Who Is “Misleading” Whom in Real Estate Transactions?

The observation that real estate agents sell their clients' homes cheaper and faster than their own homes has been well identified in the literature and interpreted as evidence of an agency problem originated from information asymmetry. This article studies whether this well‐known result holds true for all types of agents and clients, and whether information asymmetry is the full story. By using the Multiple Listing Service (MLS) data from Indiana, we find that, after controlling for observables, mainly homes owned by institutional clients are sold cheaper and faster than agent‐owned homes, and the differences are mainly driven by less and moderately experienced agents. Besides information asymmetry, we also find evidence of motivation heterogeneity—institutions themselves are very motivated to sell, and therefore are willing to sell cheaper in order to sell faster.     

“To Own or Not to Own?” A Study on the Determinants and Consequences of Alternative Intellectual Property Rights Arrangements in Crowdsourcing for Innovation Contests

Firms are increasingly engaging in crowdsourcing for innovation to access new knowledge beyond their boundaries; however, scholars are no closer to understanding what guides seeker firms in deciding the level at which to acquire rights from solvers and the effect that this decision has on the performance of crowdsourcing contests. Integrating property rights theory and the problem‐solving perspective while leveraging exploratory interviews and observations, we build a theoretical framework to examine how specific attributes of the technical problem broadcast by firms affect the seekers’ choice between alternative intellectual property rights (IPR) arrangements that call for acquiring or licensing‐in IPR from external solvers (i.e., with high and low degrees of ownership, respectively). Each technical problem differs in the knowledge required to be solved as well as in the stage of development of the innovation process and seeker firms pay great attention to such characteristics when deciding about the IPR arrangement they choose for their contests. In addition, we analyze how this choice between acquiring and licensing‐in IPR, in turn, influences the performance of the contest. We empirically test our hypotheses analyzing a unique dataset of 729 challenges broadcast on the InnoCentive platform from 2010 to 2016. Our results indicate that challenges related to technical problems in later stages of the innovation process are positively related to the seekers’ preference toward IPR arrangements with a high level of ownership, while technical problems involving a higher number of knowledge domains are not. Moreover, we found that IPR arrangements with a high level of ownership negatively affect solvers’ participation and that IPR arrangement play a mediating role between the attributes of the technical problem and the solvers’ self‐selection process. Our paper contributes to the open innovation and crowdsourcing literature and provides practical implications for both managers and contest organizers.     

Ain't it “suite”? Bundling in the PC office software market

Research Summary: We examine the importance of office suites for the evolution of the personal computer (PC) office software market in the 1990s. An estimated discrete‐choice model reveals a positive correlation of consumer values for spreadsheets and wordprocessors, a bonus value for suites, and advantages for Microsoft products. We employ the estimates to simulate various hypothetical market structures to evaluate the profitability, welfare, and competitive effects of suites under alternative correlation assumptions. We find that firms benefit greatly from bundling components (i.e., a spreadsheet and a word processor) when the correlation of consumer preferences over the components in the bundle is positive. Our work adds another aspect to the recent work in the strategy literature that examines benefits from bundling when there are complementary relationships across the products in the bundle. Managerial Summary: Our research helps managers understand the conditions under which product bundling is likely to be most profitable. We show that one key to enhanced profitability is the correlation in consumer preferences over the individual products. We consider the performance implications of bundling under a variety of alternative market structures and competitive environments. Our analysis reveals that firms benefit greatly from bundling when the correlation of consumer valuations over the products is positive. Consumers benefit as well. Hence, bundling is a win‐win for firms and their customers. Since profits increase by more than consumer surplus, bundling leads to increased value capture by the firms. Consequently, it may be profitable for firms to invest in actively increasing the correlation in consumer preferences over products in the bundle.     

Is there a “Dark Side” to Monitoring? Board and Shareholder Monitoring Effects on M&A Performance Extremeness

Research summary: W e investigate the effects of monitoring by boards of directors and institutional shareholders on merger and acquisition (M&A ) performance extremeness using a sample of M&A deals from 1997 to 2006. Both governance research and legal reforms generally have espoused a “raise all boats” view of monitoring. We instead investigate whether monitoring may serve as a double‐edged sword that limits CEO discretion to undertake both value‐destroying M&A deals and value‐creating ones. Our findings indicate that the relationship between monitoring and M&A performance is more complex than previously believed. Rather than “raising all boats” in a shift towards better M&A outcomes, monitoring instead is associated with lower M&A losses, but also with lower M&A gains . Managerial summary: M ergers and acquisitions (M&A s) are a quintessential corporate activity. There were $3.8 trillion worth of M&A deals in 2015, despite scholars and practitioners reporting that M&A s often perform poorly. We question the widespread belief that more vigilant monitoring by boards of directors and large shareholders will raise M&A performance, overall. Put differently, does monitoring constrain CEO s' discretion to pursue bad deals, while simultaneously encouraging them to pursue good ones? We find that monitoring limits both large M&A losses and large M&A gains. Contrary to widely held beliefs, our results indicate that constraining executives' ability to pursue value‐destroying M&A deals does not simultaneously encourage or enable CEO s to pursue value‐creating deals . Copyright © 2017 John Wiley & Sons, Ltd.     

Mass or Only “Niche Customization”? Why We Should Interpret Configuration Toolkits as Learning Instruments

In order to configure individual products according to their own preferences, customers are required to know what they want. While most research simply assumes that consumers have sufficient preference insight to do so, a number of psychologically oriented scholars have recently voiced serious concerns about this assumption. They argue that decades of consumer behavior research have shown that most consumers in most product categories lack this knowledge. Not knowing what one wants means being unable to specify what one wants—and therefore, they conclude, the majority of customers are unable to use configuration toolkits in a meaningful way. In essence, this would mean that mass customization should rather be termed “niche customization” as it will be doomed to remain a concept for a very small minority of customers only. This pessimism stands in sharp contrast to the optimism of those who herald the new possibilities enabled by advances in communication and production technologies as the dawn of a new era in new product development and business in general. Which position is right? In order to answer this question, this research investigates the role of the configuration toolkit. Implicitly, the skeptic position assumes that the individual customers' knowledge (or absence of knowledge) of what they want is an exogenous and constant term that does not change during the interaction with the toolkit. However, learning theories suggest that the customers' trial‐and‐error interaction with the configuration toolkit and the feedback information they receive should increase their preference insight. If this was true and the effect size strong, it would mean that low a priori preference insight does not impede customers to derive value from mass customization. Three experiments show that configuration toolkits should be interpreted as learning instruments that allow consumers to understand their preferences more clearly. Even short trial‐and‐error self‐design processes with conventional toolkits bring about substantial and time‐stable enhancements of preference insight. The value of this knowledge is remarkable. In the product category of self‐designed watches, the 10‐minute design process resulted in additional preference insight worth 43.13 euros on average or +66%, measured by incentive‐compatible auctions. A moderator analysis in a representative sample shows that the learning effect is particularly strong among customers who initially exhibit low levels of preference insight. These findings entail three contributions. First, it becomes evident that the interaction with mass customization toolkits not only triggers affective reactions among customers but also has cognitive effects—a response category not investigated before. Second, it suggests that the pessimism regarding the mass appeal of these toolkits is not justified—mass customization has the potential to truly deserve its name. The prerequisite for this, and this normative conclusion is the final contribution, is that the toolkit should not be interpreted as a mere interface for conveying preexisting preferences to the producer. Rather, it should be treated as a learning instrument. Several suggestions are made for how firms employing this innovative business model could design their toolkits towards this end.     

Has the “CEO effect” increased in recent decades? A new explanation for the great rise in America's attention to corporate leaders

We introduce a new explanation for one of the most pronounced phenomena on the American business landscape in recent decades: a dramatic increase in attributions of CEO significance. Specifically, we test the possibility that America's CEOs became seen as increasingly significant because they were, in fact, increasingly significant. Employing variance partitioning methodologies on data spanning 60 years and more than 18,000 firm‐years, we find that the proportion of variance in performance explained by individual CEOs, or “the CEO effect,” increased substantially over the decades of study. We discuss the theoretical and practical implications of this finding. Copyright © 2014 John Wiley & Sons, Ltd.     

When can you trust “trust”? Calculative trust,relational trust,and supplier performance

Our research empirically assesses two distinct bases for trust: calculative trust, based on a structure of rewards and penalties, versus relational trust, a judgment anchored in past behavior and characterized by a shared identity. We find that calculative trust and relational trust positively influence supplier performance, with calculative trust having a stronger association than relational trust. Yet, important boundary conditions exist. If buyers invest in supplier‐specific assets or when supply side market uncertainty is high, relational trust, not calculative trust, is more strongly associated with supplier performance. In contrast, when behavioral uncertainty is high, calculative trust, not relational trust, relates more strongly to supplier performance. These results highlight the value of examining distinct forms of trust. Copyright © 2015 John Wiley & Sons, Ltd.     

‘Meet the New Boss … Same as the Old boss?’ Technology,toil and tension in the agrofuel frontier

Agrofuels are increasingly sourced and sold as a socially and environmentally beneficial solution to oil dependence. The promotion of sugar‐derived ethanol as a substitute for petroleum has thus been key to state development and international trade policies by Brazil and the European Union, respectively, and subsequent investment by leading energy and food transnational corporations has transformed socio‐spatial relations in the new sites of production. Brazilian rural worker testimonies, however, point to large‐scale labour exclusion rather than reform and a deepening, rather than disruption, of historic power inequalities in the sector. Labour contestation challenges a converging institutional discourse of responsible technological innovation and social upgrading associated with emerging commodity chains and the ‘green’ economy. Although corporate and statutory response has been market‐orientated certification and ‘more technology’ the idea of the ‘techno‐institutional fix’ provides a power relation‐attentive analysis that invites the further exploration of socially committed alternatives to food and energy production.     

The (Unknown) Providers to Other Firms' New Product Development: What's in It for Them?

For every inbound activity by a firm in open innovation, a reciprocal outbound activity by another firm must be generated. The reciprocal outbound activities range from transferring of knowledge and ideas to solutions delivered to other firms' new product development projects. This paper names the firms that produce the reciprocal outbound activity for “providers,” and is the first to empirically investigate such providers of ideas, solutions, and technologies for other firms' open innovation activities. The literature review shows a surprising shortage of research on who the providers are, how they engage with other firms, and not least what potential benefits can be achieved from supporting other firms' innovation activities. The paper uses a quantitative survey on Danish small and medium‐sized enterprises (SMEs) carried out in 2010 to identify the providers, the role they take on, and the main benefits the providers gain. This paper finds that firms that are providers are indeed an under‐researched and important phenomenon for firms' innovation activities. Compared to receivers of knowledge, the providers are younger, have a higher R&D intensity, adopt more open innovation practices, have higher absorptive capacity, and fewer barriers toward knowledge sharing as demonstrated by the NIH and NSH syndromes. Finally, although only tentatively, the paper finds that the provider firms are more product innovative compared to nonproviders. The paper further finds that more projects, more embedded relationships, and mutual rather than one‐way exchange relationships significantly raise the probability that a firm experiences a substantial benefit from providing to other firms' new product development projects. The overall ambition of the paper at this point is to inspire other researchers to pursue the agenda on the provider perspective for future research. To support such research, the paper suggests a broadening of the research perspectives from the receiver of knowledge, in the literature on interorganizational relationships and open innovation, to include the provider, and even suggests some preliminary ideas for such research. Hence, the contribution of this paper lies not only in opening a new research topic but also in identifying some first characteristics of the phenomenon adding a substantial perspective to the literature on open innovation and interorganizational relationships. The paper formulates three indicative recommendations for managers that consider becoming a provider to other firms' NPD.     

The Introduction of Works Councils in German Establishments — Rent Seeking or Rent Protection?

Some recent empirical studies seem to suggest that German works councils engage in rent-seeking activities rather than in the creation of joint establishment surplus. However, those cross-sectional studies do not address the issue of causation. We address this issue by investigating the factors that influence the employees' decision to introduce a works council in their establishment. Councils are more likely to be adopted in establishments with a very poor sales situation and poor employment growth. They are also more likely to be adopted in establishments where management does not pursue an expansive market strategy. Altogether, our results support the hypothesis that employees introduce works councils to protect the quasi-rents they have created by their efforts and human capital investments.     

“We do what we must,and call it by the best names”: Can deliberate names offset the consequences of organizational atypicality?

Research summary: This article focuses on organizational naming as a strategic choice organizations make to overcome liabilities of atypicality. We argue that, in markets presenting an “illegitimacy discount,” atypical organizations may use deliberate names—names that communicate the market categories to which organizations claim membership—to offset the consequences of atypicality. Using data from the global hedge fund industry, we show that atypical hedge funds are more likely than typical funds to have deliberate names. Importantly, the selection of a deliberate name is economically significant. First, funds with deliberate names grow faster than funds without deliberate names, especially among atypical funds. Second, while atypicality heightened the likelihood of failure during the recent financial crisis—even after controlling for fund performance—having a deliberate name mitigated this effect. Managerial summary: Differentiation is a core element of many organizations' competitive advantage. Nevertheless, as differentiation implies being atypical among one's competitors, differentiation strategies can also lead to an “illegitimacy discount” whereby differentiators are at risk of being misunderstood, miscategorized, and ignored by consumers. Here we investigate how atypical hedge funds—funds that differentiate themselves from their competitors by investing in notably unique ways—use names to offset the potential consequences associated with the “illegitimacy discount.” Our analysis of more than 12,000 hedge funds over 12 years highlighted a trend whereby atypical hedge funds were more likely to choose names that unambiguously associated them with a known investment strategy—for instance, choosing the name “Apex Global Macro Capital” over simply “Apex Capital.” Importantly, name selection proved to be economically significant. For example, among atypical hedge funds, those with unambiguous names grew faster than those without. Furthermore, while being atypical increased the level of disinvestment during the recent financial crisis, having an unambiguous name reversed this effect. Organizational names play an important communication role with consumers, which, while highly symbolic, may also help resolve the dual organizational need to both conform to consumer expectations and differentiate from market competitors. Copyright © 2015 John Wiley & Sons, Ltd.     

Pre‐commercial procurement: a demand or supply policy instrument in relation to innovation?

In 2006, the European Commission introduced the concept of ‘pre‐commercial procurement’ (PCP) as an instrument to promote innovation and to mitigate grand challenges. One of the main motives for the support of PCP schemes was to use public needs as a driver for innovation. This concept was also introduced as a response to the need to reinforce the innovation capabilities of the European Union while improving the quality and efficiency of public services. But what is meant by PCP? Is it a demand‐ or a supply‐side instrument in relation to innovation? This is the research question addressed in this paper, the goal being motivated by the lack of academic discussion in this direction. The paper is based on three cases, one from the Netherlands, one from the United Kingdom and one from Australia. These cases provide evidence that PCP is a matter of research and development (R&D) funding of a targeted kind, geared toward very specific goals and in a focused way. This leads the authors to conclude that PCP is a supply‐side policy instrument in relation to innovation. In this sense, they would like to raise a flag for going back to the origins of the PCP program and calling it a ‘precompetitive R&D program’, rather than labeling it as an innovation procurement instrument.