Larger Rivals Research Articles

The effects of non-Big 4 mergers on audit efficiency and audit market competition☆

This study examines whether recent mergers between small and midsize accounting firms influence competition by increasing the number of firms that can compete with larger rivals in the U.S. public company audit market. I find that in-market mergers generate efficiencies that are reflected in a post-merger reduction in audit hours but not in reduced audit quality. For both in-market and out-of-market mergers, clients switching to post-merger firms are more likely to be accelerated filers and are significantly larger in terms of several proxies for size and complexity. Lastly, I find that an increase in market-level merger activity is associated with lower profitability of Big 4 firms operating in the same market but only in the smaller client segment. These findings suggest that recent mergers have actually increased competition in some segments of the audit market despite already high concentration and concerns about a lack of sufficient competition.

Do gaming companies benefit from the IP Box tax rate? Multinational, Polish and Wielkopolskie voivodeship perspective

This article aims to verify the impact of the reduced IP Box tax rate on the revenues of gaming companies and Gibrat’s Law stating that firm growth is independent of a company’s size. The dynamic panel-data models estimated in this article using GMM, FE panel data and OLS methods were created based on data of 673 companies from 11 countries. We show that small gaming firms are growing faster than their larger rivals. Thus, we reject Gibrat’s Law. We did not find evidence that IP Box supports the firm’s growth except for the Wielkopolskie Voivodeship. More chances for IP Box’s (reduced to 5% income tax rate being in force in Poland since 2019) effects are given to firms with more remarkable and dynamic changes in capital intensity, intangibility and inventory. The gaming industry in Wielkopolska benefits more from IP Box than the rest of Poland.

How can “No-Growth Companies” succeed? Lessons from Majestic (1973–2012)

ABSTRACT Corporate growth triggers a virtuous circle by creating economies of scale and making more financial resources available to invest in powerful differentiation policies and in growth itself. Family businesses struggle to grow and, in some industries, are replaced by larger companies. By focusing on the case of a small Italian company, this paper elucidates how small companies can target particular markets and thereby coexist with large companies, despite the latter’s economies of scale and superior capabilities. The ‘no-growth company’ avoids frontal battles with large corporations by occupying declining market segments in which large rivals no longer invest in improving their products. To seize such opportunities to gain market share with limited financial resources, the no-growth company needs to exploit available technologies and differentiate its products by combining existing functionalities or improving its product design.

Inovativni položaj MSP u zavisnosti od upotrebe marketinških alata

Although SMEs have quick adaptions to new trends, most of them suffer from having lack of financial and human resources. This fact has made those businesses disadvantaged in the usage of traditional marketing tools compared to their larger rivals. Information and communication technologies and the developments in technology-based platforms have also provided less costly but more innovative marketing options for SMEs to compete with their larger counterparts. In this regard, this research purposes of examining the impacts of the usage of traditional and technology-enabled marketing tools by SMEs on their innovativeness. In parallel with this selected purpose, the researchers have gained data from 812 SMEs in Slovakia by employing an online internet-mediated questionnaire. The researchers also apply Binary Logistic Regression Test to analyze the impacts of traditional and technology-enabled marketing tools on the innovativeness of SMEs. The results show that while usage of technology-enabled marketing channels positively affects the innovativeness of firms, the usage of traditional marketing channels by SMEs does not affect their innovativeness. Environmental, resource-related, and personal factors might be the reasons of these results.

The impact of customer performance on IMC outcomes: firm size moderation in the inter-country context

PurposeTaking the customer-centric nature of integrated marketing communications (IMC), this article investigates the specific role of customer performance in IMC effectiveness in various size companies applying inter-country context.Design/methodology/approachThe sample consists of the primary data from developed (Spain) and developing (Belarus) economies. A total of 540 manager respondents participated in the survey. The article uses structural equation modeling and multi-group analysis for analysis.FindingsWhen taking into consideration, customer performance affects the IMC outcome on the market and financial performance. The customer performance role varies in firms of various sizes and small- and medium -sized enterprises (SMEs) operating both in developed and developing economies.Research limitations/implicationsThe research underlines the significant role of customer performance in IMC implementation, which stimulates further investigation on the topic. It also closes the gap in the IMC outcomes analysis in SMEs operating in developed and developing economies.Practical implicationsCustomer evaluation plays a vital role in the IMC outcomes for market growth and financial returns. SMEs and larger companies implement IMC with different levels of effectiveness. SMEs with IMC implementation can gain an advantage over larger rivals and improve their market position. Moreover, the study generalizes the results by applying inter-country context.Originality/valueThis is a pioneering study of the complex IMC outcomes model under firms' size moderate conditions. The research applies an inter-country context.

Brewing collaboration

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Horizontal collaboration is key to the success of micro and small breweries in Wales, and may demonstrate how similar enterprises can outcompete larger rivals by coming together. Originality/value The briefing saves busy executives, strategists and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Does recent experience affect large male advantage in a sequentially-mating fish?

Abstract In many mating systems, large male body size is associated with dominance in direct contests with rivals and females may exhibit preference for larger males. As such, body size is often positively associated with mating success. However, mating experience can influence the potential advantage of large body size through alterations in behaviour and depletion of sperm reserves. In Japanese medaka (Oryzias latipes), males mate with many females each day, and larger males mate more frequently than smaller males. In an observational experiment, we tested the following alternate predictions: (1) recent mating experience may enhance mating success through a carry-over effect of prior mating, whereby small experienced males gain an advantage over large inexperienced rivals in mating contests; or (2) recent mating experience decreases mating success through a reduction in fertilization due to sperm limitation, effectively dampening the large-male advantage against a small inexperienced rival. We examined the interactive effect of size and recent experience on mating behaviour and success. While mating contests were monopolized by large males, recent experience enhanced mating success, especially in small male winners. Experienced males courted more readily than those without recent experience, suggesting that recent prior mating enhances this behaviour. Furthermore, males who had copulated recently did not exhibit sperm depletion when in the presence of a competitor, nor did female behaviour indicate a preference for inexperienced males. This suggests that males can use sexual experience to increase their reproductive success in future mating situations, which may influence the action of sexual selection and alternative tactics in shaping mating systems.

What are the sources of regional airport economic effectiveness? The dynamic capabilities perspective with evidence from Poland

The aim of this paper is to examine the sources of regional airport economic effectiveness from the perspective of the Dynamic Capabilities View, a much debated theoretical construct of organization and management discourse in recent years. The category of dynamic capabilities embraces those organizational competencies which enable organizations to modify their routines, operational capabilities and resources with the aiming of adapting to business environmental changes. The research results, conducted on a full sample of Polish regional airports, suggest that there is a difference among regional airports in perceiving the role of particular dynamic capabilities in achieving economic effectiveness. Some dynamic capabilities are more important for small regional airports in comparison with their larger rivals. Research conducted on similar groups suggests that heterogeneity in shaping dynamic capabilities exists within organizations operating in the same sector.

Open Access, Interoperability, and the DTCC's Unexpected Path to Monopoly

In markets with significant scale economies and network effects, scholars and policymakers often tout open access and interoperability requirements as superior to both regulated monopoly and the break-up of dominant firms. In theory, by compelling firms to coordinate to develop common infrastructure, regulators can use these requirements to replicate scale and network economies without leaving markets vulnerable to monopoly power. Examples of successful coordination include the provision of electricity, intermodal transportation, and credit card networks. This Article analyzes the history of U.S. securities clearinghouses and depositories in order to offer a significant qualification to this received wisdom. This history demonstrates that open access and interoperability requirements can actually serve as instruments by which dominant firms obtain and entrench their monopoly power. Specifically, by imposing high fixed costs to connect to common infrastructure, allowing dominant firms to dictate the direction and pace of innovation and investment, and reducing the scope for product differentiation, these requirements can prevent smaller firms from competing with their larger rivals. In these ways, open access and interoperability can actually exacerbate the very problems that they were designed to address. Our analysis helps explain why important components of our financial infrastructure have become too-big-to-fail. It also helps explain why, despite their highly concentrated structure, U.S. securities clearing and depository markets have still been characterized by relatively high levels of innovation and investment. More broadly, our analysis suggests that coordination requirements will only constrain market power where the costs of building, maintaining, and connecting to common infrastructure are allocated in a way that does not discriminate against smaller firms, and where larger firms are not able to dictate decisions about innovation and investment. Where this is not possible, interoperability and open access are unlikely to forestall monopoly control, even though they may still improve market efficiency by exposing incumbents to the threat of new entry.

Prawo antymonopolowe a polityka wspierania rozwoju małych i średnich przedsiębiorców

Celem artykułu jest pogłębienie nader wątłej wciąż refleksji naukowej nad rolą prawa anty-monopolowego w polityce wspierania rozwoju małych i średnich przedsiębiorców (MŚP). W pierwszej kolejności przedstawiono syntetyczny obraz ewolucji i aktualnego stanu poglądów w kwestii ochrony MŚP jako celu prawa antymonopolowego. Następnie ukazano specyfikę definicji MŚP w prawie anty-monopolowym. Kolejną część artykułu poświęcono wpływowi prawa antymonopolowego na rozwój MŚP, rozpatrywanemu z perspektywy publicznego i prywatnego egzekwowania tego prawa, z uwzględ-nieniem dwoistej sytuacji MŚP jako jego beneficjentów i naruszycieli. W podsumowaniu wskazano, że choć prawo antymonopolowe i polityka wspierania rozwoju MŚP powinny ze sobą współgrać, to nie zawsze tak się dzieje. Za godne aprobaty uznano stanowisko, że prawo antymonopolowe nie powinno w wyjątkowy sposób chronić przedsiębiorców tylko dlatego, że są mali i nie są w stanie sprostać konku-rencji ze strony większych rywali, zwłaszcza jeśli miałoby się to odbywać kosztem konsumentów.

Does Political Connection Distort Competition and Encourage Corporate Risk Taking? International Evidence.

We investigate the impact of political connection on corporate risk-taking by connected firms, their industry counterparts, as well as non-rival firms from 48 countries. We find that political connection induces higher risk taking by connected firms. By contrast, we do not find evidence that political connection, with the attendant potential competitive distortions in the industry, induces higher risk taking by competitors. We focus on non-financial industries. Our results are consistent with the hypothesis that the inability to avail themselves of political rents compels the non-connected rivals to adopt more conservative strategies. However, large rival firms, generally considered to be too-important-to-fail, exhibit evidence of higher risk taking. The top size quartile industry rivals take as much risk as the politically connected firms. The higher risk exhibited by large rivals of politically connected firms suggests that our baseline regression results of lower risk-taking among rivals of politically connected firms are biased upward by firms that would be considered too-big-to-fail. This finding also suggests that the too-big-to fail phenomenon is not unique to banks. Our results are robust to the use of alternative measures of risk, to the exclusion of privatized and state-owned firms, and to controlling for the effects of financial crisis.

Does political connection distort competition and encourage corporate risk taking? International evidence

Abstract We investigate the impact of political connection on corporate risk-taking by connected firms, their industry counterparts, as well as non-rival firms from 48 countries. We find that political connection induces higher risk taking by connected firms. By contrast, we do not find evidence that political connection, with the attendant potential competitive distortions in the industry, induces higher risk taking by competitors. We focus on non-financial industries. Our results are consistent with the hypothesis that the inability to avail themselves of political rents compels the non-connected rivals to adopt more conservative strategies. However, large rival firms, generally considered to be too-important-to-fail, exhibit evidence of higher risk taking. The top size quartile industry rivals take as much risk as the politically connected firms. The higher risk exhibited by large rivals of politically connected firms suggests that our baseline regression results of lower risk-taking among rivals of politically connected firms are biased upward by firms that would be considered too-big-to-fail. This finding also suggests that the too-big-to fail phenomenon is not unique to banks. Our results are robust to the use of alternative measures of risk, to the exclusion of privatized and state-owned firms, and to controlling for the effects of financial crisis.

The relative importance of body size and UV coloration in influencing male-male competition in a lacertid lizard

Communication via color signals is common in natural systems. Ultraviolet (UV)-blue patches located on the outer-ventral scales of some lacertid lizards are thought to be involved in male-male competition. However, the mechanisms that maintain their honesty remain unknown. Here, we use the common wall lizard Podarcis muralis to test whether the lateral UV-blue spots are conventional signals, the honesty of which is guaranteed by receiver-dependent costs, and discuss their potential role as an amplifier of body size. We first described the morphology and reflectance properties of lateral UV-blue spots in common wall lizards and investigated how they influence male-male competition. Spot size and number, UV chroma, and conspicuousness (calculated using vision models) were significantly greater in adult males relative to adult females and adult males relative to juveniles. Total spot area (and not spot number) of adult males was positively correlated with body size. We conducted staged competition encounters between focal males and smaller or larger rivals with control or manipulated spots. Spots were enlarged in small rivals and reduced in large rivals to disrupt the phenotypic correlation between spot area and body size. Aggressiveness and dominance were positively influenced by body size in control encounters. Spot manipulations resulted in greater submission and less aggressiveness in focal males. These results contradict the predictions associated with conventional signals and amplifiers, but suggest that spots contributed to opponent evaluation during short-distance encounters between competing males. Many animals use color to communicate. During intraspecific resource competition, some species use color signals as an assessment tool to determine if they should engage in or avoid conflicts. Studies have found that in non-mammalian vertebrates, UV coloration can be a good indicator of fighting ability or aggressiveness. We tested whether and how the UV-blue spots of common wall lizards play a role in male-male competition by studying the properties of their spots, and then used that information to design and conduct competition experiments between males involving spot manipulation. Both body size and spot manipulation influenced aggression and submission during encounters. In particular, results suggest that spot manipulation disrupted mutual assessment and thus that spots play a role in competition signaling in male common wall lizards.

The Effects of Non-Big 4 Mergers on Audit Efficiency and Audit Market Competition

This study examines whether a recent wave of mergers between small and midsize accounting firms influences audit market competition by increasing the number of firms that can efficiently or effectively compete with larger rivals. Using proprietary data provided by the PCAOB, I find evidence that in-market mergers (involving auditors that operate in the same geographic market) generate efficiencies that are reflected in a post-merger reduction in audit hours but not audit quality. For both in-market and out-of-market mergers, clients switching to post-merger firms are more likely to be accelerated filers and are significantly larger in terms of several proxies for size and complexity. Lastly, I examine realization rates and find that an increase in market-level merger activity is associated with lower profitability of Big 4 firms operating in the same market. These findings suggest that recent mergers have actually increased competition in segments of the audit market dominated by the Big 4 despite already high concentration and concerns about a lack of sufficient competition.

Alteration of size perception: serotonin has opposite effects on the aggressiveness of crayfish confronting either a smaller or a larger rival.

We injected serotonin (5-HT) into adult male crayfish before pairing them with size-matched non-injected competitors, and observed dyadic agonistic interactions. Paradoxically, 5-HT elicited opposite behavioral responses if the injected animal was opposed by a smaller or larger rival: the level of aggressiveness of the injected crayfish was higher when facing a larger rival but lower when facing a smaller rival. Our results indicate that the effects of 5-HT on aggressiveness are dependent on the perception of the relative size difference of the opponent. In both cases, however, 5-HT significantly delayed the decision to retreat. We conclude that 5-HT does not primarily act on aggressiveness but rather on the brain centers that integrate risk assessment and/or decision making, which then modulate the aggressive response. Our findings support a reinterpretation of the role of 5-HT in crustacean agonistic behavior that may be of interest for studies of other animals.

Solo Cup in 2007: Dollars in the Details

The case discusses the operational, strategic, and financial turnaround at Solo Cup, a manufacturer of disposable dining wares. Solo Cup’s troubles were compounded by the acquisition of a larger rival, Sweetheart Company, which had its own problems and presented issues of merger integration that management could not solve. David Garfield, a managing director at turnaround consulting firm Alix Partners, must first recognize Solo Cup’s core competencies in order to determine the appropriate change in strategic course, strip out the assets that no longer support the operations necessary for that strategy, and monetize them in order to rationalize its balance sheet. This case teaches that a three-pronged approach will invariably produce greater results than any one-dimensional turnaround.Students will learn turnaround techniques necessary to restructure a company operationally, strategically, and financially, and will learn how Alix Partners' relentless focus on “letting data rule” allowed the firm to revive a faltering company.

Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs

There is a growing concern that minority shareholding (MS) in rival firms may facilitate collusion. To examine this concern, we exploit the fact that leniency programs (LPs) are generally recognized as a shock that destabilizes collusive agreements and study the effect that the introduction of an LP has on horizontal MS acquisitions. Using data from 63 countries over the period 1990-2013, we find a large increase in horizontal MS acquisitions in the year in which an LP is introduced, especially in large rivals. The effect is present however only in countries with an effective antitrust enforcement and low levels of corruption and only when the acquisitions involve stakes of 10% - 20%. These results suggest that MS acquisitions may stabilize collusive agreements that were destabilized by the introduction of the LP.

Sovereign wealth funds investment effects on target firms' competitors

We investigate the impact of sovereign wealth funds acquisitions (SWFs) on the performance of target firms' competitors. We find a positive and significant impact of SWFs acquisitions on target firms' competitors. This means that market participants anticipate value creation in the targets competitors, due to likely expected restructuring activities. Further analysis shows that relatively large rivals, low leveraged rivals, rivals with highly correlated returns with those of their corresponding targets, rivals in less competitive industries show higher abnormal returns upon the acquisition announcement. Our results question the rationality of protectionism as legal barriers to sovereign wealth funds cross-border investments.

David vs. Goliath: Serotonin modulates opponent perception between smaller and larger rivals

During agonistic encounters, the perception of a larger opponent through morphological signaling typically suppresses aggression in the smaller individual, preventing contest intensity escalation. However, non-morphological factors such as central serotonin (5-HT) activity can influence individual aggression, potentially altering contest intensity despite initial size discrepancies. When male stalk-eyed flies (Teleopsis dalmanni) fight, contest escalation is directly proportional to similarity in body size, with escalation being lower in size-mismatched contests. We have shown that both high-intensity aggression and the probability of winning are increased in males with pharmacologically elevated 5-HT relative to size-matched non-treated opponents. Here, we hypothesized that, in size-mismatched contests, increasing brain 5-HT in the smaller opponent could similarly increase aggression and counteract the low contest intensity normally driven by size discrepancy. Size-mismatched male pairs (greater than 5% difference in eyestalk length) engaged in a forced fight paradigm, with the smaller fly either untreated or with pharmacologically elevated 5-HT levels. The expression of high-intensity aggressive behaviors was significantly increased in smaller treated opponents, but the probability of winning was not altered. This suggests that while elevated serotonergic activity can increase aggression and intensity despite perception of a larger opponent, this is not sufficient to overcome size biases with respect to contest outcome. However, the fact that larger opponents continued to win against smaller treated flies was not simply a function of size. Instead, untreated larger males adjusted their fighting strategy to match the increased aggression of their smaller treated opponent, suggesting contextual flexibility in behavior based on individual opponent assessment.

Competitive pressure and technological degree of the product portfolio: Implications for firm performance

This paper seeks to illuminate empirically a class of drivers of firm performance hitherto neglected in the economic literature. To accomplish this objective, we distinguished three elements: sales volume, participation in technology alliancing, and successful patent issuing. Our findings suggest that competitive pressure posed by larger rivals in an industry affects sales performance negatively, but the possession of absorptive capacity can counter this deleterious effect. Findings regarding the effects caused by a product portfolio with high technological content are mixed. Depending on the performance measure applied, the results show evidence of adverse outcomes for sales, U-shaped effects for participation in technology alliancing and inverted U-shaped results for patenting. We obtained our raw data from the 2006 and 2008 PITEC database, which is the Spanish equivalent of the EU Community Innovation Survey. Our sample embraces more than 3000 firms.