MNE performance during a crisis: An evolutionary perspective on the role of dynamic managerial capabilities and industry context

As the likelihood of worldwide crises increases due to globalization and the resulting economic contagion, understanding why some multinational enterprises (MNEs) prevail in such environments becomes ever more critical. Drawing from the concept of dynamic managerial capabilities, we posit that MNE in-crisis performance is associated with the pre-crisis development of asset management capabilities, or the capacity of managers to orchestrate assets so as to extract more value from the firm’s resource pool. Specifically, we argue that because dynamic managerial capabilities evolve as a response to a firm’s task environment, MNEs that operate in dynamic industries develop stronger asset management capabilities. However, we also posit that whether these capabilities contribute to in-crisis performance is contingent upon the munificence of the industry environment in which the capability evolves. Asset management capabilities that evolve in munificent environments would encompass a wider spectrum of routine-altering activities, and thus increase the ability of the MNE to react to more revolutionary events, such as global economic crises. Conversely, asset management capabilities that evolve in resource-scarce environments will result in more strategic lock-in due to firms' constrained ability to experiment with novel resource configurations, resulting in poorer in-crisis performance. We test our hypotheses using a sample of 854 MNEs in the context of the global financial crisis of 2008, and find support for our hypotheses. We discuss implications for the dynamic capabilities view and MNE resilience.     

Quantitative easing and Japanese bank equity values

One of the primary motivations offered by the Bank of Japan (BOJ) for its quantitative easing program—whereby it maintained a current account balance target in excess of required reserves, effectively pegging short-term interest rates at zero—was to maintain credit extension by the troubled Japanese financial sector. We conduct an event study concerning the anticipated impact of quantitative easing on the Japanese banking sector by examining the impact of the introduction and expansion of the policy on Japanese bank equity values. We find that excess returns of Japanese banks were greater when increases in the BOJ current account balance target were accompanied by “non-standard” expansionary policies, such as raising the ceiling on BOJ purchases of long-term Japanese government bonds. We also provide cross-sectional evidence that suggests that the market perceived that the quantitative easing program would disproportionately benefit financially weaker Japanese banks. J. Japanese Int. Economies 20 (4) (2006) 699–721.     

Re-exploring the relationship between flexibility and the external environment

The organizational structure literature has long posited that increases in uncertainty should lead to organic (adaptable) structures [T. Burnes, G.M. Stalker, The Management of Innovation, Tavistock Publications, London, 1961]. Similarly, the operations management literature has focused on the importance of flexibility as a competitive weapon [e.g., [De Meyer et al., 1989] Strategic Manage. J. 10 (1989) 135], and as a response to environmental uncertainty [Manage. Sci. 33 (1987) 509; Manage. Sci. 39 (1993) 395]. However, our recent attempts to empirically validate a relationship between environmental uncertainty and operational flexibility in manufacturing plants have failed to show a significant relationship [J. Operations Manage. 3 (1999) 307]. The present research attempts to rectify these contradictory findings by replicating and extending the works of [Manage. Sci. 33 (1987) 509] as well as [J. Operations Manage. 3 (1999) 307]. The results find no support for the proposition that firms that respond to increased uncertainty with increased flexibility will experience increased performance.     

Bayesian learning and convergence to rational expectations

In this paper the probability distribution of equilibrium outcomes is assumed to be a continuous but unknown function of agents' forecasts (which are probability measures). Agents start with a prior distribution on the set of mappings from forecasts into probabilities on outcomes. This induces an initial forecast. After observing the equilibrium outcome a posterior distribution is computed which induces a new forecast. The main result is that with probability one the forecasts converge to the set of fixed points of the unknown mapping. This can be interpreted as convergence to rational expectations.     

Cost-effectiveness of percutaneous patent foramen ovale closure as secondary stroke prevention

Objective: Compared to medical therapy alone, percutaneous closure of patent foramen ovale (PFO) further reduces risk of recurrent ischemic strokes in carefully selected young to middle-aged patients with a recent cryptogenic ischemic stroke. The objective of this study was to evaluate the cost-effectiveness of this therapy in the context of the United Kingdom (UK) healthcare system.

Methods: A Markov cohort model consisting of four health states (Stable after index stroke, Post-Minor Recurrent Stroke, Post-Moderate Recurrent Stroke, and Death) was developed to simulate the economic outcomes of device-based PFO closure compared to medical therapy. Recurrent stroke event rates were extracted from a randomized clinical trial (RESPECT) with a median of 5.9-year follow-up. Health utilities and costs were obtained from published sources. One-way and probabilistic sensitivity analyses (PSA) were performed to assess robustness. The model was discounted at 3.5% and reported in 2016 Pounds Sterling.

Results: Compared with medical therapy alone and using a willingness-to-pay (WTP) threshold of £20,000, PFO closure reached cost-effectiveness at 4.2 years. Cost-effectiveness ratios (ICERs) at 4, 10, and 20 years were ?20,951, ?6,887, and ?2,158, respectively. PFO closure was cost-effective for 89% of PSA iterations at year 10. Sensitivity analyses showed that the model was robust.

Conclusions: Considering the UK healthcare system perspective, percutaneous PFO closure in cryptogenic ischemic stroke patients is a cost-effective stroke prevention strategy compared to medical therapy alone. Its cost-effectiveness was driven by substantial reduction in recurrent strokes and patients’ improved health-related quality-of-life.     

Negative Libor rates in the swap market model

We apply Stroock and Varadhan’s support theorem to show that there is a positive probability that within the Swap Market Model the implied Libor rates become negative in finite time. Mataix-Pastor received support from the Instituto Credito Oficial (ICO), Spain, and Fundación Caja Madrid.     

On the effect of prior assumptions in Bayesian model averaging with applications to growth regression

We consider the problem of variable selection in linear regression models. Bayesian model averaging has become an important tool in empirical settings with large numbers of potential regressors and relatively limited numbers of observations. We examine the effect of a variety of prior assumptions on the inference concerning model size, posterior inclusion probabilities of regressors and on predictive performance. We illustrate these issues in the context of cross‐country growth regressions using three datasets with 41–67 potential drivers of growth and 72–93 observations. Finally, we recommend priors for use in this and related contexts. Copyright © 2009 John Wiley & Sons, Ltd.     

Whose call is it? Targeting universal service programs to low-income households’ telecommunications preferences

Do universal service programs give customers what they want? This paper uses new survey data to study low-income households’ telecommunications choices in the United States and to consider the degree to which such households’ preferences are addressed by existing universal service programs. The research shows that households that choose only one form of telecommunications increasingly are choosing a mobile phone, while those that choose to have both modes of communications are shifting their usage towards their mobile phones. These trends are less pronounced among higher-income households. One implication for universal service policy is that traditional subsidies for landline phones are increasingly ineffective in reaching low-income households such subsidies are designed to help; subsidies for acquiring and using mobile phone services might be more beneficial to low-income households than traditional subsidies for landline phones.