Peggy M. Lee

Ownership Structures and R&D Investments of U.S. and Japanese Firms: Agency and Stewardship Perspectives

This study analyzes the impact of ownership structure on R&D investments in the United States and Japan. It begins with the premise that U.S. and Japanese firms have distinct patterns of ownership that may result in disparities in R&D investments. Agency theory and stewardship theory are used to hypothesize about the relationship between ownership and R&D investments. Empirical evidence shows that the level of ownership concentration, and its impact, differ across countries. We argue that these differences result from a mixture of motives and incentives.

Organizational Reputation: A Review

The idea of organizational reputation is intuitive and simple in its common usage. However, it is surprisingly complex when employed and investigated in management research, as evidenced by the multiple definitions, conceptualizations, and operationalizations that have emerged across studies. The authors see the past decade as a formative phase of the research, characterized by attempts to bring theoretical coherence and rigor to the subject area. In their review of the management literature, the authors focus on this formative period in particular. They attempt to inspire and guide management researchers by clarifying what organizational reputation is. In particular, they identify three dominant conceptualizations, namely, that reputation consists of familiarity with the organization, beliefs about what to expect from the organization in the future, and impressions about the organization’s favorability. The final part of the review is an overview of recent empirical findings in the management literature pertaining to the effects or causes of organizational reputation. The authors conclude by drawing attention to some important directions for future research, including the needs to investigate organizational reputation as multidimensional and dynamic and to model its antecedents and effects as more complex than the unidirectional models typically proposed.

Ownership Structure and the Relationship Between Financial Slack and R&D Investments: Evidence from Korean Firms

We use agency theory to examine the influence of ownership structure on the relationship between financial slack and R&D investments, highlighting how that relationship might differ depending on the identity of the owners, and their potentially different interests. In doing so, we extend the scope of agency theory by examining the principal-principal conflicts of interests that may exist among different types of owners. Using a sample of Korean manufacturing firms in R&D-intensive industries between 1998 and 2003, we find that financial slack has an inverted U-shaped relationship with R&D investments. Furthermore, that relationship varies depending on the presence of different types of owners. Family ownership positively moderates the relationship between financial slack and R&D investments, whereas domestic institutional investors and foreign investors negatively moderate that relationship. Our results show that distinguishing among different types of owners is instrumental in enhancing our understanding of the nature of the relationship between financial slack and R&D investments.

A comparative analysis of layoff announcements and stock price reactions in the United States and Japan

Downsizing and layoffs are an important mechanism for U.S. firms to cope with their strategic and economic environment. In contrast, the Japanese tradition of lifetime employment limits the ability of firms to employ layoffs as a strategic measure, relegating its use to conditions of financial distress. This paper provides the first comparison of layoffs in Japan and the United States and examines stock price reactions to layoff announcements in each country from 1990 to 1994. Agency theory and Aokis cooperative game theory are employed to discuss differences in the governance structures of U.S. and Japanese firms and their implication for stock price reactions. Results show that layoff announcements trigger negative returns for both U.S. and Japanese firms. Specifically, layoff announcements of U.S. firms are associated with a negative 1.78 percent abnormal return, while layoff announcements for Japanese firms are associated with a negative 0.56 percent abnormal return. To better understand the impact of layoffs, this study examines the relationships between stock price reactions and various layoff characteristics (such as whether the layoff is proactive or reactive or whether the layoff is the first in the industry). Implications of the findings are discussed.

The contingent value of venture capitalist reputation

This study explores the signaling and substantive value of high-reputation affiliates to young firms, and the factors that moderate the nature of the value they provide. Specifically, the study examines the extent to which venture capitalist (VC) reputation is related to the first-day valuation and post-IPO operating performance of the firms they take public, and whether the value of a high-reputation VC is contingent on the timing of VC involvement in the portfolio firm, the VC firms’ industry-specific experience and their geographic proximity. The authors develop a time-varying, multi-item composite index of VC reputation and use a sample of VC-backed IPOs between 1990 and 2000 to test their hypotheses. The results suggest that early involvement in an IPO firm’s development significantly enhances the positive relationship between a VC’s reputation and both initial market reactions and post-IPO operating performance. The study also finds that the industry specialization of early-round VCs, regardless of their reputation, is positively related to post-IPO operating performance, and that the relationship is even stronger when the VC has a high reputation and invests in the first round. Finally, while the geographic proximity of VCs to their portfolio firms has no effect on the relationship between their reputation and the firm’s post-IPO operating performance, investors nonetheless discount the value of VC reputation when VCs are more geographically distant from their portfolio firm. However, when endogeneity associated with having greater access to high-potential start-ups is controlled for, geographic proximity significantly decreases the relationship between VC reputation and operating performance, but it no longer affects initial market valuation.

She'-E-Os: Gender Effects and Stock Price Reactions to the Announcements of Top Executive Appointments

Recently, we have seen an increase in the number of female executives. Little has been done, however, to assess how investors perceive women leaders. This study uses the market-signaling and diversity literatures to link announcements of appointments of top executives with shareholder reactions, highlighting possible gender effects. Results show that shareholder reactions to appointments of female CEOs are significantly more negative than reactions to appointments of male CEOs. Moreover, women are more positively viewed if they have been promoted from within a firm.

(Un)Tangled: Exploring the Asymmetric Coevolution of New Venture Capital Firms' Reputation and Status

We explore the relationship between status and reputation, examining how its dynamics change over time as these two intangible assets coevolve and how reputation and status are influenced by participation in highly visible events. Using a sample of more than 400 newly founded venture capital (VC) firms, we find that reputation and status positively influence each other but that reputation has a greater effect on status, particularly when firms are older. We also find that the effect of past status on current status weakens as VC firms age, but the relationship between past and current reputation remains consistent with age. Furthermore, our findings show that participating in big hits—blockbuster initial public offerings—has a positive relationship with status when firms are young and a positive relationship with reputation when firms are older, and it helps low-status and low-reputation firms more than it helps high-status and high-reputation firms. This study helps differentiate status and reputation, shows how they coevolve, and provides insight into how new firms build these important intangible assets.

Insider trading as a path to competitive advantage

There is no longer much debate about the efficacy of insider wake of the many scandals, consensus seems to rest firmly on th who believe it to be deleterious and unethical. And yet the tr Hundreds of thousands of trades are executed by insiders each only includes the upper echelons of corporations. Back when debate was more common, both sides argued tha tion was whether uninformed investors were harmed. In 1934 Exchange Commission (SEC) was established to ensure a fair Subsequent arguments supporting regulation focused on disince may have to gather information and the costs borne by market traders are better informed (DeMarzo et al., 1998; Fishman and H At the other end were those who argued that insider trading en efficiency by allowing private information to be reflected in pr et al., 1995; Manne, 1966). Since the inception of this debate, scholars have developed competitive advantage. Specifically, the resource-based view of t ders fundamental organizational problems. That is, how shoul structure their incentives to accommodate knowledge-based reso underlie a competitive advantage while also rewarding the know This basic question lies at the intersection of strategic managem zational studies. Drawing on this, we reopen the debate and ar holders may actually welcome insider trading. Indeed, insider tr a critical tool to address management dilemmas arising from asymmetries at the very core of the theory of competitive advan clude that if the following boundary conditions are met, shareho fit from insider trading: first, the firm enjoys a sustained competi second, trading substitutes for other forms of compensation; t who unwittingly sell to insiders have little voting power; and f does not encounter legal liabilities. SO!APBOX EDITORIAL ESSAY

A Study of the Effect of Success on Risk Aversion in a Naturally Occurring Experiment

Prospect theorists and behavioral economists argue that a decision maker’s risk-taking behavior is influenced by being in the realm of gains and by being in the midst of a successful decision-makin...

Chicken or Egg: Exploring the Coevolution of VC Firm Reputation and Status

We explore the relationships between status and reputation, and between past and current status and reputation, and examine how these dynamics change over time and are influenced by participation in highly visible events. Using a sample of more than 500 newly-founded VC firms, we find that reputation and status positively influence each other, but that reputation has a greater effect on status, particularly when firms are younger. We also find that the effect of past status on current status weakens as VC firms age, but the relationship between past and current reputation remains consistent with age. Participating in blockbuster deals has a positive relationship with status when firms are young and a positive relationship with reputation when firms are older, and helps low status and low reputation firms more than it helps high status and high reputation firms. This study contributes to our understanding of how status and reputation develop and are differentiated, and provides insight into how new firms b...