Industrial services, product innovations, and firm profitability: A multiple-group latent growth curve analysis

Manufacturers in many industries seek service-led growth beyond their product core. Yet research on the link between service revenue growth and firm profitability is still at an early stage. To shed further light on this complex relationship, we report the results of a longitudinal study based on panel data of 414 companies in the German mechanical engineering industry collected over a five-year period. Employing latent growth curve modeling and using multiple group analysis, the study provides empirical evidence for the causality between service infusion strategies and manufacturers' profit trajectories. The results also reveal differential effects of service categories and the moderating role of manufacturers' product innovation efforts. For companies with high product innovation activity, services supporting the product (SSPs) directly increase firm profitability, while services supporting the clients' actions (SSCs) do not display any link with long-term profitability. Conversely, for companies with low product innovation activity, SSCs have a significant, positive effect on firm profitability, while SSPs have only an indirect effect. In sum, our findings caution managers that service offerings do not automatically improve company profits. Manufacturers must carefully consider the fit between their service offerings and product innovation activities to grow bottom line results.     

Innovation intermediary challenging the energy incumbent: enactment of local socio-technical transition pathways by destabilisation of regime rules

ABSTRACT

The energy sector needs to transform towards sustainability. The multi-level perspective on sociotechnical transitions is embracing an enactment perspective, which focuses on the agency of various actors in shifting transitions pathways but has yet to study local urban experiments from such an enactment perspective. Our empirical research examines an innovation intermediary’s work in destabilising the regime rules in relation to the local energy incumbent company in Helsinki, Finland. Our paper seeks answers to the questions: How does the collaboration of the intermediary and the local energy company unfold? What are the impacts of the intermediary work on the local energy company in terms of enactment of transition pathways and what are the mechanisms causing the impact? Our research shows that the intermediary contributes to the transition by disturbing existing rules, structures, practices and networks by convening innovation champions from different constituencies, renegotiating regime rules and disrupting existing R&D alliances.     

A test of the rational expectations hypothesis using data from a natural experiment

Data on contestants’ choices in Italian Game Show Affari Tuoi are analysed in a way that separates the effect of risk attitude (preferences) from that of beliefs concerning the amount of money that will be offered to contestants in future rounds. This separate identification is possible by virtue of the fact that, at a certain stage of the game, beliefs are not relevant, and risk attitude is the sole determinant of choice. The rational expectations hypothesis is tested by comparing the estimated belief function with the ‘true’ offer function which is estimated extraneously using data on offers actually made to contestants. We find a close correspondence, leading us to accept the rational expectations hypothesis. The importance of belief formation is confirmed by the estimation of a mixture model which establishes that the vast majority of contestants are forward looking as opposed to myopic.     

The Glocalization of Responsible Investment: Contextualization Work in France and Québec

This study investigates the institutional work that underlies the diffusion of responsible investment (RI) and enhances its adaptation to local settings. Building on institutional theory and actor–network theory, we advance the concept of contextualization work to describe the institutional work that sustains RI glocalization. Empirical data from two case studies highlight how entrepreneurial actors imported the notion of RI from the US to France and Québec. Our findings uncover three types of contextualization work—filtering, repurposing, and coupling—that sustain RI glocalization, and show how actors employed them in both settings to overcome the lack of technical, cultural, or political fit between the imported practice and their local context. Our results explain how divergent glocalized versions of RI are developed and adapted through contextualization work. Last, we discuss how our repertoire of contextualization work can account for local forms of a global concept and the uneven pattern of its diffusion.     

Marketing “Frankenfood”

ABSTRACT

Most visual package research in marketing to date tests only the main effects of certain visual package elements in artificially isolated experimental contexts, though, in the store, these elements are presented to the shopper in active visual circumstances. Most food packages are highly cluttered with a number of visual and text elements all competing for the shopper's limited attention; this calls into question the external validity, and therefore the usability for practitioner purposes, of these results. Given that marketers often rely on a single visual element as the sole carrier of some particular promotional message, it is critical to ascertain whether single visual elements can break through such visual clutter to effectively deliver their promotional messages to the shopper. In this study, we manipulate the level of background activity of packages while testing the ability of one visual package element—its overall shape—to affect one particular piece of package information of concern to food shoppers— appearance of size or volume. Surprisingly, our results show that the main effect of package shape type on volume perception not only remains robust under visually cluttered conditions, but that the effect is actually heightened for certain, more geometrically complex package shape types. Managerial implications are discussed.     

New Evidence on the Politics and Economics of Multiparty Cabinets Duration

A Proportional Hazards Specification for cabinet duration data is estimated by mean of a flexible parametric approach. The hazard rate is found to be significantly affected by the majority status, the degree of fragmentation and ideological homogeneity of the coalition, the stability and the polarisation of the legislature and the time horizon at the moment of cabinet formation. Interesting innovative results concern the higher stability of cabinets supported by coalitions ideologically closer to the median party and/or left–oriented. The overall state of the economy also has a role. Graphical evidence suggests that the underlying distribution of duration data might be a Gompertz distribution.     

Capital Requirements in a Financially Driven Business Cycle Model

We consider a simple overlapping generations economy where, because of asymmetric information and limited liability both in the loan and the deposits markets, firms have the incentive to undertake less efficient investment projects, while intermediaries have the incentive to monitor a smaller number of firms. Because of the positive relationship between the deposit interest rate and the level of monitoring, the lending activity of intermediaries may cause endogenous fluctuations in the level of economic activity.
In this economy, a higher capital requirement, introduced to render deposit contracts incentive compatible, implies a higher steady state stock of capital, fewer bankruptcies among intermediaries and smaller fluctuations in the level of economic activity.
(J.E.L. E32, D82, G28)     

Unexpected Inflation,Capital Structure,and Real Risk‐adjusted Firm Performance

Managers can improve real risk‐adjusted firm performance by matching nominal assets with nominal liabilities, thereby reducing the sensitivity of real risk‐adjusted returns to unexpected inflation. The net asset value of US equity real estate investment trusts (REITs) serves as a good proxy for nominal assets and, accordingly, we use a sample of US REITs to test our hypothesis. We find that for the firms in our sample: (i) their real risk‐adjusted performance, and (ii) their inflation‐hedging qualities are inversely related to deviations from this ‘matching‐nominals’ argument. In addition to providing managers with a vehicle to maximize real risk‐adjusted performance, our findings also provide investors with the tools to infer inflation‐hedging qualities of equity investments.     

Parents’ Use of Subsidiaries to “Push Down” Earnings Management: Evidence from Italy

We find evidence consistent with Italian nonlisted subsidiaries engaging in accrual and real earnings management, so that their listed parents can meet or beat benchmarks. Thus, the parent firm drives the earnings management of the subsidiaries. We identify parents that are more likely to have managed earnings as the ones that avoid a small loss or meet or beat analyst forecast by a few cents. Cross‐sectional analysis reveals that Big 4 auditors mitigate accrual earnings management at the subsidiary level and that family‐owned firms use earnings management through nonlisted subsidiaries mainly to avoid reporting losses. Finally, we find that parent firms communicate earnings management strategies to their subsidiaries using board proximity. Our evidence shows that business groups manage earnings differently from single firms, pushing earnings management down to subsidiaries. It also supports the monitoring role of Big 4 auditors in a business group setting and contributes to understanding financial reporting decisions in family‐owned firms.