Hidden costs of control: four repetitions and an extension

We report four repetitions of Falk and Kosfeld’s (Am. Econ. Rev. 96(5):1611–1630, 2006) low and medium control treatments with 476 subjects. Each repetition employs a sample drawn from a standard subject pool of students and demographics vary across samples. We largely confirm the existence of hidden costs of control but, contrary to the original study, hidden costs of control are usually not substantial enough to significantly undermine the effectiveness of economic incentives. Our subjects were asked, at the end of the experimental session, to complete a questionnaire in which they had to state their work motivation in hypothetical scenarios. Our questionnaires are identical to the ones administered in Falk and Kosfeld’s (Am. Econ. Rev. 96(5):1611–1630, 2006) questionnaire study. In contrast to the game play data, our questionnaire data are similar to those of the original questionnaire study. In an attempt to solve this puzzle, we report an extension with 228 subjects where performance-contingent earnings are absent i.e. both principals and agents are paid according to a flat participation fee. We observe that hidden costs significantly outweigh benefits of control under hypothetical incentives.     

Coping With Dependence: A Logistics Strategy Based on Interorganizational Learning for Managing Buyer–Supplier Relations

The rise of outsourcing has heightened interest in the role of logistics managers in coping with dependence in buyer–supplier relations. Buying firm dependence on a supplier potentially reduces supplier performance to expectations because the buying firm cannot leverage power to capture value in the relationship. Drawing from interorganizational learning theory, we advance a logistics strategy that consists of supplier cost analysis and supplier integration as a means to create value and thereby mitigate the negative effects of dependence. By facilitating the acquisition and use of knowledge, supplier cost analysis and supplier integration enable buying firms to identify improvement opportunities while engaging in collaborative supplier relations. Using survey responses from 222 buying firms, we find that while buyer dependence decreases the buyer's perceived supplier performance, supplier integration suppresses these negative effects. Furthermore, we show that supplier cost analysis is a valuable knowledge acquisition tool that logistics managers can use to enable supplier integration as a relational form of governance. As such, we provide new insights into interorganizational learning theory and suggest to logistics managers the important role supplier cost analysis plays in managing buyer–supplier relationships.     

Understanding Sustainability Innovations Through Positive Ethical Networks

In this paper, a positive organizational ethics (POE)-based framework is informed by the microfinance and socially responsible investing movements to capture the process of sustainable financial innovations. Both of these movements are uniquely characterized by the formation of positive ethical networks (PENs) to develop sustainability innovations in response to external crises. The crisis–PEN–innovation framework proposed makes four contributions to the POE literature: (1) positions corporate sustainability through a POE lens; (2) formalizes the PEN construction through POE theory; (3) proposes PENs are mobilized to respond to external crises; and (4) demonstrates how PENs facilitate sustainability innovations. The theoretical framework is tested using theory-guided process tracing in the sustainable banking sector to understand how sustainability innovations were realized. The findings are consistent with the crisis–PEN–innovation framework proposed.     

Spillover effects from unintended trials on attitude and behavior: Promoting new products through access-based services

Access-based services (ABS) provide an opportunity for brands to promote their new products by enabling (unintended) trials. However, the mechanisms and impact of consumer exposure to products in ABS and the subsequent potential spillover effects on both the brand and the product perception are largely unknown. Our hypotheses are derived from the information integration theory (IIT) and subsequently tested. Study 1 is a field study investigating an unintended trial moderated by involvement and positive experience. The results indicate the positive effects of the unintended trial on product and brand attitudes, brand purchase intention, and word of mouth. In line with IIT, these effects are more pronounced for positive trial experience, although in contrast to IIT, they are less pronounced for high-involvement consumers. While the results of Study 2, an online experiment, show substantial effects of both trials compared with nontrials, they also reveal that intended and unintended trials have a similar impact on attitude, but ABS experiences have a stronger positive impact on brand purchase intention. We thus recommend that brand managers promote not only new products but also their brands in unintended trials. This study fills a gap in current discussions about the trial effect(s) of ABS.     

An Incomplete Markets Explanation of the Uncovered Interest Rate Parity Puzzle

A large literature attributes failure of uncovered interest rate parity (UIP) to the existence of a time‐varying risk premium. This paper presents a mechanism in a simple two‐country two‐good endowment economy with incomplete markets that generates sizeable deviations from UIP. In a parameterization where international wealth effects are important, liquidity constraints on an internationally traded bond and agents’ strong resulting precautionary motives successfully generates a time‐varying risk premium: countries that have accumulated large outstanding external positions have, being closer to the constraints, stronger precautionary motives and their asset carries a risk premium.     

HRM systems between control and commitment: occurrence,characteristics and effects on HRM outcomes and firm performance

In the literature, it is often assumed that traditional, control‐oriented HRM systems are increasingly being replaced by commitment‐based HRM systems because the latter generally result in higher firm performance. However, an HRM system's effectiveness may depend on an organisation's external and internal context, and neither control nor commitment HR systems are without disadvantages. Thus, the empirical validity of this claim is not clear ex ante. This paper analyses the empirical diffusion and determinants of control and commitment HRM systems in Germany as well as their impact on HRM outcomes and firm performance. The findings indicate that between the two extreme forms of high‐control and high‐commitment HRM systems, there are two hybrid forms (long‐term‐oriented control system and regulated commitment system) that combine elements of both ‘pure’ systems. Commitment HRM systems outperform the high‐control HRM system concerning many HRM outcomes and firm performance measures. However, in direct comparison, the high and the regulated commitment HRM systems do not show substantially different outcomes, indicating that there is no one best way.     

The Effects of Personality Composition and Decision‐making Processes on Change Preferences of Self‐managing Teams

Team decision‐making on organizational and strategic changes is pervasive. Yet, little is known about determinants of teams' change preferences. We analyze how composition with respect to personality traits associated with (pro‐)active behavior (locus of control and type‐A/B behavior) influences self‐managing teams' preferences for the likelihood and magnitude of changes, and whether participative decision‐making and team monitoring as core features of group decision‐making counteract or reinforce change tendencies. Results from a business simulation with 42 teams largely support predictions. Stronger type‐A orientation increases the likelihood of (drastic) changes. Teams dominated by internal locus of control members are highly responsive to performance feedback in their change preferences. Participative decision‐making encourages, whereas team monitoring restricts tendencies towards extreme magnitudes. Copyright © 2011 John Wiley & Sons, Ltd.     

Stock market volatility around national elections

This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the country-specific component of index return variance can easily double during the week around an election, which shows that investors are surprised by the election outcome. Several factors, such as a narrow margin of victory, lack of compulsory voting laws, change in the political orientation of the government, or the failure to form a government with parliamentary majority significantly contribute to the magnitude of the election shock. Furthermore, some evidence is found that markets with short trading history exhibit stronger reaction. Our findings have important implications for the optimal strategies of institutional and individual investors who have direct or indirect exposure to volatility risk.