<p>Information technology (IT) has developed and spread and the internet is now available in nearly every corner of the world all the time. It is adequate to say that we are entering an information economy. E-business is an important business tool, which is reflected by the emerging presence of the internet. Furthermore, the Internetworld says that in accordance with a development plan from the European Union it should be possible to carry out all government business electronically in 2010. But, already in January 2008, the state authorities shall be able to send and receive e-invoices. The project "E-service for safe mining projects" is one of the projects within the government owned Vinnova programme Innovative development of cross-boundary public e-services. This thesis is written on assignment for that project, taking on the role of a consultant.</p><p>Companies can through the internet easily find business over boarders, geographical or other, and there is money to be earned in new markets. To do this companies have a need to know their potential customers, their needs and wants. The purposes of this thesis are to explore the perceived needs for the "E-service of safe mining projects" and the benefits it could bring to its potential customers. By considering the customers potential needs with the aid of a theoretical lens this thesis also aims to make suggestions to the company of what to consider in the development process of this e-service and discuss how their desires could be met by the e-service.</p><p>The theoretical chapter begins with explaining the concepts of services and e-services. Cravens and Piercy's model for determining product-markets and Zeithaml's et al gap model are used. The study is done using semi-structured interviews of four different interest groups for the e-service. There were three researchers conducting the interviews together.</p><p>The conclusions of the study are that to satisfy the customers is not very easily done. Customers of today often have high expectations of the quality of the service and they want the service provider to know their needs and wants. What could be helpful for this e-service is that because it is semi-public service the potential customers may consider it a public service instead of a private service and thus the expectations will be lowered. The generic need is the "need to get the right information" and there are a number of specific perceived needs adherent to the potential customers. Also recommendations are given to the project.</p>

Information technology (IT) has developed and spread and the internet is now available in nearly every corner of the world all the time. It is adequate to say that we are entering an information economy. E-business is an important business tool, which is reflected by the emerging presence of the internet. Furthermore, the Internetworld says that in accordance with a development plan from the European Union it should be possible to carry out all government business electronically in 2010. But, already in January 2008, the state authorities shall be able to send and receive e-invoices. The project "E-service for safe mining projects" is one of the projects within the government owned Vinnova programme Innovative development of cross-boundary public e-services. This thesis is written on assignment for that project, taking on the role of a consultant. Companies can through the internet easily find business over boarders, geographical or other, and there is money to be earned in new markets. To do this companies have a need to know their potential customers, their needs and wants. The purposes of this thesis are to explore the perceived needs for the "E-service of safe mining projects" and the benefits it could bring to its potential customers. By considering the customers potential needs with the aid of a theoretical lens this thesis also aims to make suggestions to the company of what to consider in the development process of this e-service and discuss how their desires could be met by the e-service. The theoretical chapter begins with explaining the concepts of services and e-services. Cravens and Piercy's model for determining product-markets and Zeithaml's et al gap model are used. The study is done using semi-structured interviews of four different interest groups for the e-service. There were three researchers conducting the interviews together. The conclusions of the study are that to satisfy the customers is not very easily done. Customers of today often have high expectations of the quality of the service and they want the service provider to know their needs and wants. What could be helpful for this e-service is that because it is semi-public service the potential customers may consider it a public service instead of a private service and thus the expectations will be lowered. The generic need is the "need to get the right information" and there are a number of specific perceived needs adherent to the potential customers. Also recommendations are given to the project.

The Industrial Organization literature investigates the product market decisions of a firm while the corporate finance literature explores the financing decisions of the firm. But the truth is both the financing decisions and the product market decisions are interdependent and should be modeled together to develop a better understanding of a firm's decisions. This thesis takes a step in that direction. The manager of a firm caters to the equity holders of the firm who are protected by limited liability. Ex-ante debt is issued and at the time of product market decision, debt is exogenous. The traditional product market capital market interaction literature has argued that debt financing leads to more aggressive product market strategies. If debt is treated as endogenous and/or the switching state of nature is endogenous, it can be shown that debt financing may lead to less aggressive product market strategies. Further, if external financing consists of both debt and equity financing, it is shown that a financially constrained firm shall produce less than what it would have produced if it was not financially constrained. Finally, managerial compensation is reported to be one of the reasons for product market aggressiveness of a firm in the context of product market capital market interaction. / Ph. D.

Doctor of Philosophy / Department of Economics / Philip G. Gayle / This dissertation is composed of two essays in the field of Industrial Organization. Specifically, the empirical studies are conducted by focusing on the market structure and competition issues in the airline industry. The first essay investigates entry deterrence through incumbents’ pricing strategies in the airline industry. Recent research finds evidence that incumbent airlines tend to cut fares in response to the “threat” of entry by Southwest Airlines. Instead of focusing on the entry threat by a single carrier, this essay re-examines this issue by looking at incumbent airlines’ price response when entry is threatened by a wider variety of potential entrant airlines. Results show that incumbents’ response vary by the identity of the firm making the threat. As expected, incumbents cut fares in response to the threat of entry by some potential entrants; however, a new result is also found that incumbents may respond by raising their fare depending on who is making the threat. The second essay looks into an antitrust-relevant issue in the airline industry. Proper antitrust analysis often focuses on whether the concerned differentiated products are truly competing with each other. This essay uses a structural econometric model to investigate whether nonstop and connecting air travel products effectively compete with each other. Estimate results suggest that connecting products may be an attractive alternative to nonstop products for leisure travelers but less so for business travelers. If connecting products are counterfactually eliminated, the empirical model predicts small price changes for nonstop products. This suggests that the two product types only weakly compete with each other and can be treated as being in separate product markets for antitrust purposes.

This thesis consists of three chapters on financial structure, managerial compensation, and product markets. The unifying theme of these chapters is to examine how the financial decisions of firms are affected by market imperfections. Chapter 1 places emphasis on the impact of internal imperfections arising from asymmetric beliefs (or behavioral biases) and agency conflicts by examining how these internal imperfections affect managerial compensation and corporate financial structure. On the other hand, Chapters 2 and 3 incorporate external market imperfections especially arising from imperfect product market competition. More specifically, these two chapters develop market equilibrium frameworks to examine how the matching market for CEOs and firms interacts with the product market to affect the distributions of CEO compensation and firm size. In Chapter 1, we develop a dynamic model to examine the effects of asymmetric beliefs of a firm's manager and blockholders regarding the profitability of the firm's projects, and differing attitudes towards their risk, on its capital structure. The firm's capital structure reflects the tradeoff between the positive incentive effects of managerial optimism that increases the manager's output and blockholders' private benefits against the negative effects of risk-sharing costs. We provide several testable implications for the effects of the degree of managerial optimism as well as permanent and transitory components of the firm's risk on different components of capital structure. In our calibration of the model, performed separately for different industries, we show that while optimism and risk have qualitatively similar effects on capital structure in different industries, their quantitative effects are significantly different. The interactive effects of asymmetric beliefs and agency conflicts could potentially explain a significant portion of the substantial inter-industry variation in capital structure. Chapter 2 studies how the distributions of CEO talent and compensation vary across industries, and how product market characteristics affect these distributions. We develop a market equilibrium model that incorporates the competitive assignment of CEOs to firms in a framework in which firms engage in imperfect product market---specifically, monopolistic---competition. Using the distributions of CEO pay and firm value in each of twelve Fama-French industries, we calibrate the parameters of our structural model, and indirectly infer the unobserved distributions of CEO talent and firm quality that together determine firm output. We then conduct several counterfactual experiments using the calibrated models corresponding to each of the industries. We find that the distribution of CEO talent does, indeed, vary dramatically across industries. More importantly, contrary to the conclusions of earlier studies that abstract away from the effects of the product market (Tervio, 2008 and Gabaix and Landier, 2008), the impact of CEO talent on firm value appears to be quite significant. Our estimates of the effect of CEO talent on firm value for the industries in our sample are two orders of magnitude higher than those obtained by the aforementioned studies. Further, our estimates suggest that the compensation of CEOs is quantitatively in line with their contributions to firms. Broadly, our study shows that it is important to incorporate the product market environment in which firms operate when assessing the contributions of CEOs to firms. Chapter 3 builds a market equilibrium framework in which the CEO-firm matching process is affected by the product market. We show that under reasonable assumptions there is a unique equilibrium in which only managers with ability above a unique cutoff level are matched to firms. This very simple screening process endogenizes the distribution of active managers who match with firms. Our calibration of the model using a parametric approach, which is in contrast with the empirical analysis performed in Chapter 2, strongly supports the principle arguments on the importance of CEO talent and appropriate CEO talent levels (on average) in Chapter 2. In addition, due to the law of demand and supply, which is a key feature of the extended model, we obtain somewhat different influence of some of product market characteristics on CEO pay. Furthermore, our parametric approach allows us to draw some implications for the effects of CEO talent distribution on the market equilibrium.

In my first chapter, I use a novel dataset of customer reviews from Amazon.com to study the impact of managerial myopia on product market reputation. Using exogenous variation due to the timing of CEO equity vesting events, I show that short-term incentive shocks predict declines in reputation. A changing product market lineup and a deterioration of existing products are two mechanisms through which reputation is affected. The effect is larger when the CEO has other short-term concerns and when the firm has a low reputation in the product market. However, higher advertising expenses mitigate the negative reputational effect among consumers. Using an alternative empirical methodology, I find that higher short-term ownership in the firm is also associated with declining product market reputation, while higher long-term ownership is associated with increasing reputation. My second chapter uses a different setting to examine the consequences of personal wealth incentives. We test whether household wealth shocks affect professional misconduct by financial advisors. We use a panel of advisors' home addresses and examine within-advisor variation relative to other advisors who work at the same firm and live in the same ZIP code. We show that advisors increase misconduct following declines in their homes' values. The increased misconduct is due, in part, to willful actions, such as churning. We show that advisors' housing returns explain misconduct targeting out-of-state customers, breaking the link between customer and advisor housing shocks. Further, the results are stronger for advisors with lower career risk from committing misconduct.

Essay 1: An Examination of the Efficiency, Foreclosure, and Collusion Rationales for Vertical Takeovers We investigate the efficiency, foreclosure, and collusion rationales for vertical integration using a large sample of vertical takeovers. The efficiency rationale posits that vertical integration prevents future holdup between non-integrated suppliers and customers. In contrast, the foreclosure and collusion rationales suggest that vertical integration harms competition. To distinguish between these hypotheses, we examine the wealth effects of the merging firms, acquirer rivals, target rivals, and corporate customers on announcement of vertical takeovers. Our univariate and cross-sectional results suggest that firms alter their vertical boundaries in a manner that is consistent with the efficiency rationale. Our tests do not find evidence supportive of the anti-competitive rationales for vertical integration. Essay 2: Determinants of Firm Vertical Boundaries and Implications for Internal Capital Markets In this paper, we investigate the determinants of vertical relatedness between business segments of multi-segment firms and how vertical relatedness affects the internal allocation of capital. Consistent with theory, we observe a higher degree of vertical relatedness between segments in environments likely to involve contracting problems. Further, there is a greater tendency for investments to flow towards segments with better investment opportunities as the degree of vertical relatedness between business segments in the firm increases. This indicates that internal capital markets function better in the presence of significant vertical relatedness between segments. This finding supports the Stein (1997) model, which suggests that the headquarters is able to do a better job of “winner-picking” when firms operate in related lines of businesses.