Issue 4

Volume 3 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
March 1994

The Acquisition of Restructured Firms: An Illustration of Market Discipline?

James K. Seward and James P. Walsh
We examine the relationship between chief executive officer (CEO) compensation and acquisition activity subsequent to corporate restructurings in a sample of 152 firms created by a voluntary corporate spin-off. We also investigate the linkage between these relationships and the stock market reaction to the initial restructuring announcements. Surprisingly, CEO wealth in the form of stock and options is strongly related to friendly and hostile acquisition activity, respectively.

Reputation, Product Quality, and Warranties

Nabil Ibraheem Al-Najjar
This paper studies the firm's choice between implicit and explicit contracts as alternative methods of assuring product quality. The relationship between these two contractual forms is studied using a dynamic model with imperfect monitoring and team moral hazard where both the firm and the consumer take unobservable actions that affect product performance. The firm chooses the contractual arrangement that maximizes expected profit.

Rendering Alternative Offerings Less Profitable with Resale Price Maintenance

Greg Shaffer
When it was legal, resale price maintenance (RPM) was commonly observed on items such as aspirin, pens, pencils, toothpaste, soap, shaving cream, and milk. In providing a theory that is based on compensating retailers for their opportunity cost of shelf space, and that does not hinge on the existence of externalities in nonprice competition, this article explains why a manufacturer might impose RPM on these and many other products.

Pollution Regulation and Incentives for Pollution-Control Research

Gary Biglaiser and John K. Horowitz
We study the firm's incentives to engage in research for pollution-control technologies and to adopt new technologies that if discovers or that are discovered by other firms. Licensing of discoveries is assumed possible. We also study the regulator's problem in designing optimal environmental regulations that both control pollution and provide incentives for research. Technology adoption standards are part of the optimal regulation. Another finding is that making the adoption standard stricter reduces research.

Competitive Advantage and Internal Organization: Nucor Revisited

Pankaj Ghemawat
Why does the cost of organizing particular activities differ across competitors? This article explores in detail the organization of Nucor, a steel minimill that has sustained a significant cost advantage over its competitors. Nucor's past success highlights the complementarities among organizational policies and competitive advantage as well as barriers to the imitation of apparently superior organizational arrangements. The case study also suggests avenues for additional empirical and theoretical research.