when do losses loom larger than gains abstract in defining limits to loss aversion novemsky and kahneman 2005 offer important new data and a needed summary of appropriate ways to think about loss aversion in this comment to novemsky and kahneman s article the authors consider the new empirical results that involve probabilistic buying and selling suggesting caution in generalizing the results to nonprobabilistic commerce the authors expand novemsky and kahneman s summary by exploring two critical constructs that help define the boundaries of loss aversion emotional attachment and cognitive perspective emotional attachment alters loss aversion by moderating the degree to which parting with an item involves a loss whereas shifts in cognitive perspective explain why items typically viewed as a loss are given more or less weight the goal is to use these constructs to characterize more specifically contexts in which losses loom larger than gains and to suggest specific ways that research into loss aversion could evolve

country of origin effects on product evaluations this article reviews the literature regarding the effect of country of origin on buyer evaluations of products the issue is important for countries especially resource poor developing countries that need to increase manufactured exports and for firms that source products in countries different from where sold marketing inferences are drawn and implications for future research are developed

measuring returns on investments in collectibles this paper considers the question of how to measure and interpret the financial return to investing in collectibles we review various methodologies for creating priced indexes and then discuss studies that explicitly calculate a rate of return to some set of collectibles while most collectibles appear to yield positive real returns the majority embody more risk and yield lower financial returns than stocks other characteristics of collectibles prices such as covariance with other asset prices are also examined

assessing the impact of country of origin on product evaluations a new methodological perspective a new methodological approach for examining the impact of country of origin on product evaluations is proposed it takes the form of a multiattribute attitudinal model analyzed by means of a system

profit sharing and productivity microeconomic evidence from the united states profit sharing has often been suggested as a potential solution to principal agent problems in the workplace the relationship between productivity and profit sharing is examined using a panel dataset drawn from 2 976 publicly held companies over the 1971 85 period alternatively using firm intercept and first difference specifications the regression results indicate that the adoption of profit sharing is associated with a 2 5 4 2 percent increase in productivity in addition the size of the effect increases with the proportion of employees participating in profit sharing these results hold under a variety of specifications and do not appear to be explained by accompanying changes in management or personnel policies copyright 1992 by royal economic society

profit sharing in the british retail trade sector the relative performance of the john lewis partnership this paper investigates the effects of profit sharing on wages and employment by comparing the labour market behaviour of the john lewis partnership with that of four main competitors the john lewis partnership employs around 30000 workers who since 1970 have been paid between 13 and 24 per cent of workers income in the form of a profit related bonus the empirical works suggests that profit sharing in the john lewis partnership may be associated with greater levels of employment but does not significantly affect the level of remuneration in recent years a growing proportion of employment contracts in britain have linked pay with the fortunes of the firm see for example blanchflower and oswald 1988 this trend has been stimulated by the british government s introduction of tax relief for profit related pay prp first in 1987 and extended in 1991 weitzman 1984 argues that profit sharing will stabilize employment reduce unemployment and increase wage flexibility the possibility of these externalities from profit sharing on wider economic performance has been used to justify policy interventions this paper reports empirical tests of wage determination and employment creation effects based on a comparison of the labour market behaviour of the john lewis partnership with that of four important competitors in the british retail sector we find some evidence that profit sharing enhances employment

loss aversion without the endowment effect and other explanations for the wta wtp disparity abstract to learn why wta regularly exceeds wtp in economic experiments involving inexpensive market goods with ample substitutes the verbal protocol technique was used in a real cash experiment employing a random price auction results suggest that the primary reason for the disparity was subjects reluctance to suffer a net loss from any transaction whether purchase or sale and tendency to consider sale much below assumed market price as a loss this interpretation indicates a kind of loss aversion but not the kind envisioned in the endowment effect which maintains that selling creates a loss and buying creates a gain

are workers paid their marginal products status is like coase s social costs a reciprocal phenomenon given that one person s gain in status can occur only at the expense of a loss in status for others and that workers are free to choose their coworkers it follows that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products the purpose of this paper is to examine a variety of empirical evidence that relates to this proposition about the firm s internal wage structure the paper is organized as follows section i briefly summarizes the theoretical considerations that govern competitive wage determination when status matters to people and firms are viewed as voluntary associations of workers section ii then confronts the predictions of section i by examining pay and productivity schedules for a group of sales occupations for which these schedules are relatively easily observed section ii also examines the relationship between wages and productivity for a sample of university professors an occupation in which individual productivity differences are for a variety of obvious reasons relatively more difficult to measure all of the evidence examined is consistent with the hypothesis that within firms wage rates vary substantially less than do individual productivity values section iii discusses additional observations and evidence that bear on this same hypothesis it suggests that the implicit market for status may strongly influence the ways in which firms are organized to carry out the tasks they perform section iv concludes by considering the claim that egalitarian internal wage structures arise because of equity considerations it argues that the concept of equity appears very closely linked to the concept of status and suggests a strategy for assigning monetaty value to the equity considerations that so often dominate public policy decisions

cooperation productivity and profit sharing firm specific assets generate an ex post bargaining problem over surplus division and rational workers may collude to obtain a surplus share in nonpecuniary form through restriction of effort conversely profit sharing should motivate cooperation to increase productivity when work organization facilitates interaction and horizontal monitoring since productive effort yields positive externalities to workers under contractual surplus sharing in simultaneous tobit estimates we find a strong influence of profit sharing on factor productivity in a sample of medium sized metalworking capitalist firms in west germany proxies for human capital and organizational factors were included

performance benchmarking and measuring program impacts on customers lessons from the midwest manufacturing technology center abstract most attempts to evaluate the impact of manufacturing extension suffer from at least one of three weaknesses 1 subjectivity of the outcome data 2 inattention to industry leading to inappropriate outcome measures and 3 lack of controls this article reports on our work on the michigan manufacturing technology center mmtc evaluation effort and our attempts to redress these weaknesses since 1991 the mmtc has established a database of performance metrics tracking changes over time for both mmtc clients and a non client control group these data coupled with a detailed scheme for characterizing heterogeneous mmtc interventions provide the raw inputs for an analysis of the impact of mmtc operations analysis of the relative change in client performance from 1990 1992 and from 1991 1993 have demonstrated that mmtc clients are indeed taking some actions that lead to faster improvement relative to the control group but a notable exception is the area of employee computer use client firms are increasing their use of computers throughout the workforce at a slower rate than the control group this is of particular concern as employee computer use is strongly correlated with labor productivity which is closely related to improved profits and wages the article outlines our approach and analysis summarizes our recommendations to the mmtc for program improvements and reflects briefly on the lessons for manufacturing extension policy more generally

a meta analysis of country of origin effects this note reports a quantitative analysis of the country of origin coo effect based on fifty two articles or papers containing sixty nine independent studies and 1 520 effect sizes an analysis of fifteen study characteristics revealed that country of origin effects are only somewhat generalizable using omega squared as the measure of effect size verbal product descriptions produced larger coo effect sizes than did the presence of an actual product likewise single cue studies produced larger coo effect sizes than did multiple cue studies and larger samples produced effect sizes that on average were greater than those produced by smaller samples the size of an observed coo effect was a function of whether the dependent variables was a quality reliability perception or a purchase intention the average effect size of quality reliability perceptions was 30 whereas the average effect size for purchase intentions was 19 purchase intentions were most susceptible to methodological artifacts than were quality reliability perceptions study findings selectively confirm and refute common beliefs regarding the impact of a country of origin cue on product perceptions and purchase intentions

influence of contagious versus noncontagious product groupings on consumer preferences this article studies the influence of product groupings on consumer preferences specifically it is proposed that when each product in two groups has an equal chance of a gain consumers prefer to choose from a group that appears more contagious e g products arranged close together similarly or symmetrically however when each product in two groups has an equal chance of a loss consumers prefer to choose from a group that appears less contagious e g products arranged apart dissimilarly or asymmetrically across three experiments the effect is demonstrated and contagion theory is used to explicate the underlying process

design and policy choices for technology extension organizations abstract governments anxious to assist the smes in their countries to survive and grow face not only policy choices about how to assist with technology financial resources and business direction but also the complex issues of how to design organizations that can deliver these policies effectively this study is a comparative analysis of how technology extension te organizations are designed to support smes in seven countries the study focuses on the design requirements for such organizations and on the design choices that have been used to satisfy the design requirements given different policy frameworks prescriptive advice on the design of te organizations is offered to both policy makers and managers of such organizations

innovation and market strategy in italian industrial cooperatives econometric evidence on organizational comparative advantage abstract this paper argues that more than one type of organizational form can be simultaneously efficient within an industry when differentiation in product qualities are significant firms with some exogenous or persistent component to their organizational structure will specialize in product qualities for which their organizational structure puts them at an advantage relative to other firms this framework is used in an empirical study of innovation and market strategy of industrial cooperatives results of management surveys of italian cooperatives on company strategy are combined with company financial data to test the hypothesis that industrial cooperatives will hold organizational comparative advantages in innovative activity which stresses the production knowledge of ordinary employees in high quality products and in the use of specialized corporate alliances strong evidence supporting the hypotheses are found when the performance of the firm is measured by its profitability and income per member

worker participation and productivity in labor managed and participatory capitalist firms a meta analysis using meta analytic techniques the author synthesizes the results of 43 published studies to investigate the effects on productivity of various forms of worker participation worker participation in decision making mandated codetermination profit sharing worker ownership employee stock ownership or individual worker ownership of the firm s assets and collective ownership of assets workers collective ownership of reserves over which they have no individual claim he finds that codetermination laws are negatively associated with productivity but profit sharing worker ownership and worker participation in decision making are all positively associated with productivity all the observed correlations are stronger among labor managed firms firms owned and controlled by workers than among participatory capitalist firms firms adopting one or more participation schemes involving employees such as esops or quality circles

matching product catgeory and country image perceptions a framework for managing country of origin effects the study of country of origin coo effects examines how consumers perceive products emanating from a particular country this study examines coo in terms of the fit between countries and product categories a framework is suggested which matches the importance of product category dimensions with the perceived image of the country of origin along the same dimensions such matches or mismatches can be either favorable or unfavorable managers can use product country match information to assess consumers purchase intentions and assist them in managing their product s coo data collected from consumers in ireland mexico and the united states demonstrate the product country match framework and its strategic implications

firm size and job quality a survey of the evidence from germany small firms provide and create a large proportion of jobs in germany are these jobs worse than jobs in larger firms the mosaic picture that emerges from a review of several recent empirical studies using german individual or firm level micro data shows that all in all wages are lower non wage incomes fringes are lower job security is lower work organisation is less rigid institutionalized possibilities for workers participation in decision making are weaker and opportunities for skill enhancement are worse in small firms compared to large firms the weight of evidence therefore indicates that on average small firms offer worse jobs than large firms it is argued that there is no need for policy measures targeted to improve job quality in small firms because higher incomes in large firms can in part be seen as compensating differentials for more rigid work organisation and can follow from wage policies to reduce shirking and turnover that is more costly in large than in small firms furthermore a lower level of remuneration less protection against dismissals a lower level of workers participation and less opportunities for further training all contribute to lower costs in small firms that might be needed to compensate for size related cost disadvantages compared to large firms economic policy should concentrate on keeping barriers to entrepreneurs entry to markets low to foster new firm formation and creative destruction

are family firms good employers family firms employ about 60 percent of the global workforce while it is widely assumed that they are good employers data about their conduct is mixed in this study we extend stewardship and agency theories to test competing propositions about the impact of family on employment practices using data from 14 961 private belgian firms over a 19 year period higher investments lower dividend payout and higher risk tolerance indicate that family firms are better financial stewards of their companies than nonfamily firms however family firms are worse organizational stewards than nonfamily firms they offer lower compensation invest less in employee training and exhibit higher voluntary turnover and lower labor productivity further and contrary to earlier research we find that financial practices in private family firms do not change over time and that the deleterious influence of family on employment practices rises with both firm age and with heightened family involvement together our findings suggest that a more nuanced understanding of stewardship and agency theory is needed to understand the impact of family on the governance of private firms

authenticity is contagious brand essence and the original source of production it is well established that differences in manufacturing location can affect consumer preferences through lay inferences about production quality in this article the authors take a different approach to this topic by demonstrating how beliefs in contagion the notion that objects may acquire a special aura or essence from their past influence perceptions of authenticity for everyday consumer products and brands specifically they find that due to a belief in contagion products from a company s original manufacturing location are viewed as containing the essence of the brand in turn this belief in transferred essence leads consumers to view products from the original factory as more authentic and valuable than identical products made elsewhere the authors further reveal that consumers who are higher in sensitivity to contagion are more likely to exhibit this effect and that activating the concept of contagion enhances preferences for products made in the brand s original factory the authors clos

celebrity contagion and the value of objects why do people purchase objects that were once owned by celebrities such as film stars or politicians and also by despised individuals such as serial killers and notorious dictators the present studies examine three potential explanations mere associations market demands and contagion the belief that these objects contain some remnants of their previous owners results indicate that while market demands do play a role contagion appears to be the critical factor affecting the valuation of celebrity possessions manipulating the degree of physical contact that a celebrity has with an object dramatically influences consumers willingness to purchase it and individual differences in sensitivity to contagion moderate this effect additionally the valuation of celebrity possessions is principally explained by measures of contagion and subliminally activating the concept of contagion changes consumers willingness to purchase celebrity objects theoretical and practical implications of these findings

profit related pay and the u k small firm labour market this paper critically examines the relevance of profit related pay prp for the u k small firm sector since 1986 the u k government has actively encouraged prp which attracts generous tax breaks because it believed that prp would make pay more flexible downwards and would significantly improve employee identification morale and productivity an analysis of the theoretical arguments and the assumptions made regarding the nature of the u k small firm sector that underlay these claims suggests however that the likelihood of achieving either of these alleged benefits is small an appraisal of the available empirical evidence on the practical implementation and operation of prp schemes suggests that the tax relief simply encourages firms to introduce cosmetic schemes that have no appreciable impact upon the behaviour of either firms or employees moreover the experience of some firms that adopted prp schemes indicates that far from increasing morale and productivity prp often creates new tensions and conflict between owners and employees these and other unintended consequences illustrate the inherent difficulties of government attempts to use the tax system to alter the behaviour of agents engaged in a wide variety of complex and very heterogeneous bargaining situations

cultural variations in country of origin effects abstract the authors examine the extent to which cultural orientation influences country of origin effects on product evaluations in two countries japan and the united states subjects were given attribute information about a mountain bike made in either japan or the united states the target product was described as either superior or inferior to competition respondents in japan evaluated the product that originated in the home country versus foreign country more favorably regardless of product superiority in contrast respondents in the united states evaluated the product that originated in the home country more favorably only when the product was superior to competition the authors explain these findings on the basis of the cultural psychological principles of individualism and collectivism specifically the authors show that the vertical dimension of individualism and collectivism explains country of origin effects the authors also discuss implications for global marketing strategies featurin

efficiency and internal organization works councils in west german firms efficiency voice theory has not explained why highly competent managers cannot maintain effective communication without formal or mandatory institutions of l abor s voice powerful west german works councils are negatively rela ted to productivity in the sample suggesting that the best managers can do better without councils however excessive pressure on worker s should encourage both unionization and councils to gain compensatin g differentials and the simultaneous wls tobit estimates also suppor t this effect general productivity benefits from formal voice organi zation are strongly rejected but evaluating welfare efficiency and causality directly requires data on job satisfaction and managerial ability copyright 1987 by the review of economic studies limited

the endowment effect as self enhancement in response to threat the discrepancy between willingness to pay wtp and willingness to accept wta for a product referred to as the endowment effect has been investigated and replicated across various domains because of its implications for rational decision making the authors assume that implicit processes operate in the endowment effect and propose an explanation that is derived from the two main accounts of the effect ownership and loss aversion based on the implicit egotism and self affirmation literatures the model argues that selling is perceived as an implicit self threat and that sellers as a part of their automatic defense mechanism respond to this self threat by enhancing the value of the self associated object five studies test these conjectures and provide support for the proposed model

on the choice of incentives in firms abstract simple models of individual and group incentives under uncertainty are compared and comparative performance is shown to depend upon various exogenous parameters the incentive effects of profit sharing will thus vary with organizational and other characteristics that may be difficult to observe and attempts to quantify productivity effects that neglect selection bias are likely to be misspecified significant selection effects are found in previously used firm level data and productivity effects of existing profit sharing are found to be much larger than potential effects in firms without sharing arrangements this throws doubt on policies to encourage sharing in isolation

issues and perspectives on evaluating manufacturing modernization programs abstract the establishment of a national system of federal state manufacturing modernization centers to serve small and medium sized manufacturing systems is a major experiment in the us the system s rapid expansion has made it impossible to begin with an experimental design that would systematically permit tests of the variables and relationships likely to effect the long term economic effectiveness of these centers or their political and financial stability relatedly many existing evaluation studies and journalistic narratives are marred by serious analytical and empirical flaws it is not too late to attempt to improve practice in future evaluations several areas of expanded evaluation are described including theories of industrial restructuring regional technology infrastructure public management financing evaluation design evaluability assessment firm learning and measurement of benefits and costs in each case evaluation is presented as a means of simultaneously yielding information relevant to formative and summative program level decisions and to hypothesis testing

a measure of federalism assessing manufacturing technology centers abstract this article considers the evaluation of manufacturing technology centers mtcs and the possibilities for a new experimental federalism in public administration in the light of the emergence of collaborative learning among firms economic volatility is leading to decentralized decision making authority within and among firms which entails a new understanding of performance measurement and economic coordination the decentralization of decisions compels that goals and achievement indicators be continuously revised to reflect learning through local autonomy to achieve this end firms adopt disciplines requiring continuous exchange of information about organizational improvements mtcs are already encouraging firms to do just this hence assessment of the mtcs should provide a public setting for the centers to learn why they are good or bad at helping firms monitor themselves national comparisons are proposed of similar projects at different centers and of different combinations of services provided by centers and their respective regional partners this makes improvement of the parts of the system the discrete classes of service independent of improvement of the whole the architecture of the centers as development agencies the conclusion examines the resulting form of experimental federalism as the analog in governmental organization to collaborative production in firms

focusing on the forgone how value can appear so different to buyers and sellers we propose that buying and selling price estimates reflect a focus on what the consumer forgoes in the potential exchange and that this notion offers insight into the well known difference between those two types of value assessment buyers and sellers differ not simply in their valuation of the same item but also in how they assess the value buyers tend to focus on their sentiment toward what they forgo typically the expenditure and buying prices are thus heavily influenced by variables such as salient reference prices by the same token sellers tend to focus on their sentiment toward surrendering the item and selling prices are hence more heavily influenced by variables such as benefits of possessing the item four studies examining buying and selling price estimates of tickets for national collegiate athletic association basketball games offer consistent support for these ideas the studies show that naturally occurring differences among respondents in attitudes relating to the tickets that sellers forgo e g significance of the game corresponded more closely to variation in selling prices than in buying prices conversely measures relating to the expenditure e g respondents concern with money corresponded more closely to buying prices than to selling prices using controlled manipulations we then showed that changes in aspects relating to the game e g expected climate in the stadium affected selling prices more than buying prices but changes relating to the expenditure e g list price of the ticket influenced buying prices more than selling prices we also showed that drawing attention to the benefits of possessing a ticket before asking for the price estimates influenced buying prices more than selling prices supporting our claim that otherwise these benefits are naturally more salient to sellers than buyers similarly drawing attention to alternative uses of money before asking for price estimates influenced selling prices more than buying prices

money isn t everything but it helps if it doesn t look used how the physical appearance of money influences spending despite evidence that currency denomination can influence spending researchers have yet to examine whether the physical appearance of money can do the same this is important because smaller denomination bills tend to suffer greater wear than larger denomination bills using real money in the context of real purchases this article demonstrates that the physical appearance of money can override the influence of denomination the reason being people want to rid themselves of worn bills because they are disgusted by the contamination from others whereas people put a premium on crisp currency because they take pride in owning bills that can be spent around others this suggests that the physical appearance of money matters more than traditionally thought and like most things in life it too is inextricably linked to the social context the results suggest that money may be less fungible than people think

incentives the effect of profit sharing plans offered by previous employers on current wages using national longitudinal survey of youth nlsy data i investigate the relationship between wages and the use of profit sharing plans by current and past employers i find a significant wage effect of profit sharing plans in previous jobs also controlling for past plans eliminates the wage effect of current plans

profit sharing and the financial performance of companies evidence from u k panel data this paper examines the dynamic relationship between profit sharing and profitability in a sample of u k firms during the 1980s the estimates indicate a positive short run effect of the introduction of profit sharing schemes on the financial performance of companies this relationship is evident even if unobserved firm specific fixed effects and potential endogeneity of profit sharing are controlled for quite apart from its widely recognized influence on productivity and industrial relations profit sharing is arguably a financially attractive option for firms there is also evidence of the persistence of profitability in u k profit sharing firms copyright 1994 by royal economic society

the microeconomics of manufacturing modernization programs abstract manufacturing modernization programs are designed to improve the competitiveness of small and medium sized manufacturers by accelerating their use of best practice technologies justification for these programs is most often cast in terms of past slow rates of adoption international economic competitiveness and market failures in the provision of information these frameworks however do not adequately address policy and programmatic issues related to program design financing and program evaluation using a microeconomic model based on the firm and industry level effects of these programs we examine the importance of spillover benefits from modernization efforts both horizontal spillovers to rivals of program clients and vertical spillovers to clients customers and the implications for these policy and programmatic issues

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 endowment effect rose tinted and dark tinted glasses the endowment effect predicted by prospect theory is a robust finding in behavioral decision theory extending recent examinations of the underlying processes we present evidence for differential perceptions of the traded item with sellers focusing more on positive features and less on negative features relative to buyers in experiment 1 sellers and buyers access information of differing valence in a free recall task experiment 2 utilizes error rates and response latencies to demonstrate systematic and differing patterns of errors and biases in reactions to valenced stimuli experiment 3 utilizes contrast effects to manipulate these foci thereby moderating the endowment effect

profit sharing and employee share ownership profit sharing and employee share ownership saul estrin paul grout and sushil wadhwani this paper evaluates the likely effects of linking a part of a worker s pay to the employer s profits it has been suggested by weitzman that this would raise employment by lowering the cost of taking on an extra worker however this can only happen if existing workers are willing to let their share of value added fall and experience of those firms in the uk who already operate profit sharing schemes suggests that the weitzman mechanism is not operative there is however some evidence that profit related pay does boost productivity but there are other ways of raising productivity such as performance related pay which may be more effective productivity enhancing effects are likely to be greatest when employees are involved in decision making as well but this is likely to undermine the weitzman case still further even if the argument that profit sharing raises employment is not compelling it is sometimes suggested that it can do little harm however there is evidence that it may well be inflationary in which case the government would be advised to proceed cautiously we argue that there is very little case for the introduction of a permanent subsidy to encourage increased profit sharing although there may be a case for a temporary one to overcome managerial inertia however there is a danger that a subsidy will promote cosmetic schemes designed to be eligible for the subsidy but which do not reflect any real change in behaviour

the effects of improshare on productivity analyzing 112 responses to a 1988 questionnaire sent to all known users of improshare the author estimates the effects on productivity of this gain sharing plan which is being used by a growing number of companies the data indicate that improshare has led to significant increases in productivity the median productivity increase was about 8 in the first year and the cumulative productivity gains had risen to 17 5 by the third year after which they began to level off the mean productivity increases were even greater than the median increases and followed a similar pattern the author finds that a sizable portion of the gains reflects reductions in defect and downtime rates and that firm size was inversely related to productivity gains

moral hazard and risk spreading in partnerships partnerships provide a classic example of the tradeoff between risk spreading and moral hazard the degree to which firms choose to spread risk and sacrifice efficiency incentives depends upon risk preferences for which data are typically unavailable we use a unique dataset on medical group practice to investigate this tradeoff risk aversion leads to compensation arrangements which spread risk through greater sharing of revenues we find that compensation arrangements with greater degrees of revenue sharing significantly reduce physician effort the results imply that changing the method of physician payment from fee for service to capitation will dramatically reduce physician effort