Whom Should We Talk to? Investigating the Varying Roles of Internal and External Relationship Quality on Radical and Incremental Innovation Performance

Research suggests that close relationships with internal and external partners are likely to have a significant impact on new product development (NPD). What is unclear is how the effects of internal and external relationships influence development paths for different types of innovations. Prior literature indicates that the pathways for developing incremental innovations differ considerably from those for radical innovations. Thus it is plausible that the effects of external versus internal relationships vary across these two innovation types. This paper uses the 2012 Comparative Performance Assessment Study (CPAS) data set to investigate the roles of internal and external relationship quality on the development of both incremental and radical innovations. The results find that internal and not external relationship quality is beneficial for the development of incremental innovations. When driven by internal relationships, a flexible NPD process is advantageous for the financial performance of incremental innovations. Meanwhile external and not internal relationship quality is valuable for developing radical innovations. External relationship quality results in process flexibility, leading to project execution success and subsequent financial performance for radical innovations. As expected, project execution success consistently leads to increased financial performance. These findings indicate the critical differences in types of relationship quality required when developing new products based on radical versus incremental innovations.     

Tourism Taxes: Implications for Tourism Demand in the UK

Before one can understand tax implications for the tourism industry, one must understand the sensitivity of tourism demand. Using a recently developed theoretical framework, we model inbound tourism demand in the UK. The results suggest that tourism demand in the UK is very price sensitive and that measures which result in increasing tourism prices will have a significant negative impact on tourist arrivals. It is believed that a reduction in the VAT rate could boost UK's tourism sector, depending on the extent to which a decrease in taxation is passed on in the form of price reductions. The results also suggest that arrivals from neighboring countries are 98% higher than from distant origins; however, expenditure per capita of the former is 52% lower than the latter. We also found that common language between the origin and the destination increases arrivals 7% more than non‐native English‐speaking origins.     

Salesforce Compensation: An Analytical and Empirical Examination of the Agency Theoretic Approach

Since the papers of Basu et al. (1985) and Lal and Srinivasan (1993), marketing academics have been interested in the design and implementation of optimal compensation plans. The literature has focused on agency theory as a foundation to help describe and understand this process. Although there has been much theoretical work on this topic, empirical evidence to support this theory remains sparse. Studies by Coughlan and Narasimhan (1992) and John and Weitz (1988, 1989) have found some early evidence that supports agency theory.In this paper we revisit the issue of salesforce compensation on both theoretical and empirical fronts. On the theory side we build a game theoretic model of salesforce compensation that accounts for risk aversion on the part of both the principal and the agent. We further show that accounting for the firm size within the analytical framework yields new insights into the nature of compensation design.The results obtained from our model, while substantiating past findings, offer some new insights into the compensation design process. In particular we find that firm demographics play an important role in the design of the optimal compensation scheme. We then use two datasets collected ten years apart by the Dartnell Corporation to investigate and test hypotheses generated by our model and the extant literature. Our results show that the basic tenets of agency theory continue to hold over time and that our new theoretical hypotheses are consistent with the data. Using the two datasets we also find that inter-temporal changes in salesforce compensation coincide with the advent and adoption of new technologies. Our research thus adds to our substantive knowledge of the drivers of salesforce compensation, while adding to the theoretical structure through taking account of the possibility of principal risk aversion.     

World markets for raising new capital

We examine the extent to which firms from different countries rely on alternative sources of capital, the locations in which they raise capital, and the factors that affect these choices. During the 1990–2001 period, firms raised about $25.3 trillion of new capital, including $4.9 trillion from abroad. International debt issuances are substantially more common than equity issuances, with debt (equity) issues accounting for 87% (9%) of all securities issued internationally, and about 20% (12%) of all public debt issuances. Market timing considerations appear to be important in security issuance decisions in most countries.     

SKEWNESS AND KURTOSIS IN JAPANESE EQUITY RETURNS: EMPIRICAL EVIDENCE

In this paper, the distribution of equity returns on the Tokyo Stock Exchange is examined from 1965 to 1984, and significant and persistent skewness and kurtosis are found. The deviation of security returns from normality declines with increasing portfolio size and appears to be greater than the non-normality evidenced in U.S. security returns. Further, these deviations from normality persist even after controlling for January and firm size effects.     

SOCIAL ACCOUNTS AND THE DISTRIBUTION OF INCOME: THE MALAYSIAN ECONOMY IN 1970

Although the functional and institutional distributions of income are integrally connected to individual living standards and other development policy objectives, these dimensions are rarely given prominence or even accommodated within standard national accounting frameworks. This paper summarizes research on the estimation of a social accounting matrix (SAM) for Malaysia for 1970 in which the distribution of income between different factors and socio-economic groups is identified. It is the latest of a series of case studies involving some of the authors and is, perhaps, the most detailed of its kind. The study departs from the United Nations SNA guidelines at various points. The SNA basically proposes a commodity balance approach to national income accounting. In giving equal emphasis to income/outlay accounts as to the production accounts, the present study has brought together data from two major primary sources: a household expenditure survey and a production survey. Their combination poses several problems which are discussed in the paper. It leads to an integrated picture, in matrix form, of the interrelationships between income distribution and production structure in the Malaysian economy. Both the factor and household accounts in our SAM are disaggregated according to race and the geographic distinction between Peninsular and East Malaysia, with an urban/rural split within Peninsula Malaysia. The Peninsula labor force is further disaggregated by education level, while its households are then subdivided according to the employment status of main income earners. Arguments for and against these choices are presented. Some other aspects of the study can be noted. First, the distinction drawn between East and Peninsular Malaysia is desirable not only because of the inherent interest of the regions but also because of large differences in data availability and hence in estimation methods. Secondly, to complete our SAM it was necessary to estimate inter-household transfers, being the institutional analogue of inter-industry commodity flow. And finally an attempt has been made to impute the labor component of unincorporated business income. These, then, are the major problems which had to be overcome in our attempt to quantify the generation, distribution, and redistribution of income within Malaysia in a SAM framework.     

Is Carl Icahn Good for Long-Term Shareholders? A Case Study in Shareholder Activism

The increase in activist campaigns by entrepreneurial investors and hedge funds in the past decade has raised considerable debate about their benefits for average shareholders. Although critics have longed charged that the proposals for change by such active investors typically do not increase the longer-run efficiency and values of the targeted companies, more recent studies have provided evidence of success, both in terms of increasing the market value of such companies and achieving at least some of the investors' expressed objectives. This article attempts to add to these findings by examining the case of a single well-known investor, Carl Icahn, whose career as a shareholder activist now spans at least three decades. The authors report, first of all, that Icahn's targets have included companies from a remarkable variety of industries, and that his stated objectives have varied with the industries of the targets. Although more of Icahn's targets appear to have been overleveraged than underleveraged, a significant minority have had payouts ratios that were judged to be too low and more cash than they needed. In terms of Icahn's effect on other shareholders, the authors report a significant positive stock price reaction—on the order of 10%—to the announcement of Icahn's taking a position in the target firm. When examining the subsequent performance of the target firms, the authors found a very large difference between those firms that were either taken private or acquired (within 18 months)—over a third of the target companies—and those that remained independent. The authors report that although the acquired group achieved significant positive stock market returns, the firms that remained independent suffered very negative (-60%) returns. Although Icahn's proposed changes could be responsible, as critics charge, for the performance of the latter group, the authors suggest that the success of many of these companies in fending off Icahn without enacting most of his proposed reforms is a more plausible explanation. At the same time, the authors report that Icahn was successful in achieving at least one of his stated objectives in well over half of the cases in which the target companies remained independent.     

The Effects of Relative Changes in CEO Equity Incentives on the Cost of Corporate Debt

We examine how effort and risk incentives embedded in CEO equity incentives are related to the cost of debt and the role credit worthiness plays in this relationship. Our empirical approach addresses a number of unanswered questions in the literature by examining the sources and effects of co‐movements in CEO incentives, whether the proportionality of these movements is rationally priced, and whether the effects are concentrated among bonds with greater likelihood of default. Our findings confirm that effort and risk incentives are rationally priced by bond market participants. We also show that significant cross‐sectional effects are more pronounced for speculative bonds, implying that previously documented links between equity incentives and the cost of debt may not be generalizable to all debt issues.     

National Culture and the Valuation of Cash Holdings

Prior studies document that national culture traits are systematically related to cash holdings and attribute this to managerial cultural predispositions. However, it is possible that these preferences reflect investors’ cultural preferences and that managers are simply catering to investors’ preferences. It is also not clear whether the cash holding effects previously documented are value maximizing. By examining the impact of national culture traits on cash valuation, we are able to provide insight into these questions. Specifically, we examine the effect of three national culture traits – individualism, uncertainty avoidance and long‐term orientation – on firm cash valuation. Our results suggest that the previously observed effects of cultural traits on cash holdings and attributed to managerial cultural biases do not reflect investors’ preferences and are not value maximizing.     

INFORMATION SYSTEM UTILIZATION STRATEGY FOR SUPPLY CHAIN INTEGRATION

This paper investigates a set of strategies for information systems utilization in supply chain integration initiatives. We argue that there might be a recommended sequence in using information systems for supply chain integration. Support is provided through an analysis of structural relationships of ways in which information systems are utilized for supply chain integration, i.e., Infrastructural Support, Value Creation Management, Logistical Operations, and Supply Chain Management Performance.