What Makes a Family Firm Innovative? CEO Risk‐Taking Propensity and the Organizational Context of Family Firms

Investigating the new product portfolio innovativeness of family firms connects two important topics that have recently received considerable attention in innovation and family firm research. First, new product portfolio innovativeness has been identified as a critical determinant of firm performance. Second, research on family firms has focused on the questions of if and why family firms are more or less innovative than other organizational forms. Research investigating the innovativeness of family firms has often applied a risk‐oriented perspective by identifying socioemotional wealth (SEW) as the main reference that determines firm behavior. Thus, prior research has mainly focused on the organizational context to predict innovation‐related family firm behavior and neglected the impact of preferences and the behavior of the chief executive officer (CEO), which have both been shown to affect firm outcomes. Hence, this study aims to extend the previous research by introducing the CEO's disposition to organizational context variables to explain the new product portfolio innovativeness of small and medium‐sized family firms. Specifically, this study explores how the organizational context (i.e., ownership by top management team [TMT] family members and generation in charge of the family firm) of family firms interacts with CEO risk‐taking propensity to affect new product portfolio innovativeness. Using a sample of 114 German CEOs of small and medium‐sized family firms operating in manufacturing industries, the results show that CEO risk‐taking propensity has a positive effect on new product portfolio innovativeness. Moreover, the analyses show that the organizational context of family firms impacts the relationship between CEO risk‐taking propensity and new product portfolio innovativeness. Specifically, the relationship between CEO risk‐taking propensity and new product portfolio innovativeness is weaker if levels of ownership by TMT family members are high (high SEW). Additionally, the effect of CEO risk‐taking propensity on new product portfolio innovativeness is stronger in family firms at earlier generational stages (high SEW). This result suggests that if SEW is a strong reference, family firm‐specific characteristics can affect individual dispositions and, in turn, the behaviors of executives. Therefore, this study helps extend the knowledge on the determinants of new product portfolio innovativeness of family firms by considering an individual CEO preference and the organizational context variables of family firms simultaneously.     

Intertemporal monopolistic pricing of non-durables

This paper provides a tractable analytical framework to study intertemporal equilibria between non-competitive supply and dynamic demand for non-durable goods. The basic hypothesis is that consumers enjoy utility from particular services rather than from commodities. Consumption of the non-durable good follows a dynamic pattern, because it depends on the stock of durables and energy demand provides the prototypical example, e.g., mobility, thermal comfort, etc. are the output of a combination of durable and non-durable goods. Indeed, turmoils in energy markets are to a great deal due to short run inflexibility and this gives this theoretical paper a topical flavour. The outcomes differ substantially across the strategic setups while differences in expectations (myopic versus rational) matter only transiently but not in the long run.      

Analysis of United States' Utility Conservation Programs

This paper reviews the United States' experience with utility sponsored energy conservation programs. Such programs are central to the recent discussions about electric utility regulation in the United States and elsewhere. First it is shown that these programs are exposed to three problems on the consumers' side – rebound, adverse selection and moral hazard – which lower the effectiveness of conservation incentives and impede in most practical cases a reliable quantification of the achieved conservation. Moreover, the utilities have under the regulatory practice an incentive to invest in conservation measures but to limit factual conservation through a proper design of the program. Reviewing the recent literature shows that these four crucial points, which affect many of the applied conservation programs, are either insufficiently covered (rebound and adverse selection) or neglected entirely (moral hazard and regulated utilities' interest in little conservation). We conclude, that this undertaking has resulted in insignificant conservation and doubt the adequacy of these programs to reduce external social costs from energy use.     

Stability and limit cycles in one-dimensional dynamic optimisations of competitive agents with a market externality

This paper considers low dimensional (more precisely, one state variable) dynamic optimisation problems of competitive agents. These individual decisions lead to a dynamic externality for the evolution of the system. However, the impact of an individual and competitive agent is negligible and thus each agent considers this evolution as exogenous data. This leads, assuming rational expectations (perfect foresight due to the deterministic set up), to motions in the three dimensional space of state, costate and externality. Considering the fact that such externalities are widespread, e.g., R&D in the literature on new growth theory, pollution in environmental economics, etc., the incorporation of such externalities due to competitive markets is important, yet this incorporation may alter the stability of the system. Indeed, complex policies such as stable limit cycles are sustainable in such a low-dimensional economy, even for a separable and strictly concave model.     

Dynamic demand and noncompetitive pricing strategies

This paper studies optimal noncompetitive pricing strategies when the evolution of demand is the result of intertemporal considerations. Two different hypotheses of price expectations (myopia and perfect foresight) are treated. The major implication is that the slight modification from an instantaneous to a very fast consumer reaction may completely modify a monopolist's price strategy. More precisely, the price strategy should be volatile if the equilibrium demand is convex, independent whether the consumers act myopically or employ rational expectations. On the other hand, asynchronous dynamics (e.g., due to competitive fringe supply or different segments of demand) cannot explain even damped price oscillations. The equilibrium price strategy of the noncompetitive supplier exceeds the static rule if consumers employ myopic expectations; rational expectations may lead to prices above or below the static rule depending on the rate of discount.I am grateful for the helpful and elaborate comments from three anonymous referees.     

Politico-economic cycles of regulation and deregulation

This paper considers politico-economic cycles that do not depend on the exogenous electoral cycles. More precisely, the paper develops a positive model of intertemporal subsidy strategies for an authoritarian and dynastic government. It will be shown — applying the Hopf bifurcation theorem — that cyclical strategies, i.e. waves of regulation, populism alternating with deregulation, cuts in social programmes, etc., may be optimal.     

INFORMED TRADING RISK AND BID-ASK SPREAD CHANGES AROUND OPEN MARKET STOCK REPURCHASES IN THE NASDAQ MARKET

Microstructure theory contends that dealers' bid-ask spreads should vary intertemporally with changes in the asymmetric information component of the spread. Corporate theory suggests that stock repurchase announcements signal management's private information to the securities markets. An examination of dealers' spread behavior around firms' open market repurchases in the NASDAQ market reveals a decline in spreads adjusted for dealers' inventory-holding and order-processing costs. This decline is attributed to a reduction in informed trading risk associated with the open market repurchase announcements.