Local Market Performance Research Articles

Did Real Estate Professionals Anticipate the 2007-2008 Financial Crisis? Evidence from Insider Trading in the REITs

This research examines whether real estate professionals detected the property bubble and foresaw the consequent financial crisis of 2007-2008. By analysing the insider trading activities within REITs from 1996 to 2010, we find that REIT insiders reduced their holdings significantly during the real estate boom period as early as 2004, before the financial crisis. Difference-in-difference analysis reveals that REIT insiders cashed out their positions more aggressively than insiders in real estate and construction firms. The findings support the informed trader hypothesis that managers and employees in REITs anticipated the burst of the real estate bubble and the imminent financial crisis, and shifted their wealth away from the real estate market to avoid potential losses. We find no evidence to support the biased belief hypothesis (Cheng et al., 2014) that REIT insiders were over-optimistic during the real estate boom period or that their inside trading behaviour was affected by local market performance.

Does attention from headquarters influence subsidiary behavior? A social psychological perspective

Prior research has not explored fully the effect of headquarters (HQ) attention on subsidiary behavior. We address the gap via a social psychological lens, proposing that subsidiaries with more HQ attention often deal with higher performance expectation in terms of contributing towards the MNC, and thus, they tend to have a greater participation in the activities that can demonstrate such contribution. We test the idea in the context of MNC knowledge flows, hypothesizing a positive correlation between HQ attention and a subsidiary's reverse knowledge, and further the moderation effects of a subsidiary's shared vision and local market performance. Results lend support for the model. The study introduces a novel perspective of how HQ attention may influence subsidiaries, as well as the importance of attention allocation for the multinational corporation (MNC).

HOMETOWN-SPECIFIC BARGAINING POWER IN AN EXPERIMENTAL MARKET IN CHINA

We conducted a market experiment in China to examine potential effects of subjects’ hometowns on their behaviors as well as potential differences between team and individual trades. We observed that group size affected bargaining power and subsequently payoffs in different directions according to where the subjects were from. In particular, teamwork strengthened the bargaining power of the subjects from coastal areas but weakened that of the subjects from inland areas when commodity exchanges were conducted between subjects from different areas. This finding suggests that it is important to take one’s hometown into account when comparing economic behavior or decision-making between teams and individuals, especially in the countries or regions where hometown diversity plays a central role in explaining differences in business management and local market performance.

Quality, export and domestic market performance: the case of pharmaceutical firms in Iran

This study examines the relationship between export involvement/performance and domestic market performance of pharmaceutical enterprises in Iran, an area which has remained largely unresearched. The study seeks to address the following three research objectives: first, to assess the export performance of Iranian pharmaceutical companies; second, to assess the performance of Iranian pharmaceutical companies in the domestic market; and third, to examine the relationship between export involvement/performance and domestic market performance. Although existing literature claims that local performance (rivalry) leads to export performance, this study reveals that in the Iranian pharmaceutical industry, export involvement and performance enhance local market performance. The study provides empirical evidence on the relationship between export performance and domestic market performance, and adds depth to the understanding of the reasons why the traditional views did not explain the situation. A comprehensive literature review was used to build our conceptual and analytical framework upon the Export Performance (EXPERF) model for export performance evaluation. The European Foundation for Quality Management (EFQM) Excellence Model and assessment indicators of Innovativeness, Learning and Lean indices were used for measuring domestic performance. By using clustering, six clusters of similar companies were identified and the centroids of the six clusters chosen to verify the relationship between export performance and domestic performance. Correlation analyses confirmed that there was a significant positive relation between export performance and domestic performance. This means that export performance results in better domestic performance, and vice versa.

Partner Selection and Venturing Success: The Case of Joint Ventures with Firms in the People's Republic of China

It has been hypothesized in the international joint venture (IJV) literature that partner selection affects interpartner “fit” which in turn influences a synergistic effect on IJV performance. This study investigates the relationship between IJV success and the strategic and organizational traits of local partners. We address this issue in the context of an emerging economy (P.R. China). Newly emerging economies have in recent years become major hosts of direct investment by multinational corporations (MNCs) because these rapidly expanding economies, characterized by an exploding demand previously stifled by ideologically-based government intervention, provide tremendous opportunities which MNCs can preempt. MNCs in such economies, however, face the challenges of structural reform, weak market structure, poorly specified property rights, and institutional uncertainty. Right local partners can help MNCs boost market expansion, obtain insightful information, mitigate operational risks, and provide country-specific knowledge. The analysis of the data obtained from China suggests that both strategic and organizational traits of local partners are significantly associated with some individual dimensions of IJV performance. Among strategic traits, absorptive capacity, product relatedness, and market power are favorable to IJVs' market and financial outcomes. Market power and experience significantly reduce IJVs' operational uncertainties. Of organizational traits, international experience and organizational collaboration are important for IJVs' not only profitability and stability but also local market expansion and export growth. Organizational form and size influence IJVs' local market performance. The findings provided by this study can help MNCs determine what criteria they should use in opting for local partners and what criteria are vital to their goal accomplishment. Those investors seeking local market expansion should select those local partners that have rich market experience, superior market position, high absorptive capacity, and related product diversification with the IJVs. Those seeking profitability and stability should select local firms that have superior international experience, longer organizational collaboration, and greater market power. While MNCs should use appropriate strategic and organizational criteria to select local partners, the host government or local firms can try to make these traits available to attract more stable and profitable foreign direct investment.