The Positive Effect of Motivation and International Orientation on SME Growth

This empirical study on small and medium‐sized enterprise growth investigates the relationship between motivation for growth, international orientation, and subsequent performance by following 247 firms over 11 years. Using a combination of regression analysis and structural equation modeling, the authors find the international orientation of the firm to be a consistent predictor of growth in revenue and exports. The authors also find the international orientation of the firm to be closely interrelated with motivation for growth: Firms with managers and owners having a strong motivation for growth tend also to have managers with high international orientation and display superior growth both domestically and abroad. Whereas motivation seems independent of past performance, it has a profound positive influence on the growth in revenue. Moreover, the findings reveal that some firms are able to sustain high growth rates over an extended period of time. The study supports the contention that some firms are able to systematically outperform the rest.     

Non-parametric and parametric bootstrap techniques for age-to-age development factor methods in stochastic claims reserving

In the literature, one of the main objects of stochastic claims reserving is to find models underlying the chain-ladder method in order to analyze the variability of the outstanding claims, either analytically or by bootstrapping. In bootstrapping these models are used to find a full predictive distribution of the claims reserve, even though there is a long tradition of actuaries calculating the reserve estimate according to more complex algorithms than the chain-ladder, without explicit reference to an underlying model. In this paper we investigate existing bootstrap techniques and suggest two alternative bootstrap procedures, one non-parametric and one parametric, by which the predictive distribution of the claims reserve can be found for other age-to-age development factor methods than the chain-ladder, using some rather mild model assumptions. For illustration, the procedures are applied to three different development triangles.     

The Rise of Individual Performance Pay

Existing empirical evidence suggests that individual performance pay is more prevalent in human‐capital‐intensive industries. We introduce a model that can contribute to explain this. In a repeated game model of relational contracting, we analyze the conditions for implementing peer‐dependent incentive regimes when agents possess indispensable human capital. We show that the larger the share of values that the agents can hold up, the lower is the implementable degree of peer‐dependent incentives. In a setting with complementary tasks, we show that although team‐based incentives are optimal if agents are dispensable, it may be costly, and, in fact, suboptimal, to provide team incentives when the agents become indispensable.     

Different Problem,Same Solution: Contract‐Specialization in Venture Capital

Real‐world financial contracts vary greatly in the combinations of cash flow contingency terms and control rights used. Extant theoretical work explains such variation by arguing that each investor finely tailors contracts to mitigate investment‐specific incentive problems. We provide overwhelming evidence from 4,561 venture capital (VC) contracts that this tailoring is overstated: even though there is broad variation in contracting across VCs, each individual VC tends to specialize, recycling familiar terms. In fact, a VC typically restricts contracting choices to a small set of alternatives: 46% of the time, a VC uses the same exact cash flow contingencies as in one of her previous five contracts. We document specialization in both aggregated downside protection, and in each individual cash flow contingency term. Such specialization remains economically and statistically significant even after controlling for VC and company characteristics. We also find that VCs learn to use new contractual solutions from other VCs in her syndication network. Our findings challenge the traditional premise that each investor selects from the universe of combinations of terms to match an investment's unique contracting problem. Rather, the cumulative evidence indicates that contract‐specialization arises because investors better understand payoff consequences of familiar terms, and are reluctant to experiment with unknown combinations.     

In search of corporate governance in franchising

Abstract

A firm’s governance structure and business model might explain the firm’s failure or success. Franchising is a business model that has not received much attention within the corporate governance (CG) literature even though it obviously brings several unique CG challenges. Therefore, we review articles at the interface of CG and franchising. We identify and thematize the literature in four focus areas, each with a different relationship to CG: 1) traditional CG, 2) governance challenges unique to franchising, 3) governance modes, and 4) contracts. We find that the literature largely ignores the traditional view of CG when examining many aspects of franchising. We also find that the franchising literature covers governance topics when discussing governance modes, which provides a basis for developing CG theories. Altogether, our findings open a promising avenue for future research that incorporates CG into studies of franchising.     

DO STRATEGY AND MANAGEMENT MATTER IN MUNICIPAL ORGANISATIONS?

In Sweden, a large share of public services are organised, produced and delivered by municipalities, large and small, rich and poor. Contextual conditions (size and location) and economic conditions (efficiency and wealth) differ considerably among these service‐providing organisations. The question raised in this paper is whether a municipality's economic situation is a direct consequence of the contextual situation or the organisation's strategy and management – that is: Do strategy and management matter? Our analysis rests on a resource‐based view of organisation strategy. Both quantitative and qualitative observations have been made. First, cost savings data from 50 municipalities were examined for patterns and relationships between contextual and economic conditions. Second, about 100 representatives – municipal executive board members and leading officials – from 20 municipalities with different characteristics were interviewed. In this paper we outline an analytical framework and propose that sound and sustainable provision of municipal service depends on whether organisational decision‐making is in harmony with work methods and objectives. The results indicate that strategy and management do matter. Among the municipalities included in our study, we identify four prevalent basic strategies. Strategy tends to coincide with the economic situation rather than the contextual situation. A low‐performing municipality tends to have a predominantly outward orientation in its decision‐making, whereas a higher‐performing municipality makes decisions with both inward and outward orientation.     

Pricing catastrophe risk in life (re)insurance

What is the catastrophe risk a life insurance company faces? What is the correct price of a catastrophe cover? During a review of the current standard model, due to Strickler, we found that this model has some serious shortcomings. We therefore present a new model for the pricing of catastrophe excess of loss cover (Cat XL). The new model for annual claim cost C is based on a compound Poisson process of catastrophe costs. To evaluate the distribution of the cost of each catastrophe, we use the Peaks Over Threshold model for the total number of lost lives in each catastrophe and the beta binomial model for the proportion of these corresponding to customers of the insurance company. To be able to estimate the parameters of the model, international and Swedish data were collected and compiled, listing accidents claiming at least twenty and four lives, respectively. Fitting the new model to data, we find the fit to be good. Finally we give the price of a Cat XL contract and perform a sensitivity analysis of how some of the parameters affect the expected value and standard deviation of the cost and thus the price.     

Externalization of employees: thinking about going somewhere else

Externalization of employment relations was a general trend among businesses in the 1990s. As a consequence we observe an increasing use of temporary workers, outsourcing and insourcing. This paper is concerned with the consequences of externalization of employment relations from the perspective of employees. The paper is based on an in-depth empirical study of a corporate adjustment programme in a large government-owned energy producer in Sweden. The company is trying to stimulate internal mobility by means of training programmes, adjusting its workforce to changes in market demand without lay-offs. I argue that externalization of employment relations is not only a matter of temporary, administrative or geographical distance between employer and employee. Instead a complementary form - externalization of responsibility - is suggested. The results may have consequences for the understanding of human resource policies aiming at employability.     

An empirical model for durations in stocks

This paper considers an extension of the univariate autoregressive conditional duration model to which durations from a second stock are added. The model is empirically used to study duration dependence in four traded stocks, Nordea, Föreningssparbanken, Handelsbanken and SEB A on the Stockholm Stock Exchange. The stocks are all active in the banking sector. It is found that including durations from a second stock may add explanatory power to the univariate model. We also find that spread changes have significant effect for all series.     

Whistleblowing: a critical philosophical analysis of the component moral decisions of the act and some new perspectives on its moral significance

Discussions of whistleblowing whether in academic literature or in more popular media have tended to very one‐sided assessments of the moral worth of the act. Indeed, much of the current literature concentrates on psychological or managerial aspects of whistleblowing while taking for granted this or that moral position or eschewing any normative commitment on the question. The purpose of this article is firstly to reemphasise the importance and complexity of the normative foundations of whistleblowing acts; and secondly, through a moral philosophical analysis of the component decisions that make up any act of whistleblowing, to contribute to a more balanced and less polarised treatment of the topic. It is argued that the polarisation of views on the topic is in part due to a failure to decompose the act of whistleblowing into a number of inevitable component moral decisions leading up to the act. It is furthermore argued on the basis of the analysis that it is impossible to state a priori as a matter of general principle that whistleblowing is always morally right (a good act) or morally wrong (a bad act). The article will close with a reflection on the degree to which the weighing up of good and bad in the act of whistleblowing differs sharply among cultures; and with a conjecture as to a possible relation to a people's history which may serve as a pointer to interesting future empirical research on the topic.