The value of independent directors: Evidence from sudden deaths

We investigate contributions of independent directors to shareholder value by examining stock price reactions to sudden deaths in the US from 1994 to 2007. We find, first, that following director death stock prices drop by 0.85% on average. Second, the degree of independence and board structure determine the marginal value of independent directors. Third, independence is more valuable in crucial board functions. Finally, controlling for director-invariant heterogeneity using a fixed effect approach, we identify the value of independence over and above the value of individual skills and competences. Overall, our results suggest that independent directors provide a valuable service to shareholders.     

Strategies for knowledge use in R&D and their implications for innovative performance

We argue that research on R&D strategy and on the use of external knowledge in R&D in particular should differentiate between distinct uses of external knowledge. We distinguish between uses of external knowledge for replication (using knowledge as is) vs. for compounding (building on acquired knowledge by combining it together with internally developed knowledge). We theorize about the respective innovative performance implications of these two strategies and compare them with a self-reliant strategy of internal R&D. We also elaborate contingencies for each strategy, pertaining to firm capabilities and cooperation. We test our predictions using a large sample survey of Dutch innovators in multiple industries. Our findings indicate that compounding firms perform better than replicating firms when the share of sales that consists of innovations that are new to the market is assessed, but they do not outperform firms with an internal R&D strategy. Furthermore, these differences disappear when the share of sales consisting of less novel innovations is studied. This research demonstrates the importance of distinguishing between R&D strategies that replicate vs. compound external knowledge.     

A clear path towards sustainable mass tourism? Rejoinder to the paper ‘Organic,incremental and induced paths to sustainable mass tourism convergence’ by David B. Weaver

The paper forms a rejoinder to the paper by David Weaver (‘Organic, incremental and induced paths to sustainable mass tourism convergence’). It fully agrees with David Weaver that a sustainable development of tourism should focus on sustainable mass tourism development and not, as is currently the case, so much on niche products labelled ‘sustainable’. However, it critiques Weaver's operationalization of sustainability, his assumption that sustainable mass tourism (SMT) will be the ‘emergent norm’ due to external factors, and his destination development theory showing different paths that, however, all end in SMT. Finally it is shown that the path development idea might be at odds with systems thinking.     

Incentive and entrenchment effects in European ownership

In a large sample of European firms we analyze the value discount associated with disproportional ownership structures first documented by Claessens et al. (2002). Consistent with a theoretical model of incentive and entrenchment effects, we find higher value discount in family firms, in firms with low cash flow concentration, and in industries with higher amenity value. Furthermore, the discount is higher in countries with good investor protection and higher for dual class shares than for pyramids. We find no impact on operating performance, likelihood of bankruptcy, dividend policy, or growth. Finally, we discuss policy implications of these findings.     

The changing rationale for governance choices: Early vs. late adopters of global services sourcing

Research Summary: This article studies how the logic of firm governance choices varies as a function of the time of adoption of particular sourcing practices. Using data on the diffusion of global business services sourcing as a management practice from early experiments in the 1980s through 2011, we show that the extent to which governance choices are affected by process commoditization, availability of external service capabilities, and past governance choices depends on whether firms are early or late adopters. Findings inform research on governance choice dynamics specifically in highly diverse and evolving firm populations. Managerial Summary: This article considers how firms have chosen delivery models in global services sourcing decisions over time. Based on comprehensive data, we make two major observations. First, we find that firms that began with global services sourcing early, invested mainly in their internal sourcing capacity, while outsourcing only simple tasks to external providers, whereas firms that started later invested more in their capability to outsource various services to increasingly sophisticated suppliers. Second, we find that initial investments in internal or external sourcing capabilities have a strong effect on future choices of delivery models. This explains why, even today, firms vary greatly in how they implement global sourcing decisions, and it suggests that newcomers should learn from their own peer group rather than from highly experienced firms.     

The ‘Catch 22’ of communicating CSR: Findings from a Danish study

This research explored the apparent ‘Catch 22’ of communicating Corporate Social Responsibility (CSR). Although companies are regularly encouraged to engage in CSR, they are simultaneously discouraged to communicate about this engagement. We contribute with two models that may help to explain how companies can best communicate about their CSR initiatives. Based on a reputation survey and two case studies of Danish corporate CSR frontrunners, first we develop an ‘inside‐out approach’ to suggest how managers can manage their CSR activities to achieve favourable CSR reputation in a ‘Catch 22’ context. Employees appear as a key component in building trustworthiness as CSR communication is shown to evolve when taking an ‘inside‐out approach’. Second, we develop a CSR communication model with two CSR communication processes targeting different stakeholder groups: ‘the expert CSR communication process’ and ‘the endorsed CSR communication process’. Integrating these models and processes may help companies strategically capture reputational advantage from their CSR initiatives.     

Corporate credit risk modeling and the macroeconomy

Despite a surge in the research efforts put into modeling credit and default risk during the past decade, few studies have incorporated the impact that macroeconomic conditions have on business defaults. In this paper, we estimate a duration model to explain the survival time to default for borrowers in the business loan portfolio of a major Swedish bank over the period 1994–2000. The model takes both firm-specific characteristics, such as accounting ratios and payment behaviour, loan-related information, and the prevailing macroeconomic conditions into account. The output gap, the yield curve and consumers’ expectations of future economic development have significant explanatory power for the default risk of firms. We also compare our model with a frequently used model of firm default risk that conditions only on firm-specific information. The comparison shows that while the latter model can make a reasonably accurate ranking of firms’ according to default risk, our model, by taking macro conditions into account, is also able to account for the absolute level of risk.     

Tourism travel under climate change mitigation constraints

The paper first describes an inventory for 2005 giving the tourism related CO₂ emission caused by global tourism, and presents a 30-year projection and a 45-year simulation. The study found that tourists cause 4.4% of global CO₂ emissions. Also these emissions are projected to grow at an average rate of 3.2% per year up to 2035. This increase is problematic as globally a reduction of emissions by 3–6% is required to avoid ‘dangerous’ climate change. Using contemporary scenario techniques it appeared difficult to find a future tourist travel system consistent with CO₂ emission reductions of up to 70% by 2050 with respect to 2005. Based on the model underlying the 30-year projection, 70 scenarios are presented in a ‘landscape’ graph exploring the effect of opportunities to reduce the emissions, but this attempt did not reach the large reductions envisaged. We therefore explored automated scenario generation as a way to define backcasting scenarios that both reach the emission reduction target and retain the highest possible economic value for the sector. The main contributions made by this study are (1) in comparing the value of different ways to approach a (desired) future and (2) giving insight into the kind of structural changes required within tourism and tourism transport in case very strong emission reductions are required. Finally the model showed signs of ‘complex’ behaviour.     

Locating fire stations: An integrated approach for Belgium

This paper illustrates the potential of a decision-support system developed for Belgium by a consortium of universities and a private firm, in the framework of a public call made by the Ministry of the Interior. The system is designed to provide the Belgian emergency management administration with a complete decision-aid tool for the location of fire stations. The originality of the project is that it includes a risk-modeling approach developed at a national scale. This analysis involves a multiscale GIS that includes a thorough representation of the physical, human and economic spatial realities, a risk-modeling approach, an adequate optimal location and allocation model (taking into account both queuing and staffing problems). The final result is an interactive operational tool for defining locations, equipment allocations, staffing, response times, the cost/efficiency trade-off, etc. This flexible tool can be used in an assessment as well as a prospective context. It has been used to draw a national reorganization plan for fire stations that started being implemented in 2010.