Warning to Business Leaders: Corporate
Victories May Sink Your Firm
New Book Offers Guidance on How to Avoid
The Winners Curse
College
Park, Md. November 18, 2004 A
new book released this month offers
guidance on how firms can avoid the kind
of corporate victories that end up as
disasters, harming shareholders and
placing the firms future in jeopardy.
Beware the Winners Curse: Victories
That Can Sink You and Your Company (Oxford
University Press, 2004) expands the
model of the Winners Curse to explain
how companies like Tyco, MCI-WorldCom
and Lucent overpaid for acquisitions,
and how shareholders suffered as a
result.
The Winners Curse was first coined
by economists to explain how in
auctions, the winning bidder is usually
the most optimistic about the value of
an item being auctioned and therefore
often bids more sometimes much more
than the item is worth. In this new
book, authors G. Anandalingam and Henry
C. Lucas, Jr., explain how such activity
in the corporate world whether its
overpaying for another company,
overbidding for new technology, or
hiring the wrong superstar CEO can
lead to disaster.
In order to help companies avoid the
Winners Curse, the authors explain the
cultural, personality, and psychological
factors, as well as the market-based
mechanisms, which contribute to the
curse. Their advice ranges from curbing
the imperial CEO, to adopting a systems
approach for decision making and using
game theory. The authors also examine
several case studies to convince readers
that the Winners Curse is a serious
threat to business and managers, that
winning is not everything, and that the
curse can appear anywhere.
Case studies in the book include:
- The $4.5 billion paid by Lucent
for a start-up called Chromatis in
order to pre-empt other companies
only to have to close it down within
two years.
- The $44 million write-off taken
by United Artists after managers
decided to fund the box office
disaster
Heavens Gate based on the
Oscar won by the director for his
previous film
The
Deer Hunter.
- Coach Steve Spurrier being
pursued by Dan Snyder, the owner of
the Washington Redskins and given a
salary of $25 million based on his
enviable record in the college
ranks, only to have him resign after
two embarrassing seasons.
Beware the Winners Curse is
a brutally honest review of how often
investors lose money when management
pursues winning at almost any cost,
said Harvey Seegers, former CEO, Global
Exchange Services. The authors present
abundant examples of corporate hubris
that should send shivers down the spine
of any director serious about protecting
shareowner interests.
More than a caution against a
reckless pursuit of every opportunity,
this book provides a model and a
framework to systematically evaluate
each situation on its own merit, said
William E. Steele, Chairman and CEO,
Kencast. Every executive who wants to
deploy his resources effectively should
read this book.
About the Authors
G. Anandalingam is the Ralph J.
Tyser Professor of Management Science at
the University of Marylands Robert H.
Smith School of Business, and Chair of
its Decision and Information
Technologies Department. He received his
B.A. from Cambridge University and his
Ph.D. from Harvard University.
Henry C. Lucas, Jr., is the
Robert H. Smith Professor of Information
Systems and at the University of
Marylands Robert H. Smith School of
Business. He received his B.S. from Yale
University and his M.S. and Ph.D. from
the Sloan School of Management at M.I.T.
►Download Chapter 1
of Beware the Winners Curse:
Victories That Can Sink You and Your
Company
►Buy
Beware the Winner's Curse Now!
[Referral fees from purchases made at
Amazon.com via this link are put toward
Smith School scholarships.]
►Oxford
University Press
# # #
|
For more information:
Jeff Heebner
Robert H. Smith School of
Business
University of Maryland
(
301.405.9469
jheebner@rhsmith.umd.edu
|
