A structural model of sales-force compensation dynamics: Estimation and field implementation

We present an empirical framework to analyze real-world sales-force compensation schemes, and report on a multi-million dollar, multi-year project involving a large contact lens manufacturer at the US, where the model was used to improve sales-force contracts. The model is built on agency theory, and solved using numerical dynamic programming techniques. The model is flexible enough to handle quotas and bonuses, output-based commission schemes, as well as “ratcheting” of compensation based on past performance, all of which are ubiquitous in actual contracts. The model explicitly incorporates the dynamics induced by these aspects in agent behavior. We apply the model to a rich dataset that comprises the complete details of sales and compensation plans for the firm’s US sales-force. We use the model to evaluate profit-improving, theoretically-preferred changes to the extant compensation scheme. These recommendations were then implemented at the focal firm. Agent behavior and output under the new compensation plan is found to change as predicted. The new plan resulted in a 9% improvement in overall revenues, which translates to about $12 million incremental revenues annually, indicating the success of the field-implementation. The results bear out the face validity of dynamic agency theory for real-world compensation design. More generally, our results fit into a growing literature that illustrates that dynamic programming-based solutions, when combined with structural empirical specifications of behavior, can help significantly improve marketing decision-making, and firms’ profitability.     

Trade openness,foreign direct investment,and finance-growth nexus in the Eurozone countries

The paper investigates causal relationships between trade openness, foreign direct investment, financial development, and economic growth in 19 Eurozone countries over the period 1988–2013. Using a panel vector error-correction model (VECM), the empirical results show that these variables are cointegrated. The study shows that a combination of opening the Eurozone countries for trade and fostering their financial and economic development have elevated inflows of foreign direct investment into the region in the long run. At the same time, increasing inflows of foreign direct investment in the short run have propelled economic growth, which in return has strengthened the role of financial development and international trade to sustain economic growth in the region through feedback effects. The empirical results have important policy implications for countries in the Eurozone, especially those who face challenges as a result of lack of confidence in their financial system and those who face a sovereign debt crisis.     

Cointegration of firm strategies within groups: a long‐run analysis of firm behavior in the Japanese steel industry

This paper uses cointegration analysis to study the competitive interaction among firms within the integrated and minimill groups in the Japanese steel industry. The use of cointegration analysis overcomes some of the limitations associated with prior attempts at modeling firm behavior within groups, and allows us to model strategies that take considerable time to adjust. Results indicate that several strategies displayed slow adjustment characteristics. All of the strategies that displayed these properties were cointegrated within the group. Finally, over the long run, the rate of strategic response to ‘shocks’ in the system varied across members and strategies: some converged, while others diverged from the group relationship. We conclude by discussing the relevance of our findings to research on strategic groups and competitive dynamics among firms. Thus the paper contributes to the literature on strategic groups and competitive dynamics, and illustrates the use of cointegration analyses to study the competitive behavior of firms. Copyright © 2002 John Wiley & Sons, Ltd.     

Enterprise Risk Management as a Dynamic Capability: A test of its effectiveness during a crisis

The dynamic capabilities framework has emerged as a growing area of research within business disciplines—the framework seeks to explain how and why firms adapt successfully to changes in their environments. Yet, whether such capabilities are effective in periods of environmental changes that can be characterized as a crisis remains an unexplored area of research. This paper adopts the position that enterprise risk management (ERM) constitutes a dynamic capability, and examines whether a firm's ERM capability allowed it to respond effectively to the financial crisis of 2008. We find that superior ERM capability was associated with smaller decline in stock price during the downturn and superior profitability during the upturn. The results suggest that firms may need different types of dynamic capabilities to react and respond to different dimensions of environment and types of change. Copyright © 2013 John Wiley & Sons, Ltd.     

Energy advice service as perceived by Swedish homeowners

External actors can influence potential adopters to adopt energy efficiency measures. In Sweden municipality energy advisers are one such actor group who provides energy advice and information to the end users. The success of energy advice service for improvement of energy efficiency of detached houses depends on homeowners' perception towards it. In this context, we conducted a national survey of about 3000 owners of detached houses through stratified random sampling method in the summer of 2008. We found that majority of owners of detached houses consider energy advisers as an important source of information. Furthermore, many homeowners who contacted energy advisers for advice had implemented the suggestions. However, only a few homeowners had contacted an energy adviser. Our findings suggest that it is beneficial to continue the energy advice service, but more efforts are needed to increase homeowners' awareness of and satisfaction with such services.     

A brief note examining the impact of federal deposit insurance on savings and loan failures using granger causality tests

This brief note applies Granger causality testing to the issue of whether federal deposit insurance has caused S&L failures. The findings strongly indicate that federal deposit insurance has Granger-caused S&L failures over the 1934–1991 period.     

Bank Debt and Corporate Governance

In this paper, we investigate the disciplining role of banksand bank debt in the market for corporate control. We find thatrelationship bank lending intensity and bank client networkhave positive effects on the probability of a borrowing firmbecoming a target. This effect is enhanced in cases where thetarget and acquirer have a relationship with the same bank.Moreover, we utilize an experiment to show that the effectsof relationship bank lending intensity on takeover probabilityare not driven by endogeneity. Finally, we also investigatereasons motivating a bank's informational role in the marketfor corporate control.     

Self-efficacy and sustainable rural tourism development: local communities’ perspectives from Kuching,Sarawak

The future of the tourism industry is dependent on local communities’ ability to develop and sustain tourism developments, especially in sensitive rural areas. But there is limited research on this topic to guide tourism authorities and governments. In particular, few studies have studied sustainable rural tourism development from the perspective of the local communities. Therefore, this study examines local communities’ views on their capability to achieve sustainable rural tourism development in selected rural areas in Kuching, Sarawak. Questionnaires were distributed to the local communities residing at three rural tourism destinations in Kuching, Sarawak. Interestingly, the results indicated that local communities’ self-efficacy has a positive relationship with social, cultural, economic, and environmental sustainability. Hence, this study offers theoretical and practical contributions to sustainable rural tourism development literature and the tourism industry.