ORGANIZATIONAL CONTEXT AND THE INTERPRETATION OF STRATEGIC ISSUES: A NOTE ON CEOS’ INTERPRETATIONS OF FOREIGN INVESTMENT*

This paper explores the relationship between organizational context and the interpretation of strategic issues by examining the hypothesis that CEOs' interpretations of foreign investment in the USA are influenced by the organizational context in which they are embedded. Three aspects of organizational context - the global business experience of the firm; the firm's level of organizational inertia (as represented by firm age and size); and the resources available for responding - are examined as predictors of CEOs' perceptions of foreign investment as a threat or an opportunity. Analysis of data from 320 organizations, controlled by industry, shows that global business experience, firm size, and perceived capability are significant predictors of the perception of threat and opportunity. the discussion addresses the implications of these findings for future research on issue interpretation and organizational context.     

Explaining the Cross‐Section of Stock Returns in Japan: Factors or Characteristics?

Japanese stock returns are even more closely related to their book-to-market ratios than are their U.S. counterparts, and thus provide a good setting for testing whether the return premia associated with these characteristics arise because the characteristics are proxies for covariance with priced factors. Our tests, which replicate the Daniel and Titman (1997) tests on a Japanese sample, reject the Fama and French (1993) three-factor model, but fail to reject the characteristic model.     

Choice of utility function form: its effect on classification of risk preferences and the prediction of farmer decisions

In applications of expected utility analysis, researchers are confronted with a choice among several utility functional forms. Subjective utility values and probability distributions for price and yield were elicited from Sri Lankan producers of minor export crops. Exponential quadratic and cubic utility functions were estimated. The choice of functional form was found to affect both the classification of risk attitudes and the prediction of harvesting strategy. The exponential function was the best predictor of harvesting strategy because it was the best predictor of mature harvesting. All three functions were equally poor predictors of premature harvesting.     

Interannual Climate Variation, Climate Prediction, and Agricultural Trade: the Costs of Surprise versus Variability

Agriculture remains sensitive to variation in rainfall and temperature. Fortunately, our ability to predict the lower frequency variation in the earth's atmosphere is increasing rapidly. While information cannot affect the underlying source of variability, it allows unexpected shocks to be anticipated and acted upon. This paper develops and analyzes an intertemporal Ricardian trade model with Bayesian beliefs. Results in this paper show that improved climate prediction reduces expected prices, but increases price variability. In addition, trade is crucial to realizing the potential benefits of climate prediction. The value of climate prediction is highest with both storage and trade, and falls by over 300% when a country is in autarky.     

Does Hedging Affect Firm Value? Evidence from the US Airline Industry

Does hedging add value to the firm, and if so, is the source of the added value consistent with hedging theory? We investigate jet fuel hedging behavior of firms in the US airline industry during 1992–2003 to examine whether such hedging is a source of value for these companies. We illustrate that the investment and financing climate in the airline industry conforms well to the theoretical framework of Froot, Scharfstein, and Stein (1993). In general, airline industry investment opportunities correlate positively with jet fuel costs, while higher fuel costs are consistent with lower cash flow. Given that jet fuel costs are hedgeable, airlines with a desire for expansion may find value in hedging future purchases of jet fuel. Our results show that jet fuel hedging is positively related to airline firm value. The coefficients on the hedging variables in our regression analysis suggest that the “hedging premium” is greater than the 5% documented in Allayannis and Weston (2001), and might be as large as 10%. We find that the positive relation between hedging and value increases in capital investment, and that most of the hedging premium is attributable to the interaction of hedging with investment. This result is consistent with the assertion that the principal benefit of jet fuel hedging by airlines comes from reduction of underinvestment costs.     

Mapping the motivations and intentions of technology orientated entrepreneurs

The role of entrepreneurs in stimulating growth in the small business economy has received significant interest in the last three decades. This growing interest is prompted, in part, by the government’s assumption that the establishment and expansion of existing small firms could be greatly enhanced by the promotion of entrepreneurial education programmes in colleges and universities. Whilst there has been significant interest in the role, type and effect of entrepreneurs in the economy, few studies have examined the effect of entrepreneurial programmes on the progression of an idea through to commercialisation. This is because such research, whilst seemingly desirable, is problematic. Evidence can be gleaned through the development of suitable conceptual frameworks and methods, to assess the role and impact of entrepreneurial programmes on the commercialisation of products or processes, and the enhancement of entrepreneurial capabilities. To address this problem, the research will examine different approaches and frameworks that have been developed and applied hitherto. The objective of this will be to highlight the difficulties in assessing the motivations, cognitive and behavioural changes of entrepreneurs. Also, the research will demonstrate the need to undertake adequate controls, which illustrate possible improvement in entrepreneurial capabilities, networks, and credibility in comparison to students that embarked on courses without entrepreneurial elements. The process will confine itself to business development within the higher education (HEI) context. The MSEC has as its remit to provide opportunity, education, awareness and training to foster entrepreneurship within science and engineering departments across four universities in Greater Manchester. This setting will provide a unique situation in which to investigate the development of germinal technology businesses from the inception of an idea to the point of incubation, prototype development and investment. There is a requirement to understand the needs of the virgin entrepreneur, possible obstacles to commercialisation and the process of new venture creation. The methodology to be adopted has been identified, and forges new ground on combining positivist and phenomenological paradigms. The multi–paradigm approach supports the use of critical incident technique to reveal greater insights in to the personal and cognitive development of virginal entrepreneurs, the suitability of enterprise programmes to act as catalysts for venture creation, and their role in supporting technology transfer. The research will not only confine itself to examining undergraduate and postgraduate projects within MSEC’s business creation unit, but will also continue to assess the experience of entrepreneurs’ when they leave the programme. The research also documents the economic contribution of the programme, in terms of generation of new technology–based firms and the impact of entrepreneurs joining established small firms. Ultimately the aim is to build a long–term picture of the role of enterprise programmes in HEIs that will inform policy and practice.