Melbourne Business School

Markets and Networks in International Trade: On the Role of Distances in Globalization

Lars Häkanson et al. — Thu, 02 Feb 2012 18:19:35 PST

• The enduring importance of geographic distance as an impediment to international trade has recently become recognized as an em¬pirical fact in need of explanation. According to one line of argument – the ‘network view’ – the continuing high sensitivity of international trade to geographical distance is associated with a shift in the composition of trade towards goods requiring more extensive infor¬mation exchange and personal interaction between buyers and sellers. An alternative explanation – ‘the market view’ – contends that improved availability of infor¬ma-tion and increasing transparency of markets have facilitated the matching of geographically more prox¬imate buyers and sellers and the observed decline in average transportation distances is a reflection of increasingly efficient markets.

• This paper examines empirically the relative merits of these two arguments based on a longitudinal analysis of bilateral trade between 25 major trading nations for the period 1962-2008. It compares the development of the relative importance of ‘psychic distance’ – a proxy for infor¬mation related transaction costs – and geographic distance – a proxy for transportation costs – in three catego¬ries of goods.

• The results are broadly in support of the ‘market-view’, showing that the sensitivity of trade to psychic distance has declined dramatically for all categories of goods. The impact of geographic distance has increased markedly for homogenous goods, whereas for more differentiated goods it has decreased mildly.

Sweet Little Lies: Social Context and the Use of Deception in Negotiation

Mara Olekalns et al. — Sat, 28 Jan 2012 19:24:28 PST

Social context shapes negotiators’ actions, including their willingness to act unethically. In this research, we test how three dimensions of social context – dyadic gender composition, negotiation strategy, and trust – interact to influence one micro-ethical decision, the use of deception, in a simulated negotiation. To create an opportunity for deception, we incorporated an indifference issue – an issue that had no value for one of the two parties – into the negotiation. Deception about this issue was least likely to be affected by trust or negotiation strategy in all-male dyads, suggesting that dyads with at least one female negotiator were more sensitive to social context than all-male dyads. In mixed-sex and all-female dyads, trust and negotiation strategy interacted to affect the use of deception. A consistent picture emerged in mixed-sex dyads, which increased their use of deception when three forms of trust (affective, benevolent, deterrent) were low and negotiators used an accommodating strategy. However, a more complex pattern emerged in all-female dyads. When negotiators in all-female dyads competed, low benevolence-based trust increased whereas low deterrence-based decreased deception. When negotiators in all-female dyads accommodated, high affect-based trust increased deception. Jointly, these findings suggest that in all-female dyads, negotiators use multiple and shifting reference points in deciding when to deceive the other party.

Matching and Economic Design

Sven Feldmann — Wed, 21 Dec 2011 17:03:21 PST

This article presents a brief survey of two-sided matching. We introduce the reader to the problem of two-sided matching in the context of the college admission model and explain two central requirements for a matching mechanism: stability and non-manipulability. We show how the frequently used ‘Boston Mechanism’ fails these key requirements and describe how an alternative, the Deferred Acceptance Algorithm, leads to stable matchings but fails to be non-manipulable in general. A third mechanism, the Top Trading Cycle, is efficient and non-manipulable when only one side of the match acts strategically. We also discuss some applications of matching theory.

With Feeling: How Emotions Shape Negotiation

Mara Olekalns et al. — Mon, 12 Dec 2011 20:48:38 PST

An increasingly popular topic in current research is how emotional expressions influence the course of negotiation and related interactions. Negotiation is a form of social exchange that pits the opposing motives of cooperating and competing against one another. Most negotiators seek to reach an agreement with the other party; they also strive for an agreement that serves their own goals. This dual concern is reflected in a process that consists of both bargaining and problem solving. A good deal of the research and practice literature concentrates on ways to perform these activities effectively. In earlier writing, emotions were viewed largely as factors that impede performance, preventing successful coordination from occurring. More recently we have learned that emotions can both help and hinder progress. Expressions may convey useful information about preferences; they can also signal dislike or malevolent intentions. Whether emotions move a negotiation forward or backward -- or improve/threaten a relationship -- depends on a variety of process and context variables. We explore these variables in more depth in this chapter.

Bayesian Approaches to Copula Modelling

Michael S. Smith — Sun, 11 Dec 2011 22:48:33 PST

Copula models have become one of the most widely used tools in the applied modelling of multivariate data. Similarly, Bayesian methods are increasingly used to obtain efficient likelihood-based inference. However, to date, there has been only limited use of Bayesian approaches in the formulation and estimation of copula models. This article aims to address this shortcoming in two ways. First, to introduce copula models and aspects of copula theory that are especially relevant for a Bayesian analysis. Second, to outline Bayesian approaches to formulating and estimating copula models, and their advantages over alternative methods. Copulas covered include Archimedean, copulas constructed by inversion, and vine copulas; along with their interpretation as transformations. A number of parameterisations of a correlation matrix of a Gaussian copula are considered, along with hierarchical priors that allow for Bayesian selection and model averaging for each parameterisation. Markov chain Monte Carlo sampling schemes for fitting Gaussian and D-vine copulas, with and without selection, are given in detail. The relationship between the prior for the parameters of a D-vine, and the prior for a correlation matrix of a Gaussian copula, is discussed. Last, it is shown how to compute Bayesian inference when the data are discrete-valued using data augmentation. This approach generalises popular Bayesian methods for the estimation of models for multivariate binary and other ordinal data to more general copula models. Bayesian data augmentation has substantial advantages over other methods of estimation for this class of models.

What is the value of a brand to a firm?

Don O'Sullivan — Thu, 24 Nov 2011 16:53:41 PST

Modelling the Impact of Personality on Individual Performance Behavior with a Time-Varying Mixture of Monotonic Random Effects

Sally A. Wood et al. — Thu, 24 Nov 2011 16:14:07 PST

A method is presented for flexibly modelling longitudinal data that provides insight to a central question in psychology theory: the dependency between personality clas- sification and individual performance behavior. Flexibility is achieved by assuming the regression coefficients of random effects models are generated from a time-varying mixture of an unknown but finite number of processes, where the weights attached to the number of processes are parameterised to depend upon an individual’s personality classification. For a given number of mixture components the component processes are constrained distributions and the weights attached to them depend upon time. The method is made robust to outliers and we demonstrate this is an important addition when making inference at the individual level. The frequentist properties of the ap- proach are examined via simulation. The results support the hypothesis in psychology that individuals who believe abilities are inherited traits are much more likely to exhibit sustained periods of failing performance than other individuals.

But Can I Trust Her? Gender and Expectancy Violations in Negotiation

Mara Olekalns et al. — Thu, 01 Sep 2011 18:18:12 PDT

Women who negotiate incur social backlash, being perceived as more pushy and demanding than women who do not negotiate. In two experiments, we test the boundary conditions for this backlash effect. Using a simulated employment contract negotiation, we explore how the strategies that women use, who they negotiate with (E1) and the organizational context within which they negotiate (E2) affects one social outcome, women’s perceived trustworthiness. We compare the how men and women evaluate the use of a gender-congruent accommodating style or a a gender-incongruent, competing style (E1) in either an agentic or a communal organizational culture (E2). In both experiments, we show that women are more likely than men to reassess a female negotiator’s trustworthiness based on the whether she implements an accommodating or a competing strategy. In Experiment 1, we further demonstrate that in their negotiations with other women, female negotiators who accommodate preserve relational trust (identity, integrity) but prime the use of sanctions (deterrent trust) whereas those who compete erode relational trust but also reduce the salience of sanction. In Experiment 2, we show that the impact of strategy choice on a female negotiator’s perceived benevolence is attenuated in a communal culture but amplified in an agentic culture. Extending our E1 findings, in negotiation with women but not with men, female negotiators who implement an accommodating strategy in an agentic culture increase the salience of sanctions but those who implement a competing strategy in an agentic culture decrease the salience of sanctions.

The role of leadership in successful international mergers and acquisitions: Why Renault-Nissan succeeded and DaimlerChrysler-Mitsubishi failed.

Carol Gill — Wed, 24 Aug 2011 23:15:40 PDT

This paper compares and contrasts the Renault-Nissan and DaimlerChrysler Mitsubishi mergers to consider the relative and combined effects of national and organizational culture on the performance of Nissan and Mitsubishi. It also examines the reasons why the Renault-Nissan merger was successful and the Daimler-Chrysler merger failed. It finds that Japanese national culture influenced organizational culture and HRM practices which created organizations that had no sense of urgency, profit orientation and accountability and led to poor market and financial performance. It also finds that leadership was a major factor impacting on the success of the turnaround efforts of these two organizations. These findings have implications for leaders and human resource management practitioners engaged in international business and are of particular relevance to Western organizations working with organizations in high context countries with a collectivist rather than individualistic orientation.

R&D Project Valuation and Licensing Negotiations at Phytopharm Plc

Pascale CRAMA et al. — Tue, 23 Aug 2011 23:37:36 PDT

We describe a research and development project-valuation model developed for Phytopharm plc, a pharmaceutical development and functional food company based in Cambridgeshire, United Kingdom. Phytopharm uses the model to value the projects in its research and development portfolio, and in licensing negotiations with potential product development and marketing partners. We include different valuation methods, including net present value, decision analysis, and Monte Carlo simulation. We also consider the technological risks of product development, as well as the uncertainty of commercial success. In addition to determining a value for a product in development, the model proposes appropriate licensing contract structures. A typical licensing contract specifies milestone payments and royalties to be paid by the licensee to the licensor. The contract structures adhere to an agreed-upon equitable split of the project value between the two parties. The model also generates critical information during the negotiation meetings, including break-even analyses, trade-offs, and bargaining zones. Phytopharm is currently deploying the model for use with its entire project portfolio.