Complexity as a constraint on firm expansion within and across industries

With this paper, we want to shed light on factors influencing a firm's rate of expansion. We argue that expansion is a complex task and complexity associated with expansion projects in one period can negatively impact rate of expansion in the following period. Moreover, we argue that firm portfolio complexity also slows down further expansion. Using longitudinal data on the expansion path of 91 German companies, we show that added product scope of expansion and degree of internationalization characterizing expansion in one period as well as level of product and international diversity have a significant impact on slowing down rate of expansion in the subsequent period. Copyright © 2008 John Wiley & Sons, Ltd.     

Strategies for online communities

This study examines the participation of firms in online communities as a means to enhance demand for their products. We begin with theoretical arguments and then develop a simulation model to illustrate how demand evolves as a function of interpersonal communication and a firm's chosen strategy. In this model, the firm's strategy involves allocating advocates who promote its product in online communities. Our model results point to some key parameters informing firms' strategies when social learning processes shape demand. Copyright © 2008 John Wiley & Sons, Ltd.     

Relational effects of relative performance information: The role of professional identity

Prior accounting studies on relative performance information (RPI) have mainly considered the effects of RPI on employees’ performance. This study extends this stream of research by investigating relational effects of RPI that capture RPI recipients’ attitudes towards RPI provision. Specifically, we examine the conditions under which RPI has a positive influence on perceived organizational support (POS). This is important because research on organizational behaviour has demonstrated that POS is an antecedent of desirable job-related attitudes such as organizational commitment, job involvement, and extra-role performance. The results of a dyadic survey in a hospital setting suggest that the effect of RPI on POS is conditional not only on the perceived usefulness of information and relative performance but also on the professional identification of RPI recipients. Our findings indicate that RPI provision is especially suitable for employees who possess a stronger social identification with their peer groups. Our study adds a relational perspective to the hitherto mostly informational and motivational focus in studying social comparison mechanisms linked to RPI systems.     

Legal Framework of Decentralized Energy Business Models in Germany: Challenges and Opportunities for Municipal Utilities

Feasible and profitable business models to better integrate and harness decentrally generated renewable energy are expected to constitute a key element for the energy transition in Germany. Until now, generated electricity of decentralized systems is to the largest extent only used by the property owner directly or fed into the public grid. To make better use of the generated electricity, it is necessary to find business models that provide an opportunity for different market actors, such as municipal utilities and residential prosumers. Due to the importance, yet low-anticipated monetary potential of such solutions, the legislator encourages their implementation by exemption of statutory fees, levies and taxes as well as by offering public remunerations, premiums and compensations in some cases. Capitalizing on these benefits, however, is only feasible under compliance with the legal requirements. In the light of the considerations above, this work states and analyzes the legal and regulatory framework of different business models within the German energy landscape. The major aim is to identify opportunities and challenges for the implementation of the business models self consumption, direct consumption, direct marketing, demand response, community electricity storage and net metering at the municipal level. The findings show that the profitability of various decentralized on-site business models depends primarily on the current statutory cost exemptions and compensations. At the same time, the regulation is characterized by unsystematic specific exemptions which leads to uncertainty regarding long-term planning. Additionally, although not directly privileged by the existing legal framework, municipal utilities are better suited to handle the legal burdens due to their experience and their administrative infrastructure.     

Using industry momentum to improve portfolio performance

Minimum-variance portfolios, which ignore the mean and focus on the (co)variances of asset returns, outperform mean–variance approaches in out-of-sample tests. Despite these promising results, minimum-variance policies fail to deliver a superior performance compared with the simple 1/N rule. In this paper, we propose a parametric portfolio policy that uses industry return momentum to improve portfolio performance. Our portfolio policies outperform a broad selection of established portfolio strategies in terms of Sharpe ratio and certainty equivalent returns. The proposed policies are particularly suitable for investors because portfolio turnover is only moderately increased compared to standard minimum-variance portfolios.     

Equipping immigrants: migration flows and capital movements in small open economies

This paper explores the extent to which migration-related capital flows can explain the variation in investment rates and current and capital account imbalances in OECD countries. We begin with a general equilibrium model of a small open economy in which migration is exogenous. Migrants must be equipped with capital, and the resulting demands for capital will generate cross-border flows of capital. Next, we move to an empirical exercise in which we allow both capital and labor flows to be endogenous. We test this model using data from a panel of OECD countries. We conclude that migration flows do in fact generate substantial matching capital flows. We calculate that increased migration may have accounted for as much as one-fifth of the increase in the US current account deficit since 1960.     

Bait and ditch: Consumer naïveté and salesforce incentives

We analyze a model of price competition between a transparent retailer and a deceptive one in a market where a fraction of consumers is naïve. The transparent retailer is an independent shop managed by its owner. The deceptive retailer belongs to a chain and is operated by a manager. The two retailers sell an identical base product, but the deceptive one also offers an add‐on. Rational consumers never consider buying the add‐on while naïve ones can be “talked” into buying it. By offering the manager a contract that pushes him to never sell the base good without the add‐on, the chain can induce an equilibrium in which both retailers obtain more‐than‐competitive profits. The equilibrium features price dispersion and market segmentation, with the deceptive retailer targeting only naïve consumers whereas the transparent retailer serves only rational ones.     

The labour market effects of offshoring of small and medium-sized firms: micro-level evidence for Germany

Small and medium-sized enterprises (SMEs) are the economic powerhouse of many OECD countries (perhaps most prominently so in Germany). Yet, the labour market dynamics caused by the internationalization of their production activities are largely unexplored. We use survey-based micro-level data for Germany to explore the employment effects of offshoring of SMEs, relying on propensity score matching and difference-in-difference analysis. We find evidence for a downsizing effect in the immediate aftermath of offshoring whereas, initially, job creation is not spurred. In the medium run, we find evidence for a slowing down of employment dynamics of offshoring firms (that tend to belong to the better performing SMEs in Germany) relative to non-offshoring firms. Even though our results do not point to a net employment loss in the medium run, our evidence suggests that offshoring may lead to less jobs being created. This conclusion cannot be confirmed for large companies.