Incumbent Performance Research Articles

Measuring Democratic Backsliding

ABSTRACTDespite the general narrative that the world is in a period of democratic decline, there have been surprisingly few empirical studies that assess whether this is systematically true. Most existing studies of global backsliding are based largely if not entirely on subjective indicators that rely on expert coder judgment. Our study surveys objective indicators of democracy (e.g., incumbent performance in elections) and finds little evidence of global democratic decline during the past decade. To explain the discrepancy in trends between expert-coded and objective indicators, we consider the role of coder bias and leaders strategically using more subtle undemocratic action. Although we cannot rule out the possibility that the world is becoming less democratic exclusively in ways that require subjective judgment to detect, this claim is not justified by existing evidence.

The Influence of New IPO Firms on Incumbent Performance: An Empirical Investigation

Market entry of new IPO firms adds to the competition of any industry, however, the impact on competitors may differ depending on several factors. Our study contributes to the literature on IPOs and incumbent performance by providing empirical evidence of the importance of firm specific characteristics in determining performance. Using a sample of 232 firms, we found that the strategic content of an IPO firm's prospectus affects the short-term pricing of incumbents during an IPO. Specifically, our findings suggest that IPO firms that signal high levels of exploitative tendencies in their prospectus have a negative impact on incumbents’ performance. Incumbent firms’ high degree of involvement in the focal business segment of the IPO firm tends to negatively impact their performance. Finally, technologically diversity of incumbents attenuates the negative impact of new IPOs.

Australian state and territory elections: regional incumbents matter

ABSTRACT Recent research is ambiguous about the status of Australian regional elections, seeing them as conforming to the second-order election model but also as affected by regional politics. We clarify this ambiguity, drawing on aggregate and individual level data to explore the variable impact of national and regional incumbents on regional elections. Although national incumbents seem to affect Australian regional elections, under some circumstances regional incumbent parties are able to electorally outperform their national incumbent counterparts. We suggest that Australia’s uncoordinated national and regional election cycles and federal distribution of policy responsibilities both help to focus voter attention on the performance of regional incumbents. The way that regional incumbents manage key policy issues, including Covid-19 in recent years, appears to matter for their electoral support, making Australian regional elections more than second-order events.

Voter attention and electoral accountability

What sorts of policy decisions do voters pay attention to, and why? And how does rational voter attention affect the behavior of politicians in office? We extend the Canes-Wrone et al. (2001) model of electoral accountability to allow the voter to choose when to pay costly attention to learn the consequences of the incumbent’s policy. We find that the voter will pay the most attention in close races, when the instrumental value of information about incumbent performance is greatest. When the voter’s cost of attention is ‘intermediate,” she will pay different levels of attention to different policies, and generally pay more attention to an unpopular policy than a popular one. This asymmetric attention can improve accountability by giving a moderately strong incumbent an opportunity to be “caught in the act of being good” after choosing an unpopular policy. However, it can also harm accountability by leading a moderately strong incumbent to categorically avoid the unpopular policy to evade voter scrutiny. This negative effect can be sufficiently strong to harm the voter’s overall welfare, providing a novel rationale for why subsidizing information about government performance may unintentionally harm voters. Finally, we find that rational voter attention can never induce “fake leadership,” i.e., a moderately weak incumbent choosing an unpopular policy precisely because it draws more scrutiny, hoping that the voter discovers an accidental policy success.

What determines incumbent vote in Indonesia? Understanding the roles of economic conditions, religiousness, political ideology, and incumbent performance

AbstractThis study investigates possible factors leading to voting for a presidential incumbent in Indonesia, a Muslim‐majority democratic country. In addition to economic factors, we argue that religious‐psychological factors will also play a role. However, they may operate through different mechanisms. Using data from a national survey ( N = 1088), we found some support for our hypotheses. We found that economic factors (objective personal economy and subjective national economy, but not subjective personal economy) had significant direct relationships with the incumbent vote. In contrast, religiousness did not directly correlate significantly with the vote. Indirect effect analyses showed that incumbent evaluation mediated the relationship between economic factors (except for objective economic conditions) and the incumbent vote. On the other hand, we did not find a mediating role of incumbent performance evaluation in the relationship between religiousness and incumbent vote. Rather, we found a significant mediation effect of political ideology. We also found that the relationship between religiousness and the incumbent vote was mediated by political ideology and incumbent performance evaluation in serial. These findings suggest a stronger effect of non‐religious than religious factors. However, the indirect effect analysis suggests that the role of religiousness is not negligible.

The Effect of Sustained Transparency on Electoral Accountability

AbstractTransparency is expected to strengthen electoral accountability. Yet, initiatives disseminating politician performance information directly prior to elections have reported mixed results. We argue that to be effective, transparency needs to be sustained: The dissemination of politician performance information needs to occur early, regularly, and predictably throughout the term. Using a formal model of electoral accountability under nonprogrammatic and uneven party competition, we study how sustained transparency affects a string of decisions by various actors in advance of elections: incumbents' running choices, parties' nomination strategies, and potential challengers' entry decisions. We show how these effects shape the candidate slate and ultimately electoral outcomes, conditional on incumbent performance and the incumbent party's relative strength. We test our theory using a field experiment involving 354 subnational constituencies in Uganda, and find robust support for the idea that sustained transparency can improve electoral accountability even in weakly institutionalized electoral settings.

Electoral accountability and selection with personalized information aggregation

We study a model of electoral accountability and selection whereby heterogeneous voters aggregate incumbent politician's performance data into personalized signals through paying limited attention. Extreme voters' signals exhibit an own-party bias, which hampers their ability to discern the good and bad performances of the incumbent. While this effect alone would undermine electoral accountability and selection, there is a countervailing effect stemming from partisan disagreement, which makes the centrist voter more likely to be pivotal. In case the latter's unbiased signal is very informative about the incumbent's performance, the combined effect on electoral accountability and selection can actually be a positive one. For this reason, factors carrying a negative connotation in every political discourse—such as increasing mass polarization and shrinking attention span—could have ambiguous accountability and selection effects. Correlating voters' signals, if done appropriately, unambiguously improves electoral accountability and selection and voter welfare.

Benchmarking the pandemic: how do citizens react to domestic COVID-19 conditions compared to other countries’?

ABSTRACT This study examines how relative policy performance against the spread of COVID-19 corresponds to citizens’ political support. We argue that citizens form political attitude using relative COVID-19 assessments with other governments. We also examine the extent to which relative comparative assessments are likely among sophisticated voters. Using original survey data from South Korea in April 2020, we found that a relatively positive evaluation of incumbent performance corresponds to higher political support. This paper is well situated in the existing literature as it shows that voters who benchmark the performance of other countries make an informed decision regarding their political support.

COVID-19 Communication Management on Facebook Pages of Local Governments

We examine how Italian municipalities manage the COVID-19 communication on their official Facebook pages. For this purpose, we apply an automatic topic modelling procedure on a sample of 76,139 posts published on the official Facebook pages of 103 Italian provincial capital municipalities over the COVID-19 pandemic period from 1 March 2020 to 26 March 2021. We identify two topics related to COVID-19 consisting of COVID-19 restrictive measures and COVID-19 support measures. Using regression models with municipality and year-week fixed effects, we find that the prevalence of the topic on COVID-19 restrictive measures negatively affects the tone of the communication, computed through a sentiment analysis procedure, and it is negatively associated with the number of COVID-19 positive cases in the municipal area. In contrast, the prevalence of the topic on COVID-19 support measures positively affects the tone of the communication and it is positively associated with the number of positive cases. These associations are moderated by ideology, age, and political incentives of incumbent mayors. These results may reveal a strategic communication of municipalities to induce positive perceptions about the performance of municipal incumbents in responding to the pandemic and, therefore, enhance political consensus among voters. Finally, these findings may have practical implications for public regulators, public managers, and other followers of local governments’ social media.

Incumbents' Behavior and Strategic Interactions Among Local Governments: The Case of Indonesia

This paper investigates Yardstick Competition among local governments in decentralized Indonesia by distinguishing bad from good incumbent behavior. By doing so, this paper provides a more explicit connection between theoretical foundation and empirical investigation, where political incumbency is viewed based on the political economy perspective. Given that voters can compare and benchmark their incumbent's performance, an incumbent who aims for the throne twice must consider neighboring local governments' performance as the reference, leading to strategic interaction across local governments. We conduct empirical examinations using Two-regime Spatial Econometrics for panel data consisting of 99 local governments in the West, Central, and East Java Provinces from 2010 to 2017. Our empirical estimation results confirm that mimicking behavior by bad incumbents, characterized by the underperformed public sector, is evident. Bad incumbents mimic their neighbor's public spending. However, we find no evidence of Yardstick Competition by incumbents in general.

How Do Voters Evaluate Performance in Opposition?

AbstractRecent scholarship on retrospective voting has shown that when they go to the polls, voters evaluate not only incumbent performance, but also the performance of parties in opposition. So far, however, these studies have not been able to identify how voters evaluate the performance of parties in opposition. The answers to a unique open-ended question included in a Belgian electoral survey in 2019 provide new insights into voters' minds. First, this study investigates what voters think about when they evaluate a party's performance in opposition. Second, it tests whether voters hold opposition parties responsible for the state of affairs in the country. The results show that voters are most concerned with opposition parties' competence in scrutinizing the government and providing constructive criticism, and dislike unconstructive and overly negative opposition. Furthermore, voters hold opposition parties accountable for the state of affairs in their country, albeit to a lesser extent than incumbent parties.

The financial and prudential performance of Chinese banks and Fintech lenders in the era of digitalization

The years 2013 to 2019 marked an explosion in Fintech in China. We analyze the financial and prudential performance of 40 exchange-traded banks and 25 listed Fintech lenders in China during this watershed period. Among other things, traditional banks experienced rising operating costs, declining profit margins and softening loan quality. Consistent with a process of adaptation, traditional bank performance stabilized in the latter part of the study period (2018-19) after an initial period of decline. Study findings also highlight rising business and regulatory costs for Fintech providers over the course of the study frame. A marked deterioration in online lenders’ Special Mention and Non-Performing Loan (SML & NPL) positions arose during the period. Within the traditional bank group, smaller entities with fewer growth options and greater foreign ownership fared worst in prudential terms. Traditional banks’ financial and prudential performance also declines with time since IPO. Relative to joint stock commercial, city and rural banks, state-owned lenders registered more resilient performance, especially in relation to asset quality. In a final area, we construct a categorical Fintech proficiency variable for China's established banks. Our preliminary evidence suggests such proficiencies help stabilize SML and NPL rates and support financial returns. Overall, we offer major contribution to the banking literature by analyzing the financial and prudential performance of both incumbent and emerging lenders in one of the world’s most dynamic Fintech settings.

Motivated Reasoning and Democratic Accountability

Does motivated reasoning harm democratic accountability? Substantial evidence from political behavior research indicates that voters have “directional motives” beyond accuracy, which is often taken as evidence that they are ill equipped to hold politicians accountable. We develop a model of electoral accountability with voters as motivated reasoners. Directional motives have two effects: (1) divergence—voters with different preferences hold different beliefs, and (2) desensitization—the relationship between incumbent performance and voter beliefs is weakened. While motivated reasoning does harm accountability, this is generally driven by desensitized voters rather than polarized partisans with politically motivated divergent beliefs. We also analyze the relationship between government performance and vote shares, showing that while motivated reasoning always weakens this relationship, we cannot infer that accountability is also harmed. Finally, we show that our model can be mapped to standard models in which voters are fully Bayesian but have different preferences or information.

Tilting at windmills? Electoral repercussions of wind turbine projects in Minnesota

Spatial electoral repercussions of wind turbine developments are surprisingly understudied in the literature. How people vote based on the personal costs and benefits of living in the vicinity of wind turbines is an important empirical question that can improve our understanding about the political feasibility of a clean energy transition. Given the assumption that any potential nuisances or benefits associated with wind turbines are likely to be highly spatially concentrated, we merge the GIS turbine data with voting and census data at the precinct level to examine how wind turbine development affects the electoral fortunes of incumbent state legislators in the state of Minnesota in elections that occurred between 2006 and 2018. We also examine whether the incumbency advantage of turbine development favors Republicans or Democrats more. We find that turbine development has a positive impact on incumbent performance. In precincts where wind turbines are constructed, our models estimate that adding at least one turbine within that precinct increases the share of the incumbent party's vote in the next election by an average of 1.8–9 percentage points. We also find that Republicans benefit electorally from turbine development as much as or more than Democrats. The finding that voters usually reward rather than punish local politicians in both parties for wind development bodes well for the future of energy transition in the US as it suggests that most people are supportive of green energy even in their backyards.

Exploring how digitalization influences incumbents in financial services: The role of entrepreneurial orientation, firm assets, and organizational legitimacy

The performance implications of digitalization among incumbents in the financial services industry are largely under investigated. To fill this gap, this study adopts the perspective of inertia and explores how the interaction of digitalization with entrepreneurial orientation, firm assets, and organizational legitimacy influences the performance of incumbents in the financial services industry. Using panel data covering listed banks in China during 2007–2019, we find that while digitalization alone does not improve incumbents' performance, the interaction between digitalization and entrepreneurial orientation can contribute to performance as entrepreneurial orientation strengthens. When firm assets are large, digitalization does not contribute to performance, but it does contribute when firm assets are relatively small. The interaction between digitalization and organizational legitimacy undermines incumbents' performance as organizational legitimacy increases. By bridging the entrepreneurship and legitimacy literature using the perspective of inertia, this study identifies the contingency factors affecting the performance implications of the digitalization of financial services industry incumbents, suggesting that they can achieve benefits from digitalization through reductions in inertia.

Survival and performance of strategic restructuring spin-offs and necessity spin-offs

In the past decade, researchers have increasingly explored the performance of spin-offs created by events that adversely affected the incumbent. Extant literature has, however, mainly focused on employee made necessity spin-offs, while the post entry performance of incumbent made strategic restructuring spin-offs has largely been ignored. This may result in an overestimation of the performance of the former type of spin off. In the current study, we explore the post entry performance and survivability of 26 strategic restructuring and necessity spin-offs from four Danish shipyard closures over almost four decades. We find that strategic restructuring spin-offs outperform necessity spin-offs on several growth parameters including turnover and employment. Surprisingly, we also find strategic restructuring spin offs to have higher survival rate than the necessity spin-offs. The study adds to our knowledge on the relationship between spin-off type and firm growth and suggest that further attention should be given to spin-offs created in strategic restructurings.

Novel Scale Inhibitor Extends Treatment Lifetimes in Permian EOR

Background A new extended-release (ER) scale-inhibitor technology showing significantly increased lifetimes has been applied in the Permian Basin. Tomson Technologies and Group 2 Technologies, in partnership with Occidental Petroleum (Oxy), implemented a scale-squeeze program for this carrier system. It allows for fewer squeeze treatments, which results in lower chemical usage, decreased plugging risk, and reduced environmental impact. Squeeze programs are an effective field treatment strategy to prevent scale formation in wells for extended periods of time. However, in some cases, squeeze lifetimes can be short, leading to frequent re-squeezing and production decreases, lowering overall economic recoveries. The ER phosphonate-based chemistry (SI1313) was used in selected wells where incumbent (previous chemical provider) treatment lifetimes were shorter than expected. The incumbent squeeze volumes and additives were used, and the scale-inhibitor (SI) chemistry was replaced with SI1313 to obtain directly comparable results. The wells selected are vertical wells, with predominantly carbonate mineralogy and 14–18% porosity and 9–16 mD permeability. Bottomhole temperature is 105°F (40°C). These wells are under continuous CO2 flooding operations, and the scales of interest are calcium carbonate and calcium sulfate predominantly. The selected wells were targeted to have a good squeeze history for comparison and stable water production. Pre-Job Validation Work Coreflood laboratory experiments were performed to simulate the adsorption and desorption under these specific Oxy Permian conditions. The coreflood showed over 10,000 pore volume (PV) of flow with inhibitor concentration remaining above the minimum effective concentration (MEC) during the entire run. Once greater than two times incumbent performance was reached, the coreflood was stopped, although the return concentration was still above MEC. For reference, corefloods with incumbent phosphonate chemistry under the same conditions usually drop below MEC around approximately 3,000–5,000 PVs. The adsorption of SI1313 to core material was measured during the coreflood experiment and the results show 12.5 mg of inhibitor adsorbed per gram of core material. As a comparison, a typical incumbent phosphonate scale inhibitor adsorbs 1–2 mg of inhibitor per gram of core material. This increase in adsorption is considered a large improvement over traditional chemistry. The carrier platform’s superior adsorption, when combined with controlled desorption, is the basis for extending the lifetimes of scale- inhibitor treatments. The corefloods results validate the ER characteristics expected from SI1313 and allowed for field squeezes to be conducted. Field Application Group 2 Technologies provided SI1313 to be squeezed for Oxy in January 2020, into five vertical conventional wells. The selected wells are in one area where CO2 flooding is in place and there is risk of calcium carbonate (CaCO3) and calcium sulfate (CaSO4) scaling. These wells have had many scale squeezes performed on them, yielding an excellent data set to compare against. The goal of this trial was to show significant lifetime extension compared to previous incumbent squeeze lifetimes.

Incumbent Performance Facing Digital Evolution: The Role of Asset Reconfiguration

“Digital revolution” presents great challenges to incumbent firms in many industries. How could incumbents successfully renewal the assets and capabilities in digital innovation shocks is a question remains unanswered. Drawing on strategic adaptation and asset reconfiguration literature, we take a finer grained approach draw a distinction between retrenchment-oriented reconfiguration, and growth-oriented reconfiguration. Using commercial banks’ divestiture of offline branches and adoption of online innovation as the empirical context, our results suggest that incumbents could benefit from divesting devalued legacy assets, while the innovation adoption could contribute to the performance only when the incumbents are also engaging in legacy divestiture simultaneously.

The conflict between existing and new business models: The effect of resource redeployment on incumbent performance

When an incumbent firm introduces a new business model (BM), the redeployment of resources from the old BM is crucial for the firm’s operational efficiency. While previous studies have largely focused on the bright side of resource redeployment (RR) on firm performance, this study focuses on its dark side effect, namely, the business model conflict (BMC). Using data of 133 traditional Chinese retail companies that have introduced an online retail BM, we find that RR increases the BMC and decreases the firm performance. In other words, BMC mediates the relationship between RR and incumbent performance. We also highlight the significant contingent effect of the new business model age (NBMA) and the autonomous business unit (ABU) for the new BM. These findings have concrete implications for both researchers and practitioners.

The Private Impact of Public Data: Landsat Satellite Maps Increased Gold Discoveries and Encouraged Entry

How does public data shape the relative performance of incumbents and entrants in the private sector? Using a simple theoretical framework, I argue that public data reduces investment uncertainty, facilitates the discovery of new market opportunities, and increases the relative market share of new entrants relative to incumbents. I shed light on these predictions by estimating the impact of public data from Landsat, a U.S. National Aeronautics and Space Administration satellite mapping program, on the discovery rates of new deposits by incumbents (seniors) and entrants (juniors) in the gold exploration industry. I exploit idiosyncratic timing variation and cloud cover in Landsat coverage across regions to identify the causal effect of public data on the patterns of gold discovery. I find that Landsat data nearly doubled the rate of significant gold discoveries after a region was mapped and increased the market share of new entrants from about 10% to 25%. Public data seem to play an important, yet relatively underexplored, role in driving performance differences across firms. This paper was accepted by Ashish Arora, entrepreneurship and innovation.