Takeover deterrents and cross partial ownership: The case of golden shares

We analyse takeovers in an industry with bilateral capital‐linked firms in cross partial ownership (CPO). Before merger, CPO reduces the profitability of involved firms, confirming the “outsider effect.” However, the impact of CPO upon merger profitability is two‐sided in a Cournot setting. CPO, by cointegrating profits, increases output collusion leading to anticompetitive effects with facilitated mergers in most cases. Nonetheless, a protective threshold exists for which CPO arrangements can reduce the incentives for hostile takeovers. This has potentially significant regulatory implications. An illustrative example showcases the potential relevance of CPO as a defence against hostile takeovers across different industries.     

The role of executives in hostile takeover attempts

This paper proposes a two-stage game theoretic model where the discretionary power of executives acts as an implicit defense against hostile takeovers. Following managerial enterprise models, this paper analyzes the effects of discretionary power of target’s executives over R&D and advertising expenditures in defeating hostile takeover attempts. It is shown that in vertically differentiated industries, in equilibrium, target’s executives keep low level of R&D and advertising expenditures to make their firm an unattractive target for hostile takeovers. The model reveals that executives are influenced by their self-interest of monetary and non-monetary benefits and this self-interest makes the industry more differentiated.     

A strike of ‘unorganised’ workers in a Chinese car factory: the Nanhai Honda events of 2010

This strike in a Chinese factory of the Japanese multinational Honda in 2010 received worldwide coverage. A young workforce sustained an on–off strike, with varying numbers of workers involved, for 19 days. Academic interest has focused on prospects for collective bargaining and union reform in China. This article, using interviews with former strikers, and newspaper sources, analyses the strike process. The workplace union, as a constituent of the All‐China Federation of Trade Unions and subject to the Chinese Party–state, was hostile; so the workers were in effect ‘unorganised’. Examples of non‐union strikes in the interwar car industry of the USA and UK show the similarity of situation with the Honda workers. Hiller's classic text, The Strike, provides a surprisingly suitable framework for understanding strikes of unorganised workers. The strikers' vocabulary ‘framed’ their demands initially as injustice, but incorporated anti‐Japanese sentiment and, then, dignity, in response to events.     

Defensive acquisitions in the banking industry: The takeover premium hypothesis

We define defensive acquisitions as takeovers made by a firm so as to become so large that it becomes an unattractive target itself. A sample of defensive acquisitions in the banking industry is used to test the takeover premium hypothesis. Under this hypothesis, the defensive acquirers lose because a takeover premium that previously existed in their prices is deflated while the takeover premium increases for smaller competitors because they become more likely targets. We find that the defensive acquirers experience significant negative abnormal returns on the announcement day, and that smaller competitors have positive abnormal returns on the announcements of defensive acquisitions. In contrast, larger competitors do not react to the announcements. The results are consistent with the takeover premium hypothesis.     

ADAM SMITH AND THE ROLE OF THE METAPHOR OF AN INVISIBLE HAND

Daniel Klein and Brandon Lucas's ‘In a Word or Two, Placed in the Middle: The Invisible Hand in Smith's Tomes’, following a vague hint by Peter Minowitz (2004) , offers original physical evidence that Smith ‘deliberately placed the phrase “led by an invisible hand”– at the physical centre of both his masterworks’. Further, it suggests that the invisible‐hand paragraphs are a response to Rousseau (1755 ); and that in ‘numerous and rich ways’, centrality holds ‘special and positive significance in Smith's thought’. This paper acknowledges the physical centrality of the invisible‐hand metaphor, but questions whether centrality alone gives weight to wider claims that the ‘invisible hand’ was Smith's ‘central idea’. It draws upon Smith's Rhetoric Lectures (1763), and argues that the invisible‐hand paragraphs in The Theory of Moral Sentiments and Wealth of Nations identify the actual objects of the invisible‐hand metaphor. This paper insists that Adam Smith is the most reliable source for revealing what he meant. In contrast, most modern attributions of special meaning to Adam Smith's use of the metaphor ignore Smith's teaching on the use of metaphors and, instead, make numerous, and often mutually exclusive, claims that Smith had a ‘doctrine’ of ‘an invisible‐hand’.     

EXPLORING STRATEGY PERCEPTIONS IN CHANGING ENVIRONMENTS*

This article explores how a firm perceives its own strategy and that of its competitors. Findings from an exploratory, sociometric study covering both a period of ‘boom’ and a period of ‘bust’ demonstrated that firms and competitors differ greatly in their strategy perceptions. These perceptions were also found to differ from ‘objective’ evaluations made by the investigator. None of the firms studied was found to change their basic strategy in response to environmental jolts.     

A Partially Heterogeneous Framework for Analyzing Panel Data

This article proposes a partially heterogeneous framework for the analysis of panel data with fixed T. In particular, the population of cross‐sectional units is grouped into clusters, such that slope parameter homogeneity is maintained only within clusters. Our method assumes no a priori information about the number of clusters and cluster membership and relies on the data instead. The unknown number of clusters and the corresponding partition are determined based on the concept of ‘partitional clustering’, using an information‐based criterion. It is shown that this is strongly consistent, that is, it selects the true number of clusters with probability one as N→∞. Simulation experiments show that the proposed criterion performs well even with moderate N and the resulting parameter estimates are close to the true values. We apply the method in a panel data set of commercial banks in the US and we find five clusters, with significant differences in the slope parameters across clusters.     

Self‐Governance for Sustainable Global Supply Chains: Can it Deliver the Impacts Needed?

The world community convened in Rio de Janeiro in June 2012 for the third UN Conference on Sustainable Development. We are, however, increasingly facing major persistent threats, which despite being known for a few decades are still far from being solved – or are even still increasing. On the individual business level, this has four major implications: increased social pressures; possible reputational damage; exposure to resource wars; and front‐running competitors adjusting their value chain strategies. In supply chain governance this leads to four main types of strategies: do it yourself; join forces; the 5C‐approach and harmonising. The key question is: is this sufficient? Imagine 2022 – where will we be 10 years after Rio 2012? Is a rapid and structural transition to a circular and fair global economy possible, using this path of self‐governance for products traded in the global economic arena? This will strongly depend on four key factors: rapid growth of consumer demand; ‘all‐inclusiveness’ of these supply chain governance approaches; successful uplifting production practices of all suppliers; and addressing the major issues of unsustainability. Here we see various serious weaknesses, like the lack of third‐order evaluation and biases causing some of the more recent issues to be overlooked and less visible supply chains. The challenge is to develop a form of ‘meta’‐governance, including new approaches by governments, combining public policy strategies with the demonstrated virtues of self‐governance. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment     

Viceroys or Emperors? An Institution‐Based Perspective on Merger and Acquisition Prevalence and Shareholder Value

We study how cross‐country variance in institutions that aim to address core agency problems influences consequential strategic decisions of firms around the world. Scholars frequently argue that the interests of minority shareholders are threatened by merger and acquisitions (M&As) due to principal‐agency problems. Rather than acting in shareholders’ best interests, managers potentially act as viceroys, using M&As to cushion themselves from risk and extract more pay. Yet equally salient is the issue of principal‐principal agency, where controlling shareholders can behave as emperors who use M&As to siphon off assets and profits, and appropriate wealth of shareholders with fewer control rights. Taking an institution‐based perspective on these ‘viceroy’ and ‘emperor’ problems, we conjecture that institutions aimed to address these agency problems can generate the desired outcome regarding M&A prevalence, but may also produce unintentional negative consequences for shareholder value as a side‐effect. Empirical evidence covering M&As from 73 countries supports our hypotheses.     

Wealth Effects of International Investments and Agency Problems for Korean Multinational Firms

This paper recognizes the recent surge in cross‐border investments by MNCs from newly industrialized countries and investigates the wealth effects of FDI announcements by Korean firms, which are the leading FDI providers in Asia. The empirical results indicate that for Korean MNCs: 1) cross‐border investments increase shareholder wealth; and 2) they do not obtain the firm‐specific technological advantages over international competitors. The paper also presents evidence that cross‐border investments do not increase shareholder wealth for the 30 largest chaebol‐affiliates, and that shareholder wealth losses are greater when corporate ownership is concentrated, as suggested by Shleifer and Vishny (1997) and La Porta et al. (1998, 2000) .     

Do stakeholder groups influence environmental management system development in the Dutch agri‐food sector?

This paper presents the results of a survey that included 492 companies in the Dutch agri‐food sector with respect to the influence of stakeholder groups on the companies' level of environmental management system (EMS) implementation. It is concluded that primary stakeholders (government, clients) are more relevant for EMS development than secondary stakeholders (such as environmental organizations). The results suggest that small and medium‐sized companies are able to accommodate to demands with respect to the implementation of internally oriented care systems (I‐EMSs). I‐EMSs focus at the single firm or location. In general, they are predominantly influenced by governmental and other ‘non‐commercial’ stakeholder groups. For the implementation of externally oriented EMSs (E‐EMSs), which focus on the supply chain and network, qualitative rather than quantitative relationship characteristics between companies and the government are important. Moreover, commercial stakeholder groups (such as suppliers, clients and competitors) influence E‐EMS levels significantly. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.     

WHY EUROPE? A CRITIQUE OF INSTITUTIONALIST AND CULTURALIST ECONOMICS

Abstract Economists have recently started to discuss the roles of institutions and cultural beliefs in explaining the performance of civilizations. This paper investigates two views, ‘institutionalist economics’ and ‘culturalist economics’, with regard to the question of why Europe rose economically a few centuries ago, while other regions of the world lagged behind. These two views share a common platform raised on two pillars. First, both regard institutions/beliefs as extra‐economic – as primordial entities that ultimately stand independent of economic performance. Second, both regard economic performance as fully determined by institutions/beliefs – i.e. normative causality in the sense that institutions/beliefs determine performance. Douglass North's (2005) analysis of economic performance, for example, is based on both pillars. Concerning the primordial pillar, he attributes ‘the mystery’ of the rise of Europe to primordial beliefs, viz. ‘Christian dogma’ and English ‘individualism’. Concerning the normative pillar, he presumes that such beliefs have almost one‐to‐one correspondence with economic performance. This paper, though, maintains that the two pillars (primordial analysis and normative causality) are rather fragile: Advocates of the first pillar fail to recognize that institutions/beliefs are endogenous. Advocates of the second pillar fail to recognize that institutions/beliefs can give rise to diverse economic performances.     

The business case for sustainability? An examination of small firms in the UK's construction and restaurant sectors

Studies show that despite a concerted attempt by UK policy‐makers to portray ‘eco‐efficiency’ measures as cost reducing, most owner‐managers of small firms view environmental measures as expensive to undertake. As a result, owner‐managers tend to be highly resistant to voluntarily improving their environmental performance. Given that SMEs are such a vast sector of the economy, this perceived discord between profits and environmental protection is clearly a major barrier to the ‘greening’ of industry. This ESRC‐funded study has sought to unearth the underlying motivations for why SME owner‐managers in the UK resist or accept the idea that there are business benefits for improving their environmental performance. The findings from 40 in‐depth interviews with SME owners in the UK's construction and restaurant sectors and 12 ‘key informants’ from industry and government are presented, followed by a discussion of SME perspectives on the ‘business case’ for sustainability and its implications for policy‐makers. Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment.     

The contours of employee voice in SMEs: the importance of context

This article develops a context‐sensitive approach to analyse how and why voice operates in small‐ to medium‐sized enterprises (SMEs), an area that remains under‐theorised and under‐researched. By building on a priori frameworks with proven ability to unpack complexity and take account of the wider context of SMEs, this article explores how resources (human and social capital) and constraints (product market, labour market and strategic orientation) interact to shape voice practices. The article finds significant differences between ‘reported’ compared with ‘actual’ practices in situ, and identifies different types of firms (‘strategic market regulation’, ‘strategic market‐led’ and ‘non‐strategic market‐led’) along with the factors that influence the form and practice of voice. Overall, the article argues that researchers should further pursue research that appreciates the layered nature of ontology and the role played by firm context to explain complex organisational phenomena, if we are to advance our understanding of voice practices in SMEs and beyond.     

Toggling with Taylor: A Different Approach to Reading a Management Text*

ABSTRACT This paper identifies influential, but previously unrecognized, subtexts in the writings of Frederick Winslow Taylor. Working with analytical methods developed from reader‐response theories of literary criticism, we look at the words of the text as we share the standard meaning‐making of the management community, as well as through the words of the text searching out the worldview that emerges from our particular reading of the subtext. We have described our approach to reading as ‘toggling’: that is, switching between reading text ‘rhetorically’ and reading it ‘philosophically’. We conclude that reader identification with textual voices may appear in philosophical as well as rhetorical reading outcomes – that Taylor's text may inveigle readers into accepting a moral worldview wrapped up in a seemingly rational argument – and that ‘toggling’ would empower management theory readers.     

MODELS OF REGIONAL GROWTH: PAST,PRESENT AND FUTURE

Abstract This paper presents an overview of various models of regional growth that have appeared in the literature in the last 40 years. It considers the past, and therefore supply‐side models, such as the standard neoclassical, juxtaposed against essentially demand‐side approaches such as the export‐base and cumulative causation models (as integrated into the Kaldorian approach); before moving on to the ‘present’ and more recent versions of the neoclassical model involving spatial weights and ‘convergence clubs’, as well as new economic geography core–periphery models, and the ‘innovation systems’ approach. A key feature of the more recent literature is an attempt to explicitly include spatial factors into the model, and thus there is a renewed emphasis on agglomeration economies and spillovers. Discussing ‘present’ and ‘future’ approaches to regional growth overlaps with the current emphasis in the literature on the importance of more intangible factors such as the role of ‘knowledge’ and its influence on growth. Finally, there is a discussion of the greater emphasis that needs to be placed at the ‘micro‐level’ when considering what drives growth, and thus factors such as inter alia firm heterogeneity, entrepreneurship and absorptive capacity.     

The Management of Creative Vision and the Economics of Creative Cycles

This paper proposes a new theory of variability in innovation performance in managerial firms that contract ‘creative vision’. We argue that such firms are prone to ‘creative cycles’ that arise from uncertainty‐induced systemic overshooting that can threaten the firm's financial viability, requiring managers to shift control back to risk‐averse financial controllers. But this creates opportunities for competing firms to engage in bold creative visions, threatening the firm's market viability and inducing control to shift back to newly contracted suppliers of ‘creative vision’. We discuss how this ‘principal‐agent‐agent’ mechanism plays out, the types of uncertainty that drive it, and consider the industry‐level externalities it induces. Copyright © 2015 John Wiley & Sons, Ltd.     

UK consumer attitudes concerning environmental issues impacting the agrifood industry

Consumer concern for the environment has been on the increase in recent years. This concern has created many opportunities, as well as threats, for all businesses but particularly for those involved in the agrifood industry. These concerns can and do change considerably in a short space of time so it is essential that consumer surveys are conducted on a frequent basis to monitor these changes. This paper presents the findings of one such survey based on the findings of a consumer attitude study concerning environmental issues relating to the agrifood industry. The data is subjected to a cluster analysis in order to segment the respondents and make the findings more meaningful. The paper concludes that there are four groups of consumers (the ‘angries’; the ‘not‐quite‐so‐angries’, the ‘anxious‐but‐amiables’ and the ‘Panglossians’) and that while a number of subjects constitute issues for consumers the one that unites most consumers, and which will probably have the greatest impact on the environment, is genetic modification. Consumer resistance to genetic modification is found to be high and it is suggested that as a result farmers will continue to employ traditional farming practices in the future. Copyright © 2000 John Wiley & Sons, Ltd. and ERP Environment.     

The Role of Corporate Sustainability in a Low‐Cost Business Model – A Case Study in the Scandinavian Fashion Industry

This multi‐level case study illustrates how corporate sustainability contributes to the low‐cost business model of a Scandinavian fashion company. Contrary to parts of the extant literature, we do not find that corporate sustainability directly adds measurable value (e.g. a better brand image); neither does it exert coercive control over critical supplier relationships. However, corporate sustainability minimizes the downside risk of the business model. It does so by (1) creating implicit contracts that reach beyond traditional ‘shareholder value’, (2) transferring risk to suppliers and (3) improving leadership by motivating management and employees, and by directing their attention to critical issues. For companies, we offer the insight that corporate sustainability is a necessary complement to shareholder value, even if the relationship is not obvious at first sight. We also suggest that concerted actions of companies or a positive connotation of certification create effective control over suppliers. As to public policy, we conclude that regulators could introduce mandatory disclosure of suppliers to facilitate controls through stakeholders, or alternatively an industry‐wide comply‐or‐explain code of conduct. We also address how regulators can take direct actions against countries with unsustainable labor policies. Last, we suggest future research topics, e.g. expanding the notion of a business model by interpreting ‘adding value’ as prevention of losses. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.