a review of wta wtp studies abstract willingness to accept wta is usually substantially higher than willingness to pay wtp these constructs have been studied for roughly 30 years and with a wide variety of goods this paper reviews those studies we find that the less the good is like an ordinary market good the higher is the ratio the ratio is highest for non market goods next highest for ordinary private goods and lowest for experiments involving forms of money a generalization of this pattern holds even when we account for differences in survey design ordinary goods have lower ratios than non ordinary ones we also find that ratios in real experiments are not significantly different from hypothetical experiments and that incentive compatible elicitation yields higher ratios

an equilibrium model of incentive contracts in the presence of information manipulation abstract this paper develops an agency model in which stock based compensation is a double edged sword inducing managers to exert productive effort but also to divert valuable firm resources to misrepresent performance we examine how the potential for manipulation affects the equilibrium level of pay for performance sensitivity and derive several new cross sectional implications that are consistent with recent empirical studies in addition we analyze the impact of recent regulatory changes contained in the sarbanes oxley act of 2002 and show how policies intended to increase firm value by reducing misrepresentation can actually reduce firm value or increase the upward bias in manipulated disclosures

a reference price theory of the endowment effect abstract the common finding that selling prices exceed buying prices the so called endowment effect is typically explained by the assumptions that consumers evaluate potential transactions with respect to their current holdings and that the owners of a good regard its potential loss to be more significant than nonowners regard its potential acquisition in contrast to this pain of losing account the authors propose that the endowment effect reflects a reluctance to trade on terms that appear unfavorable with respect to salient reference prices in six experiments and eight more summarized in appendixes the authors show that manipulations that reduce the gap between valuations and reference prices reduce or eliminate the endowment effect these results suggest that the endowment effect is often best construed as an aversion to bad deals rather than an aversion to losing possessions

asset stocks and sustained competitive advantage a comment in their paper dierickx and cool suggest that the strategic factor markets model developed in barney barney j b 1986a strategic factor markets expectations luck and business strategy management sci october 1231 1241 cannot be applied in the analysis of sustained competitive advantages due to asset stocks accumulated over time in this comment it is shown that the discussion of asset stocks extends and complements rather than limits the strategic factor markets model this is done by analyzing how the strategic factor markets model can be used to examine the cost of accumulating asset stocks over long periods of time and how these costs will compare to the value of strategies that are implemented exploiting these asset stocks

overestimating others willingness to pay this article documents a widespread bias a tendency to overestimate how much others will pay for goods the effect may influence pricing and negotiations which depend on accurate assessments of others valuations it is also shown to underlie or interact with several widely researched behavioral phenomena including egocentric empathy gaps the endowment effect and the false consensus effect

does corporate strategy matter a revisionist view that corporate strategy does not matter has gained considerable influence in recent years this view largely stems from empirical results of early variance decomposition studies that found negligible corporate effects associated with profitability differences between businesses our analysis of the variance decomposition literature shows this view to be incorrect not only do the studies as a group show that factors at the corporate level of organizations contribute to profitability differences but also evidence suggests that factors specifically associated with corporate strategy contribute to corporate effects corporate strategy in fact does matter copyright 2001 john wiley sons ltd

the dynamic value of hierarchy this study develops a dual routines view of the dynamic value of hierarchy and tests it against the implicit null hypothesis that hierarchy merely provides static advantages over markets the view holds that hierarchical managers perform two roles that create value for firms in perpetuity an administrative role of enforcing operational routine and an entrepreneurial role of executing a metaroutine that continually revises operational routine to keep pace with changes in the environment the test consists of a natural experiment comparing the behavior and performance of establishments that leave a franchise lose their hierarchical managers with those that remain i find support for the view in the absence of the franchisor establishment behavior drifts from the operational routine and establishments fail to adopt innovation both responses lead to significant decay in performance thus hierarchical managers are necessary to actively enforce routine even after the routine been assimilated and to introduce innovation even in this unique setting of perfect incentives

markets vs management what drives profitability this study addresses the issue of the relative degree of variance in roa accounted for by industry corporate and sbu effects while controlling for the business cycle and the interaction between the business cycle and industry two key articles schmalensee 1985 and rumelt 1991 are discussed in detail research results on a recent data base compustat using variance components analysis varcomp are presented that not only confirm most of the rumelt 1991 findings but also suggest the existence of a corporate effect heretofore undetected

what does a small corporate effect mean a variance components simulation of corporate and business effects in a widely cited paper rumelt 1991 presents estimates of the relative influence of corporate business unit and other influences on business unit profitability and finds the corporation explains almost none of the variability in business unit profitability using a monte carlo simulation we examine the relation of variance component magnitudes to other indicators of the importance of a particular effect our results demonstrate that variance components can be an extremely nonlinear indicator of importance we also question whether rumelt s corporate effect represents the possible contributions of corporate strategy to business unit performance this addresses a puzzle raised by rumelt 1991 concerning the small effect of corporations in explaining performance and suggests that rumelt s findings should not be seen as demonstrating the insignificance of corporate strategy 1997 john wiley sons ltd

tobin s q and the importance of focus in firm performance using tobin s q as a measure of performance we seek to estimate the relative importance of industry focus and share effects in determining firm performance our methods are analogous to those of richard schmalensee and like him we find that industry effects account for the majority of the explained variance however we also find that firm effects exist in the form of focus effects that is narrowly diversified firms do better than widely diversified firms we interpret this finding as consistent with profit maximization by firms with different factor endowments

elicitation formats and the wta wtp gap a study of climate neutral foods we conduct a field valuation experiment where we vary the valuation method contingent valuation vs inferred valuation as well as the payment format dichotomous choice vs payment card willingness to accept and willingness to pay valuations are elicited in a within subjects design for foods with climate neutral labels we find a similar gap for valuations elicited with the contingent or the inferred valuation method however we also find that the gap can be muted by using a payment card elicitation format

network location and learning the influence of network resources and firm capabilities on alliance formation this paper presents a dynamic firm level study of the role of network resources in determining alliance formation such resources inhere not so much within the firm but reside in the interfirm networks in which firms are placed data from extensive fieldwork show that by influencing the extent to which firms have access to information about potential partners such resources are an important catalyst for new alliances especially because alliances entail considerable hazards this study also assesses the importance of firms capabilities with alliance formation and material resources as determinants of their alliance decisions i test this dynamic framework and its hypotheses about the role of time varying network resources and firm capabilities with comprehensive longitudinal multi industry data on the formation of strategic alliances by a panel of firms between 1970 and 1989 the results confirm field observations that accumulated network resources arising from firm participation in the network of accumulated prior alliances are influential in firms decisions to enter into new alliances this study highlights the importance of network resources that firms derive from their embeddedness in networks for explaining their strategic behavior copyright 1999 john wiley sons ltd

mispredicting others valuations self other difference in the context of endowment the authors argue that people systematically fail to predict how much others in the same role i e owner or buyer value an object due to self other differences in valuation arising from intra role empathy gaps across five studies in an endowment context owners consistently underestimate the average selling price demanded by other owners whereas buyers overestimate the average purchase price offered by other buyers by over 20 participants however make more accurate predictions of the valuation of others in the same role when either a an external influence i e similarity priming or b their high cognitive and emotional tendency to connect with others leads to a reduction in empathy gaps implications for theory and practice are discussed

dynamic capabilities what are they this paper focuses on dynamic capabilities and more generally the resource based view of the firm we argue that dynamic capabilities are a set of specific and identifiable processes such as product development strategic decision making and alliancing they are neither vague nor tautological although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence they have significant commonalities across firms popularly termed best practice this suggests that they are more homogeneous fungible equifinal and substitutable than is usually assumed in moderately dynamic markets dynamic capabilities resemble the traditional conception of routines they are detailed analytic stable processes with predictable outcomes in contrast in high velocity markets they are simple highly experiential and fragile processes with unpredictable outcomes finally well known learning mechanisms guide the evolution of dynamic capabilities in moderately dynamic markets the evolutionary emphasis is on variation in high velocity markets it is on selection at the level of rbv we conclude that traditional rbv misidentifies the locus of long term competitive advantage in dynamic markets overemphasizes the strategic logic of leverage and reaches a boundary condition in high velocity markets copyright 2000 john wiley sons ltd

a capability based view of competitive heterogeneity the question of how firms differ is paramount to strategy scholars this question has motivated empirical research on the factors influencing performance differences among close competitors it also has motivated work on factors that increase or decrease the mean performance of firms in an industry theories about resources and capabilities tend to dominate discussions of heterogeneity in performance and superior performance yet the strategy field lacks a cumulative body of empirical work showing how firms differ this article derives conclusions and questions from empirical work on capabilities we then discuss work that complements but lies beyond the boundaries of traditional capabilities research we conclude by suggesting approaches to and areas of future work

the capabilities of new firms and the evolution of the us automobile industry firms that diversify into new and existing industries typically outperform de novo entrants but in some new industries diversifying firms are displaced by later entering de novo firms little is known about when and how new firms can overcome the advantages of diversifying firms this is investigated for one industry automobiles where new firms had considerable success all the entrants into the industry from its inception in 1895 through 1966 are identified the heritage of every entrant into the industry is traced including the founders of de novo entrants to explore how time of entry and pre entry experience affected firm survival while diversifying firms on average outperformed de novo entrants de novo entrants founded by individuals that worked for the leading automobile firms outperformed all firms and dominated the industry this is attributed to the novel organizational challenges faced by automobile firms which made the leading firms ideal training grounds for new entrants the implications of these findings for firm capabilities industry competition and regional economic development are discussed copyright 2002 oxford university press

unraveling the process of creative destruction complementary assets and incumbent survival in the typesetter industry when radical technological change transforms an industry established firms sometimes fail drastically and are displaced by new entrants yet other times survive and prosper drawing upon an unusually rich data set that covers the technological and competitive history of the typesetter industry from 1886 to 1990 this paper uses a combination of quantitative and qualitative analysis to unravel this process of creative destruction it argues that the ultimate commercial performance of incumbents vs new entrants is driven by the balance and interaction of three factors investment technical capabilities and appropriability through specialized complementary assets in this industry specialized complementary assets played a crucial role in buffering incumbents from the effects of competence destruction and an analysis that examined investment or technical capabilities in isolation would have led to misleading results this work thus highlights the importance of considering multiple perspectives when examining the competitive implications of technological change 1997 by john wiley sons ltd

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

towards an economic theory of the multiproduct firm this paper outlines a theory of the multiproduct firm important building blocks include excess capacity and its creation market imperfections and the peculiarities of organizational knowledge including its fungible and taut character a framework is adopted in which profit seeking firms are seen to diversify in order to avoid the high transactions costs associated with using various markets to trade the services of various specialized assets neoclassical explanations of the multiproduct firm are shown to be seriously deficient

diversification ricardian rents and tobin s q according to prevailing theory firms diversify in response to excess capacity of factors that are subject to market failure by probing into the heterogeneity of these factors we develop the corollary that firms that elect to diversify most widely should expect the lowest average rents an empirical test with tobin s q as the measure of rents is consistent with this theory

the relative influence of industry and corporation on business segment performance an alternative estimate rumelt s 1991 widely cited paper presents estimates of the relative influence of industry corporate business unit and other influences on business unit profitability he finds corporations explain almost none of the variability in business unit profitability using a simultaneous equation model we provide alternative estimates of the influence of industry and corporation on business unit performance we find that both corporations and industries influence business unit profitability but corporations have the larger influence copyright 1999 john wiley sons ltd