Horatio M. Morgan

Sticky Decisions Anchoring and Equity Stakes in International Acquisitions

This study proposes an anchoring perspective on international equity ownership decisions. Given the complex, uncertain nature of such decisions, we recognize the potential for heuristics such as anchoring to replace time-consuming and information-intensive analyses; specifically, top managers might draw on the recent international equity ownership decisions of others to determine how much equity stake to purchase in foreign target firms. Drawing on standard regression methods and more recently developed hedonic regression techniques, this study reveals some systematic effects of anchoring in international equity ownership decisions. Anchoring is more likely when international acquisitions occur under informational deficiencies in genuinely uncertain settings but less likely when the acquiring firms are managed by overconfident CEOs.

An Industrial Organization Approach to the Study of Export Intensity: Strategic Market Interactions and Export Intensity

In developing countries characterized by relatively small domestic markets, local firms may have to internationalize in order to realize their growth potential. Despite the formidable challenges that may accompany the internationalization process, globally-oriented managers and domestic policymakers may effectively craft coherent export-promotion strategies and policies, respectively, if they have a solid understanding of the determinants of export performance. While the empirical export performance literature in the field of international business (IB) has the potential to contribute towards this end, it appears to be hampered by a paucity of rigorous theoretical frameworks. In the virtual absence of a well-articulated direction on how to fill this theoretical void, this paper makes a case for the application of industrial organization (IO)-based modeling in this line of research. It formulates a model of exporting in the context of market structures characterized by a monopoly, and a (symmetric linear) Stackleberg duopoly with price discrimination. Under this theoretical framework, it is found that the Stackleberg leader has an export intensity of zero, while the Stackleberg follower has an export intensity of one-half. But at an export intensity of two-thirds, the price-discriminating monopolist has the largest export intensity. These analytical results provide insights into the so-called “industry effects” phenomenon that has been noted in empirical export performance studies, and strengthens the theoretical argument for the conventional use of industry-dummy variables to control for hypothesized industry effects. More generally, this paper signals a potentially fruitful direction for IO-based modeling in the extant empirical export performance literature.

The international competitiveness of Chinese manufacturing firms and the exit of the renminbi–dollar peg

This paper evaluates the implications of a shift from a pegged to a floating exchange rate regime for the international competitiveness and the economic behavior of Chinese manufacturing firms. Using a conceptual framework that characterizes the relationship between the exchange rate regime and the potential source of a firms competitive advantage, it yields two key analytical results. First, Chinese manufacturing firms may increase their reliance on a low-margin pricing strategy as the exchange rate regime shifts towards a more flexible one. As a corollary, a low-margin pricing strategy may discourage Chinese manufacturing firms from undertaking costly research and development (R&D) activities, and investments in human capital development. Second, Chinese manufacturing firms have the incentive to employ various wage restraint measures under a floating exchange rate regime at least in the short term. These key analytical results provide insights into a number of policy-relevant issues that may arise at the firm-level. It concludes by providing some general directions on the timing of a complete transition to a floating exchange rate regime.