Temporary overpessimism: Job loss expectations following a large negative employment shock

Job loss expectations were widespread amongst workers in East Germany following reunification with West Germany. Though experiencing a large negative employment shock, East German workers were nevertheless overpessimistic immediately after reunification with respect to their job loss risk. Over time, job loss expectations fell and converged to West German levels, which was driven by a stabilizing economic environment and by an adaptation of the interpretation of economic signals with workers learning to distinguish individual risk from firm-level risk. In fact, conditional on actual job loss risk, East German workers quickly caught up to West Germans regarding the share of correctly predicted job losses.     

Contents of Volume 7

Volume Contents

Contents of Volume 7     

Coordinating on lower prices: pharmaceutical pricing under political pressure

We investigate the effects of political activity on pharmaceutical prices, focusing on the health care reform period in the early 1990s.We characterize firms based on their vulnerability to future price regulation and find that the more vulnerable firms were more likely to take various actions to forestall regulation, most notably coordinating on a specific percentage price increase during 1993. Since moderating price increases could have averted regulation, the coordination appears to be the industry's response to a collective action problem.     

Taxation and Integrated Financial Markets: The Challenges of Derivatives and Other Financial Innovations

The past decade has witnessed the explosive growth of a multiplicity of new instruments which have altered the financial landscape. These transactions have highlighted many of the inconsistencies, asymmetries and shortcomings of current tax practices and challenged some basic tax principles. The ensuing uncertainties could over the long term place considerable strain on the tax system by increasing the opportunities for abuse and raising overall compliance costs. At the same time derivatives have provided a better understanding of the operation tax laws and from this standpoint have provided a positive input into policy design. This paper has three objectives: (a) to illustrate some of the weaknesses of the current tax system by focusing on several types of novel transaction; (b) to assess the validity of various types of adjustment proposed to tax code; (c) to draw out the implications of these developments for the ongoing debate over fundamental tax reforms and over source versus residence based taxes.     

Toward an integrative cartography of two strategic issue diagnosis frameworks

There exist two prominent accounts of how managers make sense of and take action in relation to strategic issues. The threat–opportunity (TO) and feasibility–urgency (FU) approaches primarily emphasize automatic/affective and active/deliberative strategic issue diagnosis processes, respectively. Current research, however, does not effectively integrate or fully explore the relationship between these two frameworks. We employ theory‐building literature to develop a framework that highlights four distinct and increasingly integrative lenses through which such an exploration can be systematically carried out. Analyzing data from how firms reacted to the economic uncertainty of early 2003, the results of our study indicate that the FU approach is a better predictor of both intentions and actual responses than the TO approach. Our results also indicate that threat is positively related to urgency and negatively related to feasibility, while opportunity is positively related to feasibility and negatively related to urgency. Further, using the expectancy–instrumentality–valence (EIV) motivational theory as a framework, we factor analyze both TO and FU items, identifying three underlying constructs of favorability, urgency, and influence (which we dub FUI). FUI has a higher predictive efficacy than the TO approach alone. We highlight implications for theory building and research in the strategic issue diagnosis literature. Copyright © 2007 John Wiley & Sons, Ltd.     

The globalization of Chinese enterprises

The question of how and why Chinese firms globalize is one of the most pressing issues for businesses today. China's globalization process is nothing less than remarkable. The twenty‐first century will feature a developing country as the leader of the global economy by 2020, when, by most estimates, China's purchasing power parity (PPP) gross domestic product (GDP) surpasses America's. With China's new role on the world's stage, global economic and political institutions are likely to change. China's foray into Latin America, for example, has changed the traditional role that America has played in its “backyard.” While the Chinese government was given much credit for China's globalization, Chinese private‐ and family‐owned businesses have also propelled China outward. Our research stream and annual China Goes Global conference at Harvard has attempted to frame the questions associated with China's globalization. This special issue is another important step in this direction. © 2012 Wiley Periodicals, Inc.