Which of these people is your future CEO?

Americans have long believed that U.S. military officers--trained for high-stakes positions, resilience, and mental agility--make excellent CEOs. That belief is sound, but the authors' analysis of the performance of 45 companies led by CEOs with military experience revealed differences in how the branches (Army, Navy, Air Force, Marine Corps) prepare leaders for business. Those differences reflect the trade-off between flexibility and process that each branch of the armed services must make. Army and Marine Corps officers operate in an inherently uncertain environment. They define the mission but then give subordinates the flexibility to adjust to realities on the ground. This leadership experience tends to turn out business executives who excel in small firms, where they can set a goal and then empower others to work toward it. Navy and Air Force officers, who operate expensive, complex systems such as submarines and aircraft carriers, are trained to follow processes to the letter, because even small deviations can have large consequences. In corporations, these leaders excel in regulated industries and in firms that take a process approach to innovation. The larger lesson that the military can offer the business world is that fit matters. Different circumstances demand different leadership skills. Hire the person who fits the job.     

Plot-level technical efficiency accounting for farm-level effects: Evidence from Chilean wine grape producers

This paper applies alternative panel data models to a cross-sectional dataset that contains observations at the plot level for a sample of wine-grape farms in Central Chile. The input–output data as well as key attributes of the production system are at the plot level, at which individualized management exists. However, plots belonging to a particular farm are also subject to overall centralized (farm-level) management. Thus, this data configuration offers the possibility of analyzing technical efficiency (TE) both across plots and across farms. A Generalized True Random Effects model, which permits the separate identification of farm-level and plot-level inefficiency while controlling for unobserved farm-level heterogeneity, shows that TE varies across farms but not among plots within the same farm. Geographical location also affects grape production and agro-climatic conditions influence production levels, with grape farms located on cooler zones producing significantly less than their counterparts in warmer zones, as expected. The analysis underscores the value of using recent methodologies typically applied to panel data when cross-sectional information is available for individual plots within a farm unit or in similar settings.     

The Sources of Financing Constraints

Which financial frictions drive firms’ financing constraints? We structurally estimate dynamic firm financing models embedding many financial frictions, on panels of public firms and private firms. We focus on limited enforcement, moral hazard, and trade-off models and assess which models rationalize best observed corporate policies across various samples. Our tests, based on empirical policy function benchmarks, favor trade-off models for larger public firms, limited commitment models for smaller public firms, and moral hazard models for Private firms. Our estimates suggest significant financing constraints due to agency frictions and highlight the importance of identifying their sources for firm valuation.     

Operational Budgeting in Czech Companies

International Advances in Economic Research -     

Budget consolidation in a small open economy: a case study for Slovenia

In this article, we use the macroeconometric model SLOPOL10 to calculate simulations of the development of the Slovenian economy until 2030. Starting from the present favourable prospects of the European economies, the forecast is very optimistic but it can nevertheless be improved by optimal fiscal policies as calculated using the OPTCON2 algorithm. If a negative shock to world trade of a size comparable to the Great Recession occurs, it will entail a decline in GDP and a slow recovery. In this case, optimal fiscal policies should not act in an expansionary way as the effectiveness of fiscal policy with respect to output and employment is rather limited in a small open economy like Slovenia. Instead, the goal of budget consolidation will call for a more restrictive fiscal policy, at least if the shock is temporary.     

Partner Type Diversity in Alliance Portfolios: Multiple Dimensions,Boundary Conditions and Firm Innovation Performance

Our research extends the current knowledge based view on the configuration of alliance portfolios and their deployment in different external knowledge environments. We study these alliance portfolios in a longitudinal sample (1996–2010) for over three thousand firms that operate in a large number of industries in the Netherlands. Our findings indicate that partner type variety and partner type relevance, as different dimensions of partner diversity in alliance portfolios, both have an inverted U‐shaped association with firm innovation performance. However, alliance portfolios characterized by both high partner type variety and high relevance cause inferior innovation performance. Different external knowledge environments, characterized by different levels of industry modularity and scope of knowledge distribution, moderate the inverted U‐shaped associations of partner type variety and relevance in alliance portfolios with firm innovation performance in opposing directions. While for partner type variety, a high level is found to be optimal in environments with greater modularity or broader scope of knowledge distribution, for partner type relevance it turns out that a low level is optimal under more modular industry conditions.     

Within‐firm wage inequality and firm‐level exports

This paper analyzes changes in within‐firm inequality of hourly wages arising from export shocks to exporting firms in Denmark. We provide causal evidence that export demand shocks increase within‐firm inequality. Decomposing overall inequality into within and between components for occupational and educational groups, the results show that exports lead to a significant increase in within‐group wage inequality but do not affect the between‐group component. We develop a partial equilibrium model, featuring heterogeneous workers, which rationalizes these observations and shows how export demand shocks induce a complementarity effect, leading to increases in wage inequality within firms.     

Is green the new gold? Venture capital and green entrepreneurship

Small Business Economics - We test whether born-to-be-green represents a signal toward potential venture capital (VC) investors on a sample of Italian, independent, unlisted, high-tech...     

The impact of Universal Service Obligations and International Cross-subsidies on the dispersion of telephone services in developing countries

This paper re-evaluates the telecommunication policies often applied to create regional dispersion of services in developing countries. We observe that failure to consider the complexities of the regional telecommunication systems in creating policies and investment strategies has increased the telecom gap between urban and rural regions worldwide. In particular, the teledensities of rural telecommunications in developing countries have remained very low in spite of support through universal service obligation fees and cross-subsidization from international services. As traditional methods for economic analysis and modeling have failed to identify mechanisms that improve telephone dispersion in these countries, we use a system dynamics modeling approach to deal with complexities of the situation in order to evaluate how Universal Service Obligations (USOs) and International Cross-Subsidy (ICS) policies affect telephone densities. We demonstrate that these policies may be counterproductive due to the structure of the telecom system itself. We also show that, when market-clearing pricing is combined with USOs once the urban telephone density reaches a minimum threshold, the dispersion of rural telecommunications can be considerably improved.     

Financial crises and time-varying risk premia in a small open economy: a Markov-switching DSGE model for Estonia

Under a currency board, the central bank relinquishes control over its monetary policy and domestic interest rates converge towards the foreign rates. Nevertheless, a spread between both usually remains. This spread can be persistently positive due to elevated risk in the economy. This paper models that feature by building a DSGE model with a currency board, where the domestic interest rate is endogenously derived as a function of the foreign rate, the external debt position and an exogenous risk premium component. Time variation in the volatility of the risk premium component is then modelled via a Markov-switching component. Estimating the model with Bayesian methods and Estonian data shows that the economy does not react much to shocks to domestic interest rates in quiet times but is much more sensitive during crises, and matches the financial and banking crises, which cannot be captured by the standard DSGE model.