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on Business Economics |
| By: | John W. Keating (Department of Economics, The University of Kansas); Victor J. Valcarcel (Department of Economics, Texas Tech University) |
| Abstract: | Annual changes in volatility of U.S. real output growth and inflation are documented in data from 1870 to 2009 using a time varying parameter VAR model. Both volatilities rise quickly with World War I and its aftermath, stay relatively high until the end of World War II and drop rapidly until the mid to late-1960s. This Postwar Moderation represents the largest decline in volatilities in our sample, much greater than the Great Moderation that began in the 1980s. Fluctuations in output growth volatility are primarily associated with permanent shocks to output while fluctuations in inflation volatility are primarily accounted for by temporary shocks to output. Conditioning on temporary shocks, inflation and output growth are positively correlated. This finding and the ensuing impulse responses are consistent with an aggregate demand interpretation for the temporary shocks. Our model suggests aggregate demand played a key role in the changes in inflation volatility. Conversely, the two variables are negatively correlated when conditioning on permanent shocks, suggesting that these disturbances are associated primarily with aggregate supply. Our results suggest that aggregate supply played an important role in output volatility fluctuations. Most of the impulse responses support an aggregate supply interpretation of permanent shocks. However, for the pre-World War I period, we find that at longer horizons a permanent increase in output is generally associated with an increase in the price level that is frequently statistically significant. This evidence suggests aggregate demand may have had a long-run positive effect on output during the pre-World War I period. |
| Keywords: | The Great Moderation, stochastic volatility, permanent-transitory decompositions, Markov Chain Monte Carlo, structural vector autoregressions. |
| JEL: | E30 E31 E65 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:201203&r=bec |
| By: | Gellatly, Guy<br/> Macdonald, Ryan |
| Abstract: | This paper highlights the large progressive decline in Canada's net financial liabilities to non-residents that has occurred over the last fifteen years. It reports tabulations on changes in Canada's international investment position and the associated cross-border income flows, and evaluates the extent to which these investment income flows have affected the size of Canada's gross national income relative to its gross domestic income. The paper also examines the extent to which changes in Canada's net international investment position have increased the national net worth of Canadians relative to the country's stock of national wealth. |
| Keywords: | Economic accounts, Balance of international payments |
| Date: | 2012–02–29 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp5e:2012077e&r=bec |
| By: | Stefano Cascino; Joachim Gassen |
| Abstract: | The mandatory adoption of IFRS by many countries worldwide fuels the expectation that financial accounting information might become more comparable across countries. This expectation is opposed to an alternative view that stresses the importance of incentives in shaping accounting information. We provide early evidence on this debate by investigating the effects of mandatory IFRS adoption on the comparability of financial accounting information around the world. Using two comparability proxies based on De Franco et al. [2011], our results suggest that the overall comparability effect of mandatory IFRS adoption is marginal at best. To investigate the reasons for this finding, we first hand-collect data on IFRS compliance for a sample of German and Italian firms and find that firm-, region-, and country-level incentives systematically shape accounting compliance. We then use the identified compliance incentives to explain the variance in the comparability effect of mandatory IFRS adoption and find it to vary systematically with firm-level incentives, suggesting that only firms with high compliance incentives experience substantial increases in comparability. |
| Keywords: | international accounting, IFRS, comparability, accounting harmonization, financial accounting compliance, reporting incentives |
| JEL: | M41 G14 F42 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2012-009&r=bec |
| By: | Alice Albonico (Department of Economics, University of Pavia); Sarantis Kalyvitis (Department of International and European Economic Studies, Athens University of Economics and Business); Evi Pappa (European University Institute, Department of Economics) |
| Abstract: | Conventional RBC models have been heavily criticized for their inability to generate the estimated negative correlations of hours and productivity in response to technology shocks ('productivity-hours puzzle'). In this paper we show that by just enhancing the standard frame- work with investment adjustment costs can resolve the 'productivity-hours puzzle'. |
| Keywords: | technology shocks; productivity-hours puzzle; investment adjustment costs; wealth effect. |
| JEL: | E22 E32 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:pav:wpaper:164&r=bec |
| By: | Claudio Morana (Università di Milano Bicocca, CeRP-Collegio Carlo Alberto, Fondazione Eni Enrico Mattei and International Centre for Economic Research Abstract: What is the role of financial speculation in determining the real oil price? We find that while macroeconomic shocks have been the major upward driver of the real oil price since the mid 1980s, also financial shocks have sizably contributed since the early 2000s, and at a much larger extent since the mid 2000s: over the period 2004:1 through 2010:3, the real oil price increased 65%; of the latter, 33% is related to fundamental financial shocks, 11% to non fundamental financial shocks, with macroeconomic and oil market supply side shocks contributing with a 5% and 3% increase, respectively. Yet, it would be inaccurate describing the third oil price shock as a purely financial episode: macroeconomic shocks largely accounted for the 65% real oil price run up over the 2007(2)-2008 (2) period, and similarly for the -67% and -31% contractions in 2008(4) and 2009(1); only over the 2009(2) through 2009(4) period macroeconomic and financial shocks equally contributed to the 54% real oil price increase. Hence, while we find support to the demand side view of real oil price determination, we also find a much larger role for financial shocks than previously noted in the literature.) |
| Keywords: | Oil Price, Financial speculation, Macro-finance Interface, International Business Cycle, Factor Vector Autoregressive Models |
| JEL: | C22 E32 G12 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2012.07&r=bec |
| By: | John Van Reenen; Linda Yueh |
| Abstract: | Chinese economic growth has been spectacular in the last 30 years. We investigate the role of International Joint Ventures with Technology Transfer agreements, an understudied area. Technology transfer is the traditional mechanism for developing countries to “catch up” and has been a key component of Chinese economic policy. We collect original survey data on Chinese firms and their joint ventures and match this to administrative data on firm performance. To identify the causal effect of joint ventures we use time-varying and province-specific policies at the time when a firm was born. International joint ventures in general and I have large effects on productivity especially when combined with a technology transfer component. We estimate that without International joint ventures China’s growth would have been about one percentage point lower per annum over the last three decades. |
| Keywords: | China, Technology transfer, Joint ventures, Productivity |
| JEL: | O32 O33 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:592&r=bec |
| By: | Palmberg, Johanna (The Ratio Institute) |
| Abstract: | This paper examines the relationship between the board-member independence, family control, and financial performance in Swedish listed firms. The degree of independence is defined with respect to the principal owners, the management of the firm, and the employees. The definition of independence, as applied by the Swedish Code of Corporate Governance, together with good accessibility of detailed data on corporate governance variables, makes it possible to apply a precise measure of board-member independency. <p> The analysis indicates that directors, dependent on the management of the firm dominates the board of director. Board-member independency is found positively affect a firm's financial performance. The negative effect of board-member dependency originates from the firm-related directors whereas dependency on principal owners, families, and employees does not have any impact on the firm investment performance. The results are important in the contemporary political debate about the role of the board of directors as well as its composition. The analysis shows that the definition of independency is important when discussing the board of directors; directors, independent of the firm, not on principal owners, influence the firm investment performance positively. |
| Keywords: | Board Dependency; Family Control; Returns on Investment; Marginal q |
| JEL: | G30 L20 L21 L22 L25 |
| Date: | 2012–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0187&r=bec |
| By: | Palmberg, Johanna (The Ratio Institute) |
| Abstract: | This paper examines the effect of family ownership and control on executive compensation in listed firms during the period 2003-2008. The descriptive statistics show that CEOs in non-family-controlled firms have a significantly higher share of variable compensation than CEOs in family-controlled firms, they also receive remuneration in stock options relatively more often. The econometric analysis shows that family control and ownership concentration reduce CEO compensation whereas multiple-class shares increase the level of compensation. In line with the findings of previous research, firm size and performance are positively related to CEO compensation. |
| Keywords: | Corporate governance; executive compensation; family ownership |
| JEL: | G30 L20 L21 L22 L25 |
| Date: | 2012–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0186&r=bec |
| By: | Luciano Fanti (Department of Economics, University of Pisa, Italy); Nicola Meccheri (Department of Economics, University of Pisa, Italy) |
| Abstract: | In this paper, we aim at investigating if the conventional wisdom, that an increase of competition linked to a decrease in the degree of product differentiation always reduces firms’ profits, remains true in a unionized duopoly model with labour decreasing returns. In this context, mixed results emerge. In particular, we show that a decrease in the degree of product differentiation may affect wages, hence profits, differently, depending on both the mode of competition in the product market (Cournot or Bertrand competition) and the particular unionization structure (firm-specific or industry-wide union(s)). Interestingly, it is shown that the conventional wisdom can actually be reversed, even if under Bertrand competition only. |
| Keywords: | unionized duopoly, labour decreasing returns, product differentiation, profits |
| JEL: | J43 J50 L13 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:06_12&r=bec |
| By: | Luciano Fanti (Department of Economics, University of Pisa, Italy); Nicola Meccheri (Department of Economics, University of Pisa, Italy) |
| Abstract: | This paper studies a three-stage duopoly game with managerial delegation and (monopoly) unions that can be either decentralized or industry-wide. Main findings point out the opposite role played by the introduction of managerial delegation according to the different nature of unionization structure. Indeed, while under industry-wide union managerial delegation leads to incentives for sales, lower profits and higher consumer surplus as well as overall welfare, in the presence of decentralized (firm-specific) unions all those results are reversed. Moreover, and most importantly, introducing managerial delegation makes unionization structure neutral in relation to consumer’s surplus and overall efficiency. |
| Keywords: | managerial delegation, unionized duopoly, union’s structure |
| JEL: | J51 L13 L21 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:07_12&r=bec |
| By: | Alice Albonico (Department of Economics and Quantitative Methods, University of Pavia); Sarantis Kalyvitis (Department of International and European Economic Studies, Athens University of Economics and Business); Evi Pappa (Departament de Economia y d’Historia Economica, Universitat Autonoma de Barcelona and CEPR) |
| Abstract: | We develop a stochastic general equilibrium model in which maintenance endogenously affects the capital depreciation rate. The model performs well in generating maintenance series that match closely existing survey-based measures for Canada. Maintenance is procyclical and comoves almost always with output. Investmentspecific shocks are the only disturbances that induce a negative correlation between output and maintenance. This feature is crucial for the identification of such shocks in the short run. We use Bayesian estimation to obtain the time profile of equipment capital depreciation in Canadian manufacturing. The depreciation rate has been quite volatile and procyclical over the last 50 years. |
| Keywords: | real business cycle, technology shocks, endogenous capital depreciation, maintenance |
| JEL: | E22 E32 E37 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:pav:wpaper:147&r=bec |
| By: | Ahmet Ozkardas (Turgut Özal Üniversitesi - Iktisadi ve Idari Bilimler Fakültesi, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | In this paper, we present a non-cooperative wage bargaining model in which preferences of both parties, a union and a firm, are expressed by sequences of discount factors varying in time. We determine subgame perfect equilibria for three cases when the strike decision of the union is exogenous : the case when the union is supposed to go on strike in each period in which there is a disagreement, the case when the union is committed to go on strike only when its own offer is rejected, and the case when the union is supposed to go never on strike. |
| Keywords: | Union, firm bargaining, strike, alternating offers, varying discount rates, subgame perfect equilibrium. |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00674033&r=bec |
| By: | Frederiksen, Anders (Aarhus School of Business); Lange, Fabian (Yale University); Kriechel, Ben (ROA, Maastricht University) |
| Abstract: | Firms commonly use supervisor ratings to evaluate employees when objective performance measures are unavailable. Supervisor ratings are subjective and data containing supervisor ratings typically stem from individual firm level data sets. For both these reasons, doubts persist on how useful such data are for evaluating theories in personnel economics and whether findings from such data generalize to the labor force at large. In this paper, we examine personnel data from six large companies and establish how subjective ratings, interpreted as ordinal rankings of employees within narrowly defined peer-groups, correlate with objective career outcomes. We find many similarities across firms in how subjective ratings correlate with earnings, base pay, bonuses, promotions, demotions, separations, quits and dismissals and cautiously propose these as empirical regularities. |
| Keywords: | subjective performance ratings, personnel data, employee careers, career outcomes, incentives, employer learning |
| JEL: | M5 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6373&r=bec |
| By: | Arita, Shawn; Tanaka, Kiyoyasu |
| Abstract: | During the past decade of declining FDI barriers, small domestic firms disproportionately contracted while large multinational firms experienced a substantial growth in Japan’s manufacturing sector. This paper quantitatively assesses the impact of FDI globalization on intra-industry reallocations and aggregate productivity. We calibrate the firm-heterogeneity model of Eaton, Kortum, and Kramarz (2011) to micro-level data on Japanese multinational firms. Estimating the structural parameters of the model, we demonstrate that the model can strongly replicate the entry and sales patterns of Japanese multinationals. Counterfactual simulations show that declining FDI barriers lead to a disproportionate expansion of foreign production by more efficient firms relative to less efficient firms. A hypothetical 20% reduction in FDI barriers is found to generate a 30.7% improvement in aggregate productivity through market-share reallocation. |
| Keywords: | Japan, International business enterprises, Foreign investments, Manufacturing industries, Industrial management, Multinational firms, FDI, Firm heterogeneity, Investment Liberalization |
| JEL: | F10 F23 L23 R12 R30 L25 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper324&r=bec |
| By: | Hubert De La Bruslerie (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine); Imen Latrous (Département de sciences économiques et administratives - Université du Québec à Chicoutimi - Département de sciences économiques et administratives) |
| Abstract: | Debt may help to manage type II corporate agency conflicts because it is easier for controlling shareholders to modify the leverage ratio than to modify their share of capital. A sample of 112 firms listed on the French stock market over the period 1998-2009 is empirically tested. It supports an inverted U-shape relationship between shareholders' ownership and leverage. At low levels of ownership, controlling shareholders use more debt in order to inflate their stake in capital and to resist unfriendly takeovers attempts. When ownership reaches a certain point, controlling shareholders' objectives further converge with those of outside shareholders. Moreover, financial distress will prompt controlling shareholders to reduce the firm's leverage ratio. Empirically, it is shown that the inflection point where the sign of the relationship between ownership and debt changes is around 40%. Debts may help in curbing private appropriation and appears also as a governance variable. |
| Keywords: | Corporate Governance, Private Benefits, Controlling Shareholders, Debt Leverage |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00674250&r=bec |
| By: | Fabian Jintae Froese (Korea University Business School); Ralf Bebenroth (Research Institute for Economics and Business Administration, Kobe University, Nada-ku, Kobe, Japan) |
| Abstract: | Leadership succession has been an important topic for research and management practice because of its effect on firm performance. This study integrates leadership succession and expatriate staffing literatures by investigating performance outcomes of leadership succession at foreign subsidiaries in Japan. We distinguished four types of CEO successors: expatriate followers (expatriate succeeds another expatriate), localizers (local manager succeeds an expatriate), local followers (local manager succeeds another local manager), and ambassadors (expatriate succeeds a local manager). Our theory and evidence from 2,113 firm-year observations, including 521 successions, suggests that successor types have direct and moderating effects with contextual firm-level factors on subsidiary performance. We extend agency theory by showing that both local and foreign subsidiary CEOs pursue their own, unique interests affecting firm performance in different ways. |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2012-07&r=bec |
| By: | Jose Luis Groizard (Department of Economics, Universitat de les Illes Balears); Priya Ranjan (Department of Economics, University of California-Irvine); Jose Antonio Rodriguez-Lopez (Department of Economics, University of California-Irvine) |
| Abstract: | We present theory and evidence of the impact of input trade costs on job flows. Our heterogeneous-firm model with heterogeneous offshoring costs derives effects of input trade costs on both the extensive (due to births and deaths of firms) and intensive (due to expansions and contractions of firms) margins of employment. After a decline in input trade costs, the model predicts job destruction by death and contraction for non-offshoring firms, an ambiguous response for offshoring firms, a decline in the number of firms, and overall job destruction. Using a longitudinal database containing the universe of manufacturing establishments in California from 1992 to 2004, we find strong support for the model's establishment-level predictions, and mild support for the industry-level predictions. |
| Keywords: | Input trade costs; Offshoring; Heterogeneous firms; Job flows |
| JEL: | F12 F14 F16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:111208&r=bec |
| By: | Luis Garicano; Claire Lelarge; John Van Reenen |
| Abstract: | A major empirical challenge in economics is to identify how regulations (such as firing costs) affect economic efficiency. Almost all countries have regulations that increase costs when firms cross a discrete size threshold. We show how these size-contingent regulations can be used to identify the equilibrium and welfare effects of regulation through combining a new model with the firm-level distributions of size and productivity. Our framework adapts the Lucas (1978) model to a world with size-contingent regulations and applies this to France where there are sharp increases in firing costs (which we model as a labor tax) when firms employ 50 or more workers. Using administrative data on the population of firms 2002 through 2007, we show how this regulation has major effects on the distribution of firm size (a "broken power law") and productivity. We then econometrically recover the key parameters of the model in order to estimate the costs of regulation which appear to be nontrivial. |
| Keywords: | Firm size, productivity, labor regulation, power law |
| JEL: | L11 L51 J8 L25 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1128&r=bec |
| By: | Corcos, G.; Irac, D.; Mion, G.; Verdier, T. |
| Abstract: | How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation. |
| Keywords: | intrafirm trade; outsourcing; firm heterogeneity; incomplete contracts; internationalization strategies; quality of institutions, extensive margin, intensive margin. |
| JEL: | F23 F12 F19 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:362&r=bec |
| By: | Ljungquist, Urban (CSIR, Blekinge Inst of Technology); Ghannad, Navid (Halmstad University) |
| Abstract: | • Purpose: To identify facilitating and redundant components of core competence development during the growth phases in entrepreneur-driven SMEs. • Methodology: Conducts a longitudinal empirical study based on large number of interviews. • Findings: Describes how individual competences critical for a start-up firm (entrepreneurial, market and network) eventually are transformed into organisational routines and institutionalised. Highlights distinction between competence and organisational structure. The latter could emerge incrementally in a firm, yet also be a tool to manage organisational change. • Research limitations/implications: Brings in-depth knowledge by qualitative analysis. Future studies should test our findings in large-scale study with quantitative analysis. • Practical implications: A start-up built on technology competence needs to combine with market competences, preferably in parallel, or in sequence, for ideal core competence development. To expand further, the entrepreneur ultimately must step down. Important to balance the firm's ambidexterity by adding exploitation to the initial exploration. To boost expansion further, explicate visions and policies must be added, which will guide and release employees' innovative drive. • Social implications: Suggests how entrepreneurial spirits could be transformed to facilitate growth beyond small firm size. • Originality/value: Informs scholars and managers of core competence facilitators during SMEs growth phases. |
| Keywords: | SME; growth; core competence; entrepreneurial; case study; Sweden |
| JEL: | M13 |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bthcsi:2012-001&r=bec |
| By: | David Bartolini (Department of Economics, Università Politecnica delle Marche.); Alberto Gaggero (Department of Economics, University of Pavia) |
| Abstract: | This paper conducts an empirical analysis of the determinants of airline alliances. Well established airlines with large passengers' volumes are more likely to participate in an alliance and are also essential for alliance survivability. In line with this finding, older air-lines have a higher probability of being part of an alliance. Airlines operating with high load factors consider alliance participation as a significant alternative to fleet capacity expansion. As their market share grows, alliances become more appealing to airlines. Competitors' decision to enter an alliance tends to have a positive impact on alliance participation. The relatively similar magnitude and effect of the regressors' coefficients across different alliance choices, suggests that the airline's major decision is not to choose a specific alliance, but rather considering whether to enter into an alliance, as a possible strategy within its business model. |
| Keywords: | Discrete choice model, Oneworld, Sky Team, Star Alliance. |
| JEL: | C23 L10 L93 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:pav:wpaper:165&r=bec |
| By: | Emin Dinlersoz (Bureau of the Census); Jeremy Greenwood (University of Pennsylvania) |
| Abstract: | Union membership displayed an inverted-U-shaped pattern over the 20th century, while the distribution of income sketched a U. A model of unions is developed to analyze these phenomena. There is a distribution of firms in economy. Firms hire capital, plus skilled and unskilled labor. Unionization is a costly process. A union decides how many firms to organize and its members' wage rate. Simulation of the developed model establishes that skilled-biased technological change, which affects the productivity of skilled labor relative to unskilled labor, can potentially explain the above facts. Statistical analysis suggests that skill-biased technological change is an important factor in de-unionization. |
| Keywords: | Computers; Distribution of Income; Flexible Manufacturing; Mass Production; Numerically Controlled Machines; Panel-Data Regression Analysis; Relative Price of New Equipment; Skill-Biased Technological Change; Simulation Analysis; Union Coverage; Union Membership; Deunionization |
| JEL: | J51 J24 L23 L11 L16 O14 O33 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:eag:rereps:19&r=bec |
| By: | Kawakami, Momoko |
| Abstract: | This paper explores the process of creation of the netbook market by Taiwanese firms as an example of a disruptive innovation by latecomer firms. As an analytical framework, I employ the global value chain perspective to capture the dynamics of vertical inter-firm relationships that drive some firms in the chain to change the status quo of the industry. I then divide the process of the emergence of the netbook market into three consecutive stages, i.e. (1) the launch of the first-generation netbook by a Taiwanese firm named ASUSTeK, (2) the response of the two powerful platform leaders of the industry, Intel and Microsoft Intel, to ASUSTeK’s innovation, and (3) the market entry by another powerful Taiwanese firm, Acer, and explain how Taiwanese firms broke the Intel-centric market and tapped into the market-creating innovation opportunities that had been suppressed by the two powerful platform leaders. I also show that the creation of the netbook industry was an evolutionary process in which a series of responses by different industry players led to changes in the status quo of the industry. |
| Keywords: | Taiwan, Information services industry, Computer, Industrial technology, Marketing, Market share, Industrial management, Disruptive innovation, Latecomer firms, Global value chains, The PC industry |
| JEL: | L63 O51 O53 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper325&r=bec |
| By: | Hubert De La Bruslerie (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine) |
| Abstract: | The leveraging of control is the possibility for the controlling shareholder to lower her direct participation in capital through a convergence of financial and economic interest with other shareholders or would-be shareholders in the firm. In this paper, the setting of a coalition contract is done by awarding stocks to managers and employees. This article analyses it, on one side, in a rationale of economic incentive and, on the other side, in a rationale of political coalition of the initial dominant shareholder with managers and employees. It is shown that the two logics are not opposite but complementary. The sharing of the private benefits between members of the new coalition is at the heart of a new implicit contract. The initial controlling shareholder "buys" efficient efforts by awarding a stake of capital to managers or employees, but also by allowing them to share a part of the private benefits and to join a new dominant group. Even if the effort function of the employees is not productive nor observable, a targeted broad diffusion of new stocks may still respect the coherence between an economic incentive rationale and a political substitution rationale. At the end, we introduce the idea of political management of the leverage of control. |
| Keywords: | Ownership structure, private benefits, stock ownership plans, employees' incentives, coalition contract, control |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00636608&r=bec |