New Technology and The Small Firm

This paper examines how and why the role of small business has become more important over time. A special focus is placed on the role of small business in the New Economy.     

Monetary policy in a small open economy with fixed exchange rate: The case of Macedonia

This paper empirically applies the New Keynesian model for monetary policy analysis in a small open economy with a fixed exchange rate. Official reserves are included in the interest rate rule to account for the constraint that these impose on monetary policy when the exchange rate is fixed. Also, the foreign interest rate is included in order to reflect the necessity of following the foreign monetary policy. The model is applied to Macedonian data from the period 1997 to 2011. In general, results indicate that monetary policy has been focused on domestic objectives during this period, despite the fixed currency. In addition, there seem to have been significant differences in the conduct of the monetary policy in the first and second half of this period. The response to inflation has been more aggressive in the earlier period, at a time when reserves appear less important, while the output gap is found to be important only in the latter period, possibly due to the stronger monetary policy transmission. Finally, results indicate that the monetary policy has likely moved from adaptive in the first period to rational in the second period.     

Russian Roller Coaster: Expenditure Inequality and Instability in Russia, 1994–98

This paper uses the second phase of the Russian Longitudinal Monitoring Survey to investigate the changes in expenditure inequality and instability in Russia between the autumn of 1994 and the autumn of 1998. The expenditure distribution is stable in spite of the economic and political turmoil Russia is going through. However, that does not imply much stability. Households experienced considerable fluctuations in their expenditure, with over 60 percent of the population's expenditure either more than doubling or falling to less than half their previous levels. Only about 6 percent of all households experienced an expenditure shock of less than 10 percent. The inquiry in expenditure mobility suggests high levels of transitory variation in the expenditure and high levels of instability.     

SHAKEOUTS AND MARKET CRASHES*

This article provides a microfoundation for the rise in optimism that seems to precede market crashes. Small, young markets are more likely to experience stock‐price run‐ups and crashes. We use a Zeira–Rob type of model in which demand size is uncertain. Optimism then grows rationally if traders' prior distribution over market size has a decreasing hazard. Such prior beliefs are appropriate if most new markets are duds and only a few reach a large size. The crash occurs when capacity outstrips demand. As an illustration, for the period 1971–2001 we fit the model to the Telecom sector.     

Value Creation and Value Capture Alignment in Business Model Innovation: A Process View on Outcome-Based Business Models

Industrial manufacturers are innovating their business models by shifting from selling products to selling outcome-based services, where the provider (manufacturer) guarantees to deliver the performance outcomes of the products and services. This form of business model innovation requires a profound yet little understood shift in how value is created, delivered, and captured. To address this research gap, our study examines two successful and four unsuccessful cases of this shift. We find that effectiveness in business model innovation hinges on the three process phases that unfold in collaboration with the customers: value proposition definition, value provision design, and value-in-use delivery. We also find that that success is determined by the alignment of specific value creation and value capture activities in each phase: identifying value creation opportunities—agreeing on value distribution in value proposition definition, designing the value offering—deciding on the profit formula in the value provision design, and finally refining value creation processes—regulating incentive structures in the value-in-use delivery. Our process model contributes to the literature and practice on business model innovation by providing a thorough understanding of how alignment of value creation and value capture processes is ensured, whilst paying special attention to their interdependence and the interactions between provider and customer.     

Examination of travel and tourism competitiveness contribution to national economy competitiveness of sub-Saharan Africa countries

The purpose of this research is to examine the influence of travel and tourism competitiveness (measured by the Travel & Tourism Competitiveness Index [TTCI]) on the national economic competitiveness of sub-Saharan Africa (SSA) countries (measured by the Global Competitiveness Index [GCI]). The aim is to identify critical factors for improving competitiveness of SAA countries from the area of tourism competitiveness. The study was conducted using the following methods: regression, cluster and grey relational analysis (GRA). Results reveal that travel and tourism competitiveness has a high impact on national competitiveness in the analysed group of countries. The study identified three homogeneous groups within SSA countries according to the TTCI pillars. The different impact of the TTCI on the GCI is determined in each of these three homogeneous groups of countries. The outcomes of this study could provide recommendations for tourism development policy-makers in SSA countries based on the results of GRA.     

Investment in vintage capital

We study an economy in which firms use labor and various vintages of capital in a CES production function for the final good. We explicitly solve for the investment in capital of a given vintage as a function of its age, and for the resulting stocks of capital. We show that for reasonable parameter values, inverted-U-shaped dynamics of investment and S-shaped dynamics for capital arise in equilibrium. We view the model as an explanation of intra-firm adoption lags, i.e., the observation that firms adopt innovations over time and not instantaneously.     

Firm formation with heterogeneous management and labor skills

When both management skills and labor skills differ in the population, the nature of firm formation can differ radically from the equilibrium we are used to dealing with: The best potential managers could end up as wage workers. This happens when managerial skills are positively correlated with working skills, and there is some empirical evidence that this is indeed the case.