Subscribe: Managerial and Decision Economics
http://www3.interscience.wiley.com/rss/journal/7976
Added By: Feedage Forager Feedage Grade A rated
Language: English
Tags:
analysis  contract  costs  firm  firms  information  market  model  paper  performance  price  pricing  quality  results  study 
Rate this Feed
Rate this feedRate this feedRate this feedRate this feedRate this feed
Rate this feed 1 starRate this feed 2 starRate this feed 3 starRate this feed 4 starRate this feed 5 star

Comments (0)

Feed Details and Statistics Feed Statistics
Preview: Managerial and Decision Economics

Managerial and Decision Economics



Wiley Online Library : Managerial and Decision Economics



Published: 2017-12-01T00:00:00-05:00

 



Resources and market definition: Rethinking the “hypothetical monopolist” from a resource-based perspective

2017-11-17T03:45:21.123185-05:00

We reassess the concept of the hypothetical monopolist as a device for relevant market definition. The hypothetical monopolist test (also known as the Small but Significant Non-transitory Increase in Price test) is a clever, intuitive way of thinking the relevant market in antitrust, and is gaining ground in strategic management. The test, however, implicitly disregards resource characteristics in relevant market delineation, focusing exclusively on demand side substitutability. In reassessing the hypothetical monopolist, we make 2 general contributions to the strategy literature. First, using cooperative game theory, we advance a precise resource-based definition of the hypothetical monopolist. Second, we demonstrate how this definition broadens our conventional understanding on 2 important topics: resource complementarities and disruptive innovations. In doing so, we complement and strengthen the hypothetical monopolist test as a device for management (strategic) and public policy (antitrust) analysis.



Effectiveness of quality standards regulation considering the behavior of government and firms

2017-11-14T23:55:33.605682-05:00

We construct an analysis framework consisting of the central government, a local government, a representative firm, and consumers. This study analyzes how the local government's enforcement, the firm's compliance, and their interaction influence the effectiveness of regulation after the central government has established policies regarding quality standards. We construct three scenarios: perfect enforcement, imperfect enforcement, and collusion. We show that when the local government imperfectly enforces the regulation, the firm's utility and the local government's utility are higher, whereas the degree of the firm's compliance, consumers' utility, and the level of social welfare are lower. When there is collusion between the local government and the firm, the firm's utility and the local government's utility are the highest, but the degree of the firm's compliance, consumers' utility, and the level of social welfare are the lowest among the different scenarios. This study proves that the behavior of governments and firms plays a vital role in the effectiveness of quality standards regulation.



Uncovering the hidden transaction costs of market power: A property rights approach to strategic positioning

2017-11-14T23:05:24.066186-05:00

A central construct in competitive strategy research is market power, the ability to raise price above marginal cost. Positioning research focuses on attempts to build, protect, and exercise market power. However, this approach contains hidden assumptions about transaction costs. Parties made worse off by the exercise of market power can negotiate, bargain, form coalitions, and otherwise contract around the focal firm's attempts to appropriate monopoly profits—depending on transaction costs. We build on property rights economics to explain how transaction costs affect positioning and offer propositions about successful positioning in an environment with transaction costs.



Optimal targeting with entry

2017-11-14T22:50:39.40166-05:00

We study an advertising agency's optimal choice of targeting technology with endogenous market structure, namely, when targeting changes firms' entry strategies into the advertising and product market. We show that the advertising agency faces a trade-off between demand-expansion and profit-dissipation: The former arises as targeting induces more entry and increases the demand for advertising; the latter refers to that targeting relaxes competition by inducing more differentiation. We show that perfect targeting is not optimal for the advertising agency. Compared to social optimum, the advertising agency underinvests in targeting when investment cost is low and overinvests when targeting is costly.



Quality investment timing by the startup and the established firm

2017-10-27T04:55:56.018257-05:00

This study investigates quality investment timing decisions of the established firm and the startup by a duopoly model, where firms can position quality early (demand uncertainty is high) or late (uncertainty has been resolved), possibly at different costs. The startup positions quality to maximize its survival probability, whereas the established firm maximizes profits. Results indicate that the startup positions quality earlier than the established firm when the demand uncertainty is high and costs do not decline sharply over time. Additionally, policy analysis shows that subsidies work better than direct funds in encouraging quality innovation of the startup.



You do not have to succeed, just do not fail: When do soccer coaches get fired?

2017-10-16T02:05:25.484192-05:00

This article deals with circumstances leading to the dismissal of a soccer coach. The article is based on results from the Premier League in England over 12 consecutive years. In this paper, we converted the scores of matches (win, draw, and loss) into an index based upon how results were perceived by club owners—those empowered with the decision as to whether or not to fire the coach. The index is based on the difference between the actual and expected results reflected by betting odds. We conclude that to ensure job preservation, the manager does not have to succeed—he just must not fail.



When do investors reward acquisitions and divestitures? The contrasting implications of normative and behavioral economic theories

2017-10-12T23:16:04.015716-05:00

We evaluate whether a contingency theory that combines a signaling hypothesis with behavioral economic theory can elucidate the discrepancy between positive expected returns to acquisitions and divestitures and the mixed-to-negative investor reactions observed in practice. We argue that, because of bounded rationality, uncertainty avoidance, and inertia, major organizational change is generally motivated by the detection of problems in an organization. Accordingly, although investors may view acquisitions and divestitures as positive corrective measures for low performers, such initiatives by high performers often signal problems that were heretofore unknown to the market. We contrast our results with predictions based on normative theories.



Contract duration and contractual learning: Evidence from franchising networks

2017-10-10T20:35:31.048442-05:00

Contract duration in franchising has generally been studied in frameworks where agents are assumed to have a high level of foresight. We complement existing studies by adopting a dynamic perspective that allows us to introduce a learning process in choice and adjustment of contract duration. On the basis of French panel data (1995–2003), collected from the yearbooks of the French Federation of Franchising, results of dynamic models are consistent with the existence of a learning process in the capacity to design appropriate contracts. Our study shows that certain factors, in particular too much franchising, may hinder the achievement of such a capability.



Entrepreneurial orientation, intermediation services, microfinance, and microenterprises

2017-10-10T00:16:53.956455-05:00

This study was conducted to examine the influence of intermediation services on microfinance-supported microenterprises. Information was collected by using a structured pretested questionnaire from a random section of 366 respondents (from 366 enterprises) from 2 Indian states. Econometric models were used to test the hypotheses, and reliability and validity testing and data analysis were also performed. It was noticed that proactiveness and risk-taking ability of microenterprises were enhanced when intermediaries emphasize more on the business development services, financial intermediation services, and social intermediation services. Intermediation services of intermediaries impacted on entrepreneurial orientation of microenterprises where networking of microentrepreneurs positively moderated the relationship.



Valuation of R&D investment under technological, market, and rival preemption uncertainty

2017-09-28T00:21:06.959217-05:00

We develop a real options model for evaluating and optimizing a research and development (R&D) project. The model captures key features of R&D, including research duration, growth opportunity, debt financing, and uncertainty of technology, demand market, and rival preemption. In the model, we unveil the interactions of key R&D features. The effect of duration on investment depends on whether there is rival preemption. Higher uncertainty of research duration speeds up investment in the presence of rival preemption. Higher uncertainty of technological success, combined with a growth opportunity, accelerates investment. Debt financing greatly decreases time lag between the first stage project and growth project.



Cost efficiency of insurance firms in Ghana

2017-09-22T02:16:50.023021-05:00

The huge infrastructural deficit in Africa requires the establishment of an efficient insurance industry in the pursuance of economic development. Unfortunately, global statistics reveal low patronage of insurance in developing countries, thus making its impact limited in the region. To position the industry for economic development, this study utilizes the stochastic frontier technique to undertake a thorough analysis on the cost efficiency of insurers from the perspective of developing economies using Ghana as a case study. The results on the 30 insurers studied from 2005 to 2014 indicate that insurers in Ghana operate with about 53.8% average cost inefficiency. This stands to confirm the long existed low performance perception of Ghanaians about the industry. Factors identified to explain the cost inefficiencies were firm size, market share, capitalization, reinsurance, regulation, and business type. Several policy recommendations that can help boost the cost efficiency of insurers were derived from the results.



Managerial time constraints and young worker productivity: Natural experiments with NFL rookies

2017-09-22T01:31:12.248293-05:00

The 2011 National Football League lockout and movement of the 2014 draft to a later date compressed the off-seasons preceding the 2011 and 2014 seasons, exogenously tightening time constraints within which managers—head coaches and their staffs—engage in short-run training of players. We exploit these natural experiments to investigate how this impacted the productivity of young workers (National Football League rookies). Results estimated for a sample of over 1,500 rookies support hypotheses emanating from an economic model of worker training time allocation and indicate reduced productivity along several dimensions. Survival analysis shows evidence of shorter player career durations along certain lines, suggesting longer term consequences.



Trust and trustworthiness in organizations: The role of monitoring and moral suasion

2017-08-22T23:46:07.453266-05:00

We ask whether the corporate law provisions establishing that the conduct of the manager is subject to review by the investors (monitoring) and that managers are held to an honorable behavior (moral suasion) can increase trust and trustworthiness in organizations. We answer this question through a laboratory experiment. We find that moral suasion increases the investors' trust. Monitoring also increases trust but only when the manager is not aware of the experimental identity of the monitor. The manager returns more to those investors who trust more but appropriates around 50% of the available resources. The trustworthiness of the manager is, however, unaffected by monitoring or moral suasion. We discuss possible causes of the difference between the investors' expectations regarding the behavior of the manager and the observed behavior of the manager.



The hidden costs of control revisited: Should a sanctioning policy be announced in advance?

2017-08-17T02:12:03.937518-05:00

Sanctions are widely used to enhance compliance in principal agent relationships. Although there is ample evidence confirming the predicted positive incentive effect of sanctions, it has also been shown that imposing sanctions may reduce compliance by crowding out intrinsic motivation. We add to the literature on the hidden costs of control by showing that these costs are restricted to situations where the principal actively chooses to sanction low performance and where this choice is known to the agent. In such a situation, the principal's commitment to sanction low performance might indicate that she or he is a distrustful “type” and hence conveys a negative signal. To the contrary, if (a) an agent is not informed about whether low performance will be sanctioned or if (b) the computer determines whether low performance will be sanctioned, the principal's “type” is not revealed, and we find no evidence of crowding out.



Peer pressure and social comparisons with heterogeneous ability

2017-08-15T00:50:28.176932-05:00

When workers' efforts are not contractible, we investigate whether the display of workers' efforts to coworkers influences wage and effort decisions. We find that employers mainly increase the wages offered to the more valuable workers when they are observed that increases the difference in wages in such setting. We find evidence of peer pressure and strategic complementarity in efforts. Additionally, low-ability workers are more sensitive to peer pressure than their more productive coworkers, and these workers exert less effort with increases in the reciprocity of their coworkers. Finally, the display of workers' efforts to coworkers is detrimental to the employer's payoff but enhances efficiency.



Diversification, capital structure, and performance: A simultaneous equation approach

2017-08-07T21:10:55.649732-05:00

This paper examines the relationships between diversification, capital structure, and performance jointly on the financial sector. Our dataset covers 412 French financial institutions over the period ranging from 2002 to 2012. Furthermore, we use a three-stage least squares to check reverse causality. Our three-stage least squares results show positive significant simultaneous interdependencies between performance and leverage. Performance reduction and debt levels increase are associated with activity diversification. Performance and leverage reduction is due to geographic diversification. Our estimation confirms reverse association between the interaction of diversification, leverage, and performance. Moreover, the findings are robust after taking into account alternative measures of diversification.



The role of task meaning on output in groups: Experimental evidence

2017-07-27T01:25:24.616653-05:00

Previous research has shown a detrimental effect of low task meaning on individual work output. This paper analyzes whether peer settings are able to counteract this negative effect of low task meaning. First, our results confirm that a low level of task meaning decreases individual output when working alone. However, this effect vanishes completely when working in the presence of a peer. Our analysis implies that organizing work in peer settings might be particularly beneficial in work environments with a low level of task meaning.



An option pricing approach to optimal bidding in construction projects

2017-07-26T01:50:41.42942-05:00

Reaching an optimal mark-up value in the context of construction projects' bidding competitions has been a research topic for more than 40 years. This paper aims to contribute to this debate by applying a real options approach. The proposed model has a pure theoretical nature and is based on a maximization problem, whose outcome is the optimal price, that is, the price that should be included in the bid proposal. The model is later extended to accommodate the existence of penalty costs if the selected bidder refuses to enter into contract. Results reached using a numerical example demonstrate that the optimal price is higher when penalty costs are considered.



Assessment of rapid growth ventures, an extension of Schwartz and Moon model

2017-07-26T00:40:28.221332-05:00

It is a challenge to incorporate randomness into financial projections that are at the core of new venture assessment. We present a model based on Schwartz and Moon () and apply it to a real firm data. We find that our 10-year projections conform to the actual realized values. The model allows addressing crucial questions regarding the venture survival, its extreme potential outcomes, and its sensitivity to its parameters. It facilitates identifying risk drivers and assessing potential remedies. To our knowledge, we are the first to propose such a comprehensive stochastic model for risky ventures' simulation and analysis.



Decision support for firm performance by real options analytics

2017-07-23T23:30:51.734937-05:00

This paper develops a real options decision support tool for raising the performance of the firm. It shows how entrepreneurs can use our intuitive tool quickly to assess the nature and type of action required for improved performance. This exploits our estimated econometric relationship between precipitators of entrepreneurial opportunities, time until exercise, and firm performance. Our 3D chromaticity plots show how staging investments, investment time, and firm performance support entrepreneurial decisions to embed, or to expedite, investments. Speedy entrepreneurial action is securely supported with this tool, without expertise in econometric estimation or in formulae for real options valuation.



Internet diffusion and free riding in insurance markets: An empirical investigation

2017-07-19T00:00:21.560572-05:00

This paper studies the effect of internet diffusion on free riding in insurance markets, with a focus on automobile insurance. Internet usage affects both the demand and supply sides of insurance markets, while also having a bearing on institutions. Our cross-sectional analysis based on the United States supports the main hypothesis that greater internet diffusion reduced free riding by uninsured motorists. This response was fairly elastic and the reduction in the prevalence of uninsured motorists holds across different empirical specifications. Implications of these findings are discussed.



Price dispersion and optimal price categories with limited memory consumers

2017-07-17T22:31:04.098064-05:00

In this paper, we study consumers with limited memory and examine the effects of their price categorization on the pricing strategies of competing firms. The valuations of consumers are assumed to be heterogeneous. We find that it is possible to observe price dispersion even when each firm charges a single price if the consumers categorize prices non-optimally. Moreover, we demonstrate that the likelihood of a price dispersion outcome is reduced when consumers with limited memory set up the price categories optimally. These findings suggest that the consumers' limited memory and their sub-optimal behavior, that is, their inability to choose price categories optimally can be a reason for observed price dispersion.



Apple's disaster: Linking two-sided markets and strategic delegation

2017-07-14T01:26:43.4441-05:00

Asymmetric pricing structure and different intergroup network externalities are characteristics of two-sided markets not captured in the analysis of one-sided markets. Focusing on Cournot duopoly where membership decision may be delegated to a manager, several equilibrium regimes are sustained depending on the fixed cost of managerial hiring and strength of the network externality exerted by the side whose demand is more price sensitive. The change from null to full delegation sharpens the asymmetric pricing structure and reduces the price level in two-sided markets. Contrary to one-sided markets with direct network effects, the prisoner's dilemma holds for sufficiently strong indirect network externalities. Imperfect interside discrimination of managerial incentives ensures profit maximization and efficient consumers' allocation. Private hiring should occur when the two-sided market exhibits symmetric pricing structure. An explanation for Apple's unprecedented event is provided. The reduction of revenue and managerial bonus in 2016 may be justified by the dissemination of full delegation in the Chinese information technology industry. Apple's upcoming strategy may consist on reducing both access prices, although the side whose demand is more price sensitive should have a greater price reduction. Alternatively, improving the content quality may constitute Apple's corporate strategy, thereby inducing a skimming pricing strategy on Chinese rivals.



Why in rugby union does “Toulouse” mean “to win”? Estimation of a production function of sports results (2011–2016)

2017-07-13T02:15:20.343868-05:00

The objective of this article is to understand more fully the determinants of sports performance. To do this, we estimate a production function of sports results that explains the results of the Toulouse rugby union team's matches expressed as the gap in points between it and its opponents. To the best of our knowledge, this is the first time that a production function has been estimated in rugby union. In addition, it is one of the few production functions specified at the match level. The study confirms the relevance of some variables already identified in the literature, such as home advantage, ranking, the role of the referee, and in-match statistics. It also shows the influence of new variables, such as weather conditions and the relative strength of fielded teams measured by comparing the teams selected on match day to the ideal teams defined at the beginning of the season.



Information and profit sharing between a buyer and a supplier: Theory and practice

2017-07-11T01:00:45.728125-05:00

This paper is about aspects of an optimal relationship between 2 firms, a supplier and a retailer, in a 2-party supply chain. The focus is on sharing private information when demand uncertainty exists so as to better coordinate the supply chain. It draws inspiration from a real case in Ireland of a new fish-processing company, Oceanpath, and a supermarket chain, Superquinn, in which information was shared. The argument is that sharing the retailer's information increases supply chain profit, as well as benefiting consumers. Profit sharing will be needed to guarantee that both the retailer and the supplier gain when information is shared.



Private information in futures markets: An experimental study

2017-07-06T22:00:38.316921-05:00

This paper presents the results of an experimental study on how people use their private information to estimate the “fair” futures price and how the quality of this information affects the traders' behavior and desire to trade. It finds that subjects are able to use their information correctly and that their desire to rely on it depends positively on the information precision. It shows that subjects are able to recognize that they are expected to lose money on futures trading when other traders have better quality information. However, subjects failed to recognize the symmetry of the futures contracts.



Should managerial delegation contracts be made before or after union wage setting? A game-theoretic analysis

2017-07-06T21:46:22.026949-05:00

This paper analyzes a multiple-stage game in which, at the final stage, two (managerial) firms compete over quantities in the product market. Prior to this stage, firm-specific unions set the workers' wages, while the owners of both firms hire managers and provide them with incentive contracts. Owners can freely decide to arrange the managerial contract before or after the (non-managerial) wage determination stage. Hence, the endogenous choice of the incentive contract stage is derived. The possibility of multiple equilibria arises, where both owners choose managerial contracts before or after unions' wage setting, crucially depending on unions' preferences. Such results also prove to be true for a remarkable degree of asymmetry in preferences over wages vis-à-vis employment across unions.



Subscription ticket sales for symphony orchestras: Are flexible subscription tickets sustainable?

2017-07-04T00:20:26.72362-05:00

We examine the fixed subscription ticket market for U.S. symphony orchestras, which is a crucial element of their business model and has experienced declining sales in recent years. We find that subscription ticket buyers are more sensitive to price changes than total ticket buyers. Hiring a new music director may increase subscription ticket sales, and economic downturns will decrease ticket sales. We find that increasing flexible subscriptions contributes to a decline in total subscription tickets and single ticket sales, in general. In addition, with increasing advertising costs per attendee and falling revenue from fixed subscriptions, symphony orchestra management should consider ticket prices, which have risen significantly in recent years, more strategically.



Issue Information - Info page

2017-11-07T03:47:22.638246-05:00

No abstract is available for this article.



Efficiency of U.S. hospitals between 2001 and 2011

2017-03-26T19:10:26.054168-05:00

This study focuses on finding the trend of efficiency in the healthcare industry in recent years. We applied stochastic frontier analysis and data envelopment analysis methods to capture the efficiency of 1,471 hospitals and found a sign of the Baumol effect, which is detected by the decreasing trend of hospital efficiency with increasing trend of labor costs. Furthermore, we compared the results of both approaches (stochastic frontier and data envelope analyses) in capturing efficiency scores and suggest the U-shaped curve of the size effect may indicate the practice of “cream skimming” by some small hospitals.



Dual licensing strategy with open source competition

2017-04-09T22:30:34.09847-05:00

Software firms that produce and sell proprietary software can use dual licensing (DL) strategies, that is, they can distribute their products under different (proprietary, OS, e.g., open source) licensing terms. We investigate the relevance and impacts of such distribution strategies in the presence of an OS software competitor. We determine the conditions for this strategy to be profitable for the software firm, and its impact on price, market share, and welfare. We show that a DL strategy can be used to crowd the OS software out of the market. This strategy then is profitable for the software firm only if the spillovers coming from the hybrid software (i.e., second distribution launched by the software firm) are sufficiently high and result in both a higher price and a lower market share for the proprietary software. We also consider a situation where the introduction of DL leads to a market shared between the firm's software and the OS competitor. In this situation, the profitability of the DL strategy depends also on the degree of compatibility between the proprietary software and its OS competitor. We show also that this situation can generate conflicts of interests between proprietary software vendors and users, resulting in suboptimal outcomes.



R&D investment under spatial price discrimination

2017-03-23T05:00:48.670505-05:00

This paper uniquely examines an R&D rivalry under spatial price discrimination and compares two alternative timings. When firms invest first, they locate efficiently but overinvest in cost-reducing R&D if spillover is modest. When firms locate first, they locate inefficiently and always underinvest in cost-reducing R&D. Although the R&D investment improves social welfare under either timing, profit always declines and so it would never be undertaken if firms cooperate. Both timings are relevant as we identify circumstances under which each will endogenously be chosen in a premarket stage. Critically, the equilibrium timing is often not the socially beneficial timing.



Business models: Formal description and economic optimisation

2017-05-08T21:15:26.128823-05:00

This paper picks up on established concerns that the concept of a business model is underdetermined and lacking formalisation in the current academic literature. Matrix methods may usefully be deployed to characterise the architecture of resources, costs, and revenues that a business uses to create and deliver value to customers that defines its business model. Systematisation of this technique would support a taxonomical approach to empirical studies of business models. Generalisation of this matrix approach provides a formal linkage between business models, strategy, and value creation using the Hamiltonian economics associated with the Maximum Principle. Factor analysis permits the endogenous identification of critical resource combinations in the business model that underpins resource-based views of strategy, resolving the tautological impasse identified by Priem and Butler ().



Are risk disclosures an effective tool to increase firm value?

2017-03-28T00:26:09.224069-05:00

The objective of this paper is to test the effect of risk disclosures on firm value. The results show that the disclosure of information on risks is positively associated with the value of a firm. In addition, our findings highlight that this association is mediated by corporate reputation, which improves for enhanced risk disclosure practices. This evidence is particularly important to understand the usefulness of the disclosure of information on risks in the dialogue between a firm and its stakeholders. Managers and regulators can better understand the consequences of the communication of information on risks.



A systematic approach for ranking football players within an integrated DEA-OWA framework

2017-04-19T02:27:02.40034-05:00

The ranking of players has always been an important input for key decisions in the football industry. This paper introduces a systematic methodology for ranking football players through objective performance factors within a framework that integrates data envelopment analysis and ordered weighted averaging operators. Players from European Premier League Football clubs are selected and ranked under a decision setting that involves the players' desirable and undesirable performance factors alongside the attitude of the decision maker. The robustness of the proposed methodology is evaluated using different levels of optimism of the decision maker.



Flexible collective bargaining agreements: Still a moderating effect on works council behaviour?

2017-05-10T22:15:29.042964-05:00

We analyse the interaction between different labour market institutions in Germany, namely, industry-level bargaining and firm-level codetermination by works councils. In particular, we are interested in the moderating effect of flexibility measures on the link between the existence works councils and collective agreements on wages and productivity. In presence of institutional changes, the question is whether works councils in covered plants still generate rather than redistribute rents, given recent decentralisation processes in the German system of industrial relations. We augment a theoretical model to provide hypotheses, which are then tested using empirical analysis of representative German plant level data. We find that the existence of flexibility provisions in collective bargaining agreements does not alter the effect of works council on firms' wages. We find, however, that with flexibility provisions works council presence is associated with higher productivity levels than without such provisions. These findings, however, depend on the level of collective bargaining: they can only be observed in plants covered by industry-level contracts, but do not hold in plants covered by firm-level contracts.



Strategic trade policy with bargaining over managerial contracts

2017-06-01T02:27:56.027904-05:00

This paper re-examines the well-known activist regime's inefficiency (governments set export subsidies) in a sales–delegation game with owner–manager bargaining over contracts. Contrary to the received literature, this bargaining process may (a) induce governments to set a tax if products are not too substitute or complements and (b) lead to an efficient (inefficient) equilibrium provided that products are sufficiently differentiated (not too complements). Therefore, unilateral public intervention can be optimal: in case of rival governments' retaliation, under appropriate product competition degrees, welfares are larger than under free trade even for small managers' power. Thus, managerial delegation practices are crucial also for international trade issues.



Acquisitions in the biopharmaceutical IPO market: Collaboration, competition and co-opetition

2017-05-10T22:25:23.344975-05:00

The present paper explores the little studied area concerning the acquisition of recent biopharmaceutical initial public offering firms. We examine the nature of the relationship between the acquiring firm and the acquired initial public offering firm prior to the acquisition and from the perspective of the resource-based view. We find to some extent that firm specific-resources affect the prospect that the firm will be acquired. Furthermore, our findings show that firms with more of these types of resources are likely to be acquired by firms engaged in co-opetition rather than by firms engaged solely in collaboration, competition, or (to a limited extent) with no prior relationship.



A pricing-error rule on share distribution in equity joint ventures: The Bayesian approach

2017-07-06T21:55:59.525565-05:00

Equity joint ventures (EJVs) are a popular governance mode of inter-firm cooperation that has attracted substantial research attention. The literature, however, still lacks a precise rule for the parents to follow in splitting the equity shares of an EJV, although share distribution is critical to almost all aspects of the co-ownership relationship. In this study, we fill this literature gap by taking the Bayesian approach to draw a pricing-error rule on share distribution in EJVs. More specifically, we contend that equity participation by two firms in an EJV allows profit sharing to correct for the errors that they might commit in pricing their inputs to the EJV. For profit sharing to fully nullify such pricing errors, the shares of an EJV must be split between the parent firms in a percentage combination that matches the relative sizes of their pricing errors. Because pricing errors are observable only afterward, share distribution in EJVs resembles a Bayesian process, in which the partners keep updating their estimates on pricing errors to adjust share distribution to a percentage combination that could best nullify their pricing errors. Thus, the eventual outcome of share adjustment is EJV buyout, in that the partner whose pricing errors remain substantial buys out the shares of the other whose pricing errors have become tolerable.



Buyer cartels and private enforcement of antitrust policy

2017-05-23T22:10:24.824881-05:00

Collusion among buyers leads to social welfare losses, which provide the economic rationale for public enforcement of the antitrust law. This conduct also imposes losses on the victimized sellers, which provide the foundation for private enforcement through private damage actions. In this paper, we present a rigorous economic analysis of buyer cartels. This effort includes both full participation and partial conspiracies. We review the antitrust treatment of collusive monopsony in the United States, the European Union, and Asia, offer a measure of antitrust damages, and examine the necessary precision of the damage estimate. We also suggest that the proper use of modern econometrics should allay judicial concerns with speculation.



Equity-based incentive contracts and behavior: Experimental evidence

2017-05-15T02:05:42.938647-05:00

Equity-based incentive contracts provide managers with dual incentives, motivating both effort and fraud. We report the results from an experiment in which manager subjects make effort and fraud decisions that affect a firm's value. The main treatment variable is the incentive contract, which can be of either the simple equity or stock option type. We find that both effort and fraud are increasing in a manager's share of equity and decreasing in the strike price of an option. Interestingly, the stock option contract induces relatively more fraud than the simple equity contract, even though the two induce the same effort.



Quality competition and entry deterrence: When to launch a second brand

2017-06-28T21:25:54.084484-05:00

We study the rationale for an incumbent to launch a second brand when facing potential entry into a market with quality-differentiated products and a fringe producer. Depending on market size, the cost of a second brand and a potential entrant's setup cost the incumbent might use a second brand both when deterring and when accommodating entry. For low costs of brand proliferation, the high-quality firm will prevent entry with limit qualities or multiple brands. The high-quality incumbent will accommodate entry only if it cannot be prevented. Accommodation is always accompanied by an additional brand safeguarding the premium brand.



Contract design in dynamic agency: An experimental analysis

2017-05-25T22:05:28.349339-05:00

This paper reports results from an experiment studying contract design in a dynamic 2-period agency relationship with unobservable effort. A deferred compensation contract is theoretically optimal—it places all incentives on the outcomes in the second period. Observed contract choices offer a substantial part of the incentives for the high outcome in the first period suggesting a strong preference for timely rewards. Information about theoretically optimal bonuses and effort decisions shifts contract choices towards a deferred compensation contract. This contract structure is more profitable for principal participants.



Performance implications of centrality in franchisee advice networks

2017-06-27T02:17:44.121191-05:00

Although the literature has provided ample evidence for the decisiveness of the franchisor–franchisee relationship in explaining organizational success or failure, performance effects of franchisee–franchisee relationships remain largely unexplored. Yet a growing body of research indicates that by building interfranchisee relationships, franchisees can form advice networks in the chain. Such networks offer privileged access to resources such as knowledge, information, and best practices that help individual franchisees to become more productive. In this context, we study linkages between a franchisee's centrality in franchisee relationships and various individual performance outcomes, using comprehensive data from franchisees in 3 different chains in the largest European franchise market, France. We find that conditional on the specific governance structure of each chain, the results document a strong impact of centrality in advice networks on franchisee performance. Accordingly, we offer theoretical contributions concerning knowledge-sharing processes in franchise chains, and managerial implications as regards more effective cooperation management in practice, from the perspective of both a franchisee and a franchisor.



Competition and innovation: The tango of the market and technology in the competitive landscape

2017-06-05T01:35:25.833598-05:00

Technology innovation can be a double-edged sword in helping a firm to address competitive pressures. We explore the relationships among market competition, technology competition, and firms' advancement to a higher generation of production technology. Though market competition drives technology advancement as firms attempt to escape competition and technology competition also drives technology advancement as firms try to stay in the technology race, concurrent high market and technology competition lead a firm to defer advancement. We find supportive evidence with data on global flat panel display makers. Our findings shed light on how competition interacts with a firm's technology advancement decision and, in general, a firm's technology strategy.



Are athletes more cooperative than nonathletes? A laboratory experiment

2017-07-13T02:05:31.1755-05:00

Former athletic employees receive a better wage when hired than other employees because recruiters associate positive values to athletic participation. Whereas athletes are considered as more cooperative than others, this assumption lacks empirical support. We implement a laboratory experiment in order to examine whether athletes (i.e., individuals engaged in intense athletic participation) exhibit more cooperative behaviours than nonathletes. We compare the cooperative behaviours of athletes and nonathletes in a single-shot public good game using a variant of the strategy method. We find that athletes exhibit significantly more conditional cooperative behaviours than nonathletes but no significant differences in unconditional behaviours.