Diversification, Ownership and Control of Swedish Corporations

We study the short‐ and long‐term valuation effects of Swedish takeovers. Using a sample of 93 bidding firms that acquired 101 targets between 1980 and 1995, we find that diversifying acquisitions lead to a negative market reaction and deterioration of the operating performance of the bidder. Announcement and performance gains in each of the three years following the acquisition occur only when bidders expand their core rather than their peripheral lines of business. Our findings suggest that focused acquisitions lead to greater synergies and operating efficiencies than diversifying acquisitions. Intra‐group acquisitions, however, show that bidders do not realise significant gains whether they adopt diversifying or focusing investment strategies by purchasing firms controlled by the Wallenberg and SHB conglomerate groups. Intra‐group targets realize significant gains regardless bidder's investment strategy. Finally, the evidence does not support the view that intra‐conglomerate acquisitions are associated with expropriation of minority shareholders. However, they appear to enhance the control rights of large shareholders of the bidding firm.     

Moving resources across permeable project boundaries in open network contexts

This paper discusses how firms develop and use resources across a permeable project boundary and conceptualizes how a project can create value for a focal parent organization. Inspired by ideas on interaction and open innovation, we suggest a framework for analyzing the flow of resources based on the two dimensions; direction, whether the resource starts inside or outside the project, and mode, whether the resources cross the boundary once (uni-directionally) or twice (bi-directionally). The dimensions lead to four situations: Inside-out, Outside-in, Boomerang and Passing on. The framework is based on a single case study of an inter-organizational research project in plant biotechnology in a Swedish context. Through these four situations, the results show that a focal parent organization can create direct, indirect, relational potential and transactional potential value. The complex pattern of value creation in an open network context, raises the challenging question of how to capture the value created.     

Strategizing through analyzing and influencing the network horizon

How does a firm keep on being valuable in a network? One requirement is that the firm has a sufficient overview of the network and its dynamics. In other words, a firm's strategy depends on the firm's overview of the network—its network horizon. How comprehensive or limited should its network horizon be? Is it necessary to know the network beyond the direct counterparts? Such issues have not received much attention. In this article, we discuss network horizons and argue that limited network horizons are both inevitable and useful. However, such myopia requires that a firm's counterparts effectively and efficiently mediate between the firm and the rest of the network. Based on a case study, we introduce and discuss three mediating functions of counterparts: a joining, a relating, and an insulating function, and we claim that in order to support a firm's strategizing, managers need to analyze and influence counterparts' mediating functions and thereby the firm's network horizon.     

Choices of savings options related to trust in banks’ competence,benevolence and stability

The study investigates whether beliefs in professional investor skill in conjunction with trust in banks and other fund managers explain choices of options for long-term savings. From questionnaire data obtained for a population-based sample (n=178) and a sample of undergraduates (n=186), two index measures were constructed, one of beliefs in the skill of professional investors and another of trust in fund managers. The trust index was aggregated for the three interrelated components: competence, benevolence and stability. Regression analyses of the likelihood of savings in an actively managed fund showed an expected effect of investor-skill beliefs that was mediated by trust in the fund manager. In addition, self-reported knowledge played a larger role than trust for choices of passively managed index funds and in particular for own investment in stocks.     

How do suppliers strategise in relation to a customer’s supply network initiative?

The purpose of this article is twofold: firstly, to conceptualise and discuss how suppliers strategise in relation to supply network initiatives taken by their customers in the construction industry, and secondly, to discuss the buying firm’s view on the strategies pursued by their suppliers. Based on the analysis and discussion, we suggest that suppliers can strategise in relation to a focal supply network initiative by using six different connecting modes: (A) start-up relationships and processes, which can support the focal initiative; (B) intensify relationships and processes, which already give some support to the focal initiative; (C) continue with relationships and processes, which support the focal initiative; (D) weaken relationships and processes, which do not support the focal initiative; (E) end relationships and processes, which do not support the focal initiative and (F) continue with relationships and processes, which preserve non-supporting elements of the focal initiative. Furthermore, the suppliers can choose different strategising profiles. Based on the six modes, we can draw profiles, which show how much each supplier would emphasise each respective mode. In addition, we suggest that the buying firm identify the different strategising profiles of its suppliers, and handle the individual profiles of the suppliers, as well as the mix of profiles in the supply network.     

How companies strategise deliberately in networks using strategic initiatives

In this paper we contend that there is little idiographic empirical research that considers the issue of deliberate networking action in full-faced network contexts. We address the issue through the use of strategic initiatives as a form of deliberate networking action. IMP research argues the ability of an organisation to manage in a network context that involves the pull of the network and the action of the individual organisation (Håkansson & Ford 2002; Möller & Halinen 1999; Möller & Svahn 2003; Ritter, Wilkinson & Johnston, 2004; Zolkiewski 2007). Yet the paradox logic reminds us that a firm still needs to act, to try and control and influence, to suggest ideas and initiatives, to set limits and to seek opportunities. Strategic initiatives allow for conscious strategising at the same time as ongoing adaptations in activities and resources occur. Based on two complementary case studies we suggest five approaches for deliberate strategising in full-faced network contexts. These are i) strategising based on network pictures in the absence of direct interaction, ii) strategising in the presence of a network audience, iii) strategising among deliberate equals, iv) strategising among imaginative equals, and v) strategising as open and absorptive bystander. The five approaches can be used separately or in combination.     

Convex incentives in financial markets: an agent-based analysis

We investigate whether convex incentive contracts are a source of instability of financial markets as indicated by the results of a continuous double-auction asset market experiment performed by Holmen et al. (J Econ Dyn Control 40:179–194, 2014). We develop a model to replicate the setting of the experiment and perform an agent-based simulation where agents have linear or convex incentives. Extending the simulation by varying features of actual asset markets that were not studied in the experiment, our main results show that increasing the number of convex incentive contracts increases prices and volatility and decreases market liquidity, measured both as bid–ask spreads and volumes. We also observe that the influence of risk aversion on traders’ decisions decreases when there are convex contracts and that increasing the differences in initial wealth among the traders has similar effects as increasing number of convex incentive contracts.     

Trading-off Corporate Control and Personal Diversification through Capital Structure and Merger Activity

Abstract:  In this study we use direct estimates of the portfolio diversification of the largest shareholder in a firm to study the impact of shareholder diversification on the firm. For firms where the controlling shareholder is an individual, our tests indicate that the owner-managers use debt, dual class shares and corporate control transactions (merger activity) to strategically trade off corporate control and the drawback of poor portfolio diversification. However, for firms where the controlling shareholder is an institution, our results indicate that control but not diversification is important.     

A cash flow cost-volume-profit model

The traditional cost-volume-profit (CVP) model assumes the accounting flows follow the accrual accounting model. No distinction is made between accrual cost flows and cash flows. This paper looks at several different cash flow break-even models.One model assumes there is no opportunity to use an accrual accounting taxable loss by other profitable product lines or through a tax loss carryback. When graphed, this model presents a “dog-leg” at the accrual accounting breakeven point. A more general model assumes that an accrual tax loss is usable. When graphed, this model presents a line parallel to the after-tax accrual-based cost line, shifted downward in the amount of the noncash fixed costs.     

A Method for Identifying Actors in a Knowledge Based Cluster

The objective of the paper is to develop a method through which we can identify the actors (industrial, institutional and individual) who are active in technology development in the same or similar knowledge fields. The paper is, thus, aimed to make a methodological contribution to the literature, which has emerged on the systemic nature of innovation. The method involves broadening out from a starting point in a specific patent class, which corresponds as closely as possibly to the technological area of interest, to a set of related patent classes by using co-classifications and citations. After close scrutiny of both patent classes and patents, the actors in the new classes, as well as in the original class, are then identified. We try out the method on radio wave antennas for communication technology in Sweden. We find a range of firms and other actors in a whole set of industries, which bear little relation to one another in an input-output sense. Although we cannot ascertain the extent of linkages or relations between these actors, our hypothesis is that they constitute a cluster around radio wave antenna technology in Sweden.