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.     

Governmentality and Spatial Strategies: Towards Formalization of Street Vendors in Guangzhou,China

A new policy approach that seeks to formalize street vendors by immobilizing them in designated places has been taken as an alternative to exclusion in Guangzhou, China. This article develops an analytical framework for understanding this spatial formalization by drawing upon Foucault's concept of governmentality. Formalization can be understood as a form of spatial governmentality that seeks to guide the behaviour of informal economic individuals towards officially desired norms by creating bounded spaces. While the formalization programme reflects a moral form of political rationality that directs modern governments towards principles of social justice, it is fundamentally founded on a dispositional spatial rationality that imagines the dependence of social control on the ordering of space. However, this spatial rationality entails a tension between the goal of formalization and its practical effects, resulting in a failure to respect vital attributes of street vending and vendors’ counter‐responses to it. The article concludes by questioning the government's formalization approach, given its ignorance of the reality of informality, and opens up the question of what might be good formalization.     

Hiring for Networks: Social Capital and Staffing Practices in Transitional China

This article investigates how firms’ use of social capital criteria in staffing practices has been affected by China's transitional institutional environment and explores the impacts of person‐job fit in the social capital dimension on employees’ performance. Empirical results show that non‐state‐owned enterprises set a higher social capital standard in the hiring process than state‐owned enterprises. Foreign‐invested enterprises outperform other firms in promoting a better match between individuals rich in social capital and the positions that need such resources. In places with intensive market competition, foreign and private enterprises pay even more attention to employees’ social capital when making HR decisions. Moreover, a better match between people and positions from a social capital aspect has a positive impact on employees’ performance. Theoretical and managerial implications are discussed. © 2015 Wiley Periodicals, Inc.     

INCENTIVES AND SOCIAL NORMS: A MOTIVATION‐BASED ECONOMIC ANALYSIS OF SOCIAL NORMS

Abstract It is now commonplace to regard social norms as a subject of growing interest in the economic literature (e.g. game theoretical approaches based on ‘other‐regarding’ individual preferences, the analysis of the impact of rewards or punishment on individuals’ behaviour through experimental economics as well as field experiments, the revival of the institutionalist tradition spurred on by the influential work of Douglas North and followed by many others and the growing influence of neuroeconomics). In this paper, we focus on the relationship between incentives and social norms and survey the literature that could constitute the foundations of a motivation‐based economic analysis of social norms. Our main findings are that (1) the interaction between incentives and social norms is far from obvious since taking social norms into account involves the introduction of supplementary motives, in addition to self‐interest, into the economic analytical framework; (2) the analysis of the interaction between incentives and social norms resists an approach exclusively in terms of crowding‐in and ‐out effects because it is sensitive to whether it concerns behaviours driven by honour or by social stigma; (3) as a result, it is difficult to precisely evaluate the policy implication of the interactions between incentives and social norms.     

Fundamental theory of institutions: a lecture in honor of Leo Hurwicz

We follow Hurwicz in considering fundamental questions about social institutions. Hurwicz’s concept of incentive compatibility may help clarify old debates about socialism, where such questions arose. Moral hazard models show disadvantages of socialism, while adverse selection models may delimit its advantages. We review Hurwicz’s general theory of how institutions can be enforced in larger games, suggesting curb sets as an alternative enforcement theory that admits focal point effects. Finally, we consider specific problems of leadership and trust in establishing sovereign political institutions, where high officials can be deterred from abuse of power only by promises of large future rewards, which a leader must be credibly committed to fulfill.     

New Political Economy, Scientism and Knowledge: A Critique from a Hayekian Perspective, and a Proposal for an Extension of the Research Agenda

New Political Economy has something very important in common with welfare economics: its focus on static, technical efficiency criteria to judge the rationality of a social, political or economic order. This often leads theorists to perceive their objects of research as well-defined problems to which clear-cut solutions can be found and prescribed as policy proposals, addressed at the policymaker or the democratic sovereign. This perspective frequently excludes important empirical phenomena from the research agenda. Although, for example, certain well-defined informational asymmetries are frequently modeled, fundamental knowledge problems such as ignorance of the true model of the economy are usually ignored. In the present paper, this approach is criticized from a Hayekian point of view, with an emphasis on the problems of "scientism" (i.e., the inappropriate transfer of methods from the natural to the social sciences) and irremediably imperfect knowledge, troubling both the agents in the theoretical model and the theorist. Furthermore, it is argued and illustrated with two examples that an extension of Public Choice's research agenda along Hayekian lines may be fruitful, because it leads to a fresh perception even of such problems that already have been extensively researched within the traditional framework.     

Venture capitalists and entrepreneurs become venture philanthropists

• Non‐traditional charitable sources of revenue may be categorised as follows:
  • Venture philanthropy: Human resources and funding invested as donation in the charity by entrepreneurs, venture capitalists, trusts and corporations in search of a social return on their investment. It involves high engagement over many years with fixed milestones and tangible returns and exit achieved by developing alternative, sustainable income.
  • Commercial ventures: They seek a financial return on investment by creating a social enterprise operated by charities and their trading/holding companies alone or in partnership with the corporate sector, venture capitalists or investors to provide funding. Venture philanthropists may also ‘invest’ without establishing an equity position in the commercial enterprise. Any profits are re‐directed to mission‐related activity, although the business activity may or may not be mission related.
  • Social venture capital: It funds commercial ventures (as above) but may not seek a complete return on investment; instead the investor may off set some or all of the investment against social outcomes.
• Within the context of venture philanthropy, this paper demonstrates how charities, venture capitalists and entrepreneurs may work together in strategic alliances. It explores venture philanthropy from the perspective of venture capitalists and entrepreneurs, giving examples. Charities are shown how to prepare themselves to take advantage of these entrepreneurial opportunities.
• Although the emphasis in this paper is on venture philanthropy, the processes outlined may be used to help a charity take advantage of opportunities within the broader social entrepreneurial context. Successful venture capitalists and entrepreneurs have demonstrated the ability to turn outline business ideas into big results, frequently in highly competitive business environments.
• A common characteristic that appears to unite these individuals when they divert their interest toward social ventures is a desire to apply their business‐like approach, which includes planning processes, milestones and outcome measurement to their social venture activity.

Copyright © 2005 John Wiley & Sons, Ltd.     

Density Nowcasts and Model Combination: Nowcasting Euro‐Area GDP Growth over the 2008–09 Recession*

Combined density nowcasts for quarterly Euro‐area GDP growth are produced based on the real‐time performance of component models. Components are distinguished by their use of ‘hard’ and ‘soft’, aggregate and disaggregate, indicators. We consider the accuracy of the density nowcasts as within‐quarter indicator data accumulate. We find that the relative utility of ‘soft’ indicators surged during the recession. But as this instability was hard to detect in real‐time it helps, when producing density nowcasts unknowing any within‐quarter ‘hard’ data, to weight the different indicators equally. On receipt of ‘hard’ data for the second month in the quarter better calibrated densities are obtained by giving a higher weight in the combination to ‘hard’ indicators.     

Organizational Performance Consequences of Age Diversity: Inspecting the Role of Diversity‐Friendly HR Policies and Top Managers’ Negative Age Stereotypes

This paper seeks to advance the diversity literature by investigating organizational performance consequences of age diversity. Drawing from social‐identity and social‐categorization theory, we theoretically argue that, in age‐diverse companies, age‐based subgrouping processes occur, favouring a shared perception of a negative age‐discrimination climate. This perceived negative age‐discrimination climate in turn negatively relates to organizational performance. As the main contribution, top managers’ negative age‐related stereotypes and diversity‐friendly HR policies are introduced as organizational‐level moderators that increase and attenuate, respectively, the social categorization processes affecting performance in age‐diverse companies. We utilized structural equation modelling (SEM) to test the proposed hypotheses using a multisource dataset comprising 147 companies. The results supported all hypotheses, indicating that low negative top managers’ age stereotypes as well as high diversity‐friendly HR policies are potential organizational factors that can prevent the negative relation of age diversity with organizational performance transmitted through the negative age‐discrimination climate. These results are discussed in light of their contribution to the diversity literature and social‐categorization theory as well as their implication for practitioners.     

Metaphor and the Dynamics of Knowledge in Organization Theory: A Case Study of the Organizational Identity Metaphor*

abstract Despite the increased salience of metaphor in organization theory, there is still very little conceptual machinery for capturing and explaining how metaphor creates and/or reorders knowledge within organization theory. Moreover, prior work on metaphor has insufficiently accounted for the context of interpreting a metaphor. Many metaphors in organization theory, including the ‘organizational identity’ metaphor, have often been treated in singular and monolithic terms; seen to offer a similar or largely synonymous interpretation to theorists and researchers working along the entire spectrum of disciplines (e.g. organizational behaviour, organizational psychology) in organization theory. We argue in this paper that contextual variation however exists in the interpretation of metaphors in organization theory. This argument is developed by proposing and elaborating on a so‐called image‐schematic model of metaphor, which suggests that the image‐schemata (abstract imaginative structures) that are triggered by the metaphorical comparison of concepts may vary among individuals. Accordingly, once different schemata are triggered the completion and interpretation of a metaphor may equally vary among different individuals or, indeed, research communities. These points associated with the image‐schematic model of metaphor are illustrated with a case study of the ‘organizational identity’ metaphor. The case study shows that this particular metaphor has spiralled out into different research communities and has been comprehended in very different ways as different communities work from very different conceptions, or image‐schemata, of ‘organization’ and ‘identity’, and use different theoretical frameworks and constructs as a result. The implications of the image‐schematic view of metaphor for knowledge development and theoretical progress in organization theory are discussed.     

The ‘Human’ Touch

Abstract

This article critically discusses the almost mythical conception of voluntary and ‘grass-roots’ organizations as problem solvers in current welfare policy – a myth, which over the last twenty years has become increasingly dominant in social policy programmes in advanced liberal welfare states. In particular, the article examines the assumption that voluntary and local organizations are permeated by a different rationality that enables human beings to act as ‘real humans’ rather than as professionals and clients – a rationality which is, however, permanently at risk of being contaminated by bureaucratic influence. It is demonstrated that among the conditions of possibility for this discourse are explanatory models and concepts in modern organizational theory and in voluntary sector studies. The article argues that the conceptualizations of power, rationality and social change dominant in these studies are unsatisfactory. Instead, it applies a Foucauldian approach to the domain of drug addiction treatment, analysing a social work ‘regime’ that transgresses the traditional boundaries between state and voluntary sector.     

Who speaks louder,financial instruments or credit rating agencies? Analyzing the effects of different sovereign risk measures on interest rates in Brazil

Analyzing sovereign risk measures for Brazil, we observe that credit rating agencies are more cautious and conservative than the market to report risk rating improvements, and more rigorous in assigning better risk ratings. In turn, evidence suggest interest rates reflect sovereign risk conditions. However, to date, no study has assessed which measure of sovereign risk has the greatest impact on the yield curve. Using data from March 2004 to August 2019, we investigate whether interest rates respond differently to different sovereign risk measures in Brazil. As a novelty, the results indicate that credit rating agencies “speak louder” in affecting interest rates, i.e., they proved to have greater capacity to affect the yield curve. Therefore, the importance of these agencies is not limited only for financial markets, but also for policymakers, as the slope of the yield curve acts as a leading indicator of the business cycle.     

Sovereignty Beyond the State: Exception and Informality in a Western European City

Bridging debates on urban sovereignty and urban informality, this paper argues that relationships between sovereignty and informality may not reside exclusively in the way the sovereign state decides to allow or forbid informality, but also in the way sovereignty is distributed among a range of state and non‐state actors. Drawing upon fieldwork on the early‐2010s management of displaced Romanian Romani families in two emergency camps in the city of Montreuil (France), the paper shows how the NGO responsible for managing one camp acted as sovereign power, allowing a number of informal activities to thrive within its confines. By contrast, inside the other camp, managed by another NGO that resolutely implemented state directives, only formal activities took place. Building on Dean's (2010) concept of ‘disaggregated sovereignty’, the paper mobilizes this disjuncture as a case for critically examining how the ‘state of exception’ takes shape beyond the state's grip. A subtext running throughout is the parallel between the very first camps for civilians in nineteenth‐century colonized territories and these twenty‐first‐century camps for Roma in Europe—both elicited a state of exception partially predicated on camp dwellers’ perceived ethnic/racial homogeneity.     

Can everyone benefit from growth? : Two difficulties

We consider the problem of fair division in economies where the amount to be divided may vary. We show that there is no solution to this problem jointly satisfying the following requirements: (i) Pareto-optimality; (ii) resource monotonicity; an increase in the aggregate endowment should benefit all agents; (iii) individual rationality from equal division: all agents should be better off than at equal division. The first two requirements are also incompatible with (iv) no agent should consume more of every good than any other agent.     

Testing random assignment to peer groups

Identification of peer effects is complicated by the fact that the individuals under study may select their peers. Random assignment to peer groups has proven useful to sidestep such a concern. In the absence of a formal randomization mechanism, it needs to be argued that assignment is “as good as” random. This paper introduces a simple yet powerful test to do so. We provide theoretical results for this test. As a by-product, we equally obtain such results for an approach popularized by Guryan et al. (2009). These results help to explain why this approach suffers from low power, as has been observed elsewhere.     

Collective Acceptance, Social Institutions, and Social Reality

ABSTRACT . The paper presents an account of social institutions on the basis of collective acceptance. Basically, collective acceptance by some members of a group involves the members’ collectively coming to hold and holding a relevant social attitude (a “we‐attitude”), viz. either one in the intention family of concepts or one in the belief family. In standard cases the collective acceptance must be in the “we‐mode,” viz. performed as a group member, and involve that it be meant for the group. The participants must be collectively committed to what they have accepted. Social institutions are taken to be norm‐governed social practices introducing a new social and conceptual status on the practices or some elements involved in those practices. This requires that some of the involved norms be constitutive norms as opposed to merely “accidentally” regulating ones. A classification of social institutions is presented. The account is broader in scope than is Searle’s.     

Planning as Dramaturgy: Agonistic Approaches to Spatial Enactment

In urban planning, inclusion is not necessarily achieved by increasing opportunities for deliberation between planners and residents, as power and exclusion reside in the process of deliberation, especially in the rigid spaces of formal planning hearings. Planners' professional jargon may remain inaccessible to residents, who grasp their living environment in terms of the flow of sensory and social interactions. So the framework of instrumental rationality may exclude softer, yet meaningful, local stories. What is needed in urban planning is a sensitivity for the plurality of these stories. In this article we propose that applied drama methods could provide a novel model for deliberative planning, in order to surpass the silo thinking of instrumental rationality, and ingrained, taken‐for‐granted concepts and identities, by artistic and affective means of argumentation. Furthermore, it seems that residents gain access to the embodied understanding of different trajectories of meaning making by playing the roles of other residents. Drama may provide a channel of expression that helps people move beyond the antagonistic posturing between stakeholders, as well as an empowering way to express the plurality of stories in neighbourhood spaces.     

THE CULT[URE] OF THE CUSTOMER

Much organizational restructuring, at least in the UK and USA, seeks to replace organizational regulation by that of the market. These developments centre around an emphasis on relations with customers - the ‘sovereign consumer’- as a paradigm for effective forms of organizational relations; they are apparent in, and underpin, a wide variety of organizational developments: just-in-time, total quality management, culture change programmes. Understanding these developments requires consideration of the discourse of enterprise of which the culture of the (internal) customer constitutes a key element. Defining internal organizational relations ‘as if’they were customer/supplier relations means replacing bureaucratic regulation and stability with the constant uncertainties of the market, and thus requiring enterprise from employees. This discourse has fundamental implications for management attempts to define working practices and relations and, ultimately, has impact on the conduct and identities of employees. Understanding these developments is not possible if analysis remains at the level of the organization. It requires that organizational restructurings, and the discourse which supports them, be located within the social and political rationality of enterprise. The certainties of management, the conviction that environmental challenge and competitive threat must be met by the cult[ure] of the customer, are due to managements’largely unquestioned acceptance of the normality and perceived good sense of the discourse of enterprise.     

A Simple Estimator of Two‐Dimensional Copulas,with Applications1

Copulas are distributions with uniform marginals. Non‐parametric copula estimates may violate the uniformity condition in finite samples. We look at whether it is possible to obtain valid piecewise linear copula densities by triangulation. The copula property imposes strict constraints on design points, making an equi‐spaced grid a natural starting point. However, the mixed‐integer nature of the problem makes a pure triangulation approach impractical on fine grids. As an alternative, we study the ways of approximating copula densities with triangular functions which guarantees that the estimator is a valid copula density. The family of resulting estimators can be viewed as a non‐parametric MLE of B‐spline coefficients on possibly non‐equally spaced grids under simple linear constraints. As such, it can be easily solved using standard convex optimization tools and allows for a degree of localization. A simulation study shows an attractive performance of the estimator in small samples and compares it with some of the leading alternatives. We demonstrate empirical relevance of our approach using three applications. In the first application, we investigate how the body mass index of children depends on that of parents. In the second application, we construct a bivariate copula underlying the Gibson paradox from macroeconomics. In the third application, we show the benefit of using our approach in testing the null of independence against the alternative of an arbitrary dependence pattern.