Katrijn Gielens

The Market Valuation of Internet Channel Additions

The emergence of the Internet has pushed many established companies to explore this radically new distribution channel. Like all market discontinuities, the Internet creates opportunities as well as threats—it can be performance-enhancing as readily as it can be performance-destroying. Making use of event-study methodology, the authors assess the net impact of adding an Internet channel on a firms stock market return, a measure of the change in expected future cash flows. The authors find that, on average, Internet channel investments are positive net-present-value investments. The authors then identify firm, introduction strategy, and marketplace characteristics that influence the direction and magnitude of the stock market reaction. The results indicate that powerful firms with a few direct channels are expected to achieve greater gains in financial performance than are less powerful firms with a broader direct channel offering. In terms of order of entry, early followers have a competitive advantage over both innovators and later followers, even when time of entry is controlled for. The authors also find that Internet channel additions that are supported by more publicity are perceived as having a higher performance potential.

The New Regulator in Town: The Effect of Walmart’s Sustainability Mandate on Supplier Shareholder Value

Suppliers are increasingly being forced by dominant retailers to clean up their supply chains. These retailers argue that their sustainability mandates may translate into profits for suppliers, but many suppliers are cynical about these mandates because the onus to undertake the required investments is on them while potential gains may be usurped by the mandating retailer. We examine whether supplier fears are justified by studying the impact of Walmarts sustainability mandate on its suppliers’ (short-term) shareholder value. Although about two-thirds of suppliers are indeed financially harmed, approximately one-third benefit. To delve deeper into this variation, we relate suppliers’ short-term abnormal returns to Walmarts appropriation power and explore whether and to what extent a suppliers referent and expert power sources, derived from its marketing and operational characteristics, respectively, can counteract Walmarts appropriation attempts. We find that the suppliers marketing characteristics (its environmental reputation, brand equity, and advertising) provide it with the countervailing power needed to resist Walmarts appropriation attempts. In contrast, cost-efficient suppliers and suppliers that invest heavily in R&D have more difficulty withstanding Walmarts squeeze attempts.