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This paper studies the interplay between the operational and financial facets of capacity investment. We consider the capacity choice problem of a firm with limited liquidity and whose access to external capital markets is hampered by moral hazard. The firm must therefore not only calibrate its capacity investment and the corresponding funding needs, but also optimize its sourcing of funds. Importantly, the set of available sources of funds is derived endogenously and includes standard financial claims (debt, equity, etc.). We find that when higher demand realizations are more indicative of high effort, debt financing is optimal for any given capacity level. In this case, the optimal capacity is never below the efficient capacity level but sometimes strictly above that level. Further, the optimal capacity level increases with the moral hazard problem's severity and decreases with the firm's internal funds. This runs counter to the newsvendor logic and to the common intuition that by raising the cost of external capital and hence the unit capacity cost, financial market frictions should lower the optimal capacity level. We trace the value of increasing capacity beyond the efficient level to a bonus effect and a demand elicitation effect. Both stem from the risk of unmet demand, which is characteristic of capacity decisions under uncertainty.

 

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The case deals with a dramatic series of suicides at France Télécom between 2008 and 2009. Over a period of 18 months preceding the date of the opening lines of the case, 23 France Télécom employees took their lives. Many of the deceased had left notes blaming work-related stress or management decisions as the reasons for their extreme actions. The French government found it necessary to intervene and demand France Télécom’s management to indicate to the workforce and society that they were taking the situation seriously. The case briefly describes the history of France Télécom, the change initiatives following the deregulation of the European telecommunications industry, and the development of the attention of the French nation and international public toward the company in the aftermath of the suicides and suicide attempts. The case closes citing the response of the government, the company, the unions, psychologists, and stock analysts after a crisis meeting between French Labor Minister Xavier Darcos and France Télécom’s PDG (Chairman of the Board and CEO) Didier Lombard in September 2009.

The case serves as a fertile basis for discussion on responsible leadership, corporate culture, human resources management practices, adaptive change management, corporate social responsibility, or business ethics. It puts the students in a deep thinking mode on questions about the responsibility of organizational leaders for creating healthy working cultures, the impact leadership decisions have on people’s lives, and their own choices as managers or employees in difficult organizational situations. The case can also be used as introductory stimulus material for in-company management training programs on workplace health or suicide prevention.

Partnerships can be found in many areas of social and economic life. These arrangements have become particularly common in research and development activities where organizations increasingly look for partners to complement their own technological capabilities with a view to create innovative products and processes. R&D partnerships, however, are fraught with challenges because the conditions for creativity through cooperation are still not fully understood. Academic partnerships are also very common and offer a fertile ground for investigation. Academic cooperation takes many different forms and results in a wide range of outcomes (Laband and Tollison, 2000). One of the most visible outcomes is co-authored publications (Melin and Persson, 1996). Nowadays, there is extensive data available about both the context of these partnerships as well as the quality of their outcome. This paper explores the determinants of the gain for authors who cooperate through co-authorship in the publication of academic articles. We distinguish between short-term benefits (i.e. the increase in citations of the co-authored article relative to the authors’ previous publications) and the long-term ones (i.e. the increase in citations of articles subsequent to the co-authored piece). We find evidence that these benefits have different determinants for co-authors depending on their past experience. While co-authorship generally seems to benefit more the junior (younger and with a lower academic reputation) author, the senior partner can reduce the gap with a strong personal track record and co-authoring experience.

With permission of Elsevier

Post-grant validity challenges at patent offices rely on the private initiative of third parties to correct mistakes made by patent offices. We hypothesize that incentives to bring post-grant validity challenges are reduced when many firms benefit from revocation of a patent and when firms are caught up in patent thickets. Using data on opposition against patents at the European Patent Office we show that opposition decreases in fields in which many others profit from patent revocations. Moreover, in fields with a large number of mutually blocking patents the incidence of opposition is sharply reduced, particularly among large firms and firms that are caught up directly in patent thickets. These findings indicate that post-grant patent review may not constitute an effective correction device for erroneous patent grants in technologies affected by either patent thickets or highly dispersed patent ownership.

With permission of the Academy of Management

A study involving a Global 500 company finds that frontline employees’ perceptions of corporate social responsibility (CSR) can contribute to their customer orientation (self-rated) and objective job performance (supervisor-rated) by activating social identification processes. Employees identify with the organization based in part on the extent to which CSR is supported by salient and job-relevant others both internal and external to the organization. Looking internally, employees identify with the organization to the extent that they perceive management to support CSR. Looking externally, employees can identify with customers (called employee-customer identification) to the extent they perceive customers to support the company’s CSR. Both effects are enhanced when employees feel CSR is an important (versus non-important) part of their self-concept. Organizational identification directly drives job performance while employee-customer identification contributes to job performance through its effects on organizational identification and customer orientation.

With the permission of the American Marketing Association

The case study shows the development of Chinese technology company ZPMC, which entered the container crane market in 1992 and, in the space of 15 years, achieved a global market share of over 70 percent. The case gives particular insights into the strategic decisions that led to ZPMC’s competitors being pushed aside in a market previously dominated by Western providers. It also clearly illustrates the risks and limitations facing companies that are strongly focused on growth.

The case study is designed to give insights into how technology companies from emerging and developing countries can establish themselves over the long term in a market dominated by Western companies. The aim is for students to gain important knowledge about approaches to competitive strategy in the market entry phase, during the growth period to market leader, and in diversification in new markets. Non-Chinese students in particular will gain increased awareness of developments in Chinese companies. Chinese students in particular will become more familiar with the pitfalls associated with the rapid growth of Chinese companies.

The case focuses on three primary objectives. Firstly, students should identify the interests of the parties involved in a company acquisition and gain insights into the financial perspectives of the seller, the political and strategic perspectives of the buyer and, the competitive strategic perspectives of the managers in charge of operations. Secondly, students should gain an understanding of corporate thinking in Western and Chinese technology companies. Thirdly, they should use this mutual understanding as the foundation for future profitable co-operations.
This case is withdrawn and no longer available.