How Much Do Employers Learn from Referrals?

This paper tests the hypothesis that referrals from various sources provide employers with more information about job applicants than they would have with‐out a referral. The study uses data that contain information on two workers in the same job, allowing the differences in job and firm characteristics to be canceled out and controlling for the possibility that workers with referrals from different sources (or no referral at all) sort into jobs that put different weights on individual performance. The estimation results are consistent with referrals from current employees providing employers with more information than they would have otherwise. Additionally, it appears as though hiring through friends or relatives of the employer may involve some favoritism that results in employers either collecting less information than they would otherwise or ignoring information when setting wages. The study finds weak evidence consistent with referrals from other firms or labor unions providing useful information, and no evidence that referrals from community organizations or other sources have any effect.     

How Much Does Ownership Form Matter?

Research summary : Previous studies have emphasized firm and industry effects on variation in firm performance, but the relationship between forms of ownership and firm performance has been the focus of limited research. This article examines the extent to which ownership form (i.e., public or private ownership) and ownership structure (including diffused ownership and blockholding) affect firm performance. The results of an analysis of 30,525 European Union (EU) firms indicate that form of ownership is an important explanatory factor in the difference in performance among firms. These results underscore the need to study firms characterized by different ownership arrangements and to provide empirical evidence for the study of firm ownership in strategic management. Managerial summary : Motivated by growing evidence on the involvement of different types of owners in the strategies of firms, we studied the extent to which a firm's ownership form (type of legal incorporation, such as public and private ownership forms) and ownership structure (diffused ownership and blockholding) affect its performance. Our study of more than 30,000 firms from the European Union shows that ownership form differences explain some of the performance differences between firms. Our results also indicate that firms with different ownership forms are differently affected by their competitive environment. Overall, the study suggests that choosing the right ownership form can have important strategic consequences. Copyright © 2017 John Wiley & Sons, Ltd.     

Perceptions of Material Resources in Innovation Projects: What Shapes Them and How Do They Matter?

Studies on the role of material resources for team performance in innovation projects have provided inconclusive results. This paper focuses on team members' perceptions of the provided material resources' adequacy to address this gap. Understanding what drives perceptions of material resource adequacy may not only reconcile conflicting results in the literature, but may also provide much‐needed guidance for project funding, so as to maximize innovation project performance. Further, the analyses in this paper differentiate between two outcome dimensions of innovation project performance, namely, the degree of new product quality and new product novelty, and thus offer a more fine‐grained analysis of the relationship between perceptions of material resource adequacy and innovation project teams' performance. The posited hypotheses are tested using a sample consisting of survey data from 121 innovation projects in the electronics industry. To avoid common source bias, data from different respondent groups, that is, team leaders, team members, and team external managers of the examined innovation projects, were used. The results of the regression analyses identify team potency and workload as socio‐cognitive drivers of innovation project teams' perceptions of material resource adequacy. Moreover, it is found that perceived material resource adequacy relates positively to new product quality, while it relates negatively to new product novelty. This paper thus provides an important step toward disentangling the ambiguity surrounding the relationship between material resource adequacy and innovation project teams' performance, showing that a key finding of cognitive psychology seems to hold also on the team level of inquiry: the significant influence of socio‐cognitive factors on perceptions. This finding paves the way for putting more attention in research on innovation and project management on cognitive aspects, in particular considering mechanisms behind the formation of team perceptions. Further, the results provide evidence for differential effects of perceived material resource adequacy on innovation project performance, depending on the indicators used for measuring the outcomes of an innovation project. This contributes necessary detail to studying the relationship between material resource adequacy and innovation project performance, which so far has produced inconclusive results, suggesting that these contradictions might result to a large degree from different operationalizations of innovation project performance. On a practical level, the findings of this paper suggest that material resource adequacy seems not to be a catch‐all variable, influencing innovation project outcomes in a uniform way. It appears to be a useful lever for influencing team outcomes depending on the desired result, which may be manipulated by shaping team variables that exert a systematic influence on perceptions of material resource adequacy.     

Mortgage Choice: What's the Point?

This article shows that, in the presence of transaction costs payable by borrowers on refinancing, it is possible to construct a separating equilibrium in which borrowers with differing mobility select fixed rate mortgages (FRMs) with different combinations of coupon rate and points. We also show that, in the absence of such costs, no such equilibrium is possible. This provides a possible explanation for the large menus of FRMs typically encountered by potential borrowers, and suggests that the menu available at the time of origination should be an important predictor of future prepayment. We numerically implement the model, developing the first contingent claims mortgage valuation algorithm that can quantify the effect of self-selection on real contracts in a realistic interest rate setting. The algorithm allows investors to account for self-selection when valuing mortgages and mortgage-backed securities. It also, for the first time, allows lenders to determine the optimal points/coupon rate schedule to offer to a specified set of potential borrowers, given the current level of interest rates.     

How Much of Barrier to Entry is Occupational Licensing?

We exploit state variation in licensing laws to study the effect of licensing on occupational choice using a boundary discontinuity design. We find that licensing reduces equilibrium labour supply by an average of 17–27 per cent.     

How Do Financial Constraints Affect Creativity?

This paper investigates the effects of financial constraints on the outcome of different types of creative tasks such as product ideation and product repair. Four experimental studies examine the effect of financial constraints on creativity of the outcome of a product ideation task, and compare the effect of financial constraints with the effect of another type of constraint (i.e., input restrictions) on creativity of products ideated and on the amount of resources invested in the development of the creative solution. Furthermore, these studies explore the type of creative process ignited by financial constraints and analyze the effect of financial constraints in interaction with an individual difference such as novelty seeking, which embraces more remote determinants of creative performance, on the creativity of the outcomes to a product ideation task, as well as on the creativity of the outcomes to a more constrained task such as repairing an existing product. The results suggest that constrained financial resources may be beneficial to creativity. Financial constraints lead to the ideation of more creative products. Yet these products are generated using fewer inputs and a lower budget than products generated in an unconstrained condition. Furthermore, while yielding outcomes as creative as the ones generated under input constraints, financial constraints induce a parsimonious mindset reflected in the use of less costly resources. More interestingly, financial constraints activate a top‐down rather than a bottom‐up processing strategy in approaching the creative task. Finally, the results show that the effect of financial constraints is stronger for individuals with inherent tendencies toward novelty seeking, because their stock of experiences and perspectives puts them under stress when facing an unconstrained problem space. This interaction effect holds not only for product ideation tasks, but also when the problem space is already constrained in nature, as in the case of repairing a product. These findings, which are quite counterintuitive from the perspective of classic new product development literature, suggest that, at least under certain conditions, the use of financial constraints might constitute a promising approach to foster new ideas' generation, one that leads to more creative outcomes despite using less costly inputs. In addition, our results suggest that, when dealing with a creative task, companies should modulate the adoption of this kind of constraint on the individual characteristics of their employees, specifically on their innate tendency to seek novelty.     

Another Look at Local Franchise Regulation and State Commission Regulation: Do They Really Matter?

While economic theories suggest that firm behavior may diverge over time under local franchise regulation and state commission regulation, empirical studies on that issue are scant. By exploiting the facts that: both types of regulation coexisted in the cable television industry prior to federal deregulation; and the starting years of cable systems varied widely, this paper approaches the issue. Two empirically testable hypotheses are set. First, market power exercised varies with system ages. Second, the age-dependent path of the market power exercised differs under local franchise regulation and state commission regulation. The paper finds evidence supporting these hypotheses. Though some qualifications are required due to the use of cross-sectional instead of panel data, the evidence presented here is highly suggestive that regulator-firm relations have played a role and might be a cause of the differing monopoly powers exercised.     

Cross-National Diffusion Research: What Do We Know and How Certain Are We?

To compete effectively in the global marketplace, marketing managers require insight into how a product gets adopted in different countries. For example, can international marketers identify specific cultural traits that may help them to forecast how quickly a new product will be adopted in a particular country or in a group of somehow related countries? Similarly, can they identify factors that suggest why the adoption process differs among countries?Although these diffusion-related questions address critical issues for international marketing managers, only a few studies have explored cross-national diffusion. To help fill this gap, V. Kumar, Jaishankar Ganesh, and Raj Echambadi present the results of a study that replicates and extends the findings of three previously published studies of cross-national diffusion. Their research aims to replicate four findings from the previous studies: the role of country-specific effects in explaining differences in diffusion parameters, the presence of a lead-lag effect, the use of cultural variables to explain systematically the diffusion patterns across countries, and the merit of country segmentation schemes based on diffusion parameters. They extend the previous research by integrating cross-sectional and time lag variables into a single framework, and they demonstrate how managers can apply this integrated framework for forecasting the diffusion of new products.They replicate the findings from the previous studies by using annual sales data for five product categories (VCRs, microwave ovens, cellular phones, home computers, and CD players) in the following countries: Austria, Belgium, Denmark, Finland, France, Germany, Italy, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the UK. The product categories and time periods covered differ from the ones in the previous studies; some overlap exists among the countries in this study and the ones in the previous studies.The findings in this study suggest that country-specific characteristics (for example, cosmopolitanism, mobility, percentage of women in the labor force) are useful for identifying the differences in diffusion patterns across countries and innovations. This study also suggests that the lead-lag effect helps to explain differences in diffusion across countries. Factors that this study identifies as possibly influencing the clustering of countries with similar diffusion patterns include timing of entry, geographical proximity, and cultural or economic similarity.     

Do Liquidated Damages Clauses Affect Strategic Mortgage Default Morality? A Test of the Disjunctive Thesis

We test the disjunctive thesis as it relates to mortgage contracts and find that a liquidated damages clause shifts ones view of a mortgage from a promise to perform to either a promise to perform or pay compensatory damages. However, when a strategic mortgage default is responsible for the breach, the perceived immorality of this action overwhelms the liquidated damages clause effect in support of the disjunctive thesis. We also find that people's conscious “experimentally stated preference” moral stance on installment loan (mortgages, auto loans, credit card debt and even cell phone contracts) default significantly differs from their subconscious “experimentally revealed preference” moral stance indicating a difference between what people say they believe and what they actually believe.     

State of Play: How Do College Football Programs Compete for Student Athletes?

Each year high school football players sign letters of intent with college football programs. The NCAA governs this matching market with strict rules that are designed to protect amateurism. DuMond et al. (J Sports Econ 9(1):67–87, 2008) develop a model of athlete choice. I consider the matching puzzle from the program’s perspective: What factors increase the likelihood that a school will successfully recruit an athlete? Like DuMond et al., I find that the state of play matters. However, my results suggest that football programs are willing to recruit outside their borders. In addition, the results align with prior findings about cheating in the NCAA. This extends the literature on college sport recruiting and may provide insight into other matching puzzles in academic, medical, and business job markets.     

What Would They Do? Childcare under Parental Leave and Reduced Hours Options

Time diary data are used to simulate the effects of parental leave and reduced hours arrangements on childcare time among parents of infants. Estimates suggest that coupled fathers would apply approximately 70 percent of working time reductions under leave or reduced hours to childcare. Both coupled and single mothers translate working time reductions into childcare at higher rates. The analysis highlights inequalities across lines of gender, marital status, and socioeconomic status associated with existing policies and suggests policy innovations to both raise parental investments in childcare time and reduce levels of inequality.     

Lysine and Price Fixing: How Long? How Severe?

In October 1996 the Archer Daniels Midland Company(ADM) pleaded guilty to criminal price fixing withrespect to sales of lysine and agreed to pay a $70million fine. Earlier, in August 1996 two Japaneseproducers and a Korean producer of lysine had agreedto plead guilty to criminal price fixing charges. Andearlier still, in July 1996 ADM and the two Japanesecompanies settled the civil suits filed by some harmedbuyers by agreeing to pay a sum of $45 million.It is this last event that serves as the focus forthis paper. The adequacy of the settlement amount wasa major area of dispute. Connor (1996, 1997, 1998)has claimed that the trebled damages to lysinepurchasers were an order of magnitude larger. Crucialto Connor's conclusions are his assumptions as to thetime period during which the conspiracy had an effecton prices and the but for price that otherwise wouldhave prevailed in the absence of the conspiracy. Thispaper will argue that Connor substantiallyover-estimated the period of the conspiracy andunder-estimated the but-for price.     

Emerging Market Firms' Internationalization: How Do Firms' Inward Activities Affect Their Outward Activities?

Research summary : In this study we examine how an emerging market firm's inward international activities (“inward activities”) are related to its outward international activities (“outward activities”) by focusing on the role of the firm's gain from its inward activities. On the one hand, drawing upon the organizational learning perspective, we propose that a firm's gain from inward activities may facilitate its outward activities through improving its resource fungibility. On the other hand, we draw upon the prospect theory to propose that a firm's gain from inward activities may hinder its outward activities by discouraging the firm's top managers from taking risks that are inherent in outward activities. With detailed data from a sample of manufacturing firms in China, we find empirical support for both lines of arguments . Managerial summary : Are emerging market firms with higher inward gain more likely to engage in outward internationalization activities? We argue that it depends upon how a firm uses its gain from inward activities. If the firm can improve its resource fungibility (particularly organizational resource fungibility) from its inward gain, it is more likely to engage in outward activities. If the firm cannot improve its resource fungiblity, the answer is no. Our findings suggest that for emerging market firms, internationalization is not just a path toward new markets; instead, it reflects how these firms exploit and explore what they have learned from their interactions with foreign firms at home in foreign markets. Therefore, managers must think more strategically on developing (organizational) resource fungibility from their inward activities . Copyright © 2017 John Wiley & Sons, Ltd.     

How Do Firms Finance Nonprimary Market Investments? Evidence from REITs

This study explores the impact of investment characteristics, mainly investment location relative to the firm's primary market, on financing choices by real estate investment trusts (REITs). Using a large sample of commercial property acquisitions, we show that REITs are 4–8% less likely to use secured (mortgage) debt when acquiring properties in their primary markets than elsewhere. The documented evidence supports a demand‐side story for the relation between investment characteristics and financing. Moreover, the evidence is consistent with the hypothesis that REITs avoid mortgage financing in their primary markets to preserve operational flexibility in those markets.     

Paths to Success: How Do Market Orientation and Entrepreneurship Orientation Produce New Product Success?

The purpose of this paper is to examine the relationship between strategic orientation and the performance of new products. In this paper, we develop a conceptual model that explores the roles of market orientation (MO) and entrepreneurship orientation (EO) on new product performance and seek to understand the mediating roles of process and product characteristics. Based on a survey of 471 small and medium‐sized enterprises in Korea, we found that MO and EO positively affect new product performance. The main impact of MO is through new product development proficiency and product meaningfulness and that of EO is through proficient intellectual property management and product novelty. Academic and managerial implications are also discussed.     

Are Adjustable‐Rate Mortgage Borrowers Borrowing Constrained?

Past research argues that changes in adjustable‐rate mortgage (ARM) payments may lead households to cut back on consumption. These outcomes are more likely if ARM borrowers are borrowing constrained, and we show in this article that ARM borrowers exhibit attitudes toward borrowing and behavior that are consistent with being borrowing constrained. Although the demographic and financial characteristics of ARM and fixed‐rate mortgage (FRM) borrowers are somewhat similar, ARM borrowers differ from FRM borrowers in their uses of credit and attitudes toward it. In addition, we find the consumption growth of households with an ARM is more sensitive to past income than the consumption growth of other households, suggesting the ARM borrowers may be subject to borrowing constraints that hinder their ability to smooth consumption.     

New Product Development Speed: Too Much of a Good Thing?

New product development (NPD) speed has become increasingly important for managing innovation in fast‐changing business environments due to continuous reduction in the product life cycle time and increase in competition from technological advancements and globalization. While the existing literature has not produced consistent results regarding the relationship between speed and success for NPD projects, many scholars and practitioners assert that increasing NPD speed is virtually always important to NPD success. The purpose of this paper is to examine the implicit assumption that faster is better as it relates to new product success (NPS). From the perspectives of time‐compression diseconomies and absorptive capacity, the authors question the assumption that speed has a linear relationship with success. The authors further argue that time‐compression diseconomies depend on levels of uncertainty involved in NPD projects. Using survey data of 471 NPD projects, the hypotheses were tested by hierarchical regression analysis and subgroup polynomial regression. The results of this study indicate that NPD speed has a curvilinear relationship with NPS, and the nature of the speed–success relationship varies, depending on type and level of uncertainty. When turbulence or technological newness is high, the relationship is curvilinear, but when uncertainties are low, the relationship is linear. In contrast, the results of this study suggest a curvilinear relationship under conditions of low market newness but not when market newness is high. The present paper asserts that time‐compression diseconomies and absorptive capacity are important theoretical constructs in understanding speed in NPD. The different impact of market newness and market turbulence on NPD speed supports the distinction of newness and turbulence as two different sources of uncertainty. Discussion focuses on the implications of NPD speed under the different conditions of uncertainty. NPD teams need to pursue NPD speed as a critical strategy, but it is necessary to analyze the source and degree of uncertainty about projects before a time‐based strategy is selected. In order to address the challenges of high uncertainty, a firm needs to probe, learn, and iterate fast. In particular, NPD teams need to distinguish between the different requirements for new products in emerging and new markets, and those in fast‐changing markets. Moreover, NPD teams need to balance how fast they need to go with how fast they can go by considering team absorptive capacity and customer absorptive capacity.     

How Do Switching Costs Affect Market Concentration and Prices in Network Industries?

I investigate the effects of switching costs on the market outcome in network industries using a dynamic duopoly model of price competition in the presence of an outside option. I find that the role of switching costs depends on network effects and the outside option. Without a viable outside option, high switching costs can neutralize the tendency towards high market concentration associated with network effects, but with a viable outside option, switching costs increase market concentration. Furthermore, switching costs lower prices if network effects are modest and there exists a viable outside option, but generally raise prices otherwise.     

Two Sides of the Same Coin: How Do Different Dimensions of Product Program Innovativeness Affect Customer Loyalty?

Conventional wisdom holds that innovativeness has essentially positive performance implications. However, empirical research reveals mixed findings regarding customer‐related responses to innovation, as distinct dimensions—such as product newness and meaningfulness—may generate responses in different manners. This study introduces a multidimensional conceptualization of innovativeness at the program level, thereby enlarging the customary perspective by considering both positive and negative customer responses to innovativeness. Drawing on information economics, this study suggests that product program meaningfulness fosters customer loyalty, whereas product program newness undermines customer loyalty. In addition, the study examines mechanisms that might buffer the negative newness–loyalty relationship and explores enablers of the positive meaningfulness–loyalty effect by considering a brand's association with innovativeness and customer integration. Empirical support for the proposed effects comes from a multi‐industry sample with 180 triadic cases from business‐to‐business companies, which includes assessments from marketing, and research and development managers as well as customers. Moderated regression analysis was applied to test the hypotheses. The results indicate a negative effect of product program newness on customer loyalty and a positive effect of product program meaningfulness. Further, a brand's close association with innovativeness reduces the negative effect of product newness, and integrating customers into the value‐creating process fosters the loyalty effect of product meaningfulness. This study offers a potential explanation for the ambiguity created by equivocal empirical results regarding customer responses to innovativeness. The study also shows that offering more innovations does not necessarily make customers loyal. Instead, managers should mitigate the negative effects of product program newness.