Negative Incentives and Regulatory Capture: Noncompliance with Price Ceilings on Essential Medicines in India

Nonmarket scholars have paid limited attention to noncompliance as an alternative strategy to capture regulators; yet noncompliance is particularly consequential given its potentially significant negative externalities. We exploit rich data on price ceilings introduced in India in 2013 on 255 essential medicines to test whether noncompliance by other firms drives the focal firm's noncompliance decision. Our results indicate that noncompliance by other firms, particularly those with larger products in the market, is positively associated with a focal firm's noncompliance. The focal firm's scope and sales positively moderate this relationship. Overall, our study indicates that firms are more likely conclude that the potential benefits of regulatory capture using negative incentives outweigh the potential financial and social costs in the presence of a greater number of firms that are already noncompliant. As such, our study draws attention to negative incentives as an important yet largely overlooked nonmarket strategy.     

The more the merrier? Network portfolio size and innovation performance in Nigerian firms

A positive relationship between firms' networking activities and innovativeness has been consistently established in the literature on innovation. However, studies considering different innovation types, and on developing countries are scarce. This paper addresses questions concerning the relationship between networking strategies and innovativeness of firms, using innovation survey data on Nigerian firms. Quantile regression is applied to trace the link between portfolio size and innovation at different levels of innovative success. The results show a positive relationship between a firm's innovation performance and the size of its networking portfolio. This relationship varies across different innovation types and with increasing innovation performance. The findings suggest that the widely accepted portfolio approach to external search for knowledge is not necessarily always the best—its utility depends on the firm's current level of innovative success. This poses a challenge for open innovation.     

Internal and External R&D: A Sample Selection Approach*

This study underlines that the decision to enter into an external R&D relationship is related to an antecedent decision to carry out R&D. This calls for an empirical approach that permits the joint analysis of the determinants of the two decisions, correcting for sample selectivity. Based on a sample of Italian manufacturing firms, the results confirm the need to adopt this approach. Another contribution made by this study is the managerial implications that can be derived from its empirical model, which provide a better understanding of the factors associated with a firm's decision to engage in R&D both independently and with external partners.     

Talent management,absorptive capacity,and firm performance: Does it work in China and Russia?

This article investigates the relationship between talent management (TM), absorptive capacity (AC), and firm performance. We build a theoretical framework and examine the mediating role of a firm's AC in TM–performance relationships in the contexts of China and Russia. We use a sample of 120 Chinese and Russian firms to provide empirical evidence of our hypotheses. Our results show for both Chinese and Russian firms, a well‐developed TM system positively influences a firm's ability to acquire, assimilate, and exploit knowledge as well as increase the overall level of a firm's AC. We also found support for the argument that TM has an indirect positive effect on firm performance through its AC; moreover, the effect is stronger for Chinese firms, specifically, within the link between AC and performance.     

Regression Revisited

Sir Francis Galton introduced median regression and the use of the quantile function to describe distributions. Very early on the tradition moved to mean regression and the universal use of the Normal distribution, either as the natural ‘error’ distribution or as one forced by transformation. Though the introduction of ‘quantile regression’ refocused attention on the shape of the variability about the line, it uses nonparametric approaches and so ignores the actual distribution of the ‘error’ term. This paper seeks to show how Galton's approach enables the complete regression model, deterministic and stochastic elements, to be modelled, fitted and investigated. The emphasis is on the range of models that can be used for the stochastic element. It is noted that as the deterministic terms can be built up from components, so to, using quantile functions, can the stochastic element. The model may thus be treated in both modelling and fitting as a unity. Some evidence is presented to justify the use of a much wider range of distributional models than is usually considered and to emphasize their flexibility in extending regression models.     

The influence of supply network structure on firm innovation

In this study, we examine the structural characteristics of supply networks and investigate the relationship between a firm's supply network accessibility and interconnectedness and its innovation output. We also examine potential moderating effects of absorptive capacity and supply network partner innovativeness on innovation output. We hypothesize that firms will experience greater innovation output from (1) higher levels of supply network accessibility and supply network interconnectedness, (2) the interaction between the levels of these two structural characteristics, (3) the moderating role of absorptive capacity on supply network accessibility and the moderating role of supply network partner innovativeness on supply network interconnectedness. Supply network partner relationships are drawn in the context of the electronics industry using data from multiple sources. We use social network analysis to create measures for each supply network structural characteristic. Using regression techniques to test the relationship between these structural characteristics and firm innovation for a sample of 390 firms, our findings suggest that supply network accessibility has a significant association with a firm's innovation output. The results also indicate that interconnected supply networks strengthen the association between supply network accessibility and innovation output. Moreover, the influence of the two structural characteristics on innovation output can be enhanced by a firm's absorptive capacity and level of supply network partner innovativeness. By addressing the need for deeper structural analysis, this study contributes to supply chain research by accounting for the embedded nature of ties in supply networks, and showing how these structural characteristics influence the knowledge and information flows residing within a firm's supply network.     

Modeling the performance of US direct investment in Japan: Some empirical estimates

Foreign firms' direct investments in Japan increased from about $930 million in 1984 to $2.2 billion in 1987, and are still increasing at a rapid rate. Most of these investments come from the United States and Europe. In this paper a short-run model for the performance of a foreign parent firm's subsidiary in Japan is presented. The model is based on theories presented by Hymer, Caves, Buckley and Casson, among others, and consists of two equations: one for profitability and the other for growth. Duality is used to relate a parent firm's activities to its subsidiary firm's profitability. The model is estimated using data for US firms' subsidiaries in the Japanese chemical industry. We find that for jointly owned subsidiaries (joint ventures), imports from US parent firms and the R&D spending by both US and Japanese parent firms are major determinants of profitability and growth. US firms' fully owned subsidiaries, however, exhibit considerably different profit and growth behavior than their jointly owned counterparts. Because of the small sample sizes used, it is not possible to ascertain the sources of the observed differences.     

Stakeholder pressure for sustainability: Can ‘innovative capabilities’ explain the idiosyncratic response in the manufacturing firms?

This study explores role of innovative capabilities in determining a manufacturing firm's response to stakeholder pressure for adopting sustainable practices. Drawing on the theory of conservatism, we delineate that the firm's response is idiosyncratic and undergirded in the nature of its innovative capabilities. Our empirical investigation reveals that the response to the stakeholder pressure is mediated by the nature of the firm's innovative capabilities. Indian manufacturing firms are identified as unit of analysis for this study. The individual manufacturing facilities implement the environmental practices. The findings suggest that the manufacturing firm's exposure to exploitative/exploratory innovative capabilities triggers sustainable behaviours with ephemeral focus and enduring focus. Further, the exploratory/exploitative innovation is capable of explaining idiosyncratic behaviour for the firms' sustainability practices adoption. The findings delineate, with analysis, that unlike China, regulatory stakeholder pressures in India inhibit the adoption of sustainable practices with enduring focus in manufacturing firms.     

The moderating effects of supplier portfolio characteristics on the competitive performance impacts of supplier-facing process capabilities

We draw on the interorganizational relationship management literature to examine how contextual characteristics of the supplier portfolio (portfolio concentration, relationship length, and supplier substitutability) moderate the impacts of process alignment and partnering flexibility – two of a firm's key supplier-facing process capabilities to manage supplier relationships – on a product line's competitive performance. Our analysis of survey data on a firm's supplier portfolio for a major product line indicates that the impacts of process alignment and partnering flexibility on competitive performance are moderated by the three supplier portfolio characteristics. Specifically, while concentrated relationship portfolios, long-term relationships, and supplier substitutability amplify the positive effect of process alignment on competitive performance, concentrated relationship portfolios and long-term relationships attenuate the competitive benefits that firms derive from partnering flexibility. While long-term relationships and concentrated supplier portfolios enhance the competitive benefits of process alignment, operations managers also need to recognize the detrimental effects of these supplier portfolio characteristics on the competitive benefits of partnering flexibility.     

Price Discrimination under Customer Recognition and Mergers

This paper studies the interaction between horizontal mergers and price discrimination by endogenizing the merger formation process in the context of a repeated purchase model with two periods and three firms wherein firms may engage in behavior‐based price discrimination (BBPD). From a merger policy perspective, this paper's main contribution is twofold. First, it shows that when firms are allowed to price discriminate, the (unique) equilibrium merger gives rise to significant increases in profits for the merging firms (the ones with information to price discriminate), but has no ex‐post effect on the outsider firm's profitability, thereby eliminating the so‐called (static) “free‐riding problem.” Second, this equilibrium merger is shown to increase industry profits at the expense of consumers' surplus, leaving total welfare unaffected. This then suggests that competition authorities should scrutinize with greater zeal mergers in industries where firms are expected to engage in BBPD.     

How a Firm's Domestic Footprint and Domestic Environmental Uncertainties Jointly Shape Added Cultural Distances: The Roles of Resource Dependence and Headquarters Attention

Even though many firms conduct most of their business domestically, international management research has remained remarkably silent on the role of a firm's domestic footprint in its internationalization strategy. We shed light on that role by exploring how the size of a firm's domestic footprint influences the cultural distance that the firm adds to its country portfolio when expanding internationally. Integrating resource dependence theory and the attention‐based view, we hypothesize that a firm's domestic footprint has a negative relationship with added cultural distance (ACD), and that domestic policy uncertainty strengthens this relationship whereas domestic demand uncertainty weakens it. We find robust support for our hypotheses in a sample of the world's largest retailers covering the period 2000–07, indicating that a firm's domestic footprint and domestic environmental uncertainties jointly shape cross‐cultural expansion strategies. Our findings suggest that ACDs reflect headquarters executives' desire to avoid ineffective foreign expansions, hinting at possible biases in studies of the performance effects of distance.     

How effective human resource management promotes corporate entrepreneurship: evidence from China

Strategic human resource management (SHRM) represents a set of HRM practices that are aligned with firm strategies. The relationship between SHRM and organizational performance has been extensively examined; however, whether and how SHRM influences corporate entrepreneurship remains unknown. Based on the resource-based perspective, this study examined a model linking SHRM with corporate entrepreneurship. The importance of HRM people's political skill for a firm's development of devolved management through SHRM implementation was also examined. Data from a survey of 201 Chinese manufacturing firms confirm a significant relationship between SHRM and corporate entrepreneurship and that the relationship is partially mediated by a devolved management style. The relationship between SHRM and devolved management was shown to be stronger for firms with more politically skillful HRM people.     

A new quantile treatment effect model for studying smoking effect on birth weight during Mother's pregnancy

This paper proposes a new quantile regression model to characterize the heterogeneity for distributional effects of maternal smoking during pregnancy on infant birth weight across different the mother's age. By imposing a parametric restriction on the quantile functions of the potential outcome distributions conditional on the mother's age, we estimate the quantile treatment effects of maternal smoking during pregnancy on her baby's birth weight across different age groups of mothers. The results show strongly that the quantile effects of maternal smoking on low infant birth weight are negative and substantially heterogenous across different ages.     

Transnational ties and performance of immigrant entrepreneurs: the role of home-country conditions

This study contributes to the recent empirical literature on the performance of transnational immigrants' firms by investigating the effect of transnational ties on the firm's growth. In addition to the effect of the ties, the paper shows that home country's institutional and socio-economic characteristics and country-specific entrepreneurial factors have a crucial role in shaping the ties–performance relationship. The evidence from a sample of immigrant-owned firms in the Italian information and communications technology (ICT) sector in the period 2000–2010 confirmed the relevance of the proposed model and helped in understanding a potential channel of improvements in immigrant firms' performance through transnational ties. Our results show the limited relevance of a direct, or linear, impact of ties on the growth of sales in immigrant-run firms in the ICT sector, but support the crucial moderating role of home-country characteristics on the ties–performance relationship.     

The competitive determinants of a firm's environmental management activities: Evidence from US manufacturing industries

Environmental management (EM) issues have received substantial attention in operations management. While the link between EM practices and firm performance has been well studied, little is known about the competitive drivers of a firm's EM activities. In this research, a Schumpeterian economics perspective is adopted to investigate competitive interactions among leader and challenger firms in the domain of EM, with a particular focus on operational EM activities. Using econometric methods, the empirical analysis of panel data from a broad cross-section of US manufacturing firms reveals that such rivalry does exist and that the effect of a rival's past EM activity on a focal firm's EM activity is greater for more profitable and smaller firms. In addition, firm characteristics such as market leadership, firm size and firm profitability are found to significantly affect the magnitude of a firm's EM activities. This study presents theoretical and empirical evidence of rivalrous behaviors in the domains of EM and OM and, thus, has interesting implications for operations management research and practice.     

Alliance portfolio diversity,radical and incremental innovation: The moderating role of technology management

In this paper we test whether the use of a set of technology management tools (TM-tools), a specification of alliance portfolio capability, influences the relationship between alliance portfolio diversity and a firm's innovation outcomes. With this model, we add to the theoretical literature on the performance effects of alliance portfolio diversity and specific contingencies allowing to appropriate benefits from this diversity. Based on a sample of South African firms, we first confirm the inverted U-shaped relation between alliance portfolio diversity and a firm's innovation outcomes found by earlier research. We also show that the shape of this inverted-U differs for incremental and radical innovation outcomes. Subsequently, we test the moderating effect of the use of TM-tools on this relationship, for which find a strong positive moderating effect. In particular, for firms intensively using TM-tools, the negative effect of high levels of alliance portfolio diversity on innovation outcomes turns into a positive effect. This suggests that the use of formal technology management practices is beneficial to manage highly diverse alliance portfolios.     

Effect of Overconfidence on Cournot Competition in the Presence of Yield Uncertainty

This study investigates the effects of overconfidence on a Cournot competition subject to yield uncertainty. We consider one of two firms to be overconfident, whereas the other is completely rational and derive the Nash equilibrium to compare with that when both firms are completely rational. Through this comparison and analysis, we establish that (i) the relationship between a firm's overconfidence and the likelihood of that firm developing a monopoly in the market is positive; (ii) a rational firm always suffers a loss because of its competitor's overconfidence in a Cournot competition; and (iii) an overconfident firm does not benefit constantly from its overconfidence, although overconfidence results in permanent, increased, and more aggressive market sharing in competitions. Copyright © 2016 John Wiley & Sons, Ltd.     

Public support for performing arts. Efficiency and productivity gains in eleven European countries

This paper investigates the importance of public cultural expenditure for the efficiency and productivity of the performing arts (PA) firms. To this aim, we estimate a translog production function using the stochastic frontier approach (SFA), and we obtain the estimates of both technical efficiency and its determinants for the PA firms in EU-11 countries over the period 2009–2017. The large panel data set enables the application of robust true random-effects SFA techniques, which control for noise, unobserved firms' heterogeneity and endogeneity of the inputs. Moreover, by estimating a production function, the characteristics of the production technology in the PA sector is also derived. The empirical results demonstrate that PA firms are technically inefficient, implying that the investigated firms could increase their artistic output between 32 and 42% and that decreasing returns to scale are prevalent, due to the presence of too many micro and large-scale firms in the European PA sector. In contrast to the seminal Baumol and Bowen's [5] paper, we also demonstrate that the total factor productivity (TFP) increased in the EU PA firms over the examined period. Technical efficiency, although relatively low, was the main driver of this productivity growth, as opposed to scale efficiency change or technological change, which display very small or no increases. We also find that, contrary to the common wisdom on its negative effects on firm efficiency, public spending on culture increases the efficiency of PA firms. Within this context some policy implications are discussed.     

Corporate debt,corporate taxes and leasing

This paper utilizes recent developments in capital lease modeling to develop a new specification of the relationship between the expected returns to debt, levered equity and unlevered equity for firms that lease a portion of their assets. Accounting explicitly for leases is shown to be important when the difference between equity and debt risk is large, when the risk of leased assets differs from the firm's other assets and when salvage value is a significant portion of the capitalized value of the firm's lease obligations. This new specification yields improved estimates of firms' unlevered cost of capital, thereby facilitating improved capital budgeting decisions in those that lease a significant portion of their assets.     

Endogenous product substitutability strategy under duopoly

This article develops endogenous product substitutability theory. With game theory approach, the effects of endogenous product substitutability are characterized. First, equilibrium under endogenous product substitutability is achieved. Second, product substitutability strategy promotes price, total outputs, and social welfare. Outputs under high‐efficiency firm's product substitutability are compared with those under low‐efficiency firm's product substitutability. Third, compared with the other cases, joint product substitutability improves price difference. Finally, the outputs of all firms under endogenous product substitutability are shown to be lower than the social optimality level. The policy implication is to encourage firms investing product substitutability.