The Economics of Business Process Design: Motivation,Information and Coordination Within the Firm

This paper presents a transaction cost analysis of the internal business processes of firms. Business processes are collections of activities which are technologically or managerially linked so that they jointly affect value added. Their organisation is characterised by their ‘architecture’—the allocation of responsibilities amongst individuals and groups and communication between them for information and coordination—and their incentive structure. The overall costs of organisation are determined by losses due to imperfect motivation of process members, which flows from the incentive structure, and imperfect information and coordination, which flow from the architecture, together with the resource costs associated with incentives and architecture. Perfect motivation corresponds to ‘team behaviour’ and a quantitative model, based on team theory, indicates how the best architecture depends on the degree interaction between activities comprising the business process.     

The Canadian Keiretsu

This article describes the Canadian keiretsu , in which a main Chartered Bank dominates an interlocking group of corporate clients, investment dealers, trust companies, and professional advisors. Such a network facilitates information-sharing and monitoring among group members, while also reducing the agency costs of banker misbehavior. Most major Canadian firms are members of a keiretsu , and stock ownership of Canadian corporations is far more concentrated than ownership of U.S. companies.
Given their many similarities of history, law, and geography, Canada and the United States should have ended up with similar corporate ownership and governance structures. But they did not, and the difference was Canada's less restrictive banking and bankruptcy laws, which in turn can be traced to Canada's distinctly non-populist historical experience.
The Canadian keiretsu arose primarily for two reasons: (1) the larger concentration of commercial banking (the six largest Canadian banks today account for 98% of the industry's assets) allowed by Canadian law; and (2) the greater powers of Canadian secured lenders in the event of default. Unlike a U.S. Chapter 11 filing, in a Canadian bankruptcy the lender's right to assume control of the assets was not stayed until quite recently. And, even with the recent change in Canadian bankruptcy law, Canadian secured lenders have much stronger protection of their claims in bankruptcy than their U.S. counterparts in Chapter 11.     

Output sharing in partnerships as a common pool resource management instrument

Many economic environments are susceptible to either free-riding or overuse. Common pool resources (CPRs) fall in the latter category. Equally sharing the output of a CPR in partnerships introduces a free-riding incentive that may offset overuse. Socially optimal harvesting can be induced by dividing the set of resource users into a number of partnerships in such a way that each resource users’ tendency to over-harvest from the resource is exactly offset by his or her tendency to free-ride on the contributions of others. We conduct a laboratory experiment to assess the performance of this partnership solution by introducing equal-sharing subgroups of size one, four and six into a twelve-person CPR environment. Group assignment is either unchanging throughout a 15 period session or randomly mixed each decision round. Group size significantly affects aggregate effort, while group assignment makes no significant difference. The distribution of total payoffs is more equitable for randomly mixed groups. Implications of our results for voluntary and centralized implementations of the partnership solution are discussed.

The Role of China in the Global Strategy of Multinational Enterprises

This paper moves from the general to the particular. First, it examines the differential speed of globalization in different types of market – specifically markets in finance, goods and services, and finally labour markets. It then analyses the location and ownership strategies of multinational enterprises (MNEs), both as regards individual national markets and then in terms of the interaction between national markets (the ‘local/global’ spectrum). This analytical framework is applied to the place of China in the global strategy of MNEs. This application illuminates the role of DFI (direct foreign investment) in China and illustrates the peculiarities of China's place in the global system. The distortions in China's domestic system interact with the global strategies of MNEs to produce several interesting results, including: (1) the importance of MNEs’ ownership strategy; (2) non-optimal location decisions; (3) the ‘excessive internalization’ of activities in China; and (4) the growing importance of China as a location for DFI and, in future, the potential for growth of outward DFI from China.     

Partnerships in ecotourism: Australian political frameworks

Conservation interests hope to use tourism as a tool in conservation, whereas tourism interests want to use conservation as a tool in tourism development. Both promote partnerships, but with different political aims. In federated nations such as Australia, this involves industry associations and government agencies in different jurisdictions as well as different portfolios. There are several recent national‐scale initiatives in Australia. The Tourism in Australia's Protected Areas Forum, TAPAF, is an informal information exchange group between state protected area management agencies which also includes state government tourism representatives. TAPAF has promoted a Code of Practice for commercial tour operators in protected areas. Ecotourism Australia is an industry association which has promoted a Cairns Charter on Partnerships for Ecotourism. The National Tourism and Heritage Taskforce is the highest‐level consultative body, representing both industry and government, tourism and environment, federal and state levels. NTHT has produced a national strategy called Going Places, currently under implementation. The federal tourism portfolio has produced a somewhat conflicting document of its own, called Pursuing Common Goals. And the peak tourism industry association, formerly the Tourism Task Force and currently known as TTF Australia, is soon due to launch a report called Making National Parks a National Tourism Priority. Copyright © 2004 John Wiley & Sons, Ltd.     

Internalization theory and the performance of emerging-market multinational enterprises

Constrained by their peripheral position in the global factory system and underdeveloped institutions at home, emerging-market multinational enterprises (MNEs) are likely to achieve monopoly-based, rather than knowledge-based, financial gains from internationalization conditional on R&D. Emerging market MNEs need to engage in R&D to upgrade orchestration know-how within the global factory. This needs to be accompanied by the development of home-based enabling institutions. This article develops the argument based on internalization theory, and tests hypotheses against the experience of major emerging-market MNEs from 2004 to 2011.     

Home-owned versus foreign-owned firms in the UK automotive industry: Exploring the microfoundations of ambidextrous production and supply chain positioning

The UK automotive industry is home to a large number of foreign firms, demonstrating the open nature of competition. However, the industry necessitates both exploitative and explorative capabilities. Contingency theory suggests that firms align their internal structure with contextual factors. As such, the aims of this study were to investigate whether it was possible to distinguish home-owned (UK) and foreign-owned firms based upon: a) the microfoundations of ambidextrous production, which are conceptualised as lean and agile routines; and b) the tier at which these firms operate in the automotive supply chain. Survey data were collected from 85 home-owned and 55 foreign-owned firms within the UK Midlands automotive industry. Logistic regression results revealed that home-owned firms were significantly more likely to be implementing explorative (agile) production methods, whereas foreign-owned firms were significantly more likely to be implementing exploitative (lean) production. Home-owned and foreign-owned firms were found to be significantly more likely to be operating upstream and downstream in the automotive supply chain respectively. Thus, the findings support a contingency theory explanation, suggesting that firms align their performance priorities with contextual factors, but we argue that home-owned and foreign-owned firms have evolved to compete based on their different innovative capabilities, which are located at different tiers of the automotive supply chain. On this basis, although neither home-owned nor foreign-owned firms were found to be endogenously ambidextrous, we argue that foreign-owned firms internationalise into the UK automotive sector to exploit the explorative capabilities acquired by home-owned firms operating upstream in automotive supply chains, thus enabling ambidextrous capabilities at an exogenous, industrial level.