Experience,Equity and Foreign Investment Risk: A PIC Perspective

We analyze foreign investment risk-mitigating effects of host-country policy stability, firm experience and equity stakes using an empirical context largely ignored by international business (IB) research: project investment companies (PICs). PICs permit cleaner separation of individual investment project risk from the parent firm, which may otherwise pool risk characteristics from managing multiple projects across different industries and countries. PICs also permit potentially unbiased, prospective risk assessment at the time of a project’s initial announcement based on the mix of debt and equity funding the project. Consistent with previous IB research, our analyses of 396 PICs announced in 53 countries from 1990–2006 indicate that investment risk measured as the percentage of equity-to-total capital funding a PIC decreases with greater host-country policy stability, lead-investor experience in the host country, and lead-investor equity stakes. But contrary to previous IB research, we find that lead-sponsor experience and equity stakes reduce investment risk less as host-country policy stability decreases. From a PIC perspective, investor experience and equity stakes are complements to (not substitutes for) host-country policy stability. Our PIC-based evidence re-invigorates research and related practice and policy debates about how investor experience and equity holdings affect foreign project decisions and suggests new avenues for future work.     

The Long Term Effectiveness of Expected Net Present Value Maximization in an Environment of Incomplete and Uncertain Information

Most mathematical programming procedures used for optimizing capital rationing decisions consider each decision in isolation. They implicitly require that the decision maker shall know, at the time of decision, all the investment opportunities that will appear between that time and the horizon time of the decision, and further, that all assets will be converted to cash at the horizon time.

The research described in this article used a simulation methodology for studying the long term effectiveness of expected net present value maximization in an environment of incomplete and uncertain information. Some tentative conclusions are drawn from its use in long sequences of decisions in hypothetical firms: consistent use of a Rank^:on-Net-Present-Value selection procedure will tend to maximize the expected capital growth rate of the firm if the discount rate is properly selected and expected cash flows are accurately estimated; however, failure to meet either of these conditions can have a seriously adverse effect on the growth rate of the firm, causing it to be as small as, or smaller than, that achieved by a random selection procedure.     

Growth Incentives to Invest in a Network Externality Environment

Firms that operate in the telecommunications industry oftenhave to make large and risky investments in digital infrastructure.This paper examines how firm size affects the incentive to investin infrastructure projects in industry environments that incursubstantial network externalities. We suggest that, in the presenceof network externalities, a firm's rate of growth first declinesand then increases with the size of its user base. An implicationof this result is that firms may benefit from making investmentsin emerging digital infrastructure early enough to achieve asubstantial user base and to gain that user base before otherfirms' investments pre-empt them. The results mean that firmsthat undertake earlier successful investment may achieve pre-emptionvery quickly. The sources of network externalities contributeto the incidence of strategic alliances in network industries,particularly when coupled with the pressures of technical uncertainty.     

Supply chain capacity and outsourcing decisions: the dynamic interplay of demand and supply uncertainty

We study the interplay of demand and supply uncertainty in capacity and outsourcing decisions in multi-stage supply chains. We consider a firm's investment in two stages of a supply chain (Stage 1 models the “core” activities of the firm, while Stage 2 are the “non-core” activities). The firm invests in these two stages in order to maximize the multi-period, discounted profit. We consider how non-stationary stochastic demand affects the outsourcing decisions. We also consider how investment levels are affected by non-stationary stochastic supply when the market responds to the firm's investments. We characterize the optimal capacity investment decisions Tor the single- and multi-period versions of our model and focus on how changes in supply and demand uncertainly affect the extent of outsourcing. We find that as the responsiveness of the market to investments made by the firm increases, the reliance on outsourcing generally increases. While greater supply and greater demand have the expected effect on investments, decreases in variability are not as straightforward. Greater supply uncertainty increases the need for vertical integration while greater demand uncertainty increases the reliance on outsourcing. In the multi-period model, we find that the nature of adjustments in capacity based on changes in demand or supply follows from the comparative statics of the single-period model, although whether outsourcing increases or decreases depends on the costs of adjusting capacity.     

EFFECTS OF FIRM PERFORMANCE, ORGANIZATIONAL SLACK, AND DEBT ON ENTRY TIMING: A STUDY OF TEN EMERGING PRODUCT MARKETS IN USA

As technologies change and market environments evolve, firms introduce new products to create or satisfy new market demands or to substitute for existing products. A key strategic decision for firms contemplating entry into emerging product markets is the timing of their entry. Firms may choose to enter earlier and hope to preempt critical strategic resources, but they take the risk of premature entry. On the other hand, firms may prefer to enter later and wait for technical and market uncertainties to subside, but they face the potential problem of being frozen out of a profitable market by participants who risked earlier entry (Lieberman and Montgomery 1988; Mitchell 1989, 1991; Lilien and Yoon 1990; Robinson et al . 1992). This study examines three organizational factors that are hypothesized to affect a firm's strategic decision regarding timing of entry into an emerging product market: performance, organizational slack, and debt position. We begin with an overview of entry-timing research followed by some background on research in performance, organizational slack, and debt. We then develop hypotheses concerned with these three organizational factors and entry timing. We test these hypotheses in a multiindustry sample of firms in USA, and control for the influence of industry and firm variables that could be expected to affect entry-timing decisions.     

A new game of information sharing and security investment between two allied firms

In consideration of business information sharing, this paper investigates a new game of information sharing and security investment between two allied firms. Firms’ strategies in three decision models (Nash Equilibrium decision, partially centralised decision and totally centralised decision) are analysed. We provide some quantitative analyses on how some parameters affect firms’ decisions in the three decision models. Our Nash Equilibrium analysis shows that when firms make decisions individually, they will share no information with each other. When information sharing is determined by a social planner, firms will share some information with each other, which increases the risk of information leakage. Thus, firms should increase their security investments to mitigate the higher information leakage risk. However, our analysis shows that instead of investing more in information security, firms will reduce their security investment, which will further aggravate the risk. Hence, a social planner is required to designate the security investments and information sharing levels for both firms. Our theoretical analysis shows that firms’ strategies can achieve global optimality in the totally centralised decision model. Furthermore, a numerical experiment is conducted and the result demonstrates that totally centralised decision model is more efficient than the other two decision models. At last, we propose two compensation mechanisms to help firms coordinate their strategies when making decisions individually.     

Who Follows Whom? A Location Study of Chinese Private and State-Owned Companies in the European Union

This paper analyses the location decision of Chinese manufacturing firms for their greenfield investments in Europe. The analysis draws on neo-institutional theory to formulate hypotheses on the importance of mimicry in Chinese firms’ location decisions and how this differs between private and state-owned enterprises. The analysis is conducted at the subnational (regional) level while taking into account economic integration across regions. The results confirm the importance of mimicry and show that Chinese firms not only follow previous Chinese investors in the same sector but also in unrelated sectors. Furthermore, Chinese investors only follow previous investments by Chinese private-owned companies while the results also show that Chinese private-owned companies generally have a higher tendency than state-owned companies do to follow prior investment decisions by compatriot firms. As the empirical evidence demonstrates the importance of bandwagon effects, the implication is that investment decisions can have a lasting influence on the geographical pattern of Chinese investments across regions.     

Competition, Learning and Investment in New Technology

Efforts to describe the evolution of production costs must simultaneously include the impact of investment in new technologies as well as experience-based learning. In this paper we formulate a dynamic model of technological investments, which includes the impacts of learning curve effects, investment levels in new technologies with uncertain timing, and competitive responses. Our results highlight the interaction of investment and output rate decisions in monopolistic and duopolistic situations, and illuminate the impact of the planning horizon length on such decisions. The model results elaborate upon how the attractiveness of new technologies is related to the firm's ability to learn using its existing technology, how competition can increase or decrease the market size for new technologies, and how investment levels are driven in opposite directions by considering longer horizons on one hand and the competitive response on the other.     

The dynamic relation between financial positions and investment: evidence from company account data

A key feature of recent financial business cycle theories isthe existence of a two-way dynamic relation between financialfactors and investment: over time firms' financial positionsare affected by, and in turn affect, investment decisions. Thispaper investigates the dynamic interaction between financialconditions and investment by estimating and testing vector autoregressionson company account panel data for US manufacturing firms, whileconsidering explicitly sectional and time heterogeneity. Theresults show that indicators of liquidity and solvency containsignificant predictive information for investment at the firmlevel. We also find evidence of both cross-sectional and timeheterogeneity: the role played by financial factors is significantlymore important for highly leveraged than for low-debt firms;capital market frictions are shown to have asymmetric effectsover the business cycle, displaying a larger impact in contractionsthan in expansions. Overall, the evidence supports the hypothesisthat capital market imperfections have an important role inexplaining aggregate cyclical dynamics.     

High-tech entrepreneurial firms’ innovation in different institutional settings. Do venture capital and private equity have complementary or substitute effects?

ABSTRACT

The paper explores whether venture capital (VC) and private equity (PE) investments have complementary or substitute effects on innovation in high-tech entrepreneurial firms in different institutional settings, focusing on different levels of capital market development, entrepreneurial culture, and intellectual property rights protection. Using a panel sample of 326 firms from 12 EU countries observed from 2009–2013, the empirical results show that the VC/PE effect on high-tech entrepreneurial firms’ innovation is stronger in countries with a less-developed capital market. This suggests that VC/PE investments play a substitute role. A partial substitute role of VC/PE is also detected in firms located in countries with a low entrepreneurial culture. However, no significant evidence emerged regarding the level of protection of intellectual property rights. The results are generally robust to various econometric specifications. The implications of the resulting framework, the study’s limitations, and opportunities for further research are also discussed.     

企业训练与组织绩效关系之探讨--以台湾地区制造业为例

在变化日益快速的环境中，组织经营绩效的好坏已经成为企业生存的要件，而为组织创造竞争优势的其中一个重要资源便是“人”，组织中为了要让员工创造更高的绩效，人力资源部门透过训练可以让员工增加工作技能、知识及能力，进而提高组织绩效。然而在学术界及实务界较少谈及要如何证明训练对组织绩效是有影响的，因此针对训练成效对组织绩效的影响作一个深入的探讨。首先归纳整理相关献与企业实际的作法，探讨企业的训练成效对组织绩效之影响，接着以天下杂志1999年台湾地区一千大制造业厂商的调查结果进行分析，研究发现：主管对训练的支持程度及组织愈重视员工参与与决策并充分授权于员工时其训练成效愈佳；主管对训练的支持程度及公司对员工的工作有充分的保障对营业收入成长率具有正向的影响；组织重视员工参与决策或是充分授权给员工其组织获利率较高；绩效评估制度的公平性对资产报酬率具有正向的影响力；平均每人训练费用愈多，其员工产值愈高。     

Globalization of the Automobile Industry

ABSTRACT

The Japanese automobile industry has spearheaded a globalization drive that began before World War II with its use of foreign technology. This internationalization effort relied on the export of initially subcompact cars to the United States followed by capital investments in overseas manufacturing plants and the transfer of technology. A concerted move into the luxury car market has brought the Japanese into direct competition with European makers even as joint ventures and equity investments are made in Europe. In this article, corporate decisions to expand abroad are discussed along with how these moves were facilitated by the revolution in global finance and the concurrent growth of the Japanese financial sector.     

Determination of the Financing Scale, Time Limit and Returns from the Investment in BOT Projects

The key aspect to the successful implementation of BOT concept is the raising of finance by project sponsor, so financial engineering techniques and capital structuring skills are required to find the proper mix of debt and equity. The capital structure and present a model to determine the equity level from the aspects of financing scale, construction time and return on investment are analyzed. The resulting model can help the sponsor to avoid the capital risk, and offer the government a criterion to evaluate management ability of the sponsor. To show the application and availability of this model, a case study is conducted. Thus, this paper is concern with the determination of financing scale, construction time, and return on investment which would assist the sponsor to ensure that the equity level for optimal capital structure is available prior to the implementation stage in BOT project operation.     

Equity Breakeven Point: A Graphical and Tabulation Tool for Engineering Managers

Abstract

This article presents a graphical and tabulation framework for the application of equity breakeven point (EBP) for financial management of engineering projects. EBP was previously developed as a computational tool for the analysis of mortgage payments. This article presents a user-friendly framework for visualizing and assessing the utility of EPB in engineering projects. The proposed graphical and tabulation framework extends the application of EPB to general capital investments, which are part of engineering projects. Engineering managers and other practitioners can utilize the tabulation of EBP to assess what-if options in major financial transactions. The mathematical derivation of the EPB indicates the time when the unpaid balance on a capital investment is equal to the cumulative equity in the investment, thereby providing a-priori insight into how long it might take to retire an investment loan on the strength of the accrued equity. This type of graphical visualization is useful for negotiating the terms of acquiring and/or managing large engineering projects.     

The Performance of Venture-Backed Firms: The Effect of Venture Capital Company Characteristics

This paper deals with the empirical investigation of the question as to which type of venture capital (VC) companies determines the growth and survival of istics of VC companies as additional factors that explain the high variation of the employment growth rate of portfolio firms and their probability of surviving. Surprisingly, venture- backed firms financed by independent VC companies are not among the most successful firms. Independent VC companies are some of those with the greatest profit orientation and hence, a high quality of the value chain process is to be expected. Significantly higher employment growth rates are evident for firms financed by locally active VCs. Changes in the board of directors do not have a positive effect on firms' performance. Syndicated investment strategy seems to be a successful strategy.     

Technological Diversification Through Corporate Venture Capital Investments: Creating Various Options to Strengthen Dynamic Capabilities

Corporate venture capital (CVC) investment in technology-intensive entrepreneurial ventures has attracted increasing attention from established firms which recognize it as a useful learning investment strategy to create diversified technological options for future change. However, there is a lack of empirical research which examines the relationship between CVC investment and the corporate investors' technological diversification. In this study, we investigate the effects of CVC investments on corporate investors' technological diversity by using 20 years of panel data from corporate investors in five high-tech industries. As a result, we find that the total amount of CVC investments and the industrial diversity of portfolio companies exhibit curvilinear (inverted U-shape) relationships with the corporate investors' technological diversity. Moreover, the empirical results show that the absorptive capacity of corporate investors positively moderates the effects of CVC investments on the technological diversity.     

The Performance of Independent Active SMEs in French Competitiveness Clusters

This article analyses the evolution of independent members of French independent competitiveness clusters. It compares small and medium-sized enterprises (SMEs) that participated in collaborative research projects, funded by French competitiveness clusters, against similar control companies that were not part of such projects and not funded by the policy, over the period 2005–2013. French competitiveness clusters seek to enhance SMEs’ size, performance, innovation and employment; the current study therefore assesses their outcomes in terms of capital invested and equity returns. The findings from a difference-in-differences analysis reveal that sales, employment, R&D investments, and value added all increase in relative terms, but financial returns exhibit significant relative decreases for the smallest companies, whereas larger firms record strong increases. The inability of the smallest SMEs to reap gains from their cluster membership should be a matter of great concern to both companies and policy-makers.     

Environmentally friendly pathways for the evaluation of investment projects using life cycle assessment (LCA) and life cycle cost analysis (LCCA)

Issues related to improvement in the quality of products and to environmental protection in the economic policy of many countries and in the strategies of institutions and international organisations (e.g. European Union) have increased in importance in recent years as a consequence of the increase in environmental awareness of consumers. All these institutions currently recommend a comprehensive assessment of the effectiveness of planned projects during the decision-making process taking into account both economic and environmental factors. It is, therefore, important to develop methods and tools to assess environmental performance as a support to a proper choice of investment activities. The aim of this paper is to develop algorithms to link the life cycle assessment (LCA) model associated with environmental issues and the life cycle cost analysis (LCCA) model associated with economic factors to permit an integrated assessment of investment projects. The combination of LCA and LCCA results enables the assessment of ongoing or planned investments and should be used as a priority in making strategic decisions. In this paper, three environmentally friendly pathways (algorithms) using LCA–LCCA indicators as a support for decision-making processes were proposed: the first for implementing any environmental investments, the second for modernisation and innovation investments, and the third for new investments.     

Joint decisions on inventory replenishment and emission reduction investment under different emission regulations

Carbon emission regulation policies have emerged as mechanisms to control firms’ carbon emissions. To meet regulatory requirements, firms can make changes in their production planning decisions or invest in green technologies. In this study, we analyse a retailer’s joint decisions on inventory replenishment and carbon emission reduction investment under three carbon emission regulation policies. Particularly, we extend the economic order quantity model to consider carbon emissions reduction investment availability under carbon cap, tax and cap-and-trade policies. We analytically show that carbon emission reduction investment opportunities, additional to reducing emissions as per regulations, further reduce carbon emissions while reducing costs. We also provide an analytical comparison between various investment opportunities and compare different carbon emission regulation policies in terms of costs and emissions. We document the results of a numerical study to further illustrate the effects of investment availability and regulation parameters.