Firm-supplier relations and managerial compensation

In this paper we examine customer firms’ managerial compensation policies when they have important supplier relations. We show that firms with greater reliance on their suppliers tend to offer higher total- and equity-based pay but lower risking-taking incentives to its top executives. Our results are consistent with the argument that suppliers making firm-specific investments are concerned about the customer firm’s prospects. Therefore, firms with important supplier relations use the compensation policies of their top executives (more equity-based and less risk-taking) to signal their commitment to a stable and promising performance in the future. To address endogeneity issues arising out of time-varying omitted variables, we exploit a 2SLS procedure to supplement our baseline OLS findings. Our results are robust alternate measures of suppliers’ relationship-specific investments and econometric models. Overall, our results indicate that some of the heterogeneity in managerial compensation can be attributed to characteristics of the firm’s supply-chain relations.     

Data envelopment analysis with stochastic variations in data

The mathematical programming-based technique data envelopment analysis (DEA) has often treated data as being deterministic. In response to the criticism that in most applications there is error and random noise in the data, a number of mathematically elegant solutions to incorporating stochastic variations in data have been proposed. In this paper, we propose a chance-constrained formulation of DEA that allows random variations in the data. We study properties of the ensuing efficiency measure using a small sample in which multiple inputs and a single output are correlated, and are the result of a stochastic process. We replicate the analysis using Monte Carlo simulations and conclude that using simulations provides a more flexible and computationally less cumbersome approach to studying the effects of noise in the data. We suggest that, in keeping with the tradition of DEA, the simulation approach allows users to explicitly consider different data generating processes and allows for greater flexibility in implementing DEA under stochastic variations in data.     

A multilevel perspective on knowledge transfer: evidence from the Chinese automotive industry

We adopt a multilevel perspective to study the transfer of collective and individual knowledge. By making a clear theoretical distinction between collective and individual attributes in concepts such as knowledge, teaching approach, and absorptive capacity, this study extends the knowledge transfer literature and provides fresh insights into the ways in which collective and individual knowledge are transferred. Based on a survey of the capability transfer activities of 161 engineering units of multinationals in the Chinese automotive industry, we empirically validate the distinction between individual and collective teaching activities and absorptive capacity. More importantly, we find that the largely underexplored collective‐level mechanisms, such as collective teaching and collective absorptive capacity, are more effective in transferring both collective knowledge and individual knowledge in comparison to their individual‐based counterparts. Our findings also have important implications for management of multinationals and international joint ventures, particularly in emerging economies. Copyright © 2009 John Wiley & Sons, Ltd.     

Nonparametric measures of efficiency in the presence of undesirable outputs: a by-production approach

In empirical research on productivity measurement adjusted for undesirable outputs on the side, the good and the bad outcomes are treated as joint products of the underlying production process. In the present paper, following Murty, Russell, and Levkoff, we conceptualize the good output as technologically separable from the bad output. Joint disposability is assumed between the bad output and the polluting input, rather than weak disposability and null jointness between the good and bad outputs. Moreover, we set up an integrated DEA optimization problem over the intersection of these two subtechnologies to measure the efficiency of a firm that produces a bad output alongside the good output. In an empirical illustration of our methodology, we use country-level data for an unbalanced panel of 64 countries over the years 1986 through 2011 where per capita GDP is the good and per capita \(\hbox {CO}_{2}\) emission is the bad output. We then utilize our DEA results to compute opportunity costs of a targeted reduction in \(\hbox {CO}_{2}\) emission in terms of required dollar amounts of reduction in per capita GDP for the individual countries in selected years.     

Re-visiting collaborative behavior in supply networks – structural embeddedness and the influence of contextual changes and sanctions

This study considers decision making beyond a dyadic buyer-supplier context to the network context. Decisions made by firms are shaped by behavioral norms within the supply network as perceived by the decision makers. Firms can perceive themselves to be part of a collaborative regime or one in which the potential for non-cooperation is high. Further, the ability to put sanctions on non-cooperating firms could shape the overall behavioral patterns in the network. To gain further insights into these aspects and their interactive effects on firm behavior, our study investigates decision-making in supply network by means of behavioral experiments. By organizing practicing managers in a supply network, the study investigates the role of structural embeddedness, incentive structure, and sanctioning mechanisms on the level of collaboration. The results of this study confirm that while sanctions are detrimental for collaborative behavior in a supply network, they play an important role when the underlying norms of governance of such a network are perturbed. The results show that structural embeddedness provides a context that aids adaptive collaborative behavior by firms that are part of the supply network. Once the incentive structure is altered such that there is a higher payoff from defection, the adaptive collaborative behavior is replaced by a behavior in which firms try to maximize their returns and forego collaborative decision-making behavior.     

Comparing predicted prices in auctions for online advertising

Online publishers sell opportunities to show ads. Some advertisers pay only if their ad elicits a user response. Publishers estimate response rates for ads in order to estimate expected revenues from showing the ads. Then publishers select ads that maximize estimated expected revenue.By taking a maximum among estimates, publishers inadvertently select ads based on a combination of actual expected revenue and inaccurate estimation of expected revenue. Publishers can increase actual expected revenue by selecting ads to maximize a combination of estimated expected revenue and estimation accuracy.     

Toward a continuum of measurement scales in Just-in-Time (JIT) research – an examination of the predictive validity of single-item and multiple-item measures

We compare the predictive validity of single-item and multiple-item measures utilized in Just-in-Time (JIT) research. The study examines if single-item measures could be used for some of the JIT practices, especially if the object of inquiry is concrete singular and if the attribute to be researched is concrete. Arguments are developed for the concrete nature of the JIT practice of “set-up time reduction” and we examine the ability of a single-item measure of this variable to predict the criterion variable (delivery performance). In addition, the study also examines the efficacy of using multiple-item measures for variables that are abstract in nature, and thereby attempts to develop a continuum of JIT constructs ranging from concrete to abstract. The results obtained by analyzing two sets of survey data show that multiple-item measures are not necessarily more valid than single-item measures for all constructs. The findings provide evidence that multiple-item measures and single-item measures for scale development should be contingent upon the nature of constructs. For concrete constructs, single-item measures are as valid as multi-item measures. Meanwhile, for abstract constructs it is important to ensure that multiple items are considered to capture the multi-dimensional nature of these constructs. Results also reveal that JIT practices display significant differences in terms of abstract/concrete perceptions. The paper presents theoretical and practical implications of the findings, and offers directions for future research.     

Inflation and the Financing of Government Expenditure: an Introductory Analysis with an Application to Turkey

This article presents a simple framework to assess the consistencyof appropriately defined fiscal deficits with other macroeconomictargets, such as inflation. It also considers the relation offiscal deficits to output growth, real exchange rate developments,and management of internal and external debt. Finally, it considersthe implications of relying on interest-bearing government debtto postpone the adjustment necessary to restore consistencywith inflation targets. It demonstrates how the intertemporalbudget constraint of the government creates a tradeoff betweencurrent and future adjustment. Real interest rates and outputgrowth rates are shown to determine the terms at which thistradeoff takes place. The usefulness of this framework is demonstratedthrough an analysis of fiscal policy options in Turkey in 1985.     

THE WEALTH EFFECTS OF TRACKING STOCK RESTRUCTURINGS

We provide a comprehensive examination of the post‐issue wealth effects of 29 completed tracking stock restructurings. We document that for the parent stock and for the combined firm, tracking stock restructurings lead to insignificant long‐term excess returns. However, we find that shareholders of tracking stocks realize significant post‐issue wealth losses. Unlike spin‐offs and carve‐outs, announcements of tracking stock restructurings are preceded by negative one‐year excess returns, and unlike the positive post‐issue long‐term excess returns to spin‐off stocks and the insignificant long‐term excess returns to carve‐out stocks, tracking stocks experience negative long‐term excess returns.