Research notes and communications corporate restructuring and strategic change: The effect on diversification strategy and R & D intensity

In the 1980s a number of large corporations restructured their diversified businesses through divestitures. It is hypothesized that restructuring activity focused on firms at intermediate levels of diversification (e.g., related-linked) which have a mixture of related and unrelated business units. Results confirm this hypothesis which explains that such mixed corporate strategies create organizational and control inefficiencies in managing both related and unrelated types of business units. Restructured firms were also found to move towards two types of different internal capital markets (related and unrelated). Most restructuring firms moved toward lower levels of diversification (e.g., related-constrained), although some moved toward higher levels of diversification (e.g., unrelated business). Also, this study finds restructuring firms that changed their corporate strategy by reducing diversified scope increased their R&D intensity. Firms that restructured and increased their diversified scope decreased R&D intensity. This result suggested a partial substitution between diversification and R&D activity.     

The influence of accountability on overconfidence and resistance to change: A research framework and experimental evidence

This paper presents a research framework and demonstrates how commitment to a particular course of action might lead to information search that is biased in favour of the chosen alternative. The framework also incorporates accountability as a strategy for mitigating overconfidence and resistance to change.An experiment was conducted to test the predictions of the proposed framework. Results of the experiment indicate that commitment to a particular cost allocation system leads to increased desirability of the chosen system and decreased desirability of the rejected alternative. The results also show that managers who are committed to a particular cost allocation system become too conservative and overconfident in their preferred system, which leads to high resistance to change. These effects, however, were attenuated by making the managers accountable for the negative consequences of their decisions.     

Are Housing Price Cycles Driven by Irrational Expectations?

This paper investigates the extent to which condominium apartment prices are set in an efficient asset market. Unlike previous work that focuses on the time-series properties of measures of excess returns, the analysis is framed in terms of the changes in observable house prices over time. More precisely, the paper develops and applies a test of the joint null hypothesis of rational expectations, perfect markets, and no risk premium in the Vancouver condominium apartment market. The empirical results provide significant evidence against the joint null hypothesis. On average, ex post house price changes move in a direction opposite to their rational expectation. This approach offers a methodological advantage over the standard efficiency literature and is shown to provide a more powerful test of market efficiency than conventional return regressions. Another contribution of the paper is to characterize the time-series properties of deviations of condominium prices from those predicted by the risk-neutral rational expectations model, using cointegration and random coefficients techniques. Deviations in house price changes from their (risk-neutral) rational expectations are time varying, stationary, and related to the stage of the real estate price cycle.     

Learning across the life cycle: Experimentation and performance among the hollywood studio heads

Guided by notions from the literature on organizational learning, this paper investigates how product line experimentation and organizational performance change across the careers of top managers. Its subjects are the studio heads who ran all the major Hollywood film studios from 1936 to 1965. The study found first, that product line experimentation declines over the course of executive tenures; second, that there is an inverse U‐shaped relationship between top executive tenure and an organization's financial performance; and third, that product line experimentation is more likely to benefit financial performance late in top executives' tenures. These findings are consistent with a three‐stage ‘executive life cycle’. During the early years of their tenures, top managers experiment intensively with their product lines to learn about their business; later on their accumulated knowledge allows them to reduce experimentation and increase performance; finally, in their last years, executives reduce experimentation still further, and performance declines. Copyright © 2001 John Wiley & Sons, Ltd.     

Strategic groups as reference groups: Theory,modeling and empirical examination of industry and competitive strategy

Previous studies on strategic groups have mainly focused on their static characteristics in order to test the theory of strategic groups and intraindustry performance differences (Porter, 1979; Cool and Schendel, 1988; Fiegenbaum and Thomas, 1990). In contrast, this study takes a longitudinal, dynamic perspective and describes the forces driving strategic group membership and structural evolution. It proposes that a strategic group acts as a reference point for group members in formulating competitive strategy. A partial adjustment model of strategic mobility is then developed which incorporates the idea of a strategic group as a reference group. It models strategic change in an industry both within and across strategic groups. The model is tested in the context of an in-depth industry analysis of the more significant firms in the insurance industry over the 1970-84 time period. The results suggest that strategic groups act as reference points for firm strategies and that predictions of future firm strategies and industry/group structures may also be successfully derived.     

Localized Innovation and Productivity Growth in Asia: An Intertemporal DEA Approach

Recent contributions to growth theory stress the importance of localized innovation for the performance of more backward countries. In earlier papers, analyses by means of DEA techniques confirmed this intuition. In this paper, we extend this type of analysis by relaxing the macroeconomic viewpoint adopted until now. New databases on output, labor and capital input in the agricultural and manufacturing sectors are developed for 40 countries. Using intertemporal DEA, it is found that changes in the global production frontier are localized at high levels of capital intensity. This result is stronger in agriculture than in manufacturing. Further, a decomposition of labor productivity growth in eight Asian countries for the period 1975–1992 into the effects of capital intensification, learning and innovation is made. The results suggest that there is a particular development path in which increases in capital intensity appear to be a prerequisite to benefit from international technology spillovers.JEL Classification: O14, O30, O40, O47     

Land use externalities, open space preservation, and urban sprawl

Parcel data on residential land conversion are used to investigate how land use externalities influence the rate of development and modify policies designed to manage urban growth and preserve open space. Several “smart growth” policies are found to significantly influence land conversion, including a development clustering policy that concentrates development and generates preserved open space. In addition to directly affecting a parcel's hazard rate of conversion, this policy is found to affect neighboring parcels' conversion by generating a positive open space externality that hastens their development. The implication that the clustering policy could generate a more sprawled pattern of development is explored using spatial simulation.     

Applying efficiency measurement techniques to the measurement of productivity change

Deterministic frontier analysis (DFA), stochastic frontier analysis (SFA), and data envelopment analysis (DEA) are alternative analytical techniques designed to measure the efficiency of producers. All three techniques were originally developed within a cross-sectional context, in which the objective is to compare the efficiencies of producers. More recently all three techniques have been extended for use in a panel data context. In the latter context it is possible to measure productivity change, and to decompose measured productivity change into its sources, one of which is efficiency change. However when efficiency measurement techniques, particularly SFA, have been applied to panel data, it has infrequently been made clear what the objective of the analysis is: the measurement of efficiency, which may vary through time as well as across producers, or the measurement and decomposition of productivity change. In this paper I explore the use of each technique in a panel data context. I find DFA and DEA to have achieved a more satisfactory reorientation toward productivity measurement than SFA has.     

The housing question in Japan

This article first examines how bad housing conditions are in Japan based on international comparisons. The next question is whether the extremely high land prices in Japan can be explained by economic logic. We then turn to more specific housing policy questions that are peculiar to or important in Japan, such as the tax advantages of owning land that have caused under-utilization of land and the reasons why the average size of Japanese rental housing is so small.