Internationalization and the evolution of corporate valuation

By documenting the evolution of Tobin's q before, during, and after firms internationalize, this paper provides evidence on the bonding, segmentation, and market-timing theories of internationalization. We find that Tobin's q does not rise after internationalization, even relative to domestic firms. Instead, q rises significantly before and during the internationalization year, but then falls sharply in the following year, quickly relinquishing the increases of the previous years. In decomposing these dynamics, we find that market capitalization rises before internationalization and remains high, while corporate assets increase during internationalization. The evidence supports the theory that financial internationalization facilitates corporate expansion, but challenges the theory that internationalization produces an enduring effect on q by bonding firms to a better corporate governance system.     

Development and implementation of customer solutions: A study of process dynamics and market shaping

A broad, dynamic network perspective on solution processes remains scarce. This article presents the process of developing and implementing customer solutions and its effects on the wider business environment by investigating customers and suppliers in the global mining industry (Australia, Chile, and Sweden), analyzing the deployment of a new customer solution, and assessing the changes to the competitive environment and focal firms' relationships with other customers and suppliers. It shows that the forces that drive customer and supplier interests and motivation to co-develop customer solutions may change over time, thus redefining the aim and scope of solutions and creating failure risks. Customers present problems; suppliers respond, on the basis of not only the feasibility of the customer-specific solution but also of their evaluation of future solutions in a broader market; then suppliers aim to standardize successful solutions across markets. Customers want close supplier relationships and unique solutions but also like standardized and repeatable solutions, so they can share development costs with competitors and expose the supplier to competition to avoid lock-in effects. From a network perspective, a novel solution can have a market-shaping effect and evoke reactions from other actors who want to enhance their market position. However, these changes are not necessarily deliberate, and the dynamics that market introductions of solutions trigger may be difficult to predict.     

Portfolio choice with indivisible and illiquid housing assets: the case of Spain

This paper studies the investment decisions of Spanish households using a unique data-set, the Spanish Survey of Household Finance (EFF). We propose a theoretical model in which households, given a fixed investment in housing, allocate their net wealth across bank time deposits, stocks and mortgage. Besides considering housing as an indivisible and illiquid asset that restricts the portfolio choice decision, we take into account the financial constraints that households face when they apply for external funding. For every representative household in the EFF, we solve this theoretical problem and obtain the theoretically optimal portfolio that is then compared with households’ actual choices. We find that households significantly under-invest in stocks and deposits while the optimal and actual mortgage investments agree. Considering the three types of financial assets at once, we find that the households headed by highly financially sophisticated, older, retired, richer, and unconstrained persons are the ones investing more efficiently.     

Deconstructing Herding: Evidence from Pension Fund Investment Behavior

In this paper, we examine herding across asset classes and industry levels. We also study what incentives managers at various layers of the financial industry face when investing. To do so, we use unique and detailed monthly portfolios between 1996 and 2005 from pension funds in Chile, a pioneer in pension-fund reform. The results show that pension funds herd more in assets that have more risk and for which pension funds have less market information. Furthermore, the results show that herding is more prevalent for funds that narrowly compete with each other, namely, when comparing funds of the same type across pension fund administrators (PFAs). There is much less herding across PFAs as a whole and in individual pension funds within PFAs. These herding patterns are consistent with incentives for managers to be close to industry benchmarks, and might be also driven by market forces and partly by regulation.     

The Gordian Knot of Practicing Digital Transformation: Coping with Emergent Paradoxes in Ambidextrous Organizing Structures*

Despite increasing scholarly attention on digital transformation, there are only limited micro‐level insights into how incumbent firms organize and manage their digital transformation efforts on a daily basis. Through a longitudinal, exploratory qualitative case study of a large firm, this article investigates how organizational members respond to an ambidextrous organizing model designed to accelerate digital innovations. The firm relied on a hybrid model of separation and integration to organize and manage its digital transformation efforts. This study unfolds the implications and consequences of such a model at the micro‐level. By applying a paradox lens, it shows how the coping actions of organizational members affected the digital transformation. The article illustrates how the hybrid organizing model led to the emergence of three paradoxes at the organizational level (paradoxes of organizing, attention, and knowledge sharing) that organizational members had to cope with. It shows how organizational members, through their coping with these paradoxes, indirectly affected the organizing model by altering its original design; and how the management, influenced by these learnings, subsequently adapted the model to enable a better sustainability over time. Overall, the findings show and explain why organizing for digital transformation is a particularly complex and paradoxical endeavor. They also provide important insights to managers and organizational developers, helping them to become aware of possible tensions in their organizing efforts as well as of coping strategies and practices to tackle these tensions. Finally, the article suggests different paths for further research in digital transformation and digital innovation from a micro‐level perspective.     

Buyer–Supplier and Supplier–Supplier Alliances: Do They Reinforce or Undermine One Another?

abstract    Previous research has portrayed buyer–supplier and supplier–supplier alliances as important mechanisms to foster learning and exchange efficiencies. Controversy remains, however, as to how these alliances interact. While some propose they reinforce one another (e.g. learning in horizontal ties generates positive spillovers to vertical ties), others propose a negative interplay (e.g. when increasing vertical-tie intensity, suppliers may weaken horizontal ties to avoid retaliation from buyers who wish to preserve bargaining power). We empirically test these competing views using survey data from the Brazilian auto-parts industry. In an attempt at reconciliation, we propose that the positive or negative interaction between vertical and horizontal alliances depends on the level of technological uncertainty of goods exchanged. Vertical ties seem to inhibit horizontal ties when technological uncertainty is low; when technological uncertainty is higher, vertical and horizontal ties do not seem to have any meaningful form of interaction. We discuss implications for theory and practice.     

Sovereign Debt Capacity and the Distribution of Domestic Wealth: A Common Agency Model*

This paper proposes a stylized two‐period, two‐country model illustrating the role of distribution of domestic wealth in determining a country's level of access to international lending. We model sovereign debt redemption policy in a common agency framework. Within this framework, policy is the outcome of the interaction between government and local and foreign interest groups with conflicting preferences on debt repayment. Our main result is that in full lobby competition, when all interests are represented, the only equilibrium solution is repudiation and the consequent inability of government to access international capital markets. Conversely, when the ability to lobby depends on wealth, governments can access international credit up to a given maximum external debt capacity, determined by the skew in the distribution of domestic wealth.     

Index Models and Land Allocation Reconsidered

In contrast with previous index model land applications, this article shows that the land allocation problem is a portfolio model with two constraints, namely, investable funds and land. The two-constraint model implies a drastic reinterpretation of what previous studies have quantified as diversifiable and systematic risks in agricultural production. The article also argues that the constant marginal-rate-of-product-substitution (MRPS) technology implicit in financial portfolio models is unlikely to hold in a production context such as the land allocation problem, and that the index model must be modified accordingly. Farm-level data are used to illustrate and test the hypotheses advanced. Empirical results indicate that most of the risk for corn and soybeans is diversifiable, and that corn and soybeans are characterized by decreasing MRPS. The MRPS effect is found to be large from an economic standpoint and implies that crop diversification may be optimal, even for risk-neutral farmers.     

B Corp Certification and Its Impact on Organizations Over Time

Journal of Business Ethics - This study explores the impact of B Corp certification and its associated impact assessment on four case studies of small and medium-sized Brazilian companies certified...