Authority and Incentives in Organizations

I consider a corporation that consists of an owner, a manager, and two divisions. There exist externalities between the divisions: if a division behaves cooperatively, its success will increase the performance of the other division. The owner creates monetary effort incentives and allocates decision authority over the divisions. I characterize how externalities and benefits of control determine the corporation's optimal organization. The introduction of endogenous incentives changes the major findings of the existing literature, because then concentrated delegation of authority over both divisions to one of the division heads will be optimal if cooperation is important and divisions are difficult to incentivize.     

War for talents—How perceived organizational innovativeness affects employer attractiveness

Recruiting high potentials is the foundation for creating knowledge, innovation and competitive advantages. Unfortunately, many companies face the problem of having a hard time recruiting high potentials in a tightening labor market. To secure future innovation, growth and competitiveness companies must be attractive for potential employees. Within this respect, past research suggests that innovative companies might be at an advantage as they appear more attractive to employees in general and to those with an innovative personality in specific. Hence, HR communication might use an organization's innovativeness within employer branding to attract high potentials. However, current literature falls short to provide empirical evidence on whether and how the communication of organizational innovativeness affects employer attractiveness and especially attracts innovative employees. The results of our scenario-based experiment (n = 322) show that organizations with an innovative product portfolio and a strong innovation culture appear more attractive to potential employees. These effects turned out to be even stronger for employees which are highly innovative as they care a great deal about the organizational innovativeness of the company they work for. Thus, our findings suggest that communicating organizational innovativeness within employer branding is an effective measure not only to improve employer perceptions in general, but also to attract innovative employees.     

Zillmerung und Rückkaufswert – ein kritischer Blick auf die rechtliche Bewertung

This article discusses the legal and economic correlation between the Zillmer-method and the surrender values in life insurance. The aim of this paper is to present the actuarial foundation as well as the economic needs in order to analyze critically in this context the discussion about the actual legal discussion with regard to consumer protection. As a first step the Zillmer-method, its functioning and the resulting economic benefits and consequences are presented. Subsequently, the surrender value and its historical development are studied to analyze the relationship between the Zillmer-method and surrender values. It also addresses the jurisprudence of the two High Courts, BGH and BVerfG, which manifests itself in recent years increasingly critical with regard to the Zillmer-method and surrender values. The paper results in the conclusion that it should be distinguished legally between the Zillmer-method and the surrender values more consequently than before since deregulation took place in 1994. In this respect the judgments cited require a critical evaluation. In a final step it is questioned whether the minimum guaranteed surrender values according to German law might be against European law.     

A contemporary justice perspective on dual ladders for R&D professionals

Research and development (R&D) professionals play a key role in companies' innovation performance. Whereas prior research has indicated the potential benefits of dual ladder career systems to retain and motivate R&D professionals, there is a lack of knowledge regarding the design properties of dual ladders that facilitate such positive effects. The purpose of this study is to address this research gap by exploring how organizations can design dual ladders to enhance R&D professionals' organizational commitment and career satisfaction. Drawing on contemporary justice theory, we point to two factors integral for the successful application of dual ladders: the perceived equality of the technical ladder and the transparency of the dual ladder. These factors are related to R&D professionals' organizational commitment and career satisfaction. Furthermore, this study investigates whether these relationships are moderated by R&D professionals' age and self‐directedness in career management as well as firm size. The hypotheses are tested in a cross‐level study with 9 heads of R&D departments, 32 human resource managers, and 382 R&D professionals from 32 organizations. Based on the analyses, this study finds positive relationships between the perceived equality and the transparency of the dual ladder with R&D professionals' organizational commitment and career satisfaction. In addition, the findings show that the effects of the perceived equality of the technical ladder on R&D professionals' career satisfaction are weaker at high levels of self‐directed career management. The study contributes by developing theory on the consequences of dual ladders' design properties and moderating influences thereon. Thus, this research has implications for the literature on innovation management by expanding the knowledge on the interplay between career management and the human side of innovation.     

Price dynamics in the Belarusian black market for foreign exchange

Using unique data from an internet-based foreign-exchange trading platform, we show that the black market efficiently incorporated public information on the state of the Belarusian economy during the Balance of Payments crisis of 2011. Between May and October 2011, the government repeatedly devalued the Belarusian ruble and eventually abandoned its fixed exchange rate regime. Measures derived from black market transaction data have significant predictive power for these devaluations. The significance of these black market measures survives even when we include standard macroeconomic indicators in our forecasting model. In line with standard economic theory, activity in the black market has dried up subsequently.     

Financial systems in financial crisis — An analysis of banking systems in the EU

This Forum aims to systematically describe and analyse the evolution of national financial systems within the EU over the past three decades. It analyses the processes of financialisation that have dominated this period as well as the causes and consequences of the financial crisis from the perspectives of five individual member states — Germany, France, the UK, Italy and Spain. Furthermore, policy proposals which could change the role of the financial system to better serve economic and social objectives are also put forward.     

When is Lift-Off? Evaluating Forward Guidance from the Shadow

We examine the record of the CD Howe’s shadow Monetary Policy Council (SMPC) in Canada. We report a considerable diversity of opinion about the recommended future path of interest rates inside the SMPC. During the period of Bank of Canada forward guidance, market determined forward rates diverge considerably from the recommendations implied by the SMPC. Nevertheless, there is little evidence that the Bank of Canada and the SMPC coordinate their future views about the interest rate path. Finally, changes in views about future changes in policy rates for horizons beyond the next two interest rate decisions are difficult to explain. Our findings imply that there remain challenges in understanding the evolution of future interest rate paths over time. We conclude with some policy implications.     

Local underwriter oligopolies and IPO underpricing

We develop a theory of initial public offering (IPO) underpricing based on differentiated underwriting services and localized competition. Even though a large number of investment banks compete for IPOs, if issuers care about non-price dimensions of underwriting, then the industry structure is best characterized as a series of local oligopolies. We test our model implications on all-star analyst coverage, industry expertise, and other non-price dimensions. Furthermore, we posit that venture capitalists (VCs) are especially focused on all-star analyst coverage, and develop the analyst lust theory of the underpricing of VC-backed IPOs. Consistent with this theory, we find that VC-backed IPOs are much more underpriced when they have coverage from an all-star analyst.