new human resource management practices complementarities and the impact on innovation performance in this paper we take our theoretical point of departure in recent work in organisational economics on systems of human resource management hrm practices we develop the argument that just as complementarities between new hrm practices influence financial performance positively there are theoretical reasons for expecting them also to influence innovation performance positively we examine this overall hypothesis by estimating an empirical model of innovation performance using data from a danish survey of 1 900 business firms using principal component analysis we identify two hrm systems which are conducive to innovation in the first one seven of our nine hrm variables matter almost equally for the ability to innovate the second system is dominated by firm internal and firm external training of the total of nine sectors that we consider we find that the four manufacturing sectors correlate with the first system firms belonging to wholesale trade and to the ict intensive service sectors tend to be associated with the second system

saddlepoint approximations for affine jump diffusion models abstract affine jump diffusion ajd processes constitute a large and widely used class of continuous time asset pricing models that balance tractability and flexibility in matching market data the prices of e g bonds options and other assets in ajd models are given by extended pricing transforms that have an exponential affine form these transforms have been characterized in great generality by duffie et al 2000 transform analysis and asset pricing for affine jump diffusions econometrica 68 1343 1376 calculating model prices requires inversion of these transforms and this has limited the application of ajd models to the comparatively small subclass for which the transforms are available in closed form this article seeks to widen the scope of ajd models amenable to practical application through approximate transform inversion techniques more specifically we develop the use of saddlepoint approximations for ajd models these approximations facilitate the calculation of prices in ajd models whose transforms are not available explicitly we derive and test several alternative saddlepoint approximations and find that they produce accurate prices over a wide range of parameters

organisational and spatial determinants of the multi unit firm evidence from the french industry galliano d and soulie n organizational and spatial determinants of the multi unit firm evidence from french industry regional studies this article aims to analyse the factors internal characteristics spatial and industrial environments that determine the existence of multi unit firms and the intensity of their organizational fragmentation at a national scale the empirical models are based on individual data on all french industrial firms collected by the french national institute of statistics the results show the importance of internal characteristics scale economies specific assets as research and development and advertising skill level etc in organizational choice they also highlight the major role played by multi location and by the spatial profile of the firms on the intensity of their fragmentation galliano d and soulie n

markets hierarchies and information on a paradox in the economics of organization abstract the literature on the economics of organization presents the following paradox on the one hand firms are said to be repositories of superior information about input characteristics on the other hand markets are said to be superior to hierarchies in coordinating resource allocation because hierarchies are forced to aggregate heterogeneous inputs into homogeneous categories this paper suggests reasons for the association of firms with refined input information and argues that it is not their hierarchical features but their provision of an appropriate framework for rent sharing that is responsible for this association

beyond privatization institutional innovation and growth in china s large state owned enterprises abstract this article demonstrates that china s large state owned enterprises soes are not stagnant fossils waiting to die under economic reform policies this sector has undergone large change due to enhanced enterprise autonomy the impact of market forces rapid growth of domestic demand for upstream products strategic integration with the world economy and the state s policy to promote large businesses china s large soes are developing new institutional forms that do not neatly fit into existing patterns china is experimentally changing its institutions through a combination of central policy local initiative and interaction with international investment this presents a challenge to the transitional orthodoxy and to ideas concerning property rights in development economics there is not a universal model of property rights and government action that works best in all circumstances china s experience with the reform of large soes shows the diverse possibilities for effective industrial institutions

entrepreneurs perceived chances for success abstract entrepreneurs involved in planning or starting firms must engage in a continuing process of appraising prospects for success these assessments presumably bear upon the preparations they make as well as at some later point whether they decide to make major changes or even to discontinue the business in this study data from 2994 entrepreneurs who had recently become business owners were analyzed to determine their perceived changes of success although previous evidence on business survival led to the hypothesis that the entrepreneurs would only be cautiously optimistic this was not the case they perceived their prospects as very favorable with 81 seeing odds of 7 out of 10 or better and a remarkable 33 seeing odds of success of 10 out of 10 in considering the prospects for other businesses like their own they perceived odds which were significantly lower but still moderately favorable based upon previous research on factors associated with new business success it was hypothesized that those who were more likely to succeed based upon their personal backgrounds and the nature of their new firms would be more optimistic however this was not the case those who were poorly prepared were just as optimistic as those who were well prepared at this point shortly after having become business owners the assessment by entrepreneurs of their own likelihood of success was dramatically detached from past macro statistics from perceived prospects for peer businesses and from characteristics typically associated with higher performing new firms the psychological literature on post decisional bolstering suggests that decision makers in many settings tend to bolster or exaggerate the attractiveness of an option after it has been chosen this coupled with the tendency of entrepreneurs to believe that they can control their own destinies implies that the extreme optimism observed here is probably a typical occurrence for entrepreneurs the findings suggest that it is probably natural to experience feelings of entrepreneurial euphoria when first becoming a business owner with the available evidence it is difficult to judge whether this leads to inadequate preparations or an inability to diagnose problems and make adjustments after the business is started this extreme optimism probably does contribute to the heavy personal commitments observed here in which the median entrepreneur devoted more than 60 hours per week to the business the entrepreneur would seem well advised to form relationships with outsiders such as board members and professional advisors who can be objective and detached in diagnosing problems and assessing objectively the prospects for the business in its current form

innovation and bureaucracy under soft and hard budget constraints because of the inherent uncertainty promotion of innovation critically depends on screening mechanisms to select projects this paper studies the relationship between bureaucracy and financial constraints as two such mechanisms the lack of commitment to hard financial constraints interferes with its ex post screening capability ex ante bureaucratic screening is optimally chosen as a substitute however bureaucracy makes mistakes by rejecting promising projects and delays innovation and the efficiency loss due to soft financial constraints increases as prior knowledge becomes worse and as research stage investment requirements become lower in a centralized economy bureaucracy may reduce the number of parallel projects particularly for projects with higher uncertainties and less research stage requirements this theory fits much of the evidence and in particular it explains why the computer industry but not the nuclear or aerospace industries has fared so poorly in centralized economies the fundamental importance of innovation to the survival and evolution of economic systems and organizations has long been recognized marx 1978 schumpeter 1950 innovation is characterized by its inherent uncertainty because it is a process whose every element takes considerable time in revealing its true features and ultimate effects schumpeter 1950 p 83 and people are unable to anticipate the future impact of successful innovations even after their technical feasibility has been established rosenberg 1994 an understanding of how different systems and organizations deal with the uncertainties associated with innovation and the resultant consequences is crucial for understanding alternative economic systems and organizations in this paper we provide a theory to analyse how different systems screen uncertain innovative projects and the impact of the various screening mechanisms on those systems we distinguish two alternative screening mechanisms the bureaucratic screening mechanism vs the market screening mechanism the latter is directly linked to financial constraints with this perspective our theory explains why centralized economies did well in certain areas of innovation but fared poorly in others for instance in the early 1960s the west was frightened by the ussr s great success in launching the first unmanned satellite and the first manned space capsule while in the 1980s in contrast the centralized system

long term employment and job security over the past 25 years a comparative study of japan and the united states the authors document and contrast changes or lack thereof in job stability over the past 25 years between japan and the united states prime age male workers with at least five years of tenure in japan continued to enjoy much higher job stability than did their u s counterparts most remarkably japan s lost decade had little discernible adverse effect on the job stability of this group of japanese employees by contrast job stability for mid career hires and youth workers deteriorated in japan the authors cross national regression analysis of job loss confirms the consistently more important role that seniority plays in protecting workers from job loss in japan than in the united states and reveals that this gap in seniority s influence on job stability between the two countries widened overall it is the u s economy with the longest economic expansion not the japanese economy with the longest economic stagnation that experienced deteriorating job stability pointing to the absence of converg

what makes management style similar and distinct across borders growth experience and culture in korean and japanese firms using a survey database of japanese and korean firms we compare the styles of two asian business systems with a japanese rather than an american mirror there are substantial differences in the two country styles we introduce two sources of convergence firm size as measured by sales and globalization as measured by export ratio and find that both of these factors reduce the difference with globalization the more significant of the two

personal networks and firm competitive strategy a strategic or coincidental match abstract this article is based upon the premise that the personal network of the owner manager is the most important resource upon which he or she can draw in the early days of the firm s development this is particularly the case as the concept of personal networks is sufficiently general to include dimensions that include for example attention to customers understanding of the business market orientation or stress on quality as such it is intuitively obvious that the nature and use of these networks must impinge upon the resultant strategy adopted in the firm albeit often implicit rather than explicit however as yet there is no empirical evidence to support this conclusion therefore this article probes one question how do the characteristics of the owner manager s network relate to the competitive strategy of new ventures clearly within this we expected to find relationships that were logically consistent the research was conducted in two counties in england that possessed similar industrial structures and equal rates of new firm formation a list of firms was obtained from local business directories and all 629 firms that fit the criteria were contacted by telephone validation of the firms at this point resulted in a significant reduction in those that fit the sampling criteria four hundred twenty three firms were mailed an 11 page questionnaire resulting in a 52 response rate preliminary analysis of the strategy variables identified six components that were consistent with previous literature these were labeled as marketing differentiation product innovation market segmentation distribution growth through outside capital and differentiation through quality correlation of these components with the networking characteristics of propensity to network network activity network density network intensity and content of network exchanges supports our proposition that entrepreneurs differ in their networking activities according to the competitive strategy pursued by the firm further classification of the owner managers into strategic clusters demonstrates that most firms appear to follow multiple patterns of strategic behavior moreover the comparison with the networking characteristics shows that owner managers appear to differ in a logical manner in the use of their networks bailey montera and cardow 1992 argue that a firm s resource base consists of financial physical and human resources and that the manner in which those resources interact is determined by the firm s strategy previous research on entrepreneurial networks has shown the amount of time and energy the owner manager devotes to the development and maintenance of contacts the underlying assumption of social network theory is that through a personal network the owner manager of a new venture gathers access to critical resources which for a variety of reasons the new firm does not possess internally consequently this research has argued that this resource base cannot be ignored when attempting to understand the concept of strategy among new and small firms in fact this resource base may play a dominant role in formulating as well as implementing strategy

threats and opportunities faced by private businesses in china abstract this article presents a comprehensive analysis of the environment experienced by private businesses in china through examining their relationships with the major stakeholders namely government supplier employee customer and competitor since the announcement of the economic reform in 1978 substantial political and economic power has been delegated from the central government to the regions endowed with this power local governments have crucial influence on the size of the private sector within their jurisdiction being outside the state allocation plan private firms have less access to raw materials and credit in the volatile political climate of china they are vulnerable to attack during political campaigns maintaining a cordial relationship with local cadres through paying bribes and various charges is thus a prerequisite for survival having solicited political backing a private entrepreneur can not only run his business more smoothly but also may be more tolerated in his illegal activities such as tax evasion profiteering and selling banned products in short the whole situation can be described as a collusion of local governments and private businesses at the expense of the central government s interest under the economic reform the distribution system has become less rigid than before it is easier for private firms to secure supplies whether raw materials or manufactured goods labor input is also not a problem for most private firms which are small in size and employ mainly unskilled workers however large private enterprises have to compete with state collective and foreign enterprises for managerial staff who are in short supply there have been marked changes in the consumption pattern since the early 1980s people spend less on staple foods and more on non staple foods consumer goods and services moreover china is experiencing a consumption boom altogether this offers great opportunities to the private sector which has been expanding its share of industrial output and retail sales very fast on the other hand competition is becoming much keener state enterprises are improving their efficiency and giant multinational corporations are rushing in as there are few entry barriers private entrepreneurs are also competing fiercely among themselves the ideological contradiction of having labor exploitation by private entrepreneurs in a socialist country has prevented the chinese government from actively encouraging private business the private sector has been assigned a supplementary role in the dominant public economy this status has led to discrimination against private firms in obtaining factor inputs accounting partly for their vulnerability to bureaucratic harassment by local cadres this will continue to hamper private business development it is concluded that ideological and political reforms in addition to the economic reform are required for providing a more conducive environment for private businesses the chinese experience of liberalizing the private sector offers useful insights to governments of other developing countries

shirking or work morale abstract standard economics assumes that rational agents shirk and that they have to be disciplined by monitoring and regulating however under specific circumstances regulating systematically worsens workers morale and thereby negatively affects their behavior when a principal attributes a lower work morale to the agents than they actually have an implicit contract is unilaterally violated and agents reduce their excess morale this reaction is theoretically and empirically well supported by the notions of reciprocity and of overjustification the theoretical propositions are applied to a specific employment relationship but hold more generally they are consistent with empirical observations

toward an economic model of the japanese firm i owe a great deal to professor moses abramovitz who suggested that i write this article i appreciate his constant encouragement and guidance which aided me throughout its preparation i am also indebted to three anonymous referees of the journal and to professors ryutaro komiya and michael riordan for their critical comments and helpful suggestions needless to say i am solely responsible for the views expressed in this paper

decentralization hierarchies and incentives a mechanism design perspective separation of ownership from management multidivisional firm organizations delegation of production decisions to worker teams delegation of pricing and advertising decisions to retail franchisers reliance on intermediaries in trade or finance and distribution of regulatory authority across different agencies represent examples of organizations that delegate and distribute decision making authority instead of centralizing it this paper reviews literature on costs and benefits of delegated decision making in hierarchical organizations or contracting networks with regard to problems of incentives and coordination it starts by describing incentive and coordination costs of delegation in simple canonical examples of hierarchies where both information and incentives of different decisionmakers differ one class of models pertain to contexts where the classical revelation principle applies i e where costs of contractual complexity information processing or communication are absent agents do not collude and the mechanism designer can commit to the mechanism delegation may conceivably entail a loss of control and coordination arising from the divergence of information and incentives sufficient and necessary conditions for this loss to be mitigated entirely include risk neutrality top down contracting and monitoring of transfers or production assignments between subordinates the next class of models introduces communication costs that restrict the performance of centralized arrangements relative to delegation owing to a resulting loss of flexibility which has to be traded off against possible control losses of delegation finally consequences of collusion among agents is discussed which typically enlarge the range of circumstances under which delegation can attain optimal second best outcomes the paper concludes with a discussion of the relevance of this theoretical literature to recently emerging empirical studies of industrial organizations where delegated decision making plays an important role adoption of innovative human resource management practices new information technologies and retail franchising

main banks influence on financial reporting quality in japan abstractthis study investigated main banks influence on the quality of accounting firms audits and corporate firms earnings focusing on companies on japan s nikkei 500 index we posed three questions in this research study about main banks influence on corporate clients earnings management first does a weakened main bank relationship influence corporate clients financial reporting quality second does japan s firewall deregulation influence firms earnings quality finally does the relationship between accounting firms and main banks affect client firms earnings quality our main findings were that main banks are not related to client firms earnings management however main banks mitigate client firms earnings management after firewall deregulation on the other hand firewall deregulation does motivate firms to manipulate their earnings management finally using pong and kita s 2006 study as a framework we found that main banks and client firms using the same accounting firms had no in

fast delta computations in the swap rate market model abstract we develop an efficient algorithm to implement the adjoint method that computes sensitivities of an interest rate derivative to different underlying rates in the co terminal swap rate market model the order of computation per step of the new method is shown to be proportional to the number of rates times the number of factors which is the same as the order in the libor market model

contribution of new technology based firms to the strengthening of technological capabilities in intermediate economies this paper argues that the main contribution of new technology based firms ntbfs is their technological dynamism which invests them with two major roles a challenging role implicit in their creation whereby they break with the inertia of existing organisations and a more long standing technology transfer role acting as a source of new technologies which they acquire and deliver by several means the performance of these roles can be particularly valuable in less advanced economies contributing to a strengthening of the indigenous capabilities in new technologies empirical research on a sample of portuguese ntbfs has shown that these firms have indeed performed an important function by accessing new technological knowledge both from local public research and from more advanced countries which they further developed turned into marketable applications and commercialised but the conditions found in an intermediate economy such as portugal present ntbfs with particular problems the limited number of knowledgeable users prepared to adopt their products and the firms difficulty to reach other type of clients can be a major obstacle to their development therefore if the country is to profit from ntbfs challenging behaviour and technological competences their acquisition and diffusion efforts should be backed and complemented by demand oriented policies

a flexible matrix libor model with smiles abstract we present a flexible approach for the valuation of interest rate derivatives based on affine processes we extend the methodology proposed in keller ressel et al in press by changing the choice of the state space we provide semi closed form solutions for the pricing of caps and floors we then show that it is possible to price swaptions in this multifactor setting with a good degree of analytical tractability this is done via the edgeworth expansion approach developed in collin dufresne and goldstein 2002 a numerical exercise illustrates the flexibility of wishart libor model in describing the movements of the implied volatility surface

the transition to a market economy pitfalls of partial reform we present a theory of a partial economic reform of a planned economy similar to the one that took place in russia since 1988 and in china earlier in such a reform some markets are liberalized in the sense that producers can sell output to whomever they want including private firms at free prices but at the same time must sell to state firms at state prices we show that such a reform can result in a substantial diversion of subsidized inputs away from state firms and toward private firms even when state firms value these inputs more the result may be a reduction of total output the simple analysis sheds light on many consequences of the soviet reform such as breakdown of coordination of production increased state policing of delivery quotas prohibitions of trading cooperatives and opposition to privatization the model also explains why partial reform failed in russia but worked in china

networking and growth of young technology intensive ventures in china abstract more often than not new ventures lack established products known technologies longstanding customer relations experienced managerial teams sufficient capital and strong reputations almost by definition small new firms lack the resources of many larger established firms the task of an infant firm and a measure of its success is to make a transition from being resource weak to being resource strong how can resources that are critical for profitable growth be acquired for the resource weak new venture researchers have found that entrepreneurs can gain access to valuable resources and they can seek to achieve competitive advantage through networking activities forming and utilizing available relationships with external organizations can allow entrepreneurs to build credibility gain advice financing and customer access build a positive image and obtain resources at below market prices and obtain channel access information and innovations business relationships with other organizations allow an entrepreneur to achieve desired business results through asset parsimony a favorable view toward networking for new ventures leaves a number of unanswered questions however relevant research questions might include who should the entrepreneur seek as a business partner are all inter organizational relationships equal or are some types more valuable to new ventures than other relationships do firms relying on high levels of networking activities actually outperform firms that less actively seek resources through external organizational relationships the present study provides a specific understanding of the concept of networking for entrepreneurs we propose that networking can be understood in terms of range the number of external relationships to obtain resources and of intensity the frequency of contact of and amount of resource obtained from these relationships this research project evaluates the range and intensity of networking among high growth and low growth entrepreneurial ventures extensive interviewing with managers of six young technology oriented firms in the people s republic of china prc affirmed the importance of entrepreneurial networking managers in the three high growth firms reported greater range and intensity of business networking than did managers of three low growth firms matched by industry and age moreover the relationship between networking activities and growth transcended the stage of firm development where networking range and intensity are deemed important in the growth process new venture success may call for entrepreneurs to reach out deliberately to external organizations to capture needed resources to a certain extent such networking activities run counter to important entrepreneurial motivations of independence and autonomy the concept of networking and the results of this study imply that entrepreneurs need to combine the spirit of independence with the reality of resource dependence and they need to balance personal autonomy with strategic business relationships this study also contributes to the understanding of entrepreneurship in our increasingly global economy particularly in the prc business relationships between the united states and the prc have been expanding rapidly in the last decade many foreign businesses seek license agreements joint venture partners equity participation or channel relationships with young ventures in that country do the same rules of networking apply in the prc as the literature suggests apply in the united states new ventures in this study were found to engage in processes of networking activities consistent with those in the west although networking activities may have different cultural roots firm success appeared influenced by the same principles of networking

decomposing changes in wage distributions a unified approach over the last fifteen years many researchers have attempted to explain the determinants and changes of wage inequality i propose a simple procedure to decompose changes in the distribution of wages or in other distributions into three factors changes in regression coefficients the distribution of covariates and residuals the procedure requires only estimating standard ols regressions augmented by a logit or probit model it can be extended by modelling residuals as a function of unmeasured skills and skill prices two empirical examples showing how the procedure works in practice are considered in the first example sources of differences in the wage distribution in alberta and british columbia are considered in the second sources of change in overall wage inequality in the united states 1973 99 are re examined finally the proposed procedure is compared with existing procedures jel classification j3 la decomposition des changements dans les distributions de salaires une approche unifee au cours des quinze dernieres annees nombre d etudes se sont penchees sur les determinants et les changements de la distribution des salaires ce memoire propose une procedure pour decomposer les changements de la distribution des salaires en trois elements les changements dans les coefficients de regression la distribution des regresseurs et les changements residuels cette procedure ne necessite que l estimation de regressions par moindre carres ordinaires et d un modele probit ou logit l auteur montre aussi comment modeliser les residus en fonction de competences non mesurees la procedure proposee est mise en application dans le contexte de deux exemples la distribution des salaires en alberta et en colombie britannique et les changements dans la distribution des salaires de 1973 a 1999 aux etats unis le memoire examine aussi comment cette procedure se compare aux methodes proposees par d autres chercheurs

changes in the japanese employment system in the two lost decades the authors re examine developments in two key elements of the japanese employment system seniority based wages and lifetime employment using recent microdata from the basic survey on wage structure in contrast with previous studies the authors find evidence that these practices are eroding for seniority wages for example they find that the age wage profile has become flatter in recent years especially for employees in the middle and final phase of their careers and for lifetime employment a clear downward trend has developed since the early 2000s in the share of lifetime employees among younger university educated workers the findings suggest that a growing share of educated younger workers choose to leave indefinite contract jobs due to the poor prospects for seniority based wage progression while older workers choose to stay in their present job despite stagnating wages because it may be more difficult for them to find alternative employment

a quantitative content analysis of the characteristics of rapid growth firms and their founders a group of firms that is attracting attention are rapid growth firms these firms are of particular interest because rapid growth is an indication of market acceptance and firm success by studying rapidgrowth firms researchers can help all firms better understand the attributes associated with firm growth despite these positive outcomes however rapid firm growth is difficult to achieve and maintain this study adds to the literature through a quantitative content analysis of the narrative descriptions of 50 rapid growth firms and a comparison group of 50 slow growth companies the purpose of the study was to draw from the narratives a list of empirically grounded growth related attributes that are associated with rapid growth firms the findings of the study resulted in the advancement of a conceptual model of the attributes of rapid growth firms in four areas founder characteristics firm attributes business practices and human resource management hrm practices

the impact of managerial networking intensity and market based strategies on firm growth during institutional upheaval a study of small and medium sized enterprises in a transition economy varying institutional environments provide the foundation for a great deal of international business research yet relatively little empirical work has examined the determinants of small and medium sized enterprise sme growth during institutional upheaval although the importance of sme development for economic transition and growth is widely acknowledged our paper addresses this gap in the literature by examining how the competitive strategies of smes evolve during institutional transitions and assessing the implications for firm growth using data collected from 135 smes in 1993 and 200 smes in 2001 we find that managerial networking intensity i e developing and maintaining relationships that may be used for business purposes declines markedly over time whereas the importance of market based strategies increases managerial networking intensity is strongly associated with firm growth early in the institutional transition process but not later market based strategies are not associated with firm growth in either time period drawing on convergent insights from multiple theoretical perspectives we argue that changes in strategy are concurrently driven by socially constructed norms that legitimize new ways of competing and delegitimize old ones and by knowledge acquisition and learning which provide managers with a more diverse set of tools with which to exercise their strategic choices

toward a stakeholder theory of the firm the saturn partnership this paper seeks to engage the organization theory community in contemporary debates over the role of the corporation in american society by using the case of the saturn corporation to develop and illustrate a stakeholder theory of the firm one normative and three positive questions are posed for a stakeholder theory the normative question is why should stakeholder models be given serious consideration at this moment in history the positive questions are 1 under what conditions is a stakeholder firm likely to emerge in the united states 2 what are the critical determinants of performance in a stakeholder firm and 3 what will determine the sustainability and diffusion of this organizational form in the american environment the history design features and dynamics of the labormanagement partnership at saturn are used to illustrate and interpret a specific case of employees as stakeholders saturn s original mission governance structure and internal processes fit the characteristics of a stakeholder firm employees establish themselves as influential definitive stakeholders by using their knowledge to improve organizational performance the local union likewise contributes to firm performance by organizing workers into a dense social network that contributes to problem solving conflict resolution and quality improvement however the legal and political environment in which the firm operates produces considerable uncertainty over the sustainability and diffusion of saturn s features in particular and the stakeholder organizational form in general additional hypotheses and research questions are proposed to continue theory building around the more general model of the stakeholder firm researchers are encouraged to take up the analysis of stakeholder models and thereby contribute to the contemporary and future debates over the role of the corporation in american society

financial intermediaries ownership structure and monitored finance evidence from japan this paper introduces new and unique data from 127 japanese private equity funds that enable a first ever direct comparison of individual owner manager structures versus financial intermediation structures in terms of the governance provided to investee companies through private equity funds the data indicate individual owner manager structures financial disintermediation give rise to much smaller portfolios of entrepreneurial firms and more advice to entrepreneurs across the scope of different financial intermediation structures including banks life insurance companies securities firms corporations and government bodies there are further differences in the provision of governance and value added advice provided to investees the data further indicate us affiliated funds in japan are more likely to have smaller portfolios and provide more advice to entrepreneurial companies possibly due to a greater skill set in providing advice to facilitate the development of small entrepreneurial firms

does the japanese governance system enhance shareholder wealth evidence from the stock price effects of top management turnover this article examines the stock price effects of top management turnover announcements for 432 japanese corporations from 1985 to 1990 we find that these announcements are associated with significantly positive abnormal returns the returns are greater when turnover is forced than when turnover represents normal succession the stock price effects are also significantly positive when turnover is forced and the successor is appointed from outside the firm we find that large shareholders play an important role during outside succession this evidence suggests that the disciplinary decisions of japanese governance mechanisms are consistent with shareholder wealth maximization article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

managerial objectives capital structure and the provision of worker incentives worker incentive schemes are invariably assumed to be administered by an owner entrepreneur who has an incentive to understate worker performance after the event while tournaments can overcome this problem they discourage cooperation between workers we show that a professional manager concerned with equality between workers and with avoiding bankruptcy rather than maximizing shareholder wealth will conduct a tournament that preserves individual effort incentives while promoting cooperation between workers the theory predicts lower debt levels and more compressed pay scales as cooperation becomes more important in the limit this becomes a group bonus scheme supported by blue chip debt

relation of dominant problems to stages of growth in technology based new ventures two studies investigating the growth patterns of new ventures are presented in the first study a stage of growth model theorized to apply specifically to technology based new ventures was develop

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

has japan s long term employment practice survived developments since the 1990s japan s traditional long term employment practice loosely termed lifetime employment once attracted much attention but its fortunes have not been tracked since the 1990s the authors use micro data from the japanese government s basic survey on wage structure to estimate permanent full time workers tenure patterns in the years during and following japan s decade long recession mean tenure they find grew for both genders between 1990 and 2003 the main explanation for this trend was a changing relationship between tenure and the attributes of workers and firms rather than changes in the attributes themselves although the importance of the latter increased for some women beyond the tendency at the mean the authors find substantial variation notably workers who had gained employment protection under the traditional system mostly in large firms saw larger gains in mean tenure than did other workers this divergence the authors suggest could eventually exacerbate lifetime income inequality in

a theory of the nominal term structure of interest rates a model of the nominal term structure of interest rates is developed that has a positive and stationary process for the interest rate and delivers closed form expressions for the prices of discount bonds and european options on bonds unlike the one state variable version of the cox ingersoll and ross 1985 model this model even in its one state variable version allows the term premium to change sign as a function of the state and the term to maturity and also allows for shapes of the yield curve that are observed in the u s data but that are disallowed in the cox ingersoll and ross model article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the japanese crisis a case of strategic failure this paper provides an alternative insight into japan s current economic problems we concentrate upon the role played by the economy s central actors namely japan s transnational corporations since the early 1980 s japan s transnationals have become dominant players in the global economy and now have a higher rate of physical investment in new overseas greenfield sites than their competitors this has had detrimental consequences for japan s domestic economy particularly for small firms who operate in keiretsu networks this has led to concerns about the hollowing out of japan s domestic industry raising the possibility of long term industrial decline and strategic failure

industrial strategy a missing link in british economic policy this paper critically analyzes the potential and limitations of economic instruments for environmental protection it presents a general framework for analyzing environmental issues along with a taxonomy for classifying different approaches to environmental protection a key contribution of the paper is to identify critical steps in marketing economic incentive approaches for environmental protection the challenge to researchers is to design tools that will help achieve environmental goals more effectively this means taking careful account of political technical and economic constraints in system design copyright 1993 by oxford university press

firm networks and firm development the role of the relational mix abstract this study examines the role of different networks called the relational mix on the development of the entrepreneurial firm our regression analysis of survey data from 60 venture capital financed firms questions the importance of network size on firm development rather our results suggest that different types of networks are more important for firm development in particular we found a significant positive relationship for reputational networks and a weak significant negative relationship for cooperative technology networks at founding with time to break even social networks at founding have no direct effect on time to break even and a significant negative relationship with sales in the years after foundation furthermore our findings show the important role of marketing information and co opetition networks relationships with direct competitors on firm development in the years after foundation these results suggest that the relational mix is a more appropriate construct for explaining network development than network size alone

markets and organizations as coherent systems of innovation abstract the firm its tasks and the way in which it relates to the market appear in a different light with respect to the standard theory within the perspective of a process of innovation interpreted as a creation of resources the main problem with a similar process a learning process which essentially consists of the structuring of new and totally original productive options is to make it viable this implies that markets and organizations should not be looked at as distinct institutions whose respective efficiency must be tested with respect to a problem of allocation of given resources but rather considered as a system whose coherence depends on being able to render a process of creation of new specific resources viable

international trade and the internal organization of firms an evolutionary approach masahiko aoki and others have distinguished two alternative modes for a firm s internal organization we argue that the profitability of each mode depends on the distribution of firms across modes and on the general economic environment we characterize the evolutionary equilibria in both a parametric and a general model and argue that corner equilibria predominate we analyze the effects of trade between the two countries in a outputs only and b inputs factors as well as outputs our most striking conclusion is that in case b a less efficient mode can displace a more efficient mode when trade barriers are sufficiently low

post the washington consensus economic governance and industrial strategies for the twenty first century recent events in the global economy have led to a growing dissatisfaction with the neo liberal economic paradigm that has dominated economic policy over the last 30 years and the increasing concentration of and abuse of economic power within the corporate sector that has ensued however amidst calls for a new approach to economic management there is a danger that a new policy framework may overlook underlying economic governance structures that exist and may evolve within the economy such oversight has implications for development this paper seeks to demonstrate that the long run efficacy of industrial strategy depends upon designing appropriate economic governance structures that serve the wider public interest it does so by exploring past experiences of industrial strategy drawing lessons from the usa the uk japan the third italy and the emerging and transition economies we also offer some suggestions for ways forward

employment tenure and earnings profiles in japan and the united states comments the relationship between job tenure and annual earnings in japan has received considerable attention from social scientists examining employment contracts and the japanese compensation system in their widely cited article masanori hashimoto and john raisian 1985 using data for 1980 showed that japanese men have greater job tenure than comparable workers in the united states and that the earnings of japanese men rise more rapidly with increased tenure they found that an additional year of tenure increases earnings in both small and large firms in japan more than does an additional year of general market experience their results for the united states indicate that general market experience increases earnings more than an additional year of job tenure the 1970 s and 1980 s were a period of substantial change in japanese labor markets due to the rapid aging of the population and the restructuring of the economy following the oil crisis the present analysis extends the work of hashimoto and raisian by estimating earnings equations for japanese men for the years 1971 1976 1981 and 1986 specifically we wish to investigate whether hashimoto and raisian s findings have been stable over time or whether changes in the labor market have altered the importance of tenure relative to total labor market experience in the japanese labor market i changes in the labor market

organizational structure and expected output at nuclear power plants this paper examines the relationship between organizational structure and operation and outage durations at nuclear power plants in the united states it empirically examines aoki s 1990 proposition that 1 hierarchical control increases productivity in situations that are very stable or very uncertain and 2 horizontal coordination increases productivity in intermediate situations it describes a model of continuous production in which management chooses an organizational structure that minimizes the ratio of the hazard rates for operation and outage and proposes an index of hierarchy based on measures of plant level organization parameter estimates support the proposition that less hierarchy is associated with higher productivity through longer periods of operation copyright 1996 by mit press

a clash of capitalisms foreign shareholders and corporate restructuring in 1990s japan this article examines the clash between stakeholder and shareholder based business systems resulting from an increase in foreign portfolio investment in the japanese economy during the 1990s an analysis of 1 108 firms between 1991 and 2000 shows that as foreign institutional investors who were more interested in investment returns than in long term relationships replaced domestic shareholders one fundamental pillar of japan s stakeholder capitalism began to crack japanese firms began to adopt downsizing and asset divestiture practices more characteristic of anglo american shareholder economies the influence of foreigners however was weaker in firms more deeply embedded in the local system through close ties to domestic financial institutions and corporate groups thus foreign investors were influential primarily in firms less embedded in the existing stakeholder system this research contributes to debates on globalization and convergence of business systems institutional change and corporate

an exact bond option formula this paper derives a closed form solution for european options on pure discount bonds assuming a mean reverting gaussian interest rate model as in vasicek 8 the formula is extended to european options on discount bond portfolios

the role of contractual governance flexibility in realizing the outcomes of key customer relationships abstract an entrepreneurial firm s relationships with customers suppliers investors universities and other organizations have a significant and long lasting impact on the survival and success of the firm yet little research has focused on how the management of these relationships influences outcomes for entrepreneurial firms this paper focuses on the customer relationships of new technology based firms ntbfs we aim to contribute to the literature on the governance of exchange relationships between ntbfs and their customers further in so doing we seek to explore the implications of such governance for the performance of new firms because of their small size their liabilities of newness and their highly specialized knowledge intensive resources ntbfs are able to maintain only a limited number of close customer relationships consequently ntbfs often become highly dependent on one or a few of their customers in this study we focus on the relationships between ntbfs and their single largest customers we refer to the customer that accounts for the highest proportion of an ntbf s total revenue as the key customer strategic management literature resource dependence theory and transaction cost economics emphasize the risks associated with being dependent on an exchange relationship focusing on the opportunistic use of power by the exchange partner these perspectives suggest that firms can minimize their external dependencies and protect themselves against opportunism through the use of contracts the present paper expands this view by also examining how flexibility in exchange governance may unlock potential benefits or dampen potential dangers that an ntbf faces in its commitment to its single largest customer e g sharing the costs and risks of r d with the customer improving the reputation of the ntbf and realizing savings in sales and marketing costs we examine the extent to which the realization of the potential positive and negative outcomes of a high level of dependence are moderated by the flexibility of the exchange partners attitudes toward contractual agreements the research question that we seek to answer is does the manner in which a contractual agreement is implemented affect the outcomes of a customer relationship for an ntbf at high levels of exchange dependence on the key customer we develop a set of hypotheses that examines how the governance of the key customer relationship affects the ntbf s new product development reputation and sales costs when exchange dependence on the key customer is high we use the term contractual governance flexibility to refer to the extent to which the exchange partners are willing to adjust to changes in the relationship instead of relying on the contract we test the hypotheses with survey data from 195 ntbfs in the uk the results of regression analyses reveal that contractual governance flexibility moderates the relationship between exchange dependence and outcomes in relationships with a high level of exchange dependence greater contractual governance flexibility was associated with greater new product development and sales cost advantages no such benefits were realized for relationships in which exchange partners relied heavily on the contract these findings are important because they suggest that by relaxing formal contractual mechanisms governing a relationship ntbfs can derive benefits from key customer relationships that are characterized by a high level of dependence our findings suggest that at high levels of exchange dependence on key customers ntbfs can benefit when greater contractual governance flexibility is present our data indicated that interestingly ntbfs tend to do just the opposite at higher levels of exchange dependence ntbfs are inclined to rely increasingly on the contract by so doing they may fail to realize the potential benefits of the relationships such as gaining access to complementary resources and reducing costs these outcomes which may be derived from dependent exchange relationships by means of contractual governance flexibility can have a significant influence on the long term development and competitive advantage of an entrepreneurial firm

japanese labour in the 1990s stability and stagnation we review the state of the labour market and employment practices in japan over the past 15 years and try to evaluate the nature of the changes that have been occurring we also look at how government policy has reacted to the conditions in the labour market and what implications this has for the future although there has been a continual shift of resources away from manufacturing and agriculture into services employment practices have not been changing so rapidly and job protection is actually stronger this along with wage restraint accounts for why unemployment has only increased by some 2 5 percentage points during almost a decade of stagnation we also note that much government policy has acted to maintain existing employment practices and that labour economists are divided as to whether or not this is a good thing

basic research inside the firm lessons from an in depth case study abstract the economic analysis of basic research in firms has been a growing concern but only a few attempts have been made to understand the realities which characterize the implementation of this activity in an in depth case study this paper considers the organisational specificities of basic research inside the firm and emphasizes the strategic role of human resources it shows that the process of innovation which was seen in the 1970s as a stock of information to be managed became during the 1980s a sequential learning process which covers a variety of different but complementary organizational designs in the basic research unit on this basis some analytical implications for technology and innovation processes are suggested as the production process is a sequential learning process an innovative firm strategy is defined as one which is able to balance short and long terms requirements with regard to profitability this appears as an out of equilibrium problem where the crucial determinant is the organizational design chosen by the firm in order to generate and implement new learning and skills

option pricing where the underlying assets follow a gram charlier density of arbitrary order abstract if a probability distribution is sufficiently close to a normal distribution its density can be approximated by a gram charlier series a expansion in option pricing this has been used to fit risk neutral asset price distributions to the implied volatility smile ensuring an arbitrage free interpolation of implied volatilities across exercise prices however the existing literature is restricted to truncating the series expansion after the fourth moment this paper presents an option pricing formula in terms of the full untruncated series and discusses a fitting algorithm which ensures that a series truncated at a moment of arbitrary order represents a valid probability density while it is well known that valid densities resulting from truncated gram charlier series a expansions do not always have sufficient flexibility to fit all market observed option prices perfectly this paper demonstrates that option pricing in a model based on these densities is as tractable as the far less flexible original model of black and scholes 1973 allowing non trivial higher moments such as skewness excess kurtosis and so on to be incorporated into the pricing of exotic options generalising the gram charlier series a approach to the multiperiod multivariate case a model calibrated to standard option prices is developed in which a large class of exotic payoffs can be priced in closed form furthermore this approach when applied to a foreign exchange option market involving several currencies can be used to ensure that the volatility smiles for options on the cross exchange rate are constructed in a consistent arbitrage free manner

closed form solutions for term structure derivatives with log normal interest rates we derive a unified model that gives closed form solutions for caps and floors written on interest rates as well as puts and calls written on zero coupon bonds the crucial assumption is that simple interest rates over a fixed finite period that matches the contract which we want to price are log normally distributed moreover this assumption is shown to be consistent with the heath jarrow morton model for a specific choice of volatility closed form solutions for interest rate derivatives in particular caps floors and bond options have been obtained by a number of authors for markovian term structure models with normally distributed interest rates or alternatively log normally distributed bond prices see for example jamshidian 1989 1991a heath jarrow and morton 1992 brace and musiela 1994 geman el karoui and rochet 1995 these models support black scholes type formulas most frequently used by practitioners for pricing bond options and swaptions unfortunately these models imply negative interest rates with positive probabilities and hence they are not arbitrage free in an economy with opportunities for riskless and costless storage of money briys crouhy and schobel 1991 apply the gaussian framework to derive closed form solutions for caps floors and european zero coupon bond options to exclude the influence of negative forward rates on the pricing of zero coupon bond options they introduce an additional boundary condition as shown by rady and sandmann 1994 these pricing formulas are only supported by a term structure model with an absorbing boundary for the forward rate at zero where the absorbing probability is not negligible which for a term structure model is a quite problematic assumption

on the costs of a bank centered financial system evidence from the changing main bank relations in japan we examine the effects of bank firm relationships on firm performance in japan when access to capital markets is limited close bank firm ties increase the availability of capital to borrowing firms but do not lead to higher profitability or growth the cost of capital of firms with close bank ties is higher than that of their peers this indicates that most of the benefits from these relationships are appropriated by the banks finally the slow growth rates of bank clients suggest that banks discourage firms from investing in risky profitable projects however liberalization of financial markets reduces the banks market power the close relationship between manufacturing firms and financial institutions in japan has recently been at the center of the debate on the appropriate financial system for the reforming economies of eastern europe as opposed to the anglo saxon separation of finance and industry long term ties between main banks and their client firms involving bank loans bank equity holding and some bank appointed personnel which are common in japan and germany have often been described as a growth oriented financial system that could serve the needs of developing and reformed economiies better than anonymous capital markets modeled after the arnerican and british financial systems the claim that close ties between investmentoriented banks and industrial firms could help overcome the difficulties of relative backwardness dates back to gerschenkron 1962 who investigates european development rosovsky 1961 applies gerschenkron s framework to the analysis of japanese growth more recently aoki patrick and sheard 1994 hoshi kashyap and loveman 1994 and teranishi 1993 among others portray the close ties between finance and industry in japan as an important factor in the international competitiveness of modern japanese

derivative pricing with wishart multivariate stochastic volatility this paper deals with the pricing of derivatives written on several underlying assets or factors satisfying a multivariate model with wishart stochastic volatility matrix this multivariate stochastic volatility model leads to a closed form solution for the conditional laplace transform and quasi explicit solutions for derivative prices written on more than one asset or underlying factor two examples are presented i a multiasset extension of the stochastic volatility model introduced by heston 1993 and ii a model for credit risk analysis that extends the model of merton 1974 to a framework with stochastic firm liability stochastic volatility and several firms a bivariate version of the stochastic volatility model is estimated using stock prices and moment conditions derived from the joint unconditional laplace transform of the stock returns

the high growth in new metal based manufacturing and business service firms in finland this study examined the effects of the factors involved in the start up situation and the first seven years development on the subsequent high growth of firms the criterion of success used in this study was high growth in business during the first seven years the subjects were finnish metal products manufacturing firms and business service firms established in 1990 the results indicated firstly that it is the internal networks of firms that bring about competitive advantage innovations and efficiency in these entrepreneurial team driven firms a group of people participate in the strategic management of the firm it was also found that co operation between firms and changes in external personal networks contributed to a high rate of growth the empirical results showed that new firms had equal chances for growth irrespective of their locality on the other hand growth was affected by changes in a new firm s competitive situation and by changes in strategic factors the results also clearly indicated that high growth firms were characterised by rising productivity of labour at the same time as they were generating new jobs

the productivity effects of employee stock ownership plans and bonuses evidence from japanese panel data the authors report the first results for japanese firms on the effects of employee stock ownership plans esops and bonuses by estimating production functions using new panel data they find that the introduction of an esop will lead to a 4 5 percent increase in productivity this productivity payoff takes three to four years there is a modest productivity gain from the bonus system the authors also find evidence that the productivity effect of bonuses is enhanced by the existence of esops suggesting that esops may create a climate conducive to profit sharing by enhancing long term commitment and peer monitoring copyright 1995 by american economic association

the effect of mandatory retirement on earnings profiles in japan using data from the japanese basic survey on wage structure for 1981 and 1986 the authors estimate the effect of the age of mandatory retirement on the rate of growth of earnings with job tenure i

entrepreneurship and growth the strategic use of external resources abstract a common characteristic of entrepreneurial farms is fast growth a common problem for their managers is obtaining enough resources to accommodate that growth a typical entrepreneur either individual or corporate often desires to pursue a detected opportunity but lacks the necessary resources to make it happen again gaining access to those resources becomes the first entrepreneurial problem one of the most efficient weapons used by entrepreneurial firms to gain market share from larger more powerful corporations is their flexibility but the progressive accumulation of resources that growth often entails brings almost necessarily a loss of that very flexibility that made the firm successful in the first place this can be termed the second entrepreneurial dilemma networking practices are a way to overcome these problems essentially networking is a system by which entrepreneurs can tap resources that are external to them i e that they don t control in its simplest form networking consists of the use of all personal relationships to obtain advice financing insider sales etc birley 1986 in its most sophisticated form entrepreneurs set up an elaborate web of relationships between companies most of them of similar entrepreneurial characteristics that are extremely efficient and flexible at delivering a product or service in all cases we find that the ability to exploit resources that are outside the entrepreneur s control is a constant of entrepreneurial high growth management this is why entrepreneurs have been defined as being primarily motivated by the pursuit of opportunities as opposed to those managers exclusively concerned with the proper management of the resources already controlled by their firm stevenson 1983 stevenson and gumpert 1985 this paper proposes a view whereby the essence of entrepreneurship is seen precisely in the ability and willingness to use external resources a statistical validation of the main hypothesis i e that entrepreneurial fast growing firms do use more external resources than their competitors is then attempted the results strongly support the hypothesis it is found that the fastest growing firms in a very large sample of public companies are much less integrated make more use of external resources than their competitors in addition those firms that are at the forefront of using external resources grow on average much faster more than 10 every year than their competitors over a long period of time ten years this study s implication for managers seems clear it constitutes yet another piece of evidence in favor of the efficiency of networking arrangements being flexible enough to use external resources allows the entrepreneurial firm to break through the limits to sustainable growth and at the same time lowers its risk for it taps into someone else s experience and know how entrepreneurs and entrepreneurial managers must not be deterred by the lack of resources in the pursuit of opportunities