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Working papers: 1997

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WP81b: The International Supervisory Framework for Financial Services: An Emerging International Legal Regime

Kern Alexander

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This paper describes the current international framework for supervising financial markets and suggests that current efforts at cooperation and coordination amongst national regulatory authorities are insufficient at managing and minimising the risk of systemic failure in international financial markets. This paper will analyse the purpose, structure, and function of existing international and regional financial institutions, and discuss what gaps, if any, exist at the international level to reduce systemic risk and prevent future financial crises. The paper’s overriding theme concerns how the activities of these international institutions exemplify the new phenomenon of international regulatory cooperation in the area of financial services.

WP81: Towards a Competence Theory of the Region

Clive Lawson

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This paper argues that there are good grounds for extending the competence theory of the firm, or more generally the competence perspective, to analysis of the region – where the region is understood as a geographically defined productive system. The relevance of the perspective to regional study follows from the characterisation of both regions and firms as ensembles of competences, where these competences are best understood as emergent features of social interaction.

WP80: Inter-Firm Cooperation, Competition Law & Patent Licensing: A US-EC Comparison

Alan Gutterman

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This paper compares US and European Community approaches to resolving the potential tension between competition law, which seeks to promote competition, and patent law, which protects patent holders from competition in order to foster innovation. It shows that in the area of patent licensing agreements, there is growing recognition by competition authorities in both systems that inter-firm cooperation is important for innovation. However, EC practice in this respect has not been liberalised to the extent envisaged for the US by the Department of Justice’s 1995 Intellectual Property Guidelines.

WP79: Cooperation & Trust in Inter-Firm Relations: Beyond Competition Policy?

Simon Deakin, Tom Goodwin and Alan Hughes

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Considers the implications for competition law and policy of evidence that cooperation between firms is an important element in product innovation and firm competitive success. It analyses the treatment of vertical inter-firm relations in US, British and European Community competition law. Notwithstanding growing flexibility in the treatment of vertical contracts, competition authorities continue to treat arms-length relations as a first-best option. The paper argues that without abandoning mechanisms for tackling abuse of economic power, competition policy should more clearly recognise the importance of firm cooperation for both static and dynamic efficiency.

WP78: The Theory & Practice of Contracting

Simon Deakin and Jonathan Michie

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Explores possibilities for theoretical synthesis in the study of contracts and reviews recent empirical research on contract process in both the public and private sectors. It argues for an interdisciplinary approach in which insights from organisation theory and social systems theory are integrated with those of transaction cost economics. Such an approach might prove particularly valuable for the study of inter-organisational relations and trust. From this perspective, case-studies, institutional histories and legal-conceptual analyses may all be used to advance the understanding of current changes in economic organisation.

WP77: Foreign Direct Investment in the UK 1985-1994: The Impact on Domestic Management Practice

John Child, David Faulkner and Robert Pitkethly

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Reports original survey results on management structures and changes following acquisition in four groups of foreign-owned – French, German, Japanese and US – subsidiaries operating in the UK, compared with a control group of acquired UK-owned subsidiaries. Acquisition generally led to significant changes in management practice, such as performance related rewards and stronger quality emphasis, in all groups. But in addition, there was significant evidence of distinct nationality effects, which generally conformed to accepted characterisations of national management practice in the case of Japanese and US parents, but less so for French and German acquisitions.

WP76: Industrial Concentration Under Shock Therapy: Poland in Early Transition Years

Paul Kattuman and Ryszard Domañski

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Economic reforms in Poland have attempted to engender a competitive market economy. These reforms envisaged deconcentration, restructuring and privatisation of state enterprises. Together with private firm entry and growth, a competitive market structure was expected to evolve. However, empirical analysis of Polish data on firm size structures during the early 1990s reveals that concentration increased, not decreased, in several sectors and markets. A recurrent feature appears to be ‘premature’ exits and severe contraction of some large state enterprises before new private firms had grown large enough to challenge remaining incumbents.

WP75: The Policy Implications of the Globalisation of Innovation

Daniele Archibugi and Simona Iammarino

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The paper develops a taxonomy of the globalisation of innovation based on three categories. These are the international exploitation of technology produced on a national basis, the global generation of innovations, and global technological collaboration. The paper analyses the different impact each of the three categories might have on the innovative performance of countries and regions, with the aim of defining the implications for national policies. Such policies play a different role in each of the three processes of the globalisation of innovation, and are more rather than less necessary as globalisation intensifies.

WP74: Parenting & Labour Force Participation: The Case for a Ministry of the Family

Shirley Dex and Robert Rowthorn

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Examines the economic issues implicit in current debates over the way families balance their labour force participation and family and caring responsibilities. It criticises partial views which have tended to focus on women’s employment without considering wider impacts on children and the role of men. Public interests are involved in the rearing and welfare of children, and business interests in the renewal and quality of the labour force. The paper argues that from a wider perspective, many claims about economic benefits and subsidised pre-school day care and education lack economic foundation, and that government policy needs to adopt a more integrated approach to these issues.

WP73: Innovation in the Service Sector: Results from the Italian Statistical Survey

Rinaldo Evangelista and Giorgio Sirilli

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Analyses new empirical survey evidence on the nature, determinants and economic impact of technological innovation in service firms in Italy. Over one-third of service firms surveyed introduced innovations 1993-95, but with wide sectoral differences. Software acquisition and development and investment in machinery were the most frequent innovation sources. The importance of technology for firm performance is expected to increase in all service sectors. The paper also highlights major similarities and differences in service firm innovation behaviour compared with manufacturing firms.

WP72: SME Innovator Types & their Determinants (limited availability)

Eric Wood

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The distinction between innovating and non-innovating firms masks important differences within the group of innovating firms. Different types of SME innovator are identified on the basis of indicators of their innovation “outputs”. These groups are then compared in terms of their use of a variety of “inputs” to innovation. Differences between novel and non-novel innovators are highlighted, though these are dwarfed by differences between innovators and non-innovators. An earlier version of this paper was presented at the conference on “Innovation, Cooperation and Growth” on 4 June 1997 at Robinson College, Cambridge.

WP71: Small Firms & Employment

Alan Hughes

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A review of recent research on job generation and growth by UK SMEs. Only a handful of SMEs expand employment consistently or rapidly, and only 55% of new VAT registered firms survive more than three years. Growth of micro firms is generally associated with unstable and poorly paid jobs, offering little training. Growing SMEs are more likely to be those introducing product or process innovations, and have developed collaborative networks. Policy needs to encourage middle range SMEs with the capacity for management development, innovation and higher quality employment.

WP70: Leveraging Resources Under Threat of Opportunism: Predicting Networking in International Growth

Erkko Autio, Helena Yli-Renko and Harry Sapienza

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A study of the intensity of networking in the international growth of new technology-based firms in Finland. Drawing on both the resource-based (or knowledge-based) and contractual views of the firm, the paper tests a set of hypotheses about the determinants of international networking with data from 86 companies. Mixed support for the model is found. Pointers for future research are discussed.

WP69: ‘Barriers’ to Technology Transfer: Local Impediments in Oxfordshire

Helen Lawton Smith

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Analyses linkage patterns in Oxfordshire between a sample of high-technology firms and local universities and national research laboratories with a view to identifying local impediments to technology transfer. Two kinds of impediments are identified, namely ‘obstructions’ arising from the failure of mechanisms designed to create networks within the national and local innovation systems, and ‘barriers’ which are the weak links within the innovation process in general.

WP68: Unemployment Flow Regimes & Regional Unemployment Disparities

Ron Martin and Peter Sunley

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Unlike most previous research which examines unemployment stocks, this paper analyses regional unemployment flow regimes in the 1980s and 1990s in Britain, and identifies markedly different inflow and outflow patterns for different regions, especially in the 1980s. In the 1990s, however, differences have narrowed, while there have been distinct ‘switches’ in regional regimes. These findings are related to debates over the north-south divide, development of a US-style labour market, and the impact of the changing benefit system.

WP67: Technological Convergence, Globalisation & Ownership in the UK Computer Industry

Suma Athreye and David Keeble

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Using an original database of UK computer firm ownership patterns by sector and nationality, the paper finds weak support for the role of technological convergence between the computing, media and telecommunications industries in influencing corporate ownership, but marked differences in foreign ownership and nationality patterns between computer manufacturing and software/services. A particular feature of UK computer subsidiary parents is the importance of (financial) holding companies.

WP66: Expenditure, Outcome & Nature of Innovation in Italy

Daniele Archibugi, Rinaldo Evangelista, Giulio Perani and Fabio Rapiti

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The paper analyses responses to the second Italian Innovation Survey by 22,000 manufacturing firms, in terms of the number and frequency of innovating firms by sector and size, expenditures on innovation, and the quantity and quality of innovation outputs. It reveals that the most important innovation expenditures are on new machinery and R&D, that there are major sectoral variations, and that small firms innovate much less frequently than large firms: unchanged products account for 62% of sales, only 1.2% being of entirely new products.

WP65: Inter-Firm Links Between Regionally Clustered High-Technology SMEs: A Comparison of Cambridge & Oxford Innovation Networks

Clive Lawson, Barry Moore, David Keeble, Helen Lawton Smith and Frank Wilkinson

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Focuses upon the nature and extent of inter-firm linkages in two prominent high-technology regions in the UK, namely Cambridge and Oxford, utilising both direct measures of the importance of various types of linkages to the firms involved as well as less direct ‘indicators’ of the existence of local networking, such as the nature of informal interaction and of local labour market mobility.

WP64: Needs & Wants: The Case of Broadcasting Policy

Stephen Pratten

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This paper identifies two broad perspectives on broadcasting policy. It is argued that an increasingly influential wants-based position ultimately draws upon an impoverished social ontology which is unable to sustain the distinction between wants and underlying needs. It is further argued that the previously dominant beyond-wants perspective on broadcasting policy failed to elaborate its contrasting presuppositions sufficiently. It is suggested that by drawing upon a perspective developed within economics under the heading of critical realism which explicitly theorises the distinction between expressed wants and underlying needs, it is possible to provide a more adequate outline of the presuppositions of a beyond-wants perspective.

WP63: The Wage Costs of a National Statutory Minimum Wage in Britain

Paul Robson, Shirley Dex and Frank Wilkinson

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The paper uses quarterly Labour Force Survey data to estimate the number of workers likely to be affected by introducing a Statutory Minimum Wage (SMW) in Britain, and the first round increase in direct labour costs which would result. It indicates that there would be large variations in the impact on different sectors and occupations, as well by level of SMW, of which policy needs to be aware.

WP62: Business Service Firms, Service Space & the Management of Change

John Bryson

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Reviews the growth of business service firms and their relationships with clients in the UK, with particular reference to small and medium sized firms and the marked spatial concentration of business services in the ‘service space’ of London and South East England. It presents a detailed case study of the way in which large client firms use small business service companies, and argues that a dual information economy may be developing in which large firms can access specialised business service advice irrespective of their location, whereas SMEs are tied to local providers of more generalist expertise.

WP61: The Impact of European Economic Integration on Business Associations: The UK Case

Robert Bennett

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Reports new and comprehensive survey research which assesses the routes and activities used by UK business, trade and professional associations in gathering and exchanging information with, and seeking to influence, European Union institutions. It demonstrates that the most important routes are national, using UK ministers, officials and agencies, through membership of European-wide associations, and through a “Brussels Strategy” of direct lobbying. Association size, resources and sectoral circumstances are important influences on individual European strategies.

WP60: Innovation & Performance of SMEs in Italy: The Relevance of Spatial Aspects

Roberto Camagni and Roberta Cappello

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Critically reviews the role of small and medium-sized manufacturing enterprises in recent regional innovation, employment and industrial productivity trends in Italy, against a background of earlier 1970s patterns focused on the success of small firms in the ‘Third Italy’ of the north-east and centre (NEC). Its analysis reveals significant changes, with recent small firm innovation and productivity growth being spatially variable, with a divergence between the North West/North East and Centre/South NEC regions and four demonstrably different regional innovative profiles. The paper concludes that territorial specificities and spatial milieux play a key role in these new regional SME innovation differences.

WP59: Entrepreneurship, Geographic Spillovers & University Research: A Spatial Econometric Approach (limited availability)

Zoltan Acs, Luc Anselin and Attila Varga

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The paper investigates the extent of local geographic spillovers from university research in influencing innovative activity by small high technology enterprises in the USA, using Small Business Administration innovation data for 125 metropolitan regions and four high technology sectors (drugs and chemicals, machinery, electronics and instruments). Using multivariate spatial econometric models to implement the Griliches-Jaffe knowledge production framework, it demonstrates positive and significant relationships, extending over a range of 75 miles, with particularly strong impacts for small firm innovation in electronics and instruments.

WP58: Divisions of Labour, Power Asymmetries & Place Dependence: The Restructuring of Industrial Mittelstand Firms in the Ruhr Area

Christian Berndt

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In recent years, German business representatives have begun to question the sustainability of the ‘German model’ of business organisation and competitiveness in the light of increasing international integration. This paper questions the validity of such ‘globalisation rhetoric’ by analysing recent restructuring strategies of small and medium-sized manufacturing (Mittelstand) firms in the Ruhr region. It argues that the adjustment strategies revealed by these SMEs are far too complex to be encompassed by this rhetoric, and that embeddedness in different institutional contexts and asymmetric power relations with large firms play a more major role.

WP57 Replicating the Experience of the New Industrialising Economies on a Large Scale

Robert Rowthorn

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Examines whether developing countries can follow the same pattern of labour-intensive export-led manufacturing growth as the first tier of Newly-Industrializing Economies (NIEs), such as Hong Kong, Korea or Taiwan. It demonstrates that despite potential for clothing exports, neither this approach, nor that of transnational direct investment as followed by Malaysia, is a viable path for most developing countries. It concludes by considering the policy implications for these countries in terms of trade and foreign direct investment.

WP56: Hostile Takeovers, Corporate Law & the Theory of the Firm

Simon Deakin and Giles Slinger

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Assesses the impact of the regulatory system governing takeovers in the UK and considers the relevance of economic theory for the design of corporate law and governance systems. The paper argues that the UK institutional framework discourages defences against takeover bids and protects the interests of target shareholders above those of other stakeholders. In the absence of compelling evidence that hostile takeovers improve long-run performance, it questions whether maximising shareholder value in this way is compatible with maintaining an efficient corporate sector.

WP55: Retail Distribution Channel Barriers to International Trade

F M Scherer

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Recent international trade disputes highlight the frequent existence of retail trade barriers, such as those allegedly restricting US automobile and colour film manufacturers’ attempts to sell to the Japanese market. This paper examines how manufacturers’ distribution channels evolve over time, how international trade may be inhibited by retail-level barriers in the early stages of evolution, and how such vertical barriers to trade can be overcome.

WP54: Territorial Clustering & High Technology Innovation: From Industrial Districts to Innovative Milieux

Clive Lawson

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Reviews recent attempts to conceptualise and investigate the relationship between geographical proximity and innovative firm behaviour. Special attention is given to the ‘industrial district’ and ‘innovative milieu’ literatures, which are used to illustrate areas of consensus, underlying trends in thought and issues in need of investigation.

WP53: Internationalisation Processes, Networking & Local Embeddedness in Technology-Intensive Small Firms

David Keeble, Clive Lawson, Helen Lawton Smith, Barry Moore and Frank Wilkinson

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Demonstrates from an interview survey of 100 technology-intensive SMEs in the Cambridge and Oxford regions that such firms are characterised by exceptionally high levels of international sales, research collaboration, labour recruitment, and ownership and facilities location. Identifies significant differences between more ‘internationalist’ and more ‘nationalist’ SMEs, and shows that far from reducing local linkages, internationalisation appears to be embedded in successful local research and technology collaboration.

WP52: Technological Competitiveness in an International Arena

Jeremy Howells and Jonathan Michie

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Discusses the nature, extent and significance for national government policy of the globalisation of technology via multinational firms, with particular examples from UK experience. The paper documents the need for technological competitiveness and assesses the key ingredients of national government policy to promote such competitiveness.

WP51: Industrial Structure & Training Needs in the Knitwear & Clothing Sectors in Italy

Sebastiano Brusco and Daniela Bigarelli

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Reports survey results from a sample of 6,000 knitwear and clothing firms in nine Italian regions which reveal the existence of two distinctive principal models of regional productive systems. These are the ‘Tuscany’ model, of non-integrated small ‘final’ firms, and the ‘Veneto’ model of integrated medium-sized and larger ‘final’ firms which outsource to subcontractors. Elsewhere there are a great variety of intermediate regional systems, with differing training needs.

WP50: Downsizing Company Strategies & Executive Pay in Germany

Joachim Schwalbach and Ulrike Grasshoff

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Based on multi-task theoretical considerations, the paper shows that for German industrial firms, pay-for-firm-size elasticities decrease only for large firms as they change their strategy from growth to downsizing. Pay-for-performance elasticities are also contrary to agency theory predictions. Compensation contracts in large corporations do not therefore appear to be incentive compatible.