Working Papers

Firms’ innovation strategy under the shadow of analyst coverage

by Bing Guo, David Perez-Castrillo and Anna Toldra-Simats.

We study the effect of analyst coverage on firms’ innovation strategy and outcome. By considering three different channels that allow firms to innovate: internal R&D, acquisitions of other innovative firms, and investments in corporate venture capital (CVC), we are able to distinguish between the pressure and information effect of analysts. Using the data of US firms from 1990 to 2012, we find evidence that: i) an increase in financial analysts leads firms to cut R&D expenses, and ii) more analyst coverage leads firms to acquire more innovative firms and invest in CVC. We attribute the first result to the effect of analyst pressure, and the second to the informational role of analysts. We also find that more financial analysts encourage firms to make more efficient investments related to innovation, which increase their future patents and citations. Moreover, more financial analysts and reductions in R&D spending lead to less radical innovation, whereas more investment in acquisitions and CVC leads to more radical innovation. We address endogeneity with an instrumental variables approach and a difference-in-differences strategy where exogenous variation in analyst coverage comes from brokerage house mergers.

JEL Classification: G34, G24, O31.

Keywords: Financial Analysts, Innovation, Corporate Venture Capital, Acquisitions.

Strategic CSR Communication between Fashion, Affordance, and Emergence

by Peter Winkler, Michael Etter and Itziar Castelló.

Problem: Our paper starts from the observation that – just like prescriptive instrumental and deliberative approaches to CSR – also descriptive neo-institutional and CCO-inspired approaches to CSR show a tense relation when it comes to the strategic role of communication. But while tensions are explicit and well discussed in case of prescriptive approaches, they remain vague and implicit in case of descriptive approaches.

Aim: Our paper aims at making these tensions explicit, search for bridging concepts and, on that basis, promote an explicitly descriptive perspective on the strategic role of communication in CSR research. Three bridging concepts from sociological strategy research are introduced: strategy as fashion, as practice, and as emergent. They allow for a balanced perspective on the strategic role of communication on the level of CSR adoption, implementation, and outcome.

Results: On the level of adoption, this means to consider CSR as an ambiguous management fashion, however with analytic awareness for divergent strategic aspirations underlying this ambiguity. In case of CSR implementation, this means to have a balanced focus on both formal and informal forms of strategizing as well as the material affordances and constraints that go along with respective CSR communication tools-in-use. And in case of CSR outcome, this means to extend academic reflections on the strategic role of communication in CSR by closer empirical emphasis on the question what actually achieves the status of strategic CSR communication in practice – be it in terms of managerial prescriptions, or retrospectively in terms of emergent communication strategies. We finally point at the empirical fruitfulness of our perspective by drawing on three vignettes extracted from a longitudinal case study documenting the implementation of CSR communication on Twitter by an international pharmaceutical company.

Originality: Our paper contributes to a boarder research agenda trying to approximate NI and CCO in general management studies and thus paths the way for a joint re-orientation of descriptive CSR research, with particular focus on strategic CSR communication.

The Promise of Reward Crowdfunding

by María Gutiérrez and María Isabel Sáez.

We study reward crowdfunding, the most innovative segment of the crowd- funding market, where, instead of a debt or equity contract, fund providers are promised some good or service in the future in exchange for their contribution to the funding of the investment project under a contract that does not penalize the creator’s failure to deliver. The existing economic and legal literature is puzzled by the platforms use of this seemingly ine cient contract where a standard pre- sale contract would appear to work better. Counter intuitively, we prove that the no-penalty contract is the optimal contract between creators of unknown talent and early adopters of their products when creators can bene t from being discov- ered as talented and from the goodwill generated by delivering on their promise to early adopters. Our analysis has important policy implications on how backers should be protected. Standard measures of consumer or investor protection may be counterproductive.

JEL classification: G23, G24, K22.

Keywords: Reward crowdfunding, best efforts, presale contract, talent discovery.

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