Personal characteristics of salespeople and the attractiveness of alternative rewards

How do personal characteristics of salespeople affect their desire for the various rewards available to them? Do younger salespeople desire different types and levels of rewards than older salespeople? Are there differences due to job tenure, marital status, family size, and so forth? In this article, the authors attempt to answer these questions. Based on an extensive investigation of the industrial sales forces from two large companies, the authors examine the relationship between personal characteristics and the sales force's valence for various rewards. Although some of the findings are consistent with current sales management practices, some are not, suggesting that present day thinking with respect to the design and administration of rewards may need more careful scrutiny.     

Price-Anderson act declared unconstitutional: The decision and its effects on nuclear power

In March 1977, the $560 million limit on liability in the Price-Anderson Act was declared unconstitutional. The Price-Anderson Act sets forth a combination private-public insurance and compensation system for handling risks associated with commercial nuclear operations. The limit was found to violate the due process and equal protection provisions of the Fifth Amendment of the U.S. Constitution. This paper examines the salient points of the decision which include: (a) the effects of nuclear plant operations on the plaintiffs; (b) the dependence of nuclear power development on the Price-Anderson Act; (c) the plaintiff's right to bring suit; and (d) the rationale for declaring the Act unconstitutional. The potential effects include the possibility that many utilities and suppliers of nuclear plant components will terminate their nuclear business, the availability of capital funds for nuclear plants will be reduced, and that cost of capital will be increased to reflect the greater risk of nuclear development.     

Dividend decisions and the structure of the life insurance industry

The behavior of life insurance company dividend decision-making is modeled for both stock and mutual companies. Insurer payout behavior, regardless of organizational form, follows a “savings” pattern which buffers the dividend stream from short-run variability. Thus total payouts to policyholders and/or stockholders reflect long-term results rather than annual experience. Variables important in explaining annual changes in dividend levels are related to the organizational structure of the insurer. Whereas mutual companies primarily relate the change in payout to volume, stock companies' payout differentials are primarily a function of earnings. The study also examines the relative importance of policy reserves, contingency reserves, and surplus in dividend decisions.     

The FTC's handling of puffery and other selling claims made “by implication”

The Federal Trade Commission's handling of alleged false advertising representations that are made by implication is examined. Alleged false advertising presentations are held to be implied to the public by the advertiser even though they are not literally stated in his advertisement. The FTC has extended its reach over this kind of misrepresentation in recent years. Cases for 1970–76 are identified, and a catalog is developed of ten types of implications that have been attacked as deceptive during this period. Some, such as the Expansion Implication, are types established as deceptive in earlier years; others, such as the Reasonable Basis Implication, were not attacked prior to the 1970s. Some types, such as the Uniqueness Implication, have been given considerable publicity; others, such as the Inconspicuous Context Implication, are newly categorized in this paper. The consequences of FTC's identification of these types of implications, and of its growing attention to the possibility of misrepresentation by implication, are discussed in detail. A prediction is offered that attention to implications will continue to increase for some time in the future. Puffery is discussed as a category which the FTC might recognize in the future as a type of implied misrepresentation; a rationale is offered for regulating such claims. The role of the researcher is examined, using the assumption that greater attention to misrepresentation that extends beyond a message's literal meaning will produce a greater need for research. The researcher will have attractive opportunities for such work, but will have to confront the problem that playing an advocacy role in legal proceedings may involve significant conflicts with the impartial role that is appropriate for the academic researcher.     

The determination of corporate optimal capital structure under value maximization and informational asymmetry

In this article we examine the optimal capital structure of the firm under conditions of informational asymmetry, i.e., when the manager of the firm is viewed by the market as possessing inside information about the firm's future profitability. Unlike previous research on this topic, in this study we preserve the objective of value maximization when examining the signaling property of corporate capital structure. We also recognize explicitly the other consequences of debt financing on the value of the firm. An integrated analysis of the capital structure problem within the context of rational expectation is presented, and a signaling equilibrium is derived and discussed. The nature of the welfare costs that emerge from the existence of informational asymmetry is also analyzed.     

Operating leverage as a determinant of systematic risk

Since the development of the capital asset pricing model, a number of studies have examined the effect of a firm's operating leverage on its systematic risk. The essential conclusion of these studies is that operating leverage affects systematic risk through either the contribution margin or unit variable costs. In this paper, the models derived in previous research are refined and extended to demonstrate that, for either a single-product or multiproduct firm, the degree of operating leverage measures the full effect of a firm's operating leverage on its systematic risk. In addition, it is shown that a sales variability measure should also be an important differentiating factor among the systematic risk of common stocks. Thus, the results have important practical implications for financial managers when estimating project or divisional risk for investment decisions, and for security analysts when predicting the systematic risk of common stocks.     

Electric utility returns and the market model

Use of estimates of the single factor market model has been criticized on a number of fronts including the allegedly poor empirical “fit” of the characterization for regulated firms. Countervailing evidence is presented here that indicates the market model is a better characterization of electric utilities than of unregulated companies     

Using Box-Jenkins techniques in sales forecasting

This study analyzes the form, stability, and accuracy of Box-Jenkins forecasting models developed for 27 sales series. The order of autoregressive, differencing, and moving average factors is shown for each complete model along with “goodness of fit” criteria. Forecasting models are then presented for a reduced data set and accuracy is compared with seasonally adjusted linear regressions. The results suggest that Box-Jenkins models are often unstable, “goodness of fit” criteria are a poor guide to the best forecasting models, log transforms do not improve accuracy, and Box-Jenkins forecasts are usually (but not always) better than projections made with linear regression techniques.     

The use of incremental goodness of fit indices in structural equation models in marketing research

Indices of the incremental goodness fit of structural equation models can provide useful information beyond that provided by statistical significance tests. Two such indices are described, and their advantages are illustrated with several marketing research studies. Additional discussion focuses on the issue of appropriate null hypotheses against which to test proposed models.     

Determinants of callable convertible bond prices

A new model is proposed in this paper that efficiently estimates the after-market prices of callable convertible bonds. The proposed model is shown to be fairly stable over time and across firm size. The paper also shows that, among other factors, call price and bankruptcy indicators are significant determinants of callable convertible bond prices, suggesting that a priori specification regarding the exercise of call option and the ignorance of firm's possible bankruptcy, as done in past studies, are inappropriate for convertible bond price estimation.     

Sources of sectoral fluctuations in business fixed investment

A model of macroeconomic complementarity is used to assess causes of comovement in investment spending across nine sectors of the U.S. economy. It is hypothesized that the irreversibility and uncertainty of investment spending imply a greater role for investment linkages and aggregate factors in investment fluctuations compared with estimates for employment and output. For the average sector, past investment growth across all sectors, changes in aggregate demand, and a common factor account for two-thirds of the variance of investment growth. After accounting for aggregate demand, sectoral shocks explain 70% of the average sector’s innovations to investment growth.     

Estimating temporal trends in preferences measured by graded paired comparisons

A sizable marketing research literature on preference measurement, prediction, and explanation has thus far been more concerned with point estimates of preference than with consistent changes over time. Such temporal trends can be estimated using data collected from graded paired comparisons. An appropriate technique for deriving individual and group trend parameters is first described and then illustrated using data from an experiment dealing with aesthetic preferences. Suggestions are offered concerning its advantages and limitations for applications in marketing.     

Use of two-limit probit regression model : An analysis of lender response to loan requests

Research problems where the observed dependent variable is restricted to lie within an interval with massing of some of the observations at the limiting values of the interval are frequent in business research studies. This paper analyzes one such problem—that of lender response to a business loan application. The unique features of a regression model with a doubly limited dependent variable are explained and interpreted. Parameter estimation for such models is undertaken by maximum-likelihood techniques. In this paper maximum likelihood estimates are obtained for an empirical problem and compared with ordinary least-squares estimators. Results show substantial differences between least-squares and maximum-likelihood estimates, indicating a possibility for serious errors by using least-squares methods on models with a doubly limited dependent variable.     

Expectancy-value attitude models an analysis of critical measurement issues

Criteria for scaling beliefs and evaluations in the Fishbein model are considered, and a procedure is developed and illustrated for the proper test of multiplicative models. Hierarchical regression is shown to be a valid method for testing interaction hypotheses even when measures are only interval or ordinal scaled.     

The power of business models

Over the past few years, “business models” have surged into the management vocabulary. But, while it has become quite fashionable to discuss business models, there is still much confusion about what business models are and how they can be used. In fact, business models can serve a positive and powerful role in corporate management. While other authors have recently offered definitions of “business model,” none appear to be generally accepted. This lack of consensus may in part be attributed to interest in the concept from a wide range of disciplines, all of which have found a connection to the term. To help managers better understand business models, this paper reviews the extant literature and identifies and classifies the components of business models cited therein. Components were classified into four primary categories: strategic choices, the value network, creating value, and capturing value. To address the absence of a generally accepted definition of a business model, a new definition that integrates and synthesizes the earlier work is offered. Based on the proposed definition, business models are then contrasted with strategy. Four problems associated with business models are also discussed.     

Nested model comparison with structural equation approaches

Potential problems with the conventional nested model comparison procedure in the structural equation models context are discussed. It is argued that fixing parameter values might lead to creation of different unobservables in the nested model. A number of alternative ways of conducting model comparisons are reviewed and applied in a marketing example.     

Business model risk and uncertainty factors: Toward building and maintaining profitable and sustainable business models

Business models and business model innovation—and particularly their opportunities—have been a popular topic recently, but we find the extant literature on the subject lacking. The risk and uncertainty aspect typical of business models has not been sufficiently addressed. We draw upon the existing literature and triangulate results with an extensive expert group interview to identify 28 risk and uncertainty factor groups, creating a checklist that can be used as the first step in an integrative business model risk management process for existing and new iterations. With an established process for managing and identifying risk in business models, managers can make more conscious and well-informed decisions.     

Comparative dynamics in a life cycle theory of the firm

Important insights and contributions to the corporate financial manager's decision problem have been provided by the balanced-growth financial modeling literature, e.g., see [4, 5, 8, 10, 11, 13, 15]. In the spirit of this research, the objective of this paper is twofold. First, a normative model of the dynamic financial planning process in a deterministic environment is constructed wherein the traditional, steady-state assumptions are relaxed. In contrast to prior models, the firm is allowed to pay a liquidating dividend and faces a time-dependent investment rate of return, interest rate, and equity discount rate. Necessary and sufficient conditions for the levered firm's optimal investment-financing-dividend policy decisions which maximize the wealth of its investors are developed, and a solution synthesis technique is employed to catalogue the different decisions at each time instant in terms of three earnings-growth stages over the firm's life cycle. Over this life cycle, the firm experiences high, low, and negative growth stages, with the latter stage distinguished by a liquidating dividend payout and retirement of debt outstanding. Secondly, the life cycle depiction further permits an analysis of the effects, in terms of both direction and magnitude, on the optimal duration of the firm's different growth stages and optimal growth rates due to changes in the firm's return on investment, debt-equity ratio, borrowing rate, equity discount rate, depreciation rate, and flotation costs via a comparative dynamics and simulation framework. Changes in the return on investment are found to have the most influence on the duration of the firm's growth periods and their respective earnings growth rates, while changes in the mix of financing and depreciation rate tend to have the least effect. Furthermore, the magnitudinal impact of marginal changes in any of the above firm variables is greatest at low levels of debt-to-equity and growth-in-earnings and quickly dissipates as the degree of leverage increases.