Showing papers in "Managerial and Decision Economics in 2013"
TL;DR: This work identifies three corporate governance models: traditional model, management model, and corporation model and presents an empirical illustration showing a relationship between the choice of board model and product portfolio and performance.
Abstract: While most economic organisation literature on cooperatives has focused on changes in income rights, we study changes in the allocation of decision rights between board of directors (representing members) and managers. The traditional role of the board is to direct the activities of the managers. However, professional management increasingly makes most strategic decisions, pushing the board into a supervisory role. We present two groups of findings on changing board–management relationships. We identify three corporate governance models: traditional, management and corporation. And we present an empirical illustration showing a relationship between the choice of board model, and product portfolio and performance. Copyright © 2012 John Wiley & Sons, Ltd.
83 citations
TL;DR: In this paper, the authors address the problem of why parties often choose to combine alternative modes of organizations simultaneously while dealing with identical or almost identical transactions and propose a model to capture these so-called "plural forms" and to explain the choice of such non-standard arrangements.
Abstract: This paper addresses a puzzling problem: why do parties often choose to combine alternative modes of organizations simultaneously while dealing with identical or almost identical transactions? I propose a model to capture these so-called ‘plural forms’ and to explain the choice of such non-standard arrangements. Three determinants are identified as playing the major role: ambiguity surrounding the fitness of a mode of organization to the transaction at stake; complexity of a transaction or a set of transactions; and strategic behavior. Propositions are derived that are confronted to empirical data coming out of the agrifood industry.
61 citations
TL;DR: In this article, the authors address the genesis of farmer cooperatives in China in terms of the actors, and empirically show that the origins of cooperatives are due to entrepreneurial farmers and the government, rather than a bottom-up, collective action process of many small farmers.
Abstract: This paper addresses the genesis of farmer cooperatives in China in terms of the actors. Empirical results from a multiple case study indicate that the genesis of cooperatives in China is due to entrepreneurial farmers and the government, rather than a bottom-up, collective action process of many small farmers. Copyright © 2013 John Wiley & Sons, Ltd.
57 citations
TL;DR: In this article, the authors examine the evolution of risk capital markets in a small market economy, with particular reference to business angel syndication, and find that syndication generates larger investment deals and more follow-on investment but results in less new investments, fewer exits and an "equity gap" in the lower end of the market.
Abstract: In this paper, we examine the evolution of risk capital markets in a small market economy, with particular reference to business angel syndication. Scotland provides a valuable case, where the number of business angel syndicates (BAS) has grown from 3 to 18 between 2001 and 2010, the most radical shift in market organisation of any region in Europe. Findings suggest that a narrow range of focused but integrated public policies can be very effective in risk capital ‘capacity building’. Results suggest that syndication generates larger investment deals and more follow-on investment but results in less new investments, fewer exits and an ‘equity gap’ in the lower end of the market, suggesting the need for ongoing formation of new BAS and greater emphasis on investment exits. Copyright © 2013 John Wiley & Sons, Ltd.
57 citations
TL;DR: The authors used a real options perspective to augment a standard R&D investment model and implemented a firm-level empirical analysis to assess the practical significance of market uncertainty and its interactions with strategic rivalry and firm size.
Abstract: This paper uses a real options perspective to augment a standard research and development (R&D) investment model and implement a firm-level empirical analysis to assess the practical significance of market uncertainty and its interactions with strategic rivalry and firm size. We use a measure of firm-relevant market uncertainty along with panel data and find that firms invest less in current R&D as uncertainty about market returns increases. The effect of firm-specific uncertainty on R&D investment is smaller in markets where strategic rivalry is likely to be more intense. Furthermore, holding access to financing constant, the effect of uncertainty on R&D investment is attenuated for large firms. Copyright © 2012 John Wiley & Sons, Ltd.
48 citations
TL;DR: In this article, the authors investigate whether long-tenured cooperative chief executive officers (CEOs) are successful in negotiating less monitoring, resulting in the cooperative being agent-driven, and examine whether boards of longtenured CEOs exhibit differences in composition, formal committees, or procedures that may indicate these boards are more lenient monitors.
Abstract: This paper investigates whether long-tenured cooperative Chief Executive Officers (CEOs) are successful in negotiating less monitoring, resulting in the cooperative being agent-driven. Utilizing a sample of the 1000 largest U.S. agricultural cooperatives, we examine whether boards of long-tenured CEOs exhibit differences in composition, formal committees, or procedures that may indicate these boards are more lenient monitors. We find long-tenured CEOs experience less board monitoring. This result is primarily due to a difference in procedural mechanisms, rather than board composition. However, it is unclear whether monitoring leniency is an indication of the CEO’s ability to negotiate less monitoring. It remains a possibility that CEOs with shorter tenures also influence the board; but their recommendations may be heavily influenced by noncompulsory conformance with stricter corporate governance regulations, including Sarbanes Oxley legislation.
45 citations
TL;DR: In this paper, a survey among suppliers of one cooperative and two investor-owned firms (IOFs) showed that there are important differences regarding relationship characteristics such as dependence, behavioral uncertainty, market risk reduction, and adaptation support, which could account for higher quality products of the cooperative farmers.
Abstract: Organizational economics points to the weaknesses of cooperatives in producing high-quality products compared with investor-owned firms (IOFs). In the Brazilian broiler industry, suppliers delivering to a cooperative are performing better on quality than suppliers to an IOF. Data was collected through a survey among suppliers of one cooperative and two IOFs. What could explain the cooperative's advantage in terms of suppliers' quality performance? Results show that there are important differences regarding relationship characteristics such as dependence, behavioral uncertainty, market risk reduction, and adaptation support, which could account for the higher quality products of the cooperative farmers.
41 citations
TL;DR: In this paper, the authors developed and tested an extended transaction cost model to explain the structure of decision rights in franchising, and they found that the inclusion of trust in the model supplements the transaction cost explanation of the allocation of decision right in the German market.
Abstract: This study develops and tests an extended transaction cost model to explain the structure of decision rights in franchising. Results show that the inclusion of trust in the transaction cost model supplements the transaction cost explanation of the allocation of decision rights in franchising. On the basis of the data from the German franchise sector, we found that environmental uncertainty has a negative effect on the allocation of decision rights to franchisees because the franchisor exercises more control over local outlet decisions when the local market environment is highly uncertain. Contrary to the traditional transaction cost view, we found that behavioral uncertainty has a positive effect on the allocation of decision rights to franchisees. This result implies that franchisors are more likely to delegate decision rights to franchisees when they encounter difficulties in measuring franchisees' performance and controlling their behavior. Finally, trust has a moderating effect on the relationship between transaction cost variables and franchisor's propensity to delegate decision rights to franchisees. Copyright © 2013 John Wiley & Sons, Ltd.
40 citations
TL;DR: In this article, the authors employed a truncated bootstrap procedure to identify the key determinants of efficiencies for the agricultural marketing cooperatives in China's Zhejiang Province.
Abstract: On the basis of the bootstrap-Data Envelopment Analysis (DEA), this paper estimates technical, scale, and pure technical efficiencies for the agricultural marketing cooperatives in China's Zhejiang Province and employs a single truncated bootstrap procedure to identify the key determinants of efficiencies. The empirical results suggest that pure technical inefficiency was the main source of the technical inefficiency. Factors having significantly positive impacts on efficiency of cooperatives are local economic development level, entrepreneurship of managers, and human capital of members. The size of financial leverage and the number of board members have a negative impact on pure technical efficiency. Copyright © 2013 John Wiley & Sons, Ltd.
36 citations
TL;DR: In this article, the Simar and Wilson procedure is used to bootstrap the data envelopment analysis scores in order to establish the effect of football clubs' current value and debt levels on their obtained efficiency scores.
Abstract: This paper analyzes how European football clubs' current value and debt levels influence their performance. The Simar and Wilson (J Econometrics, 136: 31–64, 2007) procedure is used to bootstrap the data envelopment analysis scores in order to establish the effect of football clubs' current value and debt levels on their obtained efficiency scores. The results reveal that football clubs' current value levels have a negative influence on their performances, indicating that football clubs' high value does not ensure higher performance. At the same time, the empirical evidence suggests that football clubs' debt levels do not influence their efficiency levels. Copyright © 2012 John Wiley & Sons, Ltd.
36 citations
TL;DR: In this article, the authors investigated the performance of franchise networks through the lens of the resource-based and real options theory, and showed that the use of an explicit call option in the franchise contract increased the franchisor's managerial flexibility and incentives for intangible investments and hence improved the performance.
Abstract: This study investigates the performance of franchise networks through the lens of the resource-based and real options theory. First, according to the resource-based view, we argue that the intangible resources of the franchisor (system-specific know-how and brand name) and the intangible outlet-specific resources of the franchisees (exploration and exploitation capabilities) positively impact the performance of the franchise system. Second, on the basis of the real option perspective, we show that the franchisor’s use of an explicit call option in the franchise contract—as a clause that gives him or her the right to acquire franchise units—increases the franchisor’s managerial flexibility and incentives for intangible investments and hence improves the performance of the franchise network. We test the hypotheses with cross-sectional data from the franchise sector in Germany. The data provide somesupportofthehypotheses.Ourstudycontributestothefranchiseandinterorganizational network literature as no prior study has applied the real option perspective to franchising. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors introduce data from three countries with multiple exchanges operating under different listing standards, and show litigated cases of fraud significantly vary by country, and the different exchanges within the country.
Abstract: Statistics reporting litigated cases of fraud on an exchange-by-exchange basis are not readily available to investors. This paper introduces data from three countries with multiple exchanges operating under different listing standards, – Canada, the United Kingdom and the United States – to show litigated cases of fraud significantly vary by country, and the different exchanges within the country. Comparisons are also made to Brazil, China and Germany to assess out-of-sample inferences. The data examined suggest there are significant differences in the nature of observed fraud across exchanges within the United States; by contrast, outside the United States there appears to be a comparative lack of enforcement. The data also suggest policy implications for the ways in which fraud should ideally be reported to improve investor knowledge, market transparency and market quality. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: In this article, the authors investigated how Hungarian pig farms' output and technical efficiency would be affected if such regulations are to be fully implemented in this country, and found that the pollution could be reduced with no impact on the output level, and that pig farmers have incentives to reduce nitrogen pollution in order to increase their efficiency even in the absence of regulation.
Abstract: Pig farming is one of the strongest polluters of water due to its intensive production and slurry rejection. Several European countries have introduced environmental regulations aiming at reducing the pollution caused by nitrates from agriculture, but not yet Hungary.We investigate how Hungarian pig farms’ output and technical efficiency would be affected if such regulations are to be fully implemented in this country. Results indicate that the pollution could
be reduced with no impact on the output level, and that pig farmers have incentives to reduce nitrogen pollution in order to increase their efficiency even in the absence of regulation.
TL;DR: A survey of recent research in corporate finance on financial securities frauds can be found in this paper, where the authors discuss the empirical challenges related to this line of research and discuss opportunities for future studies.
Abstract: In this paper, I survey the recent research in corporate finance on financial securities frauds. I structure my review around the three subjects in this literature: studies of internal and external factors that elicit managerial incentives for fraudulent activities, studies on regulatory and market-based mechanisms that help to deter or detect fraud and on what affects the efficiency of such mechanisms, and studies on the economic and social consequences of financial fraud. I outline the empirical challenges related to this line of research and discuss opportunities for future studies. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: This article found evidence for the existence of four distinct strategic groups of firms in the airline industry using Latent Class Regression (LCR) models, based on the assumption that the performance of a firm in the group is a function of group characteristics after controlling for firm and industry characteristics.
Abstract: Two major controversies in strategic group research have been whether strategic groups actually exist and if so what is the best methodological approach to identify them. One perspective on strategic groups suggests that a strategic group exists if and only if the performance of a firm in the group is a function of group characteristics after controlling for firm and industry characteristics. We test this theoretical position by developing and estimating a model for the airline industry using latent class regressions. Our analysis finds evidence for the existence of four distinct strategic groups of firms in the airline industry. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this article, the authors use transaction cost theory, property rights view and agency theory to explain the percentage of multi-unit franchisees within a French franchisor's chains and propose three research hypotheses related to franchisees' transaction-specific investments, intangibility of system-specific assets and risk of franchisee free-riding.
Abstract: In this paper, we use organizational economics theories to explain the percentage of multi-unit franchisees within franchise chains We use transaction cost theory, property rights view and agency theory to formulate three research hypotheses that are related to franchisees' transaction-specific investments, intangibility of system-specific assets and risk of franchisee free-riding, respectively These hypotheses are tested in the French franchising context by using a sample of 138 franchisors The empirical results are largely supportive of the hypotheses We extend the franchising literature by arguing that the explanation of the franchisor's use of multi-unit franchising requires the combined application of different theoretical perspectives
TL;DR: In this paper, the authors build on organizational economics and the resource-based perspectives to study the tendency of SMEs to network and find that organizational capabilities in terms of coordination and communication and bonding in alliances are most relevant for cooperation decisions.
Abstract: Small and medium-sized enterprises (SMEs) face critical challenges in implementing collaborative strategies, including the difficulty of finding partners, the strain on managerial resources, and the risk of exploitation by larger partner firms. However, little is known about tendencies to network in SMEs. This paper builds on organizational economics and the resource-based perspectives. Survey data from 348 German SMEs reveal that predictions from both theories play a role for the tendencies of SMEs to network, yet organizational capabilities in terms of coordination and communication and bonding in alliances are most relevant for cooperation decisions. We provide managerial implications for cooperation involving SMEs. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: A survey of the empirical literature on the determinants of firms' compliance with mandatory SEC disclosure rules can be found in this article, where a discussion of the role of boards of directors, public accounting firms, and corporate attorneys in the preparation and review of mandatory disclosures is discussed.
Abstract: We survey the empirical literature on the determinants of firms' compliance with mandatory SEC disclosure rules. We begin with a discussion of the role of boards of directors, public accounting firms, and corporate attorneys in the preparation and review of mandatory disclosures. We then organize current research into three broad types of variation in compliance: completeness, timeliness and readability. Our review highlights three interesting areas for future research: (1) studies that examine the relations between completeness, timeliness and readability within the same research design; (2) studies that assess whether boards of directors, public accounting firms and corporate attorneys view disclosure compliance as a general firm policy; and (3) studies that investigate the influence of corporate attorneys on mandatory disclosure, as well as studies of disclosure issues that require collaboration between auditors and corporate attorneys. As a first step to address the latter agenda, we provide new empirical evidence regarding the impact of corporate attorneys on disclosure compliance. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: In this article, the authors examine how constraints on transnational corporations' official distribution channels, asset specificity, and bounded rationality of franchise dealers and parallel traders contribute to the sustainability of the parallel importation of automobiles.
Abstract: We examine how constraints on transnational corporations' official distribution channels, asset specificity, and bounded rationality of franchise dealers and parallel traders contribute to the sustainability of the parallel importation of automobiles. The manufacturing and distribution strategies employed by transnational corporations considerably add to the regional differences in the pricing and availability of specific models, as well as vehicle specifications. These necessary conditions enable opportunistic parallel traders to engage in arbitrage. The asset specificity of franchise dealers, bounded rationality, and opportunism of dealers and arbitrageurs sustain the parallel importation of automobiles. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors examine the prevalence and performance effects of synergies that franchisors actually achieve by using the plural form and conclude with managerial implications for governance design in franchised chains.
Abstract: Using the plural form helps franchised chains cope with the four ‘franchising imperatives’—system growth, chain uniformity, local responsiveness, and systemwide adaptation. Yet, despite the obvious importance of chain composition, empirical research on synergies in the plural form is largely absent, and insights on performance implications of the plural form are equally scarce. Consequently, with detailed data from 122 chains, this paper provides what is ostensibly the first in-depth examination of the prevalence and performance effects of synergies that franchisors actually achieve by using the plural form. The study concludes with managerial implications for governance design in franchised chains. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors apply a more fine grained concept of authority to interorganizational networks and provide the first empirical evidence on how formal and real authority are allocated in joint ventures.
Abstract: We apply a recent and more fine grained concept of authority to interorganizational networks and provide the first empirical evidence on how formal and real authority are allocated in joint ventures. Specifically, we show that intangibility of knowledge and uncertainty impact the allocation of authority in joint ventures via formal and real authority. Moreover, we provide evidence that formal authority and real authority function as complements in joint venture relationships. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors consider how corporations respond to public policy mandates with internal compliance policies and enforcement, and present a number of laws and regulations with which firms may choose to comply, construct a model of internal compliance, and close with a discussion of different internal compliance policy and their feasibility.
Abstract: We consider how corporations respond to public policy mandates with internal compliance policies and enforcement. We suppose that corporate compliance is determined by employees of the firm, whose incentives do not align perfectly with those of the corporation. In response, corporations expend resources to make compliance more likely. They adopt internal compliance policies and enforce these policies by sanctioning employees that violate them. Perfect compliance is unlikely, given imperfect observability of employee behavior. We present a number of laws and regulations with which firms may choose to comply, construct a model of internal compliance, and close with a discussion of different internal compliance policies and their feasibility. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: In this article, the authors identify a mistake in the demand system used in the strategic delegation model based on market shares by Jansen et al. and perform a comparison with the alternative delegation scheme a la
Abstract: We identify a mistake in the speci…cation of the demand system used in the strategic delegation model based on market shares by Jansen et al. (2007), whereby the price remains above marginal cost when goods are homogeneous. After amending this aspect, we perform a pro…t comparison with the alternative delegation scheme a la
TL;DR: In this paper, performance production regressions for Major League Baseball and National Football League were used to assess the relative importance of various managerial inputs, including owners, general managers, and head coaches.
Abstract: Sports differ according to the number of players, interdependencies among them, complexity of strategy, and other dimensions. For example, baseball has been described as ‘an individual game in which a team score is kept’. These differences suggest differences in the relative importance of managerial inputs: owners, general managers, and managers (or head coaches). Using panels over 1970–2011, I estimate performance production regressions for Major League Baseball and the National Football League that permit the relative importance of these managerial inputs to be assessed within and across sports while taking explicit account of the hierarchical structure of management levels. In addition, with predicted individual effects, I present rankings of best and worst managers, general managers, and owners. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors used a unique daily time series data set to investigate the asymmetric response of airline prices to capacity costs driven by demand fluctuations, and they used a Markov regime-switching model with time-varying transition probabilities.
Abstract: This paper uses a unique daily time series data set to investigate the asymmetric response of airline prices to capacity costs driven by demand fluctuations. We use a Markov regime-switching model with time-varying transition probabilities to capture the time variation in the response. The results show strong evidence of asymmetric price adjustments: positive cost shifts have a large positive effect, while negative cost shifts have no effect. The asymmetry is also explained by summer travel, but not by the size of cost shifts. The findings show the importance of consumer heterogeneity and capacity constraints as a source of asymmetric responses.
TL;DR: In this paper, the authors examine the evolution of the twofold function of formal governance mechanisms, for control and coordination, as an interorganizational relationship evolves, and explore whether the interorganization relationship evolution in part explains the evolution between the two functions or vice versa.
Abstract: Through a longitudinal case study, this article examines the evolution of the twofold function of formal governance mechanisms, for control and coordination, as an interorganizational relationship evolves. We ask whether all formal governance tools develop simultaneously, or whether each mechanism is designed and used for only one function; whether different mechanisms' attributes foster one function rather than the other; and whether different mechanisms are developed over time in order to provoke both functions' evolution. Finally, we explore whether the interorganizational relationship evolution in part explains the evolution of the two functions, or vice versa. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors examine how M&A transactions in such regulatory areas (e.g., environmental, finance and accounting, and antitrust compliance problems) might function to alleviate quality uncertainty.
Abstract: Firms operate under a wide range of rules and regulations. These include, for example, environmental regulations (in which some industries have increased regulatory exposure) and finance and accounting (where all industries have reporting requirements). In other areas, such as antitrust cartels, enforcement is unregulated, and antitrust leaves the market as the default tool to police against anticompetitive behavior. In all of these areas, detection of noncompliance by a firm can result in significant penalties. This issue of noncompliance has implications in the merger and acquisitions (M&A) context. In a transaction between an acquiring firm (buyer) and a target firm (seller), there is asymmetric information about the target's quality. In our framework, we link a target's quality directly to the strength of its regulatory compliance. In an M&A transaction, an acquirer seeks information about the target's compliance, as a compliance failure may result in substantial penalties and sanctions, post-acquisition. In the presence of quality (compliance) uncertainty about target firms, low-quality targets can masquerade as high quality. This would tend to give rise to an M&A market with Lemons-like characteristics, resulting in low transaction prices and dampening of M&A activity. We examine how M&A transactions in such regulatory areas – environmental, finance and accounting, and antitrust compliance problems – might function to alleviate quality uncertainty. Copyright © 2013 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors examined the degree of vertical integration by comparing franchised and company-owned chains and found that the level of network integration is positively related to the brand name value and negatively related to resource constraints and monitoring costs of the upstream firm.
Abstract: To the best of our knowledge, no previous studies have examined the degree of vertical integration by comparing franchised and company-owned chains. On the basis of recent data from the French distribution networks in retail and services, this paper investigates the determinants of network integration in the French distribution systems. The level of network integration increases from franchised chains to company-owned chains. This paper provides evidence that the level of network integration is positively related to the brand name value and negatively related to the resource constraints and monitoring costs of the upstream firm.
TL;DR: Thomas Ehrmann, Gérard Cliquet, George Hendrikse and Josef Windsperger* Institute of Strategic Management, Westfälische Wilhelms-Universität Münster, Münsters, Germany IGR-IAE, School of Business Administration, Université de Rennes 1, Rennes, France Rotterdam School of Management, Erasmus University and The Netherlands Center for Business Studies, University of Vienna, Vienna, Austria as discussed by the authors.
Abstract: Thomas Ehrmann, Gérard Cliquet, George Hendrikse and Josef Windsperger* Institute of Strategic Management, Westfälische Wilhelms-Universität Münster, Münster, Germany IGR-IAE, School of Business Administration, Université de Rennes 1, Rennes, France Rotterdam School of Management, Erasmus University, Rotterdam, The Netherlands Center for Business Studies, University of Vienna, Vienna, Austria (wileyonlinelibrary.com) DOI: 10.1002/mde.2577
TL;DR: In this article, the effects of the 2008 financial crisis on various measures of firm governance, including the impact on firm boundaries such as buyer-supplier relationship, capital structure, and employment effects, are investigated.
Abstract: The paper researches the effects of the 2008 financial crisis on various measures of firm governance, including the impact on firm boundaries such as buyer–supplier relationship, capital structure, and employment effects. Using a unique data set of 1686 Eastern European firms, we examine how the crisis affected the financial and employment decisions of different industrial and service sector firms. As these firms faced a steep decline in sales and capacity utilization, as well as credit constrains, they were forced to make significant and far reaching changes in various aspects of their operations. We discuss the implications of these changes. Copyright © 2013 John Wiley & Sons, Ltd.