Essays on Financial Constraints, R&D Investments, and Competition

This dissertation consists of two chapters of theoretical studies that investigate the effect of financial constraints and market competition on research and development (R&D) investments. In the first chapter, I explore the impact of financial constraints on two different types of R&D investments. In the second chapter, I examine the impact of market competition on the relationship between financial constraints and R&D investments. In the first chapter, I develop a dynamic monopoly model to study a firm’s R&D strategy. Contrary to intuition, I show that a financially constrained firm may invest more aggressively in R&D projects than an unconstrained firm. Financial constraints introduce a risk that a firm may run out of money before its project bears fruit, which leads to involuntary termination on an otherwise positive-NPV project. For a company that relies on cash flow from assets in place to keep its R&D project alive, early success can be relatively important. I find that when the discovery process can be expedited by heavier investment (“accelerable” projects), a financially constrained company may find it optimal to “over”-invest in order to raise the probability of project survival. The over-investment will not happen if the project is only “scalable” (investment scales up payoffs). The model generates several testable implications regarding over-investment and project values. In the second chapter, I study the effects of competition on R&D investments in a duopoly framework. Using a homogeneous duopoly model where two unconstrained firms compete head to head in an R&D race, I find that competition has no effect on R&D investment if the project is not accelerable, and the competing firms are not constrained. In a heterogeneous duopoly model where a financially constrained firm competes against an unconstrained firm, I discover interesting strategic interactions that lead to preemption by the constrained firm in equilibrium. The unconstrained competitor responds to its constrained rival’s investment in an inverted-U shape fashion. When the constrained competitor has high cash flow risk, it accelerates the innovation in equilibrium, while the unconstrained firm invests less aggressively and waits for its rival to quit the race due to shortage of funds.

TRANSCENDING FACH: A SEARCH FOR IDENTITY INSIDE AND OUT OF MEZZO-SOPRANO REPERTOIRE

The German Fach system is a tool to classify voices in classical singing. This dissertation comprises three different programs that reflect my search for identity as a mezzo-soprano and my desire to transcend the limitations of Fach. The three programs, all presented at The Clarice Performing Arts Center, contain repertoire written for male and female voices thus allowing me to explore areas outside of the mezzo-soprano Fach, gain a better understanding of the Fach system and guide me as I strive to become a more mature performer. In my first program, I sang the role of Sesto, a role that was composed originally for a castrate, in the opera La Clemenza di Tito by W.A. Mozart. The Maryland Opera Studio production took place April 30, May 2,4&6,2003. Performing this gender-bending role provided an experience of physical behavior from the male view point along with the demands of coloratura singing. Program two (November 30,2004) contained the song cycle Dichterliebe by Robert Schumann and songs by Ludwig van Beethoven, Franz Schubert and Felix Mendelssohn, which are usually sung by male voices. This program experimented with extended range, tessitura and a gender-bending performance in the art song arena. 8 In program three (April 21 &23,2005), I sang the contralto role of Cornelia from Giulio Cesare in Egitto by George Frederic Handel. The role of Cornelia is psychologically complex, expressing emotions such as love, melancholy, rage, malice, joy and fear. To convey these emotions a voice needs warmth and darkness of quality. Although the range is close to that of the mezzo-soprano, Handel wrote Cornelia for contralto voice because he wanted a dark timbre and this role allowed me to develop my lower register and manage suitable ornamentations. The programs are documented in a digital format available on compact disc and are accompanied by the oral presentation at the defense of this dissertation.