Publication database

We offer theory and evidence about how the fit between firm experience (supply side) and consumer preferences (demand side) affects postentry performance into a new technology. Specifically, we explore different types of preentry experience (technological and market experience) and use different aspects of postentry performance to draw inferences about consumer heterogeneity. Preentry technological experience (same product and different consumers) helps firms attract a larger share of intensive users (aligning with early adopters) but only if they enter the market early when these adopters make decisions. Preentry market experience (different product and same consumers) helps firms attract a larger share of lighter users, consistent with characterizations of mass market users. Exploiting different components of firm performance in the global second-generation mobile telecommunications industry (average usage intensity and market penetration) allows us to articulate and identify the paths and mechanisms that allow preentry experience to affect postentry performance. The theory as well as important theoretical boundary conditions have implications for research on preentry experience, demand-side heterogeneity, and industry evolution.

© 2019, INFORMS

This paper analyzes the effect that the U.S. Supreme Court's landmark decision on Citizens United vs. FEC had on corporate political activism. The decision opened the door for corporate treasuries to engage in independent political spending. Politically connected firms have lower announcement returns at the ruling than non-connected firms. The estimates suggest that the value of a political connection decreases by $6.9 million. To evaluate the effect of Citizens United on corporate political activism, we explore the fact that Citizens United also lifts bans on independent political spending in states where such bans existed. After the ruling, firms headquartered in states where bans are lifted have fewer state-level connections relative to firms in other states. Overall, our evidence supports the hypothesis that independent political spending crowds out political connections. We do not find any significant crowding-out effects of independent political expenditures on lobbying activity, executive contributions, and political action committees (PAC) contributions.

With permission of Elsevier

Research has shown that hiring R&D scientists from competitors fosters organizational learning. We examine whether hiring scientists who have many collaborative ties with the hiring firm prior to the mobility event produces different learning outcomes than hiring scientists who have few or no such ties. We theorize that prior ties reduce explorative learning and increase exploitative learning. From our arguments we also derive other testable implications. Namely, we posit that prior ties lead the hiring firm to focus on that part of a new hire’s knowledge with which they are already familiar and that they help appropriate the new hire’s newly generated knowledge. At the same time, prior ties induce new hires to search locally within the hiring firm’s knowledge base and also to produce more incremental, lower-impact innovations. Using data on R&D scientists’ mobility in the Electronics and Electrical Goods industry, we find broad support for our hypotheses. Our results extend our theoretical understanding of learning-by-hiring processes and bear practical managerial implications.

With permission of SAGE Publishing

We study a firm's capacity choice under demand uncertainty given it must finance this investment externally.
Sharing profits with investors causes governance problems affecting both capacity and demand: the firm may “steal" capital, which reduces effective capacity, and \shirk" on market-development, which reduces demand. We adopt an optimal contracting approach whereby the firm optimizes among feasible financial claims derived endogenously. We characterize its optimal financing and capacity choices. First, debt financing is optimal: it minimizes the incentives to both divert and shirk. Second, the firm underinvests (overinvests) if the effort problem is mild (severe) enough relative to the diversion problem. Thus, a worsening of the same governance problem can lead to over- or underinvestment depending on circumstances. Third, we find that the diversion and shirking problems interact in their impact on capacity investment. In particular, if the shirking problem is mild enough, the more severe the diversion problem, the less the firm invests. However, if the shirking problem is severe enough, the effect of diversion is reversed: the more severe the diversion problem, the more the firm invests.

Copyright © 2019, INFORMS

This paper studies five mergers in the European wireless telecommunication industry and analyzes their impact on prices and capital expenditures of both merging carriers and their rivals. We find substantial heterogeneity in the relationship between increases in concentration and carriers’ prices. The specifics of each merger case clearly matter. Moreover, we find a positive correlation between the price and the investment effects; when the prices after merger increase (decrease), the investments increase (decrease) too. Thus, we document a trade-off between static and dynamic efficiencies of mergers.

Copyright © 2019, The Author(s)

How performance is perceived and attributed has important implications for strategizing. Much research in the cognitive and social sciences suggests that people tend to mistake luck for skill in evaluations and ignore how future performances regress to the mean. We argue that these systematic mistakes can be translated into an alternative source of profit: informed strategists can take advantage of others’ misattributions of luck by exploiting the false expectations and mispricing in strategic factor markets. We also discuss the learning and interdependency barriers that protect, and thus predict the attractiveness of, a behavioral opportunity and suggest approaches to help overcome these behavioral barriers.

With permission of the Academy of Management

We consider a principal repeatedly allocating a single resource in each period to one of multiple agents, whose values are private, without relying on monetary payments over an infinite horizon with discounting. We design a dynamic mechanism without monetary transfers, which induces agents to report their values truthfully in each period via promises/threats of future favorable/unfavorable allocations. We show that our mechanism asymptotically achieves the first-best efficient allocation (the welfare-maximizing allocation as if values are public) as agents become more patient and provide sharp characterizations of convergence rates to first best as a function of the discount factor. In particular, in the case of two agents we prove that the convergence rate of our mechanism is optimal, i.e., no other mechanism can converge faster to first best.

Copyright © 2019, INFORMS