good neighbors but bad employers two faces of corporate social responsibility programs using two firm level datasets in korea we analyzed the effects of corporate social responsibility csr on employment relations we propose that participation in corporate social activity may not necessarily reflect an ethical commitment to do the right thing but instead can be associated with mobilizing internal resources to offset the costs imposed by external csr involvement undertaken because of social pressure analysis of the two datasets showed similar results the results demonstrate that socially responsible actions facilitate employer tendency to use performance based pay and efficiency based work practices we also find that csr has a negative association with employment growth and increased labor flexibility through contingent employment these findings shed light on the internal impact of csr involvement on a firm s employment policies with respect to resource allocation

operating flexibility global manufacturing and the option value of a multinational network the multinational corporation is a network of activities located in different countries the value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed we model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries a stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option the value of which is dependent upon the real exchange rate the model is extended to analyze hysteresis effects and within country growth options we show that the management of across border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing

direct estimation of synergy a new approach to the diversity performance debate this study examines the linkages between relatedness and synergy in the context of diversification among u s pharmaceutical firms for the period 1960 1980 rather than assume as in the entropy herfindahl and concentric indices of diversification that the levels of synergy generated by different related combinations of business units are identical we estimate synergy directly using a modified version of the concentric index in addition to estimating synergy using capital market performance of the firm as a whole we examine the effects of nondrug diversification on the innovative productivity of firms pharmaceutical divisions alone our two main findings are that production relatedness such as that between drugs and chemicals in fact did not imply synergy over the period of our study and that the patterns of synergy for different types of relatedness shifted over time with the industry life cycle

limit order book as a market for liquidity we develop a dynamic model of an order driven market populated by discretionary liquidity traders these traders must trade yet can choose the type of order and are fully strategic in their decision traders differ by their impatience less patient traders demand liquidity more patient traders provide it three equilibrium patterns are obtained the pattern is determined by three parameters the degree of impatience of the patient traders which we model as the cost of execution delay in providing liquidity their proportion in the population which determines the degree of competition among the liquidity providers and the tick size which is the cost of the minimal price improvement despite its simplicity the model generates a rich set of empirical predictions on the relation between market parameters time to execution and spreads we argue that the economic intuition of this model is so basic its main results must be robust in much more general models

how the heterogeneity in investment horizons affects market trends abstractto investigate the relationship between the liquidity and the divergent degree of heterogeneous investors with different investment horizons we propose an agent based model based on the assumptions of the fractal market hypothesis a laboratory market is used to investigate the impact of the divergent degree on the stability of the financial market simulation results indicate that the market becomes more stable as investors become increasingly divergent and are more likely to absorb the orders of the other side and maintain a narrow trade gap moreover with highly heterogeneous investors the market is more efficient less liable to crash and less volatile the simulation based on the agent based model demonstrates that the interactions and herding behaviours of investors lead to a market crash when the divergent structure shrinks and only limited investment horizons are available the result also suggests an alternate explanation of the anomaly of efficient market hypothesis which shows why

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

the asymptotic distribution of extreme stock market returns this article presents a study of extreme stock market price movements according to extreme value theory the form of the distribution of extreme returns is precisely known and independent of the process generating returns using data for an index of the most traded stocks on the new york stock exchange for the period 1885 1990 the author shows empirically that the extreme returns obey a frechet distribution copyright 1996 by university of chicago press

business cycles and long run growth in this survey we discuss the effect of macroeconomic fluctuations on long run growth from both a theoretical and empirical perspective we emphasize the opportunity cost approach which states that firms will intertemporally substitute productivity enhancing activities for regular production activity during recessions we provide aggregate evidence in favor of the opportunity cost approach copyright 1997 by oxford university press

on savings and investment dynamics in a small open economy abstract this paper constructs a stochastic overlapping generations two country model of savings and investment under conditions of perfect international capital mobility the focus of the analysis is on the relationship between savings and investment dynamics in a small open economy in response to stochastic variations in domestic and or foreign production technologies the model is simulated under alternative specifications of the stochastic distribution governing both technologies this provides insight into the very complicated nature and rich diversity of possible relationships between savings and investment dynamics

a framework for integrated risk management in international business treatments of risk in the international management literature largely focus on particular uncertainties to the exclusion of other interrelated uncertainties this paper develops a framework for categorizing the uncertainties faced by firms operating internationally and outlines both financial and strategic corporate risk management responses

platform investments and volatile exchange rates direct investment in the u s by japanese electronic companies this study examines the effects of previous entry on the subsequent decisions of japanese electronics companies to invest in the united states by gathering data at the firm level the empirical analysis provides a fine grain sorting out of firm and industry effects on foreign direct investment decisions the findings show that investment behavior is highly heterogeneous across firms and reflects their individual technological capabilities and their history of previous investments in the united states real exchange rate levels are also important the results suggest that initial investments serve as platforms for subsequent entry with the timing of entry triggered by movements in real exchange rates copyright 1996 by mit press

place space and geographical exposure foreign subsidiary survival in conflict zones this study focuses on the role of geography in foreign subsidiary survival in host countries afflicted by political conflict we argue that survival is a function of exposure to conflicts and depends on the characteristics of place the conflict zone and space geographic concentration and dispersion of other home country firms the roles of place and space are explored using street level analysis of geographic information systems data for 670 japanese multinational enterprises mne subsidiaries in 25 conflict afflicted host countries over 1987 2006 through dynamic modeling of conflict zones as stretchable and shrinkable places relative to subsidiary locations we develop a means of characterizing a foreign subsidiary s exposure to multiple threats in its geographic domain our results show that greater exposure to geographically defined threats in both a static and a dynamic sense reduces the likelihood of mne survival the findings indicate moreover that both concentration and dispersion with other firms affect survival however the effects depend on where the firm is spatially located whether the firm is in a conflict zone and with whom home country peers or sister subsidiaries

operational flexibility and market valuation of earnings this paper examines the association between the stock returns and accounting earnings of firms that have different levels of operational flexibility operational flexibility is a firm s ability to respond profitably to environmental fluctuations by shifting factors of production within a multinational network of subsidiaries the geographic breadth and depth of a firm s multinational network are used as indicators of operational flexibility we find a significantly greater coefficient relating stock returns and accounting earnings for multinational firms that operate in many countries but limit their concentration in any one foreign country than for other multinational firms or domestic firms this coefficient is significantly smaller for multinational firms whose foreign subsidiaries are highly concentrated in a few countries when all multinational firms are pooled together we find their earnings returns association does not differ from that of domestic firms copyright 1999 john wiley sons ltd

tying the manager s hands constraining opportunistic managerial intervention we discuss and examine empirically a firm level equivalent of the ancient problem of tying the king s hands namely how to avoid managerial intervention that is undertaken to reap private benefits but is harmful to overall value creation that is managerial opportunism the link from managerial intervention to firm level value creation is moderated by employee motivation thus intervention in the form of managers overruling employees or reneging on delegation may demotivate employees particularly when the intervention is perceived as being unfair undertaken for personal gain etc we argue that a number of mechanisms such as managers staking their personal reputation employees controlling important assets strong trade unions etc may function as constraints on managerial proclivities to intervene thus reducing the problem of managerial opportunism we derive four hypotheses from these ideas and test them using path analysis on a rich dataset based on 329 firms in the spanish food and electric electronic industries

valuation of the operating flexibility of multinational corporations the returns to multinationality are estimated as the value of operating flexibility empirical measures of the return of multinationality require a precise specification of the extensiveness of the mnc s transnational network to measure the degree of multinationality this precise empirically grounded definition of multinationality has been absent from the academic literature to date we address this omission and we find that two characteristics of the transnational network its breadth number of foreign countries in which the mnc has operations and depth the concentration of foreign subsidiaries in a few countries are significant in explaining the value of operating flexibility in particular we find that the returns to multinationality are maximized for firms with networks that have breadth but not depth the role of market intangibles such as r d and advertising on mnc market valuation is shown to depend on the flexibility regime

costly external finance corporate investment and the subprime mortgage credit crisis abstract we study the effect of the recent financial crisis on corporate investment the crisis represents an unexplored negative shock to the supply of external finance for non financial firms corporate investment declines significantly following the onset of the crisis controlling for firm fixed effects and time varying measures of investment opportunities consistent with a causal effect of a supply shock the decline is greatest for firms that have low cash reserves or high net short term debt are financially constrained or operate in industries dependent on external finance to address endogeneity concerns we measure firms financial positions as much as four years prior to the crisis and confirm that similar results do not follow placebo crises in the summers of 2003 2006 nor do similar results follow the negative demand shock caused by september 11 2001 the effects weaken considerably beginning in the third quarter of 2008 when the demand side effects of the crisis became apparent additional analysis suggests an important precautionary savings motive for seemingly excess cash that is generally overlooked in the literature

shareholder value stakeholder management and social issues what s the bottom line we test the relationship between shareholder value stakeholder management and social issue participation building better relations with primary stakeholders like employees customers suppliers and communities could lead to increased shareholder wealth by helping firms develop intangible valuable assets which can be sources of competitive advantage on the other hand using corporate resources for social issues not related to primary stakeholders may not create value for shareholders we test these propositions with data from s p 500 firms and find evidence that stakeholder management leads to improved shareholder value while social issue participation is negatively associated with shareholder value copyright 2001 john wiley sons ltd

organizing technological interdependencies a coordination perspective on the firm this paper develops a coordination perspective on the firm the basic idea is to combine insights into the division of labor with insights into the allocation of property rights thus a basic argument is that use rights over productive assets are necessary in order to accumulate the experience needed to perform improvements in production an increase in the division of labor in production accelerates the accumulation of skills from learning by doing in production however an increasing division of labor introduces greater complexity and new kinds of tools and equipment and this in turn can create uncertainty about the best way of coordinating the specialized and interdependent tasks the result may be bottlenecks in production and uneven development of components experimenting with the coordination of tasks is necessary in order to eliminate these problems however such experimentation is best facilitated by a certain structure of property rights coordination by direction provides a cheap way of conducting the experiments needed to collect information on how best to coordinate interdependent activities copyright 2001 by oxford university press

multinational investment under uncertainty in the chemical processing industries this study uses a sample of chemical processing industries to evaluate the effect of two types of uncertainty on the decision to invest in an industry it analyzes the effects of relative price uncertainty through exchange rates and input prices and demand uncertainty on the probability of expansion in a particular country the study then focuses on the behavior of individual companies and distinguishes companies by whether or not they are multinationals in the production of the product the results confirm previous evidence that exchange rate uncertainty has a negative effect on capacity expansions by domestic corporations and no effect on investment by multinational corporations finally the study also shows that expansions of production capacity in this industry are more likely to occur in those countries where capacity utilization is higher

the international control conundrum with exchange risk an eva framework principal agent problems between corporate parent and subsidiary operations are frequently exacerbated in international settings by exchange rate fluctuations between the foreign subsidiary s local currency and the parent multinational corporation s reference currency we develop a conceptual solution to this international control conundrum using economic value added as the sole performance numeraire our framework facilitates assessment of foreign subsidiary performance in emerging market countries in the presence of unexpected exchange related shocks

an empirical behavioral model of liquidity and volatility abstract we develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the london stock exchange this can be viewed as a very simple agent based model in which all components of the model are validated against real data our empirical studies of order flow uncover several interesting regularities in the way trading orders are placed and cancelled the resulting simple model of order flow is used to simulate price formation under a continuous double auction and the statistical properties of the resulting simulated sequence of prices are compared to those of real data the model is constructed using one stock azn and tested on 24 other stocks for low volatility small tick size stocks called group i the predictions are very good but for stocks outside group i they are not good for group i the model predicts the correct magnitude and functional form of the distribution of the volatility and the bid ask spread without adjusting any parameters based on prices this suggests that at least for group i stocks the volatility and heavy tails of prices are related to market microstructure effects and supports the hypothesis that at least on short time scales the large fluctuations of absolute returns r are well described by a power law of the form p r r r r with a value of r that varies from stock to stock

r d and internal finance a panel study of small firms in high tech industries since joseph schumpeter economists have argued that internal finance should be an important determinant of r d expenditures yet almost without exception previous empirical studies have not found evidence of such a relation using newly available data the authors investigate this puzzle with a panel of 179 small firms in high tech industries under each estimation strategy they employ the authors find an economically large and statistically significant relationship between r d investment and internal finance their results are consistent with the view that because of capital market imperfections the flow of internal finance is the principal determinant of the rate at which small high tech firms acquire technology through r d copyright 1994 by mit press

subsidiary expansion contraction during times of economic crisis this paper compares two real options within country growth and across country operational flexibility to examine subsidiary expansion contraction during times of economic crisis specifically we examine how the real options orientations of individual subsidiaries interact with the general characteristics of multinational enterprise networks our main findings are that a economic crises can be detrimental for subsidiaries with stronger within country orientations and advantageous for those with stronger across country orientations and b network characteristics are not the sole determinants of subsidiary expansion contraction what really matters is how the real options orientations of individual subsidiaries mesh with the overall characteristics of the network they belong to

competitor analysis and foothold moves a foothold is a small position that a firm intentionally establishes within a market in which it does not yet compete we extend theory on competitive dynamics to examine relationships between comp

heterogeneous preferences and new innovation cycles in mature industries the amateur camera industry 1955 1974 this paper examines the amateur camera industry between 1955 and 1974 the case raises important issues for our understanding of the product lifecycle first an industry can experience more than one round of radical product and process innovation in its history second there is not a strict sequence of product innovation followed by process innovation third the existence of a dominant design depends on there being a relatively homogeneous set of consumers heterogeneous consumer preferences support different camera designs in two distinct market niches in the amateur camera industry fourth new rounds of entry and exit and new industry shake outs can occur with new innovative entrants displacing old firms fifth when the new firms are from developing countries a shift in global production occurs the success of new japanese entrants in this period lay in their being more successful innovators not in their exploiting wage cost advantages

incumbent entry into new market niches the role of experience and managerial choice in the creation of dynamic capabilities increasingly technological innovation creates markets for new products and services to survive firms must respond to these new markets how do firms develop the capabilities necessary to succeed in such changing conditions some suggest that experience with previous entry builds such capabilities others suggest that capabilities arise from experience producing and selling to existing markets the role of managers is also debated some argue that experience with existing markets causes managers to miss entry opportunities others argue that managers enter new markets when their firm possesses the experience needed to compete effectively in this paper we explore these issues by investigating entry patterns in the disk drive industry we investigate the effect of experience in existing markets and experience with previous market entry we find that experience in previous markets increased the probability that a firm would enter a new market we show that this experience had greater value if the firm entered the new market we infer that managers chose to enter these markets to obtain this increase in value

strategic growth options we provide a strategic rationale for growth options under uncertainty and imperfect competition in a market with strategic competition investment confers a greater capability to take advantage of future growth opportunities this strategic advantage leads to the capture of a greater share of the market either by dissuading entry or by inducing competitors to make room for the stronger competitor as a result of this strategic effect payoffs are in a rough sense more convex than in the case of no investment in a growth option when the strategic advantage is strong increased uncertainty encourages investment in growth options higher uncertainty means more opportunity rather than simply larger risk if the strategic effect is weak the reverse is true on the other hand an increase in systematic risk discourages the acquisition of growth options our results contradict the view that volatility is a strong disincentive for investment

investment in new foreign subsidiaries under receding perception of uncertainty research on foreign direct investment has focused considerable attention on the moment of market entry but less on the dynamics of investment in the post entry phase this paper centres the influence of uncertainty on investment and develops a growth options model to explain the sequence of investment in new foreign subsidiaries in a learning process that starts at entry investors perceive receding levels of uncertainty and shift their reason for investment from option values towards net present values the findings of a panel study of 634 german subsidiaries support the propositions and reveal the potential of the real options approach to improve the understanding of internationalisation processes

real options theory in international business the last quarter century has witnessed substantial growth in applications of real options theory rot to international business ib research in this review we explicate the core rot concepts in the ib context and discuss the contributions of rot based research to three core ib issues timing and scale of market entry or exit entry mode and governance form and the role of multinational networks based on our review we propose a holistic rot view of the multinational enterprise that synthesizes the insights of existing studies finally to move the field forward we highlight key questions and challenges in current rot based work provide a more precise definition of exogenous and endogenous uncertainty suggest empirical designs to test unique rot predictions and explore areas where rot can be combined with other theoretical perspectives to better understand ib phenomena

what do unions and employers negotiate under the umbrella of corporate social responsibility comparative evidence from the italian metal and chemical industries the corporate social responsibility csr and industrial relations ir studies have evolved mostly in parallel in this paper we integrate the ir with the csr perspective highlighting their similarities and differences in particular the study adopts a framework which includes a wide set of csr related issues to explore what unions and companies negotiate under the umbrella of csr it analyses and compares the national sectoral agreements of two key industries in the italian economy i e metal and chemical we find that these two sectors exhibit differences because the csr related issues covered by the two contracts are formally labelled as csr in the chemical contract and not labelled as csr in the metal contract we also find similarities regarding the csr related issues covered and not covered by the national contracts and the binding processes centrally negotiated for their implementation we interpret the similarities in light of the specificities of the italian ir system and the differences in light of the negotiation traditions of the two sectors under study which induce the actors in the metal sector traditionally with more conflictual ir relations to focus more on what differentiates the csr and ir perspectives and the actors in the chemical sector traditionally with more cooperative ir relations to focus more on what the csr and ir perspectives share

on the growth of foreign affiliates multinational plant networks joint ventures and flexibility we take a flexibility perspective to analyse employment growth in a large sample of japanese manufacturing affiliates in nine asian countries during the years leading up to and into the asian financial crisis 1995 1999 we find that joint ventures are less flexible than wholly owned affiliates in responding to changing environmental conditions in the focal country and underperform in high growth environments multinational enterprises mnes use the flexibility created by their multinational plant network to adjust affiliate employment in response to labour cost changes in other countries in which they operate plants however no evidence was found that the presence of joint ventures in multinational plant networks reduces this network flexibility our findings suggest that more research is needed on the heterogeneous responses of mnes and their affiliates to changing economic environments

the effect of recessions on firms boundaries the economic theory of the firm offers conflicting predictions of how the two major effects of recessions changes in demand and access to credit affect firm boundaries using data on norwegian firms in the recent recession we find support for both increased and reduced vertical integration of core activities in response to a recessionary shock further we find a negative interaction effect between reductions in access to credit and reductions in demand on insourcing of core activities but no such effect on outsourcing of core activities we argue that this finding may highlight a possible explanation for the conflicting theoretical predictions regarding vertical integration in response to demand and credit shocks

an empirical analysis of the integration responsiveness framework u s construction equipment industry firms in global competition in this study businesses competing as part of the global u s construction equipment industry were categorized into three subgroups according to the integration responsiveness framework i r in an attempt to further understand industry pressures confronting businesses that compete internationally the results show that three generic strategies suggested by the i r framework do appear in a single industry context globally integrated locally responsive and multifocal beyond providing additional insight into the nature of competition in a single global industry several broad extensions to the integration responsiveness framework are suggested

does more schooling make women better nourished and healthier adult sibling random and fixed effects estimates for nicaragua there is debate on whether schooling causes increases in productivity or whether the estimated relationships reflect ability knowledge tastes etc that are associated with schooling this paper examines the impact of women s schooling on women s health and nutrition with and without controls for unobserved childhood background factors related to ability and motivation random and fixed effects models are estimated using data on adult sisters both sets of estimates reinforce the relationships found in standard estimates that women s schooling positively affects their health and nutrient intakes the latter result is particularly robust

the effect of domestic uncertainty on the real options value of international investments scholars have noted that international investments have the potential to provide firms with real options value under uncertainty to assess this issue prior studies have tended to focus primarily on exchange rate volatility although multinational firms face other types of uncertainty as well including those stemming from their domestic operating environment the role of such uncertainty for firms flexibility needs has not been previously considered in this study we compare the influence of both domestic economic uncertainty and exchange rate uncertainty on the real option value of international investments of korean firms over 16 years of varying uncertainty we find evidence that an international investment network characterized by greater breadth and lower depth is associated with higher firm value under domestic economic uncertainty exchange rate uncertainty however was not found to play a role in firms need for flexibility the results suggest that firms are able to hedge exchange rate uncertainty by using mechanisms such as forward contracts or derivatives thus potentially reducing the impact of this type of uncertainty on their operations

modes of theorizing in strategic human resource management tests of universalistic contingency and configurational performance predictions the field of strategic human resource management shrm has been criticized for lacking a solid theoretical foundation this article documents that contrary to this criticism the shrm literature

uncertainty and the dynamics of r d uncertainty varies strongly over time rising by 50 to 100 in recessions and by up to 200 after major economic and political shocks this paper shows that higher uncertainty reduces the responsiveness of r d to changes in business conditions a caution effect making it more persistent over time thus uncertainty will play a critical role in shaping the dynamics of r d through the business cycle and its response to technology policy i also show that if firms are increasing their level of r d then the effect of uncertainty will be negative while if firms are reducing r d then the effect of uncertainty will be positive

adverse selection and competitive market making empirical evidence from a limit order market this article presents a new methodology for testing economic restrictions on the price schedules offered in a limit order book that are based on i break even conditions for marginal limit orders and ii rational updating conditions for order book revisions over time using order flow data from the stockholm stock exchange i find strong evidence of insufficient depth in the limit order books relative to the theoretical predictions an extended model which allows the model parameters to depend on market conditions captures some of the systematic variation in the observed order book depth article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

productivity growth and the structure of the business cycle abstract over the recent years opportunity cost oc models of growth have argued that recessions are times when firms engage in productivity improving activities because of intertemporal substitu tion this paper tests whether this approach is correct the technique used to disentangle the trend from the cycle is semi structural vector autoregression the results are mildly supportive of the oc theory there tends to be a negative impact of demand shocks on productivity both in the short run and in the long run and the short run impact is stronger in those countries where fluctuations are more transitory however there is no significant response of r d to demand shocks

an empirical analysis of the integration responsiveness framework in global industries in this study businesses competing in global industries were categorized into three groups according to the integration responsiveness framework for conceptualizing industry pressures confronting business competing internationally using this framework contextual conditions associated with each group were examined competitive attributes distinguishing each group were then identified to clarify alternate business level strategies for competing within a global industry context beyond providing additional insight into the nature of competition in global industries several broad extensions to the integration responsiveness framework are suggested

market behavior in a clearing house one of the most fundamental market mechanisms is the clearing house where orders are accumulated over time and the market is cleared periodically the issue addressed in this study is the statistical behavior of the market under this neutral mechanism in the framework of a tractable stochastic model which captures the underlying uncertainties and indivisibilities in the demand and supply schedules applying renewal theory we derive closed form results for the behavior of prices and quantities and pursue the implications of the possibility of no trade and the multiplicity of market clearing prices

stakeholders relationships and product market competition abstractin this article we study the relationships between main stakeholders shareholders consumers and employees when firms are consumer oriented co in the sense of caring about consumers interests in the objective function we let these firms first bargain with labour union over their employees wages and then compete either in the quantity space cournot competition or in the price space bertrand competition our model shows that taking care of the consumers interests when determining product market strategies may reverse the traditional ranking between cournot and bertrand equilibria this implies that if shareholders in a co firm can choose either a quantity or a price strategy they will surprisingly choose the latter moreover we show that the conflicting interests between main stakeholders are attenuated under bertrand competition compared to cournot competition

firms choice of method of pay using data from the bls industry wage survey the author tests the theory that firms choose their methods of pay by balancing the gains from more precise links between performance and pay against m

the persistence of shocks to profitability in this study we use data for 1981 through 1994 on a large sample of u s companies to examine the persistence of incremental industry corporate parent and business specific effects on profitability our results indicate that the incremental effects of industry on profitability persist longer than the incremental effects of the corporate parent and of the specific business changes in industry structure have a more persistent impact on profitability than do changes in firm structure

firm characteristics and the cyclicality of r d investments the aim of this study is to combine micro aspects of firm behavior with macro aspects of business development and identify market conditions e g price competition and firm characteristics e g type of r d partners that enable a firm to have a pro cyclical anti cyclical or non systematic r d investment behavior the empirical results confirm to large extent a series of hypotheses as to innovation relevant firm characteristics that underline the three different behavior categories and allow us to make profiles of the three types of r d behavior

institutional investors and stock market volatility statement of responsibility on t p reads xavier gabaix parameswaran gopikrishnan vasiliki plerou h eugene stanley

firm strategy and economic exposure to foreign exchange rate movements this study examines the implications of differences in strategy and industry structure for firms economic exposures to foreign exchange rate movements in contrast with previous research using a single currency proxy this study estimates firms exposures using a multiple currency model the empirical evidence from u s manufacturing firms indicates that 13 to 17 percent of firms are exposed to foreign exchange rate movements results from cross sectional analyses reveal that foreign direct investment reduces economic exposure to foreign exchange rate movements

auctions as algorithms abstract computerized auction systems are introduced as a new form of market institution characterized by communications technologies for passing messages between traders and a set of programmed rules that restrict the message space and process messages into transactions prices and quantities the stationary distributions of price quotations and transactions prices given order arrival rates conditioned on information available through the limit order book are derived for an automated continuous auction system with price and time priority rules the key to the analysis is the application of the theory of queues with preemptive priorities to the problem of two interactive queues the model then is used to characterize the structure of the electronic order book in terms of the distributions of the number of buy and sell orders in the system and the waiting time to trade execution the theoretical development is applied to a comparison of automated continuous and periodic single price auctions with respect to price volatility the magnitude of the bid ask spread and volume traded per unit of time

volatility and growth credit constraints and the composition of investment abstract how does uncertainty and credit constraints affect the cyclical composition of investment and thereby volatility and growth this paper addresses this question within a model where firms engage in two types of investment a short term one and a long term one which contributes more to productivity growth because it takes longer to complete long term investment has a relatively less cyclical return but it also has a higher liquidity risk the first effect ensures that the share of long term investment to total investment is countercyclical when financial markets are perfect the second implies that this share may turn procyclical when firms face tight credit constraints a novel propagation mechanism thus emerges through its effect on the cyclical composition of investment tighter credit can lead to both higher volatility and lower mean growth evidence from a panel of countries provides support for the model s key predictions

the influence of industry downturns on the propensity of product versus process innovation this article sheds light on how industry fluctuations affect firms propensity to innovate we test two seemingly conflicting arguments that suggest how firms are more or less inclined to engage in innovation activities during industry fluctuations by studying a panel of 622 italian manufacturing firms during the period 1995 2003 we show how differentiating between product and process innovation may help reconcile the theory of opportunity cost of innovation with the cash flow effect argument we find that industry downturns are related to product and process innovation in different ways firms tend to invest in product innovation rather than process innovation in downturns the findings have implications for both theory showing when the opportunity cost of innovation dominates and research design showing the importance of both the input and output measures in innovation studies and how they might influence the results

employment innovation and productivity evidence from italian microdata italian manufacturing firms have been losing ground with respect to many of their european competitors this paper presents some empirical evidence on the effects of innovation on employment growth and therefore on firms productivity with the goal of understanding the roots of such poor performance we use firm level data from the last three surveys on italian manufacturing firms conducted by mediocredito capitalia which cover the period 1995 2003 using a modified version of the model proposed by harrison jaumandreu mairesse and peters 2005 which separates employment growth rates into those associated with old and new products we provide robust evidence that there is no employment displacement effect stemming from process innovation the sources of employment growth during the period are split equally between the net contribution of product innovation and the net contribution from sales growth of old products however the contribution of product innovation is somewhat lower than that for the four comparison european countries considered by harrison et al

irreversible investments and volatile markets a study of the chemical processing industry this paper investigates the empirical effect of volatility on irreversible investments we use a sample of chemical products in the united states and the european union to test the impact of volatility on new investments in capacity we distinguish among three sources of volatility exchange rates input prices and product demand we find that the effects of volatility on the amount of capacity investment differ depending on the source of volatility input prices and product demand volatility do not appear to have a material and statistically significant effect in either the united states or the european union in contrast exchange rate volatility has a significant negative impact on investment by chemical manufacturers in the european union

do multinationals operate flexibly theory and evidence do multinational enterprises operate flexibly i e do they shift production in response to currency changes three theoretical perspectives are developed flexibility optimism premised on information and sunk cost advantages takes a macro efficiency perspective and predicts sizable responses flexibility pessimism premised on inertia and internal opportunism takes an organizational perspective and predicts sticky responses flexibility realism premised on the view that to be flexible in the current period multinational enterprises need to have planned and invested accordingly in previous periods predicts positive but relatively modest responses empirical analysis spanning the period 1977 1993 finds that multinational enterprises systematically exploit currency shifts but even in the face of large exchange rate changes their operational responses are relatively modest the results appear most consistent with flexibility realism and this hypothesis is selected over the alternatives considered

the effects of mnc parent effort and social structure on subsidiary absorptive capacity although the literature provides ample evidence that the global transfer and local implementation of knowledge represents a key advantage for multinational corporations mncs we lack comparable understanding as to whether knowledge creating mnc parents can actively expand the absorptive capacity of their subsidiaries using a teacher student lens this study examines the combined impact of specific structural mechanisms and motivational processes by mnc parents on the ability of 216 subsidiaries to absorb parent initiated marketing strategies the findings reveal that mnc parents can indeed cultivate subsidiaries ability to appropriate marketing knowledge through a combination of adopting specific social structures and investing in particular efforts however the effect of social structure on subsidiary absorptive capacity is indirect and accounted for by the parents intensity of effort a number of theoretical implications emerge from the findings for research on absorptive capacity in relation to the role of the knowledge source the need to examine organizational influences in relation to one another and validating the original absorptive capacity dimensions for managers in the global marketplace the findings lead to the suggestion that mncs devote attention to nurturing the absorptive capacities at different organizational levels in order to optimize the global transfer of knowledge

learning to contract evidence from the personal computer industry organizational forms involving more detailed contracts than are found in traditional spot market exchanges appear to be increasingly prevalent there has been relatively little analysis however of the extent to which firms learn how to use contracts to manage their interfirm relationships over time in this paper we conduct a detailed case study of a time series of 11 contracts concluded during 1989 1997 between the same two partners both of whom participate in the personal computer industry to explore whether and how firms learn to contract we find many changes to the structure of the contracts that cannot be fully explained by changes in the assets at risk in the relationship and evidence that these changes are largely the result of processes in which the firms were learning how to work together including learning how to contract with each other the nature of this learning appears to have been quite incremental and local that is not very far sighted we suggest how and when contracts might serve as repositories for knowledge about how to govern collaborations and suggest some boundary conditions for this phenomenon our findings also provide implications for the debate about whether contracts have a positive or negative effect on interorganizational trust we conclude with suggestions for future research

foreignness and exit over the life cycle of firms received wisdom indicates that owing to a liability of foreignness foreign firms exit with greater likelihood than do comparable domestic firms and that the difference attenuates as firms age and overcome the liability we posit that foreign firms are also intrinsically more volatile and footloose than domestic ones and that this leads to an increasing divergence between the exit rates of foreign and domestic firms empirically we find that the difference between exit rates of foreign firms and domestic firms increases with age as exit of foreign firms increases with age while that of purely domestic firms decreases exit rates of domestic based multinationals do not change significantly with age they are between those of foreign and purely domestic firms but are closer to the latter this suggests that the footlooseness observed for foreign firms is due to foreignness more than to multinationality

the life cycle of a competitive industry firm numbers first rise then later fall as an industry evolves this nonmonotonicity is explained using a competitive model in which innovation opportunities fuel entry and relative failure to innovate prompts exit equilibrium time paths for price and quantity also share features of the data the model is estimated using data from the u s automobile tire industry a particularly dramatic example of the nonmonotonicity in firm numbers

real options in multinational corporations organizational challenges and risk implications in this study we investigate how multinationality affects firms risk levels our investigation builds on the idea from real options theory that international operations offer switching options to multinational corporations yet we also emphasize different sources of coordination costs that can mitigate the benefits of operational flexibility the findings from tobit models accounting for self selection underscore the importance of unobserved heterogeneity in the relationships between international investments and risk levels consistent with the coordination costs surrounding international operations we find that the relationship between multinationality and downside risk is curvilinear risk first declines and then increases as a firm s portfolio of international investments becomes extensive in addition downside risk is an increasing function of the average cultural distance between a firm s home base and the host countries in which its foreign subsidiaries operate

real options and foreign affiliate divestments a portfolio perspective this paper develops a real options portfolio perspective on foreign affiliate divestments affiliates are less likely to be divested in response to adverse environmental change if they represent growth or switch option value to the multinational firm under conditions of macroeconomic uncertainty however the affiliate is partially redundant to the option value of the multinational firm s affiliate portfolio if the affiliate shares the manufacturing platform role in the host country with other affiliates or if macroeconomic conditions of the host country are highly correlated with those of other countries in which the multinational firm operates affiliates we find strong support for these arguments in tests on a comprehensive sample of 1078 asian manufacturing affiliates of japanese electronics multinationals

r d innovation and productivity new evidence from italian manufacturing microdata italian manufacturing firms have been losing ground with respect to many of their european competitors this article presents some empirical evidence on the effects of innovation on employment growth and therefore on firms productivity with the goal of understanding the roots of such poor performance we use firm level data from the last three surveys on italian manufacturing firms conducted by mediocredito capitalia which cover the period 1995 2003 using a slightly modified version of the model proposed by harrison jaumandreu mairesse and peters harrison et al 2005 which separates employment growth rates into those associated with old and new products we find no evidence of significant employment displacement effects stemming from process innovation the sources of employment growth during the period are split equally between the net contribution of product innovation and the net contribution from sales growth of old products however the contribution of product innovation to employment growth is somewhat lower than in the four european countries considered in harrison et al 2005 and the contribution of innovation in general to productivity growth is almost nil in italy during this period

operational hedges and the foreign exchange exposure of u s multinational corporations this paper examines the impact of operational hedges of us multinational corporations mncs on their exchange rate exposure the two important contributions of this study are first it documents the importance of operational hedges as significant determinants of exchange rate risk as measured by breadth and depth dimensions of the mnc foreign subsidiary network second this finding remains robust even after examining the impact of operational hedges on exposure separately for negatively and positively exposed mncs

human capital in multinational enterprises does strategic alignment matter this research proposes a strategic human capital alignment framework to examine whether the alignment between subsidiary strategy i e export oriented vs local market oriented strategy and human capital i e parent firm vs local specific human capital is positively related to subsidiary performance in multinational enterprises mnes we further explore two important exogenous i e foreign exchange rate change and endogenous i e mne international experience boundary conditions since they may adjust the positive effect of strategic human capital alignment on performance the analysis based on 5604 subsidiary observations of 423 mnes from 1990 to 2012 confirms the positive synergic effect of aligning subsidiary strategy and human capital and shows the moderating effects of foreign exchange rate change and mne international experience by presenting the importance of subsidiary strategy global staffing alignment and the roles of external economic environments and internal organizational capabilities as boundary conditions the strategic human capital alignment framework suggests that what makes human capital valuable for the firm is its alignment with strategic orientation thus managers should carefully deploy the appropriate type of human capital to fulfill the requisite organizational strategy and take into account changing external and internal contextual conditions in applying the framework

innovative activity over the business cycle this paper examines cyclical patterns of innovative activity in the united kingdom over the period 1948 83 innovative activity turns out to have many of the properties of a random walk but does show a tendency to cluster during booms there is clear evidence of a long term secular relation between the level of innovative activity and the level of economic activity although this may have changed in the 1980s finally the data provide no reason for thinking that these clusters of innovation cause cyclic variations in economic activity but variations in economic activity do granger cause changes in innovative activity copyright 1995 by royal economic society

a review of research on the growth of multinational enterprises a penrosean lens abstract we provide a comprehensive review of the growth of multinational enterprises mnes based on a quarter century 25 years of scholarly international business publications we synthesize research insights on the determinants of the growth of mnes through the lens of penrose s theory of firm growth which is the most influential theoretical perspective on firm growth the review takes stock of the research findings on the facilitators constraints and the trajectory of growth of mnes and elaborates on the commonalities and differences between research on the growth of mnes that draws on penrose s theory and research that does not this comparison highlights the opportunity to build an internally coherent theory of the growth of mnes that is a theory that connects what an mne is to what determines an mne s growth it also indicates that past research placed a strong emphasis on exogenous factors e g cross country distances as key constraints on growth even though the penrosean lens suggests a close consideration of endogenous factors that drive international growth as well as endogenizing the ostensibly exogenous growth determinants the review highlights the importance of firm specific managerial knowledge and learning which shapes the direction of the growth of mnes and ensures its administrative coherence

the corporate social performance financial performance link strategic managers are consistently faced with the decision of how to allocate scarce corporate resources in an environment that is placing more and more pressures on them recent scholarship in strategic management suggests that many of these pressures come directly from sources associated with social issues in management rather than traditional arenas of strategic management using a greatly improved source of data on corporate social performance this paper reports the results of a rigorous study of the empirical linkages between financial and social performance corporate social performance csp is found to be positively associated with prior financial performance supporting the theory that slack resource availability and csp are positively related csp is also found to be positively associated with future financial performance supporting the theory that good management and csp are positively related 1997 by john wiley sons ltd