Brian T. McCann

Location Matters: Where We Have Been and Where We Might Go in Agglomeration Research

Agglomeration research investigates the geographic concentration of economic activity. The authors explicate the various explanations for this phenomenon while focusing on a particular class of agglomerations—the spatial concentrations of related firms. The authors review theoretical explanations and empirical evidence around the performance implications of clustering in proximity to related firms. Moreover, they motivate future research by identifying challenges facing researchers in this area and discuss eight distinct groups of research questions with the potential to contribute to the continuing growth of this important research area.

Demand- and Supply-Side Agglomerations: Distinguishing between Fundamentally Different Manifestations of Geographic Concentration

Agglomeration research investigates the benefits that firms receive from locating in close geographic proximity. Despite a substantial surge in interest in this topic over the past 20 years, a lack of distinction among unique manifestations of spatial concentrations of similar firms threatens continuing progress in this stream of research. We argue that agglomerations of related firms that draw benefits from the supply-related externalities of increased access to specialized labour, specialized inputs, and knowledge spillovers are fundamentally different from those that draw benefits from heightened demand realized through reduction in consumer search costs. Extending agglomeration theory, we explicate the differences between these distinct phenomena, discuss how the nature of key theoretical relationships varies across these agglomeration types, and demonstrate significant implications for research. We discuss how the differences affect a host of theoretical relationships and empirical research decisions.

Performance feedback and firm risk taking: : the moderating effects of ceo and outside director stock options

We contribute to the behavioral theory of the firm and the behavioral agency model by developing a theoretical framework that predicts the differential interaction effects of performance feedback and values of stock option grants of multiple agents on firm risk taking. We explain how chief executive officers (CEOs) versus outside directors awarded with stock option grants perceive negative or positive deviations from prior performance. We argue that in a negative attainment discrepancy context, high values of option grants will increase the risk aversion of CEOs who already bear excessive employment and compensation risks, resulting in less risk taking; however, it will enhance the risk-taking propensity of influential outside directors who increase monitoring and support for risky projects because their risk preferences are better aligned with those of shareholders. In a positive attainment discrepancy context, high values of option grants will amplify risk aversion in both CEOs and outside directors who perceive risky strategies as potential threats to anticipated incentive values associated with a gain domain, thereby reducing risk-taking activities. Analysis of panel data from 1992 to 2006 on the research and development spending of U.S. manufacturing firms based on Arellano–Bond dynamic panel regression reveals findings largely consistent with our predictions.

Opportunity evaluation and changing beliefs during the nascent entrepreneurial process

This article explores an important but less understood part of the nascent entrepreneurial process, the changes that occur to beliefs associated with continuing evaluation of the opportunity and related learning. Using samples from the Panel Study of Entrepreneurial Dynamics, we demonstrate that engaging in planning activities by nascent entrepreneurs as they proceed through the process is associated with a decrease in perceptions of environmental uncertainty but an increase in perceived individual self-efficacy and business performance expectations. Overall, our evidence is consistent with a dynamic view of the nascent stage of the entrepreneurial process characterized by ongoing significant changes in beliefs.

Ownership Structure, Profit Maximization, and Competitive Behavior

We question the broad applicability of the assumption of profit maximization as the goal of the firm and investigate how variance in objective functions across different ownership structures affects competitive behavior. While prior work in agency theory has argued that firms may fail to engage in profit maximizing behaviors due to misalignment between the goals of owners and managers, we contend that we are unlikely to observe pure profit maximizing behavior even in the case of the perfect alignment of goals that exists in owner-managed firms. We compare the competitive behaviors of owner-managed and professionally managed firms and find that, contrary to the expectations of agency theory, professionally managed firms are more likely to engage in behaviors consistent with profit-maximization goals. Consistent with the view that owner-managers are less concerned with maximizing profits, we observe that the entry, exit, and pricing decisions of owner-managed firms are all relatively less responsive to the underlying economic attractiveness of the markets in which they operate.

Modeling the Effects of Psychological Pressure on First-Mover Advantage in Competitive Interactions The Case of Penalty Shoot-Outs

The relationship between psychological pressure and performance outcomes has been studied across a variety of sporting contexts. As an extension and complement to recent empirical studies, we construct a formal model of soccer penalty shoot-outs to determine the links between psychological pressure and first-mover advantage (FMA). Our approach indicates that even seemingly simple competitive interactions may include a rich, complex set of effects. We demonstrate that psychological pressure leads to FMA in shoot-outs; however, we show that this relationship can vary depending on a variety of different factors, such as the nature of the pressure, the magnitude of the pressure, and the specific rules governing the shoot-out. Overall, our work clarifies and extends knowledge of the operation of FMA and of how psychological pressure impacts performance outcomes in competitive interactions.

Marshallian Forces and Governance Externalities: Location Effects on Contractual Safeguards in Research and Development Alliances

We examine the impact of geographic location of alliance activities on the design of safeguards in contracts governing research and development (R&D) partnerships. Joining research on agglomeration and alliance governance, we argue that the Marshallian agglomerative forces at work in a given location produce governance-related externalities that extend beyond productivity-related externalities considered in previous research. We investigate how location characteristics linked to Marshallian forces, such as local knowledge spillovers, R&D rivalry, dense industry employment, and the strength of professional organizations, have an impact on the specification of formal governance mechanisms. In particular, these Marshallian forces have a bearing on formal governance mechanisms that safeguard the execution of the R&D partnership, such as joint administrative interfaces and termination provisions. We analyze R&D partnerships between biotechnology and pharmaceutical firms and find that misappropriation hazards arising from greater knowledge spillovers and R&D competition in the region where R&D activities are located promote the use of these formal governance mechanisms in R&D partnerships. We also find that factors supporting thick interpersonal networks, such as the intensity of sectoral employment and the strength of professional bodies, reduce the use of formal governance mechanisms in R&D partnerships.

Attention to Fairness versus Profits: The Determinants of Satisficing Pricing

We investigate determinants of the competitive behaviour of satisficing, non-profit-maximizing pricing. Taking a behavioural approach, we argue that pricing decisions are motivated by fairness objectives as well as the desire to achieve economic objectives. We draw from the attention-based view to build our theoretical model explaining the contextual conditions that are most likely to be associated with attention to fairness relative to attention to achieving maximum profits when setting prices. Our hypothesized predictors of satisficing pricing decisions encompass the institutional context in which the firm is embedded, the exchange context with customers and suppliers, and the context internal to the firm. Hypotheses are tested with survey data of over 3000 firms from 15 countries. We find that the decision to set prices at a satisficing level is remarkably common, and its prevalence is associated with contextual factors that are consistent with greater attention to fairness concerns.

Competitive Behavior and Nonfinancial Objectives: Entry, Exit, and Pricing Decisions in Closely Held Firms

Because of the predominance of the assumption of profit maximization as the goal of the firm and its decision makers, especially in the competitive strategy literature, research has yet to investigate how differences in objectives might influence competitive actions such as entry, exit, and pricing decisions. This represents an important gap in the literature given the fundamental role of objectives in decision making and widespread evidence that many firms, especially those that are closely held, are motivated by nonfinancial objectives in addition to an interest in financial returns. To further our understanding of firms’ competitive strategy decisions, we discuss how the presence of nonfinancial objectives in closely held firms leads to a weakening of the relationship between economic indications of profitability and competitive behaviors. Using a unique data set of nearly 4,000 closely held and non-closely held establishments engaged in local competition in the Texas hotel industry, we find that the entry, exit, and pricing decisions of closely held establishments are less responsive to economic indicators of profit potential compared with decisions of non-closely held establishments.