Do Prior Experiences of Top Executives Enable or Hinder Product Market Entry?

How firms achieve entry into new‐to‐the‐firm product markets is an important but overlooked topic. Some aspiring entrants fail during product development, and they miss the opportunity to enter. In such contexts, firms often take action to de‐risk entry, for example, by drawing upon the experience of top executives with market‐specific expertise obtained in prior jobs. However, the empirical evidence from this study shows that beyond a narrow threshold, greater prior experience in the top executive team was associated with a greater likelihood of failed entry attempts among the firms that I tracked over two decades in the biotechnology industry. This result held across product markets with low and high degrees of dynamism. Based on the literature on dynamic managerial capabilities, where entry into new markets indicates managers’ ability to reconfigure organizational resources and adapt to a changing environment, this study’s main contribution is to illustrate how and why experience matters for entry.     

Early internet IPOs versus subsequent entrants

This paper examines whether investors in early Internet IPOs earned superior returns to those who invested in later entrants. We document three differences between early public firms in a new Internet technology and their followers: underpricing, operating characteristics at the IPO, and stock price performance after the IPO. We find that there is value in going public relatively early in a new Internet technology. Specifically, long-term returns are significantly higher for the early entrants. We also find evidence, consistent with previous studies that examine hot IPO markets, that the early public firms have better operating characteristics at the IPO than later entrants.     

Infrastructure provision and international market share rivalry

The paper examines a model of strategic infrastructure investment. Two oligopolistic firms compete on home and foreign product markets for market shares. The national governments support the firms in the market rivalry by providing cost reducing public infrastructure services that are financed out of taxing an input used in the production process. It is shown, that infrastructure policy can be used as an instrument for strategic trade policy. However, governments are facing the problem of balancing the burden of taxation and the benefits of infrastructures. The theoretical model also raises some critical issues with respect to the policy relevance of recent empirical infrastructure research.     

Second‐Mover Advantages with Asymmetric Costs and Information Updates: A Product Life Cycle Perspective

Two firms with asymmetric costs engage in a Stackelberg game under multiple levels of uncertainty with information updating. A product life cycle perspective is employed to reveal when and why a second‐mover may have an advantage. At early stages in the product life cycle, when uncertainty is the dominating factor, the impact of uncertainty may be either positive or negative. As a result, the Stackelberg leader faces the possibility of either overshooting or losing its market leadership position to the second‐mover. In later market stages, when cost is more important, a process‐innovating second‐mover may accrue higher profits. Copyright © 2011 John Wiley & Sons, Ltd.     

Information acquisition,foreign bank entry,and credit allocation

This paper presents a theoretical framework to understand the impact of foreign bank entry on the access to and the price of credit for different types of firms. A major point of departure from the previous literature is that incumbents’ information about firms is endogenous in the model; previous screenings and lending relations of incumbents determine which type(s) of firms they can identify. I show that incumbents’ information is negatively correlated with the quality of borrowers. Moreover, although a priori entrants have a comparative advantage in lending to transparent firms, previous lending relations of incumbents might reverse this relation. In particular, given that transparent firms are the only type screened before the entry and therefore they are the only type distinguishable by incumbents, entrants might have a comparative advantage in lending to opaque firms. The analysis provides new insights into the inconclusive evidence of the literature regarding entrants’ credit allocation.     

Financial analyst coverage for U.S. firms facing foreign competition: Evidence from trade liberalization

This study examines financial analyst coverage for U.S. firms following an increase in foreign product market competition. To capture exogenous shocks to domestic firms' competitive environments, we exploit a quasi‐natural experiment from large import tariff reductions over the 1984 to 2005 period in the manufacturing sector. Using data for the years before and after large tariff reductions, our difference‐in‐differences analysis shows evidence of a significant decrease in analyst coverage for incumbent U.S. firms when they face greater entry threat from foreign competitors. We also find that analysts with less firm‐specific experience and less accurate prior‐period forecasts are more likely to stop following the domestic firm when foreign competition intensifies. Overall, the findings suggest that foreign product market competition from global trade liberalization is an important determinant of financial analysts' coverage decisions.     

Sequential product positioning in the presence of an asymmetric network externality intensity

In this study, we analyze the sequential decisions on product positioning of two firms in the presence of network externalities. One commonly accepted phenomena in a market where a network externality arises is the first‐mover advantage, in which the first entrant into a market can earn a higher profit than later entrants. However, in some recent online services markets, we see that the second mover earns a higher profit than the first mover. This occurs because the second mover strengthens its variety of available functions and services markedly, thereby facilitating consumers' work and communication with its main product, which we call network externality intensity. Based on this observation, we analyze sequential positioning in Hotelling's framework by incorporating an asymmetric network externality intensity between firms. We show that unlike the results of previous related studies, both first‐ and second‐mover advantages can appear in the equilibrium depending on the relationship of the network externality intensity between firms; further, they do not change monotonically with the level of network externality intensity.     

Potential competition and quality disclosure

This study presents a model of quality disclosure in which an incumbent, through its quality and disclosure choices, influences the potential that a new entrant enters the market. In this regard, we consider a sequential framework in which the incumbent chooses its quality and decides whether to disclose it to the market; subsequently, the entrant makes the same decisions, if it enters the market. We show that the potential competition can create strategic incentives for the incumbent to choose nondisclosure, because the availability of information about the incumbent's quality promotes entry by enhancing the entrant's expected profit from the market. In addition, an analysis of the effects of mandatory disclosure laws suggests that they can be effective in encouraging new market entrants and in improving the product quality of established firms.     

A contingent theory of supplier management initiatives: Effects of competitive intensity and product life cycle

Direct investments in supplier development and close relationship building are the two major collaborative supplier management strategies for developing and accessing superior supplier capability. The impact of these two strategies, however, has not been uniform across firms, calling for a deeper examination of their relative effectiveness. Utilizing multiple theoretical frameworks, this study examines the relevance and effectiveness of the two collaborative strategies across the growth and maturity stages of the product life cycle (PLC). Specifically, the study analyzes the influence of competitive intensity as an antecedent to supplier development and relational initiatives, and the role of product life cycle as a moderator of the inter-relationships among competitive intensity, supplier development, relational initiatives, and supplier capability. Based on primary survey data, and discussion with practicing managers, the study finds that the individual and integrative effectiveness of supplier development investments (SDI) and relational orientation (RO) can be influenced differently by competitive intensity and PLC stage. In particular, RO can have a foundational role in motivating SDI for superior supplier capability, as also in safeguarding against supplier opportunism in the standardized product market context of the maturity stage. The managerial and theoretical implications of varied emphasis on the two collaborative supplier management strategies across the PLC stages are discussed.     

Are cooperative firms a less competitive form of business? Production efficiency and financial viability of cooperative firms with tradable membership shares

Cooperative firms are generally considered a less competitive form of business than conventional capitalist firms in a market system. In this study, we consider cooperative firms that issue tradable membership shares and show that they are in principle as efficient and financially viable as capitalist firms. This implies that, if allowed to issue tradable membership shares, cooperative firms could be a promising alternative to capitalist firms in a wider range of circumstances.     

Animating the Pioneer versus Late Entrant Debate: An Historic Case Study

This paper examines the debate about whether early entrants/pioneers to an industry enjoy long–term advantage over their successors. While most of the research suggests that pioneers are advantaged, there are methodological problems with these studies that tend to enhance the likelihood that pioneers will be found to be more successful. Through a case study of the US animation industry, it is shown that being a late entrant was almost certainly advantageous to some of the companies concerned. The paper explores the reasons why some late entrants prevailed over others and some of the mechanisms that allowed late entrants to overcome pioneers. The factors involved in survival relative to pioneers include the limited protection of patents, complacency, the mobility of staff with expertise in a new technology (in this case cel animation), and the neglected importance of managerial and organizational factors. It is shown that the findings also have implications for the population ecology approach.     

The effect of operational slack,diversification, and vertical relatedness on the stock market reaction to supply chain disruptions

This paper empirically examines whether operational slack, business diversification, geographic diversification, and vertical relatedness influence the stock market reaction to supply chain disruptions. The results are based on a sample of 307 supply chain disruptions announced by publicly traded firms during 1987–1998. Our analysis shows that firms with more slack in their supply chain experience less negative stock market reaction. The extent of business diversification has no significant effect on the stock market reaction. Firms that are more geographically diversified experience a more negative stock market reaction. We find that firms with a high degree of vertical relatedness experience a less negative stock market reaction. These results have important implications on how firms design and operate their supply chains to mitigate the negative effect of supply chain disruptions.     

Managerial bonding and stock liquidity: An analysis of dual-class firms

Given the decision to create a second class of stock through a dual-class structure, we propose that management is more (less) likely to create a liquid secondary market for both classes of shares the lower (higher) its willingness to tie its personal wealth to firm performance. If market makers recognize this relation, they should assign a higher likelihood to trades motivated by superior information in shares of firms that list both classes of stock and a lower likelihood for firms that list only one class of stock pursuant to recapitalization. Additionally, they should assign a lower likelihood to trades motivated by superior information in shares of IPOs that choose a dual-class structure and list only one class relative to IPOs that remain single-class. Our empirical tests based on IPOS and recaps between 1985 and 1988 provide support for these propositions.     

Director co-option and future market share growth

This paper examines the effect of director co-option on product market outcomes. We find that future market share growth declines as executives co-opt more of the board. Co-opted directors also inhibit the product market benefits from cash reserves. These findings hold in a variety of robustness tests, sustaining the view that director co-option reduces product market performance. Our results further show that co-option leads to lower market share gains among firms whose industry rivals intensely change products and have higher borrowing capacity. Compared to their competitors, firms with more co-opted directors also allocate less internal resources to potential product differentiation strategies, but award executives more cash-based pay. Overall, our findings support the agency theory supposition that firms with co-opted boards lose market share ex-post.     

Patents, Thickets and the Financing of Early-Stage Firms: Evidence from the Software Industry

Legal changes in the patentability of software since the mid 1990s have resulted in a substantial increase in the number of patents on software inventions. We focus here on the impact of transactions costs associated with patent "thickets" on new entrants' interactions with the capital markets. Using data on the financing of entrants into 27 narrowly defined software markets, we show that start-up software companies operating in markets characterized by denser patent thickets saw their initial acquisition of VC funding delayed relative to firms in markets less affected by patents after the mid 1990s. The relationship between patent thickets and subsequent financing activity such as IPO or acquisition is more complex, but there is weak evidence that firms without patents became less likely to go public if they operated in a market characterized by patent thickets. Firms with patents are more likely to be funded or experience a liquidity event. However, the application for a patent appears to matter more than its grant.     

Firm turnover and productivity differentials in Ethiopian manufacturing

Are the forces of market selection at work in Africa? How successful are markets in these economies in sorting out firms on an efficiency basis following the sequence of reforms to liberalize and particularly to transform some of the previous command economies to market oriented ones? What is the pattern of entry and exit in the manufacturing sector and how does it affect industry productivity growth? This study examines these issues using firm-level industrial census data from the Ethiopian manufacturing sector. It is the first attempt to analyze firm turnover and productivity differentials using industrial census data in sub-Saharan Africa. The Ethiopian manufacturing sector exhibits a high firm turnover rate that declines with size. Exit is particularly high among new entrants; 60% exit within the first 3 years in business. Our study consistently shows a significant difference in productivity across different groups of firms, which is reflected in a turnover pattern where the less productive exit while firms with better productivity survive. We also found higher aggregate productivity growth over the sample period, mainly driven by firm turnover.     

Contributions of design emphasis,design resources and design excellence to market performance in technology-based service innovation

The value of design in product innovation is widely acknowledged and supported by empirical research, although extant research tends to focus solely on the role of designers, or design excellence, or design emphasis. Design in the context of service innovation is less well understood. Technology-based firms are viewed as key loci of innovation and, indeed, this innovation is not limited to product innovation, even though many of the stereotypes that come to mind have to do with the development of ever more technologically advanced ‘widgets’. In response to the gaps in current literature, this work takes a holistic approach to measuring design and examines how design resources (designers), design emphasis (emphasis on aesthetics and experience) and the outcomes of design (design excellence) jointly contribute to market performance in technology-based firms engaged in service innovation. Based on a survey conducted among managers of 176 technology-based service firms and evaluations of design excellence by design experts, the findings suggest that design emphasis and design resources both contribute to market performance. Surprisingly, design excellence is not found to contribute to market performance and possible reasons for this are discussed.     

Do voluntary disclosures of bad news improve liquidity?

Can managers improve market liquidity and lower the cost of capital by providing voluntary earnings guidance? This study examines the impact of profit warnings on market liquidity and finds that voluntary disclosure of bad news actually improves market liquidity. By conducting an empirical study over the period 1995–2010 on NYSE, NASDAQ and AMEX listed firms, we find that firms that issue profit warnings show enhanced market liquidity during the post-announcement period. We show that profit warnings reduce information asymmetry and lower bid-ask spreads and increase trading volumes. These results are invariant to daily (short run) and monthly (long run) data after controlling for firm specific attributes. The results have major corporate policy implications. By voluntarily disclosing negative earnings guidance by managers, firms will experience significant improvement in market liquidity, thereby lowering the cost of capital. Our results are even more profound for firms that release bad news with extremely negative stock market impact. In other words, voluntary disclosure of bad news is good for market liquidity.     

Timeliness of Annual Report Releases and Market Reaction to Earnings Announcements in an Emerging Capital Market: The Case of China

This paper examines the relation between firm performance and the timing of annual report releases in an emerging capital market. Based on the population of listed Chinese firms with A-shares for 1994-1997, we find that good news firms release their annual reports earlier than bad news firms, and loss firms release their annual reports the latest. Moreover, consistent with Chambers and Penman (1984) and Begley and Fischer (1998), these firms unexpectedly accelerate the release of good news and delay the disclosure of bad news relative to their previous reporting pattern. We also observe a significant price reaction to the annual earnings announcements for both early (good news) and late (bad news) reporting firms. Similar results are found for those A-share firms which have also issued B- or H-shares to foreign investors. Our study documents a systematic timing pattern of annual report disclosures, which is useful for investors to predict future earnings, especially in anticipating bad news in China's emerging market where information about future earnings is very limited.     

市场需求变化条件下短生命周期产品的订货策略

在短生命周期产品供应链的管理中有一个突出问题，即制造商如何制订有效的订货条件以及零售商如何利用这些订货条件进行合理订货.在市场需求变化条件下，短生命周期的产品订货分为两个阶段：第一阶段初从供应商那里订货一次．第一阶段末第二阶段初，根据市场需求变化再订货一次：本文研究了在一个产品生命周期中，在市场需求变化下，零售商和供应商如何制定有利于双方的第二次订货时间，以及考虑库存成本的零售商在两次订货中怎样采用最优的策略.