0238820). All views expressed are ours and do not necessarily represent those of the funding organizations. INTERNATIONAL JOINT VENTURES AND THE VALUE OF GROWTH OPTIONS Real options theory predicts that international joint ventures (IJVs) confer valuable growth options to firms, yet there has been no direct evidence on whether firms actually capture growth option value from such investments or under what conditions. We bridge the gap between theory and evidence by empirically testing this prediction, and we also develop the theoretical arguments that an IJV’s ownership structure, product market focus, and geographic location are important contingencies affecting the value of embedded growth options. The empirical evidence confirms that IJVs do enhance firms ’ growth option values, but only under certain circumstances. Specifically, minority IJVs and diversifying IJVs contribute to growth option value, but other types of IJVs do not. The findings also challenge recent claims on the growth option value of investments in emerging economies. Key words: International joint ventures; real options theory; growth option value; international

How does organizational slack affect firm performance? Organization theory posits that slack, despite its costs, has a positive impact on firm performance. In contrast, agency theory suggests that slack breeds inefficiency and inhibits performance. The empirical evidence, largely from developed economies, has been inconclusive. Moreover, little effort has been made to empirically test whether such an impact (positive or negative) is linear or curvilinear. This article joins the debate by extending empirical work to the largely unexplored context of economic transitions. Specifically, two studies, based on survey and archival data (N = 57 and 1532 firms, respectively), are undertaken in China’s emerging economy. Our results suggest (1) that organization theory generates stronger predictions when dealing with unabsorbed slack, and (2) that agency theory yields stronger validity when focusing on absorbed slack. Furthermore, we also find that the impact of slack on performance is curvilinear, which resembles inverse U-shaped curves. Overall, our findings call for a contingency perspective to specify the nature of slack when discussing its impact on firm performance. Copyright © 2003 John Wiley & Sons, Ltd. How does organizational slack affect firm performance? Organization theorists typically argue that, despite its costs, slack buffers a firm’s technical core from environmental turbulence, and thus enhances its performance (Cyert and March, 1963; Pfeffer and Salancik, 1978; Thompson, 1967). In contrast, agency theorists often suggest that slack is a source of agency problems, which breeds inefficiency, inhibits risk-taking, and hurts performance (Fama, 1980; Jensen and Meckling, 1976). At present, evidence based on these two perspectives is still inconclusive, and the debate therefore calls for more conceptual and empirical probes. One aspect that unites virtually all empirical

Abstract: Similarities between individual and organizational response to loss are documented through literature analysis and case studies in the automobile industry. An identity maintenance and adaptation thesis is developed to explain this similarity and provide a logic for a stage theory of loss. Risk-seeking behavior under loss is also explained.

This paper studies the relationship between multinationality and performance under a real options lens. Based on a cross-sectional panel of multinational corporations (MNCs) that are likely to use real options reasoning for the management of their operations, we test the impact of operating and strategic options on firms ’ risk-returns parameters. Our evidence reveals that both multinationality and flexibility enhance corporate performance and reduce downside risk.

1 How and when do firms translate slack into better performance? Different theoretical perspectives recognize both positive and negative consequences of organizational slack. Where agency theory emphasizes that organizational slack will mainly be used for empire building purposes, behavioral theories focus more on the positive impact of slack through facilitating innovation and growth, or providing a buffer to uncertainty. In this paper, I test circumstances under which slack is more likely to have a positive impact on firm performance, and which mechanisms cause this impact. From the empirical analysis, I find that slack has both a positive and negative impact on performance at the same time. It leads to higher overinvestment, which consecutively has a negative impact on performance, but also to more innovation which in a large part of the sample leads to higher performance. In addition, I find empirical evidence that slack has a more positive (or less negative) impact on performance when a firm can choose between many profitable projects. Organizational slack has been related to many forms of strategic firm behavior, such as increased growth initiatives (Mishina et al. 2004), more innovation efforts (Nohria and Gulati, 1996; 1997), more

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This paper studies how a firm’s position within a hierarchy of firms in an industry affects its choice of actions, in particular its risk-taking behavior. Prior studies have demonstrated that performance relative to aspiration levels has a significant effect on risk-taking. This paper contributes to this literature by presenting a theory of how social comparison and the focal firm’s position within a social structure affect risk-taking behavior. The basic argument is that hierarchical position affects the perceptions of actors and through that their likelihood of taking risky actions. The argument is tested using data on the acquisition activity of U.S. advertising agencies from 1980 to 1989. Results from parametric estimation give strong evidence that an actor’s position vis-a-vis its immediate neighbors significantly affects its risk-taking. Additionally, semiparametric estimation identifies the likely existence of size thresholds around which risk-taking activity is intensified. Hence, this paper contributes to the growing literature on the structural approach to markets by studying how social comparison processes affect a firm’s choice of actions. 2 1

Abstract. This paper examines the risk-return relationship from a sample of 34 firms listed on the CAC 40 stock market index over the period 1993-2002. The test of risk-return association uses two distinct risk measures: the strategic risk of the firm, based on the ordinal approach proposed by Collins and Ruefli (1992), and the conventional variance of returns. The total sample is then divided into two sub-samples employing the median performance criterion. The aim is to evaluate both the reality of Bowman's paradox and validity of arguments derived from prospect theory used to explain it. The results indicate that the nature of riskreturn relationship is heavily conditioned by the risk measure utilized. They also invite to reconsider the traditional approach of Bowman's paradox. Key words. Ordinal strategic risk − Bowman’s paradox − Prospect theory.

The strategic management paradigm explains organizational performance through the alignment between environment, strategy, and reference points. We extend this paradigm by incorporating the role of interorganizational networks on firm performance, thus integrating strategic management and corporate social capital theory. This results in four normative propositions that describe the conditions under which particular interfirm network structures assist or impede firm performance. (also downloadable) in electronic version:

Similarity between individual and organizational response to loss is documented through literature analysis and case studies in the automobile industry. An identity maintenance and adaptation thesis is developed to explain this similarity and provide a logic for a stage theory of loss. Risk-seeking behavior under loss is also explained.