Buyouts tend to come in waves. The first arrived in the 1980s, when a series of high-profile leveraged buyouts shook the corporate world. Buyouts surged again in the mid-1990s, the late 1990s, the early 2000s, and around 2006.
In peak years, there were nearly a hundred buyouts — in off years, as few as 10. The 2008 financial crisis is a striking reminder of this boom-bust feature of buyout markets. At the bottom of the market in 2008 we counted as little as 10 deals; the value of these deals was also low at 48 basis points fraction of total stock market capitalization.
We negotiate nearly every day. While the term “negotiation” often brings to mind larger-stake deals, such as the purchase of a new home or car, more often these negotiations are smaller and involve project deadlines at work or divvying up of household responsibilities.
Many of us, myself included, can’t stand negotiations whether big or small — so much so that it comes as a surprise that others actually relish each chance they get to negotiate.
Regardless of which camp you’re in, most of us can relate to the feeling of pounding hearts and sweaty palms when we negotiate. Do these visceral responses — also known as physiological arousal — hurt or help us?
Conventional wisdom says that repetition leads to efficiency. The firm that produces 1,000 widgets should be more efficient at making widgets than the firm that only makes 100. We’ve seen this paradigm applied to many aspects of business over the last 30 years, including the internationalization of multinational corporations. Some maintain that the more countries a firm enters, the more efficient it is and the better its chances of success.
However, in a recent study I found that the conventional wisdom doesn’t hold up when it comes to understanding the impact of country selection on internationalization patterns and firm performance. I looked at whether it’s beneficial for firms to have prior experience before deciding to enter a new country and, if so, which experiences will help versus hinder success. My main question was: When does prior experience pay and are there penalties for having the wrong type of experience? Read More »
Marshall Van Alstyne, associate professor at Boston University and a visiting professor at MIT, recently relayed the following story about SAP, a software corporation that produces enterprise software, and its developer ecosystem, where developers can ask and answer each others’ questions:
“Previously, a value-added reseller on top of SAP’s software had no particular reason to help out another value-added reseller. As a matter of fact, one might not want to answer the question of another reseller because it might actually help them out and make them more competitive. But after the introduction of this question-and-answer marketplace, things shifted completely. Now you earn points in proportion to the value of your answers. Now the value-added resellers are telling their employees to go in and answer the questions of other resellers to prove, ‘Hey, we’re the ones with the expertise, not those guys.’ It’s completely shifted the incentives. Folks are now pushing their information into the marketplace in a way that benefits SAP. It’s a really clever mechanism that completely inverts the incentives from one of hoarding to one of information sharing.” Read More »
According to my latest research,* companies invest more in plants located closer to headquarters and those plants tend to be more productive. Combining plant-level data with airline data in the U.S. from 1977-2005, I analyzed how the launch of new airline routes affected plant investment and productivity. I found that a new direct route from headquarters city to the city where the plant is located led to an increase in plant investment of 8% to 9%. Also, plants’ total factor productivity rose by 1.3% to 1.4%. In both cases, the effect was only seen when the new route reduced travel time by at least two hours round trip; the larger the reduction in travel time, the stronger the effect. Read More »