Good News and Bad News about Firm‐Level Stock Returns of Internationally Exposed Firms

We examine stock returns of firms with international exposure. Our empirical work relies on Campbell's variance decomposition framework. Not surprisingly, we find that the volatility of discount rate and cash flow news increase with the degree of international exposure. As firms globalize, the cash flow effect is good news, while the discount rate effect amounts to bad news. The surprising result is that the covariance between the news terms increases with international exposure. This finding provides indirect evidence for the proposition that foreign exchange (FX) risk is a priced factor in the cross‐section of risk‐adjusted expected returns. JEL Classifications: G12, G15; EFM Classification Code: 330     

Biased and overconfident,unbiased but going for it: How framing and anchoring affect the decision to start a new venture

Cognitive heuristics, biases, and overconfidence have been suggested as an explanation for entrepreneurial entry. Nevertheless, empirical research on the subject has produced mixed findings and has under-explored the cognitive mechanisms leading to overconfidence in entrepreneurial settings. In two within-subject experiments, we focus on three cognitive heuristics—reference point framing, outcome salience framing, and anchoring in conjunctive events—and examine their effects on perceived risk, confidence, required and estimated probabilities of success, and the decision to start a new venture. Our findings show that reference point framing and outcome salience framing affect the decision to enter directly and indirectly via risk perception, but do not affect confidence. In addition, the effect of anchoring is contingent on the congruence between its semantic and its numeric influences. Overconfidence only obtains when the numeric and semantic influences of anchoring are aligned and aimed at enhancing the salience of potential positive outcomes, i.e., through high probabilities of success.     

Information Sharing in Global Supply Chain Alliances

The post–WWII economic expansion of economies such as Japan, South Korea, Hong Kong, Taiwan, Singapore, and more recently China and India was enabled to a significant degree by the increasingly complex, global supply chain networks of large Original Equipment manufacturers (OEMs) in the United States, European Union, and Japan. By linking buyers and suppliers across countries and industries, supply chain management (SCM) practices have a large impact on the economic fortunes of companies and countries throughout the world. Nowhere has the effect of this mutual interdependence been felt more strongly than between the U.S. companies and the Asia-Pacific market. Although the benefits of SCM are well documented, some evidence suggests that the reality of SCM implementation can create additional pressures for suppliers. We identify key problem areas experienced by suppliers and their link to the type of information shared by buying firms. The problem area experienced by most suppliers relates to issues of dependence in the alliance. Mere information sharing is insufficient for a successful alliance, and more information can be associated with a number of problems. For example, lack of information sharing can be associated with a supplier's perception of the buyer expecting excessive support. However, greater information sharing can be associated with a supplier's perception of the buyer passing on an excessive burden. Sharing of financial information is perceived as intrusive and controlling. These apparent contradictions uncover the complexity of the supply chain alliance. The moderating factors appear to be open communication and joint sharing of problem solving procedures—factors identified by suppliers that define a world-class buyer.     

Being “in Control” May Make You Lose Control: The Role of Self-Regulation in Unethical Leadership Behavior

In the present article, we argue that the constant pressure that leaders face may limit the willpower required to behave according to ethical norms and standards and may therefore lead to unethical behavior. Drawing upon the ego depletion and moral self-regulation literatures, we examined whether self-regulatory depletion that is contingent upon the moral identity of leaders may promote unethical leadership behavior. A laboratory experiment and a multisource field study revealed that regulatory resource depletion promotes unethical leader behaviors among leaders who are low in moral identity. No such effect was found among leaders with a high moral identity. This study extends our knowledge on why organizational leaders do not always conform to organizational goals. Specifically, we argue that the hectic and fragmented workdays of leaders may increase the likelihood that they violate ethical norms. This highlights the necessity to carefully schedule tasks that may have ethical implications. Similarly, organizations should be aware that overloading their managers with work may increase the likelihood of their leaders transgressing ethical norms.     

Japanese joint ventures with western multinationals: Synthesising the economic and cultural explanations of failure

Many research studies have been done to explain the reasons for the tensions and failures observed in joint ventures between Japanese and Western multinational enterprises. These studies have identified, with various degrees of sophistication, the existence of cultural differences as a primary determinant of failure. Alternative explanations focus upon a transaction cost approach, emphasising opportunism and the danger of cheating in such strategic alliances. This paper synthesises the literature through the development of a new conceptual framework. This framework, which distinguishes between economic and cultural reasons for failure, provides a new lens to view the literature. It is demonstrated that the simple view of cultural incompatibility needs to be replaced by an awareness of the combined impact of cultural and economic forces on the viability of joint ventures between Japanese and Western firms.Lee T. Brown is a doctoral candidate in the Faculty of Management at the University of Toronto. Alan M. Rugman is Royal Bank Visiting Professor at the University of Alberta and Professor of International Business at the University of Toronto. Alain Verbeke is Assistant Professor of International Business at the University of Toronto. Helpful comments have been received from Nancy Adler, Mark Casson, Martin Evans, Tom Roehl, Mark Warner and Ken Watson.     

Is targeted advertising always beneficial?

In this paper, we study a simple model in which two horizontally differentiated firms compete in prices and targeted advertising on an initially uninformed market. First, the Nash equilibrium is fully characterized. We prove that when the advertising cost is low, firms target only their “natural markets”, while they cross-advertise when this cost is high. Second, the outcome at equilibrium is compared with random advertising. Surprisingly, we prove that firms' equilibrium profits may be lower with targeted advertising relative to random advertising, while firms are given more options with targeted advertising.     

The relationship between supply chain factors and adoption of e-Collaboration tools: An empirical examination

We consider minimum-cost scheduling of different vehicle types on a predetermined set of one-way trips. Trips have predetermined ready times, deadlines and associated demands. All trips must be performed. The total time of operations on any vehicle is limited. We develop a mixed integer model to find the optimal number of vehicles at a minimum cost. Based on the hard nature of the problem, we propose six heuristics. Computational results reveal that heuristics return exceptionally good solutions for problem instances with up to 100 jobs in very small computation times, and are likely to perform well for larger instances.     

On the existence of a probability measure compatible with a total preorder on a Boolean algebra

If an economic agent's beliefs about the relative likelihood of events are characterized by a total preorder ? on the algebra $\text{A}$ of events, the problem arises to know under which conditions, ? is representable by a probability measure. Here we show that there exists a probability measure compatible with a total preorder on a Boolean algebra, if and only if, the Boolean algebra is well bounded, weakly Archimedean, and perfectly separable, this last condition substituting for Villegas' monotone condition used in Chateauneuf and Jaffray (1984); if σ-additivity is required. Villegas' monotone condition, must merely be added.