Parking Externalities in Commercial Real Estate

Local governments have employed a variety of strategies to reduce street congestion through an increase in parking supply. These policies have been criticized as an implicit subsidy that shifts costs from drivers to the public at large. Others have noted that parking lots and structures can lead to increased water and air pollution. However, there has not been an examination of whether parking, presumably by reducing congestion, generates external benefits. We measure whether nearby parking availability influences commercial property prices after controlling for property characteristics, including on‐site parking. We find that publicly accessible parking, such as commercial parking garages, generates significant aggregate externalities. We also find evidence of a significant complementary relationship between building and parking area in property values. This suggests that parking regulation could have a significant impact on property development through its effect on the value of the marginal square foot of building area.     

Do‐no‐harm versus do‐good social responsibility: Attributional thinking and the liability of foreignness

Research summary: The efforts of multinational corporations to be socially responsible do not always engender positive evaluations from overseas stakeholders. Drawing on attribution theory, we argue that two heuristics guide stakeholders in evaluating firms' social performance: foreignness and the valence of firms' social responsibility. We provide evidence from a field study of secondary stakeholders and an experimental study involving 129 non‐governmental organizations. Consistent with attribution theory, the liability of foreignness is minimized when firms engage in “do‐good” social responsibility (focused on proactive engagement creating positive externalities) but is substantial when firms engage in “do‐no‐harm” social responsibility (focused on attenuating negative externalities). In online supporting information, Appendix S1, we demonstrate that these evaluations have consequences for whether stakeholders subsequently cooperate, or sow conflict, with firms. Managerial summary: There is no guarantee that efforts to be socially responsible will improve multinational corporations' relations with overseas stakeholders, such as customers, governments, and activists. In a field study and an experiment, we unpack when foreign firms suffer from harsh stakeholder evaluations. Foreign firms especially suffer from harsh evaluations when they conduct “do‐no‐harm” CSR rather than “do‐good” CSR. Stakeholders attribute the motive for foreign firms' do‐no‐harm CSR to managerial interests and shareholder pressures, perceiving a wedge between managers and owners (who may be unmotivated to reduce the negative impacts of their business activities) and local stakeholders (who bear the social costs). A practical implication is that foreign firms gain more from highlighting do‐good rather than do‐(no)‐harm CSR initiatives. Copyright © 2015 John Wiley & Sons, Ltd.     

Why Are Foreclosures Contagious?

This article investigates the mechanism by which foreclosed properties depress neighboring property prices. Using a novel dataset on housing capital expenditure, I verify as accurate the claim of disinvestment theory made in earlier studies. When capital expenditure investment, neighborhood price trends, number of Multiple Listing Service listings and neighborhood fixed effects are controlled for, the negative effect on property prices is significant from nearby foreclosures, real estate owned (REO) listings and REO sales, but not from default and delinquent properties. The effect is larger in a depressed market than in an appreciating market. I argue that the most plausible explanation for these results is that a foreclosure discount drives down the reference prices for nearby properties and depresses neighborhood values. This discount information is revealed to the public through foreclosures, REO listings and REO sales.     

Estimating the Effect of Crime Risk on Property Values and Time on Market: Evidence from Megan's Law in Virginia

We examine neighborhood externalities that arise from the perceived risk associated with the proximity of a registered sex offender's residence. We find large negative externality effects on a property's price and liquidity, employing empirical techniques that include a fixed‐effects OLS model, a correction for sample selection bias and censoring using a Heckman treatment, and a three‐stage least‐squares model to account for simultaneity bias in the joint determination of a home's sale price and liquidity. Additionally, we find amplified effects for homes with more bedrooms (a proxy for children) and if the nearby offender is designated by the state as “violent.”     

The capitalization of metro rail access in urban housing markets

Increasing access to public transportation (including metro rail) can help alleviate traffic congestion and address climate and environmental priorities. Living close to a metro line may be especially important in terms of providing improved commuting options. However, proximity to metro lines can also be associated with negative externalities, such as noise and crime, that may make living near a station less desirable. One way to assess the net value that residents place on metro rail access is to examine how proximity to metro lines is capitalized into house prices. Using a hedonic spatial difference-in-differences model, we analyze the impact of proximity to the stations on the Gold and Expo Lines in Los Angeles, California, on nearby house prices. Our findings suggest that the capitalization effect is heterogeneous. Some residents value living near new metro stations, while others do not. Overall, our results provide evidence that the value residents place on metro rail access varies based on their income levels and other demographics.     

Housing Regulation,Externalities and Residential Property Prices

This article examines the effects of quantity restrictions on residential property prices in the presence of neighborhood externalities. A Brigham Young University policy limiting students’ location choices provides a natural experiment for studying the externality and quantity restriction effects on property values. A flexible hedonic model is used to control for nonstudent population spatial sorting by type. The estimates show significant positive quantity restriction and student agglomeration effects on student housing prices. There are also significant differences in the negative student externality across nonstudent neighborhoods, with the quantity restriction reinforcing (offsetting) the student price premium (discount) at the boundary.     

The external cost of prostitution: Evidence from shutting down red light districts in the Netherlands

This article examines the value of externalities created by the presence of sex workers in the city. Although a legal paid-sex industry might contribute to the economy, it may also generate negative externalities. To identify the net impact of overt prostitution, we estimate changes in housing prices following the sudden closure of the two red light districts (RLDs) in the Dutch City of Utrecht. Our results show that the capitalization effect of RLDs is spatially heterogeneous. While some areas are unaffected, others are up to 12% more expensive if far from operating brothels. Interestingly, though, evidence also shows that RLDs increase local employment in a variety of sectors. All the aversion to living near RLDs is instead explained by petty crimes.     

Context matters: Diversity's short‐ and long‐term effects in fortune's “best companies to work for”

Research summary: Previous research has examined the racial diversity‐productivity relationship in corporations with an evident high commitment to minority programs, Fortune's “Best Companies for Minorities.” To assess generalizability, we replicate this research using a different context of high organizational‐employee value congruence, Fortune's “Best Companies to Work For.” We are not able to find evidence for the curvilinear relationships previously found, but do uncover a linear negative relationship between racial diversity and short‐run performance. Managerial summary: Using Fortune's “Best Companies for Minorities,” previous research found that racial diversity affected both firm productivity and Tobin's q. To see if we could find these results in a different group of firms, we replicate this research using a sample drawn from Fortune's “Best Companies to Work For.” The former sample is distinguished by high commitment to minority programs, while the one used here stresses high congruence of values between the organization and all its employees. We are unable to replicate the relationships previously found, however, but do find that increasing racial diversity had a negative effect on firm productivity. Copyright © 2016 John Wiley & Sons, Ltd.     

Contemporaneous Loan Stress and Termination Risk in the CMBS Pool: How “Ruthless” is Default?

This study analyzes the impact of contemporaneous loan stress on the termination of loans in the commercial mortgage‐backed securities pool from 1992 to 2004 using a novel measure, based on changes in net operating incomes and property values at the metropolitan statistical area‐property‐type‐year level. Employing a semi‐parametric competing risks model for a variety of specifications, we find that the probability of default is extremely low even at very high levels of stress, although the coefficient estimates of greatest interest are very statistically significant. These results suggest substantial lender forbearance and are consistent with previous research that models default as a “gradual dynamic process” rather than a “ruthless” exercise once “in the money.”     

Looking at the Cost Side of “Monopoly”

Welfare loss under oligopoly is defined as that part of consumer surplus which is lost and not regained by higher profits. In a model with asymmetric firms, this implies that the total welfare loss consists of the deadweight loss triangle plus a cost side inefficiency effect, due to the fact that in imperfect markets not all firms utilize the lowest cost technique. Using a flexible CV-model we calculate these effects empirically for two relatively homogeneous industries (pulp/paper and cement). The deadweight loss triangles are shown to be smaller than the cost difference effect (“the staircase”) for these industries.     

The Performance Effects of Human Resource Practices: The Case of Interclub Networks in Professional Baseball, 1919–1940

This study investigates the performance effects of two industry‐specific human resource management innovations that dramatically changed the way professional baseball teams selected and trained ballplayers. In the early part of this century, major league clubs developed and refined two player‐development practices based on “reserve team” and “farm team” systems. We use a panel data set of the win/lose records for the population of 16 major league clubs for the seasons from 1919 through 1940 to test hypotheses about the effect of human resource practices on organizational performance. The results suggest that the reserve team practice had no significant impact on organizational performance. In contrast, the more complex farm‐team system, pioneered by Branch Rickey of the St. Louis Cardinals, improved organizational performance and diffused rapidly throughout the league. We estimate that by 4 years after its creation, the farm‐team system improved a team's win rate by 0.068 points relative to nonadopters of the farm‐team system and teams with less than 4 years of prior experience with a farm‐team system. The results also show that the farm‐team effect was not confined to St. Louis but also was experienced by later adopters. These results contribute to the growing literature showing a positive effect of human resource policies on organizational performance. The results also illustrate the important role the external environment plays in shaping this relationship (e.g., legal restrictions to labor mobility).     

Perceptions of Industrial Design: The “Means” and the “Ends”

It is widely accepted that industrial design can play an important role in the development of innovative products, but integrating design‐thinking into new product development (NPD) is a challenge. This is because industrial designers have very different perspectives and goals than the other members of the NPD team, and this can lead to tensions. It has been postulated that the communications between NPD managers and industrial designers are made more difficult because each group uses very different language. This research made the first empirical investigation of the language used by designers and managers in describing “good” and “poor” industrial design. In‐depth interviews were conducted with a sample of 19 managers and industrial designers at five leading companies. Multiple sources of data were utilized, including the repertory grid technique to elicit the key attributes of design, from the perspective of managers and designers. Using a robust, systematic coding approach to maximize the validity and reliability of qualitative data analysis, it was established that managers and industrial designers do not use a completely different vocabulary as previously supposed. Rather, it was found that managers and industrial designers use some common terms augmented by additional terms that are specific to each group: managers are commercially orientated in the “ends” they want to achieve and designers perceive more antecedents (“means”) necessary to achieve their “ends”—iconic design. This research led to a grounded conceptual model of the role of design, as perceived by managers and industrial designers. The implications of the results achieved are wide: they indicate how managers and designers can interact more productively during NPD; they highlight the need for more research on the language of designers and managers; and they point to issues that need to be covered in the education of industrial designers. Finally, this work suggests how managers and designers can engage in a more fruitful dialogue that will help to make NPD more productive.     

Local House Price Diffusion

We contribute to the literature on house price diffusion by carrying out our analysis at three levels: CBSA (nationwide), town and census tract (Greater Boston Area). We estimate fixed‐effect models of house price growth on lagged growth (“Persistence”), nearby lagged growth (“Spillovers”) and Fundamentals growth. CBSA‐level Persistence and Spillover Effects are positive and significant. These large ripple/contagion effects likely contributed to the recent national‐level housing downturn. We find evidence of smaller town‐level Persistence and Spillover Effects. Hence, diffusion appears stronger across than within housing markets. Fundamentals and price expectations drive price diffusion, leaving room for bubbles from future price overoptimism.     

Land use Controls: The Case of Zoning in the Vancouver Area

This paper explores the relationship between rezoning and changes in observed property values and the ability of zoning to mitigate externalities. Three separate methodologies are used in three locations in metropolitan Vancouver to examine these issues. Our results imply that rezoning does not necessarily lead to changes in land use and value. Further, no evidence was found to support the assertion that there are significant negative externalities due to incompatible land uses in residential property markets. Based on these results, we feel it is reasonable to question the continued use of zoning in developed areas of urban regions.     

Bricolage as a Path to Innovativeness for Resource‐Constrained New Firms

Evidence suggests that both nascent and young firms (henceforth: “new firms”)—despite typically being small and resource‐constrained—are sometimes able to innovate effectively. Such firms are seldom able to invest in lengthy and expensive development processes, which suggests that they may frequently rely instead on other pathways to generate innovativeness within the firm. In this paper, we develop and test arguments that “bricolage,” defined as making do by applying combinations of the resources at hand to new problems and opportunities, provides an important pathway to achieve innovation for new resource‐constrained firms. Through bricolage, resource‐constrained firms engage in the processes of “recombination” that are core to creating innovative outcomes. Based on a large longitudinal dataset, our results suggest that variations in the degree to which firms engage in bricolage behaviors can provide a broadly applicable explanation of innovativeness under resource constraints by new firms. We find no general support for our competing hypothesis that the positive effects may level off or even turn negative at high levels of bricolage.     

Big‐Box Stores and Urban Land Prices: Friend or Foe?

This study examined the effect of a new Walmart store on nearby U.S. urban land prices and found that, within one quarter mile of a new Walmart store locale, land prices increased by almost 39% over the four‐year development time period. Supercenters and commercial land sales were instrumental in driving the positive price effects. Robustness tests found a positive land price effect with other big‐box stores, suggesting that the land price effect was not limited to Walmart stores, but in fact, was a big‐box store effect.     

NEGATIVE EXTERNALITIES,COMPETITION AND CONSUMER CHOICE*

Consumers sometimes make choices that impose greater external costs on those who do not make the same choice. This paper examines how the selectivity of negative externalities in such situations affects the competitive equilibrium and the desirability of an externality‐reducing public policy. Selective negative externalities create network externalities, but outcomes may differ greatly from typical network effects. Price effects may cause the imposing product's sales to decline with the size of the negative externality. Consequently, a positive competitive effect may overwhelm the externality's negative direct effects on welfare, such that a policy that enlarges the externality may improve welfare.     

A Study of the Performativity of the “Ambidextrous Organizations” Theory: Neither Lost in nor Lost before Translation

Ambidextrous organizations succeed both in incremental and discontinuous innovation. However, there is little direct empirical evidence on how managers implement the principles of the “ambidextrous organizations” theory to dynamically align the structure and culture of ambidextrous organizations. Our study does not focus on analyzing the factors that give rise to organizational ambidexterity but focuses on analyzing whether the factors suggested by prior theorizing on “ambidextrous organizations” are implemented by managers in their daily practice as suggested by prior theorizing. Accordingly, this study does not investigate the traditionally conceptualized gap between academic theorizing and managerial practice since “ambidextrous organizations” theory can be characterized as rigorous and relevant. We investigate whether the “ambidextrous organizations” theory is implemented as suggested by prior theorizing and whether successful implementation is subject to managing in the way that scholars' prior theorizing suggests. Based on qualitative and quantitative data from two longitudinal case studies, we find that managers overlooked the process dimension in evaluating the required degree of ambidexterity. Furthermore, the organizational structure and culture for incremental innovation did not differ from the structure and culture for discontinuous innovation alongside the expected dimensions. Finally, the discontinuous innovation business unit had to be reintegrated to ensure sustained growth. During the reintegration processes, organizational capabilities mutated. We linked our findings on the processes and performativity of ambidextrous organizing to extant theories and developed the rationale for the observed novel phenomena of innovation myopia, second‐order competency traps, and capability mutations.     

The transfer system in European football: A pro-competitive no-poaching agreement?

We assess the proclaimed pro-competitive effects of the “transfer system”, the no-poaching agreement governing the European football (soccer) labor market. A major argument to legitimize this system is that transfer fees, which hiring clubs pay to release players from their current clubs, redistribute revenues from large market to small market clubs. This would strengthen small clubs’ financial clout and their ability to compete in sporting terms. Player transfer fees represent over 10 billion Euros in asset value in the financial statements of the 202 clubs we analyze. Still, small market clubs rarely obtain substantial revenues from the transfer market. The main beneficiaries are clubs around the middle of the market size distribution. A select group of large market clubs makes significant transfer losses, but this does not undo their initial financial advantage. Overall, the transfer system therefore leads to a very minor reduction in revenue inequality.     

Immigration and the Property Market: Evidence from England and Wales

This article investigates the link between immigration and property markets in England and Wales. Evidence from fixed effects and shift‐share–based instrumental variable regressions suggests that an increase in regional immigration, depending on the specification, either decreases prices at the lower end of the distribution up to the median or leaves them unchanged and has (almost) no effect on mean property prices or prices above the median. The evidence suggests that these findings can be explained through an interaction between the markets for rented and owned properties as well as through changes in the usage of housing space.