Knowledge spillover from other assurance services

We argue that services which are complimentary and closer aligned to the annual report audit provide greater insight about risk and are more likely to exhibit the existence of economies of scope (knowledge spillover) through a positive association with audit fees. Specifically, we consider the potential for knowledge spillover from the auditing of triennial Long-Term Plans (LTP) to the annual report audit for a large sample of New Zealand municipals over the period 2005–2013. We find the LTP audit fees are positively related to municipal annual report audit fees and other fees (audit of for-profit subsidiaries, non-audit services) are not. This suggests that knowledge spillovers are dependent on the nature of the additional services. We also find evidence of higher fees for private sector auditors for both the annual report and the LTP audit. The LTP (forecast) audit fee is associated with municipal size, complexity, and political competition.     

<Emphasis Type="Bold">Measuring the market response to going concern modifications: the importance of disclosure timing</Emphasis>

Auditor going concern modifications (GCMs) are intended to provide market participants with information related to financial distress, and prior research suggests that the disclosure of a GCM elicits a substantial negative market reaction from investors. In this study, we investigate the market reaction to GCMs in a contemporary disclosure regime and consider whether the observed market reaction is confounded by other material disclosures. We find that the majority of GCMs are issued concurrently with earnings announcements (EAs) and that EAs in the year of new GCMs elicit large negative cumulative abnormal returns (CARs). We also find that CARs surrounding GCMs are significantly more negative when GCMs are disclosed with EAs versus following EAs. We then evaluate whether GCMs convey distress that is incremental to EA disclosures by measuring i) the market reaction to GCMs disclosed following EAs, and ii) whether EA CARs are substantially more negative for companies disclosing GCMs with EAs as opposed to after EAs. In both cases, we find that the incremental market response to GCMs is statistically weak and much smaller in economic magnitude than is suggested by prior research. Finally, we find that management disclosures in EAs, rather than the presence of a GCM, appear to convey information that investors use to anticipate bankruptcy. Taken together, these findings suggest that GCMs are confounded by other significant disclosures and that the informational benefits of GCM reporting are significantly smaller than previously thought.     

Improving the effectiveness of nondisclosure agreements by strengthening concept learning

Intellectual property infringements rank among the top economic crimes, even though there are mechanisms in place to prevent their occurrence. One such mechanism are nondisclosure agreements, which, however, have been reported to fail in practice. This article argues that this may be overcome by strengthening employees’ concept learning. In an experiment, we investigated whether extended nondisclosure agreements, which provide the employee with detailed explanations and examples, lead to better recognition of trade secrets as compared to a standard nondisclosure agreement or no agreement at all. It was found that the extended nondisclosure agreement indeed increased participants’ ability to judge what falls under the trade secret law, whereas the standard nondisclosure agreement showed no such effect. Furthermore, the effects of the factors ‘Involvement’, ‘Specificity’, ‘Publicity’, and ‘Purpose’ on the identification of trade secrets could be proven experimentally. Employees’ judgments of whether an information represents a trade secret seem to rely on general cognitive processes. From this follows that concept learning could be integrated into systematic approaches for protecting intellectual property.     

When do structural holes in employees' networks improve their radical creativity? A moderated mediation model

Previous research has found a relationship between structural holes of knowledge networks, tie strength of knowledge networks, and creativity. Our study extends these findings by proposing that characteristics of R&D employees' team knowledge networks influence their acquired diversified knowledge from the team, which is critical to creativity. Our results based on 558 members of 92 R&D teams demonstrated that, in order to benefit from their broker position in acquiring diversified knowledge, R&D employees should maintain their tie strength toward the team members with whom they are connected.     

Telecommunication in the US: From Regulation to Competition (Almost)

Alfred E. Kahn was an observer and practitioner of telecommunications regulation as technology changed the industry from a natural monopoly to a platform-based oligopoly among telephone, cable, satellite, and wireless carriers. Regulation and legislation were slow to recognize these changes, and large welfare losses occurred, some of which could have been avoided if regulators, legislators and economists had followed Fred’s economic advice: Prices must be informed by costs; the relevant costs are actual incremental costs; costs and prices are an outcome of a Schumpeterian competitive process, not the starting point; excluding firms from markets is fundamentally anticompetitive; a reliance on imperfect markets subject to antitrust law is preferable to necessarily imperfect regulation; and a regulatory transition to deregulation entails propensities to micromanage the process to generate preferred outcomes, visible competitors, and expedient price reductions.     

Countervailing Power and Chain Stores

The countervailing power of large buyers subdues the market power of sellers, but price concessions won by large buyers in upstream markets may or may not translate into lower prices downstream as Galbraith (American capitalism: The concept of countervailing power. Houghton Mifflin, Boston, 1952, Am Econ Rev 44:1–6, 1954) once contended. This paper presents a model that formalizes certain previously neglected elements of Galbraith’s argument, and shows that upstream price concessions may lead to lower downstream prices. In this model, a large retail chain store with countervailing power plays one large supplier off against another to win lower prices. An indirect effect of these interactions is that small retailers also pay lower prices, although not as low as the chain. Finally, competition among the retailers drives retail prices lower. The retail-price-restraining effect of the chain is stronger than the effect that is produced by the entry of an additional supplier.     

Voting, Regulation, and the Railroad Industry: An Analysis of Private and Public Interest Voting Patterns

We examine the role of public and private interests in the passage of major legislative bills that have governed the rail industry since 1887. Our model of voting patterns in the House and Senate introduces novel measures of industry concentration, competition, and network characteristics. We find that both the level and concentration of rail infrastructure in a state, the presence of water competition, and the level of agricultural production each have a major influence over voting patterns not only for the inception of regulation but also in the major bills that deregulated the industry in the 1970s and in 1980.     

Helping behavior in a virtual crisis situation: effects of safety awareness and crisis communication

Incident evaluations show that bystanders tend to help: they do not wait for professionals to arrive, but act as required by the situation at hand. In the present study, we investigated how safety awareness (induced before an accident happened) and providing a course of action by emergency services affect helping behavior after witnessing a virtual accident with two victims. The main task of the participants was to arrive at a job interview in time. Safety awareness was manipulated by the specific organization they went to: either promoting safe traffic or healthy living. The results show that all participants were inclined to help. Participants who were primed towards safe traffic more often called the emergency number, but talked to the victim less often. Participants who had received specific courses of action moved the victim less often. In all, the results clearly indicate the value of effective risk communication (before an event occurs) and crisis communication (after an event has occurred), as both types of information improve the quality of actual helping behavior at the scene.     

Digitization,digitalization, and digital transformation in accounting,electronic commerce,and supply chains

This paper provides some basic definitions associated with digital transformation in organizations and applies those definitions to accounting, electronic commerce, and supply chains. I also drill down on the dimensions associated with digital transformation, including digital everywhere, integration (across applications and with customers and partners), and the need to reengineer processes. I examine several examples of processes ranging from digitization to digital transformation. I also examine the role of people in digitally transformed organizations and some technologies that are important to continued evolution of digitally transformed organizations. Further, we explore a number of scenarios of digital transformation. Finally, these investigations result in the determination of a number of emerging research issues.