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Selected recent publications in the top management and economics journals

When to go it alone: Examining post-conversion performance of international joint ventures

( Chang, Sea-Jin )

JOURNAL OF INTERNATIONAL BUSINESS STUDIES2019-08

Abstract

This study examines the decision to convert international joint ventures to either foreign or local wholly owned entities and the subsequent impact on performance from the perspective of incomplete contract theory. With China's relaxation of the joint venture requirement, foreign partners are more likely to take full control and thereby improve performance in provinces with fewer institutional barriers and industries with high intangible asset intensity, while local partners are more likely to do so in provinces with higher institutional barriers and low intangible asset intensity. Furthermore, the performance improvement is more salient when transitioning from foreign minority-local majority joint ventures.

Inward Foreign Direct Investment and Local Firm Innovation: The Moderating Role of Technological Capabilities

( Jin, Byungchae | Garcia, Francisco | Salomon, Robert )

JOURNAL OF INTERNATIONAL BUSINESS STUDIES2019-07

Abstract

Extant research on inward foreign direct investment (FDI) suggests that foreign entrants bring superior technology with them to host countries, thereby providing local firms the opportunity to learn and upgrade their technologies. However, foreign entrants also increase competition in the local market, potentially harming domestic firms. In this study, we extend existing work on inward FDI by investigating the moderating role of technological capabilities on the relationship between inward FDI and local firm innovation. Building upon firm capabilities arguments, we expect that domestic firms with existing technological capabilities are better positioned to stave off foreign competition and better able to learn from foreign entrants. However, we find, somewhat surprisingly, that local technological leaders apply for fewer patents and introduce fewer new products than do local technological laggards subsequent to foreign entry. These results imply that technological capabilities do not buffer domestic firms from the deleterious competition consequences associated with inward FDI.

Do Managers Disclose or Withhold Bad News? Evidence from Short Interest

( Bao, Dichu | Kim, Yongtae | Mian, G. Mujtaba | Su, Lixin (Nancy) )

ACCOUNTING REVIEW2019-05

Abstract

Prior studies provide conflicting evidence as to whether managers have a general tendency to disclose or withhold bad news. A key challenge for this literature is that researchers cannot observe the negative private information that managers possess. We tackle this challenge by constructing a proxy for managers' private bad news (residual short interest) and then perform a series of tests to validate this proxy. Using management earnings guidance and 8-K filings as measures of voluntary disclosure, we find a negative relation between bad-news disclosure and residual short interest, suggesting that managers withhold bad news in general. This tendency is tempered when firms are exposed to higher litigation risk, and it is strengthened when managers have greater incentives to support the stock price. Based on a novel approach to identifying the presence of bad news, our study adds to the debate on whether managers tend to withhold or release bad news.

Municipal borrowing costs and state policies for distressed municipalities

( Gao, Pengjie | Lee, Chang Joo | Murphy, Dermot )

JOURNAL OF FINANCIAL ECONOMICS2019-05

Abstract

Policies on financially distressed municipalities differ across US states, with some allowing unconditional access to Chapter 9 bankruptcy (Chapter 9 states) and others having proactive policies to assist distressed municipalities (Proactive states). These differences significantly affect borrowing costs. In Chapter 9 states, local municipal bond yields are higher, more cyclical, and more sensitive to default events than Proactive states. Default events have a contagion effect in Chapter 9 states, but not Proactive states. Lower local borrowing costs in Proactive states come at the expense of the state via higher intergovernmental revenue transfers in times of weak economic conditions.

Supplier Development and Integration in Competitive Supply Chains

( Jin, Yannan | Hu, Qiying | Kim, Sang Won | Zhou, Sean X. )

PRODUCTION AND OPERATIONS MANAGEMENT2019-05

Abstract

Supplier development and supplier integration are two deeply interconnected strategic tools that manufacturers often employ to improve the efficiency and competitiveness of their supply chains. This paper studies the interaction of these two strategic decisions in a competitive environment. Specifically, we consider a duopoly model where two supply chains, each consisting of one manufacturer and one supplier, sell substitutable products in the market. Each manufacturer orders components from its supplier and decides whether to integrate with the supplier and how much to invest to help reduce its cost. We find that, in most cases, a manufacturer invests more on supplier development after it integrates with its supplier; and both manufacturers integrate with their suppliers at equilibrium. However, when the heterogeneity of the manufacturers' supplier development capabilities is sufficiently high and the more capable manufacturer integrates, the less capable manufacturer would invest less on supplier development after integrating its supplier; and at equilibrium, the less capable manufacturer prefers not to integrate. Furthermore, when considering the suppliers' incentives to be integrated, we find that the less capable manufacturer is more likely not to integrate with its supplier. We also extend our model to another commonly seen sourcing structure, that is, diversified sourcing, where each manufacturer sources from two common suppliers (but each only considers supplier integration and development for one distinct supplier). In contrast to the previous case (which we call dedicated sourcing), under diversified sourcing, supplier integration of a manufacturer always leads to its more supplier development investment and both manufacturers would integrate at equilibrium. Finally, when each manufacturer could choose whether to source from one or two suppliers, we show that dedicated sourcing is the equilibrium structure.

Contact : Joo, Sunhee ( shjoo2006@kaist.ac.kr )

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