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This chapter focuses on the regulatory scheme used by the United States Food and Drug Administration (FDA) to approve medical products for commercial use in this country. After providing a brief introduction of the role of the FDA and the scope of the products regulated by the agency, the chapter outlines the common characteristics of premarket controls for drugs, medical devices, and biological products, including how clinical trials of these medical products are conducted with humans as part of the premarket approval process. The chapter then provides a detailed examination of the particular regulatory scheme for each product category. The chapter concludes with an analysis of how FDA regulates emerging medical technologies, such as cellular and tissue-engineered products. FDA regulates a variety of products intended to diagnose, cure, mitigate, treat, or prevent diseases or conditions under a legal scheme established in the Federal Food, Drug, and Cosmetic Act and the Public Health Service Act and regulations promulgated by FDA. How a product is classified (drug, device, or biologic) forecasts the regulatory approval pathway that must be followed to bring the product to market. This chapter provides education and direction regarding regulatory requirements that must be met to market medical products in the United States.

This paper aims to study the underpricing phenomenon of initial public offerings (IPOs) of 355 Indian companies issued from 2007 to 2019. The research question this paper empirically examines is whether Indian corporate executives deliberately underprice IPOs from its fair value to attract investors, thereby causing an abnormal spike in the prices on the listing day. The findings of this study challenge a commonly held notion of leaving money on the table by IPO issuing companies. Of the overall average listing day returns of 17%, the deliberate premarket underpricing component is found to be mere 5.3%, while the remaining price fluctuation is, inter alia, a result of market momentum along with the unmet demands of impatient investors.

Following Koop and Li (2001), this study uses Stochastic frontier model (SFM) to study a routine anomaly of disparity between the primary market price (i.e. IPO issue price) and the secondary market price (listing price). The jump in the issue price observed on a listing day is decomposed into deliberate premarket underpricing component that reflects the extent of managerial manipulation and the after-market misvaluation component attributable to information asymmetry and prevailing market volatility.

This paper uses SFM to bifurcate initial returns into deliberate underpricing by managers and after-market mispricing by noise traders. This study finds that a significant part of the initial return is explained through after-market mispricing. This study finds that average initial returns are 17%, deliberate premarket underpricing is 5.3% and after-market mispricing averages 11.9%.

This study can isolate underpricing done at the premarket by estimating a systematic one-sided error term that measures the maximum predicted issue price deviation from the offered price. Consequentially, the disaggregation of initial returns may be especially informative for retail investors in planning their exit strategy from an IPO by separating the strength of the firm's fundamentals and its causal relationship with the initial returns. Substantial proportion of after-market mispricing implies that future research should focus on factors causing after-market mispricing. As underlying causes are identified, tailor-made policy responses can be formulated to benefit investors.

This paper has empirically validated that initial return is a mix of both components, i.e. deliberate underpricing and aftermarket mispricing. This disaggregation of initial returns can prove helpful for investors in planning their exit strategy. This study can help investors to become more aware of the importance of the fundamentals of the firm and its causal relation with the initial returns. This information in turn can help reduce the information asymmetry amongst investors and help them lessen the costs of adverse selection.

A large number of research studies on IPO pricing find overwhelming evidence of underpricing in public issues. This research attempts to decompose the extent of underpricing into deliberate underpricing and after-market mispricing, thereby supplementing the existing literature on the IPO pricing puzzle. To the best of the authors’ knowledge, this study is the first contribution to the literature on initial return decomposition for the Indian capital markets.

This study aims to empirically validate that a knowledge-based view (KBV) is an important framework to understand price discovery processes in initial public offerings (IPOs) by emphasizing the unique feature of knowledge creation jointly invoked by underwriters and institutional investors during the book building phase.

The authors decompose underwriters’ incremental knowledge acquisition into objective knowledge – acquired from premarket bids – and subjective knowledge – which is orthogonal to the objective knowledge. The authors implement a multiplicative heteroscedasticity model to analyze how each knowledge component relates to the level and volatility (as a proxy of pricing uncertainty) of post-issue returns. The authors take the 2007 regulatory change as a quasi-natural experiment in which institutional investors were incentivized to provide true information.

For Korean IPOs, the authors find that the objective (subjective) knowledge component reduces (increases) both pricing uncertainty and underpricing. The authors also observe that the efficacy of the IPO knowledge creation critically depends on the quality of the information provided by institutional investors, as anticipated by the KBV literature.

Using fine-grained knowledge measures, the authors provide original, compelling evidence that objective (subjective) knowledge formulated from the IPO knowledge-creation processes de facto alleviates (worsens) underwriters’ pricing difficulties. This reinforces the importance of knowledge-based mechanisms in managerial decision-making processes.

Advances a framework for understanding the mechanisms that maintain unearned or inherited advantage or privilege in a hierarchical world of unequal rewards and differential opportunity. Central in this framework is the presence of a dominant group and a subaltern group in an environment where there is rivalry over social rewards. A dominant group can seek to structure and control access to the credentials required for preferred positions to insure admission of their own and to keep out others. This could involve, for example, deprivation of subaltern group members of schooling, both in quantity and quality. In other words, the dominant group can take steps to influence the “premarket” characteristics of the members of the subaltern group to the disadvantage of the latter. The dominant group emphasizes the cultural, cognitive, or motivational deficiences of the subaltern group significantly by silently rendering them non‐competing, all the while denying any discrimination.

The purpose of this paper is to analyze the Parallel Review program that offers simultaneous review of the Food and Drug Administration premarket approval submissions and the Centers for Medicare and Medicaid Services (CMS) national coverage determinations (NCDs) of medical devices.

The paper analyzes the impact of Parallel Review on medical device innovation, focusing in particular on the causes for low popularity of the program among medical device manufacturers. Program outcomes are evaluated in the light of its intended goals.

The paper identifies four reasons for the program’s limited impact. First, few devices are eligible to participate. Second, most manufacturers prefer to seek Medicare reimbursement at the local level as less risky than the CMS NCDs. Third, participation in the Parallel Review might actually delay the marketing of the device. Fourth, the program does not address numerous obstacles that device sponsors currently encounter. While giving the appearance of support for the medical device innovation, the policy falls short on its intended goals.

This paper elucidates the challenges to internal reform and serves as a reminder to political economists and health care researchers that to make disruptive innovation possible, we must continue to illuminate the otherwise unseen cost of marketing delays and document the ability of emergent market mechanisms to protect consumer safety.

Although many theories aim to explain initial public offering (IPO) underpricing, initial-day returns of US Real Estate Investment Trust (REIT) IPOs remain a “puzzle”. The literature on REIT IPOs has focused on indirect quantitative proxies for information asymmetries between REITs and investors to determine IPO underpricing. This study, however, proposes textual analysis to exploit the qualitative information, revealed through one of the most important documents during the IPO process – Form S-11 – as a direct measure of information asymmetries.

This study determines the level of uncertain language in the prospectus, as well as its similarity to recently filed registration statements, to assess whether textual features can solve the underpricing puzzle. It assumes that uncertain language makes it more difficult for potential investors to price the issue and thus increases underpricing. Furthermore, it is hypothesized that a higher similarity to previous filings indicates that the prospectus provides little useful information and thus does not resolve existing information asymmetries, leading to increased underpricing.

Contrary to expectations, this research does not find a statistically significant association between uncertain language in Form S-11 and initial-day returns. This result is interpreted as suggesting that uncertain language in the prospectus does not reflect the issuer's expectations about the company's future prospects, but rather is necessary because of forecasting difficulties and litigation risk. Analyzing disclosure similarity instead, this study finds a statistically and economically significant impact of qualitative information on initial-day returns. Thus, REIT managers may reduce underpricing by voluntarily providing more information to potential investors in Form S-11.

The results demonstrate that textual analysis can in fact help to explain underpricing of US REIT IPOs, as qualitative information in Forms S-11 decreases information asymmetries between US REIT managers and investors, thus reducing underpricing. Consequently, REIT managers are incentivized to provide as much information as possible to reduce underpricing, while investors could use textual analysis to identify offerings that promise the highest returns.

This is the first study which applies textual analysis to corporate disclosures of US REITs in order to explain IPO underpricing.

Purpose – The cost of new drug development is increasing every year. Pharmaceutical companies use R&D joint ventures, mergers, and outsource different stages of pharmaceutical R&D activities for a faster and cost minimizing method of innovation. Pharmaceutical companies outsource R&D activities to independent small biotech or pharmaceutical companies that specialize in different stages of pharmaceutical R&D. This chapter examines the determinants of the payment structure of research contracts between large bio/pharmaceutical companies and specialized research firms.

Methods – Determinants of R&D contracts are analyzed using detailed R&D contract data between bio/pharmaceutical companies and independent research firms for 10 years. A multinomial logit model is used in order to understand the determinants of three different types of contracts; royalty contracts, fixed payment contracts, and the mixed contracts.

Findings – Under uncertainty, the likelihood of a royalty contract rises for the early stages of the research and with the patent stock of the research firm. It is more likely to observe both royalty and fixed payment if the pharmaceutical client has past contracts with the same research firm. The results also suggest that if Food and Drug Administration (FDA) is more stringent in any disease area in reviewing the new drug application, then the likelihood of signing pure royalty contract decreases.

Implications – Understanding the nature of R&D contracts and the effects of FDA's behavior on the pharmaceutical R&D contract is important because these contracts not only affect the cost of new drug invention but also the quality and the rate of invention.

Value – Results are useful for both the pharmaceutical companies and the economic/business researchers.

The regulatory design of Indian stock market provides us with the opportunity to disaggregate initial returns into two categories, i.e. voluntary premarket underpricing and post market mispricing. This study explores the impact of investor attention on the disaggregated short-run returns and long-run performance of initial public offerings (IPOs).

The study employs regression techniques on the sample of IPOs listed from 2005 to 2019. It measures investor attention with the help of the Google Search Volume Index (GSVI) extracted from Google Trends. Along with GSVI, the subscription rate is used as a proxy to measure investor attention.

The empirical results suggest a positive and significant relationship between initial returns and investor attention, thus validating the attention theory for Indian IPOs. Furthermore, when the returns are analysed for a more extended period using buy-and-hold abnormal returns (BHARs), it was found that price reversal holds in the long run.

This study highlights the importance of information diffusion in the market. It emphasizes the behavioural tendency of the investors in the pre-market, which reduces the market efficiency. Hence, along with fundamentals, investor attention also plays an essential role in deciding the returns for an IPO.

According to the best of the authors’ knowledge, this is one of the first studies that has attempted to explore the influence of investor attention and its interplay with underpricing and long-run performance for IPOs of Indian markets.

This chapter reviews the historical and political context of immigration to Norway, patterns of ethnic inequality in the labour market, as well as how ethnic discrimination has been legislated, publically debated and studied in the Norwegian context. Drawing on the findings of a multimethod study of discrimination in the Norwegian labour market, combining a field experiment with employer-interviews, the chapter furthermore clarifies the extent of discrimination in ethnic minority applicants’ access to the labour market and discusses what mechanisms influence the level of ethnic discrimination ‘at work’. The field experiment reveals that young Norwegians of Pakistani heritage – the by far largest group among immigrant descendants in the country – face substantial discrimination when applying for work. However, it also demonstrates striking differences in the scope of discrimination between the public and the private sector, as well as across occupational contexts, indicating that discrimination should not be seen as mere reflections of individual bias, ethnic preferences or statistical uncertainty, but rather that such individual-level dispositions are mediated through factors at the organizational level. This conclusion has important implications for our theoretical understanding of why discrimination occurs, as well as for the further development of anti-discrimination measures.