Risks and Portfolio Decisions Involving Hedge Funds

This article characterizes the systematic risk exposures ofhedge funds using buy-and-hold and option-based strategies.Our results show that a large number of equity-oriented hedgefund strategies exhibit payoffs resembling a short positionin a put option on the market index and therefore bear significantleft-tail risk, risk that is ignored by the commonly used mean-varianceframework. Using a mean-conditional value-at-risk framework,we demonstrate the extent to which the mean-variance frameworkunderestimates the tail risk. Finally, working with the systematicrisk exposures of hedge funds, we show that their recent performanceappears significantly better than their long-run performance.     

Incubation of an industry: Heterogeneous knowledge bases and modes of value capture

Research summary : We examine firms' technological investments during an industry's incubation stage—the period between a technological breakthrough and the first instance of its commercialization. Using the agricultural biotechnology context, we develop stylized findings regarding the understudied knowledge evolution preceding product evolution in an industry's life cycle, the trend and diversity of firms undertaking technological investments in anticipation of industry emergence, their leverage of markets for technology and corporate control, and their use of alternative modes of value capture. We juxtapose these stylized findings with existing literature to identify new theoretical insights, and set the stage for future scholarly work to develop and test new theories for the incubation period, examine its existence in other industries, and study its impact on subsequent firm and industry evolution. M anagerial summary : New technological breakthroughs present managers of existing firms and aspiring entrepreneurs with opportunities to create altogether new industries. During the vibrant incubation period, we find that multiple firms capitalize on diverse knowledge bases to shape the industry's knowledge evolution and also capture economic value in diverse ways. Existing firms in the obsolescing industry are more likely to become targets in acquisitions given their complementary knowledge. Science‐based start‐ups are more likely to engage in acquisitions and collaborations with established firms. Diversifying firms are more likely to commercialize products after leveraging of internal development, acquisitions, and alliances. Our study highlights the importance for managers to think about “success” and “failure” across multiple yardsticks of performance, rather than only as product commercialization as the sole goal. Copyright © 2016 John Wiley & Sons, Ltd.     

Ownership structures of U.S. joint ventures in the 1980S

A firm's choice between sole and joint ventures in a foreign market is subject to various market-specific and firm-specific influences. This study draws upon the transaction cost and bargaining power theoretical frameworks to identify and measure some of these influences. A logistic regression model was employed to examine the relative influences of the main and interaction effects of the independent factors on ownership structures employed for new foreign subsidiaries by U.S. firms in the 1980s.     

Does Entry Size Matter? The Impact of the Life Cycle and Technology on Firm Survival

A wave of empirical studies has recently emerged showing that smaller-scale entry is confronted with a lower likelihood of survival than their larger counterparts. The purpose of this paper is to examine whether the relationship between size of a firm when entering an industry and the likelihood of survival holds under different technological conditions and across the different stages of the industry life cycle. The empirical evidence suggests that the relationship between firm size and the likelihood of survival is shaped by technology and the stage of the industry life cycle. While the likelihood of survival confronting small entrants is generally less than that confronting their larger counterparts, the relationship does not hold for mature stages of the product life cycle, or in technologically intensive products. In mature industries that are still technologically intensive, entry may be less about radical innovation and possibly more about filling strategic niches, thus negating the impact of entry size on the likelihood of survival.     

KALDORIAN DEMAND FUNCTIONS AND THE RETURN TO CAPITAL: AN ANALYSIS IN A TRADE THEORETIC FRAMEWORK

Abstract.  This paper shows that under certain plausible conditions capital accumulation raises the return to capital. A three good trade theoretic model with Kaldorian demand functions is used to establish this result. This proposition is also independent of the assumption of diminishing return to capital a key feature of endogenous growth theory. Our result sheds light on the high rates of investment and growth that many East Asian economies have achieved.