nep-bec New Economics Papers
on Business Economics
Issue of 2005‒02‒27
sixteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. The Management of Projects and Product Experimentation: Lessons from the Entertainment Industries By Mark Lorenzen & Lars Frederiksen
  2. Why So Unhappy? The Effects of Unionisation on Job Satisfaction By Bryson, Alex; Cappellari, Lorenzo; Lucifora, Claudio
  3. 09/11 on the USD/EUR Foreign Exchange Market By Mende, Alexander
  4. WTO Agricultural Negotiations: a comparison of the Harbinson proposal and the Swiss Formula By Martina Brockmeier; Marianne Kurzweil; Janine Pelikan; Petra Salamon
  5. Statistical Properties of a Heterogeneous Asset Price Model with Time-Varying Second Moment By Carl Chiarella; Xue-Zhong He; Duo Wang
  6. Assessing Brand Image through Communalitites and Asymmetries Brand-to-Attribute and Attribute-to-Brand Associations. By Anna Torres; Tammo Bijmolt
  7. Situation Variation in Consumers’ Media Channel Consideration By Wendel,Sonja; Dellaert,Benedict G.C.
  8. The Impact of Price Disclosure on Dynamic Shopping Decisions By Dellaert,Benedict G.C.; Golounov,Vladislav Y.; Prabhu,Jaideep
  9. The Knowledge Lift: The Swedish Adult Education Program That Aimed to Eliminate Low Worker Skill Levels By Albrecht, James; van den Berg, Gerard J.; Vroman, Susan
  10. Why doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation By Sebnem Kalemli-Ozcan; Laura Alfaro; Vadym Volosovych
  11. People People: Social Capital and the Labor-Market Outcomes of Underrepresented Groups By Borghans, Lex; ter Weel, Bas; Weinberg, Bruce A.
  12. Multiple board appointments and firm performance in emerging economies: Evidence from India By Jayati Sarkar; Subrata Sarkar
  13. Corporate Rent-Seeking and the managerial soft-budget constraint By Rodolfo Apreda
  14. Profiting from innovative user communities: How firms organize the production of user modifications in the computer games industry By Lars Bo Jeppesen
  15. Beware of Workaholics: Household Preferences and Individual Equilibrium Utility By Gersbach, Hans; Haller, Hans
  16. Can Fluctuations in the Consumption-Wealth Ratio Help to Predict Exchange Rates? By Jorge Selaive; Vicente Tuesta R

  1. By: Mark Lorenzen & Lars Frederiksen
    Abstract: The paper analyses management of product innovation in project-based industries, offering a view on management not only of firms, but also of markets. It first argues that projects are prominent in industries where the nature of consumer demand means that product innovation takes place as experimentation. Then, the paper argues that if skills needed for projects are very diverse and projects are complex, there are few internal managerial economies of projects, and the scope for management then transcends the boundaries of firms. In these cases, markets become organized in combinations of people, contracts, and other institutions, in order to facilitate the coordination of market-based projects. While contracts play a role, a continuous, active role of knowledgeable managers (leaders and boundary spanners) is also often necessary. Such managers ? and thus (core parts of) whole industries ? are embedded in project ecologies at particular places, which is why we see geographical clusters in many project-based industries. The paper is mainly conceptual, but develops its argument by drawing examples from the Entertainment industries throughout.
    Keywords: Project organization, product innovation, portfolio management of projects, entertainment
    JEL: L22 O31 L82
  2. By: Bryson, Alex (Policy Studies Institute and CEP); Cappellari, Lorenzo (Catholic University of Milan, CESifo and IZA Bonn); Lucifora, Claudio (Catholic University of Milan and IZA Bonn)
    Abstract: We use linked employer-employee data to investigate the job satisfaction effect of unionisation in Britain. We depart from previous studies by developing a model that simultaneously controls for the endogeneity of union membership and union recognition. We show that a negative association between membership and satisfaction only emerges where there is a union recognised for bargaining, and that such an effect vanishes when the simultaneous selection into membership and recognition is taken into account. We also show that ignoring endogenous recognition would lead to conclude that membership has a positive effect on satisfaction. Our estimates indicate that the unobserved factors that lead to sorting across workplaces are negatively related to the ones determining membership and positively related with those generating satisfaction, a result that we interpret as being consistent with the existence of queues for union jobs.
    Keywords: job satisfaction, union membership, union recognition, endogeneity
    JEL: J28 J51
    Date: 2005–02
  3. By: Mende, Alexander
    Abstract: We study the relationship between foreign exchange trading activity and volatility on the USD/EUR foreign exchange market on the basis of a unique data set around the events of 09/11/2001. We find that volatility and bid-ask spreads are by far larger at that time, but the shock is not persistent. The positive correlation between volume and volatility does not break up, but intensifies strongly indicating the arrival of new information and increased price risk. We conclude that the USD/EUR foreign exchange market maintains its liquid structure and its efficient processing of exogenous shocks.
    Keywords: foreign exchange, market microstructure, liquidity, sudden events
    JEL: F31 G14 G15
    Date: 2005–02
  4. By: Martina Brockmeier; Marianne Kurzweil; Janine Pelikan; Petra Salamon (FAL Federal Agricultural Research Centre)
    Abstract: The WTO negotiations of the Doha round are a key issue in the public debate. This paper analysis the effects of different market access option on the basis of general equilibrium model. An extended version of the GTAP model is used to firstly project a base run including the Agenda 2000, the EU enlargement, the EBA agreement and the MTR. The policy simula-tion includes the WTO negotiations. Here, it is differentiated between three different experi-ments. While the first experiment simply implements the HARBINSON 1½ proposal, the sec-ond one additionally takes into account an adoption of the EBA agreement by all industrial-ized countries. In the third experiment, the tariff cuts are based on the Swiss Formula using a coefficient of 33 instead of the tiered approach of HARBINSON. Based on the experiments, it can be shown that world wide the high protected sectors experiences severe losses relative to the application of the HARBINSON 1½ approach. The comparison also shows that the highly protected beef and other processed food products sectors of the EU are particularly affected by the Swiss Formula.
    Date: 2005–02
  5. By: Carl Chiarella (School of Finance and Economics, University of Technology, Sydney); Xue-Zhong He (School of Finance and Economics, University of Technology, Sydney); Duo Wang
    Abstract: Stability and bifurcation analysis of deterministic systems has been widely used in modeling financial markets. However, the impact of such dynamic phenomena on various statistical properties of the corresponding stochastic model, including skewness and excess kurtosis, various autocorrelation (AC) patterns of under and over reactions, and volatility clustering characterised by the long-range dependence of ACs, is not clear and has been very little studied. This paper aims to study this issue. Through a simple behavioural asset pricing model with fundamentalists and chartists, we examine the statistical properties of the model and their connection to the dynamics of the underlying deterministic model. In particular, our analysis leads to some insights into the type of mechanism that may be generating some of the stylised facts, such as fat tails, skewness, high kurtosis and long memory, observed in high frequency financial data.
    Keywords: fundamentalists; chartists, stability; bifurcation; investors' under- and over-reactions; stylized facts
    JEL: D83 D84 E21 E32 C60
    Date: 2004–11–01
  6. By: Anna Torres; Tammo Bijmolt
    Abstract: Brand image is a key component of customer-based brand equity, and refers to the associations a consumer holds in memory. Such associations are often directional; one should distinguish between brand-to-attribute and attribute-to-brand associations. Information on these associations arise from two ways of collecting data respectively: brand-by-brand evaluations of all attributes and attribute-by-attribute evaluations of all brands. In this paper, the authors present a methodological approach, namely correspondence analysis of matched matrices, to assess the communalitites as well as asymmetries between brand-to-attribute and attribute-to-brand associations. The methodology results in perceptual maps visualizing brand image. The approach is illustrated in an empirical market research project in which two samples of consumers evaluated ten brands of deodorants and eleven attributes.
    Date: 2005–02
  7. By: Wendel,Sonja; Dellaert,Benedict G.C. (METEOR)
    Abstract: In this article, the authors investigate consumers’ consideration of media channels during different usage situations. They develop a model that explains consumers’ media channel consideration as a function of the media channel’s perceived benefits. In addition, they hypothesize that the usage situation affects consumers’ media channel consideration and that situation-based benefit requirements moderate the effect of the benefits on their channel consideration. The authors test the hypothesized relationships using survey data from 341 consumers regarding their consideration of 12 different media channels used by manufacturers to communicate product information across three product-related usage situations. The results of the analyses support the proposed model structure and confirm the expected relationships among perceived media channel benefits, usage situations, media channel requirements, and consumers’ media channel consideration.
    Keywords: marketing ;
    Date: 2005
  8. By: Dellaert,Benedict G.C.; Golounov,Vladislav Y.; Prabhu,Jaideep (METEOR)
    Abstract: A potentially powerful way to assist consumers in making dynamic shopping decisions is to disclose price information to them before they shop, for example by posting prices on the Internet. This paper addresses the differential impact of disclosing either only current, or both current and future prices, on consumer shopping decisions in multi-period tasks involving multiple product purchases. In the context of an Internet-based experiment, we find that consumer expenditure deviates more strongly from that of a normative model when both current and future prices are disclosed than if only current prices are disclosed. We investigate the behavioral effects underlying this finding by estimating a model that allows for variations in consumer discounting, strength of store price format preferences, as well as choice consistency between different price disclosure conditions.
    Keywords: marketing ;
    Date: 2005
  9. By: Albrecht, James (Georgetown University and IZA Bonn); van den Berg, Gerard J. (Free University Amsterdam, IFAU Uppsala, Tinbergen Institute, CEPR, IFS and IZA Bonn); Vroman, Susan (Georgetown University and IZA Bonn)
    Abstract: The Swedish adult education program known as the Knowledge Lift is unprecedented in its size and scope, aiming to raise the skill level of all low-skilled workers towards the medium level. This paper evaluates the effects of program participation on individual labor market outcomes, notably employment and annual income, as well as on the labor market equilibrium. For the effects at the individual level, we apply fixed effect methods allowing for treatment effect heterogeneity. The data are based on a number of matched longitudinal administrative data sets covering the full population of Sweden. For the equilibrium effects, we analyze an equilibrium search model with heterogeneous worker skills. This model is calibrated using pre-program observations.
    Keywords: returns to education, training, program evaluation, wages, participation, unemployment, schooling, Swedish labor market, selectivity bias, treatment effect
    JEL: J24 I28
    Date: 2005–02
  10. By: Sebnem Kalemli-Ozcan (Department of Economics, University of Houston); Laura Alfaro (Department of Economics, Harvard Business School); Vadym Volosovych (Department of Economics, University of Houston)
    Abstract: We examine the role of different explanations for the lack of flows of capital from rich to poor countries—the “Lucas paradox”—in an empirical framework. Broadly speaking, the theoretical explanations for this paradox include differences in fundamentals affecting the production structure versus international capital market imperfections. Our cross-country regressions show that, for the period 1971-1998, institutional quality is the most important causal variable explaining the “Lucas paradox”. Human capital and asymmetric information play a role as determinants of capital inflows but these variables cannot fully account for the paradox.
    Keywords: capital inflows, fundamentals, institutions, international capital market imperfections, neoclassical model
    JEL: F21 F41 O1
    Date: 2003–12
  11. By: Borghans, Lex (ROA, Maastricht University and IZA Bonn); ter Weel, Bas (MERIT, Maastricht University and IZA Bonn); Weinberg, Bruce A. (Ohio State University and IZA Bonn)
    Abstract: Despite indications that interpersonal interactions are important for understanding individual labor-market outcomes and have become more important over the last decades, there is little analysis by economists. This paper shows that interpersonal interactions are important determinants of labor-market outcomes, including occupations and wages. We show that technological and organizational changes have increased the importance of interpersonal interactions in the workplace. We particularly focus on how the increased importance of interpersonal interactions has affected the labor-market outcomes of underrepresented groups. We show that the acceleration in the rate of increase in the importance of interpersonal interactions between the late 1970s and early 1990s can help explain why women’s wages increased more rapidly, while the wages of blacks grew more slowly over these years relative to earlier years.
    Keywords: interpersonal interactions, wage level and structure, economics of minorities and races and gender, social capital
    JEL: J16 J21 J24 J31
    Date: 2005–02
  12. By: Jayati Sarkar (Indira Gandhi Institute of Development Research); Subrata Sarkar (Indira Gandhi Institute of Development Research)
    Abstract: The relation between multiple directorships, busy directors and firm performance has been researched predominantly in the context of developed economies, notably the US. This paper extends the existing literature on multiple directorships in two ways; first, by providing additional evidence on its effect on firm performance, but with respect to an emerging economy, India, and secondly, by suggesting an alternative measure of directorial "busyness" that is more general in its applicability compared to those that have been applied in the existing literature. Using a sample of 500 large firms from the Indian corporate sector for the year 2002-03, the paper finds multiple directorships by independent directors to correlate positively with firm value thereby supporting the "quality hypothesis" that busy directors are likely to be better directors, a result that is different from the existing evidence on busy directors. Multiple directorships by insider directors are, however, negatively related to firm performance. Estimation of group and non-group companies separately reveals that the quality effect of independent directors persists for the former but disappears for the latter. In general, the results suggest that the relation between "busy" directors and firm performance may depend on the institutional context and on the type of director.
    Keywords: Multiple Directorships, Busy Directors, Firm Performance
    JEL: G30 G39 K22
    Date: 2005–01
  13. By: Rodolfo Apreda
    Abstract: This paper seeks to expand on two topical strands in Government Finance and Political Science literature, rent-seeking and the soft-budget constraint, so as to bring forth a strong linkage with corporate governance environments. It will attempt to accomplish this task by setting up a distinctive framework of analysis that hinges on incremental cash flows. Firstly, it claims that both rent-seeking behavior and the soft-budget constraint are worthy of being applied to corporate governance learning and practice. Secondly, the paper contributes to focus on cash-flows reliability and managers’ accountability. Thirdly, it is shown how conflicts of interest underlie rent-seeking behavior, and how the latter relates to the soft-budget constraint.
    Keywords: Rent-Seeking, Soft-Budget Constraint, Corporate Governance, Incremental Cash Flow model, Conflicts of Interest.
    JEL: G30 G34 D72 D74 D82
    Date: 2004–12
  14. By: Lars Bo Jeppesen
    Abstract: Modding – the modification of existing products by consumers – is increasingly exploited by manufacturers to enhance product development and sales. In the computer games industry modding has evolved into a development model in which users act as unpaid “complementors” to manufacturers’ product platforms. This article explains how manufacturers can profit from their abilities to organize and facilitate a process of innovation by user communities and capture the value of the innovations produced in such communities. When managed strategically, two distinct, but not mutually exclusive business models appear from the production of user complements: firstly, a manufacturer can let the (free) user complements “drift” in the user communities, where they increase the value to consumers of owning the given platform and thus can be expected to generate increased platform sales, and secondly, a manufacturer can incorporate and commercialize the best complements found in the user communities.
    Keywords: Innovation, modding, user communities, software platform, business model
    JEL: L21 L23 O31 O32
  15. By: Gersbach, Hans (University of Heidelberg and IZA Bonn); Haller, Hans (Virginia Tech)
    Abstract: This paper analyzes the effects of sociological changes in the form of a shift of influence within two-member households participating in labor and product markets. The most striking effects occur when household members differ in individual preferences and enjoy positive leisure-dependent externalities. For instance, a global sociological change where the “workaholic" member becomes more influential in each working class household can render the working class worse off. A binding restriction on the number of hours an individual is allowed to work can benefit all workers.
    Keywords: household behavior, general equilibrium, externalities, labor supply
    JEL: D10 D50 J22
    Date: 2005–02
  16. By: Jorge Selaive (Central Bank of Chile); Vicente Tuesta R (Central Bank of Peru)
    Abstract: It is well documented that macroeconomic fundamentals are little help in predicting changes in nominal exchange rates compared to the predictions made by a simple random walk. Lettau and Ludvigson (2001) find that fluctuations in the common long-term trend in consumption, asset wealth, and labor income (hereby, consumption-wealth ratio) is a strong predictor of the excess returns. In this paper, we study the role of the consumption-wealth ratio in predicting the change in the nominal exchange rate of a large set of countries. We find evidence that fluctuations in the consumption-wealth ratio help to predict in-sample all the currencies. In terms of out-of-sample forecasts, our results suggest that the consumption-wealth ratio may play a significant role at predicting the Canadian dollar at all horizons and at short-intermediate horizons for some currencies.
    Keywords: Exchange Rates, Consumption-Wealth Ratio, Predictability
    JEL: C52 F31
    Date: 2005–01

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