nep-net New Economics Papers
on Network Economics
Issue of 2013‒06‒04
ten papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Optimal pricing and quality of academic journals and the ambiguous welfare effects of forced open access: A two-sided model By Mueller-Langer, F.; Watt, R.
  2. Global R&D network. A network analysis of international R&D centres. By Giuditta De Prato; Daniel Nepelski
  3. To the problem of turbulence in quantitative easing transmission channels and transactions network channels at quantitative easing policy implementation by central banks By Dimitri O. Ledenyov; Viktor O. Ledenyov
  4. Investment and Efficiency under Incentive Regulation: The Case of the Norwegian Electricity Distribution Networks By Rahmatallah Poudineh; Tooraj Jamasb
  5. Global Trade Imbalances: A Network Approach By Marco Duenas; Giorgio Fagiolo
  6. Emergence of Innovation Networks from R&D Cooperation with Endogenous Absorptive Capacity By Ivan Savin; Abiodun Egbetokun
  7. Ambiguous Networks By Marco Pelliccia
  8. The Small World of 9/11 and the Implications for Network Dismantlement Strategies By Virginie Masson; Kelsey Wilkins
  9. Uncertainty in an Interconnected Financial System, Contagion, and Market Freezes By Mei Li; Frank Milne; Junfeng Qui
  10. Is venture capital a local business? A test of the proximity and local network hypotheses By Wuebker, Robert; Schulze, William; Kräussl, Roman

  1. By: Mueller-Langer, F.; Watt, R. (Tilburg University, Tilburg Law and Economics Center)
    Date: 2012
  2. By: Giuditta De Prato (European Commission – JRC - IPTS); Daniel Nepelski (European Commission – JRC - IPTS)
    Abstract: A firm's decision to establish an R&D centre in a specific location creates externalities affecting other firms and, thus, a random distribution of location choices is unlikely. Expecting that the global distribution of R&D centres fulfils the criteria of a complex network, we apply social network analysis to study the locations of international R&D centres and the relationships between the countries owning and hosting them. We analyse the characteristics of the global R&D network and identify its core members. Further, we include network indices in an empirical analysis of the R&D internationalisation determinants. We find that a country's position in the network, which does not necessarily coincide with its geographical or cultural proximity to other countries, has a significant impact on the formation and intensity of R&D linkages between countries. We provide policy implications addressing the challenges emerging from the increasing internationalisation and network of R&D.
    Keywords: globalisation of innovation, location of R&D centres, network analysis, gravity model
    JEL: D8 O32 L23
    Date: 2012–06
  3. By: Dimitri O. Ledenyov; Viktor O. Ledenyov
    Abstract: In agreement with the recent research findings in the econophysics, we propose that the nonlinear dynamic chaos can be generated by the turbulent capital flows in both the quantitative easing transmission channels and the transaction networks channels, when there are the laminar turbulent capital flows transitions in the financial system. We demonstrate that the capital flows in both the quantitative easing transmission channels and the transaction networks channels in the financial system can be accurately characterized by the Reynolds numbers. We explain that the transition to the nonlinear dynamic chaos regime can be realized through the cascade of the Landau, Hopf bifurcations in the turbulent capital flows in both the quantitative easing transmission channels and the transaction networks channels in the financial system. We completed the computer modeling, using both the Nonlinear Dynamic Stochastic General Equilibrium Theory (NDSGET) and the Hydrodynamics Theory (HT), to accurately characterize the US economy in the conditions of the QE policy implementation by the US Federal Reserve. We found that the ability of the US financial system to adjust to the different levels of liquidity depends on the nonlinearities appearance in the QE transmission channels, and is limited by the laminar turbulent capital flows transitions in the QE transmission channels and the transaction networks channels in the US financial system. The proposed computer model allows us to make the accurate forecasts of the US economy performance in the cases, when there are the different levels of liquidity in the US financial system.
    Date: 2013–05
  4. By: Rahmatallah Poudineh; Tooraj Jamasb
    Abstract: Following the liberalisation of the electricity industry since the early 1990s, many sector regulators have recognised the potential for cost efficiency improvement in the networks through incentive regulation aided by benchmarking and productivity analysis. This approach has often resulted in cost efficiency and quality of service improvement. However, there remains a growing concern as to whether the utilities invest sufficiently and efficiently in maintaining and modernising the networks to ensure long term reliability and also to meet future challenges of the grid. This paper analyses the relationship between investments and cost efficiency in the context of incentive regulation with ex-post regulatory treatment of investments using a panel dataset of 126 Norwegian distribution companies from 2004 to 2010. We introduce the concept of “no impact efficiency” as a revenue-neutral efficiency effect of investment under incentive regulation which makes a firm “investment efficient” in cost benchmarking practice. Also, we estimate the observed efficiency effect of investments in order to compare with no impact efficiency and discuss the implication of cost benchmarking for investment behaviour of network companies.
    Keywords: Investments, cost efficiency, incentive regulation, distribution network
    JEL: L43 L51 L94 D21 D23 D24
    Date: 2013–04–01
  5. By: Marco Duenas; Giorgio Fagiolo
    Abstract: We study trade imbalances between world countries in the period 1960-2000 using a complex-network approach. We show that trade imbalances in absolute value are characterized by a hierarchical arrangement wherein few rich economies display high clustering and carry an important amount of global-trade imbalances. In contrast, trade imbalances in relative terms show a more fragmented topology, with less concentrated clustering which is particularly high for emergent economies. In addition, we find that traditional null random-network models and the gravity model poorly predict the topology of trade imbalance networks. Our main finding is that the evolution of the international trade has caused very heterogeneous imbalances in world economies, which may have important consequences for global instability and development
    Keywords: Trade Imbalances; International Trade Network; Gravity Model; Null Models
    Date: 2013–05–21
  6. By: Ivan Savin (DFG Research Training Program "The Economics of Innovative Change", Friedrich Schiller University Jena and the Max Planck Institute of Economics); Abiodun Egbetokun (DFG Research Training Program "The Economics of Innovative Change", Friedrich Schiller University Jena and the Max Planck Institute of Economics)
    Abstract: This paper extends the existing literature on strategic R&D alliances by presenting a model of innovation networks with endogenous absorptive capacity. The networks emerge as a result of bilateral cooperation over time between firms occupying different locations in the knowledge space. Social capital is ignored, and firms ally purely on the basis of knowledge considerations. Partner selection is driven largely by absorptive capacity which is itself influenced by cognitive distance and investment allocation between inventive and absorptive R&D. Cognitive distance between firms changes as a function of the intensity of cooperation and innovation. Within different knowledge regimes, we examine the structure of networks that emerge and how firms perform within such networks. Our model replicates some stylised empirical results on network structure and the contingent effects of network position on innovative performance. We find networks that exhibit small world properties which are generally robust to changes in the knowledge regime. Second, subject to the extent of knowledge spillovers, certain network strategies such as occupying brokerage positions or maximising accessibility to potential partners pay off. Third and most importantly, absorptive capacity plays an important role in network evolution: firms with different network strategies indeed differ in the build-up of absorptive capacity.
    Keywords: absorptive capacity, agent-based modeling, cognitive distance, dynam- ics, innovation, knowledge spillovers, networks
    JEL: C61 C63 D83 D85 L14 O33
    Date: 2013–05–22
  7. By: Marco Pelliccia (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We investigate the impact of network structures describing reciprocal influence-relationships between agents on their perceived ambiguity. We argue that, under specific assumptions, the potential complexity of the link-structures creates extra uncertainty or ambiguity over the "right" probability distribution to consider. This result affects the optimal equilibrium structures which arise in a dynamic game where the agents/nodes strategically rewire their links to minimize the perceived uncertainty. The model could explain specific network dynamics observed in markets with asymmetric or not perfect information on the partners' outcomes. For instance, we propose an interpretation of the dynamic of the European Interbank Market structure before and after the recent financial crisis.
    Keywords: Ambiguity, Network, Interbank Market
    JEL: D85 D81 D82 G21
    Date: 2013–02
  8. By: Virginie Masson (School of Economics, University of Adelaide); Kelsey Wilkins
    Abstract: We retraced the development of the network of those who participated in the 9/11 attacks through four stages: 1998-99, December 2000, May 2001 and August 2001. We established that throughout its development, the network had the characteristics of a small world. The implications of this result pointed towards an easily detectable but difficult to dismantle network due to its large clusters. We then assessed the performances of traditional measures of network strength and node centrality. We found that although betweenness surpasses all other measures for all stages, we could improve its performance. The new measure, termed the Jenga index, proved to perform best through all stages.
    Keywords: Terrorism, Counterterrorism, Social Network Analysis.
    JEL: F52 D74 D85
    Date: 2013–05
  9. By: Mei Li (University of Guelph); Frank Milne (Queen's University); Junfeng Qui (Central University of Finance and Economics)
    Abstract: This paper studies contagion and market freezes caused by uncertainty in financial network structures and provides theoretical guidance for central banks. We establish a formal model to demonstrate that, in a financial system where financial institutions are interconnected, a negative shock to an individual financial institution could spread to other institutions, causing market freezes because of creditors’ uncertainty about the financial network structure. Central bank policies to alleviate market freezes and contagion, such as information policy, bailout policy and the lender of last resort policy, are examined.
    Keywords: Interconnection, Market Freezes, Contagion, Financial Crises
    JEL: D82 G2
    Date: 2013–05
  10. By: Wuebker, Robert; Schulze, William; Kräussl, Roman
    Abstract: Venture capital (VC) investment has long been conceptualized as a local business, in which the VC's ability to source, syndicate, fund, monitor, and add value to portfolio firms critically depends on their access to knowledge obtained through their ties to the local (i.e., geographically proximate) network. Consistent with the view that local networks matter, existing research confirms that local and geographically distant portfolio firms are sourced, syndicated, funded, and monitored differently. Curiously, emerging research on VC investment practice within the United States finds that distant investments, as measured by exits (either initial public offering or merger & acquisition) out-perform local investments. These findings raise important questions about the assumed benefits of local network membership and proximity. To more deeply probe these questions, we contrast the deal structure of cross-border VC investment with domestic VC investment, and contrast the deal structure of cross-border VC investments that include a local partner with those that do not. Evidence from 139,892 rounds of venture capital financing in the period 1980-2009 suggests that cross-border investment practice, in terms of deal sourcing, syndication, and performance indeed change with proximity, but that monitoring practices do not. Further, we find that the inclusion of a local partner in the investment syndicate yields surprisingly few benefits. This evidence, we argue, raises important questions about VC investment practice as well as the ability of firms to capture and lever the presumed benefits of network membership. --
    Keywords: Venture Capital,Internationalization,Networks
    JEL: E20 E65 N14 O52 P52
    Date: 2012

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