Delegated portfolio management and diversification

This article analyses the potential diversification benefits available to high-net-worth investors utilizing multiple portfolio managers. We show that enlisting seven actively managed portfolios from multiple portfolio managers generate significant benefits in terms of risk reduction, and, interestingly, diversification benefits are shown to be larger for low-risk portfolios compared to high-risk portfolios.     

Economic Integration,Monopoly Power and Productivity Growth without Scale Effects

This paper considers how monopoly power affects the relationship between economic integration and economic growth that is not biased by a scale effect. In a two‐country model of trade, productivity growth is generated by firm‐level investment in process innovation, and the location of economic activity is determined by relative market size, trade costs and imperfect knowledge diffusion. Equilibrium features the partial concentration of manufacturing and the full concentration of innovation in the larger country. Increased economic integration raises the concentration of manufacturing in the larger country, and when monopoly power is strong, leads to decreased product variety, accelerated productivity growth and greater national welfare. With weak monopoly power, however, it raises product variety and dampens productivity growth, but may benefit or hurt welfare.     

Ethical Ideology and the Ethical Judgments of Marketing Professionals

The present study extends the study of individuals' ethical ideology withinthe context of marketing ethics issues. A national sample of marketing professionals participated. Respondents' ethical ideologies were classified as absolutists, situationists, exceptionists, or subjectivists using the Ethical Position Questionnaire (Forsyth, 1980). Respondents then answered questions about three ethically ambiguous situations common to marketing and sales. The results indicated that marketers' ethical judgments about the situations differed based on their ethical ideology, with absolutists rating the actions as most unethical. The findings are consistent with those of two earlier studies that utilized samples of business students (Barnett et al., 1994, 1995). The results suggest that personal moral philosophy is an important influence on ethical decision making that should be considered in empirical studies of business ethics. The results also support the utility of the Ethical Position Questionnaire (Forsyth, 1980) as a means for researchers and practitioners to assess individuals' ethical ideology.     

Incapability of Technological Capability: A Case Study on Product Innovation in the Japanese Facsimile Machine Industry

Technological leadership in an industry certainly seems like a ticket to ongoing success. However, overemphasis on existing technological capabilities may produce a form of myopia in product development. In other words, by focusing primarily on developing and improving their core technologies, organizations miss opportunities to exploit new technologies and thus create breakthrough products. Ken Kusunoki proposes that problem-solving approaches in a technologically leading firm paradoxically may impede radical product innovation. Suggesting that such firms are inherently oriented toward incremental innovation, he presents a conceptual framework of the dynamic interaction between technological and product development problem-solving in the context of product innovation. He then illustrates this conceptual framework by examining a case of radical innovation in the Japanese facsimile industry. For a technological leader, product innovation typically is driven by technology development. In other words, such a firm quite reasonably relies on the technological advantage it holds over competitors as the basis for its product developments. By refining and enhancing its industry-leading technological capabilities, the firm can successfully introduce incremental innovations in its products. Because of this strong emphasis on exploiting existing technological capabilities, however, the technological leader may fail to capitalize on new technologies that can produce radical innovations. In the race to develop high-speed, digital facsimile equipment during the early 1970s, for example, Matsushita held a decided technological advantage over competitors such as Ricoh. Notwithstanding Matsushita's technological edge, however, Ricoh brought this radical innovation to market two years before Matsushita introduced its first digital machine, causing a serious decline in Matsushita's market share. Ricoh's approach to technological and product problem-solving—an autonomous team structure, with a strong project manager and frequent transfers of engineers among interdependent units—contrasts dramatically with Matsushita's functional structure and strong emphasis on technological problem-solving. Interestingly, Matsushita regained its technological advantage by 1976, thanks to a rapid series of incremental innovations in its product technologies.     

Managerial Rationale for Entry and the Relation to Performance and Small-Business Lending

In a survey of banks founded from 1994–2002, we find over 85% of respondents think their small-business market was underserved, 72% felt the market needed more competition, almost half indicated they were likely to start a bank because takeover activity displaced them, and 75% entered due to a market merger. Markets of banks started by displaced managers or following a merger have performance and lending characteristics similar to comparable banks, but larger changes in asset growth rates. Managers who responded that small-businesses were underserved have higher numbers and amounts of small-business loans 3 years after entry. Managers responding that entry was due to mergers eliminating community banks have lower ROA, but larger changes in market ROA. Markets had smaller changes in ROA when entry was to provide competition or when managers thought the small business market was underserved.

Is the Risk Comparison Made by the Public Between EMF and Smoking or Asbestos a Valid One?

The possibility of adverse health effects from exposure to extremely low frequency (ELF) electric and magnetic fields (EMF) has caused considerable controversy in the scientific community and has received great attention in the media and among the general public with many comparing ELF EMF with tobacco smoking and asbestos. Although both smoking and asbestos are now classified by the International Agency for Research on Cancer (IARC) as Group 1 or “established” carcinogens, this was not always the case. In this paper the evidence for the carcinogenicity of ELF EMF is compared with that for smoking and asbestos using the Bradford Hill model for establishing causality between exposure and disease. Application of the model shows that present data are insufficient to demonstrate that exposure to ELF EMF poses a definite human health hazard. However, while the bulk of the evidence is weak, there are several epidemiological studies which have reported an association between prolonged exposure to magnetic fields at levels above what is normally encountered and an increased risk in childhood leukaemia. On this basis IARC has classified ELF magnetic fields as a Group 2B or “possible” carcinogen.     

Optimal insurance in the presence of reinsurance

This paper studies an optimal insurance and reinsurance design problem among three agents: policyholder, insurer, and reinsurer. We assume that the preferences of the parties are given by distortion risk measures, which are equivalent to dual utilities. By maximizing the dual utility of the insurer and jointly solving the optimal insurance and reinsurance contracts, it is found that a layering insurance is optimal, with every layer being borne by one of the three agents. We also show that reinsurance encourages more insurance, and is welfare improving for the economy. Furthermore, it is optimal for the insurer to charge the maximum acceptable insurance premium to the policyholder. This paper also considers three other variants of the optimal insurance/reinsurance models. The first two variants impose a limit on the reinsurance premium so as to prevent insurer to reinsure all its risk. An optimal solution is still layering insurance, though the insurer will have to retain higher risk. Finally, we study the effect of competition by permitting the policyholder to insure its risk with an insurer, a reinsurer, or both. The competition from the reinsurer dampens the price at which an insurer could charge to the policyholder, although the optimal indemnities remain the same as the baseline model. The reinsurer will however not trade with the policyholder in this optimal solution.     

Strategic Planning and Community Involvement as Contributors to Sustainable Tourism Development

This paper is concerned with the role of stakeholder driven strategic planning as a contributor to the ultimate sustainability of tourism development. An initial literature review describes the evolution of theory related to three specific issues in the study of tourism – sustainability of tourism development as a desirable goal, stakeholder participation as a contributor to sustainability, and strategic planning as an appropriate framework within which stakeholder driven development activity can occur. The review concludes that these concepts are well supported in the literature, with little empirical evidence available on which to base any meaningful level of support. It is therefore argued that the value of these propositions may exist more strongly in theory than in practice. After discussing a number of factors which may negatively impact upon the practical implementation of these theoretical constructs, the paper proposes a quantitative instrument by which a specific tourism development planning process can be assessed for its conformity with desirable principles of sustainability in tourism development. Closing paragraphs indicate an intention to test this instrument across a variety of regional settings.     

Durkheim and the Limits of Corporate Culture: Whose Culture? Which Durkheim

Recent years have seen a resurgence of interest in Durkheimian perspectives on management. P. Dahler-Larsen uses such a perspective to critique theories of corporate culture. He is particularly critical of corporate culture’s claim that the locus of morality can exist in organizations. This, he argues, is inimical to Durkheim’s view of morality as a societal phenomenon. This paper argues that this criticism of corporate culture is limited on two counts. First, it is limited in its failure to deal with those proponents of corporate culture who are themselves critical of culture as a form of ideological control. Secondly, it is based on only one of several possible readings of Durkheim. In his later work, Durkheim analyses the construction and destruction of social solidarities. A Durkheimian reading of organizational culture and the related phenomenon of the learning organization allows us to develop a view of management and organization in which culture is conceived as a heterogeneous rather than homogeneous.