Industrial organisation

Stephen Lin, Catherine Thomas, Arturs Kalnins, 22 January 2020

Why do so many transactions take place within firms rather than between independent agents via markets? This column sheds new light on this question by analysing hotel chains’ decisions about whether to outsource management to independent franchisees. Properties with the lowest and the highest occupancy rates tend to be managed by franchisees, at arm's length from the hotel chain. This variation in organisational form is consistent with the authors’ model in which the incentives embodied in management contracts vary with property-level productivity. 

Katharina Janke, Carol Propper, Raffaella Sadun, 17 January 2020

Studies have shown that in the private sector, top managers and CEOs can make a difference in the performance of their organisations and have a ‘style’ that is portable across firms. This column uses the setting of hospitals in the English National Health Service to examine whether CEOs can make a difference in large and complex public sector organisations. The findings suggest that the CEOs of large public hospitals do not have a significant impact on performance, casting doubt on the ‘turnaround CEO’ approach to management in the public sector.

Nickolay Gantchev, Mariassunta Giannetti, Rachel Li, 24 December 2019

There is growing consensus that as well as maximising shareholder value, listed companies should also take into account their shareholders’ environmental and social concerns. This column aims to shed light on whether market discipline can influence corporate behaviour. The findings indicate that through their sales and purchases, investors and customers can effectively impose their social preferences on firms, suggesting that market discipline indeed works.

Ariela Caglio, Sébastien Laffitte, Donato Masciandaro, Gianmarco Ottaviano, 19 December 2019

One of the most important challenges of globalisation is to adapt regulations to new conditions imposed by global competition. This column argues that the introduction by UEFA of its Financial Fair Play regulations, with their break-even requirements for European football clubs, represents an exemplary case of how a change of accounting measurement rules motivated by international competition in the sports entertainment industry can shape businesses’ decisions by redefining their preferences and incentives towards better economic performance.

Hans Hvide, Tom G. Meling, 16 December 2019

Successfully predicting which startups will thrive has long bedevilled economists. Using data from procurement auctions in Norway, this column finds that temporary demand shocks have long-term effects: startups that win a procurement auction are 20% larger than the runners-up, even years after the contract work has ended. In terms of job creation and sales growth, winning a procurement auction seems to have much larger effects for startups than for mature firms, which suggests the potential value in public policies that promote startups’ participation in government procurement auctions.

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