Investment and pricing strategies of competing firms: A computational approach

We analyze the classical investment and pricing problem of a dominant firm faced with competition from substitute industries or marginal firms in the same field. The firm owns a finite level of a resource (e.g. the stock of an exhaustible one), the consumption of which is to be divided optimally over a finite planning horizon. The competitors' measures affect the demand for the resource towards the dominating firm. Rising crude oil prices and investments in forms of alternative energy are representative examples of the strategic questions which involve competitive and contradictory interests among firms within an industry. The investment and pricing problem can be solved analytically only with strong, simplifying assumptions. To make the analysis simpler and to relax these restrictions, we combine a series of numerical tools, computerize them, and build up a user-oriented, computerized decision aid, which we call a ‘computerized approach’. We solve the problem under different sets of theoretical assumptions. This chosen incremental theory building allows us to study the theoretical sensitivity of the original problem.     

European Pension Funds and Sustainable Development: Trade‐Offs between Finance and Responsibility

Pension funds try to account for sustainable development in their operations. This mainly translates in responsible investing. We investigate how this interacts with the financial objectives. We use a survey of more than 250 pension funds based in 15 European countries. Multinomial logistic regression is used to find out how pension funds trade off sustainable development and financial objectives. Our findings suggest that pension funds that have not included responsibility in their strategy and investments have a clear priority regarding their financial performance. Pension funds who integrate sustainable development in their strategy can bring balance between finance and responsibility. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Public capital and convergence in the Spanish regions

This paper discusses the preconditions and strategies of local development and turnaround in difficult surroundings such as peripheral rural communities. Its key premise is that local decision makers' beliefs of how such small economies function and of ‘proper’ interventions are critical. Such thought patterns were studied among Finnish rural municipality directors (RMDs), using comparative cause mapping. The findings show that while private initiative, entrepreneurship, is regarded as key for development, prevalent views of entrepreneurship, especially firm formation, are unsophisticated, stressing personal traits and social factors such as supportive cultures and role models. Paralleling these views, the current developmental doctrine is indirect, focused on resource provision and implying passive waiting for entrepreneurs to emerge before developers ‘can’ act. Considering their bleak perspectives, the paper argues that communities with weak autonomous turnaround capabilities need more interventionist strategies than those built-in the dominant paradigm, whereas current resource-providing models may be suitable in more benevolent environments. To augment the dominant thinking, the paper suggests an initiating ‘business-based development model’ as a parallel approach for a more effective local economic development in difficult surroundings.     

Dynamics of Export Market Entry and Exit*

We apply discrete time duration models to explain the duration until new plants start to export and the duration until exit from the export markets, using data on Finnish manufacturing plants. Plants that are large, young, highly productive, and with high‐capital intensity are likely to enter the export market earlier and to survive in the export market longer. Foreign ownership increases chances of export entry, especially for small and low human capital plants, and decreases the risk of export failure for large, high‐productivity plants. The upper and lower tails of the productivity distribution are represented by plants that start exporting and those that are exiting, respectively.     

Book Reviews

This paper examines factors affecting the owner-manager's voluntary decision to hire an auditor in small firms. Using a random sample of 412 small private companies in Finland responding to an Internet survey, we first probe the institutional boundaries of a prior UK study [Collis, J., Jarvis, R., and Skerratt, L., 2004. The demand for the audit in small companies in the UK. Accounting and business research, 34 (2), 87–100] and conclude that its main findings can be generalised to a different regulatory setting (Finland) typical of many Continental European countries. Second, we broaden the prior research by testing new hypotheses regarding the drivers of an audit among small companies. We hypothesise and find evidence that outsourcing of critical accounting functions creates information asymmetry between the owner-manager and the external accountant, which may arouse the need for monitoring the external accountant through a voluntary audit. In addition, we find, as hypothesised, that tax advisory services provided by the external accountant reduce the likelihood of a voluntary audit. Moreover, we hypothesise that receiving a qualified opinion from the auditor reduces the likelihood of hiring an auditor voluntarily, whereas firms experiencing financial distress would be more willing to have their financial statements audited. We find evidence consistent with these hypotheses.     

Social capital approach on Enterprise 2.0: a multiple case study

The goal of Enterprise 2.0 is to create a collaborative work environment and facilitate knowledge sharing. However, organisations report both increases and decreases in productivity associated with Enterprise 2.0. The focal qualitative case study adopts the social capital approach as a theoretical lens to provide a holistic account of Enterprise 2.0. The study reveals the multilevel and multifaceted nature of Enterprise 2.0 and shows how it associates with individual employees’ behaviours, their mutual work- and non-work-related relationships and knowledge sharing patterns, as well as managerial processes. Thus, the study continues and contributes by going beyond the mere operational use and benefits of Enterprise 2.0, and approaches it as a holistic socio-technical phenomenon that largely intertwines with organisational realities and strategic management. Furthermore, the study provides a discussion on Enterprise 2.0 as a driver of social change, and what kind of managerial action and involvement is required for its success.     

On the Existence of Undominated Nash Equilibria in Normal Form Games

In this paper the existence problem of undominated Nash equilibrium in normal form games is analyzed. It is shown that an undominated Nash equilibrium exists, if (a) strategy sets are convex polytopes inRⁿand (b) utility functions are affine with respect to each player's own strategy. It is shown by counterexamples that, first, it is not sufficient to have concave utility functions instead of affine under condition (b) even when condition (a) is satisfied, and, second, it is not sufficient to have just compact and convex strategy sets instead of polytopes in condition (a) even when condition (b) is satisfied.