Does Corporate Diversification Destroy Value?

We analyze several hundred firms that expand via acquisition and/or increase their number of business segments. The combined market reaction to acquisition announcements is positive but acquiring firm excess values decline after the diversifying event. Much of the excess value reduction occurs because our sample firms acquire already discounted business units, and not because diversifying destroys value. This implies that the standard assumption that conglomerate divisions can be benchmarked to typical stand-alone firms should be carefully reconsidered. We also show that excess value does not decline when firms increase their number of business segments because of pure reporting changes.     

A Management Capacity Constraint? Obstacles to the Development of the Overseas Chinese Family Business

Overseas Chinese family business (OCFBs) have gained a reputation for cost efficiency, responsiveness, and flexibility as original equipment manufacturers (OEMs) and as pioneers of the mainland's industrialization. This success is based upon a relatively simple ‘personally managed’ organization operating within a network of kin and ethnic relations. To what extent are mid-sized OCFBs now able to develop the capacity to compete in new strategic domains and manage more complex value chains? The paper examines competing views of the OCFBs organizational and competitive capabilities. The strategies of 50 mid-sized Hong Kong based manufacturing firms are used to provide insight into the questions of capabilities upgrading and long-term competitiveness in personally managed enterprises. In contrast to prevailing cultural and institutional accounts of OCFB behavior, the paper suggests that current (western) theory of the family firm and of organizational networks provides an alternative explanation of observed investment strategies and organizational structure.     

Combining Matching and Nonparametric Instrumental Variable Estimation: Theory and An Application to the Evaluation of Active Labour Market Policies

We show how instrumental variable and matching estimators can be combined in order to identify a broader array of treatment effects. Instrumental variable (IV) estimators are known to estimate effects only for the compliers, representing a subset of the entire population. By combining IV with matching, we can estimate the treatment effects for the always‐ and never‐takers as well. Since in many cases these groups are the (endogenous) outcome of some assignment process, such estimates also help in judging the implications of such a selection process. In our application to the effects of participation in active labour market programmes in Switzerland, we find large and lasting positive employment effects for the compliers, whereas the effects for the always‐ and never‐participants are small. In addition, the compliers have worse employment outcomes without treatment than those who participate in the programme with or without the intervention under investigation. This suggests that the earlier assignment policy of the caseworkers was inefficient in that the always‐participants were neither those unemployed who would experience the highest expected treatment effects nor those unemployed who had the largest need for assistance. Copyright © 2014 John Wiley & Sons, Ltd.     

It is not just about paying your dues: Impact of generational cohort on active and passive union participation

The lack of a validated measure of active–passive union participation and a dearth of research into the relationship between generational cohort and union participation challenge union leaders to develop policies and practices to facilitate union renewal. We address these issues by (a) developing a multidimensional measure of union participation that captures both active and passive components, (b) using structural equation modelling to validate the measure within a nomological framework, and (c) investigating the impact of generational cohort on all paths in our framework. Data from members of a large American union confirm that generational cohort influences how union members participate in their union. The two‐factor measure developed in this study facilitates research into antecedents and outcomes of passive and active union participation. Our findings should also prove useful to unions seeking to increase participation within their membership, academics researching unions and generational cohort, and human resource practitioners operating in unionised environments.     

Baylor University Roundtable on The Corporate Mission, CEO Pay, and Improving the Dialogue with Investors

A small group of academics and practitioners discusses four major controversies in the theory and practice of corporate finance:

• • What is the social purpose of the public corporation? Should corporate managements aim to maximize the profitability and value of their companies, or should they instead try to balance the interests of their shareholders against those of “stakeholder” groups, such as employees, customers, and local communities?
• • Should corporate executives consider ending the common practice of earnings guidance? Are there other ways of shifting the focus of the public dialogue between management and investors away from near-term earnings and toward longer-run corporate strategies, policies, and goals? And can companies influence the kinds of investors who buy their shares?
• • Are U.S. CEOs overpaid? What role have equity ownership and financial incentives played in the past performance of U.S. companies? And are there ways of improving the design of U.S. executive pay?
• • Can the principles of corporate governance and financial management at the core of the private equity model—notably, equity incentives, high leverage, and active participation by large investors—be used to increase the values of U.S. public companies?

     

Services,industry evolution,and the competitive strategies of product firms

Services of different types have become increasingly important for product firms. While these firms mainly focus on products, managers and researchers lack a comprehensive framework to understand when to make significant investments in particular kinds of services. We identify three categories of product‐related services from a product firm—smoothing and adapting services, which complement products, and substitution services, which enable customers to pay for the use of a product without buying the product itself. We develop propositions about the relative level of these different kinds of services vis‐a‐vis industry evolution, as well as suggest how these services affect industry structure. We draw upon various literatures, though we conclude that the relationship between products and services is more complex and richer than any one literature suggests. Copyright © 2014 John Wiley & Sons, Ltd.     

Institutional Resilience in a Changing World Economy? The Case of the German Bankking and Chemical Industries

This paper examines whether there has been a transformation towards company-specific and unitarist industrial relations in Germany. On the basis of 25 case studies of employment practices in German and foreign-owned banks and chemical firms as well as industry data, the research found that the German system has so far remained relatively stable. Companies in the two industries studied generally still comply with the labour market institutions of multi-employer collective bargaining, workplace representation and initial vocational training. Pressures have been accommodated by changes within the system rather than by a radical change of the system.