Working Papers

Working PapersPedada, Kiran., Shankar, Venkatesh.,Dass, Mayukh. "The Effects of International Marketing Joint Venture Dissolutions on the Shareholder Value of Emerging Market Firms"Read Abstract >Close >
Working PapersUppal, Abhinav., Bradlow, Eric T..,Yildirim, Pinar. "A Bayesian Learning Model for Product Hierarchies"
Working PapersUppal, Abhinav., Jerath, Kinshuk.,Raju, Jagmohan S. "A Theory of Selling Formats in Retailing: Direct versus Mediated Access"Read Abstract >Close >Retailers worldwide employ various selling formats characterized by different degrees to which customers can access and inspect products in the store. In the direct access format, all available products are stocked on shelves directly accessible to customers for inspection, while store associates offer minimal assistance. In the \"mediated access\" format, retail stores are manned by shopkeepers who offer one product at a time to customers and the customers decide whether to purchase an offered product or to ask for an alternative. We build a theoretical model in which a retailer makes selling format, product assortment and pricing decisions, and consumers have shopping costs. There are two products: a general purpose brand that provides the same utility uniformly to all consumers, and a specialized brand that gives ex ante uncertain utility to a consumer that can be higher or lower than the utility of the general purpose brand, and a consumer can resolve this by inspecting this brand. We find that the retailer chooses the mediated access selling format with the specialized brand offered first when customers' uncertainty about fit with the specialized brand is large (as long as the retailer's margin on the general purpose brand is not too high). If consumers' uncertainty about fit with the specialized brand is medium, the retailer chooses to internalize consumer shopping costs by employing the direct access format and carries both brands. If consumers' uncertainty about fit with the specialized brand is small, the retailer chooses the mediated access format carrying only the general purpose brand. Our model offers an explanation for the observation that the mediated access selling format is more popular in emerging markets (as compared to developed markets) where consumers' shopping costs (e.g., cost of time) are typically small, but in these markets this format is less popular for large, organized retailers (as compared to small, unorganized retailers) that may be able to obtain better trading terms, e.g., larger retail margins, from upstream sellers.

Working PapersSubramanian, Krishnamurthy., Bhowal Subhendu, Tantri Prasanna. "Costs Of Job Rotation: Evidence From Mandatory Loan Officer Rotation"Centre for Analytical FinanceRead Abstract >Close >We highlight the costs from a principal rotating agents among tasks when decision-making inside a firm is driven by soft information. These costs arise because (i) an incoming agent cannot verify the information set that the outgoing agent utilized, and (ii) neither agent receives the entire marginal benefit/penalty for her effort. We provide evidence of this cost using unique loan and officer level data from a large public sector bank in India. Using the bank's fixed-tenure-based policy of loan officer rotation for identification, we find that default probabilities are 8% higher for loans affected by job rotation when compared to other loans. This difference is not explained by differences in hard information or the loss of a lending relationship

Working PapersSubramanian, Krishnamurthy., Vaidyanathan. k.,Yadav Ajay. "Deregulation of Entry and Systemic Bank Failures"
Working PapersSubramanian, Krishnamurthy., Abhishek Bharadwaj, Tantri Prasanna. "Relationship Banking and Monetary Policy Transmission: Evidence from India"Read Abstract >Close >Though the monetary policy transmission and financial intermediation literatures have highlighted the role of the “bank credit channel” and relationship banking respectively, the effect of relationship banking on the transmission of monetary policy has not been investigated. In this paper, we study the impact of relationship banking on the transmission of monetary policy. Theoretically, relationship banking could ameliorate or exacerbate the effects of monetary policy shocks. Using unique and comprehensive data on bank-borrower relationships in India, we find that firms that enjoy an exclusive banking relationship are less susceptible to monetary policy shocks than firms that bank with multiple banks.

Working PapersSubramanian, Krishnamurthy. "The Color of Money: A Startup's Choice among Venture Capitalists "Read Abstract >Close >Venture Capitalists (VCs) differ from one another in the non-financial resources they offer startups. This paper develops a model to study an entrepreneur's choice among disparate VCs. While greater non-financial resources foster specialization to the startup’s idea, they tempt the VC to hold up the entrepreneur. Such hold-up, however, adds value to the startup by engendering greater effort from the VC. VCs offering greater non-financial resources endogenously match with entrepreneurs possessing higher quality ideas. Therefore, unlike mutual funds that do not offer non-financial resources, performance persistence in VCs stems the non-financial resources and the VC’s ability to hold up the entrepreneur.

Working PapersSubramanian, Krishnamurthy. "Clicks Versus Bricks: A Theory of Differences between Intangible-asset-intensive and Tangible-asset-intensive Firms"Read Abstract >Close >
Working PapersManchiraju, Hariom., Prabhat, Saumya., Subramanian, Krishnamurthy., Sahoo, Satish. "Once Bitten, Twice Shy? Do Firms Learn Following Bad Acquisitions "
Working PapersSubramanian, Krishnamurthy. "The Optimal Locus of Innovation"Read Abstract >Close >I develop a unified theory to study five different organizational modes for developing an idea: corporate research alliance, venture capital financing, angel financing, intrapreneurship, and spinoff. I model these choices as a combination of access as defined by Rajan and Zingales (1998) and ownership of the idea as defined by the property rights theory. The optimal choice encourages the entrepreneur and the collaborator---venture capitalist, corporation or angel investor---to invest in developing the idea while discouraging them from investing to extract rents. This effect manifests because ownership has an asymmetric effect on the collaborator's and entrepreneur's incentives while access has a symmetric effect. The theory explains some empirical regularities and generates several new predictions.

Working PapersMangipudi, Chandrasekhar., Subramanian, Krishnamurthy., Vasu, Rajkamal. "Valuation of Private, Innovative Targets: Evidence from Cisco’s Acquisitions"Centre for Leadership, Innovation, and ChangeRead Abstract >Close >We study how the value paid for private, innovative targets is affected by its knowledge-related intangible assets. We use unique data from Google Patents for the targets acquired by serial acquirer Cisco. We minimize bias in estimates of the value paid by comparing across deals undertaken within the same year by an acquirer that represents the “gold standard for M&A practices.” We find that acquirers pay for the target’s (i) intellectual property rights, (ii) expertise/technology especially that overlapping with the acquirer’s, and (iii) employees’ human capital. Ours is the first study to examine the value paid for knowledge-related intangible assets in mergers and acquisitions.

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Working PapersBang, Nupur Pavan., Ramachandran, Kavil., Vishwanthan, Anierudh. "Evidence on Family Firm Performance and Relevance of Context in an Emerging Economy"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Ownership of firms and their impact on firm performance has been a topic of interest for long. Concentrated ownership of a firm in the hands of a family presents unique opportunities and challenges that may have an impact on the performance of the firm. Multiple studies have arrived at differing conclusions with regards to performance of family firms. Using a unique proprietary database of scientifically classified listed family and non-family firms this paper studies the impact of family ownership, control and management on firm performance through the lens of external and internal context. It thus advances the debate that has so far been skewed towards studies from the developed markets, larger firms and micro analysis. Using accounting and market measures of firm performance, we conduct a time-series cross-sectional comparison of family and non-family firms. Our analyses consistently reveal that family firms performed poorly in comparison to non-family firms in India. We also find that the impact of family does not weaken over time and that family management results in poorer performance. We, therefore, conclude that family ownership, control and managementm per se are a significant impediment to firm performance in emerging markets contexts like India.

Working PapersVishwanthan, Anierudh.,Bang, Nupur Pavan., Ramachandran, Kavil. "Parenting among Business Groups: An Emerging Market’s Perspective"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Emerging markets witness a significant overlap between social communities, families and business activities. This paper attempts to decipher a source of heterogeneity, which is business group affiliation among family firms. This paper details the reasons why business group affiliation is beneficial in an emerging market by employing the concept of parenting to reconcile the potential deficiencies of business group affiliation pointed out by various strategy scholars. We use two proxies to measure the extent of parenting namely, firm leadership by a family member and promoting family’s shareholding in the group affiliate company. The study has been conducted in the Indian economic context using a dataset consisting of 3,728 listed companies. Results show that superior parenting realized by professional firm leadership and higher promoter shareholding leads to superior financial performance among family business group firms.

Working PapersPedada, Kiran., Shankar, Venkatesh.,Dass, Mayukh. "Determinants of International Marketing Joint Venture Dissolutions in Emerging Markets"Read Abstract >Close >
Working PapersRamachandran, Kavil., Bhatnagar, Navneet. "Do Family Business Leaders really Cooperate with Non-Family Executives - Process Challenges of Professionalization"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Stewart & Hitt (2012) concluded in their literature review that we need more insights into the process of professionalization of family firms. Some pertinent questions not much researched are - what processes do family firms follow to professionalize? why do only some of those approaches work?, and what are these approaches? To find the answers we studied professionalization processes at two Indian family controlled businesses. We found that professionalization process at the top management level entails cooperation and role clarity between family business leader and professional manager. We conclude that there is need to have perfect chemistry and understanding between them to manage the undefined areas of responsibility between them, a zone of managerial ambiguity or “No Man’s Land”. The paper discusses and generates propositions for the processes of professionalization.

Working PapersBang, Nupur Pavan.,Vishwanthan, Anierudh., Ramachandran, Kavil. "Evidence on Family Firm Performance and Relevance of Context in an Emerging Economy"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Ownership of firms and their impact on firm performance has been a topic of interest for long. Concentrated ownership of a firm in the hands of a family presents unique opportunities and challenges that may have an impact on the performance of the firm. Multiple studies have arrived at differing conclusions with regards to performance of family firms. Using a unique proprietary database of scientifically classified listed family and non-family firms this paper studies the impact of family ownership, control and management on firm performance through the lens of external and internal context. It thus advances the debate that has so far been skewed towards studies from the developed markets, larger firms and micro analysis. Using accounting and market measures of firm performance, we conduct a time-series cross-sectional comparison of family and non-family firms. Our analyses consistently reveal that family firms performed poorly in comparison to non-family firms in India. We also find that the impact of family does not weaken over time and that family management results in poorer performance. We, therefore, conclude that family ownership, control and management per se are a significant impediment to firm performance in emerging markets contexts like India.

Working PapersRamachandran, Kavil., Bhatnagar, Navneet. "Familial Socio-political Influences on New Venture Creation in Family Business"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >New venture (NV) creation has been extensively studied in Entrepreneurship literature (Perrow, 2002). However, recent discussion on NV has moved to ecosystems such as family businesses (Sharma et al., 2014). As a business family grows, creating new business ventures becomes crucial for family business sustainability (Zahra, Hayton & Salvato, 2004). Family plays an important role in NV creation (Rodriguez et al., 2009). Though it is critical for family business sustainability, researchers have regularly emphasized that our understanding of the actual venture creation process in family business requires further exploration (Steier, 2009). particularly, the role played by the socio-political forces within the family in NV creation process is an area that is not understood well. This paper is an attempt to address this crucial gap in literature. The key questions we researched are: (i) Besides commercial viability, what other considerations influence NV creation in family businesses? (ii) Why some economically viable NV proposals receive family’s support, while others do not?, and (iii) What influence do family members have on resource allocation to NVs? We report answers to them based on empirical research done on Indian family businesses.

Working PapersRamachandran, Kavil., Bhalla, Ajay.,Bhatnagar, Navneet. "New Venture Creation in Indian Family Firms: Dynamics of Family versus Non-Family Champions"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Research on entrepreneurship in family controlled enterprises is fairly young, though the contribution of such businesses to economies across the world has been very significant. It is now proven that creation of new ventures in family business is different from that in non-family business context in different ways. This paper builds on an earlier work done by Bhalla et al. (2010) wherein it was argued that family firms evaluate new venture proposals based on a combination of the family’s economic, expertise, reputation and affiliation criteria (i.e. the EERA logic). This paper reports preliminary findings from an ongoing study that validates the EERA logic and goes on to empirically find out through primary data the processes involved in the evaluation of new venture proposals and their approvals in family controlled firms. We find that the EERA factors are given different levels of importance by families. We also find that new venture creation process in family business context is distinct due to the influence of familial factors. We conclude that family membership, social standing and family embeddedness of the proposer significantly influence the mechanisms adopted for proposal evaluation and resource allocation to new ventures.

Working PapersBhatnagar, Navneet., Ramachandran, Kavil., Ray, Sougata. "Perfecting the Mould:How Indian Family Firms are Developing their Next Generation Leaders"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Continuity of family legacy and control over the family business depends on effective inter-generational leadership transition. Weak next generation leadership is known to be one of the main reasons for the failure of family firms (Miller, 2015). Hence, developing effective next generation leadership is most crucial to ensure long-term sustenance of family business. That involves a long and systematic process spread over time and acts. Though next generation leadership development is a significant process for the future of family business, it has not been studied well, more specifically in an emerging economy context. This paper examines case studies of next generation leadership development process of 15 Indian family firms. The pathways adopted in this process by the senior and next generation leaders are identified. Case study analysis finds two broad phases of leadership development that involve acquisition of multiple capabilities. The next generation member builds intrapersonal capabilities in the family business context during Phase I and interpersonal capabilities in Phase II. Some of the stages in between were found to be critical for successful leadership development, in absence of which, family businesses failed to achieve effective inter-generational leadership transition. Mapping all the capability development stages observed, a conceptual framework for next generation leadership development process is presented in the paper. The paper concludes with implications and future research suggestions

Working PapersBhatnagar, Navneet.,Sharma, Pramodita., Ramachandran, Kavil. "Spirituality and Corporate Philanthropy in Indian Family Firms "Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Family firms are known to help local community through philanthropy. Scholars have examined the nature, process, and outcomes of family firm philanthropy. However, the study of heterogeneity in their philanthropy motives across cultural contexts has received inadequate attention. Based on 16 cases of Indian family firms, this paper examines the influence of spirituality on family firm philanthropy. The paper presents a typology of family firm philanthropy by juxtaposing two dimensions: (i) ‘Dharma’ - i.e., the firm’s sense of duty towards society, and (ii) ‘Karma’ - i.e., the degree of family involvement in philanthropy. Four distinct philanthropic engagement profiles are identified.

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