I have benefited from comments and criticisms of an earlier draft by Irma Adelman, Peter Balacs, Ronald Dore, Edgar Edwards, Unni Eradi, Michael Faber, Anne Gordon, Keith Griffin, Jill Rubery, Seev Hirsch, Ernest Stern, Frances Stewart, Hugh Stretton, B. R. Virmani, Gordon Winston and Howard Wriggins. To these, and to a research seminar at Queen Elizabeth House, I am very grateful. I am also grateful to the Economic Development Institute of the World Bank and its Director, Mr. Andrew Kamarck, for having provided the facilities and stimulating atmosphere for the early stages of a considerably larger paper, commissioned by Mr. Ernest Stern, of which this paper forms a part. I am grateful to Mr. Stern and the World Bank for permitting me to use the material here.

We find strong evidence that firms with employee-friendly workplaces achieve greater innovative success, particularly in industries where innovation is more difficult to achieve. Furthermore, employee-friendly firms were also more inclined to sustain R&D investment during the recent crisis. These findings are consistent with the view that an employee-friendly workplace helps to develop tolerance for failure, which encourages engagement in innovation. We find no support for alternative explanations, such as employee-friendly workplaces helping to attract and retain talented employees and reducing career concerns of executives, which could nurture innovation.

JHE CLIOMETRIC revolution in ecoknomic history wedded neoclassical economics and quantitative methods in order to describe and explain the performance of economies in the past.' Economic history gained in rigor and scientific pretension, but at the expense of exploring a much more fundamental set of questions about the evolving structure of economies that underlies performance.2 Cliometricians have turned their backs on a long tradition stretching back from Joseph Schumpeter to Karl Marx to Adam Smith. These scholars regarded economic history as essential because it added a dimension to economics. Its purpose was to analyze the parameters held constant by the economist. If economics is a theory of choice subject to specified constraints, a task of economic history was to theorize about those evolving constraints. The failure of economic historians to provide their colleagues with a historical dimension to their perspective has reduced the effectiveness of economists in dealing with contemporary problems. Failure of economists to appreciate the transitory character of the assumed constraints and to understand the source and direction of these changing constraints is a fundamental handicap to further development of economic theory. The challenge to the economic historian which has equally compelling implications for the economic theorist is to explain the transformation of the structure of the American Economy in the past century.3 In the rest of this essay I shall explore this issue in order to specify some of the dimensions of the economic historian's task.

We study how listing status affects investment behavior. Theory offers competing hypotheses on how listing‐related frictions affect investment decisions. We use detailed data on 74,670 individual projects in the U.S. natural gas industry to show that private firms respond less than public firms to changes in investment opportunities. Private firms adjust drilling activity for low capital‐intensity investments. However, they do not increase drilling in response to new capital‐intensive growth opportunities. Instead, they sell these projects to public firms. Our evidence suggests that differences in access to external capital are important in explaining the investment behavior of public and private firms.

An increasing segment of economic activity is taking place in nonmarket situations in which economic agents act outside the traditional markets or create markets to deal with specific resource allocation problems. One such problem involves the selection by a buyer of a contractor using a competitive bidding process. Competitive bidding is used extensively by the government for the selection of suppliers of goods and services and for the sale of resources such as offshore oil leases. Firms may use competitive bidding for the selection of certain suppliers of factor inputs and may attempt to sell certain products in markets in which competitive price quoting is the established market mechanism. This paper is concerned with a bidding process in which a firm has an opportunity to bid on a project under the terms of an incentive contract. Incentive contracts

Compulsory arbitration is frequently employed to resolve labor-management bargaining disputes when the union is legally prohibited (as are, for example, many public employees' unions) from striking. In this form of arbitration, an arbitrator is empowered to impose a settlement on the bargaining parties if their negotiations break down. Various compulsory-arbitration schemes are now in use in many states, including Alaska, Connecticut, Iowa, Maine, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Dakota, Washington, Wisconsin, and Wyoming. But there has been little formal analysis of the various schemes that are employed in these states and, as a result, the basis available for choice among them remains incomplete. This paper classifies the theoretical problems that must be resolved before a more careful comparison of these compulsory-arbitration schemes is possible, provides a brief overview of the work that has been done on each of these problems, and indicates what appear to be the most promising directions for future research along these lines. Four kinds of compulsory arbitration are considered here: conventional ccmpulsory arbitration (CCA), in which the arbitrator imposes a settlement of his (unrestricted) choice if negotiations break down; finaloffer arbitration (FOA), in which the arbitrator must choose without compromise between bargainers' final offers if negotiations break down; multiple FOA, a variant of FOA originally suggested by Donn; and, on occasion, issue-by-issue FOA, which is like simple FOA except that the arbitrator is permitted to fashion his settlement from the components of bargainers' final offers. CCA, simple FOA, and issue-by-issue FOA are already in widespread use, while multiple FOA, which is similar but not identical to a scheme used in Eugene, Oregon, has been suggested by Donn and my 1979a article as an improvement on simple FOA. In the literature of industrial labor relations, compulsory-arbitration schemes have been judged primarily by three criteria: the quality of the arbitral settlements they generate when negotiations break down; their freedom from bias, which is usually defined as the distortion of negotiated settlements away from what they would have been in ordinary bargaining, with both strikes and lockouts permitted; and the extent to which they create environments conducive to negotiated settlements. An integrated analysis, in which bargainers choosing their stategies consider the effects of their actions on negotiated and arbitral settlements as well as on the probabilities of these possibilities, would be ideal. But in beginning the study of the effects of arbitration schemes, it is convenient, and probably not misleading, to simplify the problem by dividing it. Thus, I shall propose separate analyses of the quality of arbitral settlements, under noncooperative behavioral assumptions; the bias of negotiated settlements, under cooperative assumptions; and the probability of a negotiated settlement, under a blend of both noncooperative and cooperative assumptions. Each section of this paper in turn discusses existing work that is relevant to judging arbitration schemes by one of the above three criteria. *University of California-San Diego. This research was supported by the National Science Foundation. Many of the observations made here evolved in discussions and correspondence with Clifford Donn, who by no means agrees with all, or even most, of them. I am grateful to him, and to Joel Sobel and participants in a workshop presentation at the University of Chicago, who also made helpful comments.

We show that higher institutional ownership causes firms to pay more dividends. Our identification relies on a discontinuity in ownership around Russell index thresholds. Our estimates indicate that a one-percentage-point increase in institutional ownership causes a $7 million (8%) increase in dividends. We also find differences in shareholder proposals and voting patterns that suggest that even nonactivist institutions play an important role in monitoring firm behavior. The effect of institutional ownership on dividends is stronger for firms with higher expected agency costs.

We predict that access to cross-border financing by the industrial sector reduces firms' reliance on domestic banks, thereby leading to lower rents for banks and greater competition in the domestic banking sector. We also predict that banks take on more risk to offset these lost rents and remain competitive. Using mandatory adoption of International Financial Reporting Standards (IFRS) to identify variation in cross-border financing, we find evidence consistent with our hypotheses. Additional tests verify that the effects emanate from the demand side (i.e., firms not relying on banks) rather than the supply side (i.e., banks not willing to lend to firms). Overall, we document how competition from overseas financial markets influences the domestic banking sector.

This paper investigates financial attention using novel panel data on daily investor online account logins. We find support for selective attention to portfolio information. Account logins fall by 9.5% after market declines. Investors also pay less attention when the VIX volatility index is high. The level of attention and the attention/return correlation are strongly related to investor demographics (gender, age) and financial position (wealth, holdings). Using a new statistical decomposition, we show how aggregate and individual household trading are related to investor attention.