Fear of the Market or Fear of the Competitor? Ambiguity in a Real Options Game

In this paper we study an investment game between two firms with a first--mover advantage, where payoffs are driven by a geometric Brownian motion. At least one of the firms is assumed to be ambiguous over the drift, with maxmin preferences over a strongly rectangular set of priors. We develop a strategy and equilibrium concept allowing for ambiguity and show that equilibria can be preemptive (a firm invests at a point where investment is Pareto dominated by waiting) or sequential (one firm invests as if it were the exogenously appointed leader). Following the standard literature, the worst--case prior for an ambiguous firm in the follower role is obtained by setting the lowest possible trend in the set of priors. However, if an ambiguous firm is the first mover, then the worst--case drift can fluctuate between the lowest and the highest trends. This novel result shows that ``worst--case prior'' in a setting with drift ambiguity does not always equate to ``lowest trend''. As a consequence, preemptive pressure reduces. We show that this results in the possibility of firm value being increasing in the level of ambiguity. If only one firm is ambiguous, then the value of the non--ambiguous firm can be increasing in the level of ambiguity of the ambiguous firm

Fear of the market or fear of the competitor? Ambiguity in a real options game

Hellmann T, Thijssen JJJ. Fear of the market or fear of the competitor? Ambiguity in a real options game. Center for Mathematical Economics Working Papers. Vol 533 Januar 2016. Bielefeld: Center for Mathematical Economics; 2016.In this paper we study a two–player investment game with a first mover advantage in continuous time with stochastic payoffs, driven by a geometric Brownian motion. One of the players is assumed to be ambiguous with max–min preferences over a strongly rectangular set of priors. We develop a strategy and equilibrium concept allowing for ambiguity and show that equilibria can be preemptive (a player invests at a point where investment is Pareto dominated by waiting) or sequential (one player invests as if she were the exogenously appointed leader). Following the standard literature, the worst–case prior for the ambiguous player if she is the second mover is obtained by setting the lowest possible trend in the set of priors. However, if the ambiguous player is the first mover, then the worst–case prior can be given by either the lowest or the highest trend in the set of priors. This novel result shows that “worst–case prior” in a setting with geometric Brownian motion and –ambiguity over the drift does not always equate to “lowest trend”

Internal Barriers in the Transition of Enterprises from Central Plan to Market

While a number of transition countries have been able to make significant progress with macroeconomic stabilization, little is being done to understand and to address the horrendous difficulties and barriers that attend the process of transition at the level of the enterprise. Not knowing what to change and what to leave in place -either because of its intrinsic value or because of its impenetrable and unyielding nature- exacerbates the complexity of the challenge. The purpose of this paper is to present the insights revealed by our study on the barriers obstructing the transition of enterprises from central plan to market. Stakeholders' fears and institutional uncertainty seem to be the major impediments to the transition of enterprises from central plan to market. It is the fears of "being independent and self responsible, not having the protecting 'umbrella' of the state", of ignorance of markets, of "too many fast changes", of "losing one's own job", of "increased unemployment" and most importantly the fear of "losing power and status". These fears are all derived from a deep suspicion of the consequences of any change. Thus workers fear the loss of job and of the enterprise umbrella, managers fear the loss of power and status and boards fear financial losses and loss of ownership. The insights gained apply to most transition countries. Differences from country to country are a matter of degree. The degree of effectiveness and stability of the market economy to which the system is transforming will greatly depend on the degree of transmutation of local, social value systems to the new values and practices, which market oriented systems will be able to contain and integrate. Efforts to introduce management techniques suited to a market economy will almost certainly fail, unless the techniques chosen from the arsenal of contemporary market oriented management methods, complement and build upon local traditional managerial values. Successful transition might hinge more upon overcoming internal barriers of enterprises, than upon any other single factor of this complex and arduous process. Local as well as western managers and investors should spend time and efforts to understand the concealed logic of the barriers encountered during the implementation of each change. They should address the fears of individual stakeholders (employees, potential partners, clients, suppliers and public officials) with whom they are dealing. They should be mindful of how deeply certain attitudes may be ingrained and should not overlook the value of experience, existing skills and the prevailing managerial behavior that can be usefully built upon; they should expect to work hard and long at change before it really occurs.http://deepblue.lib.umich.edu/bitstream/2027.42/39634/3/wp248.pd

Internal Barriers in the Transition of Enterprises from Central Plan to Market

While a number of transition countries have been able to make significant progress with macroeconomic stabilization, little is being done to understand and to address the horrendous difficulties and barriers that attend the process of transition at the level of the enterprise. Not knowing what to change and what to leave in place -either because of its intrinsic value or because of its impenetrable and unyielding nature- exacerbates the complexity of the challenge. The purpose of this paper is to present the insights revealed by our study on the barriers obstructing the transition of enterprises from central plan to market. Stakeholders' fears and institutional uncertainty seem to be the major impediments to the transition of enterprises from central plan to market. It is the fears of "being independent and self responsible, not having the protecting 'umbrella' of the state", of ignorance of markets, of "too many fast changes", of "losing one's own job", of "increased unemployment" and most importantly the fear of "losing power and status". These fears are all derived from a deep suspicion of the consequences of any change. Thus workers fear the loss of job and of the enterprise umbrella, managers fear the loss of power and status and boards fear financial losses and loss of ownership. The insights gained apply to most transition countries. Differences from country to country are a matter of degree. The degree of effectiveness and stability of the market economy to which the system is transforming will greatly depend on the degree of transmutation of local, social value systems to the new values and practices, which market oriented systems will be able to contain and integrate. Efforts to introduce management techniques suited to a market economy will almost certainly fail, unless the techniques chosen from the arsenal of contemporary market oriented management methods, complement and build upon local traditional managerial values. Successful transition might hinge more upon overcoming internal barriers of enterprises, than upon any other single factor of this complex and arduous process. Local as well as western managers and investors should spend time and efforts to understand the concealed logic of the barriers encountered during the implementation of each change. They should address the fears of individual stakeholders (employees, potential partners, clients, suppliers and public officials) with whom they are dealing. They should be mindful of how deeply certain attitudes may be ingrained and should not overlook the value of experience, existing skills and the prevailing managerial behavior that can be usefully built upon; they should expect to work hard and long at change before it really occurs.barriers, transition, enterprise, communitarianism, resistance

What is the fair wage? A model of as-if-co-operation

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Learning Strategies in Coopetitive Environments

The objective of this chapter is to explore the learning strategies that can be deployed by firms in coopetitive configurations with no other choice than deploying an “adverse learning” mechanism to reach their customers through cooperation with their competitors. After exploring the mechanisms of asymmetric learning in a first section, the chapter adopts an ecological perspective (Hawley, 1950) in drawing parallels between animal organization and groups of firms in gaining a strategic advantage through asymmetric learning.coopetition; Learning Behavior; Learning Strategy.

Technological Evolution and the Devolution of Corporate Financial Reporting

My claim is that the technology link to the recent disclosure scandals is no coincidence. To be sure, cheating tempts all who seek wealth, in whatever line of business they find themselves. I want to show, however, how the rapid pace of innovation at a number of levels offered motive, opportunity, and rationalization for a downshift in financial reporting norms, which in turn made outright fraud more probable

Fear of failure in the context of making internationalisation decision of a firm

The thesis addresses the broad research problem exploring fear of failure as experienced by small-and medium-sized enterprise (SME) owners in the context of their making decisions about internationalising their ventures. The success of SME internationalisation pursuits is associated with the decision maker’s capacity to appropriately evaluate and to make relevant decisions in the context of the risk, uncertainty and complexity of the international business environment. The possibility of failure, in particular, contributes to the difficulty of decision-making, with failure in international markets a widespread phenomenon. Fear of failure is well researched in Psychology and is studied extensively in Entrepreneurship research; however, these findings cannot be simply extended into new contexts including international business settings, because individuals may generate unique feelings, thinking and behavioural responses when moving into a new environment. A number of empirical studies indicate the effect of emotions on internationalisation decisions, including direct foreign investment and the impact of fear of failure on the exporting behaviour of SMEs. Although fear of failure is recognised as being real and a contributor toward other behaviours, SME owners’ emotions, cognition and behavioural responses are unclear when experiencing fear of failure in the context of making internationalisation decisions. The thesis advances the field of international business by providing insights into the relevance and complexity of the fear of failure in the process of SME internationalisation. The research builds upon existing theory and extends the conversation about “connecting people with internationalisation”, exploring the micro- level characteristics and actions of the individual driving firm-level internationalisation outcomes. The thesis explores the scholarly conversation between ‘emotion and internationalisation’ by leveraging insights from Psychology and Entrepreneurship in order to better understand the fear of failure experiences of individuals and by identifying ways in which they respond differently. Such in-depth understanding cannot be achieved if this complex phenomenon is explored within the process of internationalisation alone. The contexts for making internationalisation decisions provide greater insights as a conduit for in-depth exploration of the fear of failure experience and its dynamic and complex nature. This is because new market entry decisions are often made in unfamiliar, foreign business environments underpinned by risk and uncertainty. They provide environmental stimuli to trigger cognitive re-appraisals and to impact the SME owners’ perceptions relating to venture growth potential and/or potential threats to venture survival. This empirical investigation answers two research questions: (1) How do SME owners experience emotional and cognitive aspects of fear of failure in the context of making internationalisation decisions for their firms? (2) How do SME owners learn when experiencing fear of failure in the context of making internationalisation decisions for their firms? Due to the exploratory nature of these research questions, this study applies a qualitative methodology and employs interpretive phenomenological analysis of data collected via semi-structured interviews with 18 owners of SME-exporters from China. The research is conducted in China due to its contextual uniqueness, including its export- led SME growth associated with international networks, as well as the socially deep- rooted culture of fear losing ‘face’. The research findings conclude with a greater understanding of the dynamism of fear of failure as experienced by SME owners in the context of making internationalisation decisions. These findings focus on the interaction between emotional expression of fear of failure and cognitive assessment of sources of fear of failure: fear of failing to manage risk and uncertainty, as well as fear of the consequences of failing to enter an international market. Furthermore, fear of failure triggers individuals to learn as a behavioural response. In turn, this learning contributes to pacifying the fear of failure emotions, and further activating hope of success as indicating emotional change, as well as enhancing knowledge development of risk and uncertainty management strategies to gain clarity of thinking as part of cognitive change. As such, the research findings contribute to entailing emotion, cognition and behaviour response when experiencing the fear of failure in the context of making internationalisation decisions. The thesis contributes to International Business literature by centralising the role of the individual decision-maker in the IP model and extending it from the fear of failure perspective. Research contributions are made at both theoretical and applied levels with results that are relevant for SME owners. Furthermore, implications for designing internationalisation education and training programs are offered, so contributing to proactive strategies formulated to deal with fear of failure.Thesis (Ph.D.) -- University of Adelaide, Adelaide Business School, 201

Trusting the stock market

We provide a new explanation to the limited stock market participation puzzle. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function not only of the objective characteristics of the stock, but also of the subjective characteristics of the investor. Less trusting individuals are less likely to buy stock and, conditional on buying stock, they will buy less. The calibration of the model shows that this problem is sufficiently severe to account for the lack of participation of some of the richest investors in the United States as well as for differences in the rate of participation across countries. We also find evidence consistent with these propositions in Dutch and Italian micro data, as well as in cross country data. Klassifikation: D1, D

Gender identity and breast cancer campaigns

Concerning itself with understanding how marketing methods and tools can be of benefit to healthcare professionals, health marketing is an area of research that has grown substantially in recent years. Of much interest to the sector is whether awareness campaigns are effective in increasing the public’s perceived vulnerability to any given disease