First Look

Abstract—Democracy and Its Elected Enemies reveals that American politicians have usurped their constitutional authority, substituting their economic and political sovereignty for the people's. This has been accomplished by creating an enormous public service sector operating in the material interest of politicians themselves and of their big business and big social advocacy confederates to the detriment of workers, the middle class, and the nonpolitical rich, jeopardizing the nation's security in the process. The authors contend that this usurpation is the source of America's economic decline and fading international power and provide an action plan for restoring "true" democracy in which politicians only provide the services people vote for within the civil and property rights protections set forth in the constitution.

Publisher's link: http://www.cambridge.org/US/academic/subjects/economics/economics-general-interest/democracy-and-its-elected-enemies-american-political-capture-and-economic-decline

Abstract—We propose a new means by which non-profits can induce donors to give today and commit to giving in the future: contingent match incentives, in which matching is made contingent on the percentage of others who give (e.g., "if X% of others give, we will match all donations"). A field experiment shows that a 75% contingent match (where matches "kick in" only if 75% of others donate) is most effective in increasing commitment to recurring donations. An online experiment reveals that the 75% contingent match drives commitment to recurring donations because it simultaneously provides social proof yet offers a low enough target that it remains plausible that the match will occur. A final online experiment demonstrates that the effectiveness of the 75% contingent match extends to one-time donations. We discuss the practical and theoretical implications of contingent matches for managers and academics.

Publisher's link: http://www.hbs.edu/faculty/Pages/download.aspx?name=anik%20norton%20ariely%20in%20press.pdf

Abstract—We investigate the effect of corporate sustainability on organizational processes and performance. Using a matched sample of 180 U.S. companies, we find that corporations that voluntarily adopted sustainability policies by 1993-termed as High Sustainability companies-exhibit by 2009 distinct organizational processes compared to a matched sample of companies that adopted almost none of these policies-termed as Low Sustainability companies. The boards of directors of High Sustainability companies are more likely to be formally responsible for sustainability, and top executive compensation incentives are more likely to be a function of sustainability metrics. High Sustainability companies are more likely to have established processes for stakeholder engagement, to be more long-term oriented, and to exhibit higher measurement and disclosure of nonfinancial information. Finally, High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.

Publisher's link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1964011

Abstract—In this paper we examine how the quantity of information generated about firm prospects can be improved by splitting a firm's cash flow into a "safe" claim (debt) and a "risky" claim (equity). The former, being relatively insensitive to upside risk, provides a commitment to shut down the firm in the absence of good news. This commitment provides the latter a greater incentive to collect information than a monitor holding the aggregate claim would have. Thus debt and equity are shown to be complementary instruments in firm finance. We show that stock markets can play a useful role in transmitting information from equity to debt holders. This provides a novel argument as to why information contained in stock prices affects the real value of a corporation. It also allows us to make empirical predictions regarding the relation between shareholder dispersion, market liquidity, and capital structure.

Publisher's link: http://www.sciencedirect.com/science/article/pii/S1042957314000138

Abstract—Network effects are a key economic and strategic phenomenon in "new economy" industries. They can, but do not necessarily, lead to market tipping, unless they outweigh customers' benefits from differentiation and are accompanied by high switching and multi-homing costs. Network effects create the possibility for multiple equilibrium market configurations, which are crucially determined by market participants' expectations. While in some markets network effects are exogenously given, in other markets their existence and magnitude is endogenously determined by firms' strategic choices.

Publisher's link: http://www.palgraveconnect.com/esm/doifinder/10.1057/9781137294678.0461

Abstract—Recent contributions to a growing theory literature have focused on the tradeoff between adaptation and coordination in determining delegation within firms. Empirical evidence, however, is limited. Using establishment-level data on decision rights over information technology investments, I find that a high net value of adaptation is strongly associated with delegation, as are local information advantages and firm-wide diversification; in contrast, a high net value of within-firm coordination is correlated with centralization. Variation across establishments within firms is widespread: most firms are neither fully centralized nor fully decentralized. Delegation patterns are largely consistent with standard team-theory predictions; however, certain findings, such as a negative correlation between delegation and firm size, call for a consideration of agency costs as well.

Publisher's link: http://onlinelibrary.wiley.com/doi/10.1111/jems.2014.23.issue-2/issuetoc

Abstract—Product market strategy is the collection of choices, actions, and activities of a firm that determines how it positions itself in its product markets and allows it to achieve and maintain a competitive advantage. This article examines product market strategy from the perspective of positioning, using the value-based strategy framework.

Publisher's link: http://www.palgraveconnect.com/esm/doifinder/10.1057/9781137294678.0543