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Voith Paper, one of the two big international suppliers of premium, technically complex machines for paper production, has to improve its profitability. This also affects Mr. Kohl, senior sales executive of the product division with the highest turnover. He, however, does not want to save the additional millions through cost or personnel reduction. Instead, he plans to sell the consulting services of his sales engineers and thus meet the financial target.

We explore the determinants of the willingness to rely on trust in a business partnership where both partners are at risk. By focusing on the willingness to rely on trust (WTRT) we reduce the methodological challenge of perception-based approaches where trust is measured as an expectation on the partner's behavior. Executives in several countries were presented with a proposal for a business partnership and were asked about the level of safeguards they would require in the agreement, their main concerns as to future conditions, and to what extent their views would be affected by several behaviors and/or events. Twelve hypotheses are tested using path analysis and multiple/hierarchical regressions. Whereas our findings confirm prior results on differences in the propensity to trust between nationalities, they suggest that several organizational, functional and contextual variables mediate their impact in determining WTRT in inter-organizational ventures. Among these are the partners' cultural proximity, their concerns about business risk, and two organizational demographics regarding the size of the organization. In addition, we found that sensitivity to external information on partner's benevolence and the respondent's education and industry affected WTRT significantly.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

We provide evidence of an inherent trade-off between access regulation and investment incentives in telecommunications by using a comprehensive data set covering 70+ fixed-line operators in 20 countries over 10 years. Our econometric model accommodates: different investment incentives for incumbents and entrants; a strategic interaction of entrants' and incumbents' investments; and endogenous regulation. We find access regulation to negatively affect both total industry and individual carrier investment. Thus promoting market entry by means of regulated access undermines incentives to invest in facilities-based competition. Moreover, we find evidence of a regulatory commitment problem: higher incumbents' investments encourage provision of regulated access.

This paper analyses how different types of access regulation to next generation networks affect investments and consumer welfare. The model consists of an investment stage with uncertain returns and subsequent quantity competition. The access price is a function of investment costs and the regulatory regime. A regime with fully distributed costs or a regulatory holiday induces highest investments, followed by risk-sharing and long-run-incremental cost regulation. Risk-sharing creates most consumer welfare, followed by regimes with fully distributed costs, long-run-incremental costs and regulatory holiday, respectively. Risk-sharing benefits consumers as it combines relatively high ex-ante investment incentives with strong ex-post competitive intensity.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

This paper asks whether adversity spurs the introduction of process innovations and increases the use of managerial incentives by firms. Using a large panel data set of workplaces in Canada, our identification strategy relies on exogenous variation in adversity arising from increased border security along the 49th parallel following 9/11. Our longitudinal difference-in-differences estimates indicate that firms responded to adversity by introducing new or improved processes, but did not change their use of managerial incentives. These results suggest that the threat of bankruptcy may provide impetus for improving efficiency.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).