Ashton Hawk

Speed and Tobin's Q

Slow execution of investment projects often means substantial revenue losses for companies. However, accelerating investments generally results in higher investment costs. Our paper integrates this investment speed tradeoff in a reduced-form model of project development to create an empirical proxy for firm speed. We examine how deviations from industry-average speed in the execution of large investments in oil and gas facilities worldwide from 1996 to 2005 affect firm value, as measured by Tobin’s q. We find substantial variation in investment speed among firms in the oil and gas industry. Using a linear correlated random parameter model to allow for unobserved firm heterogeneity, we show that firms’ speed capabilities have high market value. On average, accelerating a firm’s investments by 5% (or 1 month) relative to the industry norm due to organizational capabilities increases market value by

Applying Random Coefficient Models to Strategy Research: Testing for Firm Heterogeneity, Predicting Firm-Specific Coefficients, and Estimating Strategy Trade-Offs

214.3 million. Additionally, we show that the effect of speed on firm value varies widely among firms and is amplified by good corporate governance but often mitigated by the level of firms’ debt.

FIRM HETEROGENEITY IN SPEED CAPABILITIES AND ENTRY INTO THE EMERGING SUBMARKET OF ATLANTIC BASIN LNG.

Although Strategy research aims to understand how firm actions have differential effects on performance, most empirical research estimates the average effects of these actions across firms. This paper promotes Random Coefficients Models (RCMs) as an ideal empirical methodology to study firm heterogeneity in Strategy research. Specifically, we highlight and illustrate three main benefits that RCMs offer to Strategy researchers — testing firm heterogeneity, predicting firm-specific effects, and estimating trade-offs in strategy — using both synthetic and actual data-sets. These examples showcase the potential uses of RCMs to test and build theory in Strategy, as well as to perform exploratory and definitive analyses of firm heterogeneity.

Institutional Obstacles to Entrepreneurship

In this study of the Atlantic Basin LNG submarket, we examine the role of intrinsic speed capabilities as an antecedent to entry decisions into new market opportunities. We find that intrinsically faster firms enter later and more frequently than slower competitors.