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Abstract:
Societe Suisse de Microelectronique et d'Horlogerie (SMH) was formed in 1983 by merging the two leading Swiss watch groups, SSIH and ASUAG. SMH and its main brand, Swatch, was the outcome of crisis for the Swiss watch industry. In a few short decades, foreign competitors with superior technology had all but eliminated the Swiss from a global industry that they dominated for centuries. The creation of Swatch is the extraordinary story of how the Swiss re-invented their watch industry. Recognizing the crucial role of brand intangibles to its future success, SMH changed its name to the Swatch Group in 1998. Now in the new millennium the Group needs to chart a strategy to preserve and enhance its stable of global brands. This case study has been reprinted: ICFAI Journal of Brand Management, Vol.2(2), pp.39-54, June 2005. An updated version of this case, under the same title, is available from the European Case Clearing House, Case 307-377-1, 2007. An accompanying teaching note is also available: Teaching Note 307-377-8, 2007.

Brands, Swiss watch industry, multinational management

Abstract:
We propose that the long-run performance of IPOs is a function of pre-IPO factors, including managerial decisions and the firm's performance prior to going public. We relate long-run performance to a much richer set of explanatory factors than in the previous literature. Using a number of variables, we provide empirical evidence in support of this proposition. The manner in which a company is run before it is listed on the stock exchange gives a strong signal of how its shares will perform in its first few years of coming to the market. Using a UK data set, we find that the percentage of equity issued and the degree of multinationality are key predictors of IPO performance. A revised version of this paper is forthcoming in Managerial Finance, Vol. 33, No. 6, pp. 401-419, 2007.

IPOs, long-run performance, signals

Abstract:
Theory tells us that managerial ownership of shares in a firm generates two conflicting effects on management behaviour, i.e. the convergence effect whereby increased managerial ownership can improve corporate performance, and the entrenchment effect which counters it. A number of studies have sought to evaluate these effects empirically. The results in the literature are not uniformly in agreement. In this paper, we distinguish between measures of ownership and measures of control implied by this ownership. Furthermore, we provide evidence supporting the entrenchment and convergence effects using UK data.

Corporate finance, ownership structure, control, performance

Abstract:
Theory tells us that managerial ownership of shares in a firm generates two conflicting effects on management behaviour, i.e. the convergence effect whereby increased managerial ownership can improve corporate performance, and the entrenchment effect which counters it. A number of studies have sought to evaluate these effects empirically. The results in the literature are not uniformly in agreement. In this paper, we distinguish between measures of ownership and measures of control implied by this ownership. Furthermore, we provide evidence supporting the entrenchment and convergence effects using UK data. A revised version of this paper has appeared in the journal Applied Financial Economics, vol.8(2), pp.175-180, 1998.

Corporate finance, ownership structure, control, performance

Abstract:
In the international business literature location has traditionally been analyzed using Dunning's (1977) OLI framework, which focuses on the perspective of the multinational firm. However, another strand of literature has focused on the perspective of the host location. In this paper the current state of the literature with respect to these two perspectives is surveyed. An attempt is made to assess the interactions of the two perspectives with a view to developing a complete picture of the location of multinational activity.

multinational firms, investment location, NGOs, MNC-government relations

Abstract:
In the international business literature location has traditionally been analyzed using Dunning's (1977) OLI framework, which focuses on the perspective of the multinational firm. However, another strand of literature has focused on the perspective of the host location. In this paper the current state of the literature with respect to these two perspectives is surveyed. An attempt is made to assess the interactions of the two perspectives with a view to developing a complete picture of the location of multinational activity. A revised version of this paper has appeared as Mudambi, R. amd McCann, P., Analytical differences in the economics of geography: The case of the multinational firm, Environment and Planning A, vol.37(10), pp.1857-1876, 2005.

multinational firms, investment location, NGOs, MNC-government relations

Abstract:
Elections are the main instrument through which a democratic polity expresses its choices. Decisions made in elections have political implications. However, the decisions themselves are the result of individual optimization by the voter and organizational optimization by political formations. Economics has developed sophisticated tools and methods for the analysis of optimization problems. Over the last few decades these tools have increasingly been applied to the study of elections and electoral behavior. In this survey, we attempt to integrate this body of literature.

Elections, public choice, democracy, politics

Abstract:
The early years are a particularly hazardous period for new ventures. This paper focuses on the survival of international new ventures (INVs), approaching the question from an empirical point of view. It is pointed out that the choice of an INV strategy is endogenous, in the sense the firms self-select into the strategy modes that are best suited to their resources. When this self-selection is ignored, INVs appear to have lower survival probabilities than other multinational firms. However, this result disappears when the endogeneity of the firms' strategies is taken into account. A revised version of this paper, joint with Shaker Zahra, has appeared: Journal of International Business Studies, vol.38(2): 333-352, 2007.

International new ventures, firm survival, multinational firms

Abstract:
The short run underpricing of initial public offerings (IPOs) is one of the best documented anomalies in finance. The Rock model explains this anomaly in terms of horizontal information asymmetry amongst investors. In this paper we use a comprehensive IPO data from the UK main market for the period 1989-96 to test the Rock model against several other alternatives. We propose that horizontal information asymmetry should be smaller for investment trust IPOs as compared to conventional issuing companies. The Rock model then predicts that investment trust IPOs should display less underpricing than conventional issuing companies. Our findings support the Rock model and are consistent with previous studies of investment trust IPOs.

Initial public offerings, investment trusts, short-run underpricing

Abstract:
The short run underpricing of initial public offerings (IPOs) is one of the best documented anomalies in finance. The Rock model explains this anomaly in terms of horizontal information asymmetry amongst investors. In this paper we use a comprehensive IPO data from the UK main market for the period 1989-96 to test the Rock model against several other alternatives. We propose that horizontal information asymmetry should be smaller for investment trust IPOs as compared to conventional issuing companies. The Rock model then predicts that investment trust IPOs should display less underpricing than conventional issuing companies. Our findings support the Rock model and are consistent with previous studies of investment trust IPOs. A revised version of this paper has appeared: Applied Financial Economics, vol.12(10), pp.697-706, 2002.

Initial public offerings, investment trusts, short-run underpricing

Abstract:
During the Nineties Italian politics underwent major changes. Following the uncovering and prosecuting of systemic corruption, the current political establishment was wiped out. Further, the system of representation at both the national and local levels underwent a significant transformation that improved voters' control over their elected representatives. We argue that both events were the consequence of citizens' demand for greater accountability of elected public officers. We model the relationship between voters and politicians as a repeated Trust game. In such game, cooperation can be attained either by means of external controls or by means of internal controls. The latter are less costly, but they may be unfeasible. Whereas the judicial investigation is an external mechanism to monitor representatives' actions, the electoral reform provides a form of control internal to the political system. Our formal model depicts the Italian transition between these different modes of control. We show under which conditions a cooperative equilibrium can be established in which voters can trust their representatives, who in turn have an incentive to reciprocate and act in the public interest. The results of our model have important implications for the process of electoral reform still under way in Italy. A revised version of this paper has appeared: Mind and Society, vol.4(1), pp.129-148, 2005.

Abstract:
The determinants of R&D-intensity differ between subsidiaries in an MNE. The qualitative nature of R&D behavior (and hence also the extent of investment in R&D) differs, depending upon whether a subsidiary achieves a competence-creating output mandate. Using data on UK subsidiaries of non-UK MNEs, we find that the R&D investments of subsidiaries with mandates is both qualitatively and quantitatively different from that of subsidiaries that do not. The R&D of mandated subsidiaries depends upon local infrastructure, subsidiary strategic independence and product diversification; but for non-mandated subsidiaries R&D depends instead upon entry mode, and local demand conditions. A revised version of this paper has appeared in the Strategic Management Journal, Vol.26, No. 12, pp. 1109-1128, 2005.

MNEs, Firm competencies, R&D, Subsidiary, Mandates, Internationalization

Abstract:
The role of institutions as determinants of rent seeking success is well established. In this paper, we focus on institutions that have received little attention in the literature, namely electoral institutions. We examine three measures of electoral institutional structure that are hypothesized to be instrumental in determining the level of rent seeking. These are the type of electoral system, pluralistic or proportional; method of selection of the chief executive, presidential or parliamentary; and the number of electoral districts. An index of economic freedom is used as the metric for rent seeking opportunities created by governments. Theoretical implications of variation in these electoral institutions are developed and empirically tested employing data from 29 countries classified as having emerging market economies. Countries with emerging economies are expected to exhibit more institutional flexibility that more developed countries whose property rights are well established and defended. The empirical results are controlled for differences in a number of demographic and historical factors. Plurality electoral systems are more resistant to the political demands of rent seeking than proportional systems. Fewer election districts seem to reduce rent seeking opportunities. However, conditional on the type of electoral system, presidential systems are found to be no more resistant to rent seeking than parliamentary systems. Finally, we find strong control effects. Literacy increases a country's resistance to rent seeking while military spending and years of institutional entrenchment reduce it.

Rent-seeking, institutional economics, international business

Abstract:
The role of institutions as determinants of rent seeking success is well established. In this paper, we focus on institutions that have received little attention in the literature, namely electoral institutions. We examine three measures of electoral institutional structure that are hypothesized to be instrumental in determining the level of rent seeking. These are the type of electoral system, pluralistic or proportional; method of selection of the chief executive, presidential or parliamentary; and the number of electoral districts. An index of economic freedom is used as the metric for rent seeking opportunities created by governments. Theoretical implications of variation in these electoral institutions are developed and empirically tested employing data from 29 countries classified as having emerging market economies. Countries with emerging economies are expected to exhibit more institutional flexibility that more developed countries whose property rights are well established and defended. The empirical results are controlled for differences in a number of demographic and historical factors. Plurality electoral systems are more resistant to the political demands of rent seeking than proportional systems. Fewer election districts seem to reduce rent seeking opportunities. However, conditional on the type of electoral system, presidential systems are found to be no more resistant to rent seeking than parliamentary systems. Finally, we find strong control effects. Literacy increases a country's resistance to rent seeking while military spending and years of institutional entrenchment reduce it.

Rent-seeking, institutional economics, international business

Abstract:
This study examines why, even when financial resource constraints are significantly relaxed, some new ventures struggle to survive while others prosper. Using the data of approximately 200 new Internet ventures that went public during the years 1997 through 1999, we propose that the performance of new ventures is a function of pre-IPO characteristics. We determined that firm-level characteristics including top management team, financial position, networks and location are related to the performance of struggling new ventures. We found strong evidence of agency relationships, so that a substantial reduction in equity holdings by the entrepreneurial team is strong signal of impending crisis. Interestingly, similar reductions by venture capital backers did not serve as a signal of crisis. A revised version of this paper is forthcoming in the Journal of Business Venturing, Vol.20, No.4.

internet bubble, IPOs, cash crisis

Abstract:
Increasing divisional operational responsibilities and the dispersal of knowledge creating activities within the firm have loosened the traditional hierarchical structure of multi-divisional firms. In this paper we argue that a similar mixture of competition and cooperation that is found in inter-firm relationships now characterizes intra-firm relationships. Our model describes a situation in which divisional managers have their own objectives that may diverge from those of the firm as a whole. Thus, divisional managers are both profit-seekers in creating value that can be appropriated and rent-seekers in attempting to maximize their divisional share of the value created by the firm. The profit-seeking activity requires collaboration amongst divisions in maximizing firm profits. The rent-seeking activity is modeled as a bargaining game. The division's bargaining power is a crucial determinant of its (Nash bargaining) equilibrium share of firm profits. We find that when divisional managers are able to take actions to increase their bargaining power, this has a negative effect on the performance of the firm as a whole.

multi-divisional firms, managerial rent-seeking, inter-divisional bargaining

Abstract:
The dispute over the conflicting merits of proportional representation (PR) and plurality (PL) electoral systems is mainly a debate over which element, representation or stability, should be emphasized. Advocates of PR do not accept policies as democratically valid if they are made on an inadequate representational base. On the other hand, advocates of PL argue that representation is meaningless if it is achieved at the expense of any possible agreement among the policy makers. These arguments appear repeatedly in the literature and with more practical impact, in constitutional assemblies. One of the outcomes of these arguments has been the development and implementation of mixed electoral systems that attempt to capture the strengths of both PR and PL systems. In this paper we analyze how parties form electoral coalitions in multiparty systems with mixed PR/PL electoral rules. We stress that mixed system of representation are created in the attempt to balance governance and representation by assigning a portion of the legislature's seats on the basis of plurality and the remaining seats on a proportional basis. This is operationalized through double-ballot-voting: a PL ballot for the allocation of the seats won by the candidates in single-member-college races and a PR ballot for the proportional allocation of the remaining seats among the competing parties. The aim of the paper is to formulate a general model to describe the electoral incentives that mixed electoral rules provide to political agents in multiparty systems. Italian 1994 and 1996 national elections are used as a case study to test the validity of our theory.

Elections, party strategies, plurality, proportional representation

Abstract:
The dispute over the conflicting merits of proportional representation (PR) and plurality (PL) electoral systems is mainly a debate over which element, representation or stability, should be emphasized. Advocates of PR do not accept policies as democratically valid if they are made on an inadequate representational base. On the other hand, advocates of PL argue that representation is meaningless if it is achieved at the expense of any possible agreement among the policy makers. These arguments appear repeatedly in the literature and with more practical impact, in constitutional assemblies. One of the outcomes of these arguments has been the development and implementation of mixed electoral systems that attempt to capture the strengths of both PR and PL systems. In this paper we analyze how parties form electoral coalitions in multiparty systems with mixed PR/PL electoral rules. We stress that mixed system of representation are created in the attempt to balance governance and representation by assigning a portion of the legislature's seats on the basis of plurality and the remaining seats on a proportional basis. This is operationalized through double-ballot-voting: a PL ballot for the allocation of the seats won by the candidates in single-member-college races and a PR ballot for the proportional allocation of the remaining seats among the competing parties. The aim of the paper is to formulate a general model to describe the electoral incentives that mixed electoral rules provide to political agents in multiparty systems. Italian 1994 and 1996 national elections are used as a case study to test the validity of our theory. A revised version of this paper has appeared: European Journal of Political Economy, Vol. 20, No. 1, pp. 227-253, 2004.

Elections, party strategies, plurality, proportional representation

Abstract:
In this paper we study the determinants of people's attitudes toward income inequality and their consequences for redistributive policies. In the light of a recent literature in social choice theory, we argue that an individual's attitudes toward inequality depend upon the extent of autonomy freedom he/she enjoys. We use individual level data to validate our theory and show that the higher the extent of an individual's autonomy freedom, the greater the probability that he/she supports larger income differences as incentives for individual effort. Conversely, the lower the extent of autonomy freedom, the more likely he/she supports the view that incomes should be made more equal. These findings appear to be robust to different model specifications even after controlling for a large set of both socio-economic variables and individual characteristics.

Freedom, Fairness, Social Mobility

Abstract:
Leveraging knowledge from geographically disparate subsidiaries is a crucial source of competitive advantage for multinational corporations (MNCs). This study investigates the determinants of knowledge transfers to and from newly acquired subsidiaries in three transition economies in Central and Eastern European countries. We hypothesize that the determinants of 'conventional' knowledge transfers from MNC parents to subsidiaries and 'reverse' knowledge transfers from subsidiaries to MNC parents are based on different transfer logics. Based on a sample of 105 acquired subsidiaries, we find that organizational characteristics are important in conventional knowledge flows from headquarters, so that subsidiaries acquired with competence-creating objectives receive significantly larger inflows. Knowledge characteristics are important in reverse flows to headquarters so that subsidiaries whose knowledge is more relevant are able to transmit significantly larger outflows. Host country locations have significant moderating effects. The significance of the directional context in knowledge transfers is an important new finding. A revised version of this paper has appeared: Journal of Management, Vol. 34, No. 5, pp. 882-902, 2008.

knowledge management, knowledge relevance, acquisitions, multinational subsidiaries, transition economies

Abstract:
The unintended consequences of prohibition on domestic markets are well documented (Miron and Zwiebel, 1995). The enforcement of these prohibitions denies the extralegal enterprise (XLE) access to property rights and contract enforcement from the state. Consequently, XLEs must provide their own enforcement through the application of coercion and violence (Lott and Roberts, 1989; Paul and Wilhite, 1994). In this paper we focus on multinational activity by multinational XLEs in the illegal drug trade, examining the applicability of Dunning's OLI paradigm. We find that the location and internalization aspects of the paradigm apply well, while the ownership aspect does not. Further, we argue that wherever XLEs operate, their coercive powers distort the incentives in resource and goods markets, increase corruption and reduce institutional stability. Their activities substantially reduce the size of the productive exchange economy and the attractiveness of the location for investment by legitimate businesses. These distortions are amplified by the enforcement of prohibition by governments in target market countries. A revised version of this paper has appeared: Journal of International Management, vol.9(3), pp.335-349, 2003.

Multinational enterprises, Extralegal activities, Prohibition

Abstract:
We argue that the creation of new knowledge is both difficult and rare. More specifically, we posit that the creation of new knowledge is dominated by a few key insights that challenge the way people think about an idea; generating high interest and use. We label this the homerun hypothesis. Using a sample of 2,012 published management studies we find support for the homerun hypothesis. Our evidence suggests that new knowledge creation is rare among the leading journals in management. We also find that numerous studies in the leading management journals are virtual strikeouts, making no contribution to knowledge. Additional tests indicate that journal "quality" is related to the ratio of homeruns to strikeouts a journal publishes and that journal rankings are a poor proxy for study influence. Consistent with the notion that editorial boards are able to identify new knowledge, we find that research notes significantly under-perform articles in both the same journal and in lower ranked journals. Taken together, the results imply that only a few scientific studies, out of the thousands published in a given area, change or influence the boundaries of knowledge, with many of the others contributing nothing. Overall, this analysis indicates that the development of new knowledge is rare yet appears to be recognizable.

knowledge creation, innovation models, diffusion, role of the university

Abstract:
UK firms going public have a choice between public offers and placings. This choice has important implications in terms of who bears the risk of the issue failing and of its costs. We find that firms with higher ex ante uncertainty choose a placing contract. Highly reputable sponsors and creditor screening serve as signals of firm quality, enabling such firms to choose a public offer. Large and multinational firms usually choose a public offer whereas there is some evidence that very small issues choose a placing. Finally, the 'hotness' of the IPO market increases the probability of placings.

Abstract:
This study examines why some new ventures struggle in spite of an absence of financial constraints.More specifically, the crisis of new ventures is examined within the context of the cash burn of Internet-based firms.Taken together, the hypotheses developed suggest that a firm with a large, young top management team, a strong financial position prior to going public, an extensive network, and a location in a resource-rich cluster is likely to perform well. Data from 207 new Internet firms that went public between 1996 and 1999 are used to determine whether these pre-initial public offering (IPO) characteristics are indeed integral to high firm performance.These data cover the network relationships, size, ownership structure, business model, top management team (TMT) characteristics, and financial position of each IPO firm.The hypotheses are largely supported by the data--i.e., the performance of new ventures is a function of pre-IPO characteristics.New Internet-based ventures would do well to have a young management team, a low debt-to-assets ratio, and a strong equity position. (SAA)

Firm performance, Experimental/primary research, Ownership structures, Startups, Cash flow, Firm location, Debt, Internet, Initial public offerings (IPO), Management teams, Social networks, Public offerings, Equity

Abstract:
The rising share of intangibles in economies worldwide highlights the crucial role of knowledge-intensive and creative industries in current and future wealth generation. The recognition of this trend has led to intense competition in these industries. At the micro-level, firms from both advanced and emerging economies are globally dispersing their value chains to control costs and leverage capabilities. The geography of innovation is the outcome of a dynamic process whereby firms from emerging economies strive to catch-up with advanced economy competitors, creating strong pressures for continued innovation. However, two distinct strategies can be discerned with regard to the control of the value chain. A vertical integration strategy emphasizes taking advantage of linkage economies whereby controlling multiple value chain activities enhances the efficiency and effectiveness of each one of them. In contrast, a specialization strategy focuses on identifying and controlling the creative heart of the value chain, while outsourcing all other activities. The global mobile handset industry is used as the template to illustrate the theory.

innovation, value chains, intangibles, vertical integration, specialization, knowledge-intensive industries

Abstract:
Purpose - The aim of the paper is to study the long-run under-performance of UK initial public offerings (IPOs) by relating it to the pre-IPO financial performance of the firm as well as the managerial decisions taken before the IPO.

Design/methodology/approach - The three-year share returns of UK IPOs is studied using various methodologies such as buy and hold returns, cumulative abnormal returns and Fama and French three-factor returns.

Findings - It was found that the percentage of equity issued and the degree of multinationality of a firm are the key predictors of its performance after the IPO. It is also found that small firms behave differently from large firms and suffer from worse long-run performance than large firms.

Research limitations/implications - There is a great need for future research to focus on ownership structure and long-run returns. Further, a focus on the level of debt and venture capital financing in the pre-IPO period may also uncover important relationships with the long-run performance of a firm.

Practical implications - The results obtained from this study provide important information for the prospective long term investors in new issues. While pre-IPO performance of a firm cannot predict the post-IPO performance with certainty, nevertheless the results of this study suggest that long-term investors should show caution while deciding on long term investment in IPO firms.

Originality/value - The paper explains the post-IPO underperformance of firms by relating it to the pre-IPO managerial decisions made in the firm. It also documents the role of multinationality in explaining long run underperformance.

Company performance, Share values, Strategic management, Decision making

Abstract:
The model considers a seller operating under the threat of an arbitrarily large number of unknown potential entrants and facing a strategic buyer. It is shown that the seller's Nash best response function slopes downward in price-output space, while that of the buyer slopes upward. The Nash equilibrium may be associated with a lower probability of entry than the equilibrium at which the buyer behaves non-strategically. With the buyer as the Stackelberg leader, the price is shown to decrease relative to that at the Nash equilibrium, but the probability of entry may rise or fall.

The intuition behind the model is that the buyer faces the choice of dealing with a known incumbent seller or an unknown potential entrant and can affect the probability of entry by making the market more or less lucrative. The buyer's incentive to encourage entry by raising purchase quantity increases as the incumbent charges a higher price. Similarly, the seller's incentive to discourage entry by lowering price increases as the buyer announces larger purchase quantity.

entry games, buyer-supplier relations, bilateral monopoly

Abstract:
It is generally accepted that an increase in the amount of voter information is desirable. As Reisman (1990) points out, a well-informed and committed electorate is better able to exercise rational choice and consequently is less likely to have its wishes being thwarted by elected representatives. In this connection, a crucial question relates to the effect of increased voter information on power of elected representatives. In other words, does increased voter information dilute or increase the power of political parties? From the answer to this question flow numerous conclusions about the size of rents enjoyed by political parties under differing electoral systems. We use data from Sicilian provincial elections (1985 and 1990) to examine the empirical relationship between voter information and power dilution. We use Olson's theory of groups to derive measures of voter information, following a methodology developed in Mudambi, Navarra, and Nicosia (1996). We use a measure of power dilutio proposed by Capron and Kruseman (1988) and suggest an adjustment to correct it for truncation bias.We then examine the relationship between voter information and power dilution.

elections, voter information, plurality, proporionality, learning

Abstract:
A crucial property of an electoral system is the manner in which it translates a vote distribution into a pattern of representation. Measures of this property are important in assessing the relative merits of differing electoral systems. I argue that indices that do not use the vote and seat shares of all competing parties are informationally incomplete. In this paper, a complete information index is developed and shown to have several desirable properties: (a) it is bounded between zero and unity; (b) it takes the value of unity in the limiting case of perfect proportionality; and (c) it takes the value of zero in the limiting case where the seat distribution is unaffected of the vote distribution. The index is shown to perform better than limited information indices in an illustration using data from Sicilian provincial elections.

electoral systems, proportionality, measurement issues

Abstract:
The actions that individuals take to minimize the impact of risk generally involve cost. Thus, the actions that provide insurance often provide signals with regard to the individuals' underlying quality characteristics. Since the same action affects risk exposure and signals quality, individual objectives are difficult to disentangle. In this paper we use an experimental approach to distinguish between the two distinct objectives served by the same action.

A sample of 528 students taking a single course were provided with 4 optional pre-final tests. Increasing the number of pre-final tests reduced the weight of the mandatory final exam in the overall course grade. The literature on insurance markets predicts that poorer students would take more pre-final tests (tests as insurance); and further that a greater number of pre-final tests would, ceteris paribus, cause final exam performance to decline. However, the literature on market signaling predicts that better students would take on more pre-final tests (tests as signals), and hence a greater number of pre-final tests would be associated with a better final performance. The results provide strong support for the signaling hypothesis. This suggests that individuals' choices in risky situations are likely to have both direct (risk alleviation) and indirect (signaling) aspects.

adverse selection, moral hazard, choice under risk

Abstract:
The competing merits of plurality and proportional representation have intrigued political economists and political scientists for quite some time. Of primary interest is whether one or the other system is better in serving the interests of the electorate. Since theoreticians are unable to unambiguously determine the answer to this question, the issue must ultimately be decided empirically.

We use data from Sicilian elections, where the system was recently altered towards the system of plurality. We are able to demonstrate that the proportional representation system engenders greater information among voters and elicits greater commitment from them than plurality. We are also able to show that in larger towns increased information causes a more dispersed vote under a proportional representation system; further, this result does not hold under plurality. This may have some implications for the size of positional rents reaped by political parties under the two electoral systems.

Elections, plurality, proportional representation

Abstract:
We consider price setting strategic behavior in the market for quality-differentiated goods. In his classic analysis Ricardo showed that at the competition equilibrium the price of marginal unit is driven to zero. An oligopolistic market structure leads to a radically different equilibrium in almost all cases. Deliberate withholding of units often becomes part of a firm's Nash best response and whenever this occurs, a pure strategy equilibrium fails to exist. A necessary but not sufficient condition for a pure strategy equilibrium to exist is for one firm to own all the best quality units. We show that a mixed strategy equilibrium always exists. In spite of the price setting nature of the strategies, the associated payoff is always greater than the competitive payoff.

Oligopoly games, mixed strategies, existence of equilibrium

Abstract:
In this article advertiser supported media, such as television, are analyzed as an industry selling audiences to advertisers. A simple stylized model is used to demonstrate that increased competition leads to less of a price decline (in extreme cases, maybe even a price increase) than would be expected in other industries. This arises because audience diversion introduces terms similar to conjectural variations in equilibrium output. Further, in this model, it is shown that if greater competition makes advertisers better off, it makes media consumers worse off and vice versa. The extension to mixed subscriber-advertiser supported media is demonstrated to lead to similar, albeit attenuated, conclusions.

Advertiser-supported media, oligopolistic competition

Abstract:
While cooperative buyer-supplier relations are an important source of sustainable competitive advantage, non-cooperative behavior persists widely. Reaping the full advantages of such cooperation requires an understanding of both the underlying theory as well as the context within which implementation will take place. Theoretically, as in all cooperative games, in buyer-supplier relations it is necessary to specify each player's outside options and threat points, using transaction cost analysis. Practically, it is necessary to implement strategies and design processes that maximize the value of the shared payoff and minimize the benefits and scope of opportunistic behavior. This paper tests a model in which the incentives for non-cooperative behavior are nested within a context of formal commitment, using data from the US auto industry. This 'close, but adversarial' model appears to be reasonably well supported by the data, suggesting that even within professed cooperative buyer-supplier relationships adversarial behavior persists. In contrast, a small but significant minority of the relationships were found to be characterized by high levels of trust as well as informal commitment. The results suggest specific strategies for developing cooperative supplier relations.

buyer-supplier relations, automobile industry, game theoretic models

Abstract:
This study examines the characteristics that make start-up biotechnology firms attractive alliance partners. We distinguish between firm specific and location-specific characteristics as well as between foreign and domestic corporate partners. We present and test a longitudinal model of alliance development based on data from 64 public biotechnology firms. The results provide evidence that foreign and domestic alliance capital inflows are driven by different factors. Firm-specific factors explain minimal variance in capital inflows from foreign alliance partners; rather, location-specific factors seem to matter more. The reverse is true for domestic alliance partners. Further, our results suggest that firm size moderates the relationship between location-specific factors and capital inflows from foreign alliance partners such that larger firms benefit more when located in technologically munificent environments.

Agglomeration, alliances, biotechnology, clusters, investment, patents

Abstract:
In the international business literature location behavior has traditionally been analyzed using Dunning's (1977) OLI framework, which focuses on the nature, role and behavior of multinational enterprise. In this paper we argue that this approach is now no longer appropriate for discussing the spatial behavior of MNEs, because of the fundamental changes which have taken place either in MNE organization or in the global and institutional environment for foreign direct investment (FDI). At the same time, we argue that current location theory from regional economics and economic geography is also largely unsuitable for discussing these issues, such that the spatial behavior of the MNE provides a set of difficult challenges to location analysts. There appears to have been some response to these issues from the international business and management literature, most notably the Porter literature on clusters. However, we will also argue here that this literature provides few, if any real answers to the problems set by the geographical behavior of the MNE. We conclude that a fusion of traditional economic geography approaches with a focus on the information and organizational aspects of the firm and the region under consideration may be a way forward for both theory and empirical analysis.

Multinational firms, location, foreign direct investment

Abstract:
This study examines why, even when financial resource constraints are significantly relaxed, some new ventures struggle to survive while others prosper. Using the data of approximately 200 new Internet ventures that went public during the years 1997 through 1999, we propose that the performance of new ventures is a function of pre-IPO characteristics. We determined that firm-level characteristics including top management team, financial position, networks and location are related to the performance of struggling new ventures. We found strong evidence of agency relationships, so that a substantial reduction in equity holdings by the entrepreneurial team is strong signal of impending crisis. Interestingly, similar reductions by venture capital backers did not serve as a signal of crisis.

New ventures, IPOs, cash crisis

Abstract:
From the wide range of voting schemes, two electoral rules, proportional representation (PR) and plurality (PL) attract primary interest. This paper examines the relationship between proportionality, voter information and a conception of the power of competing political parties under the differing electoral rules. Data are from three Sicilian provincial elections (1985, 1990 and 1994). Two measures of power and two measures of proportionality are used and Olson's theory of groups is applied to derive a measure of voter information. The results indicate that proportionality and voter information have a negative effect on political party power dilution under PR rules. However, these effects disappear under PL rules. We offer some interpretations of these findings.

Plurality, proportionality, political competition

Abstract:
Does the political culture of an area have any impact on the foreign direct investment (FDI) decisions of multinational corporations (MNCs)? This question is difficult to address empirically, as locations differ in many dimensions. We therefore address this question by examining MNC investment location decisions with regard to different regions within a single country. The country we examine is Italy, which exhibits one of the highest levels of variation with regard to the political culture of its geographical regions. We find that political culture as represented by the pattern of support for political parties at different points on the political spectrum has a significant impact on the MNC investment location decision. Thus, in choosing between locations on a short list, where economic and financial location factors are roughly similar, political culture can have a determining influence. In the case of Italy, a Center-right orientation is conducive to MNC FDI, while a Center-left orientation is not. A Far-left orientation is found to have a very negative effect on FDI.

Foreign direct investment, political culture, MNCs

Abstract:
The location decisions of multinational enterprises (MNEs) are increasingly becoming the targets of lobbying efforts by government inward investment agencies (IIAs). This is related to the increasing mobility of MNE operations as the firms seek to rationalize and leverage their international networks. Prisoners' dilemma considerations are one element of the strategic competition amongst such agencies to secure the location of foreign direct investment (FDI) in their jurisdictions. However, while such activities may be collectively sub-optimal, they represent Nash best response strategies for individual governments. This paper focuses on the problem of how best to structure the investment supports. Five different types of investment supports are theoretically and empirically analyzed. In each case the principal-agent relationships between the government, the IIA and the MNE investor are assessed in the strategic context. Theoretical analysis suggests that in some cases, governments may prefer support schemes that appear to be more expensive, but have better incentive or risk-sharing implications. Empirical analysis suggests that MNE firm characteristics are related to the type of investment support package obtained. In particular, MNEs with substantial local experience (looking to expand or enhance operations) are more interested in tax concessions, while those with high levels of local factor dependence are more interested in infrastructure development. These results imply that policy-makers in government and in IIAs need to follow a two-stage strategy to be successful in FDI attraction. The first stage consists of 'targeting' the most appropriate MNEs and the second stage consists of 'tailoring' the appropriate package of incentives for the firms being considered. Undertaking the first stage without the second is unlikely to yield the desired results.

Key words: government investment supports, MNE investment location, principal-agent theory