Equity stakes and exit: An experimental approach to decomposing exit delay

Research summary : Exit delay is an important problem for entrepreneurs and managers alike, yet relatively little is known about its causes. We conduct a laboratory experiment in which optimal exit is well defined, and in which a treatment group with equity stakes—the actual cash flows of a firm and decision rights over its continuation—is compared to a control group whose compensation is based solely on its assessment of the firm's profitability. While treatment group participants make exit decisions that are nearly optimal given their beliefs, their beliefs are significantly distorted relative to the control group. The pattern of distortion is consistent with confirmatory bias and motivated reasoning. A fundamental finding of our study is that incentives may not only affect behavior, but belief formation as well. Managerial summary : Managers and entrepreneurs frequently destroy significant value by failing to shut down underperforming businesses in a timely manner. To address this problem, we must understand the mechanisms causing exit delay. We examine behavioral mechanisms causing delay through a laboratory experiment in which subjects make decisions about when to exit a failing venture. We find that “equity stakes”—receiving the firm's cash flows and having decision rights over exit—cause participants to discount negative performance information, retain overly optimistic beliefs, and delay exit. By contrast, participants without these high‐powered incentives exit nearly optimally. Our findings suggest ways to reduce exit delay in managerial settings, including implementing automated decision rules, removing equity‐based compensation, and recruiting managers less susceptible to knowledge overconfidence, a trait associated with exit delay. Copyright © 2015 John Wiley & Sons, Ltd.     

世界石油市场:在动荡中寻求平衡

世界金融市场经历了动荡、恐慌、稳定和重塑信心的过程。相应地,国际油价也经历了暴跌、筑底和反弹的过程。为了应对金融危机引发的经济衰退,世界主要经济体纷纷采取宽松的货币政策和积极的财政政策,以刺激经济尽快止跌复苏。2009年二季度以来,世界经济初现复苏"春芽",但石油需求仍然疲弱,国际油价大幅度反弹的原因是石油金融属性的再度体现。2008年9-12月,欧佩克为稳定油价连续3次减产,且执行相对较好,但OECD库存在2009年上半年仍然持续上涨。持续减产使得欧佩克原油剩余产能大幅提高,应对市场供应中断风险的能力大大增强。2009年下半年,估计石油需求将温和回暖,如果欧佩克不增产,OECD国家石油库存将呈下降趋势,从而使世界石油市场逐渐呈现供应偏紧的局面。国际油价正在动荡中寻求新的平衡。综合考虑多方因素,预计下半年多数时间国际油价将在5580美元/桶区间波动。     

Strategic determinants of decisions not to settle patent litigation

Settlement outcomes in patent litigation are modeled as resulting from strategies pursued by firms with their patented technologies. Hypotheses are derived for two types of influences: the use of patents as isolating mechanisms to protect valuable strategic stakes, and their ‘defensive’ role in obtaining access to external technologies through mutual hold‐up. Parameter estimates from a sample selection probit model provide support for the strategic stakes hypotheses, while the evidence for mutual hold‐up is inconclusive. Interindustry comparisons show that nonsettlement of patent suits in both research medicines and computers is increased by strategic stakes and, in addition, mutual hold‐up appears to play an important role in computer patent suits. Copyright © 2003 John Wiley & Sons, Ltd.     

矛盾的越南

"到越南去!"这个充满诱惑力的响亮口号,就在今年5月份前,还在人们的耳边回绕,中国的媒体和企业界还在热议越南更加廉价的劳动力很可能会接过中国制造的接力棒,给中国外向型的制造企业制造麻烦;越南市场是一个需求旺盛、充满机会的市场,像极了上世纪80年代的中国,廉价的"中国制造"将在越南市场所向披靡、积极抢占市场份额……但突如其来的越南经济危机给了那些热情的已经或正在准备奔赴越南的投资者以当头一棒,无论在行动还是思想认识上都让他们感到措手不及。越南真的是中国转移生产的乐土吗?或者是贩卖中国产品的销售乐园?这场危机给了中国媒体和企业界重新审视和反思越南这个新兴市场的机会。其实,在"走出去"的征途上,中国企业最终会发现,任何一个市场都充满了它固有的复杂性,而无法单一地判断其好与坏,越南也如此。这就是本刊记者辗转越南河内、胡志明市、海防、岘港等地,通过实地探访希望为中国企业揭示的真相——矛盾的越南。     

Decision making and uncertainty: The role of heuristics and experience in assessing a politically hazardous environment

Heuristics have long been associated with problems of bias and framing error, often on the basis of simulation and laboratory studies. In this field study of a high‐stakes strategic decision, we explore an alternative view that heuristics may serve as powerful cognitive tools that enable, rather than limit, decision making in dynamic and uncertain environments. We examine the cognitive efforts of senior decision makers of an inexperienced multinational, as they assessed a potential acquisition in a politically hazardous African country. They applied a diversity of heuristics, some with clear building block rules, to build small world representations of this very uncertain strategic context. More expert individuals drew on experiential learning to build richer representations of the political hazard environment. Copyright © 2014 John Wiley & Sons, Ltd.     

Food,peace — and the pursuit of arms

‘Every gun that is made, every warship launched, every rocket fired, signifies in a final sense, a theft from those who hunger and are not fed from those who are cold and are not clothed.’ So said President Eisenhower 20 years ago. ¹ Today the world spends over $350 000 million a year on military and armaments — money lost to world development     

Wheat in the world food economy: Increasing role in developing countries

Wheat is the oldest and most important of the cereal grains in world food supply. In the last two decades the role of wheat in the world food economy has increased substantially, especially in the developing world. This article describes and analyses the role of wheat and highlights and interprets changes that have occurred in the last two decades of rapid change. The authors analyse, in turn, trends in production, consumption, trade and prices with special emphasis on the developing countries.¹ Finally, the authors speculate on how these trends are likely to be effected by future events.     

‘Keep out’ signs: the role of deterrence in the competition for resources

To explain resource heterogeneity, past research focuses on how rivals' resources are hidden from firms and firms accordingly have difficulties accessing them. We argue that resource heterogeneity may also arise when firms are deterred from a technological space upon being shown what resources rivals already possess within that space. To illustrate this deterrence effect, we use patent reexamination certificates, which indicate strategic stakes within a technological space without materially disclosing additional details of the underlying technologies and hence avoid the confounding effect of attracting competition through disclosure. We demonstrate how rivals' reexamination certificates within a technological space induce a firm to subsequently allocate less inventive effort in that space, based on two mechanisms—indications of rivals' developmental speed and exclusionary ability. We further develop these two mechanisms by arguing that the deterrence effect is stronger when rivals' speed is enhanced by their downstream capabilities, or when rivals' exclusion is enhanced by their litigation experiences. Findings suggest that a firm's path of resource accumulation evolves through avoidance of rivals' paths, and deterrence may constitute a viable alternative theory of resource heterogeneity. Copyright © 2010 John Wiley & Sons, Ltd.     

The effects of workers' participation on enterprise performance: Empirical evidence from French cooperatives

The results of estimating production functions augmented by various measures of workers' participation on a large enterprise level data set of French cooperatives are reported. Value added is found to be an increasing function of participation in profits, in collective membership and in ownership, even when a wide assortment of enterprise specific and environmental factors are taken into account. This finding is very robust, surviving tests between alternative specifications of technology, for reverse causality, for simultaneous equation bias and for multicollinearity. The typical productivity effect from participation, however, is small, around 5% of output. The results suggest that Western policymakers should investigate ways to increase workers' participation in capital stakes and profit shares.     

Ninety-four ways to ignore Brandt

In March 1980, a Commission of 18 senior statesmen, headed by former West German Chancellor, Willy Brandt, published a report, North-South - A Programme for Survival, which recommended 94 ways in which the countries of the North could help the South out of hunger and poverty and help itself in the bargain. Although the report was much discussed, the commissioners admitted in late 1982 that virtually none of its recommendations had been implemented. But during the last three years, the economies of most countries in both North and South have deteriorated, whilst hunger is more prevalent than ever. In response to this common crisis, the Brandt commissioners have now produced a second report.¹.If this is also ignored, then prospects for substantially reducing hunger and ending world recession are grim.     

研判行业大势 促进交流合作——《2011年国内外油气行业发展报告》发布会综述

2012年2月9日和15日,中国石油集团经济技术研究院分别在北京、上海两地发布了《2011年国内外油气行业发展报告》。报告显示:2011年,国际政治持续动荡,乱象丛生;世界经济复苏遇阻,危机难解。世界石油供需增速双降,基本面总体偏紧,国际主要基准油价同比大幅攀升,高位徘徊。世界天然气需求平稳较快增长,全球LNG贸易活跃,价格大幅上升。2011年,中国石油消费增速大幅下滑,但石油和原油对外依存度双破55%;天然气表观消费量增速超过20%;炼油能力布局进一步优化,油品质量继续升级;海外油气合作取得明显进展,能源公司国际化程度稳步提升。展望2012,世界石油供需趋于宽松,油价有望总体低于2011年水平,但伊朗问题是影响石油市场的最大不确定因素;天然气供需基本平衡,预计价格呈小幅增长态势。中国成品油需求将稳步增长;天然气消费量有望超过1500亿立方米,在一次能源中的比例超过5%。与会专家建议,加强能源战略研究和产业规划,对成品油价格加快市场化改革,对天然气利用政策进行适当调整,并适时推出天然气管网监管机制。     

ENGINEERING ECONOMY—TEACHING AND PRACTICE

Since construction of a plant involves considerable sums of money which are invested for many years, optimum location becomes an important factor, and the best available information must be corralled for management decision-making (there being no certain way of avoiding all future risks in a dynamic economy). A recent improvement in technique is constituted in linear programming techniques, of which a simple example is given here.¹     

Lesotho's food priorities

Lesotho is a small independent nation completely surrounded by South Africa. Of its 33000 km², 87% is peaks and high mountain pastures, leaving only one km² of arable land for each 325 people. Low yields on limited arable land leave the country serious food deficit. Production shortfalls are overcome with large commercial imports and substantial concessional food aid. Commercial imports through retail channels are financed by migrant remittances. Nearly half of the male labour force work in South Africa. Their repatriated wages contribute 40% of gross national income and 63% of rural household income.¹ Thus consumer markets are relatively well monetized and 55% of migrant remittances is spent on food.²     

Modified Stage‐Gate® Regimes in New Product Development*

The purpose of this research was to explore the nature of the Stage‐Gate^®process in the context of innovative projects that not only vary in new product technology (i.e., radical versus incremental technology) but that also involve significant new product development technology (i.e., new virtual teaming hardware‐software systems). Results indicate that firms modify their formal development regimes to improve the efficiency of this process while not significantly sacrificing product novelty (i.e., the degree to which new technology is incorporated in the new offering). Four hypotheses were developed and probed using 72 automotive engineering managers involved in supervision of the new product development process. There was substantial evidence to creatively replicate results from previous benchmarking studies; for example, 48.6% of respondents say their companies used a traditional Stage‐Gate^®process, and 60% of these new products were considered to be a commercial success. About a third of respondents said their companies are now using a modified Stage‐Gate^®process for new product development. Auto companies that have modified their Stage‐Gate^®procedures are also significantly more likely to report (1) use of virtual teams; (2) adoption of collaborative and virtual new product development software supporting tools; (3) having formalized strategies in place specifically to guide the new product development process; and (4) having adopted structured processes used to guide the new product development process. It was found that the most significant difference in use of phases or gates in the new product development process with radical new technology occurs when informal and formal phasing processes are compared, with normal Stage‐Gate^®usage scoring highest for technology departures in new products. Modified Stage‐Gate^®had a significant, indirect impact on organizational effectiveness. These findings, taken together, suggest companies optimize trade‐offs between cost and quality after they graduate from more typical stage‐process management to modified regimes. Implications for future research and management of this challenging process are discussed. In general, it was found that the long‐standing goal of 50% reduction in product development time without sacrificing other development goals (e.g., quality, novelty) is finally within practical reach of many firms. Innovative firms are not just those with new products but also those that can modify their formal development process to accelerate change.     

Agriculture and pollution

The seventh report of the UK Royal Commission on Environmental Pollution¹ is entirely concerned with agriculture. It notes the marked changes in the industry, since the second world war, which affect the environment, particularly the vast increase in the use of pesticides and nitrogenous fertilizers, and the growth of intensive livestock units, often situated on areas of land insufficient to take the animal excreta generated by them.     

R &D investments and profitability during the crisis: evidence from Greece

Innovation and Research and Development (R&D) investments have been considered in the literature as a significant determinant of corporate development and sustainability. Previous studies have examined the impact of intangibles on financial performance but not extensively within economic environments of intense financial turmoil. The scope of this study is to shed further light on this issue and examine whether R&D investments had an impact on the profitability of Greek firms especially during the sovereign debt crisis. We collected a sample of Greek corporations that have capitalized their R&D investments and paid significant amounts on R&D expenses during the period 2003–2016. Panel regression results indicated that R&D investments and R&D expenses had a negative impact on the profitability of sample firms before the crisis, but during the crisis (2011–2016) firms which managed to sustain or enhance their level of R&D investments achieved to improve their profitability. These findings corroborate our hypotheses that during a period of limited lending and hearse financial turmoil, R&D investments could be a vital tool for sustaining firms' financial performance. The study offers useful implications for managers and regulators, and contributes to the ongoing debate about the impact of R&D investments on corporate performance.     

Rejoinder : The mixed blessing of domestic support policies

This rejoinder notes the encouraging conclusion in the article by Tim Josling and Richard Barichello (p317–27),¹ that the impact of the policies followed for wheat by the world's main exporters has tended towards stabilizing world markets over the past twelve years. However, placing this conclusion in a wider context, the author believes that assuring world food security will remain dependent on support policy decisions taken for domestic policy reasons and that developed country domestic support policies have had a mixed effect for world markets.     

Analysing the stakes of stakeholders in research and development project management: a systems approach

Research and development (R&D) project management involves managing multiple stakeholders with conflicting stakes. This article proposes a systems approach to capture such conflicting stakes of multiple stakeholders in controversial R&D projects. The approach is illustrated using a New Zealand case study related to the use of 1080 chemical for pest management. Initially, the problem situation was structured systemically by analysing the behaviour of the main variables and by conducting a stakeholder analysis. Further, a participative systems model related to the problem situation was developed using a group model‐building process. The analysis of the model revealed a set of feedback loops operating in the system identified as constituting and responsible for the complexity of the problem situation relating to 1080 use. In conclusion, the paper highlights some strategies suggested by the stakeholders to manage conflict.     

利比亚战乱对油气产业的影响

自2011年2月中旬利比亚发生动荡和战乱以来,利比亚油气产业陷入停顿状态,油气产量急剧下降,油气田管理处于无序状态,沿海油气集输设施受到战争威胁,部分炼油厂和港口储运设施遭到破坏,油气出口陷于停滞。在西方国家支持和卡塔尔国家石油公司帮助下,反对派石油运营逐渐起步。利比亚战乱对国际石油市场形成冲击,由于担心在北非引起骨牌效应,在中东埋下动荡的种子,国际基准油价不断走高,轻质低硫原油紧俏,导致部分石油消费国开始考虑调整油源结构。未来,影响利比亚局势发展的关键因素包括西方国家支持反对派的决心,阿盟对多国部队空中打击的立场,反对派能否团结一致,国内各地区各部落的立场,卡扎菲政权应对制裁的能力。可以预见,利比亚局势在短期内较难明朗,其油气产业年内很难恢复,这将对世界石油市场产生长期的影响。     

The State and Industrial Relations: Background to the Adoption of Compulsory Arbitation Law in Australia and Nigeria

Conventional wisdom maintains that industrial turmoil accounts largely for the enactment of the compulsory arbitration law, the Conciliation and Arbitration Act 1904 and the Trade Disputes (Emergency Provisions) Decree 1968, in Australia and Nigeria respectively. Considering this view as patently inadequate, the paper investigates a broader background of this law in both countries and finds more critical factors at work. Important as the industrial turmoil was, this factor turned out to be merely a symptom of a more fundamental phenomenon, namely the lack of an institutionalized consensual collective bargaining system, arising largely from a similar form of interaction between the state and industrial relations in both countries.