Guy L.F. Holburn

• Holburn, G. L. F.; Maxwell, J.; Bonardi, J. P., (Forthcoming), "Safe Bets, Long Shots and Toss-Ups: Strategic Engagements between Activists and Firms.", Management Science
  Abstract: We use a game-theoretic model to examine how different types of activist motivation affect strategic interactions between an activist and a firm in the context of a threatened adversarial engagement, in which the activist can benefit from “warm glow” and media publicity as well as from firm compliance with activist demands. The model yields novel predictions about when firms prefer to self-regulate to pre-empt a contested engagement, how vigorously firms defend themselves against the activist’s attack if an engagement occurs, and a new taxonomy of engagements, characterized by offensive and defensive strategies and the likelihood of activist success. The model predicts that when warm glow and campaign-driven wins are important motivations for activists, safe bet and long shot types of engagements are more likely to occur: These tend to be lower expenditure skirmishes where one party has a clear advantage and where a pre-emptive settlement is infeasible. By contrast, firms and activists are more likely to negotiate self-regulation that pre-empts resource-intensive toss-up engagements where each side is evenly matched and expends significant effort. Our findings contribute to strategic management research by developing new insights about how firms respond to different activist motivations and types of engagements. We explore extensions of the model and discuss implications for future empirical and theoretical research on the management of activist relations.

  Link(s) to publication:

  http://dx.doi.org/10.1287/mnsc.2022.01638

• Fremeth, A.; Holburn, G. L. F.; Piazza, A., 2022, "Activist Protest Spillovers into the Regulatory Domain: Theory and Evidence from the U.S. Nuclear Power Generation Industry", Organization Science, May 33(3): 1163 - 1187.
  Abstract: We examine how social activism—in the form of public protests against contentious business practices—can spill over into the regulatory domain, extending beyond activists’ articulated goals to affect firms’ regulatory outcomes in areas that are not directly targeted. We argue that firms are likely to experience broader regulatory repercussions after activist protests because public contention invites greater scrutiny of firm behavior by industry regulators, increasing the likelihood that instances of organizational non-compliance will be discovered. Protests can also cause regulators to evaluate targeted firms more negatively in regulatory assessments, especially firms with less favorable pre-existing reputations or stakeholder relations, and to tighten regulations on non-targeted issues that signal their commitment to safeguarding the public interest. We further contend that the political context within which regulatory agencies operate shapes the extent of protest spillovers: when political institutions are aligned with activist goals, and when regulators are ideologically sympathetic too, protests have a more pronounced negative impact on firms’ regulatory outcomes in non-targeted domains. We find robust support for our predictions in a statistical analysis of the impact of anti-nuclear protests – which sought to block nuclear power plant development by electric utilities – on utilities’ subsequent regulated financial rates of return on their assets. Our analysis contributes new insights to research on the indirect consequences for targeted organizations of social activism.

  Link(s) to publication:

  https://pubsonline.informs.org/doi/full/10.1287/orsc.2021.1473

  http://dx.doi.org/10.1287/orsc.2021.1473

• Fremeth, A.; Holburn, G. L. F., 2020, "The Impact of Political Directors on Corporate Strategy for Government-Owned Utilities: Evidence from Ontario's Electricity Distribution Sector", Energy Policy, August 143
  Abstract: We contribute to research on governance of state-owned electric utilities by examining the implications of oversight by independent versus ‘political’ directors for corporate strategy. While policy think-tanks often recommend that governments appoint independent professional directors to boards of state-owned corporations, governments sometimes select politicians who bring a politically-oriented perspective to their oversight duties. To examine the potential strategic consequences, we draw on a novel survey of 384 directors of municipally-owned local electricity distribution companies in Canada, of which about a third were elected municipal councillors and the remaining were independent business professionals. The survey solicited individual director views about strategic priorities, including mergers and acquisitions, business diversification, and corporate financing options. Our statistical analysis of the survey response data finds that political directors, after controlling for prior executive experience and organizational context, were more risk-tolerant on average than independent directors, as evidenced by a greater willingness to diversify into unregulated business activities and to acquire equity stakes in other utilities; but at the same time, they prioritized enhanced dividend payments to the municipal government over re-investment in the corporation, a potential constraint on future business growth.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.enpol.2020.111529

• Jiang, F. J.; Holburn, G. L. F.; Beamish, P. W., 2020, "Repeat Market Entries in the Internationalization Process: The Impact of Investment Motives and Corporate Capabilities", Global Strategy Journal, May 10(2): 335 - 360.
  Abstract: Multinational firms often make multiple investments over time in a concentrated set of countries, accumulating superior knowledge and capabilities in these environments. Researchers have nonetheless uncovered factors that can lead firms to deviate from strategic trajectories defined by their prior investments. In a statistical analysis of country entry decisions by Japanese manufacturing firms over a 35-year period, we found that firms’ tendencies to re-invest in the same host countries were smaller for horizontal (i.e. market-seeking) investments but greater for vertical (i.e. efficiency-seeking) investments. We also found that organizational capabilities influence the geographic trajectory of international expansion: firms with stronger marketing and production capabilities were less likely to be influenced by the locations of prior entries and were more likely to invest in new countries.

  Link(s) to publication:

  http://dx.doi.org/10.1002/gsj.1206

• Guerello, A.; Page, S.; Holburn, G. L. F.; Balzarova, M., 2020, "Energy for off-grid homes: Reducing costs through joint hybrid system and energy efficiency optimization", Energy and Buildings, January 207
  Abstract: This paper develops a new process for identifying the lowest cost package of energy efficiency measures (EEM) and hybrid energy system configuration for off-grid homes. Hybrid energy systems, which combine two or more types of energy technologies, often require significant capital expenditure, however, the cost can be reduced by applying EEM to the house to decrease energy demand. The method proposed here, termed Combined Optimization Process (COP), was tested on an off-grid hypothetical case and incorporates an iterative assessment of a building energy and efficiency optimization tool (BEopt) and a hybrid system optimization tool (HOMER). The COP results were compared with the base case where no efficiency measures were applied, and also with a standard process, which involved a selection of best-practice efficiency measures. The COP method yielded net present cost savings of 10% less than the base case, and 5% less than the standard process. The COP method developed in this paper is applicable for existing houses converting to off-grid status as well as for the design stage of off-grid houses.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.enbuild.2019.109478

• Jiang, G. F.; Holburn, G. L. F., 2018, "Organizational performance feedback effects and international expansion", Journal of Business Research, September 90: 48 - 58.
  Abstract: Drawing on performance feedback theory to develop the Uppsala internationalization model, we argue that organizational performance relative to managerial aspirations influences firms’ foreign expansion propensity as well as the type of country location. Our statistical analysis of foreign entries by Japanese machinery firms between 1976 and 2002 finds that firms performing closer to aspirations were more likely to enter foreign countries than those that under- or out-performed. Underperforming firms were also more likely to enter countries with greater cultural and geographic proximity to those in which they had already invested. Our findings contribute to international business research by identifying organizational performance conditions under which firms tend to adopt an incremental approach to foreign expansion, or else a comparatively radical one of selecting more distant or unfamiliar countries.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.jbusres.2018.04.034

• Holburn, G. L. F.; Raiha, D., 2017, "Startups Are Turning Customers into Lobbyists", Harvard Business Review
  Abstract: How can new firms overcome the regulations that protect incumbents? Lobbying for policy reform isn’t much of an answer, because incumbents generally have the benefit of long-term relationships with government agencies built up over many years. Recent research finds that some insurgent firms have prevailed on the regulatory front by using a strategy straight out of the playbook of environmental activists – mobilizing stakeholders to become political advocates. Organized demonstrations of support by stakeholder groups can send a powerful signal to policymakers. Firms mobilize their customers – one important stakeholder group – in three primary ways: online petitions, partnerships with other organizations, and customer associations.

  Link(s) to publication:

  https://hbr.org/2017/10/startups-are-turning-customers-into-lobbyists

• Fremeth, A.; Holburn, G. L. F.; Vanden Bergh, R., 2016, "Corporate Political Strategy in Contested Regulatory Environments", Strategy Science, December 1(4): 272 - 284.
  Abstract: We examine how firms strategically manage opposition from organized stakeholders who participate in regulatory agency policy-making processes. As stakeholder opposition in regulatory agency hearings increases, we argue that firms invest more in developing counter-balancing support from elected politicians who oversee regulators, and more so when regulators are less experienced or are closer to re-appointment dates. We find robust statistical support for our predictions in a statistical analysis of financial campaign contributions to state politicians by firms in the U.S. electric utility industry during the period 1999 to 2010. Our findings contribute to nonmarket strategy research by providing evidence that firms respond to contested regulatory environments by cultivating support from elected political institutions, contingent on the degree of regulator sensitivity to political and stakeholder pressures.

  Link(s) to publication:

  http://dx.doi.org/10.1287/stsc.2016.0021

• Jiang, F.; Holburn, G. L. F.; Beamish, P. W., 2016, "The Spatial Structure of Foreign Subsidiaries and MNE Expansion Strategy", Journal of World Business, April 51(3): 438 - 450.
  Abstract: Drawing on internalization theory and economic geography research, we examine how the spatial structure of MNE subsidiaries in supranational regions affects subsidiary location choices. Our analysis of foreign production investments by Japanese manufacturing firms from 1971-2006 supports our theoretical predictions: firms were more likely to establish new production subsidiaries in countries geographically more proximate to existing production subsidiaries, but not to trading subsidiaries, in the same region. The proximity effect diminished for production subsidiaries engaged in accessing natural resources or R&D. Performance of production subsidiaries was also stronger for those closer to other production subsidiaries in the same region.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.jwb.2015.12.001

• Fremeth, A.; Holburn, G. L. F.; Richter, B. K., 2016, "Bridging Qualitative and Quantitative Methods in Organizational Research: Applications of Synthetic Control Methodology in the U.S. Automobile Industry", Organization Science, March 27(2): 462 - 482.
  Abstract: We assess the utility of synthetic control, a recently developed empirical methodology, for applications in organizational research. Synthetic control acts as a bridge between qualitative and quantitative research methods by enabling researchers to estimate treatment effects in contexts with small samples or few occurrences of a phenomenon or treatment event. The method constructs a counterfactual of a focal firm, or other observational unit, based on an objectively-weighted combination of a small number of comparable but untreated firms. By comparing the firm’s actual performance to its counterfactual replica without treatment, synthetic control estimates, under certain assumptions, the magnitude and direction of treatment effects. We illustrate and critique the method in the context of the U.S. auto industry by estimating (a) the effect of government intervention in Chrysler’s management from 2009-2011 on its sales volumes, and (b) the impact of Toyota’s 2010 acceleration crisis’ on Camry sales.

  Link(s) to publication:

  http://dx.doi.org/10.1287/orsc.2015.1034

• Jiang, G. L. F.; Holburn, G. L. F.; Beamish, P. W., 2014, "The Impact of Vicarious Experience on Foreign Location Strategy", Journal of International Management, September 20(3): 345 - 358.
  Abstract: MNEs can learn from the foreign investment experiences of other firms when evaluating their own foreign entry strategies. We argue that other firms’ experiences reduce investment barriers arising from formal and informal institutional environments in host countries that are dissimilar from an MNE’s home country, thereby encouraging new entry. Our empirical analysis of foreign entries by Japanese public manufacturing firms over more than a thirty-year period indicates that the prior experiences of other firms in a host country mitigate the negative effect of formal and informal institutional distance on entry decisions: as other firms’ experiences in a host country increase, a firm is less deterred by greater institutional distance from entering the country. We also find that the distance-mitigating effect of other firms’ experiences in different industries is less significant when a larger body of same-industry firm experience exists in a country, implying a substitution effect between different types of vicarious experience.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.intman.2013.10.005

• Holburn, G. L. F.; Vanden Bergh, R., 2014, "Integrated Market and Nonmarket Strategies: Political Campaign Contributions around Merger and Acquisitions Events in the Energy Sector", Strategic Management Journal, March 35(3): 450 - 460.
  Abstract: We examine how firms use political strategies to protect economic rents created by mergers and acquisitions against dissipation by regulators. In regulated industries, regulators can impose costly merger conditions, for instance consumer rate reductions in the utilities sector, thereby reducing shareholder gains. We investigate empirically whether and how firms use election campaign contributions to politicians as a method of influencing regulatory merger approvals. In a statistical analysis of campaign contributions by all electric utilities from 1998-2006, we find that utilities increased their contributions in the year before they announced a merger, and that merging utilities increased their contributions more in states with greater political party competition. Our findings contribute to political strategy research by providing novel evidence that firms integrate market and nonmarket strategies.

  Link(s) to publication:

  http://dx.doi.org/10.1002/smj.2096

• Fremeth, A.; Holburn, G. L. F.; Spiller, P. T., 2014, "The impact of consumer advocates on regulatory policy in the electric utility sector", Public Choice, January 161: 157 - 181.
  Abstract: We examine the effect of consumer advocate participation in administrative procedures on regulatory policy. We use a unique panel database of rate reviews conducted for US electric utilities from 1980 to 2007 to assess how state consumer advocates affect Public Utility Commission decisions on utilities' allowed financial returns and rate structures. We find first that utilities experience fewer rate reviews in states with consumer advocates, consistent with utilities strategically postponing requests for rate increases. Second, after controlling for observed and unobserved state characteristics, we find that PUCs in states with consumer advocates permit returns on equity that are on average 0.45 percentage points lower than states without advocates-equivalent to a $7.9 million (3.7 %) reduction in average utility operating income, all else equal. Third, consumer advocates are associated with lower residential rates relative to other customer classes. Our findings provide statistical support for the thesis that institutionalizing interest group representation in administrative procedures is one way for legislatures indirectly to influence agency-determined policies. © 2013 Springer Science+Business Media New York.

  Link(s) to publication:

  http://dx.doi.org/10.1007/s11127-013-0145-z

• Holburn, G. L. F., 2012, "Assessing and Managing Regulatory Risk in Renewable Energy: Contrasts between Canada and the United States Energy Policy", Energy Policy, May 45: 654 - 665.
  Abstract: A challenge for energy firms when considering new investments is to balance expected financial gains against potential risks. However, while investment opportunities in different jurisdictions are often straightforward to identify, the policy or regulatory risks for investors are more difficult to accurately ascertain. Here I provide a novel conceptual framework for how firms can assess regulatory risk that focuses on the institutional processes governing policy-making. Risks are lower - and policies will subsequently be more stable - in jurisdictions where regulatory agencies have greater autonomy from politicians and where policies are formulated through more rigid’ policy-making processes. The contrasting development patterns of renewable energy policies in Ontario and Texas offer support for the framework. I further develop strategies for how firms can successfully manage regulatory risks in different types of environment.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.enpol.2012.03.017

• Fremeth, A.; Holburn, G. L. F., 2012, "Information Asymmetries and Regulatory Decision Costs: An Analysis of U.S. Electric Utility Rate Changes 1980-2000", Journal of Law, Economics & Organization, February 28(1): 127 - 162.
  Abstract: We argue that information asymmetries between regulators and firms increase the administrative decision costs of initiating new policies due to the costs of satisfying evidentiary or 'burden of proof' requirements. We further contend that regulators with better information about regulated firms - i.e. with lower information asymmetries - have lower decision costs, thereby facilitating regulator policy-making. To empirically test our predictions, we examine the relationship between regulatory informational environments and changes to regulated rates for all investor-owned electric utilities from 1980 to 2000. We exploit several natural sources of variation in the informational environments of U.S. state utility regulators. These stem from the prior experiences and administrative resources of regulators observable policy decisions of other regulatory agencies for a given utility and differences in procedural regulations pertaining to rate increases and decreases. Our results suggest that as regulators acquire more information about utility operations, including from experience in office, they are more likely to enact rate decreases and less likely to implement rate increases.

  Link(s) to publication:

  http://ssrn.com/abstract=1504203

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