Anju Seth

The design of coordination and control mechanisms for managing joint venture–parent relationships

Joint ventures (JVs), defined as independent organizations formed by the pooling of resources and sharing of equity by two or more firms, are being formed at an increasingly rapid pace. While much empirical research has examined the conditions which favor the formation of JVs, less attention has been paid to the equally important issues of control and implementation which are the focus of interest in this study. We identify two factors which are expected to influence the design of control mechanisms, i.e., (1) the strategic interdependence between the JV and each parent and (2) the environmental uncertainty faced by the JV. Our empirical examination confirms the importance of the degree of strategic interdependence and the moderating role of environmental uncertainty in explaining the design of control mechanisms.

Ingraining product-relevant social good into business processes in subsistence marketplaces: The sustainable market orientation

This article uses insights gained from the unique context of subsistence marketplaces, or the base of the pyramid, to put forth a sustainable market orientation for businesses. Using qualitative research and case studies of businesses, ingraining social good in a product-relevant sense is argued to be central and essential for businesses in subsistence contexts to be successful. This analysis is unique in taking a bottom-up in orientation and begins at the microlevel, drawing on psychological and sociological aspects of subsistence marketplaces to derive macrolevel implications.

The Impact of Leveraged Buyouts on Strategic Direction

This article examines the leveraged buyout as a tool for corporate restructuring and focuses on the strategic impact of leveraged buyouts on a firmss corporate objectives. The article documents the increased frequency and size of large leveraged buyouts over the period of 1978-1985. A leveraged buyout brings about four changes in the firm: changes in ownership structure, changes in capital structure, changes in asset structure, and changes in organizational structure. The changes in ownership structure involve significant increases in the stakes of managers and large holdings by the buyout specialists fund. In addition, leveraged buyouts are accompanied by a large increase in debt financing. These changes in ownership and capital structure influence the strategic decisions made by the post-buyout firm. In the post-buyout firm, asset acquisition and divestment decisions and organization structure changes are aimed towards creating shareholder value and maintaining debt coverage.

CONTROLLING THE CONFLICT OF INTEREST IN MANAGEMENT BUYOUTS

A controversial aspect of the management buyouts that were popular throughout the 1980s is the potential for a conflict of interest to arise when a manager bids to acquire the firm he manages. This study examines 184 management buyouts and reports three findings. First, returns to prebuyout shareholders are greater when managers must bid against outside acquirers. Second, bid revisions in the face of competition exceed revisions due to shareholder litigation and negotiations with boards. Third, the incidence of competition is negatively related to the prebuyout share holdings of managers. Coauthors are Ronald F. Singer, Anju Seth, and Darla F. Lang. Copyright 1994 by MIT Press.

Limits on managerial discretion in management buyouts: the effectiveness of institutional, market and legal mechanisms

Recent changes in the legal environment faced by US corporations suggest that the shareholder-manager conflict of interest, and the effectiveness of mechanisms to narrow this divergence, are issues of continuing importance. This study examines the linkages between institutional, market and legal mechanisms to control managerial discretion in management buyouts, and the circumstances under which each type of mechanism is effective. We find that these mechanisms do act to control managerial discretion in management buyouts to some degree. At the same time, there appear to be significant frictions which act to partially insulate managers from these types of governance, limiting their effectiveness.

Regression Analysis and Governance

This paper explores the use of regression analysis in conducting research on corporate governance. We highlight that combinations of governance mechanisms together act to mitigate the shareholder-manager agency problem, and examine the implications of this idea for designing empirical research on corporate governance using regression models. We outline the consequences of the omitted variable problem that arises if linkages between governance mechanisms are ignored. We describe two research studies to illustrate how linear regression and logistic regression may be used to examine the complex interlinkages among multiple governance mechanisms. These studies demonstrate approaches to model specification issues that arise in governance research, and also highlight how research designs may be constructed to avoid violation of important assumptions of the regression model.

OPERATIONAL AND MOTIVATIONAL EFFICIENCY IN INTERNATIONAL STRATEGY AND STRUCTURE

Previous studies on international competitive strategies identify a number of loosely defined strategy types and suggest that the choice among them is based on their relative productive efficiency (i.e. ability to exploit such factors as economies of scale, economies of scope, and location economies). Our analysis highlights the additional role of motivational efficiency. We propose that the proportion of available productive efficiency that is actually realized under each strategy depends on the motivational efficiency of the best possible incentive system for implementing the strategy. Our conceptual framework allows the identification of precise theoretical relationships for empirical measurement and testing.