Estimating the price of default risk

A firm's instantaneous probability of default is modeled asa translated square-root diffusion process modified to allowthe process to be correlated with default-free interest rates.The parameters of the process are estimated for 161 firms. Anextended Kalman filter approach is used that incorporates boththe time-series and cross-sectional (term structure) propertiesof the individual firms' bond prices. The model is reasonablysuccessful at fitting corporate bond yields, while key featuresof the term structures of yield spreads are captured in thesigns and magnitudes of the resulting parameter estimates.     

WHEN ELECTIONS FAIL TO RESOLVE UNCERTAINTY: THE CASE OF THE 2016 U.S. PRESIDENTIAL ELECTION

In this article, we examine whether certain political election outcomes create, rather than resolve, uncertainty in financial markets. We posit that the market uncertainty associated with unanticipated election outcomes is not resolved before or on the election dates. To test this claim, we use the surprise outcome of the 2016 U.S. presidential election and two previous U.S. presidential elections as benchmarks. In contrast to prior elections, we find that the 2016 U.S. presidential election outcome did not resolve market uncertainty. Specifically, we show significant increases in transactions costs, adverse selection costs, and volatility in the days following the election date. We contribute to the literature by suggesting that unexpected elections can engender, rather than resolve, market uncertainty.     

What makes a brand manager effective?

Brands have become increasingly important as a foundation for competitive strategy. Unfortunately, although brand managers are responsible for brand strategy development and execution, little is known about what makes a brand manager effective. A model is developed to understand what intangible capital embodied by brand managers influences brand management capabilities and resultant brand performance. Measures of brand manager intangible capital and brand management capabilities are developed through an iterative scale development process. Hypothesis testing, derived from a survey of brand managers, indicates that brand manager human, relational and informational capital influences brand management capabilities and resultant brand performance, and brand manager intangible capital has an indirect effect on brand performance via brand management capabilities. By delineating and operationalizing the intangible capital and capabilities of brand managers, this study provides a theoretical and empirical foundation for future research on brand managers, tools for assessing current brand manager capital and capabilities, and guidance in relation to intangible capital and capabilities needed by brand managers.     

The effects of behavioral,cognitive, and decisional control in co-production service experiences

Companies are encouraging customers to participate in the process of creating and delivering their offering(s). In this strategy, not only do providers select a level of customer co-production, but also the level of customer control. This study examines the effects of control types (cognitive, behavioral, and decisional) and their interaction on customers’ affective responses in service operations with varying levels of co-production. An extensive two-study design, across two service contexts, tests the interaction of different levels of co-production and control types on customers’ affective responses. Results show when decisional control is low, one additional control type (behavioral or cognitive) in the operational process can compensate for low decisional control. Theoretical and practical implications are discussed.     

“Deja Vu All Over Again:” Constitutional Economics and European legal Integration

Existing theories of regional integration do not satisfactorily explain European legal integration. Like the bears’ porridge, one explains too much, another too little, and yet another requires unnecessary information. Constitutional economics, viewing regional integration as a process producing a constitution, is able to explain both momentum toward and resistance to legal integration in a parsimonious fashion. Further, it produces a unique analysis of the current circumstances of European legal integration, revealing that the Kompetenz–Kompetenz debate addresses the fundamental dilemma of compound republics. This also discloses that European integration has produced a novel answer to this old question.

Innovation and Productivity Across Four European Countries

This paper compares the role innovation plays in productivityacross four European countries, France, Germany, Spain, andthe UK, using firm-level data from the internationally harmonizedCommunity Innovation Surveys (CIS3). Despite a considerablenumber of national firm-level studies analysing this relationship,cross-country comparisons using micro data are still rare. Weapply a structural model that describes the link between R&Dexpenditure, innovation output, and productivity (CDM model).Our econometric results suggest that overall the systems drivinginnovation and productivity are remarkably similar across thesefour countries, although we also find interesting differences,particularly in the variation in productivity that is associatedwith more or less innovative activities. Footnotes ¹ E-mail addresses: rgriffith{at}ifs.org.uk; ehuergo{at}ccee.ucm.es;jacques.mairesse{at}ensae.fr; b.peters{at}zew.de     

Probability distributions for economic surplus changes: the case of technical change in the Australian wool industry

Mullen, Alston and Wohlgenant (1989) (MAW) examined the distribution of the benefits of technical change in the Australian wool industry. Their conclusions are revisited by examining the probability distributions of changes in the welfare measures, given uncertainty about their model parameters. Subjective probability distributions are specified for the parameters and correlations among some of the parameters are imposed. Hierarchical distributions are also used to model diverse views about the specification of the subjective distributions. A sensitivity elasticity is defined through the estimation of a response surface to measure the sensitivity of the estimated research benefits to individual parameters. MAW's conclusions are found to be robust under the stochastic approach to sensitivity analysis demonstrated in this article.     

Strategic change and termination of interfirm partnerships

An evolutionary perspective of the resource‐based view is adopted to understand how changes in a partner firm's overall strategy may influence the firm's interfirm partnerships over time. We contend that changes in a partner firm's overall resource deployment strategy and partnering strategy influence the value and uniqueness of partnership resources. These changes alter the competitive advantage associated with partnership resources, affecting the propensity of partnership termination. An event history analysis is employed with 150 joint ventures over the period 1990 to 2001 to examine partnership termination within a longitudinal dataset. With initial partnership conditions controlled for, the results indicate significant influences of various changes in partner firm overall resource deployment strategy and partnering strategy on the propensity of termination. Further, competitor imitative activities are found to increase the propensity of termination as they reduce the uniqueness of partnership resources. This study provides support for an evolutionary perspective of resource value and competitive advantage that incorporates strategic change over time. Copyright © 2010 John Wiley & Sons, Ltd.     

Fitting strategy derived from strategic orientation to international contexts

The search for strategic fit within a market has become a core concept in strategy research. The issue of strategic fit is becoming increasingly important in international strategy as managers and academics explore the uniqueness of international markets. Unfortunately, during a time of open market diversity, many firms are driving toward a singular strategic orientation (i.e., market orientation), thus ignoring the underlying problems and criticisms with a standardized strategy, often resulting in suboptimal performance. A model highlighting the criteria necessary for fitting strategy to international contexts is developed. An empirical illustration is then used to examine the benefits of strategically fitting strategy to context. Finally, a process is provided to assist managers in the formation and implementation of their strategy. © 2006 Wiley Periodicals, Inc.     

The Role of Globalization, Time Acceleration, and Virtual Global Teams in Fostering Successful Global Product Launches

The present article presents a conceptualization of how firms can respond to the issues of globalization and time‐based competition through the use of virtual global teams to foster successful global product launches. It is argued that by combining input, managerial, and transformation‐based competencies effectively, the firm can configure a repertoire of strategic choices (e.g., marketing plans throughout the product development process) based on the national competitive environment, while at the same time being mindful of the need to maintain consistency within the firm's intermediaries operations—both in product development and global product launch. It is further argued that the linkages between globalization and time‐based competition necessitate managerial adjustments in decision frameworks to incorporate accelerated timescapes to maximize effectiveness in global product launch. In an effort to capture the varying impact of time on global decision makers a timescapes perspective is employed, where timescapes are analogous to landscapes because they include the temporal features of socioeconomic events in a variety of socially constructed contexts inclusive of timeframe, tempo, degree of path dependency, synchronization of events, sequence, anticipation, and ubiquity. The recognition of timescapes accentuates the contextual complexity of competition and creates the interface among events, environments, and individuals beyond the traditional numeric concept of clock time, thus requiring modification of a manager's decision‐making perspective. Further, it is argued that due to the rapid pace of globalization, many multinationals in their global product launches require that products, services, technical support, and prices throughout the world need to be coordinated. To effectively accomplish this goal of coordination as an accommodation, firms and their networks can form global virtual teams (i.e., culturally diverse, geographically dispersed, electronically communicating work group of members, who think and act in concert with the diversity of the global environment and intermediary needs–expectations) to enhance global product launch success. Lastly, it is argued that the hypercompetitive global marketplace cannot be managed ex post due to the level of cognitive complexity but must be managed ex ante by developing strategies capable of maintaining flexibility. To accomplish the task of competing in a hypercompetitive landscape, management must understand and incorporate a timescape of events that integrates the various perspectives of those involved in the global product development and launch decision‐making processes. Without a well‐articulated perspective of social time, managers will limit their ability to effectively coordinate global product development and launch across markets, thus hindering the firm's ability to maximize returns.