nep-bec New Economics Papers
on Business Economics
Issue of 2005‒05‒07
fourteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Wage Differentials, Discrimination and Efficiency By Shouyong Shi
  2. Vertical Contracts between Manufacturers and Retailers: Inference with Limited Data By Sofia Villas-Boas
  3. Building Gorman's Nest By Jeffrey LaFrance; Timothy Beatty; Rulon Pope
  4. Overcoming Participation Constraints By Hanming Fang; Peter Norman
  5. Financial Acceleration of Booms and Busts By Jan Kakes; Cees Ullersma
  6. Social Networks of Researchers in Business To Business Marketing: A Case Study of the IMP Group 1984-1999 By Piera Morlacchi; Ian F. Wilkinson; Louise Young
  7. Organisational Memory and Innovation Across Projects: Integrated Service Provision in Engineering Design Firms By Eugenia Cacciatori
  8. Outside Entrepreneurial Capital By Andy Cosh; Douglas Cumming; Alan Hughes
  9. How do Multinationals Build Social Capital? Diageo's Corporate Citizenship Programme. By David Bek; Ian W Jones; Michael J Pollitt
  10. On the Role of Arbitrageurs in Rational Markets By Basak, Suleyman; Croitoru, Benjamin
  11. Organizational Citizenship Performance in Non-Governmental Organizations: Development of a Scale By Kumar Rajiv
  12. Mediating Effects in the Relationship between 360-Degree Feedback and Employee Performance By Rai Himanshu; Singh Manjari
  13. Knowledge and Productivity in the World's Largest Manufacturing Corporations By Lionel Nesta
  14. Sustained Innovation: Career Engineers, Stock Markets, and the Theory of the Innovative Enterprise By William Lazonick; Andrea Prencipe

  1. By: Shouyong Shi
    Abstract: In this paper I construct a search model of a large labor market in which workers are heterogeneous in productivity and (homogeneous) firms post wages and a ranking of workers to direct workers' search. I establish the following results. First, the wage differential is negatively related to productivity when the productivity differential is small, while a positive relationship emerges when the productivity differential is large. Second, as the productivity differential decreases to zero, the reverse wage differential increases and so it remains strictly positive in the limit. Third, high-productivity workers are not discriminated against even when they have a lower wage, because they always have a higher priority in employment and higher expected wage than low-productivity workers. Fourth, the equilibrium is socially efficient, and so the wage differential and the ranking are part of the efficient mechanism. Finally, I provide numerical examples to illustrate the wage distribution.
    Keywords: Search; Wage Differential; Discrimination
    JEL: J3 J6 J7
  2. By: Sofia Villas-Boas (University of California, Berkeley)
    Abstract: In this paper we compare different models of vertical contracting between manufacturers and retailers in the supermarket industry. Demand estimates are used to compute price-cost margins for retailers and manufacturers under different supply models when wholesale prices are not observed. The focus is on identifying which set of margins seems to be compatible with the margins obtained from direct estimates of cost and to select the best among the non-nested competing models. The models considered are: (1) a simple linear pricing model; (2) a vertically integrated model; and (3) a variety of alternative (strategic) supply scenarios, that allow for collusion, non-linear pricing and strategic behavior with respect to private label products. Using data on yogurt sold at several stores in a large urban area of the United States, we find that wholesale prices are close to marginal cost and that retailers have pricing power in the vertical chain. This is consistent with non-linear pricing by the manufacturers or with high bargaining power of the retailers.
    Keywords: Vertical contracts, multiple manufacturers and retailers, non-nested tests, yogurt local market.,
    Date: 2004–08–01
  3. By: Jeffrey LaFrance (University of California, Berkeley); Timothy Beatty (University of British Columbia, Vancouver); Rulon Pope (Brigham Young University)
    Abstract: Gorman Engel curves are extended to incomplete systems. The roles of Slutsky symmetry and homogeneity/adding up are isolated in the rank and functional form restrictions for Gorman systems. Symmetry determines the rank condition. The maximum rank is three for incomplete and complete systems. Homogeneity/adding up determines the functional form restrictions in complete systems. There is no restriction on functional form in an incomplete system. Every full rank and minimal deficit reduced rank Gorman system has a representation as a polynomial in a single function of income. This generates a complete taxonomy of indirect preferences for Gorman systems. Using this taxonomy, we develop models of incomplete Gorman systems that nest rank and functional form and satisfy global regularity conditions. All results are completely derived with elementary and straightforward methods that should be of wide interest.
    Keywords: aggregation, functional form, incomplete demand systems, Gorman Engel curves, weak integrability,
    Date: 2004–09–20
  4. By: Hanming Fang (Cowles Foundation, Yale University); Peter Norman (University of British Columbia)
    Abstract: In incomplete information environments with transferable utility, efficient outcomes are generally implementable unless interim or ex post participation constraints are imposed on the problem. In this paper we show that linking a sufficiently large number of independent but possibly unrelated social decisions, a slightly perturbed Groves mechanism can implement an efficient outcome with probability arbitrarily close to one, while respecting all participation, incentive and balanced budget constraints.
    Keywords: Linking, Participation constraints, Perturbed groves mechanism
    JEL: D61 D82 H41
    Date: 2005–05
  5. By: Jan Kakes; Cees Ullersma
    Abstract: For a panel of 20 industrialized countries from 1970 through 2002,we analyze the role of financial variables in economic cycles. We focus on equity busts, which are considered a proxy for downward revisions of economic prospects. Our empirical findings provide support for financial accelerator effects around asset price busts. The financial accelerator mechanism appears to have become stronger over time. The typical bust is followed by a reduction in nominal policy interest rates, sometimes to levels close to the zero lower bound.
    Keywords: asset price busts; financial accelerator
    JEL: E44 E32
    Date: 2005–04
  6. By: Piera Morlacchi (SPRU, University of Sussex); Ian F. Wilkinson (University of New South Wales); Louise Young (University of Technology, Sydney)
    Abstract: Science is a social process that functions through social networks of researchers that form invisible colleges. Analysis of these social networks provides a means for examining the structure of relations among researchers. The Industrial Marketing and Purchasing (IMP) group, "an informal international group of scholars concerned with developing concepts and knowledge in the field of business-to-business marketing and purchasing," is used as a case study of a network of researchers because it has been responsible for considerable research over the last decades in the area of business-to-business marketing, yet its structure remains hidden because of its informal network characteristics. The results of a social network analysis of the IMP group is described based on the pattern of co-authorship at annual IMP conferences. The results reveal a power law distribution of paper co-authorship and a small world network that conforms to the results of studies of other types of social networks. A core network of 57 researchers is identified and its network properties are described, including how it has evolved over time. The study provides the basis for further studies of the social networks of marketing and business researchers.
    Keywords: informal networks, business-to-business marketing
    JEL: D85
    Date: 2005–04–26
  7. By: Eugenia Cacciatori (CRORA, Bocconi University and SPRU, University of Sussex)
    Abstract: This paper provides an exploration of the dynamics of organisational remembering in firms operating through projects. The paper focuses in particular on the deliberate use of experience accumulated in the past in order to sustain innovation in the provision of services. It relies on the notions of boundary objects and brokers to empirically explore how a common memory crossing occupational and organisational boundaries is built. In so doing, it highlights how a boundary object as memory device in a project environment operates at different levels, i.e. personal, project-specific, organisational-specific and occupational specific, and how it takes different formats to perform its roles at each level. Finally, the paper highlights the role of specific communities, beyond that of specific individuals, as boundary brokers.
    Keywords: project development, innovation processes, organisational memory, boundary brokers
    JEL: O22 O31
    Date: 2005–04–26
  8. By: Andy Cosh; Douglas Cumming; Alan Hughes
    Abstract: This paper investigates the internal versus external financing decisions among 1900 early stage privately held UK firms in 1996-1997. We study the factors that affect rejection rates in applications for outside finance among the different types of investors, taking into account the non-randomness in a firm’s decision to seek outside finance. The data support the traditional pecking order theory; firms with greater capital expenditures / profits are more likely to seek finance and apply for more external finance. The data further indicate growth oriented firms are much more likely to apply for external finance. There are some differences in the internal versus external financing of female and male founder CEO firms, but these differences are largely attributable to growth orientation. Firms in industries with a greater proportion of larger competitors are less likely to obtain all of their desired outside capital. The data also indicate banks are less likely to finance completely new startups, while venture capital funds are more likely to finance innovative and growth orientated firms. Overall, the data do not indicate the presence of a capital gap in entrepreneurial finance; rather, firms seeking capital are able to secure their requisite financing from at least one of the many different available sources.
    Keywords: Entrepreneurial Finance, Capital Gaps, Pecking Order, Adverse Selection, Gender
    JEL: G21 G22 G23 G24 G31 G32 G35
  9. By: David Bek; Ian W Jones; Michael J Pollitt
    Abstract: This paper attempts to enhance understanding of the process by which multinationals build social capital by examining the Corporate Citizenship (CC) activities and associated social capital outcomes of the UK-based branded alcoholic drinks company, Diageo. The firm possesses a structured portfolio of CC initiatives and projects and has a long-standing tradition of community engagement. This paper examines Diageo’s CC strategy in depth and considers the ways that their engagements impact upon social capital development in different arenas. The forces driving social capital outcomes are considered and implications for companies and governments are offered.
    Keywords: social capital, corporate citizenship, Diageo, community programmes.
    JEL: M14 Z13
  10. By: Basak, Suleyman; Croitoru, Benjamin
    Abstract: Price discrepancies, although at odds with mainstream finance, are persistent phenomena in financial markets. These apparent mispricings lead to the presence of ‘arbitrageurs’, who aim to exploit the resulting profit opportunities, but whose role remains controversial. This article investigates the impact of the presence of arbitrageurs in rational financial markets. Arbitrage opportunities between redundant risky assets arise endogenously in an economy populated by rational, heterogeneous investors facing restrictions on leverage and short sales. An arbitrageur, indulging in costless, riskless arbitrage is shown to alleviate the effects of these restrictions and improve the transfer of risk amongst investors. When the arbitrageur lacks market power, they always take on the largest arbitrage position possible. When the arbitrageur behaves noncompetitively, in that they take into account the price impact of their trades, they optimally limit the size of their positions due to decreasing marginal profits. In the case when the arbitrageur is subject to margin requirements and is endowed with capital from outside investors, the size of the arbitrageur’s trades and the capital needed to implement these trades are endogenously solved for in equilibrium.
    Keywords: arbitrage; asset pricing; margin requirements; non-competitive markets; risk-sharing
    JEL: C60 D50 D90 G11 G12
    Date: 2004–12
  11. By: Kumar Rajiv
    Abstract: Past two decades have seen increasing research in the broad area of beneficial non-task employee behaviors. Several concepts have been proposed to capture such behaviors, like organizational citizenship behavior (OCB), prosocial behavior, organizational spontaneity, extra-role behavior, contextual performance, etc. But “contextual performance” (labeled here as organizational citizenship performance, meaning behaviors that support the organizational, social and psychological environment in which the technical core, i.e., task performance, must function) has emerged as the best specified concept (Organ, 1997). Despite the emphasis by scholars on the twin needs of construct validity and developing culture-specific measures for concepts like OCB, progress is lacking in this direction. This study aims to fill this gap. The research design involved three broad stages: item generation, scale development and assessment of scale’s psychometric properties (reliability and validity). Fulltime and paid employees of several NGOs participated in data collection. The emerging scale shows satisfactory psychometric properties. It is expected that this scale would be useful for research as well as practice. Besides bridging the research gaps mentioned above, NGOs can use it to measure organizational citizenship performance. With some modifications, this scale is expected to be useful for other Indian organizations as well.
    Date: 2005–04–26
  12. By: Rai Himanshu; Singh Manjari
    Abstract: 360-degree feedback has been linked to several positive outcomes like improved performance, better interpersonal communication, smoother work relationships, etc. The paper empirically examines the mediating effects in the relationship between 360-degree feedback and employee performance with a sample of executives (N=198) working in four organisations in Western India. The results show that interpersonal communication and quality of working life have a complete mediating effect. Leader member exchange quality and perceived organisational support were found to have a partial but significant mediating effect. An elementary form of an integrated model, which includes all the four mediating variables and their inter-relationships, has been developed conceptually. This model is examined and built up empirically using structural equation modelling.
    Keywords: 360-degree feedback, employee performance, mediating effects, structural equation modelling
    Date: 2005–04–30
  13. By: Lionel Nesta (SPRU, University of Sussex)
    Abstract: I examine the relationship between the characteristics of firm knowledge in terms of capital, diversity and relatedness, and productivity. Panel data regression models suggest that unlike knowledge diversity, knowledge capital and knowledge relatedness explain a substantial share of the variance of firm productivity. Activities based on a set of related technological knowledge are more productive than those based on unrelated knowledge because the cost of co-ordinating productive activities decreases as the knowledge used in these activities becomes integrated efficiently. The contribution of knowledge relatedness to productivity is significantly higher in high-technology sectors than in other sectors.
    Keywords: knowledge, productivity, large corporations, knowledge measurement, panel data
    JEL: O33
    Date: 2005–04–26
  14. By: William Lazonick (INSEAD and University of Massachusetts); Andrea Prencipe (Università G. D’Annunzio di Pescara, and SPRU, University of Sussex)
    Abstract: The aim of this paper is to document the role that career engineers played in the investment strategies and eventual survival of an organization producing large high technology capital goods. Using the theory of innovative enterprise developed by Lazonick and O'Sullivan (2000), we analyze the locus of strategic control and its interactions with the cognitive and behavioral dimensions of Rolls-Royce, nowadays a successful industrial firm. The company has been analyzed during an intense period of radical changes in the ownership structure of the company that followed the firm's misdemeanors. Analysis of the role of engineers is paralleled with an analysis of what influence the firm's exposure to the stock market had on its innovative activities. The case analyzed shows that there was a clear lead by the engineering-related functions, while other functions had little say in important investment decisions. Company decisions were driven by the creed of engineering excellence transmitted from generation to generation of engineers via the recruitment and apprentice systems that were at the basis of the company's internal training policy.
    Keywords: career engineers, investment strategies, Rolls-Royce, innovative processes
    JEL: L10 L62 O31
    Date: 2005–04–26

This nep-bec issue is ©2005 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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