The creation of company cultures: The role of stories and human resource systems

This article shows how informally told stories and human resource systems help create strong company cultures which can support a corporate strategy. It explains why stories are so powerful in creating company culture. It also suggests how managers can deal with negative stories and encourage the telling of positive stories both through their personal behavior and through the human resource systems they manage.     

Distinguishing the Source of Market Power

Structural models used to measure market power, though widely employed, continue to be criticized. We compare alternative market power tests, including nonparametric and Solow residual-based (SRB) tests. We develop SRB methods that permit nested testing for both monopolistic and monopsonistic market power by the same firm. These tests and a set of nonparametric tests are implemented to examine market power exertion by U.S. cigarette manufacturers from 1977 to 1993. All tests indicate that cigarette manufacturers exerted monopsonistic power in the upstream tobacco market. They are mixed on whether monopolistic power exertion was exerted in the downstream market.     

Seasonal Migration and Improving Living Standards in Vietnam

We use panel data methods to explore whether households in Vietnam used seasonal migration to increase their living standards during the 1990s. Using per capita expenditures as our primary measure of living standards and historical and latent network variables as instruments for migration, we can attribute 5.2 percentage points of annualized expenditure growth to increased migration. The results are robust to several alternative measures of living standards. As the estimates suggest migration accounts for a 3 percentage point decrease in the poverty headcount, we conclude migration played an important role in the improvement of living standards observed in Vietnam.     

Predicting Spatial Patterns of House Prices Using LPR and Bayesian Smoothing

This article is motivated by the limited ability of standard hedonic price equations to deal with spatial variation in house prices. Spatial patterns of house prices can be viewed as the sum of many causal factors: Access to the central business district is associated with a house price gradient; access to decentralized employment subcenters causes more localized changes in house prices; in addition, neighborhood amenities (and disamenities) can cause house prices to change rapidly over relatively short distances. Spatial prediction (e.g., for an automated valuation system) requires models that can deal with all of these sources of spatial variation. We propose to accommodate these factors using a standard hedonic framework but incoporating a semiparametric model with structure in the residuals modeled with a partially Bayesian approach. The Bayesian framework enables us to provide complete inference in the form of a posterior distribution for each model parameter. Our model allows prediction at sampled or unsampled locations as well as prediction interval estimates. The nonparametric part of our model allows sufficient flexibility to find substantial spatial variation in house values. The parameters of the kriging model provide further insights into spatial patterns. Out–of–sample mean squared error and related statistics validate the proposed methods and justify their use for spatial prediction of house values.     

Disrupting the Disruptors or Enhancing Them? How Blockchain Reshapes Two-Sided Platforms

The importance of platform-based businesses in the modern economy is growing continuously and becoming increasingly relevant. Specifically, the deployment of digital technologies has enhanced the applicability of two-sided business models, enabling companies to act not just as builders and owners of assets, but also as orchestrators of external resources. Management research has, therefore, focused increasingly on the unique aspects of this model. At the center of a two-sided platform there is a platform provider that enables a transaction between the sides, reducing the relative transaction costs. However, in recent years, a new technology emerged that challenges some of the underlying assumptions of this model: the blockchain. Blockchain enables the creation of a peer-to-peer network that is able to authenticate transactions, upon which applications and services may be built. It allows users to conduct transactions without the need for a central platform. We explore how blockchain technology reshapes two-sided platforms, focusing in particular on the role of the platform provider. The research is based upon multiple case studies, using an inductive approach to explore this emerging phenomenon. Our findings show there is a significant shift in the role of the central player that links the two sides of a transaction using blockchain. We frame this as a shift from a “platform provider” to a “service provider,” leveraging the blockchain as a Platform-as-a-Service. Our work examines the peculiarities of this model, unveiling new dynamics in these businesses. Specifically, we show that different variables must be considered to classify two-sided platforms using blockchain. Furthermore, the essential characteristics of two-sided platforms must also be enlarged. For example, traditional platform theories emphasize the importance of cross-side network externalities in creating value. In blockchain-enabled platforms however, we show the use of “tokens” play a key role in creating different types of externalities between the two sides.     

Interest rate trees: extensions and applications

This paper provides extensions to existing procedures for representing one-factor no-arbitrage models of the short rate in the form of a tree. It allows a wide range of drift functions for the short rate to be used in conjunction with a wide range of volatility assumptions. It shows that, if the market price of risk is a function only of the short rate and time, a single tree with two sets of probabilities on branches can be used to represent rate moves in both the real-world and risk-neutral world. Examples are given to illustrate how the extensions can provide modelling flexibility when interest rates are negative.     

Reputational contagion and optimal regulatory forbearance

Existing studies suggest that systemic crises may arise because banks either hold correlated assets, or are connected by interbank lending. This paper shows that common regulation is also a conduit for interbank contagion. One bank's failure may undermine confidence in the banking regulator's competence, and, hence, in other banks chartered by the same regulator. As a result, depositors withdraw funds from otherwise unconnected banks. The optimal regulatory response to this behavior can be privately to exhibit forbearance to a failing bank. We show that regulatory transparency improves confidence ex ante but impedes regulators' ability to stem panics ex post.