consumption and debt response to unanticipated income shocks evidence from a natural experiment in singapore abstract this paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock consumption rose significantly after th

the determinants of the management hierarchy evidence from italian plants abstract the paper aims to test some of the predictions of economic theory on the organizational architecture by looking at the relation between the depth of the management hierarchy of plants and plant and industry specific variables i test this relation through the estimates of an ordered logit econometric model on a sample of 438 italian manufacturing plants the findings show that the plant size the characteristics i e vintage and extent of use of the production and communication technology in use the plant s ownership status i e state versus private ownership and differences in the nationality of firms to which plants belong figure prominently in explaining the complexity of a plant s organization

an empirical analysis of post merger organizational integration we study post merger organizational integration using linked employer employee data integration is implemented by reassigning a small number of high skilled workers especially in r d and management workforce mixing is concentrated to establishments set up after merger rather than to previously existing establishments worker turnover is high after merger but new hiring yields stable total employment target employees have higher turnover and reassignment particularly if the target firm is small relative to the acquiring firm these findings might suggest that integration is costly but can be achieved by focusing on key employees alternatively the reassignment of a few key employees is sufficient for achieving integration

economics of leadership and hierarchy this paper explores leadership within hierarchical organizations for each hierarchy i consider a dynamic signaling game in which each player observes only the actions of his direct superiors before choosing his action at the top of the hierarchy are the leaders who learn the state from nature the hierarchy controls the flow of information and the timing of the game and determines the equilibrium output and welfare i show that the welfare optimal hierarchy is the chain because it maximizes the incentive of players to lead by example for their subordinates the chain remains optimal even in the presence of verifiable or unverifiable costly information acquisition by the leaders

compensation and span of control in hierarchical organizations this article presents evidence on the relationship between compensation ratios and spans of control within hierarchical organizations we find that compensation ratios are lower than span of control at any position within the hierarchy which is consistent with an elasticity of compensation to a number of subordinates lower than one managers human capital endowments determine a significant part of the salary differences throughout hierarchical levels as predicted by models of talent allocation in hierarchies differences in the size of firms should be attributed more to differences in their number of hierarchical levels than to variations in the span of control

dynamic capabilities as context the role of decision system and structure in this article we look at some implications of the role of dynamic capabilities in enabling strategic decision making in the firm it is argued that properly specifying questions relating to dynamic capabilities raises questions of what is involved in strategic decisions which in turn inevitably involves or should involve consideration of the complementary roles of non decomposability and decision processes this entails a reappraisal of how and where established frameworks may or may not be of relevance in this context and invites consideration of how an economics perspective should be framed to deal with such issues copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

do renewable energy technology innovations promote china s green productivity growth fresh evidence from partially linear functional coefficient models abstract renewable energy technology innovation can benefit the environment by promoting green productivity as proposed by existing theoretical studies however recent uneven developments of both environmental performance and renewable energy technology among regions in china remind us to revisit the above theoretical link in this paper we relax the hypothesized homogeneity and linearity in traditional empirical models to investigate the effects of renewable energy technology innovation on china s green productivity the results of the partially linear functional coefficient models show that the effect of renewable energy technological innovation on green productivity is significant only when the relative income level of a province passes a critical turning point beyond the turning point such an effect increases with the growth of relative income levels finally we provide provincial specific policy implications based on the estimated nonparametric relationship between renewable energy technology innovation and green productivity

rethinking the development agenda this paper calls for a development agenda based on five major premises 1 a more balanced form of globalisation based on a genuine respect for diversity 2 a broad view of macroeconomic stability which provides an adequate role for counter cyclical policies 3 the need to complement macroeconomic stability with active productive development policies 4 strong social policies and the mainstreaming of social objectives into economic policies to guarantee adequate linkages between economic and social development and 5 the recognition that development involves broader human development goals copyright 2002 oxford university press

the political economy of linguistic cleavages article i nfo this paper uses a linguistic tree describing the genealogical relationship between all 6912 world languages to compute measures of diversity at different levels of linguistic aggregation by doing so we let the data inform us on which linguistic cleavages are most relevant for a range of political economy outcomes rather than making ad hoc choices we find that deep cleavages originating thousands of years ago lead to better predictors of civil conflict and redistribution the opposite pattern emerges when it comes to the impact of linguistic diversity on growth and public goods provision where finer distinctions between languages matter 2011 elsevier b v all rights reserved

incentives and loss of control in an optimal hierarchy this paper studies incentives and loss of control in a hierarchy model which combines and generalizes the models of williamson calvo wellisz and keren levhari in our model of the hierarchy the levels of effort from managers and workers the wage scales the span of control and in particular the total number of tiers are all endogenous using optimal control techniques we show that in the optimal hierarchy the wage scales and effort levels decrease as one moves down the hierarchy as the hierarchy expands with no technological progress workers exert less effort and are paid less top managers work harder and are paid more and the wage distribution becomes increasingly skewed

real time decentralized information processing as a model of organizations with boundedly rational agents this paper studies the properties of real time decentralized information processing as a model of human information processing in organizations real time decentralized processingwhich models the computation of decision rules in a temporal decision problem by members of an organization captures both the cost of computation in terms of the members time and the constraints imposed by computational delay on the use of recent information unlike a batch processing model it has no single measure of delay because decisions are computed from data of heterogeneous lags furthermore decentralization does not unambiguously reduce delay because processing a message precludes processing current data 1 real time decentralized information processing

strategizing by firms in the presence of markets for resources strategizing by firms from the resource based view is concerned with the process through which firms acquire a distinctive bundle of resources that is costly and time consuming for competitors to duplicate or imitate a central question facing any firm therefore is its strategy for accumulating the resources that underpin its production activities in this article the process of resource accumulation is discussed as one involving potentially both internal resource development and external resource acquisition from the perspective of the strategic issues involved in making a choice between these options emerging markets for technologies and know how through licensing and other forms of resource exchange have opened up new avenues through which firms may jostle for advantage the article is concerned with three major aspects of this process illustrating the discussion with cases from biotechnology and pharmaceuticals first the strategizing by firms around the internal development vs external sourcing issue is discussed as informed by the practices of leading firms and how these lend greater variety of strategic options for firms second the potential competitive advantages as well as disadvantages to be secured by firms through the process of external sourcing as compared with the well known potential advantages accruing to incumbents through internal development such as time compression diseconomies and causal ambiguity and third the criteria to be used by firms to strategically evaluate resources individually as contrasted with the strategic evaluation of the resource bundle or totality these criteria it is argued turn on the issues of marginal value contribution resource complementarities and synergies resource variety and transferability involving intellectual property issues successful firms it is argued expand their options through blending internal resource accumulation with external resource leverage thereby deepening their distinctive dynamic capabilities this approach extends the framework of the rbv enabling it to encompass resource driven schumpeterian competition and such aspects of industrial dynamics as specialization modularization and imitative challenge copyright 2003 oxford university press

coordination and delay in hierarchies this article studies hierarchical organizations where concerns for fast execution are important and employees must be coordinated to avoid wasteful duplications of effort simple conditions are provided for the time spent on coordinating subordinates to be increasing and the span of control to be decreasing as one goes up the hierarchy with equalities holding if delay is all that matters when returns to specialization are substantial the span of control also tends to widen and the hierarchy to flatten as urgency increases the model suggests that concerns for fast execution may be key in explaining recent trends toward decentralization and delayering in firms

managerial leverage is limited by the extent of the market hierarchies specialization and the utilization of lawyers human capital abstract this paper examines the role of hierarchies in the organization of human capital intensive production we develop an equilibrium model of hierarchical organization and provide empirical evidence based on confidential data on thousands of law offices the equilibrium assignment of individuals to hierarchical positions varies with the degree of field specialization which increases as the extent of the market increases as individuals knowledge becomes narrower but deeper managerial leverage the number of workers per manager optimally increases to exploit this depth consistent with our model the share of lawyers who work in hierarchies and the ratio of associates to partners increase as market size increases and lawyers field specialize other results provide evidence against alternative interpretations that emphasize unobserved differences in the distribution of demand or firm size effects and lend additional support to the view that in legal services hierarchies help exploit increasing re

on governing multilateral transactions with bilateral contracts bilateral contracts while neither negotiated nor enforced in an integrated way are nevertheless often interrelated both economically and strategically owing to production or consumption complementarities and to asymmetric information a set of bilateral contracts forms a mechanism with special properties this mechanism forms a contract equilibrium if there is no joint incentive for a supplier and any individual customer unilaterally to alter the terms of their contract if agents preferences are risk neutral in money income and if their private information is independent then there exists a contract equilibrium that implements efficient transactions if in addition preferences are strictly concave and differentiable in goods and services and technologically feasible sets are suitably convex then this equilibrium is essentially unique

the decentralization of information processing in the presence of interactions we propose a model of organizational decision making in which information processing is decentralized our model incorporates two features of many actual organizations aggregation entails a loss of useful information and the decision problems of different agents interact we assume that an organization forms a portfolio of risky assets following a hierarchical procedure agents decision rules and the organization s hierarchical structure are derived endogenously typically in the optimal hierarchical structure all agents have one subordinate and returns to ability are at least as high at the bottom as at the top however these results can be reversed in the presence of returns to specialization

financial globalisation and crisis institutional transformation and equity this paper comprises the long introduction to the symposium of five papers on financial globalisation published in the cambridge journal of economics volume 34 no 2 the paper discusses the impact of financial globalisation in a variety of spheres and shows how the five papers link together to provide a coherent view of the current economic and financial crisis in this paper we also examine the globalisation of finance more broadly both in historical terms as well as in relation to the current widespread failure in the financial markets we take up the policy question of how the interests of the poor in particular and developing countries in general could be safeguarded from the vagaries of financial globalisation questioning how much choice communities and countries have and what can the international community do to extend these choices

learning about the nature of production from equilibrium assignment patterns this paper exploits empirically a key insight from lucas 1978 and rosen 1982 that the organization of production and the distribution of earnings across individuals are jointly determined by the equilibrium assignment of individuals to firms and hierarchical positions we study how different classes of production functions generate alternative equilibrium assignments we then use confidential census data on u s law offices to investigate the form that the production function should take to rationalize earnings patterns in legal services we argue that earnings patterns in this industry are consistent with a production function that is characterized by asymmetric sensitivity to the skill of agents in different organizational positions complementarity between managers and workers skill and scale effects in individual skill

incentives for managers and inequality among workers evidence from a firm level experiment we present evidence from a firm level experiment in which we engineered an exogenous change in managerial compensation from fixed wages to performance pay based on the average productivity of lower tier workers theory suggests that managerial incentives affect both the mean and dispersion of workers productivity through two channels first managers respond to incentives by targeting their efforts towards more able workers implying that both the mean and the dispersion increase second managers select out the least able workers implying that the mean increases but the dispersion may decrease in our field experiment we find that the introduction of managerial performance pay raises both the mean and dispersion of worker productivity analysis of individual level productivity data shows that managers target their effort towards high ability workers and the least able workers are less likely to be selected into employment these results highlight the interplay between the provision of managerial incentives and earnings inequality among lower tier workers

do land revenue windfalls create a political resource curse evidence from china abstract by analyzing a panel on the political turnovers of 4390 county leaders in china during 1999 2008 we find that the revenue windfalls accrued to these officials from land sales have undermined the effectiveness of the promotion system for government officials instead of rewarding efforts made to boost gdp growth promotion is positively correlated with signaling efforts and with corruption the robust positive relationship between land revenue windfalls and political turnover or specifically promotion suggests that those who are politically connected to their superiors and those beyond the prime age for promotion are the primary beneficiaries the case for corruption is substantiated by the evidence inferred from anti corruption crackdowns which reveals that the additional effect of land revenue on political turnover and size of bureaucracy a proxy for corruption decreases significantly in crackdowns but that land revenue has no effect on city construction expenditure a proxy for signaling

trade liberalisation in developing economies modest benefits but problems with productivity growth macro prices and income distribution microeconomically the case for liberalisation is dubious under increasing returns to scale and when firms can invest directly in productivity enhancement distributional effects of commercial policy changes can be regressive and large but the rents they generate can serve as a basis for effective policy intervention contingent on firms performance macroeconomically the case of liberalisation rests on say s law which is not always enforced recent combined current and capital market liberalisations have been associated with strong exchange rates and high interest rates and output and productivity growth have positive mutual feedbacks which liberalisation may well suppress

restructuring in dynamic environments a dynamic capabilities perspective despite the assumed importance of environmental dynamism with respect to organizational decline theory and evidence of its effect are lacking integrating work from firm survival and turnaround literature within a dynamic capabilities framework we posit that dynamism positively moderates the relationship between firm retrenchment and performance we find that dynamism positively moderates the relationship between firm performance and both asset and cost retrenchment however as expected from the dynamic capabilities framework the moderating effects of dynamism differ according to the chosen retrenchment strategy

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

the optimal size of a bank costs and benefits of diversification abstract this paper provides a theory of diversification and financial structure of banks it shows that by diversifying the bank portfolio and financing it with debt the bank can commit to a higher level of monitoring by linking the benefits of diversification to the costs the paper derives an optimal size of the bank which is bounded the costs of diversification lie in the higher overload costs with which the banker is faced by monitoring more projects the benefits of diversification lie in increasing the bank s owner s incentives to monitor the lenders

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

interpersonal authority in a theory of the firm this paper develops a theory of the flrm in which a flrm s centralized asset ownership and low powered incentives give a manager interpersonal authority over employees in a world with difiering priors the paper derives such interpersonal authority as an equilibrium phenomenon one key result is that a manager s control over critical assets through its efiect on the level of outside options allows the manager to order employees what to do the paper thus provides microfoundations for the idea that bringing a project inside a flrm gives the manager authority over that project while in the process explaining concentrated asset ownership low powered incentives and centralized authority as typical characteristics of flrms it also leads to a new perspective on the flrm as a legal entity and building on the insights of a parallel paper to a new theory for flrm boundaries based on the idea of break up a key feature of the latter theory is that flrm boundaries matter even though both ex ante investments and ex post actions are perfectly contractible

why do the free trade gain numbers differ so much the role of industrial organization in general equilibrium a small general equilibrium model calibrated approximately to match the canadian tradeable goods sector is used to examine the implications of a range of assumptions about pricing behaviour and entry barriers for the impact of free trade with the united states it turns out that only a model with an extreme combination of non competitive product market and free entry as well as unexploited scale economies can generate substantial gains from free trade other assumptions modelled include monopolistic competition market share pricing an economist s model and a mainstream industrial organization approach the predicted welfare gains range from zero to more than 7 per cent of gnp pourquoi est ce que les evaluations numeriques des gains derives de l accord de libre echange different tellement le role de l organisation industrielle dans l analyse d equilibre g6neral l auteur utilise un petit modele d equilibre general calibre pour approximer le secteur canadien des biens echangeables avec l exterieur dans son analyse des implications d un ensemble de postulats quant a la tarification et aux barrieres a l entree sur l impact du libre echange avec les etats unis il appert que seul un modele impliquant une combinaison extreme de marches de produit non concurrentiels et d entree libre ainsi que d economies d echelle non exploitees peut engendrer des gains substantiels comme resultat du libre echange on examine aussi d autres postulats concurrence monopolistique tarification pour maintenir une part du marche un modele a saveur economiste et 1 approche standard d organisation industrielle les gains de bien etre qu on predit selon les postulats de base couvrent un eventail de zero a 7 pour cent du pnb

the firm as a dedicated hierarchy a theory of the origins and growth of firms in the formative stages of their businesses entrepreneurs have to provide incentives for employees to protect rather than steal the source of organizational rents we study how the entrepreneur s response to this problem determines the organization s internal structure growth and its eventual size large steep hierarchies will predominate in physical capital intensive industries and will have seniority based promotion policies by contrast e at hierarchies will prevail in human capital intensive industries and will have up or out promotion systems furthermore e at hierarchies will have more distinctive technologies or cultures than steep hierarchies the model points to some essential differences between organized hierarchies and markets at the root of most enterprises generating economic surplus is an entrepreneur with a unique critical resource such as an idea good customer relationships a new tool or superior management technique a fundamental problem of entrepreneurship is how to enlist the cooperation of the many agents necessary for production without ceding to them too much of the surplus generated by the enterprise the risk of being expropriated however is always inherent in production in particular the entrepreneur has to give her employees whom we call managers close proximity or access to the critical resource for them to learn to produce effectively for example a manager has to understand the idea be in contact with the key customers and suppliers or even learn the entrepreneur s unique managerial techniques in order to work effectively but access also gives the manager the opportunity to expropriate this critical resource and compete against the entrepreneur managers may steal the idea walk away with clients or mimic the entrepreneur s management style and start up a rival concern the greater the access a manager has the more he can appropriate and the more effectively he can compete this paper explores the role of organizational design in

contract renegotiation a simple framework and implications for organization theory this paper provides a unifying framework for studying renegotiation of contracts in the presence of asymmetric information we show that interim renegotiation does not constrain the set of contracts attainable with full commitment regardless of whether renegotiation offers are made by the informed or the uninformed agent ex post renegotiation however does constrain the set of attainable contracts these constraints depend on the identity of the agent making the renegotiation offer we then show how the theory of contract renegotiation can provide insights for organization theory specifically we show how decentralization of decision making can be an optimal response to the threat of ex post renegotiation finally we show that our framework can be used to analyse the trade off between internal and external markets

decentralization aggregation control loss and costs in a hierarchical model of the firm abstract we study the multi divisional firm with the help of a model which links organizational structure and performance we add to our previous model an ability to delegate decisions at the cost of control loss and study its effects on both the structure and the average costs of the firm our technique involves the aggregation of observations and disaggregation of commands the aggregation while simplifying the calculations by superiors and saving time introduces error into their decisions the tradeoff between time and error is taken into account in the construction of the hierarchy

is the implementation of energy saving and emission reduction policy really effective in chinese cities a policy evaluation perspective abstract reducing pollutant emissions while ensuring a stable economic growth is an important embodiment of sustainable development based on the national comprehensive demonstration of energy saving and emission reduction fiscal policy eser policy proposed by the chinese government in 2011 this paper analyzes the impact of such policy on emissions reduction and economic growth under the framework of differences in differences did method this paper first identifies the implementation conditions of eser policy then we adopt three specifications to control the endogenous problem for the selection of demonstration cities the robustness test verifies the reliability of our findings and the spillover effect analysis reveals the deficiency of this policy we reach the following conclusions 1 different from the previous studies we find that the eser policy can effectively reduce the pollutant emissions while ensuring a stable economic growth 2 however the event study reveals that the reduction effect is only existing in the demonstration period which means that this policy is not sustainable 3 furthermore we find no spillover effect of eser policy on the non policy targeted pollutant suggesting that the local government only cares about the reduction of policy targeted pollutants based on these findings we propose that the future energy saving and emissions reduction policy formulation should focus on the policy sustainability and overall environmental performance

move to the beat rhythms of change and firm performance this study examines how different rhythms of change relate to firm performance an explorative analysis of 67 european insurance companies between 1995 and 2004 reveals that corporate strategic changes occur in four distinct rhythms which are classified as either regular or irregular focused punctuated and temporarily switching subsequent quantitative analysis shows that companies that change regularly outperform those that change irregularly this finding prevails under different internal and external contingencies under different change characteristics and over time periods we also find that the rhythm and frequency of change have distinct performance effects our findings contribute to research on the change stability paradox by showing that a regular and sequential balance between change and stability is associated with long term success

noncooperative regulation of a nonlocalized externality with a nonlocalized pollution externality different groups bear the costs and benefits of abatement in the case of acid rain these groups are respectively consumers in the midwest and pollutees in the northeast these groups have conflicting interests that are represented respectively by a public utilities commission and an environmental regulator we analyze a model in which the environmental protection agency acting as a von stackelberg leader regulates pollution and the public utility commission regulates the price for a monopolist that has private information about the effectiveness of its abatement alternatives we characterize a noncooperative equilibrium and compare it with a cooperative equilibrium a nonlocalized pollution externality poses special regulatory problems when the benefits and the costs of abatement are borne by distinct groups whose interests are represented by different regulatory agencies a relevant example is acid rain which is believed to be caused in part by coal fired electricity generating plants these emit sulfur dioxide and nitrogen oxide which upon contact with moisture in the atmosphere form acid that falls with rain measures to reduce these emissions are of concern to the residents of the states in which the coal fired generating plants are located because abatement costs increase the prices they pay for electricity a number of plans have been proposed for distributing those costs more broadly but the costs of reducing the emissions of generating plants located in ohio will likely be borne in large part by ohio consumers and utilities while the benefits from abatement will largely be realized by the residents of the northeast and canada the control of a nonlocalized externality such as acid rain raises the issue of the relationship between the environmental regulator the environmental protection agency epa and the public utility commission the former is responsible for achieving an acceptable balance between the damage from pollution and the cost of abatement the latter is responsible for pricing electricity on the basis of the costs of production and pollution control one possibility is that cooperation between the two regulators leads to the joint regulation of emissions and prices cooperation would internalize the conflicting interests and mandates of the regulators but the distributive consequences of the regulatory alternatives inhibit cooperation the public utility commission for example has an interest in avoiding abate

know how and asset complementarity and dynamic capability accumulation the case of r d dynamic capabilities enable firms to create new products and processes and respond to changing market conditions this empirical investigation of dynamic r d capabilities deals with the role of complementary know how and other assets in the context of changing conditions in the u s petroleum industry during the 1970s and early 1980s the analysis suggests that in response to rising oil prices firms with larger amounts of complementary technological knowledge and physical assets also undertook larger amounts of r d on coal conversion a synthetic fuels process 1997 by john wiley sons ltd

china s land market auctions evidence of corruption this paper studies the urban land market in china in 2003 2007 in china all urban land is owned by the state leasehold use rights for land for re development are sold by city governments and are a key source of city revenue leasehold sales are viewed as a major venue for corruption prompting a number of reforms over the years reforms now require all leasehold rights be sold at public auction there are two main types of auction regular english auction and an unusual type which we call a two stage auction the latter type of auction seems more subject to corruption and to side deals between potential bidders and the auctioneer absent corruption theory suggests that two stage auctions would most likely maximize sales revenue for properties which are likely to have relatively few bidders or are cold which would suggest negative selection on property unobservables into such auctions however if such auctions are more corruptible that could involve positive selection as city officials divert hotter properties to a more corruptible auction form the paper finds that overall sales prices are lower for two stage auctions and there is strong evidence of positive selection the price difference is explained primarily by the fact that two stage auctions typically have just one bidder or no competition despite the vibrant land market in chinese cities

a dynamic capabilities based entrepreneurial theory of the multinational enterprise this paper develops a dynamic capabilities based theory of the multinational enterprise mne it first reviews scholarship on the mne with a focus on what has come to be known as internalization theory one prong of this theory develops contractual transaction cost informed governance perspectives and another develops technology transfer and capabilities perspectives in this paper it is suggested that the latter has been somewhat neglected however if fully integrated as part of a more complete approach it can buttress transaction cost governance issues and expand the range of phenomena that can be explained in this more integrated framework dynamic capabilities coupled with good strategy are seen as necessary to sustain superior enterprise performance especially in fast moving global environments entrepreneurial management and transformational leadership are incorporated into a capabilities theory of the mne the framework is then used to explain how strategy and dynamic capabilities together determine firm level sustained competitive advantage in global environments it is suggested that this framework complements contract based perspectives on the mne and can help integrate international management and international business perspectives

different firm size effects on wages for supervisors and workers abstract we find that i the plant size effect for supervisors is at least double that of non supervisors ii the difference is statistically significant and iii the firm size effect for supervisors is not explained by differential returns on standard variables

state capacity conflict and development the absence of state capacities to raise revenue and to support markets is a key factor in explaining the persistence of weak states this paper reports on an ongoing project to investigate the incentive to invest in such capacities the paper sets out a simple analytical structure in which state capacities are modeled as forward looking investments by government the approach highlights some determinants of state building including the risk of external or internal conflict the degree of political instability and dependence on natural resources throughout we link these state capacity investments to patterns of development and growth

filtered social learning knowledge sharing is economically important but also typically incomplete we filter our communication this paper analyzes the consequences of filtering in the model homogeneous agents share knowledge with their peers whenever the private benefits exceed communication costs the welfare implications of this transmission mechanism hinge on whether units of knowledge complement substitute for or are independent of each other both substitutability and complementarity generate externalities cheaper communication eliminates externalities in the former case but not necessarily in the latter complementary basic skills such as numeracy catalyze technology adoption and adoption may be path dependent even when payoffs are certain and independent across agents

generalizing incentives and loss of control in an optimal hierarchy the role of information technology abstract how do changes in information technology affect a firm s organization to answer this question i extend the existing literature on incentives and control in hierarchies to include i a varying management technology and ii endogenous hierarchy size the generalization produces the new prediction that improvements in information technology produce larger hierarchies this prediction is confirmed by published historical analysis of the emergence of the modern corporation

rational inattention and organizational focus this paper studies optimal communication flows in organizations a production process can be coordinated ex ante by letting agents stick to a prespecified plan of action alternatively agents may adapt to task specific shocks in which case tasks must be coordinated ex post using communication when attention is scarce an optimal organization coordinates only a few tasks ex post those tasks are higher performing more adaptive to the environment and influential hence scarce attention requires setting priorities not just local optimization our results provide microfoundations for a central idea in the management literature that firms should focus on a limited set of core competencies

language and the theory of the firm we characterize efficient technical languages and study their interaction with the scope and structure of organizations efficient languages use precise words for frequent events and vague words for unusual ones a broader organizational scope allows for more synergies to be captured but reduces within unit efficiency since it requires a more generic language a manager working as specialized translator may also be used to achieve between unit coordination while maintaining separate languages our theory reconciles two recent well documented phenomena within organizations the recent increase in information centralization and the reduction in hierarchical centralization

when does coordination require centralization this paper compares centralized and decentralized coordination when manag ers are privately informed and communicate strategically we consider a multi divisional organization in which decisions must be adapted to local conditions but also coordinated with each other information about local conditions is dispersed and held by self interested division managers who communicate via cheap talk the only available formal mechanism is the allocation of decision rights we show that a higher need for coordination improves horizontal com

strategic change in the turnaround process theory and empirical evidence early corporate turnaround theorists argued that strategic reorientations are central to the recovery process at many declining firms however subsequent large sample empirical studies have reported that performance turnarounds for declining firms are primarily associated with cutback actions that increase efficiency thus creating a gap between theory and empirical findings we close this gap by presenting and empirically supporting a model proposing that the extent of strategic change initiated in a successful turnaround varies systematically with a declining firm s need and capacity to reorient its strategy based on our model we offer explanations for why past large sample researchers were not able to verify the role of strategic change in the turnaround process and we reassert the adaptive role that strategic reorientations have in the turnaround attempts of declining firms with weak strategic positions 1997 by john wiley sons ltd

trade and relative wages the role of supervisory function by skilled workers abstract the effect of trade on relative wages is examined taking into consideration some aspects of internal organization of firms namely the twin function of production and supervision by skilled workers when trade is based on endowment differences the effect of trade is greater than is predicted by the stolper samuelson theorem when trade is based on technological differences freer trade tends to reduce the relative wages in each country in a two country world economy

some stylized facts on organization and its evolution abstract there is a striking difference between the large number of theoretical papers on firm organization and the lack of quantitative empirical evidence if on the one side economists are increasingly concerned with organization of firms on the other side organization still remains an ambiguous concept hardly analyzed empirically in this paper we develop a new empirical methodology based upon business history and previous theoretical works which allows us to describe some aspects of the organization of firms in quantitative terms this approach is instrumental to analyzing the hierarchical structure and the allocation of decision making activities in a sample composed of 438 italian metalworking plants we also study the dynamics of firm organization in the period 1975 1997 the results of the analysis show that the static choice of the organizational form crucially relies upon the loss of control phenomenon they also illustrate that the dynamics of hierarchical structure follows an inertial process characterized by incremental adjustments lastly both the organization of firms and more interestingly its evolution differ from one category of firms to another depending crucially on firm size

optimal supervision intensity collusion and the organization of work the intensity of supervision defined as the proportion of supervisors to bottom rank productive workers differs widely across organizations and nations analysing three monitoring systems that differ in their supervision intensity i show that the possibility of collective shirking arrangements can impose a system dependent limit on the range of implementable performances this brings about a tradeoff in the choice of the monitoring system the system that economizes on incentive costs may implement an inferior range of performances applications of the model generate work disutility ethics and job characteristics based explanations for variations in the intensity of supervision l intensite de supervision definie par la proportion de superviseurs par rapport au nombre de travailleurs productifs de plus bas niveau differe vastement d une organisation a l autre et d un pays a l autre on analyse trois systemes de surveillance qui different par leur degre d intensite de supervision et on montre que la possibilite d arrangements de resquille collective peut imposer des limites a l eventail de performances realisables voila qui met de l avant une relation d equivalence dans le choix du systeme de surveillance un systeme qui economise sur les couts d incitation peut mettre en place un eventail de performance relativement inferieur les applications du modele suggerent des explications fondees sur la desutilite du travail l ethique et les caracteristiques du travail pour expliquer les variations dans l intensite de supervision

does flattening government improve economic performance evidence from china this paper examines a causal relationship between the flattening of a government hierarchy and economic performance by exploiting a panel data set on government reorganization in china from 1995 to 2012 delayering has led to increases in revenue and inter governmental transfers for county governments but the associated enlarged span of control makes it difficult for upper level governments to coordinate and monitor local ones this has led to a reduction in county governments total public expenditure and pro growth expenditure as well as an increase in land corruption overall the flattening of the government hierarchy has a negative effect on economic performance

television and voter turnout i use variation across markets in the timing of television s introduction to identify its impact on voter turnout the estimated effect is significantly negative accounting for between a quarter and a half of the total decline in turnout since the 1950s i argue that substitution away from other media with more political coverage provides a plausible mechanism linking television to voting as evidence for this i show that the entry of television in a market coincided with sharp drops in consumption of newspapers and radio and in political knowledge as measured by election surveys i also show that both the information and turnout effects were largest in off year congressional elections which receive extensive coverage in newspapers but little or no coverage on television

international diversification and firm performance the s curve hypothesis a proposed theoretical framework for the study of multinationality and performance includes both benefits and costs of geographic expansion over different phases of internationalization data on 1 489 japanese firms over 12 years show a consistent horizontal x s shaped x relationship between multinationality and performance further firms investing more heavily in intangible assets such as technology and advertising achieved greater profitability gains from growth in foreign direct investment our framework and findings highlight complexity and temporal dynamics

dynamic capabilities what are they this paper focuses on dynamic capabilities and more generally the resource based view of the firm we argue that dynamic capabilities are a set of specific and identifiable processes such as product development strategic decision making and alliancing they are neither vague nor tautological although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence they have significant commonalities across firms popularly termed best practice this suggests that they are more homogeneous fungible equifinal and substitutable than is usually assumed in moderately dynamic markets dynamic capabilities resemble the traditional conception of routines they are detailed analytic stable processes with predictable outcomes in contrast in high velocity markets they are simple highly experiential and fragile processes with unpredictable outcomes finally well known learning mechanisms guide the evolution of dynamic capabilities in moderately dynamic markets the evolutionary emphasis is on variation in high velocity markets it is on selection at the level of rbv we conclude that traditional rbv misidentifies the locus of long term competitive advantage in dynamic markets overemphasizes the strategic logic of leverage and reaches a boundary condition in high velocity markets copyright 2000 john wiley sons ltd

the firm as a communication network this paper analyzes how organizations can minimize costs of processing and communicating information communication is costly because it takes time for an agent to absorb new information sent by others agents can reduce this time by specializing in the processing of particular types of information when these returns to specialization outweigh costs of communication it is efficient for several agents to collaborate within a firm it is shown that efficient networks involve centralization that individuals delegate tasks to subordinates only if they are overloaded and that the number of transits to the top tends to be equalized across individual information items

organizational structure and product choice in knowledge intensive firms this paper formulates a model in which a firm simultaneously chooses its organizational structure and product position the firm s production is knowledge intensive requiring employees to solve problems a vertical hierarchy in which workers refer unsolved problems to managers facilitates the acquisition and leveraging of managers superior knowledge i show that a larger span of control is complementary to the provision of high value products moreover this complementarity is sustained when employees acquire sufficient knowledge and is further strengthened when the firm enhances its capability of communicating knowledge the model yields testable implications concerning 1 the fit between a firm s product position and span of control 2 the effect of information technology on product innovations and skill biased organizational changes and 3 the heterogeneity in hierarchical structure and human resource management in professional service firms this paper was accepted by bruno cassiman business strategy

optimal design of peer review and self assessment schemes a principal must decide whether or not to implement a project that originated with one of her employees several employees have information about the quality of the project a successfully implemented project raises the inventor s chance of promotion at his peer s expense but a failed project ruins the inventor s career an employee who has a relatively good reputation and therefore is happy with the status quo must be encouraged to promote new ideas an employee who has a relatively bad reputation and therefore wants to change the status quo must be prevented from exaggerating the quality of new ideas we study incentive compatible and renegotiation proof mechanisms and we find that self assessment without any peer reports is optimal copyright 2001 by the rand corporation

communication complexity and mechanism design the curse of the revelation principle is that it leads us to focus on unrealistic mechanisms in which agents report all private information to the principal who then makes all decisions centrally this is not true when communication costs are introduced in that case partial communication of information sequential back and forth conversations and decentralization of decisions become part of optimal mechanisms this paper looks at the interplay between the incentive constraints and the communication constraints when can they be separated so that for example one can separately study the incentive compatibility of a social choice rule and the minimum cost communication protocol that realizes the social choice rule jel d82 c72

should a team be homogeneous abstract should an organization hire people with similar backgrounds or with different backgrounds we formulate this question within the framework of team theory the team is formed by n agents the type of each agent is endogenous and determines his information structure and his cost for the team we show that the sign of complementarity between jobs determines workforce homogeneity with positive complementarities the team should be composed of agents of the same type while with negative complementarities workforce heterogeneity is optimal these results do not rely on the restrictions on the way uncertainty is modeled or on the feasible set of agent types they can be explained in terms of correlation between errors committed by different agents

costly communication and learning from failure in organizational coordination abstract this paper investigates the coordination failure that arises from combining two small pre existing groups and focuses on the reaction of group members to this change in environment in an experiment small groups were first able to establish a coordination history in a repeated minimum effort game in the second phase two groups with different histories were combined into a larger group unlike most of the previous literature subjects could endogenously choose to communicate in the newly formed group for a small fee while communication proved to be necessary for preventing coordination failure in the newly formed group only every second subject was willing to implement communication particularly subjects from groups with a less efficient coordination experience in the first phase were more likely to realize the potential of coordination failure in the new group and were thus more likely to decide for communication the results may be useful for understanding how groups coordinate in changing environments as they are common in economic contexts

the impact of hierarchies on wages abstract hierarchical production theory has only one consistent prediction that wages increase with level in a hierarchy theoretical disagreement exists as to what causes this wage premium and how it might be affected by the number of levels of superiors above an employee by empirically analyzing these issues we find that i level one supervisors receive a premium due to some unobserved characteristic ii higher level supervisors receive a premium through higher rates of return on human capital and iii the marginal effect on wages of increasing the level of an employee declines with the number of levels above the employee

the agricultural roots of chinese innovation performance abstract a debate is brewing in the literature on whether legacies of rice and wheat cultivation in china matters for cultural attributes in particular individualism vs collectivism in turn this important cultural dimension has recently been shown to affect the pattern of innovation across countries however the previous literature has not firmly connected agricultural legacies and innovation rates and has consistently used low resolution data we study the role of agricultural legacy for innovation performance using unique patent data from close to two thousand chinese counties we provide robust evidence that counties with a legacy of rice cultivation generate fewer patent applications than other counties and a legacy of wheat production tends to be associated with more patent applications the results for rice are robust to e g controlling for temperature precipitation irrigation disease burden religiosity and corruption as well as accounting for migration patterns our results firmly establish the importance of agricultural legacy for shaping the culture of innovation

hierarchies of processors with endogenous capacity abstract capacity is defined as the number of information items a processor can handle in a given time this note studies the properties of a hierarchy of processors in which the capacities of processors are choice variables the hierarchy must pay each processor it decides to employ a wage which is an increasing function of the processor s capacity it is shown that efficient hierarchies tend to be characterized by three simple properties i within any given level capacity is uniform ii across levels the higher the level the higher the capacity and iii no skip level reporting occurs journal of economic literatureclassification numbers d21 j31 l23

incentives information and organizational form we model an organization as a hierarchy of managers erected on top of a technology here consisting of a collection of plants in our framework the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him we argue that different organizational forms give rise to different information about managers performance and therefore differ according to how effective incentives can be in encouraging a good performance in particular we show that under certain assumptions the m form multi divisional form is likely to provide better incentives than the u form unitary form because it promotes yardstick competition i e relative performance evaluation more effectively we conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for chinese data

a technological and organisational explanation for the size distribution of firms this paper combines insights from the literature on the economics of organisation with traditional models of market structure to construct a theory of equilibrium firm size heterogeneity under the assumption of a homogenous product industry it is possible that configurations consisting entirely of small firms run by entrepreneurs with limited attention and with larger firms using managerial techniques to substitute away these limits to allow increasing returns technologies to become profitable can arise in equilibrium however there also exist equilibrium configurations with the co existence of large and small firms the efficiency properties of these respective equilibria are discussed finally the implications of an expanding market size are considered

project characteristics incentives and team production we develop a model to show how agency conflicts free rider effects and monitoring costs interact to affect optimal team size and workers incentive contracts team size increases with project risk decreases with profitability and decreases with monitoring costs as a proportion of output our predictions are consistent with empirical evidence that firm specific risk has increased over time average corporate earnings have declined and firms organizational structures have also flattened the predicted effects of monitoring costs on team size are supported by evidence that improvements in information technology likely to lower monitoring costs lead to larger teams further firms with relatively more intangible assets where monitoring costs are likely to be higher are smaller optimal incentive intensities decrease with risk and increase with profitability the endogenous determination of team size accentuates the positive effects of a decline in risk and an increase in profitability on incentives

under the weather health schooling and economic consequences of early life rainfall life in rural areas of developing countries is prone to many kinds of risk such as illness or mortality of household members crop or other income loss due to natural phenomena weather insect infestations or fire for example and civil conflict in addition to their contemporaneous effects the effects of certain types of shocks may still be felt many years or even decades later from a public policy standpoint it is particularly important to identify shocks that have large long run effects moreover the mechanics underlying the persistence of shocks may be of con siderable interest for example a health shock may have a long run effect simply because the health shock itself persists over time alternately the health shock may not directly affect long run outcomes but it could affect some other outcome such as educational attainment that helps determine long run well being in this paper we focus on shocks that occur at the very beginning of life we ask how sensi tive long run individual well being is to environmental conditions around the time of birth in particular we examine the effect of weather shocks around the time of birth on the adult health education and socioeconomic outcomes of indonesian women and men born between 1953 and 1974 in addition we attempt to shed light on the intervening pathways connecting early life rainfall to adult outcomes illuminating the roles of health and educational attainment in deter mining adult socioeconomic status this investigation has considerable data requirements it necessitates information on weather shocks experienced by individuals several decades earlier as well as detailed current informa tion on adult outcomes we use information in the indonesian family life surveys ifls on an individual s year and location of birth and link each individual in that survey to locality specific rainfall data for their birth year for individuals born in rural areas on whom we focus rainfall variation across space and time should generate corresponding variation in agricultural output and thus household income to deal with measurement error in the rainfall data we run instrumental variables regressions where variables for rainfall measured at slightly more distant rainfall stations serve as instruments for rainfall in the individual s birthplace and birth year we examine the impact of early life rainfall on a range of adult outcomes observed in 2000 we find that higher early life rainfall leads to improved health schooling and socioeconomic status for women women with 20 percent higher rainfall relative to normal local rainfall in their year and location of birth are 3 8 percentage points less likely to self report poor or very poor health they attain 0 57 centimeters greater height attain 0 22 more completed grades of

is cumulative growth in manufacturing productivity slowing down in the eu12 regions the cumulative causation in the relation between labour productivity and output growth known as verdoorn s law is empirically tested using data from 109 eu12 regions during the period 1977 2005 several specifications of verdoorn s law are put forward in this paper which attribute the process of cumulative causation to a series of factors including manufacturing agglomeration spatial interaction and responses to the problems of growth the findings suggest that although cumulative causation holds over this period the slowdown of its pace is nonetheless apparent post 1992 revisions in responses e g policy along with further research are thus recommended the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved

a strategic theory of bureaucratic redundancy do redundant bureaucratic arrangements represent wasteful duplication or a hedge against political uncertainty previous attempts at addressing this question have treated agency actions as exogenous thus avoiding strategic issues such as collective action problems or competition i develop a game theoretic model of bureaucratic policy making in which a political principal chooses the number of agents to handle a given task importantly agents have policy preferences that may be opposed to the principal s and furthermore may choose their policy or effort levels among the results are that redundancy can help a principal achieve her policy goals when her preferences are not aligned with the agents but redundancy is less helpful if even a single agent has preferences relatively close to the principal s in this environment collective action problems may cause multiple agents to be less effective than a single agent redundancy can also be unnecessary to the principal if the agent s jurisdiction can be terminated

foodgrain price stabilisation in an open economy a cge analysis of variable trade levies for india within the present multilateral trading system the developing countries are obliged to gradually open up their agricultural sector to world markets as a result of this the effectiveness of conventional instruments of food price stabilisation will be greatly reduced how then is food price stability to be maintained in a liberalised open economy this article presents a general equilibrium evaluation of using variable trade levies on agricultural trade to stabilise foodgrain prices in response to exogenous shocks this is done for the indian economy with the help of a multi period computable general equilibrium cge model focused on agriculture and income distribution the model is used to analyse the sensitivity of the economy s growth income distribution and food security to external and internal shocks under varying degrees of trade openness the results show that both shocks are distributionally regressive and with external shocks become more so the more open the economy is wto consistent var

the division of labor coordination costs and knowledge this paper considers specialization and the division of labor a more extensive division of labor raises productivity because returns to the time spent on tasks are usually greater to workers who concentrate on a narrower range of skills the traditional discussion of the division of labor emphasizes the limitations to specialization imposed by the extent of the market we claim that the degree of specialization is more often determined by other considerations especially emphasized are various costs of coordinating specialized workers who perform complementary tasks and the amount of general knowledge available