We analyze the absorptive capacity (AC) process of a manufacturing company with central R&D and an internationally distributed manufacturing network. Prior research shows that an implementation of the lead factory (LF) is especially supportive if the international manufacturing network struggles with implementing new products and processes. We analyze determinants of AC and show that, in addition to prior related knowledge of the receiving plant, structure can have an even stronger influence. We show that in the case of a low level of prior related knowledge and a low level of AC within the receiving plants as well as high technological heterogeneity between plants and LF, the implementation of an LF may not lead to the expected result. In addition, we conclude that the analysis of the AC process has to move from a single unit to a network. This helps to understand the AC concept in the context of multinational companies.
Several countries have implemented bonus taxes for corporate executives in response to the current financial crisis. Using a principal-agent model, this paper investigates the incentive effects of bonus taxes by analyzing the agent's and principal's behavior. Specifically, we show how bonus taxes affect the agent's incentives to exert effort and the principal's decision regarding the composition of the compensation package (fixed salary and bonus rate). We find that, surprisingly, a bonus tax can increase the bonus rate and decrease the fixed salary if the agent is highly risk averse. Additionally, a bonus tax can induce the principal to pay higher bonuses even though the agent's effort unambiguously decreases. Nevertheless, a bonus tax reduces the overall salary of the agent. Further results are derived with respect to the existence and uniqueness of the equilibrium for a general effort cost function.
Based on a model of asymmetric competition between a pay and a free media platform, this paper investigates advertising pricing models. The pay media platform generates revenues from media consumers through subscription fees, while the free media platform generates revenues from charging advertisers either on a lump-sum basis (regime A) or on a per-consumer basis (regime B). We show that the free platform produces a higher advertising level and attracts more consumers in regime A than B although advertisers must pay more for ads and consumers dislike ads. Moreover, the pay media platform faces higher subscription fees and lower consumer demand in regime A than B. Compared to regime B, the profit of the free (pay) media platform is higher (lower) in regime A, while aggregate profits are higher only if the consumers’ disutility from ads is sufficiently low. In addition, advertisers are better off in regime A than B, while the opposite is true for the media consumers. Finally, in small media markets, social welfare is lower in regime A than B, while this is true in large media markets only if the media consumers’ disutility from advertising is sufficiently high.
