This is a picture of ESMT books and working papers


ESMT Berlin publishes in international academic journals, which are first-class in their respective fields. Research also provides cutting-edge and profound insights for the business community as well as the classroom through managerial publications and case studies. This rare integration of research and practice makes ESMT Berlin an outstanding location for generating relevant and ground-breaking knowledge.


Willingness to rely on trust in global business collaborations: Context vs. demography

Journal of World Business
Francis Bidault, José de la Torre, Stelios H. Zanakis, Peter Smith Ring
Strategy and general management
Keyword(s): Inter-organizational trust; Propensity to trust; Willingness to rely on trust; Trustworthiness; Contextual factors in trust; Demographic factors in trust; Contractual safeguards; International joint ventures (IJVs) and collaborations
JEL Code(s): M16

We examine how 712 executives from several countries, industries and backgrounds are willing to rely on trust (WTRT) when entering a collaborative venture where both partners are at risk. Presented with a specific partnership opportunity they were asked about the level of safeguards required to enter into an agreement. We test for the impact of contextual and demographic conditions and confirmed differences in WTRT between nationalities, but find that several contextual variables mediate this impact. Different nationalities treat three dimensions of trust (integrity, reliability, and benevolence) differently as they are shown to be time dependent. We conclude that context is as important as demography in determining an executive’s WTRT.

With permission of Elsevier


Naivete-based discrimination

The Quarterly Journal of Economics
Paul Heidhues, Botond Kőszegi
Economics, politics and business environment
Keyword(s): Sophistication, naivete, first-degree, price, discrimination, third-degree price discrimination, big data, privacy
JEL Code(s): D21, D49, D69, L19

We initiate the study of naivete-based discrimination, the practice of conditioning offers on external information about consumers’ naivete. Knowing that a consumer is naive increases a monopolistic or competitive firm's willingness to generate inefficiency to exploit the consumer's mistakes, so naivete-based discrimination is not Pareto-improving, can be Pareto-damaging, and often lowers total welfare when classical preference-based discrimination does not. Moreover, the effect on total welfare depends on a hitherto unemphasized market feature: the extent to which the exploitation of naive consumers distorts trade with different types of consumers. If the distortion is homogenous across naive and sophisticated consumers, then under an arguably weak and empirically testable condition, naivete-based discrimination lowers total welfare. In contrast, if the distortion arises only for trades with sophisticated consumers, then perfect naivete-based discrimination maximizes social welfare, although imperfect discrimination often lowers welfare. And if the distortion arises only for trades with naive consumers, then naivete-based discrimination has no effect on welfare. We identify applications for each of these cases. In our primary example, a credit market with present-biased borrowers, firms lend more than socially optimal to increase the amount of interest naive borrowers unexpectedly pay, creating a homogenous distortion. The condition for naivete-based discrimination to lower welfare is then weaker than prudence.

This is an open access article.


The open innovation research landscape: Established perspectives and emerging themes across different levels of analysis

Industry and Innovation
Marcel Bogers, Ann-Kristin Zobel, Allan Afuah, Esteve Almirall, Sabine Brunswicker, Linus Dahlander, Lars Frederiksen, Annabelle Gawer, Marc Gruber, Stefan Haefliger, John Hagedoorn, Dennis Hilgers, Keld Laursen, Mats Magnusson, Ann Majchrzak, Ian P. McCarthy, Kathrin M. Moeslein, Satish Nambisan, Frank T. Piller, Agnieszka Radziwon, Cristina Rossi Lamastra, Jonathan Sims, Anne L. J. Ter Wal
Knowledge, information and comms system management, Technology, R&D management
Keyword(s): open innovation, review, research, theory, contingencies, knowledge, collaboration
JEL Code(s): D83, O30

This paper provides an overview of the main perspectives and themes emerging in research on open innovation. The paper is the result of a collaborative process among several open innovation scholars — having a common basis in the recurrent Professional Development Workshop (PDW) on “Researching Open Innovation” at the Annual Meeting of the Academy of Management. In this paper, we present opportunities for future research on open innovation, organized at different levels of analysis. We discuss some of the contingencies at these different levels, and argue that future research needs to study open innovation — originally an organizational-level phenomenon — across multiple levels of analysis. While our integrative framework allows comparing, contrasting, and integrating different perspectives at different levels of analysis, further theorizing will be needed to advance open innovation research. On this basis, we propose some new research categories as well as questions for future research — particularly those that span across research domains that have so far developed in isolation.


Competition, loan rates and information dispersion in microcredit markets

Journal of Money, Credit and Banking
Guillermo Baquero, Malika Hamadi, Andréas Heinen
Finance, accounting and corporate governance
Keyword(s): Bank competition, microfinance, microcredit, microbank, loan rates, information dispersion, PAR, portfolio quality
JEL Code(s): D4, G21, L1, O1

We study the effects of competition on loan rates and portfolio-at-risk in microcredit markets using a new database from rating agencies, covering 379 microbanks located in 67 countries between 2002 and 2008. Our study reveals different competitive effects in nonprofit and for-profit microbanks. We find that for-profit microbanks charge significantly lower rates and exhibit improved portfolio-at-risk in less concentrated markets. In particular, the effect of concentration on loan rates is nearly three times the one reported in previous studies in banking. In contrast, nonprofit microbanks are relatively insensitive to changes in concentration. We control for interest rate ceilings, which very significantly reduce rates in for-profit microbanks. However, our study also uncovers a competitive interplay between for-profit and nonprofit microbanks. In particular, the PAR of nonprofit microbanks deteriorates when the proportion of profit-oriented microbanks increases. Finally, we find evidence consistent with dispersion of borrower-specific information among competing microbanks in the for-profit sector, even after controlling for the presence of credit registries.


Contracts as a barrier to entry in markets with non-pivotal buyers

American Economic Review
Özlem Bedre-Defolie, Gary Biglaiser
Economics, politics and business environment
Keyword(s): Long-term contracts, breakup fees, foreclosure
JEL Code(s): D21, D86, L13

Considering markets with non-pivotal buyers we analyze the anti-competitive effects of breakup fees used by an incumbent facing a more efficient entrant in the future. Buyers differ in their intrinsic switching costs. Breakup fees are profitably used to foreclose entry, regardless of the entrant's efficiency advantage or level of switching costs. Banning breakup fees is beneficial to consumers. The ban enhances the total welfare unless the entrant's efficiency is close to the incumbent's. Inefficient foreclosure arises not because of rent shifting from the entrant, but because the incumbent uses a long-term contract to manipulate consumers' expected surplus from not signing it.


Decomposition of solutions and the Shapley value

Games and Economic Behavior
André Casajus, Frank Huettner
Management sciences, decision sciences and quantitative methods
Keyword(s): Decomposition, Shapley value, Potential, Consistency, Higher-order contributions, Balanced contributions
JEL Code(s): C71, D60

We suggest foundations for the Shapley value and for the naïve solution, which assigns to any player the difference between the worth of the grand coalition and its worth after this player left the game. To this end, we introduce the decomposition of solutions for cooperative games with transferable utility. A decomposer of a solution is another solution that splits the former into a direct part and an indirect part. While the direct part (the decomposer) measures a player's contribution in a game as such, the indirect part indicates how she affects the other players' direct contributions by leaving the game. The Shapley value turns out to be unique decomposable decomposer of the naïve solution.


Do credit shocks affect labor demand? Evidence for employment and wages during the financial crisis

Journal of Financial Intermediation
Jörg Rocholl, Alexander Popov
Economics, politics and business environment, Finance, accounting and corporate governance
Keyword(s): Credit shocks, financial crisis, labor demand, employment, wages
JEL Code(s): D92, G01, G21, J23, J31

We study the impact of exogenous funding shocks to German savings banks during the U.S. subprime mortgage crisis on the labor decisions of 30,000+ private and public firms in Germany. We find that firms with credit relationships with affected banks experience a significant decline in labor demand relative to firms with credit relationships with healthy banks, manifested in a simultaneous reduction in firm‐level employment and average wages. The employment effect is more pronounced in larger firms, while the wage effect is stronger in smaller firms. Both employment and wages go back to pre‐shock levels three years after the shock.

(Abstract from author's website.)


Exerting pressure or leveraging power? The extended chain of CSR enforcement in B2B supply chains

Journal of Public Policy and Marketing
Urs Müller, Johannes Habel, Marcel Stierl


Infuriating impasses: Angry expressions increase exiting behavior in negotiations

Social Psychological and Personality Science
Jeremy A. Yip, Martin Schweinsberg
Human resources management/organizational behavior
Keyword(s): Negotiations, emotion, conflict, selfishness, timing, communication, social norms, impasses, anger

Prior research has focused on the influence of emotional expressions on the value of negotiated outcomes. Across three studies, we demonstrate that people interacting with angry counterparts become more likely to walk away from a negotiation, resulting in an impasse. In Study 1, participants who encountered counterparts expressing anger were more likely to choose an impasse, relative to those with neutral counterparts. In Study 2, building on the emotion-as-social-information model, we found that inferences of selfishness mediate the effect of angry expressions on impasses. In Study 3, we found that timing moderates the relationship between angry expressions and impasses. Furthermore, we demonstrated that perceptions of inappropriateness mediate the interactive effect of timing and angry expressions on impasses. Taken together, our work reveals that expressing anger is risky in negotiations because people infer that angry counterparts are selfish and become more likely to exit negotiations.


Joint procurement and demand-side bidding strategies under price volatility

Annals of Operations Research
Xiaofeng Nie, Tamer Boyaci, Saibal Ray, Mehmet Gumus, Dan Zhang
Product and operations management
Keyword(s): Supply chain management, procurement, bidding, supply risk, price volatility, price-dependent base-stock policy

We consider a firm buying a commodity from a spot market as raw material and selling a final product by submitting bids. Bidding opportunities (i.e., demand arrivals) are random, and the likelihood of winning bids (i.e., selling the product) depends on the bid price. The price of the commodity raw material is also stochastic. The objective of the firm is to jointly decide on the procurement and bidding strategies to maximize its expected total discounted profit in the face of this demand and supply randomness. We model the commodity prices in the spot market as a Markov chain and the bidding opportunities as a Poisson process. Subsequently, we formulate the decision-making problem of the firm as an infinite-horizon stochastic dynamic program and analytically characterize its structural properties. We prove that the optimal procurement strategy follows a price-dependent base-stock policy and the optimal bidding price is decreasing with respect to the inventory level. We also formulate and analyze three intuitively appealing heuristic strategies, which either do not allow for carrying inventory or adopt simpler bidding policies (e.g., a constant bid price or myopically set bid prices). Using historical daily prices of several commodities, we then calibrate our models and conduct an extensive numerical study to compare the performances of the different strategies. Our study reveals the importance of adopting the optimal integrative procurement and bidding strategy, which is particularly rewarding when the raw material prices are more volatile and/or when there is significant competition on the demand side (the probability of winning is much smaller when submitting the same bid price). We establish that the relative performances of the three heuristic strategies depend critically on the holding cost of raw material inventory and the competitive environment, and identify conditions under which the shortfalls in profits from adopting such strategies are relatively less significant.

© Springer Science+Business Media New York 2015. With permission of Springer