How CEOs protect themselves against dismissal: A social status perspective

In this study, we address the question of why some CEOs stay in office during a performance downturn while others don't. Taking a social status perspective, we argue that an individual's board network embeddedness—as reflected in the number of outside directorships—plays an important role in dismissal decisions. We predict that a high status of the CEO relative to the chairman of the board protects an underperforming CEO against dismissal, while the relative salience of board network outsiders can counter this effect. Using longitudinal data of large German corporations, we find support for our predictions. Ltd. Copyright © 2015 John Wiley & Sons, Ltd.     

Adaptation and inertia in dynamic environments

Research summary : We address conflicting claims and mixed empirical findings about adaptation as a response to increased environmental dynamism. We disentangle distinct dimensions of environmental dynamism—the direction, magnitude, and frequency of change—and identify how selection shapes adaptive responses to these dimensions. Our results show how frequent directional changes undermine the value of exploration and decisively shift performance advantages to inert organizations that restrict exploration. In contrast, increased environmental variance rewards exploration. Our results also show that, in dynamic environments, the best‐performing organizations are generally more inert than less successful organizations. Managerial summary : Our research helps managers to understand under what business conditions investments into exploration and strategic flexibility are more likely to pay off. Dynamic business environments characterized by persistent trends and by large, infrequently occurring structural shocks reward strategic pursuit of temporary advantage. Thus, exploration and strategic flexibility are preferred strategies. In contrast, the challenge in frequently changing environments with fleeting opportunities is to identify and to focus on strategic actions whose payoffs on average are high, independent of environmental volatility. Low levels of exploration and long‐term strategic focus are preferred strategies in these circumstances. Copyright © 2015 John Wiley & Sons, Ltd.     

A new approach to wind power futures pricing

Decisions in Economics and Finance - We propose a new model for the pricing of wind power futures written on the wind power production index. Our approach is based on an arithmetic multi-factor...     

Distributional effects of imputed rents in five European countries

Most empirical distributional studies of well-being in developed countries rely on distributions of disposable income. From a theoretical point of view this practice is contentious since a household’s command over resources is determined not only by its spending power over commodities it can buy in the market but also on resources available to the household members through non-market mechanisms such as the in-kind provisions of the welfare state and the value of private non-cash incomes. In developed market economies the most important private non-cash income component is imputed rent from owner-occupied or subsidized accommodation. Employing a wider definition of imputed rent that also allows the analyst to capture income advantages among tenants living in rent-subsidized accommodations of various sorts (including rent-free or reduced-rent households), the present paper examines the differential effects of including imputed rents in the concept of resources in five European countries (Belgium, Germany, Greece, Italy and the UK). The results suggest that in almost all cases, the inclusion of imputed rents in the concept of resources leads to a decline in measured levels of inequality and poverty. The main beneficiaries are outright homeowners and households living in rent-free (or heavily subsidized) accommodation—most often older persons. The inclusion of imputed rents in the concept of resources does not lead to substantial changes in the ranking of the countries according to their level of inequality, despite widespread differences in the rates of home ownership and subsidization across the countries studied here.     

Prices vs. Quantities with fiscal cushioning

Enforcement of international environmental quantity regulations (e.g. tradable pollution permits) is often expected to be stricter than that of price regulations (e.g. emission taxes). While both instruments provide opportunities for misrepresenting actual pollution, enforcement of international price-based instruments is additionally hampered by potential fiscal cushioning, i.e. an adjustment of domestic fiscal policies offsetting the tax incentive to reduce emission reductions. The present paper extends the formal debate on Prices vs. Quantities by including the risk of fiscal cushioning. We find the level of the marginal benefit curve and the variance of costs become key elements for instrument choice and can render quantity regulations strictly preferable. Remarkably, in the latter case, the slopes of the marginal curves do not affect optimal instrument choice. Numerical calculations, using data taken from the international climate policy context, support the potential dominance of quantity regulations found in our formal analysis.     

The Choice of Prices versus Quantities under Uncertainty

This paper analyzes a duopoly model with stochastic demand in which firms first commit to a strategy variable and compete afterwards. We find that in equilibrium the relative magnitude of demand uncertainty and the degree of substitutability determines firms' variable choice. Firms set prices if uncertainty is high compared to the degree of substitutability and quantities if the reverse holds true. The reason is that demand uncertainty and the degree of substitutability have countervailing effects on variable choice: Prices adapt better to uncertainty while quantities induce softer competition. If no effect dominates, firms choose different strategy variables in equilibrium.     

No Mangoes in the Tundra: Spatial Heterogeneity in Agricultural Productivity Analysis*

In line with the wider macro productivity literature existing studies of agricultural production largely neglect technology heterogeneity, variable time‐series properties and the potential for heterogeneous but correlated total factor productivity (TFP) across countries. Our empirical approach accommodates these difficulties and seeks to model the nature of the cross‐section dependence in a sample of 128 countries (1961–2002). Our results suggest that agro‐climatic environment drives similarity in TFP evolution across countries with heterogeneous production technology. This provides a possible explanation for the failure of technology transfer from advanced countries of the temperate ‘North’ to arid and/or equatorial developing countries of the ‘South’.