nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2014‒02‒15
nine papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Gibrat's law redux: Think profitability instead of growth By Mundt, Philipp; Milakovic, Mishael; Alfarano, Simone
  2. Essential themes in Personnel economics By Josheski, Dushko
  3. The importance of design for firms' competitiveness: a review of the literature By Beatrice D'Ippolito
  4. Report on the structure of ownership in the financial sector across the EU By Michal Jurek
  5. Business models for sustainable technologies: Exploring business model evolution in the case of electric vehicles By René Bohnsack; Jonatan Pinkse; Ans Kolk
  6. INSTITUTIONAL THEORY IN TOURISM STUDIES: EVIDENCE AND FUTURE DIRECTIONS By Lavandoski, Joice; Albino Silva, João; Vargas-Sánchez, Alfonso
  8. I just cannot get you out of my head: Regulatory capture of financial sector supervisors By Dennis Veltrop; Jakob de Haan
  9. Price Discrimination through Refund Contracts in Airlines By Escobari, Diego; Jindapon, Paan

  1. By: Mundt, Philipp; Milakovic, Mishael; Alfarano, Simone
    Abstract: The basic philosophy behind Gibrat's rule of proportionate effect has been to find some common mechanism in the growth process of business firms, based on the idea that growth rates are independent of size and drawn from the same distribution. After decades of research, however, it seems fair to say that the 'law' fails to provide a universal mechanism for the growth of firms. Here we take the position that it is more plausible for Gibrat's approach to apply to firm profitability rather than firm growth, in line with the classical idea of economic competition as a dynamic process of capital reallocation. Considering a sample of more than five hundred long-lived US corporations from virtually all sectors, we compare the statistical properties of growth and profit rates over a time span of thirty years, and find that profit rates and their volatilities are independent of size, which is not true of growth rates. We also find that the empirical densities of both profitability and growth can be described by exponential power (or Subbotin) distributions, but there are pronounced differences in their parameterizations and autocorrelation structures. We argue that a recently proposed diffusion process not only reproduces the cross-sectional distribution of profit rates, but is also consistent with the empirical time series of individual firms and their autocorrelations. In the natural sciences such a situation is commonly referred to as a statistical equilibrium, while econometricians speak of ergodicity and stationarity. Our economic interpretation of this property is that all surviving firms are subject to the same competitive pressures of capital reallocation, irrespective of their industry or particular line of business. They all face the same profitability benchmark and volatility, while their idiosyncratic efforts merely have an effect on the persistence of abnormal profits. In other words, survivors have to participate in the same game and can only choose to do so at different 'speeds'. We conclude with the empirical observation that the speed of convergence from abnormal profits to the system-wide average depends negatively on firm size, diversification, and capital intensity. --
    Keywords: profit rates,diffusion process,statistical equilibrium,dynamic competition,persistence
    JEL: C16 L10 D21 E10
    Date: 2014
  2. By: Josheski, Dushko
    Abstract: In this paper are presented essential themes in the subject of personnel economics. In the first part analysis has been conducted on the impact of peer pressure on workplace behaviour. Then again models for compensation structures within firms, and their influence on the utility of work by employees. In the final section of the paper the productivity spillover effect has been analyzed, and the causes of existence of spillovers and their impact on workers’ productivity --
    Keywords: Personnel economics,compensation structures,peer pressure,spillover effect
    JEL: M00 M52 M55
    Date: 2014
  3. By: Beatrice D'Ippolito (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM))
    Abstract: Scholars dedicated increasing attention towards appreciating how design has changed individuals' perception of new products, firms' understanding and formulation of strategy, or other relevant actors' approach to innovation and technology management. By emphasising the importance of design for the definition of consumers' needs, the restructuring of firms' organisational structures and strategies, and the evolution of firms' value creation processes, this review paper identifies relevant research gaps and questions that would benefit from future scholarly attention. In particular, it is suggested that such effort should address the analysis of: how design consumption can help better comprehend consumers' needs; what are the implications of design thinking on the skill sets of design professionals; the organisational structure of firms, including the reconfiguration of other business functions, and their strategy; and whether and how design thinking can shape firms' value creation processes and contribute to the formalisation of design tasks.
    Keywords: Design; strategy making; consumers' needs; value creation; literature review; firm competitiveness; research gaps
    Date: 2014–01–28
  4. By: Michal Jurek (Department of Banking, Poznan University of Economics)
    Abstract: The purpose of this report is to analyse the structure of ownership in the financial sector in the selected old (France, Germany, Greece, Italy, Sweden, the United Kingdom) and new (the Czech Republic, Hungary, Poland) EU Member States. This subject is particularly important to the proper understanding of the scale and scope of the process of financialisation in the EU countries. General objective of the report is the investigation and evaluation of the evolution of the structure of ownership in the financial sector across the EU and its consequences with the special consideration of relations between this process and withdrawal of the State from the financial sector. In order to accomplish this target, extensive research is undertaken. It encompasses the analysis of the types of financial institutions functioning in selected countries. Areas of competition, cooperation and interdependence between different types of financial institutions are identified, as well as similarities and differences in the present composition and structure of the financial sector in particular EU countries and factors behind inter-country differences. Finally, comparative analysis of evolution of structure of financial sector and its driving forces in particular countries and group of countries is presented.
    Keywords: financial institutions, financial sector, banking and finance, ownership structure, market concentration, mergers and acquisitions, privatization
    JEL: E44 E50 G21 G22 G32 G34 N24
    Date: 2013–12–02
  5. By: René Bohnsack (University of Amsterdam Business School - University of Amsterdam Business School); Jonatan Pinkse (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Ans Kolk (Amsterdam Business School - University of Amsterdam)
    Abstract: Sustainable technologies challenge prevailing business practices, especially in industries that depend heavily on the use of fossil fuels. Firms are therefore in need of business models that transform the specific characteristics of sustainable technologies into new ways to create economic value and overcome the barriers that stand in the way of their market penetration. A key issue is the respective impact of incumbent and entrepreneurial firms' path-dependent behaviour on the development of such new business models. Embedded in the literature on business models, this paper explores how incumbent and entrepreneurial firms' path dependencies have affected the evolution of business models for electric vehicles. Based on a qualitative analysis of electric vehicle projects of key industry players over a five-year period (2006-2010), the paper identifies four business model archetypes and traces their evolution over time. Findings suggest that incumbent and entrepreneurial firms approach business model innovation in distinctive ways. Business model evolution shows a series of incremental changes that introduce service-based components, which were initially developed by entrepreneurial firms, to the product. Over time there seems to be some convergence in the business models of incumbents and entrepreneurs in the direction of delivering economy multi-purpose vehicles.
    Keywords: Sustainable technology; business models, evolution; path dependencies; electric vehicles
    Date: 2014
  6. By: Lavandoski, Joice (University of Caxias do Sul); Albino Silva, João (University of Algarve); Vargas-Sánchez, Alfonso (University of Huelva)
    Abstract: The present article focuses on the effective application of the Institutional Theory as a theoretical perspective in scientific studies. The particular goal is to present a literature review about the Institutional Theory applied to the tourism industry, particularly the wine tourism segment. Different research areas are identified among those developed within institutional premises in tourism studies. The present review discusses the influence of the institutional framework in the organizational behavior and the pursuit of social legitimacy of tourism organizations. The Institutional Theory presents itself as a consolidated theoretical perspective used to explain organizational behaviors; however, it has been poorly used in tourism studies. It is in this sense that this article offers significant contributions by gathering a theoretical discussion body of the Institutional Theory in the tourism industry, which could lead to practical implications concerning the public and private management of this sector. This article provides theoretical reflections for future research directions with the Institutional Theory in wine tourism and adds to the few tourism studies developed with an institutional perspective.
    Keywords: Institutional Theory; Tourism; Wine Tourism; Tourism Organizations
    JEL: M10 M20 M21
    Date: 2014–02–07
  7. By: Pereira, Renato (University of Algarve); Leite, Joaquim (University of Aveiro); Albino Silva, João (University of Algarve)
    Abstract: This methodological paper defines how to interview people regarding the decision-making process, construction and operation of Faro Airport and its role in the Portuguese tourism policy for the Algarve between 1946 and 1973. The interviewee’s age makes these interviews urgent and unique. We will hear retired workers and people who held head positions at the airport or in other relevant public or private organizations. The interviews will allow the access to data otherwise not attainable or not sufficiently evident in other sources, such as documents. The interview consists of hearing the stories of the people, as a narrative, being the interview a semi-structured, guided and unstructured mix. The use of photographs during the interview will help respondents recall events that occurred decades ago. The interviewee will be selected by snowball sampling technique. Content analysis is the method to obtain data from the transcripts of the interviews, in order to construct a coherent narrative and with the contribution of all the interviews and interviewee. As field instruments, we will use an informed consent form, photographs and the confidentiality form after the interview, which responds to the ethical requirement for confidentiality, consequences of the interview and the role of the researcher.
    Keywords: Interview; Methodology; Historiography; Tourism; Economics; Airport; Aviation; Algarve
    JEL: N10
    Date: 2014–02–07
  8. By: Dennis Veltrop; Jakob de Haan
    Abstract: Regulatory capture is generally considered to be a principal cause for shortcomings in financial sector regulation and supervision. Little is known, however, about the mechanisms driving public officials’ capture by the financial industry. We argue that social identification with the financial sector is an important psychological mechanism driving regulatory capture of financial sector supervisors and that this is likely to reduce supervisory effectiveness. Using survey data gathered from supervisors working at two Dutch financial supervisory institutions, our results demonstrate that, first, supervisors with previous tenure in the financial sector are more likely to socially identify with the financial sector, second, that social identification with the financial sector negatively affects supervisors’ task performance, and, third, that the negative effect from socially identifying with the financial sector can be curbed by a supervisor’s professional identity. These results shed light on the, to date, unaddressed psychological mechanisms driving regulatory capture.
    Date: 2014–01
  9. By: Escobari, Diego; Jindapon, Paan
    Abstract: This paper shows how an airline monopoly uses refundable and non-refundable tickets to screen consumers who are uncertain about their travel. Our theoretical model predicts that the difference between these two fares diminishes as individual demand uncertainty is resolved. Using an original data set from U.S. airline markets, we find strong evidence supporting our model. Price discrimination opportunities through refund contracts decline as the departure date nears and individuals learn about their demand.
    Keywords: Price discrimination; Refund contracts; Airlines; Individual demand learning
    JEL: C23 D42 D82 L93
    Date: 2014–02–10

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