The role of contractual governance flexibility in realizing the outcomes of key customer relationships

An entrepreneurial firm's relationships with customers, suppliers, investors, universities, and other organizations have a significant and long-lasting impact on the survival and success of the firm. Yet, little research has focused on how the management of these relationships influences outcomes for entrepreneurial firms.This paper focuses on the customer relationships of new, technology-based firms (NTBFs). We aim to contribute to the literature on the governance of exchange relationships between NTBFs and their customers. Further, in so doing, we seek to explore the implications of such governance for the performance of new firms.Because of their small size, their “liabilities of newness,” and their highly specialized, knowledge-intensive resources, NTBFs are able to maintain only a limited number of close customer relationships. Consequently, NTBFs often become highly dependent on one or a few of their customers. In this study, we focus on the relationships between NTBFs and their single largest customers. We refer to the customer that accounts for the highest proportion of an NTBF's total revenue as the “key customer.”Strategic management literature, resource dependence theory, and transaction cost economics emphasize the risks associated with being dependent on an exchange relationship, focusing on the opportunistic use of power by the exchange partner. These perspectives suggest that firms can minimize their external dependencies and protect themselves against opportunism through the use of contracts. The present paper expands this view by also examining how flexibility in exchange governance may unlock potential benefits or dampen potential dangers that an NTBF faces in its commitment to its single largest customer, e.g., sharing the costs and risks of R&;D with the customer, improving the reputation of the NTBF, and realizing savings in sales and marketing costs. We examine the extent to which the realization of the potential positive and negative outcomes of a high level of dependence are moderated by the flexibility of the exchange partners' attitudes toward contractual agreements. The research question that we seek to answer is: Does the manner in which a contractual agreement is implemented affect the outcomes of a customer relationship for an NTBF at high levels of exchange dependence on the key customer?We develop a set of hypotheses that examines how the governance of the key customer relationship affects the NTBF's new product development, reputation, and sales costs when exchange dependence on the key customer is high. We use the term “contractual governance flexibility” to refer to the extent to which the exchange partners are willing to adjust to changes in the relationship instead of relying on the contract. We test the hypotheses with survey data from 195 NTBFs in the UK. The results of regression analyses reveal that contractual governance flexibility moderates the relationship between exchange dependence and outcomes. In relationships with a high level of exchange dependence, greater contractual governance flexibility was associated with greater new product development and sales cost advantages. No such benefits were realized for relationships in which exchange partners relied heavily on the contract.These findings are important because they suggest that by relaxing formal contractual mechanisms governing a relationship, NTBFs can derive benefits from key customer relationships that are characterized by a high level of dependence. Our findings suggest that at high levels of exchange dependence on key customers, NTBFs can benefit when greater contractual governance flexibility is present. Our data indicated that, interestingly, NTBFs tend to do just the opposite: at higher levels of exchange dependence, NTBFs are inclined to rely increasingly on the contract. By so doing, they may fail to realize the potential benefits of the relationships, such as gaining access to complementary resources and reducing costs. These outcomes, which may be derived from dependent exchange relationships by means of contractual governance flexibility, can have a significant influence on the long-term development and competitive advantage of an entrepreneurial firm.     

Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation

Technical analysis, also known as 'charting,' has been a part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis—the presence of geometric shapes in historical price charts is often in the eyes of the beholder. In this paper, we propose a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression, and we apply this method to a large number of U.S. stocks from 1962 to 1996 to evaluate the effectiveness of technical analysis. By comparing the unconditional empirical distribution of daily stock returns to the conditional distribution—conditioned on specific technical indicators such as head-and-shoulders or double bottoms—we find that over the 31-year sample period, several technical indicators do provide incremental information and may have some practical value.     

Adjustment of Profits: Evidence from Australian Manufacturing

Studies of industry profitability generally deal with long-run equilibrium models, making no allowance for slow adjustment to equilibrium. In this study, a cross-sectional analysis is carried out against a sample of Australian manufacturing industries at the Australian Standard Industrial Classification (ASIC) four-digit level between 1977–78 and 1984–85. Firstly, a profit model is estimated in equilibrium form as well as allowing for both uniform and variable adjustment rates across industries. The variable adjustment model is superior, with either model implying at least half adjustment to equilibrium within the seven-year sample period. Secondly, results are examined for the impact of firm homogeneity of firms within industries. Homogeneity of firms is found to have substantial impact,increasing both the estimated profits-concentration relationship and the estimated speed of adjustment.     

Schumpeter and Steindl on the dynamics of competition

This paper compares and contrasts the contributions of Joseph Alois Schumpeter and Josef Steindl to the competitive paradigm. Both reject the static nature of traditional profit maximizing analysis and the analytical device of a representative firm. Instead they both opt for a dynamic framework in which there is a key role for innovation. Differences emerge in terms of the characteristics of individual firms that nurture the competitive struggle and are responsible for technical change. The maturation process of a capitalist economy, whereby a natural progression will involve an increase in concentration, as prescribed by Schumpeter and Steindl is also explored, as is criticism of their analyses. Finally the holistic approach to competitive modelling, a legacy of these two economists, is expounded and challenges for the future identified.     

Teamwork and Morality: Comparing Lean Production and Sociotechnology

In this article two important organizational concepts – lean production and sociotechnical systems design – are evaluated on their reflective capacity and their (moral) outcomes. At least in theory both concepts entail a promise of overcoming some of the irreflexive pitfalls of rational organization. As will be shown, both concepts do have shortcomings too. It is argued that the meaning and value of the concepts is related to the context in which the systems are implemented.     

MACROECONOMIC AND LABOUR MARKET POLICIES FOR EMPLOYMENT GENERATION IN SOUTH AFRICA

The recent advent of political democracy in South Africa has brought into sharp focus those macroeconomic and labour policies designed to combat unacceptably high unemployment levels, that have escalated steadily to present estimates of approximately 40 per cent of the Economically Active Population. The continuing implementation of neo-liberal orthodox policies, the authors maintain, will aggravate the problem. An alternative theoretical framework containing elements of a neo-Ricardian, post-Keynesian approach and based on research work of the Macroeconomic Research Group (MERG) is advocated. This approach focuses on State-led, demand-inducing policies, while not neglecting the supply side of the labour market in South Africa.     

Households transport-home energy conservation strategies in response to energy price policies: A stated adaptation experiment based on portfolio choices and cross effects designs

This article explores consumer investment choice in long-term energy conservation technology and assesses trade-offs in energy saving behaviour between the housing and transportation domains. The long-term energy conservation choice problem is conceptualized as a portfolio choice problem. Consequently, to measure trade-offs between investments in housing and transport options, a cross effects choice design is developed in which respondents were shown one or more alternate ways to reduce their current energy consumption: (1) investing in new technology in the house, such as solar panels; (2) exchanging the current car for a more energy efficient car; (3) buying a new energy-efficient car, such as EV or solar car; (4) moving house to reduce current travel distances. To help respondents linking these options to their current energy consumption, a new Web-based survey system (SINA) to implement and administer stated adaptation experiments was developed. The system was used to collect two sets of data. First, data about out-of-home and in-home energy consumption, together with detailed time use data, was collected. Second, using a cross effects design, respondents were asked to select a portfolio of energy-saving strategies in response to different energy pricing policy scenarios. Results reported in this paper are based on 572 respondents who completed the survey and responded to seven adaptation questions based on their current energy expenditures. A random parameters logit model is estimated to predict the probability of choosing a particular portfolio of energy-saving options. Estimation results indicate that individuals from different socio-demographic groups exhibit varied preferences. The saving option characteristics, especially cost related characteristics have significant effects on individuals' preferences. Moreover, the results also showed significant effects of choice set composition on energy saving options. Further, the energy pricing policies had showed mixed effects on individual's preferences.     

How family influence,socioemotional wealth,and competitive conditions shape new technology adoption

Research summary : In family businesses, investment decisions often involve both socioemotional wealth and economic considerations. Focusing on new technology adoption, we argue that multiple dimensions of socioemotional wealth contribute to complex effects within different types of family firms—depending on the level of family control—as well as in contrast to non‐family firms. Results based on cable TV operators from 1983 to 1987 confirm that family ownership correlates negatively with technology adoption, especially when family owners hold a minority rather than majority position. We also show contingencies based on performance improvements and competitive threats. Our arguments contribute new insights about the tensions between economic and socioemotional factors within minority family ownership that are absent from non‐family firms and more pronounced than in majority family firms. Managerial summary : We find evidence of greater reluctance toward new technology adoption among firms with minority family influence than majority family influence. This suggests that goals related to socioemotional wealth only partly explain the cautious decision‐making observed in family firms, with further caution arising from conflicting priorities between family and non‐family owners. Recent performance improvements help offset the reluctance to adopt new technology, albeit to a lesser degree among firms with minority family ownership. High levels of competitive threats also offset the reduction in new technology adoption, and contrary to expectations, to a greater extent among minority family firms. Copyright © 2016 John Wiley & Sons, Ltd.     

An Experimental Analysis of Modifications to the Centralized Milk Quota Exchange System in Quebec

Using experimental economics, this paper tests the potential impacts of modifying the centralized quota exchange system in Quebec with the intent of decreasing the quota price while minimizing negative impacts on auction effectiveness. Two separate treatments are applied to a uniform price auction similar to that employed in Quebec. The first treatment is an exclusion (5% or 15%) of the highest buyer bids and seller offers. The second is a tax (2% or 10%) on all units offered for sale that remain unsold. Various combinations of the two treatments are also tested. The results suggest that exclusion of the highest bids and offers can decrease the price of the quota and that a 15% exclusion rate is more effective than a 5% rate. The tax alone has little impact on quota price. The combination of the two treatments generates a more marked reduction in both the number of exchanges and the price of the quota than when the tax or the exclusion is applied individually. However, the combination of treatments results in a greater loss of economic efficiency. In all cases, relatively small market price reductions are realized at the expense of substantial losses in economic efficiency. La présente étude teste de manière expérimentale la capacité d'une modification au système centralisé de vente du quota à faire diminuer le prix du quota laitier au Québec tout en minimisant les impacts négatifs des changements sur l'efficacité de l'enchère. Cette modification consiste à appliquer deux traitements sur l'enchère de prix uniforme où s'échange le quota. Le premier traitement consiste en une exclusion (5% ou 15%) des mises les plus élevées des acheteurs et des vendeurs. Le second traitement est une taxe (2% ou 10%) appliquée aux unités que les vendeurs mettent en marché et ne réussissent pas à vendre. Différentes combinaisons de ces deux traitements sont également testées. Les données générées permettent de conclure que le mécanisme d'exclusion des mises les plus élevées permet de faire diminuer le prix du quota, l'exclusion de 15%étant plus efficace que celle de 5%. Pour sa part, la taxe seule a peu d'impact sur le prix du quota tandis que la combinaison des deux traitements entraîne une diminution du nombre de transactions et du prix du quota plus marquée que lorsque les traitements de taxe et d'exclusion sont appliqués individuellement. Cela a comme corollaire d'entraîner une perte d'efficacitééconomique plus importante. Dans tous les cas, des baisses de prix de marché relativement modestes sont réalisées au coût d'importantes pertes d'efficacitééconomique.     

Cross-subsidization Due to Inframarginal Support in Agriculture: A General Theory and Empirical Evidence

A general theory of cross-subsidization due to inframarginal support is developed. Two sources of output distortion are identified: exit deterrence and extramarginal output. Some firms would not be in business without the subsidy. Cost savings due to declining average costs are always greater than the losses incurred where price equals marginal cost. Moreover, it is theoretically possible for inframarginal subsidies to expand output more than equivalent fully coupled subsidies. Empirical analysis of U.S. dairy subsidies isolates these components of cross-subsidization and finds distortions from inframarginal support to be substantial, with implications for trade negotiations, dispute settlement, and policy formulation.