Ample incentives exist for firms to pursue product, service, or process innovations to increase their profitability. In contrast, few incentives exist for firms to pursue innovations that provide social externalities if these are not inherently profitable. This article provides an argument that first generation research and development (R&D), or R&D that does not utilise economies of scale (as ...

This paper examines the causes and consequences of hedge fund activism. Hedge funds target profitable and healthy firms, with above-average cash holdings. The target firms earn significantly higher abnormal stock returns around the initial 13D filing date than a sample of control firm. However, they do not show improvements in accounting performances in the year after the initial purchase. Inst...

We study a duopoly competition where customers have different preferences and one or both firms can offer customized products geared to those preferences. Firms differ in their production costs and customization capabilities. We analyze the effects of these differences and characterize the firms’ strategic process choices. We find that the value of customization to a firm critically depends on ...

D who should receive a mail-order catalog is among the most important decisions that mail-ordercatalog firms must address. In practice, the current approach to the problem is invariably myopic: firms send catalogs to customers who they think are most likely to order from that catalog. In doing so, the firms overlook the long-run implications of these decisions. For example, it may be profitable...

Diversification has become a common strategy of corporate risk management along with availing other potential benefits. The intent of this study is to identify and analyze the nature of relationship that exists between diversification and capital structure as well as profitability in Pakistan. For this purpose we use the 10 years’ (2000-2009) data of all the companies of chemical and food secto...

have begun to offer their services, such as voice telephony, Internet and TV in so-called triple play packages. While carefully recognizing the technological, legal and economic framework of the fixed-line telecommunications industry, this book investigates whether bundling is indeed a profitable pricing strategy for the firms and if it can possibly facilitate the leverage of market power into ...

This study examines whether investors incorporate the effect of employee and director bonuses into firm market valuation for a sample of 191 profitable high-tech firms during 2001-2007 in Taiwan. We use the Ohlson (1995) equity valuation model, and compare difference dilution ratio model’s explanation power. We find a negative correlation between the value of CSBs and Tobin’s Q but no significa...

In order to analyse the stability of cartel structures in a Cournot oligopoly, I propose a noncooperative game of coalition formation in which any group of firms can induce a dismantling deviation such that each member is in a smaller cartel in the resulting structure. It is required that a deviation only occurs if it is robust against further dismantling deviation. I characterise the set of st...

Emission allowances are sometimes distributed for free in an early phase of a cap-and-trade scheme to reduce adverse effects on the profitability of firms. This paper investigates whether grandfathering can also be used to avert the relocation of firms to countries with lower carbon prices. We show that under certain conditions, relocation can be averted in the long run, even if the grandfather...

In an efficient economy, capital should be quickly (re)allocated from declining firms and sectors to more profitable investment opportunities. This process is affected by the concentration of corporate control, which in turn is affected by market institutions. We employ a panel of 12,000 firms across 44 countries to estimate the functional efficiency of capital markets. We adapt a measure for t...