People

The prior literature on role congruity theory has revolved around demographic-based expectations, emphasizing role incongruity derived from a mismatch between prescriptive expectations of distinct roles. In this study, we depart from this traditional focus on between-role incongruity and explore an alternative source of role incongruity by examining how language can trigger the within-role incongruity of function-based expectations. Through an analysis of conference call transcripts and contracts for 7,649 deals during 2003–2018, we show that the incongruity of function-based expectations manifested through the language of the CFO leads banks to employ more debt contract covenants. This takes place because such incongruity increases banks’ perceived hazards. In addition, by investigating the moderating effects of corresponding CEO language and media sentiment, we show how the social context and sentiment toward the firm weaken this incongruity effect. We discuss the theoretical implications of our study for future research on the sources of role incongruity and the antecedents of contract design.

To stay competitive, high-technology manufacturers not only frequently source new technologies from their suppliers, but also financially support the development of these new technologies into component products or production tools. We consider a manufacturer that can either source a new but immature technology from a financially constrained supplier, or source a mature technology from an existing supplier if and only if the development of the new technology fails. To support the new technology, the manufacturer can choose to inject capital in the form of an equity or loan. The investment strategy not only affects the new supplier’s development effort and the probability of technical success (PTS), but also affects the existing supplier’s effort to improve the mature technology, which presents the manufacturer with a trade-off. Following the debt financing literature, we find that a loan contract is associated with a cost-shifting effect and often leads to a higher PTS. However, because the manufacturer not only maintains an investment but also a procurement relationship with the new supplier, we find a profit-sharing effect associated with an equity investment, which does not exist in the traditional equity issuance literature. In particular, we show that the profit-sharing effect can dominate the cost-shifting effect and lead to a higher PTS when the new supplier’s technological capability is sufficiently high. Nonetheless, we also show that the strategy that derives a higher PTS does not necessarily generate a higher payoff for the manufacturer. On the one hand, a loan can be preferred even when it leads to a lower PTS because the cost-shifting effect allows the manufacturer to offer a sufficiently low procurement payment while maintaining a sufficiently high PTS. On the other hand, when the existing supplier is very capable of reducing its costs, a loan can over-incentivize the new supplier to exert excessive effort and backfire.

Problem definition: We study how the government should design the subsidy policy to promote electric vehicle (EV) adoptions effectively and efficiently when there might be a spatial mismatch between the supply and demand of charging piles. Academic/practical relevance: EV charging infrastructures are often built by third-party service providers (SPs). However, profit-maximizing SPs might prefer to locate the charging piles in the suburbs versus downtown because of lower costs although most EV drivers prefer to charge their EVs downtown given their commuting patterns and the convenience of charging in downtown areas. This conflict of spatial preferences between SPs and EV drivers results in high overall costs for EV charging and weak EV adoptions. Methodology: We use a stylized game-theoretic model and compare three types of subsidy policies: (i) subsidizing EV purchases, (ii) subsidizing SPs based on pile usage, and (iii) subsidizing SPs based on pile numbers. Results: Subsidizing EV purchases is effective in promoting EV adoptions but not in alleviating the spatial mismatch. In contrast, subsidizing SPs can be more effective in addressing the spatial mismatch and promoting EV adoptions, but uniformly subsidizing pile installation can exacerbate the spatial mismatch and backfire. In different situations, each policy can emerge as the best, and the rule to determine which side (SPs versus EV buyers) to subsidize largely depends on cost factors in the charging market rather than the EV price or the environmental benefits. Managerial implications: A “jigsaw-piece rule” is recommended to guide policy design: subsidizing SPs is preferred if charging is too costly or time consuming, and subsidizing EV purchases is preferred if charging is sufficiently fast and easy. Given charging costs that are neither too low nor too high, subsidizing SPs is preferred only if pile building downtown is moderately more expensive than pile building in the suburbs.

Long held assumptions about the mutually incremental relationship between quantities and discounts have been upended by new research. The rule of thumb that the bigger the purchase quantity, the higher the discount is shown not to hold true for medium-sized customers buying products such as semi-conductors, with implications for other products and industries.