Past research has shown that founders bring important capabilities and resources from their prior employment into their new firms and that these intergenerational transfers influence the performance of these ventures. However, we know little about whether organizational practices also transfer from parents to spawns, and if so, what types of practices are transferred? Using a combination of survey and registrar data and through a detailed identification strategy, we examine these two previously unaddressed questions.
On January 31 and February 1, 2019, the Frank H. Kenan Institute of Private Enterprise (Kenan Institute) hosted its Frontiers of Entrepreneurship Conference at The Breakers Palm Beach Resort. The conference brought together more than 150 academic research scholars, policy experts and private sector professionals to discuss and debate the most challenging current issues in the field of entrepreneurship in order to set the agenda for future research and policy.
This article utilizes a unique database (PLACE, the PLatform for Advancing Community Economies) to explore relationships between founders’ prior work experiences and the outcomes of their entrepreneurial firms.
In many service operations, customers have repeated interactions with service providers. This creates two important questions for service design. First, how important is it to maintain the continuity of service for individuals? Second, since maintaining continuity is costly and, at times, operationally impractical for both the organization (due to potentially lower utilization) and providers (due to high effort required), should certain customer types, such as those with complex needs, be prioritized for continuity?
Marketers create social media, in the form of firm-generated content (FGC), to ignite interest in new products such as movies; in turn, there is a clear need to understand whether and how FGC influences demand. With a descriptive study, the authors investigate two potential mechanisms by which FGC may drive box office revenues.
In this paper, we propose a research agenda for psychologists in general, and scholars of culture and negotiations in particular, to address the key challenges of dealing with an increasingly globalized world from a psychological perspective. Building on an understanding of globalization in terms of cultural and subjective matters, we propose three research domains in which psychology scholars can contribute to a further understanding of our global society: (a) the effects of global contact on cognition and behavior; (b) hybridization and human agency; and (c) new forms of cooperation.
In the past decade, coworking spaces have emerged as a new and promising phenomenon within entrepreneurship. Due to its prevalence, popularity and potential for disruptive change, coworking is increasingly relevant to theory, practice and policy in entrepreneurship, yet its implications are largely unstudied given its rapid rise. Overall, more data and analysis is needed to inform owners, policy makers and entrepreneurs about the effects of coworking. This paper is meant to increase understanding about the nature and value of this new phenomenon. In other words, it attempts to address the question: Does coworking work?
We explore the theoretical relation between earnings and market returns as well as the properties of earnings frequency distributions under the assumption that managers use unbiased accounting information to sequentially decide on real options their firms have and report generated earnings truthfully, with the market pricing the firm based on those reported earnings. We generate benchmarks against which empirically observed earnings‐returns relations and aggregate earnings distributions can be evaluated.
Using U.S. venture capital investment data from 1985 to 2008 and qualitative interviews, we examine how group dynamics influence the growth of interorganizational collaborations through the addition of new members.
We examine whether changes to corporate governance arising from board reforms affect corporate tax behavior. While the relation between corporate governance and tax behavior has been the subject of intense interest in the literature, prior research has been hampered by a lack of exogenous variation.
High rates of opioid abuse have had a significant impact on the United States including implications for firms which must now contend with a lower pool of available and productive workers. This paper documents a negative effect of instrumented opioid prescriptions and subsequent individual employment outcomes.
In the last few decades, many healthcare institutions converted their ownership type from nonprofit to for-profit, contributing to an increased presence of for-profit ownership in the U.S. healthcare sector. There have been opposing views on whether such ownership conversions benefit the public. Employing a large panel dataset of U.S. nursing homes from 2006 to 2015, we conduct a difference-in-differences analysis on converted facilities’ financial performance, operating policies, and quality of care. We observe that converted facilities significantly increased their post-conversion profit margins, compared to propensity-score-matched controls.
In this study, we ask if it is desirable to give greater freedom to firms in their choices of class shares. Making use of the 2011 Commercial Act amendment that significantly relaxed the regulation on class shares in Korea, we study the motivation and the effect of adopting two newly emerged class shares.
Using a large database of U.S. equity position-level holdings for hedge funds, we measure the degree of securitylevel crowdedness. The crowdedness factor is related to downside “tail risk" as stocks with higher exposure to crowdedness experience relatively larger drawdowns during periods of market distress. This tail risk extends to hedge fund portfolio returns as the crowdedness factor explains why some funds experience relatively large drawdowns.
We examine whether the contribution of firm-level accounting earnings to the informativeness of the aggregate is tilted towards earnings with specific financial reporting characteristics. Specifically, we investigate whether considering the smoothness of firm-level earnings increases the informativeness of aggregate earnings for future real GDP, and if so, whether macroeconomic forecasters use this information efficiently. Using recently-developed mixed data sampling methods, we find that the aggregate is tilted towards firms with smoother earnings and that this composition of aggregate earnings outperforms traditional weighting schemes.
Pump-and-dump schemes (P&Ds) are pervasive in the cryptocurrency market. We find that P&Ds lead to short-term bubbles featuring dramatic increases in prices, volume, and volatility. Prices peak within minutes and quick reversals follow. The evidence we document, including price run-ups before P&Ds start, implies significant wealth transfers between insiders and outsiders.
The UNC Energy Center and the Kenan Institute of Private Enterprise hosted a conference on "Meeting the Renewables Intermittency Challenge" on April 13-14, 2018. The conference, and resulting white paper, examined the true cost of integrating renewable energy generation into the electric grid and explore ways to address the challenges posed by wind and solar energy intermittency.
As firms mature, their founders are often replaced with seasoned executives. When founders are retained, the surrounding top management team (TMT) members are viewed as critical resources in helping compensate for the founder's managerial deficiencies. Surprisingly, however, little is known about how TMT members affect a founder‐led firm's performance later in a firm's life.
We find that although team structure has a significant impact on the performance of nonfounder‐led firms (consistent with past literature), it has little to no effect on the operating performance of founder‐led firms, suggesting that founder chief executive officers (CEOs) may exert too much control. Thus, the irony is that founders are retained to propel progress but their very retention may prevent progress.
Customer care employees (CCEs) are an excellent source of ideas for new and enhanced services for customers. By serving many customers, CCEs have the ability to see patterns in unserved and underserved needs. By being inside rather than external to the firm, CCEs have the ability to offer suggestions that build on existing capabilities, which result in ideas that are more easily implementable. There is a long history of research and practice for soliciting suggestions from employees, but little of this work has described how CCEs can be organized into a temporary online crowd to cocreate innovative ideas.
We study how an improvement in contracting institutions due to the 1999 U.S.-China bilateral agreement affects U.S. firms’ innovation. We show that U.S. firms operating in China decrease their process innovations—innovations that improve firms’ own production methods—following the agreement.
Little is known about how TMT members affect a founder-led firm’s performance later in a firm’s life. Using novel methods and a sample of over 2,000 firms, we find that although team structure has a significant impact on the performance of non-founder-led firms (consistent with past literature), it has little to no effect on the operating performance of founder-led firms, suggesting that founder CEOs may exert too much control.
We examine the implications of less powerful forward guidance for optimal policy using a sticky-price model with an effective lower bound (ELB) on nominal interest rates as well as a discounted Euler equation and Phillips curve. We find that, under a wide range of plausible degrees of discounting, it is optimal for the central bank to compensate for the reduced effect of a future rate cut by keeping the policy rate at the ELB for longer.
In this paper, we compare several approaches of producing multi-period-ahead forecasts within the GARCH and RV families – iterated, direct, and scaled short-horizon forecasts. We also consider the newer class of mixed data sampling (MIDAS) methods.
Although the level of power held by the marketing department can determine key organizational outcomes, including firm performance, this power often is modest and, in many firms, diminishing. To address this apparent disconnect, the authors propose that the board of directors is a critical but overlooked driver of marketing department power.
We derive asymptotic properties of estimators and test statistics to determine - in a grouped data setting - common versus group-specific factors. Despite the fact that our test statistic for the number of common factors, under the null, involves a parameter at the boundary (related to unit canonical correlations) we derive a parameter-free asymptotic Gaussian distribution. We show how the group factor setting applies to mixed frequency data. As an empirical illustration we address the question whether Industrial Production (IP) is still the dominant factor driving the U.S. economy using a mixed-frequency data panel of IP and non-IP sectors. We find that a single common factor explains 89% of IP output growth and 61% of total GDP growth despite the diminishing role of manufacturing.
In this paper, we empirically analyze the determinants of excess inventory announcement and the stock market reaction to the announcement in the US retail sector. We examine if the firm’s operational competence, as measured by total factor productivity (TFP), can explain the retailer’s excess inventory announcement. We also investigate if the stock market reaction to such announcements is conditional on the operational competence of the announcing firm. We use a combined dataset on excess inventory announcements, annual financial statements, and daily stock prices of publicly traded retailers in the USA between 1990 and 2011.
Brand naming challenges are more complex in logographic languages (e.g., Chinese), compared with phonographic languages (e.g., English) because the former languages feature looser correspondence between sound and meaning.
Retailers routinely indulge in comparative pricing where they post two different prices (e.g., regular price and sale or posted price) on the price tag of a product. Previous literature shows that comparing the posted price to a higher reference price, also known as the advertised reference price (ARP), increases consumer’s likelihood to purchase. In this paper, we study the effect of ARP on transacted prices (conditional on purchase) in settings where consumers can negotiate on prices.
Whether fair value accounting should be used in financial reporting has been the subject of debate for many years. A key dimension to this debate is whether fair value earnings can provide information to financial statement users that is helpful in making their economic decisions.
This study investigates the determinants of goodwill impairment decisions by firms applying IFRS based on a comprehensive sample of stock-listed firms from 21 countries. Multivariate logistical regression findings indicate that goodwill impairment incidence is negatively associated with economic performance, but also related to proxies for managerial and firm-level incentives.
We show that there exists significant heterogeneity across US households in how uncertain they are in their expectations regarding personal and macroeconomic outcomes, and that uncertainty in expectations predicts households' choices.
This paper examines corporations’ actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine four different outcomes—bonuses (or other actions that benefit workers), announcements of new investments, share repurchases, and dividend announcements.
In business-to-business (B2B) markets, the success of key account management (KAM) teams depends on how they are structured and how they handle customer relationships.
Innovation, the implementation of creative ideas, involves a dialogue between two roles: creators - who generate creative ideas, and evaluators-who determine which ideas to implement. Although each role aids innovation, we reveal that each role may also shape creativity assessments in different ways. In two experiments, participants randomly assigned to either an evaluator or creator role rated the same idea described as having low or high levels of novelty.
We explore the impact of Knightian uncertainty on contracting within a multi-layered firm. We study a setting where, absent uncertainty, division managers should be paid based on their division performance, but not other divisions' performance.
We model the joint dynamics of intraday liquidity, volume, and volatility in the U.S. Treasury market, especially through the 2007--09 financial crisis and around important economic announcements. Using various specifications based on Bauwens & Giot (2000)'s Log-ACD(1,1) model, we find that liquidity, volume and volatility are highly persistent, with volatility having a lower short-term persistence than the other two. Market liquidity and volume are important to explaining volatility dynamics but not vice versa. In addition, market dynamics change during the financial crisis, with all variables exhibiting increased responsiveness to their most recent realizations.
We provide the first large‐scale empirical evidence of banks functioning as tax planning intermediaries. We posit that some banks specialize in assisting corporate clients with tax planning. In this role, banks make use of their centrality in financial relationships; access to private information; and ability to structure, execute, and participate in tax planning transactions for clients. We measure bank‐client relationships using loan contracts and measure client tax planning using either the cash effective tax rate or the unrecognized tax benefit balance. Using a difference‐in‐differences design, we find that firms experience meaningful tax reductions when they begin a relationship with a bank whose existing clients engage in above‐median tax planning.
On September 30, 2018, California became the first U.S. state to set quotas for women directors on corporate boards. The passage of this law resulted in a significant decline in shareholder value for firms headquartered in California. The decline in shareholder value is directly related to the number of female directors that firms are required to add under these quotas.
We model leverage cycles in the natural laboratory of a mature asset class, namely US Commercial Real Estate. In this setting we can observe entrepreneurs' asset values as well as debt balance and thus model capital-market yields, as conditioned by market-wide leverage, which indicates debt availability. Using a VAR framework, we examine variance decompositions and impulse-response functions. We show that leverage constitutes the primary driver of innovations in capital-market yields and vice versa. We further find evidence for flight to quality as well as knock-on effects that affect low-leverage entrepreneurs in the market.
Like anyone trying to get something done with limited time and resources, economic developers have a lot of options to weigh when formulating a strategy to attract and retain businesses in their local economy. Over the years, economic development researchers have espoused a succession of theories as they’ve learned more about the many factors that influence economic growth. Historically, practitioners have tended to respond by focusing their efforts around what they perceive as the latest and greatest thinking, often at the expense of previously favored approaches. In practice, this has led to waves in which economic developers have focused on recruiting large, established companies or on fostering home-grown start-ups—but rarely both.
We undertake the first large-sample analysis of foreign tax holiday participation by U.S. firms.
This trial will provide evidence on the impact of a behavioral intervention to implement huddles as a key component of team-based care models. Knowledge gained from this trial will be critical to broader deployment and successful implementation of team-based care models.
This paper studies the investment decisions and price impact of non-resident foreigners in the Paris housing market, employing unique micro-level transaction data over the period 1992–2016. We find that these “out-of-country” buyers generally purchase relatively small but high-quality properties in desirable neighborhoods and in areas with high ratios of compatriots.
Servicization is a business strategy to sell the functionality of a product rather than the product itself. It has been touted as an environmentally friendly strategy as it encourages manufacturers to take more responsibility for their products. We study when servicization results in a win-win outcome where it can simultaneously increase a firm’s profits and decrease its environmental impact compared with selling products.
This paper examines price discovery and liquidity provision in the secondary market for bitcoin -- an asset that has no observable fundamentals and is associated with a high level of speculative trading. Based on a comprehensive dataset of the full limit order book of BTC-e over the 2013-2014 period, we find that order informativeness generally increases with order aggressiveness within the first 10 tiers, but that this pattern reverses in the outer layers of the book. In a high volatility environment, aggressive orders seem to be more attractive to informed agents, as reflected by the increased information content of such orders, although market liquidity appears to migrate outward in response to the information asymmetry.
Although teams benefit from developing plans and processes that boost efficiency and reduce uncertainty, they may become too attached to these plans and escalate commitment when an alternative response is needed. Drawing on theories of team leadership, team processes and escalation of commitment, we propose that a change in leadership can help the team reduce commitment to outdated plans and avoid further escalation over time.
Arabs represent a major cultural group, yet one that is relatively neglected in cultural psychology. We hypothesized that Arab culture is characterized by a unique form of interdependence that is self-assertive. Arab cultural identity emerged historically in regions with harsh ecological and climatic environments, in which it was necessary to protect the survival of tribal groups.
This chapter investigates the pricing of key contract provisions of Puerto Rican debt. In doing so, the chapter contributes to a body of research that asks the questions: do investors price contract provisions? Does the pricing of contract provisions vary with credit risk? To our knowledge, this is the first study to address these questions for the case of Puerto Rico or any municipal issuer. Puerto Rico’s unique status as a U.S. territory implies that its subsidiaries, such as municipalities, cannot file for bankruptcy under Chapter 9 of the U.S. Bankruptcy Code.
I develop a theory of credit relationships in an economy subject to search frictions and limited enforceability. The model features a dynamic contracting problem embedded within a directed search equilibrium with aggregate and creditor-specific uncertainty.
