In addition to catastrophe and operational risks like e.g. the terrorist attacks on the World Trade Center airlines are exposed to substantial capital market risks. This study examines the cases of three major airlines including Lufthansa, United Airlines, and Qantas. Their risk profiles are analyzed with respect to commodity and exchange rate risks by applying the “Earnings at Risk”-concept to the profit and loss statements of the year 2003. Furthermore, potential hedging strategies are explored. It turns out that airlines are especially sensitive to movements of the oil price. However, hedges can provide (partial) protection against adverse movements of the risk factors.
This paper addresses the capital requirements based on the RiskMetrics™ framework and the BIS standard model. A case study is developed which shows that the capital requirements can be reduced by applying the more accurate RiskMetrics™ framework. Furthermore it gives an overview of the capital requirement rules for credit risk and operational risk in the Basel II Accord.
This research analyzes the convergence properties of a discrete implementation of the Hull and White two-factor model. It compares caplet prices using both the discrete valuation algorithm and the analytic solution. Quality of the results depends crucially on the properties of the model parameters. The valuation algorithm may be improved while preserving its computational efficiency. An application of the modified algorithm to the caplet pricing problem indicates that substantially reduced valuation errors.
The purpose of this thesis, which is entitled 'Bioentrepreneurship in Germany', is to study important issues of entrepreneurship research in the specific context of the biotechnology industry. The thesis consists of five empirical studies which cover such diverse topics as financing strategies, M&As, strategic alliances, crisis management, and venture capital (VC) portfolio strategies. In the first study I analyse the development of the German biotechnology industry during the hostile financing environment in the years 2002 – 2004. I employ the theoretical perspectives of population ecology and evolutionary economics and investigate adaptation processes outside and within the biotech firms. External adaptation takes places through an increasing number of insolvencies and a decreasing number of foundations of VC-backed bioventures. The industry, however, experienced a much weaker consolidation than assumed by industry experts. Drawing on in-depth case studies of bioventures which successfully adapted to the hostile environment, I show that downsizing, changing the business model towards more service orientation, partnering of product candidates in strategic alliances, and entering into mergers and acquisitions (M&As) with other firms are successful strategies to survive in times of hostile financing environments. In the second study I draw on a comparative case study approach to illustrate motives, benefits, and problems which may arise when two entrepreneurial biotech firms decide to merge. I identify several M&A motives specific to the bioentrepreneurial context such as the integration of the partners’ technologies, the desire to gain a critical mass of projects, and the access to the partner’s networks and experienced management team. Among the main benefits are an enhanced visibility for investors, an extension of the venture’s product pipeline, and the possibility to escape a hostile financing environment through an international M&A. Problems may already arise before the M&A deal because of the inability to find the right partner and the opposition of shareholders. Problems that may occur during post-merger integration include the incompatibility of the partners’ technologies and the difficulty to control financial issues in a subsidiary abroad. The scope of the third study is to investigate the motivation of biotech managers to seek new alliances with other firms. I draw on data from a conjoint experiment with 51 German biotech managers and find that their decision to look for a new alliance depends on the capabilities, governance, and context of their firms. The decision is complex since these factors interact. For example, managers take into account that sufficient liquidity is necessary to further develop product candidates acquired through alliance formation. On the other hand, high liquidity of their companies allows the managers to survive in times of a hostile financing environment without seeking further alliances. These results show that an over commitment to alliances is not necessarily due to limited rationality and hubris of managers but appears to be a rational attempt to make the best of bad circumstances in case of low liquidity and the threat to the venture’s survival. The forth study illustrates how a bioentrepreneurial venture can successfully escape a technology breakdown crisis. An exploratory case study of a German biotech firm which successfully managed this situation demonstrates that an aggressive business development and project acquisition strategy consisting of in-house technology development, in-licensing activities, and M&As may enable a bioventure to build up a new technological basis. If a technological breakdown is detected, financial resources should be concentrated on corroborating the findings in order to ensure a maximum of liquidity for acquisition of the new technology. Entering into an M&A with another company may help to raise further capital from VC investors. Knowledge related to the new technology may be integrated in the firm by employing key technology developers and entering into long-term collaborations with the organisations where the projects are acquired from. Quick acceptance of staff turnover and concentration on hiring of new personnel are further elements of a successful crisis management process. In the final empirical study I introduce a theoretical framework for an analysis of risk distribution within life science portfolios. This framework is based on practitioner-oriented literature and interviews with VC managers. Drawing on a comparative case study approach, I apply this framework to the life science portfolios of seven VC firms and identify two archetypical portfolio strategies. VCs invest either with a focus on risky drug development firms and distribute those broadly among markets and technologies, or they diversify their drug development sub-portfolio less but invest more in less risky business areas. Thus, specialisation on the industry level is probably the optimum for VCs to reduce their investment risk by building up specific knowledge and reputation. Additional interview data show that portfolio diversification is also influenced by the VCs’ inability to create the desired deal flow or the necessity to follow technological trends. In summary, the results of this thesis extend the literature on bioentrepreneurship research in several areas and provide new insights for scholars and practitioners.
This study is a collection of essays on monetary-fiscal interactions within the European Monetary Union (EMU). Our research focuses on a theoretical evaluation of the Stability and Growth Pact (SGP) and its huge reform debate. The topics chosen are not on the top economists' agenda because the whole field of research has been too young and has not fully been developed, since the beginning of the Monetary Union, in 1999. We analyze the Stability and Growth Pact in new and extended theoretical model frameworks. We ask the following questions on the 'political agenda': 1. What is an optimal fiscal rule in a monetary union? 2. What are internal constraints in a monetary union? 3. Why do larger countries have more problems with the SGP? Our theoretical findings lead us to elaborate a "new" reform proposal on the Stability and Growth Pact. We find a mechanism that allows for a more efficient and credible enforcement of the SGP than in the old and meanwhile reformed Stability Pact. Our aim of providing a comprehensive overview of the fiscal architecture of the EMU is feasible only by means of a close link between methods of economics and political science. This interdisciplinary approach and new field of research supplies a highly promising way of reaching a deeper insight into the present and future interlockings - both on the national as well as the supranational level.
This dissertation deals with theories of organisation in young companies. The focus is on principles of organising in newly founded internet-based companies. The latter have considerably increased in the late 1990s in Germany due to the internet-hype. The thesis starts with an overview of the current entrepreneurship discussion and is followed by organisational theories with a focus on contingency theories and the works by Karl Weick. This is followed by a discussion of the emergence of organisational structures. As these theories show gaps in relation to organising in newly founded companies, the methodological chapter describes three research questions which have guided the empirical part. The latter is based on an explorative and qualitative research approach covering comparative case studies and a narrative analysis. The empirical part then describes in detail the (hi)stories of all four young companies emphasising their aspects of organising. The case studies result in four organising principles which are an attempt at operationalising the works of Karl Weick. These are (1) organising as enacting dualities, (2) organising as the context of entrepreneurial behaviour, (3) organising as identity construction and (4) organising as a game. In all four principles, the importance of organisational dilemmas is shown.
Worker participation has been subject to controversial debate in Europe. Although the member states' traditions in industrial relations and especially in worker participation vary greatly, the Council of Ministers agreed on some directives in this regard, recently: the EWC directive (94/45/EC) and the information/consultation directive (2002/14/EC), and the directive (2001/86/EC) supplementing the Statute for a European Company with regard to the involvement of employees, which emphasises voluntary negotiations between employees' representatives, a so-called special negotiating body, and the management. The latter directive does not only provide information and consultation procedures but also provisions regarding board-level representation. For that reason, the focus of this paper is on the European Company (Societas Europaea = SE). In this context, the fundamental provisions regarding the SE are presented. After discussing some exemplary cases in order to demonstrate the practical implications of this legal initiative regarding employee involvement, some issues arising are examined.