepreneurs' ability levels are heterogeneous and mutually unobservable. We find that an exogenous rise in the number of high ability entrepreneurs or their ability level may lead to a lower equilibrium growth rate. This negative relationship is caused by the rent seeking element in the exercise of entrepreneurship. Thus our finding challenges the commonly held belief that innovative entrepreneurship is rent creating. Classification-JEL: M13; O31; O32 Keywords: Growth, Entrepreneurship, Innovation Handle: RePEc:san:crieff:0024 File-URL: http://www.st-andrews.ac.uk/crieff/papers/crieff0024.pdf File-Format: application/pdf Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: Gerald Pech Title: Deficits, Coalition Effects and the Timing of Decisions Abstract: This paper develops an intertemporal model of legislative bargaining in the presence of distorting redistributive instruments. It includes negotiations in the cabinet and in the parliament that acts with or without coalitional discipline. We focus on the comparison of outcomes with negotiations on a debt target prior to tax spending decisions to outcomes where the level of debt is renegotiated. In the cabinet, a switch to targeting procedures allows for local improvements in debt policies. In the parliament with lack of coalitional discipline targeting results in a materially balanced budget. Classification-JEL: H61; H62; D78 Keywords: Public debt, Budgeting, Non cooperative bargaining Handle: RePEc:san:crieff:0023 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0023.pdf File-Format: application/pdf Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: Gary S Shea Title: The Course of the Exchange: Measuring and Interpreting Returns Process in 18th and Early 19th Century Britain Abstract: As an introduction to a new database, this paper demonstrates some aspects of returns processes on equity share capital in the earliest companies publicly traded in Britain. Based upon not a sample, but the near universe of all publicly traded companies for which data are available for the period 1690-1834, the characteristics analysed are both cross-sectional and intertemporal. From the point of view of significant research questions in both economic history and financial economics the following analyses are presented. The largest returns to shareholders in the 'great moneyed companies' who financed the reorganisation of the National Debt in the middle of the 18th Century were actually realised in the earliest years in the formation of these companies - the early 18th Century. Similarly, the largest returns to investors in the large transportation improvments (canals and docks in particular) that preceded the Industrial Revolution were actually realised before the Industial Revolution occured. The measured 18th Century equity premium is assuredly smaller than its more modern equivalents and cannot be much more than 4% per annum. Classification-JEL: G12; N23 Handle: RePEc:san:crieff:0022 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0022.pdf File-Format: application/pdf Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: John Bennet Author-Name: Manfredi La Manna Title: Reversing the Keynesian Asymmetry In a Quasi-Competitive Industry with Menu Costs Nominal Prices are More Flexible Downwards than Upwards Abstract: Menu-cost models that provide a theoretical underpinning for the "Keynesian asymmetry" whereby nominal prices are more flexible upward than downward consider relatively uncompetitive market structures (monopoly, oligopoly, monopolistic competition). We examine the effect of menu costs on a "quasi-competitive" industry (a Bertrand oligopoly with menu costs and free entry) and identify simple conditions under which the assymetry is reversed: nominal price becomes more flexible downward than upward. Our analysis suggests that, in the presence of menu costs, the pattern of nominal price adjustment is related to the form and extent of imperfect competion. Classification-JEL: D43 Keywords: adjustments, free-entry, Bertrand oligopoly Handle: RePEc:san:crieff:0018 Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: Laurence Lasselle Author-Name: Serge Svizzero Title: On The Existence of A Cournot Equilibrium With Endogenous Income Abstract: We consider the general equilibrium of an economy with Cournot competition in the product market. In this framework, firms endowed with market power are assumed to know the true or objective demand function. However, depending on the economy's structure, the demand function varies with the size of income feedback effects. Two cases are studied depending on whether the consumers' income is considered by firms as exogenous (no feedback effects) or indogenous (feedback effects) to their actions. We establish a relationship between both cases, that is to say an expression for the demand for goods including feedback effects in terms of the demand without feedback effects. This relationship is useful regarding the conditions ensuring the existence of a Cournot equilibrium and also the features of this equilibrium. We illustrate the latter point through macroeconomic implications such as the debate, full employment vs involuntary unemployment. Classification-JEL: D43; E24 Keywords: feedback effects, price-elasticity Handle: RePEc:san:crieff:0012 Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: Laurence Lasselle Author-Name: Serge Svizzero Title: Imperfectly Competitive Business Cycles With Underemployment Abstract: We investigate how imperfect competition affects the occurence and properties of endogenous business cycles with underemployment in an overlapping generations model. We consider a competitive product market in association with an imperfect labour market. The latter is presented in two variants. These differ from each other by the game-theoretical concepts used in the description of market equilibria, namely the cooperative concept of Nash-Bargaining and the noncooperative concept of Nash-Cournot. Although they are different, both cases admit the union-monopoly as a limit case. We show that the existence of cycles depends on the degree of market power. Our results are illustrated for specific preferences and technology. Classification-JEL: C62; C78; D43; E24 Keywords: price-elasticity, stability Handle: RePEc:san:crieff:0011 Creation-Date: 2000-10 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Free Trade, Business Strategy and Globalization Abstract: This paper links the economist's analysis of free trade with the business strategist's analysis of the forces behind the globalization of competition. It argues that, although the drive to globalization may seem different from the seeking of superior outcomes in competitive markets, this may be only because the modern reference point for competition is inappropriate. However, reference to classical ideas of competition shows that both the advantages of globalization, and its disadvantages, had been anticipated by classical writers of the eighteenth century, most notably by Adam Smith. That argument is supported with two main lines of reasoning. The first identifies globalization as the most recent stage in a process of stadial development. The second links global business strategy to the analysis of competition as a dynamic process in classical economics. These two ideas are combined, to provide the basis for a 'cumulative causation' argument. In this approach, expansion of production, innovation, and increasing returns, are mutually reinforcing, causing a progressive spiral of growth. However, it is pointed out that the same process can cause 'vicious circles' as well as 'virtuous circles'. If demand starts to stagnate, this tendency can be self-reinforcing, with firms who are not industry leaders going to the wall, and a tendency to monopolisation asserting itself. Thus the process of globalization needs to be guided; the 'virtuous circle' is not a necessary outcome. Classification-JEL: B12; B31; D29; F23; L21; O31 Keywords: Globalization, stadial analysis, process competition, cumulative causation Handle: RePEc:san:crieff:0009 Creation-Date: 2000-02 File-URL: http://www.st-andrews.ac.uk/crieff/papers/dp0009.pdf File-Format: application/pdf Template-type: ReDIF-Paper 1.0 Author-Name: Laurence Lasselle Author-Name: Serge Svizzero Title: Involuntary Unemployment in Imperfectly Competitive General Equilibrium Models Abstract: This paper is about involuntary unemployment in general equilibrium models with imperfect competition. It surveys papers written after the seminal work of d'Aspremont, Dos Santos Ferreira and Gérard-Varet (1984). This unemployment is called involuntary because it exists at any wage. It results from imperfect competition in the product markets, more specifically from firms' excessive market power. These papers have focussed their attention on the required conditions for involuntary unemployment. In our presentation, we characterise this form of unemployment through three elements: consumers' preferences, price expectations and Ford effects. Each element is important because it influences the demand for the good and hence its price elasticity, the latter being central in the definition of firms' market power. Classification-JEL: D43; E24 Keywords: competition, preferences, price-elasticity, unemployment Handle: RePEc:san:crieff:0008 Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: Andrew E. Burke Author-Name: Felix R. FitzRoy Author-Name: Michael A. Nolan Title: Self-Employment Wealth and Job Creation: The Roles of Gender, Non-Pecuniary Motivation and Entrepreneurial Ability. Abstract: This paper uses National Child Development Study data for a large cohort of British individuals, to explore the influence of education, inheritance and other background characteristics on the propensity to become self-employed; and also on subsequent success, as measured by job and wealth creation. For the first time, we study the effect of our regressor variables on our success measures via disaggregation of our sample by gender - and, in this way, reveal striking differences between the determinants of male and female entrepreneurial performance. Classification-JEL: J23; M13 Keywords: Self-employment, entrepreneurship, employment, liquidity constraints Handle: RePEc:san:crieff:0006 Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: Atanas Christev Author-Name: Felix R. FitzRoy Title: Employment and Wage Adjustment: Insider and Outsider Control in a Polish Privatization Panel Study Abstract: New survey data for a panel of Polish firms is used to study employment and wage adjustment in state-owned enterprises, new private firms, and insider- and outsider- controlled privatized firms. In contrast to earlier studies, dynamic panel data estimators (GMM) allow for endogeneity of observed variables and partial adjustment to shocks. Asymmetric demand and productivity shocks have differeing effects across ownership categories that are missed by the simpler and more aggregated specifications used in the previous transition literature. We do seem to confirm rent-seeking behaviour in insider-controlled firms and find significant size-wage and employment-growth wage effects. Classification-JEL: C23; J23; J21; J31; P2; P3 Keywords: Privatization, insider vs. outsider, employment, wages Handle: RePEc:san:crieff:0003 Creation-Date: 2000-02 Template-type: ReDIF-Paper 1.0 Author-Name: Gavin C Reid Title: Information System Development in the Small Firm Abstract: This paper argues that the informational requirements for good decision making in small and medium sized enterprises (SMEs) are complex and adaptive. It identifies the basic information needs of the SME, and considers how information is used to guide decisions. It argues that accounting information systems (AIS) and, in particular, management accounting systems (MAS), best characterise successful information systems implementation in the SME. The paper examines the relationship between AIS development and SME performance. It shows that the extant evidence suggests that greater information use in the SME is associated with better performance. Classification-JEL: D21; D81; L21; M13; M21; M41 Keywords: Information Systems, Small Firms, Management Accounts, Decision Making Handle: RePEc:san:crieff:0002 File-URL: http://www.st-andrews.ac.uk/crieff/dp0002.pdf File-Format: application/pdf Creation-Date: 2000-02