Contributions in Merlin

The optimal human resource and skill development strategy is one important factor of economic success. This paper, therefore, analyzes industry-specific differences in the training provision between engineering and retailing companies in Japan and focuses in particular on the initial training provision for intermediate skills at the firm level. Based on 11 in-depth interviews in the retailing and the engineering sector in Japan, we find that gross training costs per basic trainee are significantly higher in engineering than in retailing. However, not only the engineering companies, but also their employees bear higher costs than their counterparts in retailing. The absolute and relative entrance wages for production employees are significantly lower than the entrance wages of employees in sale. Even though wages in engineering increase significantly stronger within the first five years, the absolute and relative wages in engineering remain still significantly lower. The results relate to the qualification levels of new trainees and the career paths

Firms generate new knowledge that leads to innovations by recombining existing knowledge sources. A successful recombination depends on the availability of a knowledge stock (human capital pool) and the flow of knowledge within the firm (induced by HRM systems). While human resource theory expects complementarities between human capital pools and HRM systems, it does not explicitly address how knowledge exchange may be guaranteed or fostered. Moreover, empirical approaches neglect the complexity of such complementarities. In this study we develop a model that integrates a firm’s knowledge stock and flow into a knowledge creation (KC) system comprising four ideal types. This system explains the occurrence of superior incremental innovation performance. We empirically analyze the KC system by applying fuzzy set qualitative comparative analysis (fsQCA) and identify configurations concurring with our ideal types. The results show that the use of human capital and HRM practices depends on firm size and industry dynamism.

I study the impact of ''say on pay'' (SoP) on the compensation decisions and the structure of the board of directors (BoD) in a setting where the CEO has the real authority over the composition of the BoD. The CEO's authority arises endogenously from an informational advantage about individual board members' contribution to firm value and allows her to establish a dependent BoD. Shareholders approve the CEO's director slate because they can only control the level of board dependence but not the board's contribution to firm value. In this setting, SoP has two effects. On the one hand, it prompts a BoD with a given dependence level to reduce the CEO's bonus. On the other hand, it allows the CEO to extract the rent generated by the improved compensation policy and to establish a more dependent BoD. In equilibrium the board becomes more dependent from the CEO and pays her a higher bonus for the same performance. This outcome can only be avoided if the CEO is restricted in her ability to adjust the board composition. Motivated by existing differences in SoP design, I also analyze the consequences of a binding and a pre-contractual vote. I find that a binding vote creates a moral hazard problem on the part of the firm's shareholders if the vote takes place after the agent has supplied her effort. Its consequences critically depend on the legal protection standard of the CEO. Whenever the shareholders can enforce a retroactive bonus cut, the allowable amount of the bonus reduction determines whether or not SoP improves the efficiency of the pay process or diminishes firm value. I show that the moral hazard problem can be avoided by a pre-contractual vote. If the vote is binding, SoP can improve the efficiency of the compensation arrangement and effectively reduce the equilibrium level of board dependence without impairing the CEO's effort incentives.

We study the role of peer groups in determining the structure and the total amount of executive compensation. Our analysis is based on a standard agency model in which the agent's reservation utility is related to the peer group used for performance evaluation. Our main result is that the informativeness criterion proposed by Holmström (1979) is neither a necessary nor a sufficient condition for the optimality of a relative performance evaluation. Whenever the relative performance evaluation is positively related to the agent's reservation utility, the principal faces a trade-off between the benefits from improved risk sharing and the total cost of compensation. If the peer group effect is strong, it can be optimal to evaluate the agent on her own firm performance only. If the relative performance evaluation is negatively related to the agent's reservation utility, it can also prove useful to reward the agent on the basis of uninformative signals. We also study the optimal weighting and composition of the performance index and find that the principal puts lower (higher) weight on an index and on peer firms that are positively (negatively) related with agent's reservation utility. In case of a negative relation it can even be optimal to include firms with uncorrelated cash flows into the index in order to reduce the total compensation.

This paper analyzes the use of transfer pricing as a strategic device in divisionalized firms facing duopolistic price competition. When transfer prices are observable, both firms' headquarters will exclude their marketing division from the external input market and charge a transfer price above the market price of the intermediate product to induce their marketing managers to behave as softer competitors on the final product market. When transfer prices are not observable, strategic transfer pricing is not an equilibrium, and the optimal transfer price equals the market price of the intermediate product. As an alternative, the firms can signal their competitor a transfer price above the market price of the intermediate input through a proper choice of their accounting system. The paper identifies conditions under which the choice of absorption costing is a dominant strategy for both firms. Moreover, when the firms' products are close substitutes, the strategic benefits of full cost based transfer pricing can provide incentives to maintain a production department that would not be able to survive as a separate firm in the long run.

This paper evaluates individuals’ ability to avoid investment mistakes and analyzes how investment competence is related to the propensity to seek or rely on professional advice. To address these issues, we use novel survey data collected from a representative sample of Swiss households. We find that investment competence is characterized by significant age and gender gaps, and that individuals who rely less on price movements as a source of information about investments are more likely to show above-the-average investment competence. We also find that individuals with relatively extensive investment experience and those who rely relatively strongly on their own judgment in making investment decisions are more likely to make investment decisions autonomously. In addition, we find that investment competence is positively related to the demand for financial advice. Thus, it appears that the individuals who most need financial advice are those who are least likely to seek such advice and rely on it.

Based on an in-depth case study, this paper examines how framing contests between proponents and opponents of the Diesel particulate filter (DPF) in Germany evolve over time to affect institution creation. Our results suggest that the emergence of institution passes through three cumulative phases: necessary opening, organizing-mobilizing, instrumentalization of channels. This development is characterized by specific framing contests where the precedent phase is a necessary condition for the next to occur, a process which we conceptualize as cumulation. Our data indicate that framing contests were resolved when collective action frames which have a motivational task were crafted by the social movement with the effect of mobilizing customers, thereby creating a de facto standard i.e. the Diesel particulate filter. We argue that the motivational frame resonated because it features negative individualized evidence-based consequences and because it built on the framing contests of previous phases. Finally, we observed that framing contests tend to polarize over time, thereby reflecting the intensity of the conflict.

We argue that development of dynamic capabilities theory into a fully dynamic theory of strategy is inhibited by the operation of an incomplete set of perspectives on human action. Clarifying how human action is conceptualized, particularly as regards creativity and learning, might help strategy scholars to develop theory in ways that adequately address action at all levels of engagement in dynamic contexts, thereby turning existing contradictions into complementarities whilst accounting for issues of both content and process. By reorganizing existing literatures along action theoretic lines the paper reframes some of the difficulties in current theorizing, illustrates the value of this reframing by applying action theory to recent work on dynamic capabilities and proposes a rules-based framework as a potential integrating device for the field. The paper closes by highlighting the need for interdisciplinary research in strategy.

Replicating a successful “template” or best practice across time (“temporal replication”) or across a number of different economic settings (“spatial replication”) is an important strategy for organizational growth and performance improvement. In this paper, we use an NK landscape model to examine how organizations may innovate and adapt to their environment through “inaccurate replication”. We identify conditions under which inaccurate replication can result in higher long-run performance than accurate replication. We also uncover the specific mechanisms through which replication errors may affect organizational performance. In that, our study also sheds a new light on how organizations may learn from (replication) errors.