CEO political ideologies and pay egalitarianism within top management teams

Research summary : We examine the influence of CEO and compensation committee liberalism on top management teams (TMT ) pay arrangements. Given that politically liberal individuals tend to value egalitarianism, we test whether firms with liberal CEO s tend to (1) reduce pay dispersion among non‐CEO executives; and (2) reduce pay gaps between CEO and non‐CEO executives, and whether compensation committee liberalism moderates these relationships. We find some evidence of a direct effect of CEO liberalism on TMT pay arrangements as well as some interaction between CEO and compensation committee liberalism on the pay arrangements. This study provides a better understanding of the antecedents of TMT pay arrangements and empirical evidence showing the influence of values at the top of organization . Managerial summary : Do the values of the CEO and compensation committee influence the pay of other top managers? Our study provides evidence that political ideology affects top manager pay. We examine whether CEO liberalism produces more egalitarian pay arrangements among top managers, and whether the liberalism of the compensation committee affects that relationship. We find that CEO liberalism reduces differences in the total pay among top managers, but does not influence the difference between CEO total pay and the total pay of top managers. We also find that compensation committee liberalism strengthens the negative influence of CEO liberalism on differences in total pay among top managers. Finally, we find that CEO liberalism reduces the difference between CEO bonus pay and the bonus pay of other top managers . Copyright © 2016 John Wiley & Sons, Ltd.     

The effect of organisational change on UK public library efficiency

Restructuring of local authority services, beginning in 1995/6, changed the organization of public library services in some areas, but not in others. This event provides an opportunity to assess the effect of organizational change on the technical efficiency of library services. A longitudinal data set is used to estimate efficiency scores using a time varying, multi-output stochastic distance function, which is estimated using maximum likelihood methods. Overall, there is little apparent difference in the efficiency of library systems, whether restructured or not. More detailed analysis shows that initially efficiency was reduced, but the scores change over time and higher relative efficiency is implied in subsequent periods.     

Public Employee Compensation and the Efficacy of Privatization Alternatives in US State and Local Governments

This article investigates the evidence used in the debate over public‐sector collective bargaining and privatization as US states attempted to resolve their budget problems. Specifically, the article evaluates the research on whether US state and local government workers are overpaid and whether privatization provides a cost‐effective alternative to the provision of public services by public employees. All recent studies find that state and local public employees earn on average lower wages than comparable private‐sector workers and on average receive better health benefits and pensions than private‐sector employees. Most studies find that the better benefits offset lower wages on average, and there is no state and local public employee compensation premium. The research on privatization in the USA indicates that it has reached something of an equilibrium with approximately one‐quarter of municipal public services being provided by private organizations. The major costs of privatization include overhead costs of competitive bidding, monitoring, oversight, and evaluation, which if done properly can often offset any privatization cost advantage, while if privatization is done without adequate controls, it can result in corruption, poor quality services, and then demands for reverse privatization.     

Cross‐border acquisitions and the asymmetric effect of power distance value difference on long‐term post‐acquisition performance

Research summary : Inconclusive findings about the effect of national cultural differences on post‐acquisition performance may be created by the failure to distinguish among the different cultural dimensions and the asymmetry of cultural differences. To demonstrate a different approach, this study focuses on one dimension of national cultural values—power distance value (PDV) and develops a framework for the asymmetric effect of PDV differences in creating two types of conflicts. The analysis of 2,115 cross‐border acquisitions in the global information technology industry shows that PDV differences undermine the long‐term post‐acquisition performance of acquirers. This effect is stronger when acquirers are higher than targets in PDV than when the opposite is the case. This asymmetric effect of PDV difference depends on national status difference, business relatedness, and acquisition experience. Managerial summary: National cultural differences can create “cultural clashes” to undermine the value creation by cross‐border acquisitions. During integration, individuals react to the acquirer–target hierarchy according to their respective power distance value (PDV): the extent to which they value equality (low PDV) or hierarchy (high PDV). PDV divergence results in two types of conflicts, depending on whether acquirers are higher or lower than targets in PDV. The two types of conflicts vary in the magnitude of their harmful effect on post‐acquisition performance. Both types of conflicts are more detrimental when acquirers are higher than targets in country status and when individuals need to interact more intensely. Acquisition experience can both help and harm post‐acquisition performance. These findings offer important implications for managing cross‐border acquisitions. Copyright © 2016 John Wiley & Sons, Ltd.     

Ownership structure and firm value: new evidence from Spain

This paper provides new evidence on the way in which ownership influences firm value. Unlike previous studies, the empirical evidence obtained from our ownership concentration model supports not only the monitoring but also the expropriation effects. Additionally, the insider ownership model provides results that confirm the convergence‐of‐interest and the entrenchment effects, even though Spanish insiders get entrenched at higher ownership levels than their U.S. and U.K. counterparts. Copyright © 2004 John Wiley & Sons, Ltd.     

Which Service? How Industry Conditions Shape Firms’ Service‐Type Choices

This article studies the role of industry conditions as determinants of manufacturing and software firms’ decisions to offer services. It draws on the competence perspective on industry evolution and servitization to theorize and provide empirical evidence on how industry conditions affect firms’ choice to offer two distinct types of services—product‐oriented services and customer‐oriented services. It is argued that firms are likely to offer product‐oriented services in Schumpeterian industry environments to address high technological uncertainty by leveraging and reinforcing capabilities in the existing technology. In contrast, firms are likely to offer customer‐oriented services in non‐Schumpeterian industry environments to address value generation uncertainty by building competences in new technological or market areas. Based on longitudinal data on 410 public firms from manufacturing industries and the software industry, empirical evidence suggests that firms are indeed more likely to offer product‐oriented services in Schumpeterian industry environments, such as in the early stage of the industry life cycle and under conditions of high R&D intensity and competition, whereas they are more likely to offer customer‐oriented services in non‐Schumpeterian environments, such as in the later stages of the industry life cycle and in highly cyclical industries.     

Service Regulations,Input Prices and Export Volumes: Evidence from a Panel of Manufacturing Firms

Using a panel of firm‐level data from Spanish manufacturers, this study shows that better service regulation reduces the price of intermediate inputs paid by downstream firms. The beneficial cost effects of services reforms extend to both large and small‐to‐medium sized corporations (SME’s), but the former tend to enjoy greater gains. This feature also manifests itself in international markets. We find evidence of an input cost channel through which service regulations affect the volume of exports of large manufacturers, while the evidence of such a channel is weaker for SME’s. Our estimates indicate that, from 1991 to 2007, large firms increased their volume of exports by an average of 20 per cent as a result of the direct input cost effect of services reforms, such that the firms that benefited the most typically belonged to industries more dependent on service inputs. Furthermore, convergence to the ‘best practice’ regulatory framework in services would have raised exports at least by an additional nine per cent. We conclude that firm size is relevant for the connection between services reforms, intermediate input prices and export volumes.     

Negative Externalities of Rail Noise and Housing Values: Evidence from the Cessation of Railway Operations in Singapore

The governments of Malaysia and Singapore reached a landmark agreement in May 2010 to end the operations of nearly 80‐year‐old railway lines and stations in Singapore. In our study, the cessation of the railway services operated by Keretapi Tanah Malaya (KTM), a firm owned by the Malaysian government, with effect from July 1, 2011 is used in a quasi‐experiment design to test the effects of the removal of train noise externalities on real estate values. Based on the nonlanded private housing transactions data from January 2005 to June 2013, we find that average prices for houses located within a 400‐m boundary from the railway lines increased by 3.5% relative to prices for houses located outside the 400‐m boundary after the cessation agreement has been announced. The removal of train noise externalities increases housing prices in the affected area by 13.7% on average in the postcessation period of the KTM railway services. Realized economic benefits associated with the railway services cessation were estimated at S$0.36 billion based on houses sold in the post cessation period of the KTM railway services.     

Services,industry evolution,and the competitive strategies of product firms

Services of different types have become increasingly important for product firms. While these firms mainly focus on products, managers and researchers lack a comprehensive framework to understand when to make significant investments in particular kinds of services. We identify three categories of product‐related services from a product firm—smoothing and adapting services, which complement products, and substitution services, which enable customers to pay for the use of a product without buying the product itself. We develop propositions about the relative level of these different kinds of services vis‐a‐vis industry evolution, as well as suggest how these services affect industry structure. We draw upon various literatures, though we conclude that the relationship between products and services is more complex and richer than any one literature suggests. Copyright © 2014 John Wiley & Sons, Ltd.     

U.S. Free Trade Agreements and Enforcement of Labor Law in Latin America

The paper provides difference‐in‐differences estimates suggesting that Latin American countries that signed a free trade agreement with the United States experienced an increase in the number of labor inspectors and inspections. We also find large heterogeneity across signers and no evidence that the North American Free Trade Agreement (NAFTA) had a positive impact on Mexico. We conclude by suggesting that the stringency of content of the accord and the resources devoted by the U.S. government to increase enforcement make a difference.     

Firm,strategic group,and industry influences on performance

A long‐standing debate has focused on the extent to which different levels of analysis shape firm performance. The strategic group level has been largely excluded from this inquiry, despite evidence that group membership matters. In this study, we use hierarchical linear modeling to simultaneously estimate firm‐, strategic group‐, and industry‐level influences on short‐term and long‐term measures of performance. We assess the three levels' explanatory power using a sample of 1,165 firms in 12 industries with data from a 7‐year period. To enhance comparability to previous research, we also estimate the effects using the variance components and ANOVA methods relied on in past studies. To assess the robustness of strategic group effects, we examine both deductively and inductively defined groups. We found that all three levels are significantly associated with performance. The firm effect is the strongest, while the strategic group effect rivals and for some measures outweighs the industry effect. We also found that the levels have varying effects in relation to different performance measures, suggesting more complex relationships than depicted in previous studies. Copyright © 2007 John Wiley & Sons, Ltd.     

Customer participation in knowledge intensive business services: Perceived value outcomes from a dyadic perspective

Knowledge intensive business services (KIBS) are considered a cornerstone of contemporary developed economies. Successful production and delivery of these services, and thus their perceived value outcomes, highly depend on customer participation (CP) in the service processes. However, the extant understanding of the perceived value outcomes of CP, which is crucial to the appropriate inducement and integration of organizational resources in service processes, is limited. Through the exploratory investigation of three dyadic cases, each comprising one customer and one service provider organization engaged in a knowledge-based service project, this study addressed this crucial topic. Results indicated four categories of perceived value outcomes emerged through CP: functional, economic, relational, and strategic values. The study provides insights on the evolution of value perceptions over time, the individual value components within each value category, and perceptual similarities and differences between customer and provider organizations. Further, these results indicate that various value outcomes of CP receive divergent levels of attention from personnel in different organizational hierarchies. The paper provides useful and applicable suggestions for managers, especially in the context of technology-based KIBS and solutions.     

Price Dispersion Over the Business Cycle: Evidence from the Airline Industry

This study provides empirical evidence documenting how price dispersion moves with the business cycle in the airline industry. Performing a fixed‐effects panel analysis on seventeen years of data covering two business cycles, we find that price dispersion is highly pro‐cyclical. This effect is especially pronounced for legacy carriers relative to low‐cost carriers. We show that our empirical result is consistent with firms' implementing second‐degree price‐discrimination tactics.     

Do We Have to Get Along to Innovate? The Influence of Multilevel Social Cohesion on New Product and New Service Development

In this study, based on the Comparative Performance Assessment Study survey conducted by the Product Development Management Association, the authors develop and test a model which considers the antecedents and performance outcomes of social cohesion, a seemingly critical organizational factor in new product development (NPD). Using a sample of over 450 innovation and product development professionals from North America, Europe, and Asia, social cohesion is conceptualized and tested across three levels—within team cohesion, between team cohesion, and between firm cohesion. The results of a structural equation model indicate several differences between the antecedents of the varying forms of social cohesion. A post hoc exploration of the difference between goods‐ versus service‐dominant firms provides a clearer picture of cohesion's influence on innovation outcomes. Specifically, within team and between team cohesion are positively associated with new services performance, while for traditional goods‐based NPD, within team, between team, and between firm cohesion all appear to be positively related to performance. The findings suggest that high social cohesion is not always optimal and that managers should focus on specific types or levels of social cohesion as opposed to thinking about social cohesion as a one‐dimensional construct. The findings also suggest that goods‐ and service‐centric firms can use different tactics or strategies to drive social cohesion and, ultimately, new product performance, and that innovation managers may need to allocate resources differently depending on the nature of the market offering being developed. The paper also presents several implications for theory and practice, as well as future research directions related to the various levels of social cohesion and their influence on new product and new service performance.     

Collective Bargaining and Innovation in Germany: A Case of Cooperative Industrial Relations?

At the level of theory, the effect of collective bargaining on innovation is contested. The large proponderance of the U.S. evidence clearly points to adverse effects, but other‐country experience suggests that certain industrial‐relations systems, or the wider regulatory apparatus, might even tip the balance in favor of unions. Our pooled cross‐ section and difference‐in‐differences estimates provide some weak evidence that German collective bargaining inhibits innovation. However, in conjunction with workplace representation, there is the suggestion that it might actually foster innovative activity.     

How national systems differ in their constraints on corporate executives: a study of CEO effects in three countries

Do CEOs matter more in some countries than in others? Based on a theoretical consideration of three fundamental national‐level institutions—national values, prevailing firm ownership structures, and board governance arrangements—we argue that CEOs in different countries face systematically different degrees of constraint on their latitudes of action, and hence they differ in how much effect they have on firm performance. To test these ideas, we apply a variance components analysis methodology to 15‐year matched samples of 100 U.S. firms, 100 German firms, and 100 Japanese firms. Results provide strong, robust evidence that the effect of CEOs on firm performance—for good and for ill—is substantially greater in U.S. firms than in German and Japanese firms. Copyright © 2007 John Wiley & Sons, Ltd.     

An empirically-based typology of product innovativeness for new financial services: Success and failure scenarios

During the last decade, an increasing number of studies have been concerned with the factors that lead to new service success. Quite a few studies, however, have examined the role of product innovativeness in new service development and performance. The present article aims to test empirically a widespread, yet under‐researched argument, according to which, different innovative types may be associated with different development patterns and performance outcomes. On the basis of a detailed literature review we designed the conceptual framework for the present study. More specifically, we propose that the performance outcome of a new service is the result of the development process followed, which, in turn, is influenced by the innovativeness of the new service. The development process is examined through three blocks of variables, namely new service development activities (i.e., the “what” component), process formality (i.e., the “how” component) and cross‐functional involvement (i.e., the “who” component). Performance is viewed in relation to both financial and non‐financial outcomes. The different dimensions of innovativeness form the basis of our classification scheme. To collect the data, we followed the “dropping off method. That is, we handed in self‐administered questionnaires to participants and, a picking‐up appointment was set. Respondents were NSD project leaders who were asked to select two financial services, one successful and one unsuccessful, that they had developed within the last three years and reply to all questions relating to the development and launching of these services. Overall, 84 financial companies participated in the study, providing data for 132 new financial services (80 successes and 52 failures) developed and marketed in Greece. Data analysis revealed that six distinct service innovativeness types exist. They can be represented in the form of a continuum depending on the degree of innovativeness that characterizes each type. At the most innovative extreme of the continuum we find the new‐to‐the‐market services followed by new‐to‐the‐company services, new delivery processes, service modifications, service line extensions, while at the least innovative end service repositionings are placed. These six types are found to be associated with different development patterns in terms of activities, formality and cross‐functional involvement as well as performance outcomes. Interestingly enough, our data suggest an almost inverted U‐shaped relationship between the degree of innovativeness of a new financial service and financial performance. On the other hand, the major service innovations make the strongest contribution on non‐financial performance, while “me‐too” offerings are the least successful ones. The study has a number of research contributions as well as implications for managers involved in new service development in the financial services industry. The conceptualization of the continuum of innovativeness helps disclosing the critical points of the NSD process and its structuring which, depending of the type of new service and the degree of innovativeness that characterizes it, ensures that the management's objectives regarding the performance of the new service are attained.     

Labour Adjustment Implications of Service Offshoring: Evidence from Canada

About one‐fifth of Canadian employees are in jobs that are vulnerable to service offshoring. Despite this figure, both theory and our empirical evidence (based on a variety of methodologies and datasets) suggest that the offshoring of business services is not likely to lead to large adverse employment effects. We also conclude that existing active labour market adjustment policies (e.g. increased labour market information, job search, mobility and training) developed for other adjustment pressures such as technological change and free‐trade in goods are just as appropriate (perhaps even more so) to deal with the consequences of service offshoring.     

Innovation Management Practices Compared: The Example of Project‐Based Firms*

The importance of project‐based firms is increasing, as they fulfill the growing demands for complex integrated systems and knowledge‐intensive services. While project‐based firms are generally strong in innovating their clients' systems and processes, they seem to be less successful in innovating their own products or services. The reasons behind this are the focus of this paper. The characteristics of project‐based firms are investigated, how these affect management practices for innovation projects, and the influence of these practices on project performance. Using survey data of 203 Dutch firms in the construction, engineering, information technology, and related industries, differences in characteristics between project‐based and nonproject‐based firms are identified. Project‐based firms are distinguished from nonproject‐based firms on the basis of organizational configuration, the complexity of the operational process, and the project management capabilities of the firm. Project‐based firms also differ with regard to their level of collaboration and their innovation strategy, but not in the level of autonomy. A comparison of 135 innovation projects in 96 of the firms shows that project‐based firms do not manage their innovation projects different from other firms. However, the effects of specific management practices on project performance are different, particularly the effects of planning, multidisciplinary teams and heavyweight project leaders. Differences in firm characteristics provide an explanation for the findings. The implication for the innovation management literature is that “best” practices for innovation management are firm dependent.     

The Effect of Municipal Services and Local Taxes on Housing Values

This paper presents an economic model which casts the "Tiebout Hypothesis" in a Von Thumen type model of spatial equilibrium and considers the effect of differential provision of municipal services on household utility levels and housing prices in a politically fragmented urban area. Also in the context of this model three alternative methods of financing municipal services are examined. The article suggests that different levels of municipal services may cause spatial disequilibrium in an urban area, and as households move within the urban area to maximize their utility, they bid up (or down) the price of housing to the extent that their consumer's surplus is capitalized in housing values. Thus, the resultant urban rent gradient may be "kinked" or discontinuous. This paper also presents empirical findings examining the relationship between housing values and several municipal services.