Gibrat’s law and the learning process

This paper discusses the speed of convergence of small firms in the context of Gibrat’s law for manufacturing and service industries. We analyze unbalanced panel data from 139,922 firms belonging to the Spanish manufacturing and service industries between 1994 and 2002. The results show that small firms grow faster than large firms. The evidence supports the proposition that market structure affects the capacity of firms to grow. In particular, small firms in service industries do not grow as quickly as small firms in manufacturing industries. This is mainly due to the lower medium efficient size (MES) in the service industries diminishing the incentives to grow and the positive effect of MES on the speed of convergence.     

The Relationship Between Competition and Incumbent’s Innovation

A static model is developed to analyse the incumbent’s innovation strategy under monopoly and duopoly. A number of potential objectives for the incumbent are modelled here, including the maximization of revenue, profit, and welfare (which are common among the network industries). Its marginal cost depends upon investment in new technologies and processes. The incumbent chooses its price and its level of investment in innovation. The incumbent’s elasticity of demand under both market structures and the incumbent’s market share under duopoly determine which market structure creates more incentives to innovate. For certain values of these variables, duopoly provides more incentives to innovate than monopoly. As expected, the incentives to innovate increase when the incumbent places greater weight on social welfare.     

editor’s

本期话题:北京市交通委发布消息,禁止手机叫车软件私自设置"小费"等加价功能。你怎么看?你愿意多花多少钱叫到一辆出租车?     

Underpaid and Corrupt Executives in China’s State Sector

This study examines the role of executive compensation in public governance. We collect data on corruption cases that involve top-level executives in Chinese listed state-controlled firms. We find a significant positive relationship between underpayment of executives and the likelihood of an investigation into corrupt behavior. We also show that corruption is positively associated with firm performance and that the relationship between underpayment of executives and corruption is influenced by firm performance, suggesting that top managers are more likely to engage in illicit behavior if they are compensated poorly while the firms under their control perform well. Finally, we find that pay-performance sensitivity decreases when top executives are involved in corruption investigations, indicating a lack of pecuniary incentives. Our empirical findings point toward an important relationship between executive compensation and corrupt behavior, thus providing valuable input to the understanding of executive pay and its effects in China’s state sector.     

Maybe It’s Right,Maybe It’s Wrong: Structural and Social Determinants of Deception in Negotiation

Context shapes negotiators’ actions, including their willingness to act unethically. Focusing on negotiators use of deception, we used a simulated two-party negotiation to test how three contextual variables—regulatory focus, power, and trustworthiness—interacted to shift negotiators’ ethical thresholds. We demonstrated that these three variables interact to either inhibit or activate deception, providing support for an interactionist model of ethical decision-making. Three patterns emerged from our analyses. First, low power inhibited and high power activated deception. Second, promotion-focused negotiators favored sins of omission, whereas prevention-focused negotiators favored sins of commission. Third, low cognition-based trust influenced deception when negotiators experience fit between power and regulatory focus, whereas affect-based trust influenced deception when negotiators experience misfit between these structural context variables. We conclude that regulatory focus primes different moral templates: promotion-focused negotiators’ decision to deceive is determined by moral pragmatism, whereas prevention-focused negotiators’ decision to deceive is determined by opportunism. Because each combination of power and regulatory focus was tied to a specific subcomponent of trust, we further conclude that negotiators engage in motivated information search to determine whether they should deceive their opponents.     

Gibrat’s law and persistence of growth in Greek manufacturing

This study makes use of a sample of Greek manufacturing firms during 1995–2001 in order to analyze Gibrat’s law. We find Gibrat’s law is rejected for the total sample of firms, since persistence of growth plays a key role. The classification of firms in size and age groups, however, yields more interesting results: Gibrat’s law is rejected for micro, small, and young firms, since an inverse relationship between firm growth and initial firm size is found along with a persistence of growth rates in subsequent periods. In contrast, Gibrat’s law is accepted for medium, large, and old firms, implying that the growth patterns of these categories follow a random walk and do not tend to persist in subsequent periods.     

How Leadership and Commitment Influence Bank Employees’ Adoption of their Bank’s Values

Retail banking is facing many challenges, not least the loss of its customers’ trust and loyalty. The economic crisis is forcing banks to examine their relationships with stakeholders and to offer greater reassurance that their brand promises will be delivered. More than ever, banks need to stand for something positive and valued by stakeholders. One way to achieve this is through paying more attention to brand values. Our article explores how values are adopted by employees within a bank. When employees ‘live’ their brand’s values, their behaviour during customer interactions reflects this, encouraging the strengthening of customer relationships. Specifically, we test the relationship between leadership style, employee commitment, and the adoption of values. Data was collected from a survey of 438 branch employees in a leading Irish retail bank. The study found that a structured and directive leadership style was effective at encouraging the adoption of the bank’s values. Moreover, when employees are committed to the organisation, this has a significant impact on their adoption of values. Thus, this study supports the literature which suggests that leadership and commitment are prerequisites for values adoption.     

Sequential Mergers and Antitrust Authority’s Decisions in Stackelberg Markets

This paper analyses a sequential merger formation game in a setting where: (i) firms compete à la Stackelberg; (ii) mergers may give rise to endogenous efficiency gains; and (iii) every merger has to be submitted for approval to the Antitrust Authority (AA). Two different types of AA are studied: first, we assume a myopic AA, which accepts or rejects a given merger without considering that this merger may be followed by other mergers; and, second, a forward looking AA, which anticipates the final industry structure a merger will give rise to, if approved. We conclude that these two types of AA adopt similar decisions whenever a merger would not trigger the exit of outsider firms. Their decisions are, however, shown to be very different when evaluating exit-inducing merger proposals.     

Advertising and Steiner’s Dual Stage Model: Our Assessment

Between 1967 and 1979, we produced a number of studies that explored different facets of the economics of advertising. This work culminated in our 1974 book entitled Advertising and Market Power. Our leading hypothesis was that heavy advertising expenditures often but not always had anti‐competitive effects. And our primary empirical evidence in support of this hypothesis was that industries with heavy advertising expenditures also reported higher profit rates, which we interpreted as indicating that higher prices followed when manufacturers can effectively spend large amounts on advertising. Since that time, Robert Steiner has developed a model of firm behaviour for consumer goods industries. He finds that distribution margins are generally higher where manufacturer prices are lower. Furthermore, heavy manufacturer advertising is likely to depress distribution margins for heavily advertised products. While our earlier work implicitly assumed that distribution margins are generally the same regardless of the volume of advertising, Steiner’s results raise doubt on this assumption. Steiner’s model must therefore be acknowledged when interpreting our earlier findings.     

Imperfections and Shortcomings of the Stakeholder Model’s Graphical Representation

The success of the stakeholder theory in management literature as well as in current business practices is largely due to the inherent simplicity of the stakeholder model––and to the clarity of Freeman’s powerful synthesised visual conceptualisation. However, over the years, critics have attacked the vagueness and ambiguity of stakeholder theory. In this article, rather than building on the discussion from a theoretical point of view, a radically different and innovative approach is chosen: the graphical framework is used as the central perspective. The major shortcomings of the popular stakeholder framework are systematically confronted with the graphical scheme to illustrate their visual impact. The graphical illustrations of the imperfections help explain the sometimes-oversimplified generalisation inherent to every graphical model. They also make some interrelationships easier to understand. The analysis demonstrates that, with the tacit but implicit acceptance of simplification of the discussed explanatory elements, Freeman’s framework remains a rather good approximation of reality. Only a few minor changes to the stakeholder model are consequently proposed.     

Alibaba’s IT platform and electronic commerce synergy in driving “Singles’ Day”

Global electronic commerce (ecommerce) development is growing exponentially, especially in the business-to-consumer (B2C) field. Consumers in the Asia-Pacific region have spent more on ecommerce purchases in 2014 than consumers in North America, making them the largest regional ecommerce market in the world. Singles’ Day on November 11 (also known as Double 11 Day or Chinese National Ecommerce Day) is the most successful online shopping day in China. What drives the success of Singles’ Day? We conducted in-depth interviews with Alibaba senior managers, observed the progress of Singles’ Day, and investigated this issue. We find that over the past six years, Alibaba has successfully implemented five critical strategies associated with value activities from identifying merchants and pricing, marketing and sales, payments, and outbound logistics. Along with these strategies, Alibaba has created a synergistic IT platform to connect consumers, merchants, and service providers through identifying merchants and pricing, marketing and sales, payments, and outbound logistics to facilitate value creation by increasing efficiency in their value activities and expanding the market base. These successes have driven the interest of Chinese consumers to its annual shopping carnival on Singles’ Day, changing consumer shopping from traditional stores to online sites and creating the miracle of the Chinese National Ecommerce Day.     

Organizational Misbehavior and Management Control in China’s Public Hospitals: Doctors’ Red Packets

This paper investigates Chinese doctors’ informal payment, known as red packets, with reference to the debate on organizational misbehavior, fiddles and control. It aims to examine the internal and external factors that have contributed to the emergence of red packets in health services and the strategies of hospital management in dealing with informal payment. Analysis on the data collected from two hospitals shows that doctors’ misbehavior is influenced by health services’ funding mechanism, payment systems and corruption. More importantly, the study demonstrates the rationality of employee fiddles and management responses. Findings indicate that doctors are mainly responsible for this fiddling, unethical and illegal activity because of the financial gains acquired from patient bribery. However, doctor misbehavior remains under management’s latent control as long as hospital income generation and reputation are not severely threatened. The study contributes to the analysis of informal payment in the field of organizational studies and employment relations, with a fresh perspective offered to extend our understanding of red packets in the context of healthcare marketization reform.     

China’s Financial Transformation in the Context of Slowdown and Deleverage

China stands in a critical inflexion point, because its credit-fuel investment model has become obsolete. China’s current slowdown has revealed that its original growth drivers have been exhausted, whereas its debt accumulation has reached unsustainable highs. Hence, China is in urgent need of implementing an efficient deleveraging process at a time when slowdown and demographic pressure make such a process difficult. There is a danger that slowdown, deflation, and deleveraging will bounce negatively into each other. The deflationary tendencies, if uncontrolled, will propel China into a liquidity trap and threaten to draw the economic system to a halt.     

China’s Stone Market

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Alan Rugman’s methodology

This paper argues that the intellectual contribution of Alan Rugman reflects his distinctive research methodology. Alan Rugman trained as an economist, and relied heavily on economic principles throughout his work. He believed that one good theory was sufficient for IB studies, and that theory, he maintained, was internalisation theory. He rejected theoretical pluralism, and believed that IB suffered from a surfeit of theories. Alan was a positivist. The test of a good theory was that it led to clear predictions which were corroborated by empirical evidence. Many IB theories, Alan believed, were weak; their proliferation sowed confusion and they needed to be refuted.Alan’s interpretation of internalisation was, however, unconventional in some respects. He played down the trade-offs presented in Coase’s original work, and substituted heuristics in their place. Instead of analysing internalisation as a context-specific choice between alternative contractual arrangements, he presented it as a strategic imperative for firms possessing strong knowledge advantages. His heuristics did not apply to every possible case, but in Alan’s view they applied in the great majority of cases and were therefore a basis for management action.     

Jared Jackson’s Dilemma

Whether to use privileged information as a basis for a decision to sell stock is the central issue in thiscase. A conflict between a stockbrokers perceived obligations to maximize clients stock values and protect their investments (fiduciary responsibility) and violating Security and Exchange Commission insider trading regulations must be resolved.