Excess market value,market power,and inside ownership structure

This study is an empirical investigation of whether principal-agent problems do in fact significantly affect corporate managers' decision making, and hence the price of the firms' securities. If inside ownership structure of firms is reflected in firm market value, then agency theory leads one to expect that market value will be a positive function of the degree of inside ownership. This study demonstrates that rational investors recognize inside ownership and its resultant effect on market value. Furthermore, it is shown that excess market value as measured by the Tobin's Q-ratio is related to the level of advertising and R&D expenditure, the degree of market power as proxied by the Lerner Index, leverage, and firm size.     

Overlapping ownership and product innovation

We characterize the effect of overlapping ownership (OO) on investments in drastic product innovation. The success probability of innovation increases with investment. We analyse two opposing forces: (1) OO induces firms to internalize that success on their own behalf erodes the rivals’ business, reducing investments; (2) OO softens competition in the product market, enhancing investments. Our analysis reveals that the competition-softening effect, by stimulating investments, can induce OO to benefit consumers, in particular when the R&D projects are complex. We also show that an incumbent technology raises the threshold required for OO to stimulate investments in innovation.     

Trademarks,market power,and information

This paper examines the advantages of market power acquired or maintained through trademark. Without denying the benefits to consumers of trademark protection, several objections to trademark-based dominant positions are raised:-1- the possibility that in certain cases the social benefits are less than the sum of private benefits, and less than the social costs, of trademark protection;-2- the link between trademarks and incorrect perceptions of quality differentials; and-3- certain problems which may arise in tying two trademarked products.     

Actor engagement,value creation and market innovation

We extend the discourse on actor engagement by arguing that the ‘actor’ should be viewed both as a single-actor (humans or machines) and a group of actors (collectives or organizations), and that engagement implies both exchange-based and non-exchange-based resource contributions, which are facilitated by dispositions, formed partly by actor specific characteristics and partly by the institutional and organizational arrangements prevalent in the context in which the resource contributions occur. We further show how the resource contributions, combined with other resources, improve resource density and, thus, drive value creation. This mechanism can be the foundation for ‘economies of actor engagement’; focal actors can achieve increasing returns by mobilizing actor engagement. Building on this, we argue that actor engagement is central for market-shaping strategies that aim for market innovations, which we define as the emergence and institutionalization of resource linkages that improve resource density and, hence, value creation in a market. Finally, we suggest that the dramatic shifts that we see in the operating environment are elevating the role of actor engagement, making the management of actor engagement a strategic priority.     

Market definition,market power

Market definition and market power are central features of competition law and practice but pose serious challenges. On one hand, market definition suffers decisive logical infirmities that render it infeasible, unnecessary, and counterproductive, and the practice of stating market power requirements as market share threshold tests is incoherent as a matter of empirics and policy. On the other hand, market power is often probative of the desirability of liability, yet the typically assumed functional relationship is unexplored and often implausible. These latter deficiencies are addressed through a ground-up analysis of the channels by which market power can be relevant. It is important to explicitly and simultaneously consider both anticompetitive and procompetitive explanations for challenged practices and to attend to the magnitudes of the social consequences of correct and mistaken imposition of liability in order to identify the various ways and senses in which market power bears on optimal decision-making.     

Efficiencies,market power and horizontal merger

In June 1982 the Justice Department issued itsMerger Guidelines which specify in terms of the Herfindahl index (H) what combinations of merger size and post-merger H are likely to lead to a merger challenge. This paper assesses theseGuidelines using Williamson's (1968) well-known model in which an optimal merger policy is viewed as one that considers both the price and cost consequences of merger. The Williamson model is recast in terms of H and changes in H and linked to theGuidelines. This allows an assessment of the welfare congequences of an industry merger for any given level of concentration and merger-produce changes in concentration. Among the conclusions are that, consistent with theGuidelines, higher values of H make socially successful mergers less likely, and a more appropriate, if perhaps not more feasible, focus for theGuidelines are coordination adjusted measures of concentration and merger size.     

Learning with the market: Facilitating market innovation

This paper generates new insights into the market innovation process by merging literatures on higher-level learning and market shaping. The research shows that market learning expands the traditional organizational learning literature in three ways: it extends the unit of analysis from individual and organizational learning to inter-organizational learning; it implies a shift from adaptive to higher-level transformative learning; and it positions learning outcomes as changes in market-level properties rather than the mere cognitive developments of individual actors. A key contribution to the understanding of market learning is the development of a market-learning cycle framework that delineates the market-learning process into distinct phases. The framework structures the field in which focal actors with market driving strategies operate as they proactively engage other market actors during the different phases of the market-learning cycle. The usefulness of the framework is illustrated by a longitudinal case.     

Commodity price inflation, retail pass-through and market power

When commodity prices rise, wholesalers and retailers of products derived from basic commodities respond by passing along at least a portion of the price increase to consumers. In this paper we examine whether firms respond differently to positive commodity price shocks than to negative commodity price shocks; that is, whether commodity price volatility alters market power. We exploit recent volatility in food commodity prices over the period 2007-2010 to investigate how commodity price shocks translate into market power in two different vertically-structured food product industries: potatoes and fluid milk. For potatoes, we find both wholesale and retail market power decreases (increases) during periods of rising (falling) commodity prices. Moreover, price-cost margins widen a substantially greater degree in response to negative shocks than margins narrow in response to positive shocks, indicating that commodity price volatility increases market power. For fluid milk, we find that market power likewise declines during periods of rising commodity prices; however, market power does not significantly change during periods of falling commodity prices, suggesting that commodity price volatility decreases market power.     

Foreign and domestic ownership,business groups,and firm performance: evidence from a large emerging market

We adopt a multi‐theoretic approach to investigate a previously unexplored phenomenon in extant literature, namely the differential impact of foreign institutional and foreign corporate shareholders on the performance of emerging market firms. We show that the previously documented positive effect of foreign ownership on firm performance is substantially attributable to foreign corporations that have, on average, larger shareholding, higher commitment, and longer‐term involvement. We document the positive influence of corporations vis‐á‐vis financial institutions with respect to domestic shareholdings as well. We also find an interesting dichotomy in the impact of these shareholders depending on the business group affiliation of firms. Copyright © 2006 John Wiley & Sons, Ltd.     

Mergers in Medicare Part D: Assessing market power,cost efficiencies,and bargaining power

We empirically examine horizontal mergers amongst Part D insurers with the aim of assessing how market power, cost efficiencies, and bargaining power affect premiums and coverage characteristics, including drug access and out-of-pocket (OOP) cost. Our results reveal that market power raises premiums, but this is only a local effect that occurs in markets where the merging firms overlap. Mergers alter the bargaining process with upstream suppliers at both local and national levels, affecting drug access and OOP cost. We find evidence of cost efficiencies when firms restructure by consolidating their plan offerings.     

Innomediary agency and practices in shaping market innovation

In today's business world, the role of the Schumpeterian entrepreneur is dwarfed by that of the variety of market actors who co-create innovation by interacting with and integrating resources within performative practices. New actors have entered the market and changed how market innovation occurs. This study focuses on the “innomediary” as a new category of market actor. By moving beyond the mainstream research, we offer a fresh conceptualisation of innomediary agency and practices in shaping market innovation. Acting as catalysts of creativity and knowledge, innomediaries collect information, expertise, skills and experiences from a heterogeneous mass of actors, and encourage the interchange of ideas, tools, images and languages. Innomediary agency enables the deployment of four practices: 1) engaging; 2) exploring; 3) exploiting; and 4) orchestrating. Each practice involves a set of actions and resource integration.     

Agencing markets: Actualizing ongoing market innovation

This paper explores what it takes to actualize market innovation. It traces the ongoing efforts instigated by an exporter to bring about, and transform a mainstream market into, a new sustainability market; a market designed to advance ecological and social sustainability goals. We draw attention to the diverse and heterogeneous composite – a socio-technical agencement – whose transformative connections collectively reconfigure and transform the mainstream market into a sustainability market. This paper draws on evidence from an ethnographic study of a newly established sustainability coffee market in Uganda to discuss how market innovation unfolds. It illustrates the ongoing character of market innovation and reveals the agencing work involved in bringing about the agencement and capacitating agencies to realize market innovation.     

Ownership structure and innovation: An emerging market perspective

Considerable attention has been focused on the ways in which emerging market firms can obtain and mobilize the knowledge and resources required for innovation. Innovation is a particular challenge in emerging markets because of inadequate external institutions. In this study, we focus on the importance of ownership structure, and in particular on ownership type diversity and ownership concentration. Using transaction cost and agency theories embedded in an emerging market context, we argue that ownership structure provides an important mechanism by which firms can assemble and direct the resources necessary for innovation in the context of inadequate external institutions. Specifically, we hypothesize that ownership type diversity improves innovation performance and that increasing ownership concentration has the same effect, but only up to a point. Using a panel dataset of 487 and 475 Chinese listed companies during 2004–2005 and 2005–2006 respectively, we find supportive empirical evidence for our hypotheses. Our findings also suggest that ownership type diversity is a more important factor in explaining innovation performance than ownership concentration, although most of the extant literature focuses on the latter.     

How knowledge affects radical innovation: Knowledge base,market knowledge acquisition,and internal knowledge sharing

This paper examines how existing knowledge base (i.e., knowledge breadth and depth) interacts with knowledge integration mechanisms (i.e., external market knowledge acquisition and internal knowledge sharing) to affect radical innovation. Survey data from high technology companies in China demonstrate that the effects of knowledge breadth and depth are contingent on market knowledge acquisition and knowledge sharing in opposite ways. In particular, a firm with a broad knowledge base is more likely to achieve radical innovation in the presence of internal knowledge sharing rather than market knowledge acquisition. In contrast, a firm with a deep knowledge base is more capable of developing radical innovation through market knowledge acquisition rather than internal knowledge sharing. Copyright © 2012 John Wiley & Sons, Ltd.     

Relationships between innovation stimulus, innovation capacity, and innovation performance

This paper examines the integration of the human and technological aspects of innovation management by modelling the innovation stimulus – innovation capacity relationship in determining innovation performance. The research framework developed in this study was tested amongst 194 managers of Australian firms. The survey responses indicate that both the relationships between innovation stimulus and innovation capacity and between innovation capacity and innovation performance are significant and strong. However, innovation stimulus does not show any direct effect on innovation performance, suggesting that its effect is mediated through innovation capacity. The overall practical implication that can be drawn from the findings is that to achieve high innovation performance, organizations first need to develop the behavioural and cultural context and practices for innovation (i.e. stimulus), and only within such conducive environments is it possible for organizations to develop innovative capacity in research and development and technology so as to more effectively deliver innovation outcomes and performance.     

Can market power be estimated?

Simulation experiments demonstrate the strengths and weaknesses of the Panzar-Rosse, Hall, and structural approaches to estimating or testing market power. The structural model works well only if it is properly specified. The Hall methods works well in industries with constant retums to scale (CRS); however, even slight deviations from CRS lead to serious biases. Although easier to use than the structural approach, the Panzar-Rosse approach cannot distinguish between collusion and competition for some technologies. Some empirical applications of the Hall and Panzar-Rosse methods are provided.     

The impact of internationalization on performance and innovation: The moderating effects of ownership concentration

Researchers in international business have long been interested in understanding the impact of internationalization on performance and innovation. However, prior studies of this research stream offer mixed results. This study contributes to this research stream by employing agency theory to investigate how ownership concentration affects the performance and innovation implications of internationalization. Specifically, we examine two primary effects of ownership concentration: the incentive alignment effect, proxied by the controlling shareholder??s cash flow rights, and the entrenchment effect, proxied by the divergence between control rights and cash flow rights of the controlling shareholder. Based on a sample of Taiwan??s publicly listed firms, we find that the incentive alignment effect moderates the relation between internationalization and performance and innovation positively and the entrenchment effect moderates the relation negatively. These findings shed light on the mixed results of the literature. In addition, most countries outside the United States and the United Kingdom have high ownership concentration; therefore, our results may be generalizable to other settings, providing insight into the role of corporate governance in internationalization.     

Concerned innovation: The ebb and flow between market and society

This paper examines concerned market innovations i.e. new market configurations which integrate non-economic values and collective concerns. We focus on a specific example of concerned market innovation: the evolution over a ten-year period of a cell phone take-back scheme in a single European country. Adopting a practical constructivist perspective, we note that in the case of concerned market innovation, market configurations are shaped by non-economic values and collective concerns and that, in turn, non-economic values and collective concerns are shaped by market configurations. The analysis of market practices integrating, and at the same time, performing values and concerns, leads us to the conceptualization of a theoretical model which shows that one of the difficulties of realizing concerned market innovations resides in the distinction between market and society.