The aims of business management

International joint ventures are progressively growing more important in LDCs. However, their activvities frequently lead to conflicts between such countries’ overall economic objectives and the aims of business management.     

Increasing returns and unsynchronized wage adjustment in sunspot models of the business cycle

A challenge to models of equilibrium indeterminacy based on increasing returns is that required increasing returns for generating indeterminacy can be implausibly large and rise quickly with the relative risk aversion in labor. We show that unsynchronized wage adjustment via a relative wage effect can both lower the required degree of increasing returns for indeterminacy to a plausible level and make it invariant to the relative risk aversion in labor. Consequently, indeterminacy and sunspot-driven fluctuations can emerge for plausible increasing returns regardless of the relative risk aversion in labor. Our model generates reasonable dynamics in terms of matching the business cycle, and sunspot shocks become more important with labor market friction.     

Advertising intensity,investor recognition,and implied cost of capital

The main purpose of this paper is to test Merton’s (J Finance 42(3):483–510, 1987) hypothesis that better investor recognition is correlated with lower expected returns. We measure investor recognition with the firms’ advertising intensity and offer consistent evidence that higher advertising intensity is associated with lower implied cost of capital, as derived from Value Line target prices and dividend forecasts. Investor recognition plays an important role in attracting investors, improving liquidity, and ultimately reducing the cost of capital. The findings shed light on the capital market implications of advertising expenditures and complement the extant research on investor recognition.     

Information demand and stock market volatility

We study information demand and supply at the firm and market level using data for 30 of the largest stocks traded on NYSE and NASDAQ. Demand is approximated in a novel manner from weekly internet search volume time series drawn from the recently released Google Trends database. Our paper makes contributions in four main directions. First, although information demand and supply tend to be positively correlated, their dynamic interactions do not allow conclusive inferences about the information discovery process. Second, demand for information at the market level is significantly positively related to historical and implied measures of volatility and to trading volume, even after controlling for market return and information supply. Third, information demand increases significantly during periods of higher returns. Fourth, analysis of the expected variance risk premium confirms for the first time empirically the hypothesis that investors demand more information as their level of risk aversion increases.     

The Development of Organizational Capabilities and Corporate Entrepreneurial Processes: The Case of Chinese Automobile Firms

Corporate entrepreneurship (CE) has contributed to the rapid growth of emerging‐market firms (EMFs), yet little is known about this phenomenon from a process perspective. This article examines how EMFs develop organizational capabilities in pursuit of CE as a strategy to catch up with their global competitors. By adopting a case study method, our in‐depth analysis of two leading Chinese automobile companies identifies specific organizational capabilities that enable firms’ CE activities at different stages—initiation, development, and implementation. Our findings also reveal how different means of developing organizational capabilities lead to different catch‐up strategies, which subsequently influence firms’ entrepreneurial transformation and value creation. © 2014 Wiley Periodicals, Inc.     

Estimating global bank network connectedness

We use LASSO methods to shrink, select, and estimate the high‐dimensional network linking the publicly traded subset of the world's top 150 banks, 2003–2014. We characterize static network connectedness using full‐sample estimation and dynamic network connectedness using rolling‐window estimation. Statically, we find that global bank equity connectedness has a strong geographic component, whereas country sovereign bond connectedness does not. Dynamically, we find that equity connectedness increases during crises, with clear peaks during the Great Financial Crisis and each wave of the subsequent European Debt Crisis, and with movements coming mostly from changes in cross‐country as opposed to within‐country bank linkages.     

Online marketing: When to offer a refund for advanced sales

Advance selling is a marketing strategy commonly used by online retailers to increase sales by exploiting consumer valuation uncertainty. Recently, some online retailers have started to allow refunds on products sold in advance. On the one hand this reduces the net advance sales, but on the other hand it allows a higher advance sales price. This research is the first to explore the overall effect of allowing a refund on profits from advance sales, identifying conditions where advance selling with or without refunds (or no advance selling at all) is best. We analytically compare the profits of three advance selling strategies: none, without refund, and with refund. We show that selling in advance and allowing a refund is optimal for products with a relatively small profit margin and small strategic market size, and that the added profit can be considerable. Our results guide managers in selecting the right advance selling strategy. To facilitate this, we graphically display, based on the two dimensions of regular profit margin and strategic market size, under what conditions the different strategies are optimal.     

Is it still economic to build a new coal-fired power plant in the U.S.? A real option analysis

In the U.S., virtually no new coal-fired power plants have been built in recent years. Both industry experts and academics seem to believe that no rational firm will build a new coal-fired plant. Will such a trend continue in the future? To provide insights into this question, we investigate the optimal decision of an electricity company with an irreversible and deferrable opportunity to build either a new coal-fired or natural gas-fired power plant as its new base-load resource. According to our real option analysis, the optimal decision depends on the location. In the case of the eastern U.S., it is optimal to choose a natural gas plant if a firm is given a choice among a new natural gas plant, a new coal plant and deferring the investment. However, contrary to the common sentiment in the industry and academia, building a new coal plant in the western U.S. is still more economical than building a new natural gas plant in the absence of emission pricing. Furthermore, introducing carbon pricing to western U.S. states, as California did, can substantially increase the probability that a firm will optimally choose a natural gas plant over a coal plant.     

Network ties and export propensity of Vietnamese small and medium enterprises

This paper investigates the impacts of different network ties on export propensity of Vietnamese small and medium enterprises (SMEs) in the manufacturing sector. Using data from a survey of over 2,600 manufacturing SMEs in 2015, we found that social networks contribute positively to the export propensity of SMEs, while the size of business networks negatively associates with the likelihood of export. However, bank networks and political networks are not significant for the propensity to export of Vietnamese SMEs. We discuss the results in detail and offer recommendations for SME owners, managers and policy makers.