Piecewise linear incentive scheme and participative budgeting

This paper studies the economic incentives of participative budgeting through the design of incentive schemes within the agency theory framework. In particular, a piecewise linear incentive scheme (PLIS), an optimal version of Weitzman's New Soviet Incentive Scheme (NSIS), is derived. The characteristics of PLIS are: first, unlike NSIS, the bonus (penalty) rates of the optimal PLIS vary according to the agent's type in order to improve the principal's welfare, second, a penalty may be imposed on the overfulfillment of the agent's performance in order to maintain incentive compatibility, and finally, it is shown that if the coefficients are constant as in NSIS, there is no need for participative budgeting. Also, PLIS is compared with a quadratic incentive scheme. Both incentive schemes achieve the optimal solution, but each incentive scheme has its own advantage over the other depending on the situation.     

Screening early stage ideas in technology development processes: a text mining and k-nearest neighbours approach using patent information

Applying previous idea screening approaches to large amounts of early stage ideas is recognised as challenging since they rely heavily on manual tasks and human judgments. Considering that technological factors are more important than others in early phases of technology development processes, we propose a machine learning approach to screening ideas by linking the contents of ideas implied in patented inventions and the technological value of the ideas. At the heart of the proposed approach are the text mining technique, to construct keyword vectors from patents, and the k-nearest neighbours algorithm, to capture the relationships between the keyword vectors and the numbers of forward citations of the patents. Integration of these methods makes it possible to assess large amounts of early stage ideas in terms of their potential technological value. A case study of pharmaceutical technology shows that our approach is useful for filtering out ideas of little technological value.     

The Role of Transfer Price for Coordination and Control within a Firm

This paper explores the role of transfer prices as coordinating mechanisms within a firm. Three cases (full information; pure adverse selection; adverse selection and moral hazard) are analyzed and compared to show how quantity and effort are affected as assumptions on observability are progrssively relaxed. The analysis of the second case, having two observable variables, identifies the necessary and sufficient condition under which the local approach can be applied. The third case is reinterpreted as transfer prices in a direct delegation setting. The main results are: First, the optimal transfer price is standard average cost plus. Second, it is not necessarily decreasing in quantity unlike the downward sloping demand function.