Alignment and Misalignment in Business Relationships

‘Alignment’ and ‘misalignment’ are terms commonly used both in strategy and in marketing. In B-to-B marketing, in particular, researchers investigated alignment/misalignment between customers and suppliers and recently discussed the effects of misalignment. Research in this field remains however fragmented. There is ambiguity about the objects to be aligned, the processes that characterize their change, the effects on the relationship development and the methods used to assess them. In general, the empirical research that has examined the two concepts in business relationships is limited.In this study we will develop a theoretical framework to assess alignments/misalignments in parties' interpretations of a problem and its solution for the customer, in order to address the following questions: How and why do alignment and misalignment change over time? When can misalignment be positive for the relationship development?We use data from a longitudinal study involving 84 customers and suppliers in the ICT Security Industry. The first finding is that there are no patterns in how alignment changes, but there is a slight tendency toward misalignment over time. Second, change in the alignment is mostly linked to parties' perceptions of the available resources and how these resources are combined, along with parties' interpretations of critical events. Finally, the research suggests that when parties are aware of misalignment, when misalignment is perceptual and when there are no external constraints to action, the effort to align practices produces positive effects, even when misalignment persists.     

Advertising non-premium products as if they were premium: The impact of advertising up on advertising elasticity and brand equity

Non-premium brands occasionally emulate their premium counterparts by using ads that emphasize premium characteristics such as superior performance and exclusivity. We define this practice as “advertising up” and develop hypotheses about its short- and long-term impact on advertising elasticity and brand equity respectively. We test the hypotheses in two large-scale empirical studies using a comprehensive dataset from the automotive industry that includes, among others, the content of 2317 television ads broadcast over a period of 45?months. The results indicate that advertising up increases (decreases) short-term advertising elasticity for non-premium products with a low (high) market share. The results also show that an intensive use of advertising up over time leads to long-term improvements (reductions) in brand equity for expensive (cheap) non-premium products. Furthermore, an inconsistent use of advertising up leads to reductions in brand equity. The results imply that managers of non-premium products with a low market share can use advertising up to increase advertising effectiveness in the short run. However, advertising up will only generate long-term improvements in brand equity for expensive non-premium products. Finally, to avoid long-term reductions in brand equity, advertising up should be consistently used over time.     

Recursive Moments of Compound Renewal Sums with Discounted Claims

Under regularity conditions, Le´veille´& Garrido [6] gives a derivation of the first two moments (resp. asymptotic) of a Compound Renewal Present Value Risk (CRPVR) process using renewal theory arguments. In this paper, with the same procedure and assuming that all the moments of the claim severity and the claims number process exist, we get recursive formulas for all the moments (resp. asymptotic) of the CRPVR process.     

Patricia Werhane and Alan Singer,Business Ethics in Theory and Practice

Teaching Business Ethics -     

Interest Rates Fluctuations and the Advantage of Long-Term Debt Financing: A Note on the Effect of the Tax-Timing Option

When interest rates fluctuate, issuing long-term debt may implicitly generate a valuable tax-timing option. The holder of long-term debt has an optimal-trading taxtiming option to immediately realize capital losses if an increase in interest rates lowers the price of the bond below the original issue price. In contrast, if interest rates decrease and the bond price is greater than the original issue price, the holder would prefer to defer the realization of capital gains. This tax-timing option confers an advantage for issuing long-term debt. Our formal presentation also highlights how the tax-timing options of long-term debt may increase the debt capacity of the firm.     

Reviews

Concepts and measurement of social exclusion. Room, G. (ed) 1995: BEYOND THE THRESHOLD: THE MEASUREMENT AND ANALYSIS OF SOCIAL EXCLUSION. Bristol, the Policy Press, £13.95.

Local job creation. European Commission 1995: LOCAL DEVELOPMENT AND EMPLOYMENT INITIATIVES: AN INVESTIGATION IN THE EUROPEAN UNION. Luxembourg: Office for Official Publications of the European Communities, Ecu 11.00, paper.

Local economic development. Blair, J. P. 1995: LOCAL ECONOMIC DEVELOPMENT: ANALYSIS AND PRACTICE. California: Sage, £44.95 cased.

The British economy in transition. Turner, R. (ed) 1995: THE BRITISH ECONOMY IN TRANSITION: FROM THE OLD TO THE NEW? London: Routledge, £14.95, paper.

Defence R and D. Hartley, K. and Newman, I. (eds) 1996: DEFENCE, RESEARCH & DEVELOPMENT AND DIVERSIFICATION. Harlow, Essex: South East Economic Development Strategy, £20.00 + £3.50 pp, paper.     

Italian economic dualism and convergence clubs at regional level

This paper gives a contribution to the debate on regional convergence by comparing the long run prediction of convergence clubs introduced by Quah (1996 and 1997) with the actual observed dynamics of the Italian regions during the period 1970–2004. To this end we analyze the evolution of per capita income levels for the Italian regions using a non-traditional (non-parametric) statistical model. In addition we segment the set of economies by the mean of hierarchical clustering methodologies and compare the trajectories of the regions by introducing different notions of distance. The general conclusion is that the average distance identifies a clear division between a high performance club consisting of regions from the Center North, and a low performance club composed by regions from the South and islands. The presence of a cluster composed by Center North regions is substantially confirmed by the distance correlation analysis, suggesting an homogeneous response to external shocks. By contrast Southern regions display the same dynamical evolution but difference in co-movements. Our analysis provides hints about the fundamentals that link the regions in their process of divergence. In fact the performance clubs pattern we discovered reflects the distribution of economic activities as well as the structural attributes of the regional economies.