Reference distorted prices

I show that when consumers (mis)perceive prices relative to reference prices, budgets turn out to be soft, prices tend to be lower and the average quality of goods sold decreases. These observations provide explanations for decentralized purchase decisions, for people being happy with a purchase even when they have paid their “valuation”, and for why trade might affect high quality local firms “unfairly”.     

The Long-Term Performance of Small Businesses: Are there Differences Between “Christian-Based” Companies and their Secular Counterparts?

Recent years have witnessed the proliferation of “Christian” companies in the U.S. These firms declare their belief in, and active pursuit of, the successful merging of biblical principles with business activities. Economic success, hard work, and biblical values are seen as capable of existing together in harmony. While the number of such businesses appears to be growing, there has been a dearth of any scientific study of these companies. No empirical research has been conducted to determine whether these religious values and behaviors have any significant impact on a company’s performance. The present study is designed to partially fill this gap. Specifically, it seeks to determine whether there are differences in long-term performance between self-proclaimed “Christian-based” businesses and their secular counterparts. Data were collected from 312 companies. A multivariate analysis of variance (MANOVA), followed by univariate ANOVAs, found significant differences between these two groups of firms on three of the four performance variables that were analyzed. Some explanations as well as limited generalizations and implications are developed.     

Opportunity Identification and Pursuit: Does an Entrepreneur’s Human Capital Matter?

Extending human capital approaches to entrepreneurship, an entrepreneur’s “inputs” relating to their general (i.e. education and work experience) and entrepreneurship-specific human capital profile (i.e. business ownership experience, managerial capabilities, entrepreneurial capabilities and technical capabilities) are presumed to be related to entrepreneurial “outputs” in the form of business opportunity identification and pursuit. Valid and reliable independent variables were gathered from a stratified random sample of 588 owners of private firms. Ordered logit analysis was used to test several theoretically derived hypotheses. With regard to the number of business opportunities identified and pursued, entrepreneurship-specific rather than general human capital variables “explained” more of the variance. Entrepreneurs reporting higher information search intensity identified significantly more business opportunities, but they did not pursue markedly more or less opportunities. The use of publications as a source of information was positively associated with the probability of identifying more opportunities, while information emanating from personal, professional and business networks was not. Implications for practitioners and researchers are discussed.      

The Effect of Ethical Fund Portfolio Inclusion on Executive Compensation

This paper divides firms in the Standard and Poor’s 500 (S&P 500) into two groups based on inclusion in or exclusion from the Domini Social Index (DSI). Inclusion in the DSI is interpreted as a positive indicator of ethical status. Using data for the 1992–2003 period, I provide evidence that chief executive officer (CEO) compensation, other executive compensation, and director compensation tend to be lower in DSI firms than in other firms in the S&P 500. This applies to the unconditional group averages (and medians) and is particularly striking given that DSI firms as a group had better financial performance than the other firms. This finding is also true in a regression framework that controls for other influences on compensation, including firm size and financial performance. In a regression context, the estimated discount for CEOs of DSI firms is approximately 12% for both current compensation (salary and bonuses) and total compensation (including the value of options). These results are consistent with the expectation that some senior executives require a “compensating differential” to accept positions in firms with less attractive ethical status. It is also consistent with the expectation that some firms with positive ethical status might use more restraint in setting executive compensation.James Brander is the Asia-Pacific Professor of International Business in the Sauder School of Business at the University of British Columbia. An economist, his research areas include international trade, industrial organization and finance. He is a former editor of the Canadian Journal of Economics and has published widely, including the textbook “Government Policy Toward Business”.     

The latent demand for bank debt: characterizing “discouraged borrowers”

Concerns that small firms encounter credit constraints are well entrenched in the literature, despite widespread empirical evidence that a relatively small proportion of small firms have their loan applications rejected. However, many firms may be discouraged from applying for fear of rejection. These businesses are the focus of this paper. Based on responses to a large-scale postal survey of UK small and medium-sized enterprises (SMEs), we find that twice as many businesses were discouraged from applying for a bank loan than had their loan request denied. More particularly, we observe a number of distinguishing characteristics of “discouraged borrowers” (relative to applicants). These include: strategy, sector, prior entrepreneurial experience and banking relationships. The implications of our findings for policy and future research are briefly discussed.     

Variations in entrepreneurship

This article is written in the style of a “bildungsroman,” a fictional autobiographical “coming of age story” about the author’s experiences of his beginning to recognize the: great diversity of entrepreneurs, many types of startup firms, multiple ways entrepreneurs go about starting firms, and innumerable situations in which entrepreneurial activity takes place. In this remembrance of things past, the author realizes: the phenomenological underpinnings of his understanding of entrepreneurship, his belief in the primacy of facts as the arbiter of theory, that his theory predisposed him to look only for certain kinds of facts and ignore others which then makes theory paradoxically the arbiter of the facts found, and, finally, that knowledge is hard won and wisdom elusive. “Nothing is more uncertain, more contradictory, more unsatisfactory than the evidence of facts”—William Godwin     

The Resource-Based Theory of the Firm and Firm Survival

This paper examines the determinants of firm survival. We use hazard models to test a number of hypotheses mainly drawn from the Resource-Based Theory of the Firm. According to the Resource-Based View the ability of a firm to develop distinct capabilities enhances its ability to adapt to the changing competitive environment and improves its survival prospects. The results confirm that firms that develop firm-specific assets through advertising and making R&D (independently of the technological intensity of the industry) enjoy better survival prospects. Furthermore, failure risk increases up to about 20 years of trading, and then decreases to later rise in line with liability of “adolescence” and “senescence.”      

Preserving Knowledge on IS Business Value

The economic relevance of information systems has been studied for many years and has attracted an abundance of research papers. However, the “productivity paradoxon” of the 1990s, Carr’s widely recognized paper “IT doesn’t matter”, and several studies that do not find a positive correlation between IS investments and economic performance reveal long-lasting difficulties for IS researchers to explain “IS business value”. Business executives and researchers also continue to question the value of IS investments. This raises the question of whether literature reviews have tapped their potential to address the concerns by covering key research areas of IS business value and preserving their key findings. In order to address this question, this paper identifies and describes 12 key research areas, and synthesizes what literature reviews published in pertinent academic outlets have done to preserve knowledge. The analysis of 22 literature reviews shows that some crucial areas have not been (sufficiently) covered. They provide fertile areas for future literature reviews. As this work is based on the results of more than 200 research papers, it is capable of drawing a comprehensive picture of the current state-of-the-art in IS business value research.     

中国资本市场融资顺序新证:可转债发行公告效应研究

This paper empirically shows that the announcements of the issue of convertible bonds (CBs) by Chinese firms have significant negative effects on shareholders’ wealth. We find that when the samples are partitioned by equity component negative market responses towards the announcements of issuing equity-like CBs are more than that of debt-like CBs. This finding is different from the “pecking order hypothesis” of Myers and Majluf (1984). By analyzing the firm characteristics of convertible bond issuers, we find that the wealth effects are negatively related to equity component, firm size and issue size of convertible bonds, and are positively related to financial leverage, liquidity structure of equity, book value of non-liquidity equity and market-to-book ratio. The underlying reason of equity finance taking precedence of bond finance in Chinese capital market can be attributed the to special “two-system-ownership structure” and corporate governance of Chinese listed companies. Translated from Guanli Shijie 管理世界 (Management World), 2006, (6): 19–27     

Beim Übergang zum Bürgergeld mutig große Veränderungen wagen

Wirtschaftsdienst - The new German federal government wants to replace the unemployment benefit II (Arbeitslosengeld II) with a so-called citizen’s income (“Bürgergeld”). In...     

An Analysis of International Accounting Codes of Conduct

The International Federation of Accountants (IFAC) has recently issued a revised “Code of Ethics for Professional Accountants” (IFAC Code). As a requirement for membership in IFAC, a national accounting organization must either adopt the IFAC Code or adopt a code of conduct that is not “less stringent” than the IFAC Code. In this paper, we examine the extent to which 158 national accounting organizations have adopted the revised IFAC Code as their own. Our results indicate that 80 of our sample organizations have adopted the IFAC Code (sometimes with minor modifications), while the remaining 78 opted not to utilize the model IFAC Code. We then test the hypothesis that national accounting organizations in lower income economies would be less likely to adopt the IFAC Code than those in high income economies. Our results do not support the hypothesis. We argue that one potential reason for such a finding is that adopting the IFAC Code may be a cost effective means of adopting a code of ethics for organizations in lower income economies.     

Toward a relational perspective of franchising chains

In many professional and services industries, firms try to scale up their operations by reproducing practices in new locations through franchising arrangements, especially business format franchising. The classic but still prevailing explanations for franchising related phenomena, especially the initiative of franchising, the propensity to franchise, and the franchise performance, are mostly based on two orders of reasons (or a combination of them): franchising is either explained as a means to deal with resource scarcity or (and) as a mechanism for franchisor and franchisee to align incentives between themselves. However, empirical studies have shown limited support for both such claims, especially in face of the so called plural form, where proprietary and franchised units of the same franchisor co-exist. It may also be argued that the traditional literature on franchising has assumed a high level of homogeneity within and between franchising “networks,” possibly due to the perception that they tend to be “dominated” by a high level of standardization and replication of practices, both operative and relational. However, learning processes in such “networks” have recently been brought in as an attempt to capture other mechanisms that may underlie their operation and sustainability. This article seeks to explore a third perspective to look at franchising “networks,” by drawing from the literatures on capabilities and industrial networks. Seen from this perspective, business format franchising may involve more than the mere replication or exploitation of a recipe, especially if we take into consideration the partly idiosyncratic nature of both the relationships between actors and their capabilities and intentions. Within this perspective, variety preservation, and not only uniformity, may be recognized by participants as relevant for the performance of the franchise chain. In other words, variety may reflect the need for the refinement of the “package” throughout time, in more than one ways, together with the gradual development of the network and the learning experiences that take place in that context.     

股市再融资的门槛有效吗?

This paper compares the cumulative abnormal returns and operating performance of Chinese listed firms which made seasoned equity offerings or right issues at different profitability thresholds. Results show that both the average long-term and short-term cumulative abnormal returns of these firms increase significantly after the setting of thresholds. Moreover, the accounting performances of these firms are also improved to some degree. It implies that regulations on new equity raising behavior of listed firms are necessary and effective in protecting the investors and restricting listed firms’s “money encirclement” behaviors. Translated and revised from Guanli shijie 맜理世界 (Management World), 2006, (10): 108–113     

Intellectual property marketplaces and how they work: Evidence from German pharmaceutical firms

This article examines a sample of German pharmaceutical firms to highlight the strategic reasons why firms participate in various intellectual property (IP) marketplaces, both proprietary (patents and copyrights) and non-proprietary (open source and non-patented technology). The obstacles that prevent these marketplaces from functioning efficiently are also investigated. The analysis suggests that IP policy must embrace all IP forms and must recognise that IP marketplaces do not work “automatically” but suffer many institutional failures.     

中国企业渠道联盟关系影响因素研究

Channel alliance is regarded as the most advanced form of channel relationships. The extant literature mainly focuses on commitment, trust, communication and cooperation as influencing factors of channel alliance relationship. This paper empirically explores influencing factors of channel alliance relationship in Chinese enterprises, and their respective degrees of influence, particularly those of personal relationship and government administrative factors. Research hypotheses were tasted based on a survey of automobile vendors and dealers. Three most important influencing factors were identified “commitment and trust”, “communication and cooperation”, and “returns”. __________ Translated from Nankai Guanli Pinglun 南开管理评论 (Nankai Business Review), 2006, 6(1): 42–48     

Income Per Capita Inequality in China: The Role of Economic Geography and Spatial Interactions

(1241) Laura Hering and Sandra Poncet This paper contributes to the analysis of growing income inequality in China. We apply a structural model of economic geography to data on per capita income over 190 Chinese cities between 1995 and 2002, and evaluate the extent to which market proximity and spatial dependence can explain the growing income inequality between Chinese cities. The econometric specification explicitly incorporates spatial dependence in the form of spatially‐lagged per capita income. We show that the geography of market access and spatial dependence are significantly correlated with per capita income in China. Market access is particularly important in cities with smaller migration inflows, which is consistent with NEG theory, whereas spatially‐lagged per capita income matters more in cities with greater immigration. We conclude that the positive impact of spatially‐lagged income partly results from labour mobility between neighbours, so that spatial dependence reflects the influence of migration, knowledge transfers and increasing competition between cities.     

Undivided Corporate Responsibility: Towards a Theory of Corporate Integrity

In the years since Enron corporate social responsibility, or “CSR,” has become a ubiquitous phenomenon in both research and business practice. CSR is used as an umbrella term to describe much of what is done in terms of ethics-related activities in firms around the globe to such an extent that some consider it a “tortured concept” (Godfrey and Hatch 2007, Journal of Business Ethics 70, 87–98). Addressing this skepticism, I argue in this article that the focus on CSR is indeed problematic for three main reasons: (1) the term carries a lot of historical baggage – baggage that is not necessarily conducive to the clarity of the concept; (2) it is the object of increasing ethical instrumentalism; and (3) given the multiple ethical challenges that corporations face, and given the fact that the “social” responsibilities of business are but one set of corporate responsibilities, a suitable term would have to be more inclusive and integrative. I therefore suggests moving instead toward a sound definition of corporate integrity and aim in this article to develop a working definition by fleshing out “7 Cs” of integrity: commitment, conduct, content, context, consistency, coherence, and continuity. I then discuss how these 7 Cs impact our understanding of CSR or, more broadly, corporate responsibility in general.

Ethical Attitudes of Accounting Practitioners: Are Rank and Ethical Attitudes Related?

We address a previous finding in the business ethics literature in which accounting professionals in higher rank levels, i.e., “manager” or “partner” of auditing firms, appear to have lower moral reasoning ability than their junior counterparts. Prior investigations have relied upon a similar methodology for estimating ethical beliefs, namely testing “moral reasoning ability” using either the Moral Judgment Interview or Defining Issues Test. In the present study, we use a multiple vignettes approach to test for the existence of the inverse rank-ethical beliefs effect. With only 2 of the 30 vignettes resulting in both managers and partners being more accepting of the ethically charged behaviors, the results presented here using this alternative methodology are generally not supportive of the inverse rank-ethical beliefs phenomenon. We also use a multivariate analysis in order to control for demographic characteristics. Our results suggest that the most robust predictor of ethical attitudes among accounting practitioners is age, not rank within a firm.     

Corporate social responsibility of financial organizations in the social economy: a case study on savings banks

The implementation of corporate social responsibility policies in firm management processes is becoming increasingly relevant. In the particular case of the financial sector, the incorporation of these policies often has huge repercussions as their role as intermediaries means that firms depend on them for investment which, in turn, affects the way firms perform. Within the financial sector, those organizations form part of the social economy—credit cooperatives and savings banks—are a very particular case as one of the principles on which they are based is their social nature. In this study, we examine the social responsibility situation in these financial organizations, focusing on the case of savings banks. We provide information that will help us better understand the real state of Spanish savings banks with respect to these two areas of social responsibility: The “Obra Social” (or charitable activities) and the incorporation of social and environmental criteria in their business policies.     

An Adversarial Ethic for Business: or When Sun-Tzu Met the Stakeholder

In the economic literature on the firm, especially in the transaction–cost tradition, a sharp distinction is drawn between so-called “market transactions” and “administered transactions.” This distinction is of enormous importance for business ethics, since market transactions are governed by the competitive logic of the market, whereas administered transactions are subject to the cooperative norms that govern collective action in a bureaucracy. The widespread failure to distinguish between these two types of transactions, and thus to distinguish between adversarial and non-adversarial relations, has led many business ethicists to develop a “uniform” moral code. Yet in market transactions, the checks and balances built into the system of commercial exchange are such as to permit more instrumental forms of behavior. In administered transactions, by contrast, these checks and balances are absent, and thus the institutional context calls for much greater exercise of moral restraint. In this paper, I begin the task of developing an adversarial ethic for business. According to this view, the competitive environment licenses a greater range of “self-interested” behavior, but also imposes its own constraints on the strategies that firms may adopt in the pursuit of their interests. Joseph Heath is Associate Professor in the Department of Philosophy and the Centre for Ethics at the University of Toronto. He is the author of three books: Communicative Action and Rational Choice (MIT Press, 2001), The Efficient Society (Penguin, 2001), and with Andrew Potter. The Rebel Sell (HarperCollins, 2004). His research focuses on practical rationality, normative economics, and critical theory.