Book reviews

New Technology and Industrial Relations R. Hyman & W. Streeck Oxford, Basil Blackwell, 1988.

Strategic Planning: Development and Implementation. Bonita H. Melcher & Harold Kerzner Blue Ridge Summit, PA, TAB Books, 1988, 404 pp., £23.65.

Science and Corporate Strategy: Du Pont R & D, 1902-1980 D.A. Hounshell & J.K. Smith New York, Cambridged University Press, 1988.

Sharpbenders: The Secrets of Unleashing Corporate Potential Pete H. Grinyer, David G. Mayes & Peter McKiernan Oxford, Basil Blackwell, 1988, 287 pp., £25.00.

Small and Medium Size Enterprises and Regional Development Maria Giaoutzi, Peter Nijkamp & David J. Storey (Eds.) London, Routledge 1988, 314 pp.     

Significant Issues for the Future of Product Innovation

What's happening in the world of product innovation? What are the tough issues that managers are facing? And what's going to happen in the remaining years of this decade? In this article, several members of the Editorial Board of The Journal of Product Innovation Management offer their ideas about where the important problems lie. This is the fodder for a good round table discussion and through the medium of this journal we'll engage in such a discussion in this and a subsequent issue.     

The value of formal planning for strategic decisions: A comment

In an earlier paper in the SMJ, Armstrong (1982) conducted a review of the empirical evidence relating to the question of whether formal planning for strategic decision-making pays off, or more concisely whether strategic planning pays. Armstrong found that the evidence was equivocal. He also found that the methodological purity of a number of the 12 studies, which he claimed to constitute the totality of the evidence, was in doubt. For that reason he assessed the rigour of the studies relative to a framework previously proposed by Terpstra (1981). Using this framework he found that the studies rated poorly.     

FORECASTING VOLATILITY FOR PORTFOLIO SELECTION

The volatility of an asset is a primary input to the portfolio selection problem. Information about volatility is available from two sources, namely the share market and the option market. This paper examines the forecasting performance, over a three month investment horizon, of time series forecasts (from the share market) and option based implied volatilities. Three time series models, including GARCH, are used and twenty four implied volatility estimation models are employed. Using a data set of twelve UK companies, it is demonstrated that implied volatilities produce better individual forecasts than time series. However, more remarkably, forecasts combining implied volatilies and time series estimates significantly outperform both component forecasts.     

A Note on Selecting a Response Measure for Financial Distress

Since 1966, researchers have examined financial distress prediction models to determine the usefulness of accounting information to lenders. These researchers primarily used legal bankruptcy as the response variable for economic financial distress, or included legal bankruptcy with other events in dichotomous prediction models. However, theoretical models of financial distress normally define financial distress as an economic event, the inability to pay debts when due (insolvency). This study uses a loan default/accommodation response variable as a proxy for the inability to pay debts when due. The purpose of this note is to empirically test whether or not using the inability of a firm to pay debts when due, loan default/accommodation, as a response measure produces different results than using legal bankruptcy as the response measure. The study's empirical results show that legal bankruptcy and loan default/accommodation financial distress prediction models produce different statistical results, thus suggesting that the responses measure different constructs. A loan default/accommodation model also fits the data better than a bankrupt model. Our results suggest that a loan default/accommodation response may be a more appropriate measure to determine which accounting information is most useful to lenders in evaluating a firm's credit risk.     

Customer‐employee substitution: Evidence from gasoline stations

We document the adoption of self‐service pumps in U.S. gasoline stations from 1977 to 1992. Using establishment‐level data from the Census of Retail Trade over this period, we show that self‐service stations employ approximately one quarter fewer attendants per pump, all else equal. The work done by these attendants has shifted to customers, biasing upward conventional measures of productivity growth.     

Future shock and corporate planning

There are changing needs within the corporate community for forecasting and planning systems that interact with the action process. Here, a procedure is described whereby the businessman can arrive at a satisfactory business plan having generated strategic opportunities and then assessed programme options. If the planning and the action process are separate then failure is inevitable.     

Nigerian SMEs: Commitment and loyalty to their banks

Commitment has a crucial role to play in underpinning long-term business relationships, and as such, is well established in the related academic literature. Limited research does, however, exist pertaining to the specific relationships between SMEs and their banks. This paper presents and assesses commitment relationship framework that seeks to evaluate such relationships. Various validated scale-sets from the existing studies are combined here to assess commitment, advocacy and repurchase intention. Data were collected from 199 SMEs via interviews with owners or senior (financial) managers. Their assessment involved exploratory factor analysis to determine underlying data structure, with internal reliability assessment of the identified factors. Commitment is established around two components; affective and calculative, whilst advocacy and repurchase intention converge into a single behavioural intentions factor. The two-dimensional presentation of commitment and behavioural intentions are also distinct. Originality lies in the validation of commitment and behavioural intention constructs within this specific business arena and geographical location, as well as showcasing research that involves engagement with smaller organisations rather than their larger counterparts in the consideration of bank performance.