Urban Vibrancy and Corporate Growth

We find that a firm's investment is highly sensitive to the investments of other firms headquartered nearby, even those in very different industries. A firm's investment also responds to fluctuations in the cash flows and stock prices (q) of local firms outside its sector. These patterns do not appear to reflect exogenous area shocks such as local shocks to labor or real estate values, but rather suggest that local agglomeration economies are important determinants of firm investment and growth.     

What Works at Work: Overview and Assessment

This article discusses why it is difficult to measure the effects of management practices on organizational performance. In spite of these difficulties, a collage of evidence suggests that innovative workplace practices can increase performance, primarily through the use of systems of related practices that enhance worker participation, make work design less rigid, and decentralize managerial tasks. A majority of U.S. businesses have adopted some innovative work practices. However, only a small percentage of businesses have adopted a full system of innovative practices. We outline several constraints on the diffusion of new work practices, and suggest directions for future research     

Consumer Perceptions of Advertising as Misleading

A mail survey was conducted of 314 residents of two California cities to measure consumer perception of the prevalence of misleading advertising. Information was obtained concerning the extent of misleading advertising in the various media, for 30 products and services and for three age groups. The findings indicate that over half of the sample viewed “most” or “all” mail and telephone advertising as misleading, and that 38 percent of the respondents regarded “most” or “all” television advertising as misleading. Newspaper advertising was considered the most credible. Findings indicate that “most” or “all” advertising for products and services was viewed as misleading by 30 percent of the respondents. Findings for actions taken concerning misleading advertising indicate that nearly half of the sample had registered a complaint to the store or person advertising and that 29 percent of the respondents had complained to a manufacturer. Also, findings for the age groups indicate that two out of three respondents regarded “most” or “all” advertising directed at children as seriously misleading. Advertising directed at senior citizens was viewed as seriously misleading by 45 percent of the sample, and advertising directed at young and middle-aged adults was viewed as only slightly less misleading.     

Anchoring on Credit Spreads

This paper documents that the path of credit spreads since a firm's last loan influences the level at which it can currently borrow. If spreads have moved in the firm's favor (i.e., declined), it is charged a higher interest rate than is justified by current fundamentals, whereas if spreads have moved to the firm's detriment, it is charged a lower rate. We evaluate several possible explanations for this finding, and conclude that anchoring to past deal terms is most plausible.