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Publication Field Experiments With Firms(2011-01-01) Bandiera, Oriana; Barankay, Iwan; Rasul, ImranWe discuss how the use of field experiments sheds light on long-standing research questions relating to firm behavior. We present insights from two classes of experiments—within and across firms—and draw common lessons from both sets. Field experiments within firms generally aim to shed light on the nature of agency problems. Along these lines, we discuss how field experiments have provided new insights on shirking behavior and the provision of monetary and nonmonetary incentives. Field experiments across firms generally aim to uncover firms' binding constraints by exogenously varying the availability of key inputs such as labor, physical capital, and managerial capital. We conclude by discussing some of the practical issues researchers face when designing experiments and by highlighting areas for further research.Publication Interest Groups, Veto Points, and Electricity Infrastructure Deployment(2006-01-01) Henisz, Witold J; Zelner, Bennet AIn this article we examine the effects of interest group pressure and the structure of political institutions on infrastructure deployment by state-owned electric utilities in a panel of seventy-eight countries during the period 1970–94. We consider two factors that jointly influence the rate of infrastructure deployment: (1) the extent to which the consumer base consists of industrial consumers, which are capable of exerting discipline on political actors whose competing incentives are to construct economically inefficient “white elephants” to satisfy the demands of concentrated geographic interests, labor unions, and national engineering and construction lobbies; and (2) veto points in formal policymaking structures that constrain political actors, thereby reducing these actors' sensitivity to interest group demands. A higher fraction of industrial customers provides political actors with stronger incentives for discipline, reducing the deployment of white elephants and thus the infrastructure growth rate, ceteris paribus. Veto points reduce political actors' sensitivity to interest group demands in general and thus moderate the relationship between industrial interest group pressure and the rate of infrastructure deployment.Publication Safe Harbours Are Hard to Find: The Trans-Atlantic Data Privacy Dispute, Territorial Jurisdiction and Global Governance(2004-01-01) Kobrin, Stephen JThe trans-Atlantic dispute over application of the European Union's Data Directive (1995) is discussed as a case study of an emerging geographic incongruity between the reach and domain of the territorially-defined Westphalian state and the deep and dense network of economic relations. The article reviews significant EU-US differences about the meaning of privacy and the means to protect it, the history of attempts to apply its provisions to information transferred to the US, and the less than satisfactory attempt at resolution – the Safe Harbor agreement. It then argues that attempting to apply the Directive to transactions on the Internet raises fundamental questions about the meaning of borders, territorial sovereignty and political space and explores the implications for territorial jurisdiction and global governance at some length.Publication The Institutional Environment for Infrastructure Investment(2002-04-01) Henisz, Witold JThe empirical evidence that links political institutions to economic outcomes has grown dramatically in recent years. However, virtually all of this analysis is undertaken using data from the past three decades. This paper extends this empirical framework by performing a two‐century long historical analysis of the determinants of infrastructure investment in a panel of over 100 countries. The results demonstrate that political environments that limit the feasibility of policy change are an important determinant of investment in infrastructure.Publication Sovereignty@Bay: Globalization, Multinational Enterprise, and the International Political System(2009-01-01) Kobrin, Stephen JThis article is concerned with only one aspect of the vast literature on MNE–state relations: the impact of the MNE on sovereignty, autonomy, and control. It argues that the mainstream literature of the sovereignty at bay era did not predict the end of the nation-state or conclude that sovereignty is critically compromised either in theory or practice. In fact, while the terms ‘sovereignty’, autonomy', and ‘control’ appear frequently in these discussions, they are rarely defined or even used precisely. At the end of the day MNEs are international or cross-border entities which are of the existing inter-state system firmly rooted in national territorial jurisdiction. The problems posed by the traditional MNE for both states and the inter-state system tend to involve issues of jurisdictional asymmetry, jurisdictional overlap and control, rather than sovereignty in its formal sense. The hierarchical or Fordist structure of the traditional MNE reinforces the core values of the modern international political system: state sovereignty and mutually exclusive territoriality.Publication The Coevolution of Community Networks and Technology: Lessons From the Flight Simulation Industry(1998) Rosenkopf, Lori; Tushman, Michael LThis paper explores how interorganizational net-works coevolve with technology in the modern flight simulation industry. Since industries characterized by complex technologies, like flight simulation, rely on cooperative groups such as technical committees, task forces and standards bodies to adjudicate the process of technological evolution, we focus on these groups and term them 'cooperative technical organizations' (CTOs). Focusing on CTOs enables a multi-level examination of interorganizational networks, as individuals represent their employing organizations in CTOs, mapping into overlapping membership patterns which generate community-wide networks. We develop a set of propositions on the emergence, growth and re-formation of CTO networks, and explore how the evolution of these networks both shapes and is constrained & by technological outcomes in the flight simulation industry. We argue that varying levels of technological uncertainty between eras of ferment (high uncertainty) and eras of incremental change (low uncertainty) engender fundamentally different modes of network evolution: social construction during eras of ferment, and technological determinism during eras of incremental change. More specifically, during the era of ferment, movement of new members into the CTO community enables the re-formation of interorganizational networks which select among competing technological alternatives. The selection of a dominant design, however, constrains the evolution of network structure, as subsequent CTO membership remains relatively consistent. These dynamics have strategic implications for firms, as the era of ferment presents a window of opportunity where firms must seek to manage these community-level networks and selection processes to their advantage.Publication How Are U.S. Family Firms Controlled?(2009-08-01) Villalonga, Belén; Amit, Raphael HIn large U.S. corporations, founding families are the only blockholders whose control rights on average exceed their cash-flow rights. We analyze how they achieve this wedge, and at what cost. Indirect ownership through trusts, foundations, limited partnerships, and other corporations is prevalent but rarely creates a wedge (a pyramid). The primary sources of the wedge are dual-class stock, disproportionate board representation, and voting agreements. Each control-enhancing mechanism has a different impact on value. Our findings suggest that the potential agency conflict between large shareholders and public shareholders in the United States is as relevant as elsewhere in the world.Publication Social Incentives in the Workplace(2010-04-01) Bandiera, Oriana; Barankay, Iwan; Rasul, ImranWe present evidence on social incentives in the workplace, namely on whether workers' behaviour is affected by the presence of those they are socially tied to, even in settings where there are no externalities among workers due to either the production technology or the compensation scheme in place. To do so, we combine data on individual worker productivity from a firm's personnel records with information on each worker's social network of friends in the firm. We find that compared to when she has no social ties with her co-workers, a given worker's productivity is significantly higher when she works alongside friends who are more able than her, and significantly lower when she works with friends who are less able than her. As workers are paid piece rates based on individual productivity, social incentives can be quantified in monetary terms and are such that (i) workers who are more able than their friends are willing to exert less effort and forgo 10% of their earnings; (ii) workers who have at least one friend who is more able than themselves are willing to increase their effort and hence productivity by 10%. The distribution of worker ability is such that the net effect of social incentives on the firm's aggregate performance is positive. The results suggest that firms can exploit social incentives as an alternative to monetary incentives to motivate workers.Publication Learning Versus Stealing: How Important Are Market-Share Reallocations to India's Productivity Growth?(2012-01-01) Harrison, Ann E; Martin, Leslie A; Nataraj, ShanthiRecent trade theory emphasizes the role of market-share reallocations across firms (“stealing”) in driving productivity growth, whereas previous literature focused on average productivity improvements (“learning”). We use comprehensive, firm-level data from India's organized manufacturing sector to show that market-share reallocations were briefly relevant to explain aggregate productivity gains following the beginning of India's trade reforms in 1991. However, aggregate productivity gains during the period from 1985 to 2004 were largely driven by improvements in average productivity. We show that India's trade, FDI, and licensing reforms are not associated with productivity gains stemming from market share reallocations. Instead, we find that most of the productivity improvements in Indian manufacturing occurred through “learning” and that this learning was linked to the reforms. In the Indian case, the evidence rejects the notion that market share reallocations are the mechanism through which trade reform increases aggregate productivity. Although a plausible response would be that India's labor laws do not easily permit market share reallocations, we show that restrictions on labor mobility cannot explain our results.Publication Incentives for Managers and Inequality Among Workers: Evidence From a Firm-Level Experiment(2007-05-01) Bandiera, Oriana; Barankay, Iwan; Rasul, ImranWe present evidence from a firm level experiment in which we engineered an exogenous change in managerial compensation from fixed wages to performance pay based on the average productivity of lower-tier workers. Theory suggests that managerial incentives affect both the mean and dispersion of workers' productivity through two channels. First, managers respond to incentives by targeting their efforts towards more able workers, implying that both the mean and the dispersion increase. Second, managers select out the least able workers, implying that the mean increases but the dispersion may decrease. In our field experiment we find that the introduction of managerial performance pay raises both the mean and dispersion of worker productivity. Analysis of individual level productivity data shows that managers target their effort towards high ability workers, and the least able workers are less likely to be selected into employment. These results highlight the interplay between the provision of managerial incentives and earnings inequality among lower-tier workers.