The persistence of founder influence: management,ownership, and performance effects at initial public offering

The purpose of this research is to apply a conceptual framework to questions of how, why, and when founders participate in the firms that they establish and to empirically test for the persistent influence of the founder on the firm after start‐up. A definition of the term ‘founder’ is proposed. Empirical tests compare firms with founder CEOs to those with nonfounder CEOs to determine whether governance and ownership relationships are distinguishable at initial public offering (IPO). In addition, investor reaction to founder‐led firms at IPO is tested. Results suggest that founder influence does persist in governance and ownership arrangements and that the stock market reaction to founder‐led firms is higher than for the comparison group, relative to accounting value. Copyright © 2003 John Wiley & Sons, Ltd.     

Common ownership,market power,and innovation

I examine the effects of overlapping ownership on market power when there are external effects across firms. This is done in an oligopoly model with cost-reducing innovation with technological spillovers where firms have an overlapping ownership structure based largely on López and Vives (2019). The model allows for Cournot competition with homogeneous product and for Bertrand with differentiated products as well as for strategic effects of R&D investment. It derives positive testable implications and normative results to inform policy.     

Institutional ownership,capital structure,and firm performance

In most studies of ownership and firm performance, researchers have assumed different forms of ownership do not interact in their effect on firm strategy or performance. Focusing on the role of institutional owners, this study poses two related questions: (1) What are the relationships between outside institutional shareholdings, on the one hand, and a firm's capital structure and performance, on the other? and; (2) Does the size of stockholdings by corporate executives, family owners, and insider-institutions modify those relationships? The data, collected from 40 pairs of manufacturing firms selected from as many industries over a 3-year period, shows that the size of outside institutional stockholdings has a significant effect on the firm's capital structure. We have also found that family and inside institutional owners' shareholdings moderate the relationship between outside institutional shareholdings and capital structure. Likewise, corporate executives' shareholdings supplement the relationship between outside institutional shareholdings and firms' performance. These findings suggest that internal and external coalitions interact with each other to influence the firm's conduct.     

Rising markups,common ownership,and technological capacities

This paper analyses the impact of common ownership on markups and innovation and adds to the discussion of the recently observed patterns of a long term rise in market power. Using a panel of European manufacturing firms from 2005 to 2016, we structurally infer markups and construct a measure of common ownership. We use a propensity score reweighting estimator to eliminate biases due to observational characteristics and find an increase of firm markups ranging up to 3.3% on average in industries with high technological spillovers after the first exposure to common ownership. For companies directly held by common institutional investors, we also measure a positive effect on citation-weighted patents of up to 9.6% in high-spillover industries on average. Both findings are consistent with recent theoretical findings in López and Vives (2019).     

Property rights and transaction costs – The role of ownership and organization in German public service provision

This paper provides evidence that ownership and organization matters for the efficiency of the provision of public services. The results confirm trade-offs implied by the property rights literature and provide important policy implications regarding the organization of public service provision. We find that pure private ownership is more efficient than pure public ownership, and public ownership is more efficient than mixed ownership. The delegation of management in different legal forms also has an impact, highlighting the importance of the design of the government-operator relationship. We apply a structural approach of a production function estimation, ensuring precise determination of total factor productivity for a panel of German garbage collection firms between 2000 and 2012, followed by a projection of those total factor productivity estimates on ownership and organization.     

Airport capacity and inefficiency in slot allocation

This paper studies the time slot allocation of flight departures when travelers have a preference for departing on peak times and the number of available peak-time slots is constrained by airport capacities. We show that, compared to public airports, private airports may restrain their supply of peak slots strictly below their capacity levels when they serve airlines that compete to the same destinations. Such an inefficiency takes place in airports that have low per-passenger charges and are not too busy. It does not occur in the absence of competition in destination markets.     

Excess market value,market power,and inside ownership structure

This study is an empirical investigation of whether principal-agent problems do in fact significantly affect corporate managers' decision making, and hence the price of the firms' securities. If inside ownership structure of firms is reflected in firm market value, then agency theory leads one to expect that market value will be a positive function of the degree of inside ownership. This study demonstrates that rational investors recognize inside ownership and its resultant effect on market value. Furthermore, it is shown that excess market value as measured by the Tobin's Q-ratio is related to the level of advertising and R&D expenditure, the degree of market power as proxied by the Lerner Index, leverage, and firm size.     

Affiliation, integration, and information: ownership incentives and industry structure

This paper presents theory and evidence on horizontal industry structure. At issue is the question: what makes industries necessarily fragmented? The theoretical model examines trade‐offs associated with affiliation and integration, and how they are affected by the contracting environment. I show how contractual incompleteness can lead industries to be necessarily fragmented. I also show that contractual improvements will tend to lead to a greater concentration of brands, but whether they lead industries to be more or less concentrated depends on what becomes contractible. I then discuss the propositions generated by the model through a series of case study examples.     

Overlapping ownership and product innovation

We characterize the effect of overlapping ownership (OO) on investments in drastic product innovation. The success probability of innovation increases with investment. We analyse two opposing forces: (1) OO induces firms to internalize that success on their own behalf erodes the rivals’ business, reducing investments; (2) OO softens competition in the product market, enhancing investments. Our analysis reveals that the competition-softening effect, by stimulating investments, can induce OO to benefit consumers, in particular when the R&D projects are complex. We also show that an incumbent technology raises the threshold required for OO to stimulate investments in innovation.     

List pricing and discounting in a Bertrand–Edgeworth duopoly

List, or retail, pricing is a widely used trading institution where firms announce a price that may be discounted at a later stage. Competition authorities view list pricing and discounting as a procompetitive practice. We modify the standard Bertrand–Edgeworth duopoly model to include list pricing and a subsequent discounting stage. Both firms first simultaneously choose a maximum list price and then decide whether to discount, or not, in a subsequent stage. We show that list pricing works as a credible commitment device that induces a pure strategy outcome. This is true for a general class of rationing rules. Further unlike the dominant firm interpretation of a price leader, the low capacity firm may have incentives to commit to a low price and in this sense assume the role of a leader.     

Institutional framework,corporate ownership structure,and R&D investment: an international analysis

We combine agency theory with the law and finance approach to analyze how the legal protection of investors and the corporate ownership structure affect corporate investment in research and development (R&D). We use information from 956 firms from the five most R&D-intensive industries in 19 developed countries. Our results show that better protection of investors’ rights by the institutional environment has a positive influence on corporate R&D. We also find that corporate ownership concentration works as a substitute for legal protection. This finding means that R&D investment of the firms in the countries with poor legal protection increases as ownership becomes more concentrated. Our results also show that the identity of shareholders has a relevant effect: Whereas banks and nonfinancial institutions as shareholders result in lower R&D, institutional investors as shareholders increase corporate investment in R&D.     

Entrepreneurship and paths to business ownership

Alternative paths to ownership are examined, including starting, purchasing or inheriting a firm, as well as being promoted or brought in by existing owners. It is hypothesized that these involve different ‘degrees of entrepreneurship’, which will be reflected in the profiles of owner-managers who have followed each path. Data on 1756 owner-managers are used to test hypotheses relating path to ownership to: the entrepreneurs' background characteristics; motivations and attitudes; and previous careers, incubator organizations and processes of starting.     

Simultaneous and sequential price competition in heterogeneous duopoly markets: experimental evidence

We investigate simultaneous and sequential price competition in duoply markets with differentiated products and random matching of symmetric firms. We find that second movers gain from the sequential structure in comparison to simultaneous-move markets whereas first movers do not. As predicted by the theory, there is a significant first-mover disadvantage in the sequential game. Finally, we report the results of control treatments varying the matching scheme and the mode of eliciting choices (strategy method vs. standard sequential play).     

Family ownership and firm performance: Influence of family management,family control,and firm size

This study examines the relationship between family ownership and firm performance by considering the influence of family management, family control, and firm size. Using proxy data of 786 public family firms in Taiwan during 2002–2007, this study found that family ownership is positively associated with firm performance. The positive association is strong particularly when family members serve as CEOs, top managers, chairpersons, or directors of the firms; however, the association becomes weak when family members are not involved in firm management or control. The findings suggest that the potential family-ownership effects are more likely to be realized when family ownership is combined with active family management and control. In addition, the association between family ownership and firm performance is stronger in small- and medium-sized enterprises (SMEs) than in large companies.     

Foreign and domestic ownership,business groups,and firm performance: evidence from a large emerging market

We adopt a multi‐theoretic approach to investigate a previously unexplored phenomenon in extant literature, namely the differential impact of foreign institutional and foreign corporate shareholders on the performance of emerging market firms. We show that the previously documented positive effect of foreign ownership on firm performance is substantially attributable to foreign corporations that have, on average, larger shareholding, higher commitment, and longer‐term involvement. We document the positive influence of corporations vis‐á‐vis financial institutions with respect to domestic shareholdings as well. We also find an interesting dichotomy in the impact of these shareholders depending on the business group affiliation of firms. Copyright © 2006 John Wiley & Sons, Ltd.     

Foreign ownership and long‐term survival

We study the relative survival of foreign‐ and domestically owned companies in Denmark over more than a century (1895–2005). Contrary to previous studies that have emphasized the liability of foreignness, we find evidence of a significant survival premium for foreign‐owned companies; however, the premium declines over time and disappears entirely in the last decade leading up to 2005. Further evidence indicates that the foreign survival premium is negatively influenced by new foreign entry, and that the long‐run decline is caused by increasing competition between foreign subsidiaries. Copyright © 2008 John Wiley & Sons, Ltd.     

The dynamic implications of increasing returns: Technological change and path dependent inefficiency

This paper addresses the issue of path-dependent selection and inefficiency, counterfactual methods and the empirical evidence employed in this research trajectory. The general message is basically that the theoretical argument to prove path-dependent inefficiency is relatively straightforward, while empirical demonstrations, as well as the analysis of welfare implications are much more difficult. In the first section, we briefly state the basic argument explaining how localized learning leads to an incomplete exploration of the variety distribution of a technology. We then synthesize the most interesting historical studies, which get potential regret results, and ask whether these results suggest a large welfare loss. To try to answer this question, we start from the critical arguments of Liebowitz and Margolis to discuss the theoretical and empirical difficulties of establishing path-dependent inefficiency.     

The structure of ownership and corporate acquisition strategies

In this study, we examine in an agency‐theoretic context the influence of executive equity stakes upon corporate strategy and firm value. We argue that beneficial, risk‐increasing corporate strategies may initially be emphasized but non‐value‐maximizing, risk‐reducing strategies may subsequently be emphasized as managers expand their stock ownership. We alternatively contend that stock options may have a consistently positive impact on firm risk taking and acquisition returns. The empirical findings are supportive of our expectations. Copyright © 2002 John Wiley & Sons, Ltd.