Congratulations to Professor Zhiqi Chen for his continued success with high-quality peer-reviewed publications! Two of his papers have been accepted for publication.
First paper
“Buffer Joint Ventures,” (joint with Thomas Ross) in International Journal of Industrial Organization.
Abstract
While strategic alliances and joint ventures have become important organizational forms promising a variety of efficiency benefits for the economy, a body of research has been building showing that alliances between competitors can have significant anticompetitive consequences. This paper explores a particular kind of arrangement, here called a “buffer joint venture”, in which parent firms create an entity selling products located between their own locations in product or geographic space. Depending upon the governance structure of the joint venture and the timing of price-setting by the joint venture and its parents, the buffer joint venture may reduce competition between the parents leading to higher prices and profits and lower social welfare. By altering the per-period profits from collusion and deviation payoffs, a buffer joint venture can also affect the stability of collusion between parents in a repeated game context.
Second paper
“Specific Investment, Supplier Vulnerability and Profit Risks,” (joint with Xiaoqiao Wang) in Journal of Business Finance and Accounting.
Abstract
We investigate, theoretically and empirically, the impact of relationship-specific investment on suppliers’ profitability and profit risks. In addition to the familiar holdup problem, we explore another facet of specific investment that has received little attention in the literature, namely suppliers’ vulnerability to customer risks. In a theoretical model, we demonstrate that the supplier vulnerability problem implies a negative relationship between the degree of specificity and the expected profit of a supplier, and a positive relationship between the degree of specificity and volatility of the supplier’s profit. Using panel data on over 5000 U.S. firms from 1990 to 2010, our empirical analysis shows the prevalence of the supplier vulnerability problem.