Raymond De Bondt

Spillovers and innovative activities

Abstract This paper reports a search for general tendencies among models that look at spillovers in innovative activities. A number of inferences are detailed that appeared in a wide class of settings, including stochastic racing models, (static) stochastic models, dynamic and static commitment models, and strategic investment models. They include: • - the role of a critical spillover level that drives the comparison between symmetric cooperative and non-cooperative efforts; • - the disincentive effect of symmetric spillovers for strategic investments and the positive effect of such spillovers for investment commitments and cooperative efforts; • - the fact that innovative output in many cases is highest when appropriation is neither perfect nor free, although circumstances also emerge where any lack of appropriation will discourage innovative efforts.

Innovative strategic groups in multinational industries

Abstract Differences in innovative strategies between groups of domestic and multinational enterprises are analyzed within a two stage game model, that incorporates the asymmetries in transaction costs between the two species of enterprises. Nash and cooperative behaviour is shown to result in different equilibrium R&D strategies, with the multinational companies doing typically more R&D for larger markets and domestic companies focusing on specific market segments. Survey data from companies operating in eleven high-tech multinational industries in Belgium provide support for these strategic differences and show how they are related to company performance.

Fuel Adjustment Mechanisms and Economic Efficiency

FUEL adjustment mechanisms used in electricity and natural gas pricing are formulae that provide for automatic adjustments in output prices in response to changes in the factor prices of boiler fuels and wellhead gas, respectively. Because these adjustments are made automatically, regulatory commissions do not exercise direct review of the appropriateness of the adjustments although they do generally have authority to determine the form of the formulae used. The purpose of this paper is to investigate the implications of these mechanisms for economic efficiency, and the analysis will focus on fuel adjustment clauses for electricity rates, since they have been the subject of the most concern in the US. 2 Fuel adjustment mechanisms were first utilized in the US during World War I to enable the regulatory process to function in response to the rapid increase in coal prices.3 By 1958, the vast majority of electric utilities had adopted fuel clauses. .. most fuel clauses, however, were limited to commercial and industrial users . .. The percentage of utilities having residential fuel clauses rose from 35% in 1970 to 65% in 1973 [19, p. 5]. As an indication of the pervasiveness of these mechanisms, they are currently allowed in all but five states, Montana, Oregon, Utah, Washington and Wyoming, and in Idaho and Nevada FACs are not used or are denied to some categories of utilities [20, p. VI]. Of the 82 electric utilities responding to an October 3rd, 1974, questionnaire of the Edison Electric Institute, 8I reported that an FAC was included in their tariffs [8]. An FPC survey as of January Ist, 1974, showed that 65% of the larger privately owned utilities had fuel adjustment clauses in their residential schedules, 77% had such clauses in their commercial schedules, and 83% in their industrial schedules [13, p. 315].

On the design of regulatory price adjustment mechanisms

Abstract Price adjustment mechanisms are employed in the electric utility industry to pass changes in fuel costs on to consumers without formal rate review by a regulatory commission. The predictability of this pass-through and the regulators limited ability to observe the actions of a firm can create potential incentive problems associated with the choices of technology and fuel supply. This paper is concerned with the regulatory design of pass-through formulas when a factor price is uncertain. The optimal design involves deviating from the full-information optimal price formulas in order to mitigate the incentive problems.

Immunohistochemical evaluation of cartilage-derived morphogenic protein-1 and -2 in normal human salivary glands and pleomorphic adenomas

Cartilage-derived morphogenic protein (CDMP)-1 and -2 belong to the bone morphogenetic protein (BMP) family in the transforming growth factor (TGF)-β superfamily. CDMP-1 and CDMP-2 were reported to play essential roles in limb cartilage and limb-joint formation in developing mice. Although pleomorphic adenoma of the salivary glands is an epithelial tumor, it frequently shows ectopic cartilaginous formation. These findings suggested that CDMP-1 and -2 may play essential roles in chondroid formation in salivary pleomorphic adenoma. To evaluate this hypothesis, we examined the expression and localization of CDMP-1 and -2 immunohistochemially in 20 normal human salivary glands and 35 pleomorphic adenomas. CDMP-1 was immunolocalized in the striated ducts and the intercalated ducts in the normal salivary glands. CDMP-1 was immunolocalized in the cuboidal neoplastic myoepithelial cells around the chondroid areas of the pleomorphic adenomas, whereas these molecules were not localized in the spindle-shaped neoplastic myoepithelial cells of the myxoid element or the lacuna cells of the chondroid element in these tumors. CDMP-2 was expressed neither in normal salivary glands nor any of the elements of the pleomorphic adenomas. Type-II collagen and aggrecan were immunolocalized throughout the matrix around the lacuna cells of the chondroid element, whereas type-X collagen was not immunlocalized in any epithelial or stromal elements, including the chondroid elements. Aggrecan was deposited not only on the chondroid matrix, but also on the myxoid stroma and intercellular spaces of the tubulo-glandular structures, whereas chondromodulin-I was deposited on the chondroid matrix. These results indicated that the cuboidal neoplastic myoepithelial cells around the chondroid areas expressed CDMP-1 and suggested that this molecule may play a role in the differentiation of neoplastic myoepithelial cells in pleomorphic adenoma. The phenotype of the lacuna cells was similar to that of mature to upper hypertrophic chondrocytes of the authentic cartilage. In conclusion, pleomorphic adenoma expressed CDMP-1 but not CDMP-2.

Demand-creating R&D in a symmetric oligopoly

Spillovers with demand-creating research and development (R&D) activities are investigated by revisiting a widely employed market share rivalry demand structure. Positive technological spillovers may inflict positive or negative side effects on rivals and this has important implications for the effects on innovative efforts of loose or tight R&D cooperation in symmetric oligopolies. A comparison with the effects that apply with linear demand structures and implications for empirical research are also touched upon.

Innovative activity and barriers to entry

Abstract The short-run effects of potential competition on innovative input decisions are studied for an innovating firm realizing that by increasing the magnitude of its efforts it may enlarge its temporary monopoly position. Additional protection from new competition is viewed as resulting from to the innovator exogenous barriers to rivals entry decisions and from the assurance of a temporary monopoly during an entry lag. This protection is shown to promote innovative activity in some circumstances, but to temper such efforts in other situations.

Factor price changes, technical efficiency, and revenue requirements regulation

A regulatory framework is considered in which output price adjustments can be initiated only by a change in the price of a non-capital input (e.g. fuel) at some time in the future which is uncertain. At that time there is a processing period and then an adjustment of the output price so that the revenues of the firm meet an allowed rate of return s. The regulated firm choosing a putty-clay technology is shown to overcapitalize for large values of s and to undercapitalize for sufficiently small values of s. A decrease in the length of the processing period is found to accentuate the extent of either the undercapitalization or overcapitalization resulting from the specified rate of return.