Javier Gimeno

The Influence of Activism by Institutional Investors on R&D

Researchers have assumed that large ownership stakes held by institutional investors grant them power to influence R&D investments. We found that ownership alone was insufficient and that institutions resorted to activism to influence R&D investments. Institutional activism increased R&D inputs over both the short and long terms. The nature of the activism and the strategic context of the R&D investment moderated the relationship. Further, R&D inputs mediated the effect of activism on R&D outputs.

Reciprocal threats in multimarket rivalry: staking out ‘spheres of influence’ in the U.S. airline industry

The paper investigates the outcomes of multimarket competition among U.S. scheduled airlines when the interests and positions of the airlines differ in the mutually contested markets. Asymmetry in territorial interests provides multimarket competitors with footholds in important markets of their rivals, which can be used to deter the behavior of the rivals in other markets. Evidence suggests that airlines use footholds in their rivals’ important markets (particularly in their hubs) to reduce the competitive intensity of those rivals in the airlines’ own important markets (their hubs), and sustain their dominant positions (or spheres of influence) in those markets. Copyright© 1999 John Wiley & Sons, Ltd.

Multimarket Contact, Economies of Scope, and Firm Performance

We integrate the efficiency and competitive effects of product-market scope choice into a comprehensive model of economic performance and empirically test the model in the context of the U.S. airli...

Current and Future Research Methods in Strategic Management

Early work in strategic management emphasized single case studies, followed by research on corporate diversification strategy, firm heterogeneity, strategic groups, and generic business strategies. Intermediate work added the foci of environmental determinants and strategic choice, often using secondary data from large, multi-industry firm samples. Recently, the most prominent new theoretical paradigm is the resource-based view of the firm, using smaller sample studies. Future research is likely to integrate and contrast multiple theories and to develop more fine-grained and complex models. Quantitative research will emphasize longitudinal data, dynamic analysis, and greater focus on specific strategic decisions/actions. Future research will use more specialized tools such as panel data analysis, dynamic models of partial adjustment, logistic and Poisson regression analyses, event history analysis, network analysis, and structural equation modeling. Nontraditional research designs will also gain popularity, such as combined qualitative/quantitative data approaches and comparison of outliers.

Strategic Delegation: A Review, Theoretical Integration, and Research Agenda

This article reviews the strategic delegation literature and provides a theoretical framework that integrates this perspective into management research. The strategic delegation literature is built on the observation that, under strategic interdependence, delegation of decision making and accompanying actions can serve as commitments that influence competitive interactions with rivals and lead to beneficial outcomes. In this article, the authors first integrate diverse models and streams of research on strategic delegation in an organizing framework and highlight points of agreement and departure. This is the first comprehensive review of formal game-theoretical research purporting to show the strategic effects of delegation. The authors then integrate strategic delegation into strategic management and organization theory research in three main ways: They propose a common set of assumptions that would attune the strategic delegation perspective with other views and make it more relevant for management research, they outline ways in which the strategic delegation perspective can be linked to a set of theories of management, and finally they point out additional empirical research avenues that can exploit interindustry heterogeneity, intraindustry heterogeneity, and international differences in delegation instruments.

Multimarket contact: meaning and measurement at multiple levels of analysis

The growing literature on multimarket contact and mutual forbearance in management and economics has produced an inflation of multimarket contact measures. The lack of validation of these multiple measures has hindered the accumulation of consistent knowledge and comparison of empirical findings. This paper investigates the measurement of the multimarket contact concept. Specifically, we review the existing measures of multimarket contact, identify the main differences among them, and evaluate their reliability and discriminant and predictive validity at multiple levels of analysis, both cross-sectionally and longitudinally. The results indicate substantial differences in the reliability and discriminant validity of these measures. Predictive validity depends critically on the level of measurement and on whether longitudinal or cross-sectional correlations are considered.

Constrained Delegation Limiting Subsidiaries’ Decision Rights and Resources in Firms That Compete across Multiple Industries

We examine the influence of competitive spillovers among subsidiaries on the design of headquarters-subsidiary relationships. We focus on multi-industry firms and competitive spillovers across markets, hypothesizing that these firms delegate most business-level decisions to subsidiaries but adapt to multimarket competition by limiting their subsidiaries’ incentive and ability to make resource commitments by constraining the scope of decision rights and the available resources, a phenomenon that we refer to as “constrained delegation.” Accordingly, the extent of multimarket contact in a given market (1) is associated with lower subsidiary discretion in decisions pertaining to resource commitments and (2) counteracts the tendency of internal capital markets to provide financial resources to subsidiaries that have a low market share or operate in high-growth industries. Results of analyses, based on the population of majority-owned subsidiaries of groups operating in France between 1997 and 2004, support the predictions. We also found that multimarket contact is associated with a subsidiary’s being even less competitively aggressive when the organization’s design imposes more constraints on the subsidiary’s resource allocations. This study, one of the first to explore empirically the impact of negative spillovers within the firm on organization design in multiunit firms, suggests that organizational choices are endogenous to the competitive context.

Earnings Pressure and Long-Term Corporate Governance: Can Long-Term-Oriented Investors and Managers Reduce the Quarterly Earnings Obsession?

Recent research has shown that managers in publicly traded companies facing earnings pressure—the pressure to meet or beat securities analysts’ earnings forecasts—may make business decisions to improve short-term earnings. Analysts’ forward-looking performance forecasts can serve as powerful motivation for managers, but may also encourage them to undertake short-term actions detrimental to future competitiveness and performance. To identify whether managerial reactions to earnings pressure suggest evidence of intertemporal trade-offs, we explored how companies respond to earnings pressure under different conditions of corporate governance that shape the temporal orientations of managers. Using data on competitive decisions made by U.S. airlines under quarterly earnings pressure, we examined the effect of earnings pressure on competitive behavior under different ownership structures (ownership by long-term dedicated investors versus transient investors) and CEO incentives (unvested incentives that are restricted or unexercisable in the short term, versus vested incentives). The results suggest that companies with more long-term-oriented investors and long-term-aligned CEOs with unvested incentives are less likely to soften competitive behavior in response to earnings pressure, relative to companies with transient investors and CEOs with vested, immediately exercisable stock-based incentives. Using a difference-in-differences (DiD) specification for stronger identification, we also found that firms respond to their rivals’ earnings pressure shocks by increasing capacity and prices, particularly when those rivals do not have long-term-oriented investors and CEO incentives. The evidence is more aligned with the view that the pursuit of short-term earnings as a result of earnings pressure may be detrimental to long-term competitiveness.

Dynamics of Competitive Repositioning: A Multidimensional Approach

We investigate the dynamics of competitive repositioning of firms in the deregulated U.S. airline industry (1979–1995) in terms of a firms target market, strategic posture, and resource endowment relative to other firms in the industry. We suggest that, despite strong inertia in competitive positions, the direction of repositioning responds to external and internal alignment considerations. For external alignment, we examined how firms changed their competitive positioning to mimic the positions of similar, successful firms, and to differentiate themselves when experiencing intense rivalry. For internal alignment, we examined how firms changed their position in each dimension to align with the other dimensions of positioning. This internal alignment led to convergent positioning moves for firms with similar resource endowments and strategic postures, and divergent moves for firms with similar target markets and strategic postures. The evidence suggests that repositioning moves in terms of target markets and resource endowments are more sensitive to external and internal alignment considerations, but that changes in strategic posture are subject to very high inertia and do not appear to respond well to alignment considerations.