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Companies from industrialized nations have faced with the threat of competition from low-cost countries. We suggest Industrial Product Service Systems (IPS²) as a possible answer. Our article has two main aims. We establish a framework for designing an initial IPS² which meets current customer and market requirements. Building on this, we broaden our focus to include requirements induced by subsequent changes. We propose a combination of the Net Present Value Approach and the Real Options Approach as a means of determining the quantified value of an IPS² for an individual customer over its life cycle.

With permission of Elsevier

In this article we report on the design, prototyping and results of a research effort aimed at identifying whether and how trust affects the innovativeness of a partnership between two players. The methodology combined an experiment and two questionnaires. The research aimed to increase our understanding of trust and its impact on the innovative outcome of cooperation and to derive some guidance for economic actors, namely R&D managers and executives who intend to build innovation-oriented relationships with their business partners. Specifically, we investigated the effect of trust on partners' creativity and willingness to invest financially in a joint development. Our results show that more trustful partners invest higher amounts in the alliance, while there seems to be an optimum amount of mutual trust between partners who maximize their joint creativity and innovativeness; if the level of mutual trust is below or above this threshold, their joint creativity seems to increase less or even to decrease. Our findings suggest that joint development projects should always include explicit trust development activities at the beginning of the project, and that the amount of trust in the joint team should be monitored to avoid the negative consequences of excessive trust.

© 2009 The Authors. Journal compilation © 2009 Blackwell Publishing Ltd

"Think outside the box" is the slogan of countless creativity experts who rightly connect creative thinking to corporate innovation. Jörg Reckhenrich, Martin Kupp and Jamie Anderson advocate, instead, that you think outside the canvas. A review of the thinking of the German artist, Joseph Beuys, shows how managers can unleash bold new ideas.

© 2009 The Author Journal compilation © 2009 London Business School

This paper uses proprietary data on European IPOs with detailed information on the demand at different points of time and allocation for institutional and retail investors. The nature of the data allows us to analyze the reason of why institutional investors as a group get more allocations of underpriced issues than retail investors. By explicitly examining institutional and retail demand for different kinds of stocks, we find that this is due to institutional investors' superior ability to detect underpriced stocks rather than the underwriter's preferential treatment. At the same time, the subset of domestic institutional investors supports the underwriter in issues with weak demand and receives in turn favorable allocations in underpriced issues.

With permission of Elsevier

Globalization has been seen as both a threat and an opportunity whenever it has occurred. Jamie Anderson, Martin Kupp and Jörg Reckhenrich give us an artists' perspective on managing in a global business world.

© 2009 The Author Journal compilation © 2009 London Business School

The Basel II Accord requires banks to establish rigorous statistical procedures for the estimation and validation of default and ratings transition probabilities. This raises great technical challenges when sufficient default data are not available, as is the case for low default portfolios. We develop a new model that describes the typical internal credit rating process used by banks. The model captures patterns of obligor heterogeneity and ratings migration dependence through unobserved systematic macroeconomic shocks. We describe a Bayesian hierarchical framework for model calibration from historical rating transition data, and show how the predictive performance of the model can be assessed, even with sparse event data. Finally, we analyze a rating transition data set from Standard and Poor's during 1981-2007. Our results have implications for the current Basel II policy debate on the magnitude of default probabilities assigned to low risk assets.

With permission of Elsevier