Partner Characteristics,Information Asymmetry,and the Signaling Effects of Joint Ventures

We provide theory and evidence regarding the signaling effects of joint venture (JV) announcements. We argue that when a firm characterized by information asymmetry with respect to the stock market announces a JV, the growth opportunities and the quality of resources of the partner provides a signal to investors about the true value of the firm. Our study shows that (i) apart from synergies, JV announcements impact firm value also because of the information they convey about future growth opportunities; and (ii) JVs may not only validate but also ‘invalidate’ the quality of a firm by revealing that it is unable to attract strong partners. Copyright © 2011 John Wiley & Sons, Ltd.     

Real options signaling game models for dynamic acquisition under information asymmetry

We construct a real options signaling game model to analyze the impact of asymmetric information on the dynamic acquisition decision made by the aggressive acquirer firm and passive target firm in the takeover terms and timing. The target firm is assumed to have partial information on the synergy factor of the acquirer firm in generating the surplus value. Our dynamic acquisition game models are based on the market valuation of the surplus value of the acquirer and target firms, where the restructuring opportunities are modeled as exchange options. We analyze the various forms of equilibrium strategies on the deal and timing of takeover in the acquisition game and provide the mathematical characterization of the pooling and separating strategies adopted by the acquirer firm. We also determine the terms of takeover in the signaling game under varying levels of information asymmetry and synergy.     

Learning Through Joint Ventures: A Framework Of Knowledge Acquisition

Joint ventures (JVs) are becoming an increasingly important organizational form in international business. When JVs are formed, valuable learning opportunities may be created for the venture partners. The primary objective in this paper is to explore the conditions under which firms exploit JV learning opportunities through the acquisition of knowledge. A framework of knowledge acquisition by JV partner firms is proposed. Using JV partner organizations as the primary level of analysis, the paper identifies various factors that influence the acquisition of learning, its value to the learning organization, and the migration of knowledge from the JV to the parent. Two firm specific learning-based concepts are developed: alliance knowledge accessibility and knowledge acquisition effectiveness.     

Corporate investments and growth options

Real options theory models certain corporate investments as investments in growth options, yet there is little direct evidence on whether firms actually capture growth option value from these investments. In the current paper, we attempt to bridge this empirical gap, and we also examine the conditions under which the growth option value embedded in such investments is enhanced. Results from a sample of manufacturing firms during 1989–2000 reveal that investments in research and development and joint venture (JV) investments contribute to firms' growth option values. We also show that, among JVs of different ownership structures, only minority JVs increase growth option value. Our findings affirm options theory's assertion that real options can help firms capture valuable upside opportunities, they highlight the value of examining contingencies that drive option value, and they also point to the challenges firms face in realizing the unique benefits the theory emphasizes. Copyright © 2007 John Wiley & Sons, Ltd.     

Firm Productivity and the Foreign‐Market Entry Decision

We use Japanese firm‐level data to examine how a firm’s productivity affects its foreign‐market entry strategy. The firm faces a choice between exporting and foreign direct investment (FDI). In the case of FDI, the firm has two options: greenfield investment or acquisition of an existing plant (M&A). If it selects greenfield investment, it has two ownership choices: whole ownership or a joint venture with a local company. Controlling for industry‐ and country‐specific characteristics, we find that the more productive a firm is, the more likely it is to choose FDI rather than exporting and greenfield investment rather than M&A.     

Real options game analysis of sleeping patents

Using the real options game approach, we analyze the two-stage preemptive patent-investment race between an incumbent and a challenger (new entrant) in a product market with profit flow uncertainty. The challenger can gain entry into the monopolized product market dominated by the incumbent by patenting related technologies for a substitute product. To maintain its monopolized advantage, the incumbent has an incentive to block challenger’s entry by patenting the substitute product before the challenger. Either firm can pay an upfront fee to gain an immediate acquisition of the patent and subsequently holding the real option to develop the new substitute product. Under our simplified real options game model, there is no potential patent litgation risk. Also, the costs of holding the patent, like the payment of annual fees, are taken to be zero. We provide a full characterization of the optimal strategies adopted by the incumbent and challenger firm in this asymmetric patent-investment race. In particular, we examine the phenomena of sleeping patent, where the patented product is not launched immediately into the product market.     

The moderating effect of environmental uncertainty on the relationship between real options and technological innovation in high-tech firms

In the past decade, management scholars have applied aspects of real options theory to organizational settings, considering it an approach to enhancing strategic flexibility in the firm. They have also recognized that technological innovation is a critical mechanism through which high-tech firms try to secure a place in the competitive world of the future. Uncertainty about the environment makes it very important to analyze both factors, since the use of real options obligates managers to reflect constantly on future scenarios for which they will have to propose innovative solutions. This paper attempts to apply the theory of real options to innovation theory to propose a model in which real options reasoning improves the level of product/process technological innovation. We argue that this improvement will increase when the environment's level of uncertainty is higher. The proposal is supported empirically by a study performed on a sample of technology firms from different countries in the European Union.     

The R&D Investment–Uncertainty Relationship: Do Strategic Rivalry and Firm Size Matter?

This paper uses a real options perspective to augment a standard research and development (R&D) investment model and implement a firm‐level empirical analysis to assess the practical significance of market uncertainty and its interactions with strategic rivalry and firm size. We use a measure of firm‐relevant market uncertainty along with panel data and find that firms invest less in current R&D as uncertainty about market returns increases. The effect of firm‐specific uncertainty on R&D investment is smaller in markets where strategic rivalry is likely to be more intense. Furthermore, holding access to financing constant, the effect of uncertainty on R&D investment is attenuated for large firms. Copyright © 2012 John Wiley & Sons, Ltd.     

Decision support for firm performance by real options analytics

This paper develops a real options decision support tool for raising the performance of the firm. It shows how entrepreneurs can use our intuitive tool quickly to assess the nature and type of action required for improved performance. This exploits our estimated econometric relationship between precipitators of entrepreneurial opportunities, time until exercise, and firm performance. Our 3D chromaticity plots show how staging investments, investment time, and firm performance support entrepreneurial decisions to embed, or to expedite, investments. Speedy entrepreneurial action is securely supported with this tool, without expertise in econometric estimation or in formulae for real options valuation.     

Applying real options theory to HRM: an empirical study of IT software firms in India

Environmental uncertainties can impact the market value of a firm's human assets both positively and negatively, and make return on human assets uncertain over time. However, the strategic human resource management (SHRM) literature has so far focused almost exclusively only on the upside value of human assets of a firm. Real options theory can provide the process heuristics as well as the economic logic for guiding investments in human assets to create sustainable market value for firms operating in uncertain environments. In spite of the growth in popularity of the real options approach, no meaningful progress, however, has been made towards application of this approach to HRM. This study, using data from 108 IT software development firms in India, seeks to address this gap and make three important contributions to the SHRM literature: (1) operationalise the concept of HR options by identifying the HR practices that possess option value; (2) investigate how use of HR options affects firm-level performance; and (3) develop and test a causal model that links the various types of HR options that firms use to exploit uncertainties faced by them with the firm-level operational and financial outcomes. The results support the central hypothesis of the article that use of HR options by firms operating in uncertain environments would have positive impact on their operational and financial performance. Significant differences were observed in the nature of linkages between different types of HR options used to address different types of uncertainties, and the operational and financial performance of the firm.     

A real options perspective on entrepreneurial entry in the face of uncertainty

In this paper we develop and test theory regarding whether entrepreneurs contemplating starting a new venture account for the value of the option to defer the entry decision. While others have illuminated the theoretical applicability of real options theory to entrepreneurship, empirical evidence in this context is lacking. Consistent with predictions derived from real options theory, we find that high uncertainty in the target industry dissuades entry, and that the irreversibility of the entry decision moderates this relationship. Furthermore, we find that the irreversibility of the investment decision can be influenced by industry‐level, firm‐level and even individual‐level factors. Copyright © 2003 John Wiley & Sons, Ltd.     

Value Relevance of Multinationality: Evidence from Korean Firms

The purpose of this study is to examine the valuation effects of multinationality in Korean firms and to identify the role of multinationality in internalization theory. We hypothesize that the market positively values the multinational activities of Korean firms, which are operating in a small open economy in which firms have strong motivations for internationalization. We use Ohlson's (1995, Contemporary Accounting Research, 11, 661) value model and document the positive effect for multinational firms compared to domestic firms, as well as the positive effect of multinationality on firm value. These results are robust across studies, as indicated by Tobin's q measure, as well as across years. We also hypothesize that multinationality mediates or moderates the relationship between intangibility and firm value that is proposed in internalization theory. We do not find supporting evidence for a mediated influence of intangibility through multinationality on firm value nor for a moderated influence of intangibility on firm value. We find that multinationality and intangibility directly and independently influence firm value, without any interference from each other. These results are also robust across studies, as indicated by Tobin's q measure. Finally, we find that multinationality in Korean firms has never lost its importance, even during the global financial crisis in the year 2008.     

MANAGING FOR AUTONOMY IN JOINT VENTURES: A LONGITUDINAL STUDY OF UPWARD INFLUENCE*

This article explores the relationships among influence, autonomy and control in a joint venture setting. It addresses the mechanisms available to joint venture (JV) managers to influence and gain compliance from parent firms. Control categories derived primarily from research on unified structures are explored in a new domain, an international joint venture. the beginning of new theory specific to relationships in joint ventures is developed based on causal maps of managerial perceptions. the results suggest that the use of upward influence to gain autonomy in a joint venture is different and more complex than in unified structures or among independent organizations.     

Understanding the consequences of diversification on financial stability

In this paper, we study the consequences of diversification on financial stability and social welfare using an agent based model that couples the real economy and a financial system. We validate the model against its ability to reproduce several stylized facts reported in real economies. We find that the risk of an isolated bank failure (i.e. idiosyncratic risk) is decreasing with diversification. In contrast, the probability of joint failures (i.e. systemic risk) is increasing with diversification which results in more downturns in the real sector. Additionally, we find that the system displays a “robust yet fragile” behaviour particularly for low diversification. Moreover, we study the impact of introducing preferential attachment into the lending relationships between banks and firms. Finally, we show that a regulatory policy that promotes bank–firm credit transactions that reduce similarity between banks can improve financial stability whilst permitting diversification.

     

Value and risk dynamics over the innovation cycle

This paper studies investment in intellectual capital and corresponding value and risk dynamics over the innovation cycle. We assume that the innovation cycle consists of three phases, R&D, trial, and market introduction phases. We use a real option investment model to characterize firm value and risk dynamics over the innovation cycle and find that firm value is the sum of the value of assets in place and non-linear option values related to breakthrough, exit, and market introduction options. Firm risk over the innovation cycle is highly non-linear and quite distinct in different phases. During the R&D phase risk is high as the firm faces high operating leverage originating from R&D fixed costs together with technological uncertainty. During the trial phase risk is significantly lower and dominated by option risk to launch the product in the market while after the introduction of the product in the market risk is equivalent to the asset risk of the company. Our model is consistent with the view that positive excess returns of R&D intensive firms are a compensation for risk. Based on this insight we derive several testable predictions.     

Communication technologies and spatial organization of multi-unit firms in metropolitan areas

Departing from traditional location theory (which treats a firm as a single-unit entity), in this paper we consider that each firm consists of multiple units that exchange information or services. Specifically, we develop a general equilibrium model of the city,in which each firm consists of a front-unit (e.g. business office) and back-unit (e.g. plant or back-office). Each front-unit interacts with all other front-units for the purpose of business communications, while each back-unit exchanges information or management services only with the front-unit of the same firm. Each firm must choose the location of its front-unit and back-unit optimally. The equilibrium spatial configuration of the city is determined as an outcome of interactions among all firms and households through competitive land and labor markets. We show that, depending on parameters, a variety of interesting patterns of metropolitan spatial organization emerges.     

Corporate entrepreneurship through joint venture

One of the characteristics of the entrepreneurial firm is the active search for opportunities without taking into account the resources available to the firm at a given moment. In such cases, certain types of operation, such as a joint venture, may provide a quick solution to the resource needs of the entrepreneurial firm. Moreover, this form of cooperation offers a suitable context for partners to be able to learn specific knowledge pertaining, for example, to the country of origin of the market they are aiming to enter, or to learning particular activities etc. Bearing these two dimensions in mind, the objective of this paper is to analyze the role of the joint venture as a tool for undertaking different activities associated with Corporate Entrepreneurship, that is to say, strategic renewal, Corporate Venturing and innovation. An empirical study using a sample of 74 joint ventures suggests that this particular mode of cooperation is employed by the entrepreneurial firm to carry out some, though not all, of the activities associated with Corporate Entrepreneurship.     

The impact of open innovation on firm performance: The moderating effects of internal R&D and environmental turbulence

Researchers have identified open innovation as two dimensions, external technology acquisition and external technology exploitation. This study explores the direct and interactive effects of these two dimensions on firm performance and further examines the moderation effects of two factors (i.e., internal R&D and environmental turbulence) on the relationship between both types of open innovation and firm performance. Based on Chesbrough's open innovation model, multi-item scales were developed to measure two dimensions of firm-level open innovation. Survey results of 176 Taiwanese high tech manufacturing firms provide support for most hypotheses. The result shows that external technology acquisition positively affects firm performance, whereas external technology exploitation does not. This study also finds that external technology acquisition strengthens the relationship between external technology exploitation and firm performance. Both external technology acquisition and external technology exploitation are positively related to firm performance under high internal R&D investment and a turbulent market environment. However, technological turbulence only positively affects the relationship between external technological acquisition, but not external technology exploitation, and firm performance. The findings contribute to enhanced understanding of how the degree of leveraging open innovation dimensions depends on their complementarity, internal R&D, and environmental turbulence.     

Theorizing collaboration practice

This article provides an overview of the theory of collaborative advantage. This is a practice-oriented theory concerned with enhancing practical understanding of the management isssues involved in joint working across organizations. Two contrasting concepts are central to it: collaborative advantage which is concerned with the potential for synergy from working collaboratively; and, collaborative inertia which relates to the often disappointing output in reality. The theory is structured as a set of overlapping themes, which are predominantly issues that practitioners see as causing pain and reward in collaborative situations. Five example themes are discussed: common aims; power; trust; membership structures; and, leadership. It is argued that the theory captures the complexity that underlies collaborative situations and conveys it in a way that seems real to those involved. It aims to empower those involved through legitimising experienced frustration and providing conceptual handles to help address the practical issues involved.     

CEO股票期权激励与并购决策关系研究——代理成本的中介作用和CEO过度自信的调节作用

运用美国上市银行1998—2014年的数据,将股票期权激励、代理成本、CEO过度自信与并购决策纳入统一的框架进行研究,以代理成本为中介变量,CEO过度自信为调节变量,以检验股票期权激励是否会影响并购决策,以及股票期权激励、代理成本、CEO过度自信与并购决策之间的关系。实证结果表明:CEO股票期权激励能够有效刺激其做出并购决策;代理成本对股票期权激励与并购决策的关系存在部分中介效应;CEO过度自信能显著调节股票期权激励与并购决策的关系;CEO过度自信对于股票期权激励与并购决策的关系的调节作用会通过代理成本起作用。