Corporate Governance and CEO Innovation

A fundamental concern emerging from the corporate literature is the agency problem of innovation. While innovation is considered as a major driver of corporate growth and profitability, the Chief Executive Officer (CEO) has an intrinsic reluctance to pursue innovation projects. The thrust of this paper is to identify the mechanisms of corporate governance which help attenuate this problem, thereby encouraging the CEO to have the propensity to innovate. The empirical results suggest that firms with a widespread dispersion of shares among shareholders are less likely to encourage the CEO to innovate. The likelihood of innovation appears to increase, however, in the presence of a large shareholder. Contrary to prevailing beliefs, there appears to be no association between innovation and board independence. The same result holds for board size. Also, a diverse board appears to negate CEO predisposition to innovate. On the other hand, innovation increases when the CEO is not the Board Chair but has equity ownership, although the incentive effect is economically small. The paper uses a sample of domestically-owned, publicly-listed Australian firms over the period 1994–2003.     

Migration,FDI, and Welfare

We investigate migration and foreign direct investment (FDI) for a small trading economy. Historically, immigration in small countries has been accompanied by FDI inflows (complementary capital movements). Based on the skill composition of migrants, empirical evidence finds that skilled immigration is accompanied by FDI inflows but unskilled immigration is accompanied by FDI outflows (substitutable capital movements). We prove that the Heckscher-Ohlin model cannot reconcile these apparently contradictory observations. We introduce a theoretical model in which capital and unskilled labor are sector specific, and demonstrate that this model can reconcile the historical and empirical observations on migration and FDI.     

STEM education in the twenty-first century: learning at work—an exploration of design and technology teacher perceptions and practices

Teachers’ knowledge of STEM education, their understanding, and pedagogical application of that knowledge is intrinsically linked to the subsequent effectiveness of STEM delivery within their own practice; where a teacher’s knowledge and understanding is deficient, the potential for pupil learning is ineffective and limited. Set within the context of secondary age phase education in England and Wales (11–16 years old), this paper explores how teachers working within the field of design and technology education acquire new knowledge in STEM; how understanding is developed and subsequently embedded within their practice to support the creation of a diverse STEM-literate society. The purpose being to determine mechanisms by which knowledge acquisition occurs, to reconnoitre potential implications for education and learning at work, including consideration of the role which new technologies play in the development of STEM knowledge within and across contributory STEM subject disciplines. Underpinned by an interpretivist ontology, work presented here builds upon the premise that design and technology is an interdisciplinary educational construct and not viewed as being of equal status to other STEM disciplines including maths and science. Drawing upon the philosophical field of symbolic interactionism and constructivist grounded theory, work embraces an abductive methodology where participants are encouraged to relate design and technology within the context of STEM education. Emergent findings are discussed in relation to their potential to support teachers’ educational development for the advancement of STEM literacy, and help secure design and technology’s place as a subject of value within a twenty-first Century curriculum.     

Economics at the Antitrust Division: 2017–2018

This article describes some of the work of Antitrust Division economists over the past year, with a focus on modeling. It begins by illustrating the mapping from evidence to prediction using tools for assessing the effects of mergers using Bertrand, Cournot, and auction models. It then turns to two hot topics in competition policy: the implications of claims of increasing margins for merger enforcement and the validity of claims of increasing concentration. Finally, it considers how mergers affect prices in bargaining models.     

Towards an operations strategy model of servitization: the role of sustainability pressure

Servitization requires an important strategic shift to drive changes in the operations of manufacturing firms. Using a large-scale survey, the purpose of this paper is (1) to build and validate an operations strategy model of servitization confirming previous case study findings on servitization as a strategic action and (2) to explore the role of sustainability pressures in, and the sustainability performance effects of, pursuing service-based operations strategies. To reach these objectives, a dataset including the responses of 735 manufacturing plants from 21 different countries is analyzed using the PLS-SEM method. The results indicate that the sustainability pressures of stakeholders can push manufacturers to adopt a service-based operations strategy, materializing in the provision of both basic (product-oriented) and advanced (customer-oriented) services (BAS and ADS). Our analysis further indicates that while offering BAS is a precondition for ADS provision, only ADS can offer a competitive edge for manufacturers, both in terms of service and sustainability-related operational performance.     

The moderating effect of management behavior for Lean and process improvement

It is commonly agreed that the success of Lean management is not only determined by its technical practices, but also by the so-called soft practices such as behavior and actions of employees and management. Lean Management behavior is in itself paradoxical in nature as it incorporates technical aspects (e.g., fact-based management, analysis and adhering to the standard operating procedures for sake of efficiency) and social, follower-related aspects (e.g., promotion of employee responsibility to continuously improve their work processes). In this paper, we investigate the (moderating) effect of some important Lean related management actions on the relationship between Lean and the level of process improvement: i) envisioning and communicating the meaning of Lean, ii) setting goals and active steering on improvement performance metrics and ii) encouraging continuous improvement. Survey data of 178 responses from Dutch organizations, shows that these management actions have a positive effect on both Lean and the level of process improvement. In addition, active steering on performance improvement has a reinforcing effect on the relationship between Lean and process improvement. For respondents with a low level of steering on performance improvement Lean does not lead to process improvement, while it does for respondents with average and high levels of steering on performance improvement. The more management operates on performance improvement, the more Lean will result in a higher level of process improvement.     

Internalization of externalities and local government consolidation: empirical evidence from Japan

The fact that jurisdictional consolidation overcomes externality problems in the provision of local public goods is one of the best-known benefits of consolidation in the theoretical literature. Nevertheless, previous studies provide little evidence of how public service spillover effects influence consolidation decisions. This study empirically tests the hypothesis that spillovers induce consolidation, using voting data on the consolidation of Japanese municipalities. The extent of spillovers is measured by estimating the demand function for public goods with externalities. It is found that residents of the municipalities that can internalize a large amount of public goods spillovers through municipal consolidation tend to favor consolidation. This result supports the theoretical inference that spillovers in local public goods affect utility gains from jurisdiction integration, thus serving as one of the key impetuses for boundary reform. Moreover, after controlling for the spillover effects, economies of scale, population share, differences in median income, and unconditional grants can help explain consolidation preference.     

Firm age and performance

Amid increasing interest in firm age and its effects on firm performance, this special issue offers an exhaustive review of the literature and a novel collection of evidence on the effects of firm age on performance, including a special focus of interest on innovation performance, financial performance, exports, survival and growth. This editorial positions the theme in the extant literature, and provides key definitions and challenges ahead in the field of evolutionary economics. It introduces the collection of articles composing the special issue. The papers offer a diversity of country contexts, as well as analytical approaches and methods. They include an exhaustive review of the literature on age and firms’ performance, and present original empirical studies focusing on the effects of age on firms’ economic outcomes on the one hand, and on innovation outcomes on the other hand. While most of the papers use econometric analysis, the level of analysis ranges from firm to individual.