Knotting the action net, or organizing between organizations

This paper presents a study of a successful organizing process, namely the knotting together of different types of action by “translating” them into one another. The connections thus established were then stabilized to form a unit that can be designated as an “action net”. This instance of organizing occurred in the course of a project in the Swedish health care sector, with a view to establishing coordination between care units in three separate organizations. Different laws regulated their tasks, their operations were financed by different principals, and the everyday work of their members was undertaken at different point in time and in different places. Despite this, the participants in the studied project were able to establish a lasting net of connections that contributed, in the eyes of the environment, to an instance of “good care”. In this paper we examine in detail the creation of an action net, and offer a tentative theory of organizing in action nets.     

Evaluating shifts in Japan's quality-of-life

This paper presents a Data Envelopment Analysis/Malmquist index (DEA/MI) analysis of the change in quality-of-life (QOL), which is defined as the state of a social system as measured by multiple social-indicators. Applying panel data from Japan's 47 prefectures for the period 1975–2002, we identify significant movement in the country's overall QOL using a “cumulative” frontier shift index. Results suggest that Japan's QOL rose during the so-called “bubble economy years” (second half of the 1980s), and then dropped in the succeeding “lost-decade” (1990s). We also identify those prefectures considered most “responsible” for the shift(s) in QOL. Moreover, the use of both upper- and lower-bound DEAs enabled an evaluation of both “good” and “bad” movements in QOL.     

Subprime lending and the housing bubble: Tail wags dog?

The cause of the “housing bubble” associated with the sharp rise and then drop in home prices over the period 1998–2008 has been the focus of significant policy and research attention. The dramatic increase in subprime lending during this period has been broadly blamed for these market dynamics. In this paper we empirically investigate the validity of this hypothesis vs. several other alternative explanations. A model of house price dynamics over the period 1998–2006 is specified and estimated using a cross-sectional time-series data base across 20 metropolitan areas over the period 1998–2006. Results suggest that prior to early 2004, economic fundamentals provide the primary explanation for house price dynamics. Subprime credit activity does not seem to have had much impact on subsequent house price returns at any time during the observation period, although there is strong evidence of a price-boosting effect by investor loans. However, we do find strong evidence that a credit regime shift took place in late 2003, as the GSE’s were displaced in the market by private issuers of new mortgage products. Market fundamentals became insignificant in affecting house price returns, and the price-momentum conditions characteristic of a “bubble” were created. Thus, rather than causing the run-up in house prices, the subprime market may well have been a joint product, along with house price increases, (i.e., the “tail”) of the changing institutional, political, and regulatory environment characteristic of the period after late 2003 (the “dog”).     

A fuzzy-QFD approach to supplier selection

This article suggests a new method that transfers the house of quality (HOQ) approach typical of quality function deployment (QFD) problems to the supplier selection process. To test its efficacy, the method is applied to a supplier selection process for a medium-to-large industry that manufactures complete clutch couplings.The study starts by identifying the features that the purchased product should have (internal variables “WHAT”) in order to satisfy the company's needs, then it seeks to establish the relevant supplier assessment criteria (external variables “HOW”) in order to come up with a final ranking based on the fuzzy suitability index (FSI). The whole procedure was implemented using fuzzy numbers; the application of a fuzzy algorithm allowed the company to define by means of linguistic variables the relative importance of the “WHAT”, the “HOW”–“WHAT” correlation scores, the resulting weights of the “HOW” and the impact of each potential supplier.Special attention is paid to the various subjective assessments in the HOQ process, and symmetrical triangular fuzzy numbers are suggested to capture the vagueness in people's verbal assessments.     

Household production, full consumption and the costs of children

Recent work criticises both the logic and relevance of the theoretical basis of the approach to estimating the costs of raising children adopted in much of the economics literature. This tends to be restricted purely to models in which the household members consume market goods with given household income. The “costs of children” are perceived essentially as market consumption costs. This ignores the fact that an important, possibly preponderant element of child costs takes the form of parental time, which must be diverted from alternative uses such as market work, other household production activities, and leisure, to care for children. The studies also ignore the question of the differential incidence of child costs on adult members of the household. In this paper, we first of all argue that a satisfactory theoretical approach to modelling child costs must simultaneously incorporate an “individualistic” formulation of the household and a formal treatment of household production. We then provide such a model. Using data from a time use survey we estimate specialised versions of the model for families with two children and use the results to derive the intra-family distribution of resources and implied child-rearing costs.     

Towards an holistic understanding of disruptions in Operations Management

The paper reviews the literature on maintenance management, integrates key dimensions of maintenance within a taxonomy of maintenance configurations, and explores the impact of differing configurations on contextual factors and operational performance. “Prevention”, “hard maintenance integration” and “soft maintenance integration” were identified as key maintenance variables. Data were collected from 253 Swedish manufacturing companies, and three distinct clusters were identified. “Proactive Maintainers” emphasized preventive maintenance policies. “IT Maintainers” relied on computerized and company-wide integrated information systems for maintenance. “Maintenance Laggers” emphasized all maintenance dimensions to lesser extent than the others. The importance of maintenance prevention and integration differ between contexts. There were subtle performance differences across identified configurations, but preventive and integrated maintenance were more important for companies seeking competitive process control and flexibility. There existed no group with any great emphasis on all three maintenance dimensions, but attaining truly high performance may require a rare mix of the three dimensions. This mix of variables could constitute a hypothesized “World Class Maintenance” group.     

Microworlds and Simuworlds: Practice fields for the learning organization

Management is one of the few professions, the authors note, in which members have no formal “rehearsal space” for honing their skills. In response to this need, organizations such as The Center for Creative Leadership, MIT's Learning Center, and The Stern School of Business at New York University have created a brave new world of management simulations—“practice fields” for the learning organization. Some of these new games (“simuworlds”) use computer programs to replicate an entire industry and give participants an opportunity to play out one company's strategy in that setting. Other simulations (“microworlds”) engage participants in complex behavioral role playing, based on scenarios that typically develop within a company. Still other simulations combine both approaches. The authors take their point of departure from Peter Senge's definition of the “learning barriers” that develop in any organization: solving fragmented “problems” rather than dealing with systemic issues; overemphasis on competition at the expense of cooperation; and a failure to innovate until forced to do so. The new simulations, the authors argue, are particularly useful in helping managers learn how to overcome these barriers.     

Decentralized Welfare: Will There Be Underprovision?

This paper develops an Asymmetric Nash Equilibrium model of welfare provision by states when the benefit payment is a local public good and a fixed population of welfare recipients distributes itself between states with logistic “migration” function. The model shows that state size is an important demand shifter across states because it alters the supply elasticity of recipients. The model provides estimates of how the degree of benefit under provision varies with this migration elasticity. Other demand instruments (such as taxpayer resources and “generosity”) likewise generate positive correlation between benefits and recipients, while supply shifters generate negative correlation between benefits and recipients. The model's predictions are closely matched empirically, when examining the reduced form impact of these instruments on the pattern of welfare benefits and recipients across states. Using these impacts to assign the instruments to either supply or demand sides of the model, it is possible to estimate the model's structural elasticities. These turn out to be high enough so that simulated solutions to the model generate considerable welfare underprovision and thus raise concern about a race to the bottom with decentralized control over AFDC.     

“Agreeing to disagree” type results: a decision-theoretic approach

This paper explores interactive epistemology within Morris’ [S. Morris, Alternative definitions of knowledge, in: M.O.L. Bacharach, L.-A. Gerard-Varet, P. Mongin, H.S. Shin (Eds.), Epistemic Logic and the Theory of Games and Decisions, Kluwer Academic Publishers, Amsterdam, 1997, pp. 217–233] framework of knowledge. Specifically, this paper proves a generalized “agreeing to disagree” result. The major features of this formalization are: (i) non-expected utility receives a unified treatment; (ii) the information structure is not necessarily partitional; (iii) Aumann’s celebrated result of “agreeing to disagree” and Milgrom and Stokey’s well-known result of “no trade” are derived as special cases. This paper also presents some new extensions of the “no trade theorem”.     

Service Guarantee Strength: The key to service quality

While most authors describe a service guarantee as a “zero-one variable” indicating the presence or absence of an explicit written service guarantee, this paper develops a construct called “Service Guarantee Strength” (SGS) that is a continuous variable. This construct measures the degree to which a firm sets clear service quality standards for itself on dimensions that customers care about, and has an formal policy for quickly giving meaningful compensation to customers when these standards are not met.The paper builds upon established micro-level behavioral theory to develop the “Service Guarantee Strength Framework”. This framework posits that high Service Guarantee Strength leads to improved service quality, customer satisfaction, and loyalty through three intervening variables—marketing communications impact, employee motivation and vision, and learning through service failure.An empirical investigation was conducted to test the SGS Framework using both employee and customer data from three pairs of firms, with each pair in a different industry. None of these firms had an explicit service guarantee. Unlike many behavioral research studies, this study measured both employee and customer perceptual data and compared the two. The research finds that Service Guarantee Strength is positively related to customer perceptions of service quality, customer satisfaction, and loyalty.     

Tiebout choice and residential segregation by race in US metropolitan areas, 1980–2000

This article examines the link between local government fragmentation, or “Tiebout choice,” and segregation between black and white residents. As suggested by Tiebout [Tiebout, C., 1956. A pure theory of local public expenditures. Journal of Political Economy 64, 416–424.], fragmented local governance structures may encourage households to vote with their feet and sort into communities based on their willingness to pay for local public services. This outcome has been well documented. The nuance explored here is that, if the demand for local public services varies by race or if households have preferences for neighbors with specific racial characteristics, local government fragmentation may foster an increase in residential segregation by race across neighborhoods and jurisdictions. Results from metropolitan-level regressions suggest that increased Tiebout choice is associated with increases in black–white residential segregation within US metropolitan areas. Comparable results are obtained from household-level estimates, where the black racial composition of a household's census tract of residence is regressed on household-level controls and racially stratified measures of Tiebout choice. Results from both approaches suggest that a 10% increase in Tiebout choice would increase neighborhood segregation by no more than 1%, while segregation across jurisdictions would increase by between 4% and 7%.     

Does pay affect productivity or react to it?: Examination of U.S. manufacturing

There may be a bi-directional relationship between wages and labor productivity. According to conventional theory, employers reward improvements in productivity by raising pay. It also has been argued that wage increases can provide an incentive to improve productivity. This study applies a technique by Geweke to identify the feedback between pay and productivity in U.S. manufacturing. For the 1949–1998 period, measures of directional feedback indicate that both “pay as reward” and “pay as incentive” behaviors have occurred, but the results vary across manufacturing subsectors.     

INSTITUTIONALISED JUSTIFICATION OF CORPORATE ACTION: INTERNATIONALISATION AND THE EU IN CORPORATE REPORTS

This paper provides an institutional analysis of the way a set of Finnish firms have used the concept of internationalisation and the EU in justifying major strategic decisions. They have used internationalisation, and in particular the then new possibility of Finland joining the EU, as an argument in support of radical change. An analysis of their annual reports reveals a number of institutional arguments which are strong because they are generally accepted, a priori, as being important not only to firms but indeed to Finland as a whole. In using institutional arguments firms are aligning their own interests with those of the country, and in so doing are able to justify radical changes in most parts of their own organisations. We are not claiming that Finnish firms should not react to the challenges which EU represents. Rather, we suggest that by using institutional arguments they are borrowing legitimacy from a wider public. The arguments used are typically very broad, invoking very general visions of the role of Finland in the EU. We call these arguments “easy rides” because, even if they are only partially explicated, it is generally assumed that they will become accepted without questioning by public and employees alike. Certain specific patterns of “easy rides” can be distinguished: i) The mobilisation of a “national mission”, ii) “Sacrifice now, reap the benefit later”, and iii) “Bigger is better”. The paper concludes with a methodological discussion about the difficulty of distinguishing between the technical/functional and the institutional arguments.     

The cultural significance of accounting in Japan

We have had a spate of works on “Japanese Management” in the world, but very few on “Japanese Accounting”. In this article it is made clear that the functioning of accounting is contingent on the culture in which the accounting systems are incorporated, and that in order to discuss this intermingling of accounting and culture a perspective elaborated in Scandinavia can be relevant despite the uniqueness of Japanese culture. For only non-rationalistic or “naturalistic” perspectives can provide a basis for understanding the cultural dynamics of Japanese organizations and Japanese society. Thus the roles of accounting in Japan go far beyond what has been discussed in accounting textbooks.     

Fear of crime and housing prices: Household reactions to sex offender registries

Megan's Law requires public dissemination of information from sex offender registries. Opponents to this controversial law have questioned whether households misinterpret or even use this information. One concern was that the information might simply induce a “fear of crime.” This study finds evidence for both use and misinterpretation of the publicly available information on sex offenders. Using a unique dataset that tracks sex offenders in Hillsborough County, Florida, the results indicate that after a sex offender moves into a neighborhood, nearby housing prices fall by 2.3% ($3500 on average). However, once a sex offender moves out of a neighborhood, housing prices appear to immediately rebound. Surprisingly, these price impacts do not appear to differ in areas near high risk offenders labeled as “predators.”     

Solving the incomplete markets model with aggregate uncertainty by backward induction

This paper describes a method to solve models with a continuum of agents, incomplete markets and aggregate uncertainty. I use backward induction on a finite grid of points in the aggregate state space. The aggregate state includes a small number of statistics (moments) of the cross-sectional distribution of capital. For any given set of moments, agents use a specific cross-sectional distribution, called “proxy distribution”, to compute the equilibrium. Information from the steady state distribution as well as from simulations can be used to chose a suitable proxy distribution.     

Is econometrics useful for private policy making? A case study of replacement policy at an auto rental company

The goal of this paper is to illustrate the potential usefulness of econometrics as a tool to assist private policy makers. We provide a case study and detailed econometric analysis of the automobile replacement policy adopted by a large car rental company. Unlike public policy making–where the benefits from using econometric models and “science-based” approaches to policy making are hard to quantify because the outcomes of interest are typically subjective quantities such as “social welfare”–in the case of firms there is an objective, easily quantifiable criterion for judging whether policy A is better than policy B: profits. We introduce and estimate an econometric model of the rental histories of individual cars in the company’s fleet. Via stochastic simulations, we show that the model provides a good approximation to the company’s actual operations. In particular, the econometric model is able to reproduce the extraordinarily high rates of return that the company obtains on its rental cars, with average internal rates of return between purchase and sale of approximately 50%. However, the econometric model can simulate outcomes under a range of counterfactual vehicle replacement policies. We use the econometric model to simulate the profitability of an alternative replacement policy under pessimistic assumptions about the rate maintenance costs would increase and rental rates would have to be decreased if the company were to keep its rental cars longer than it does under the status quo. Depending on the vehicle type, we find that the company’s expected discounted profits would be between 6% to over 140% higher under the suggested alternative operating strategy where vehicles are kept longer and rental rates of older vehicles are discounted to induce customers to rent them. The company found this analysis to be sufficiently convincing that it undertook an experiment to verify the predictions of the econometric model.     

On Certain Indices for Ordinal Data with Unequally Weighted Classes

In this paper, some new indices for ordinal data are introduced. These indices have been developed so as to measure the degree of concentration on the “small” or the “large” values of a variable whose level of measurement is ordinal. Their advantage in relation to other approaches is that they ascribe unequal weights to each class of values. Although, they constitute a useful tool in various fields of applications, the focus here is on their use in sample surveys and specifically in situations where one is interested in taking into account the “distance” of the responses from the “neutral” category in a given question. The properties of these indices are examined and methods for constructing confidence intervals for their actual values are discussed. The performance of these methods is evaluated through an extensive simulation study.     

“100% EDI-connected suppliers” projects: An empirical investigation of success factors

Electronic Data Interchange (EDI) is becoming increasingly important, and new organizational forms based on EDI suppliers’ capabilities are emerging. Therefore, taking advantage of recent technological changes, especially the development of Web-based EDI systems, many big industrial buyers are seeking to get all their suppliers EDI-connected. Based on previous research on EDI adoption, we conducted a survey to study the opportunities of success of such a “100% EDI-connected suppliers” policy using data from the vehicle industry. Findings from our survey helped us to understand suppliers’ responses to such a policy and to provide recommendations to industrial buyers who are seeking to succeed in a “100% EDI-connected suppliers” project. This includes employing tailored communication strategies and selecting appropriate incentives that take into account different levels of suppliers’ EDI-capabilities and suppliers’ dependence.     

A theory of the temporary organization

The idea of the firm as an eternal entity possibly came in with the era of industrialism. In any case, the practical consequences of this idea contrast sharply with many ideas about projects and temporary organizations. Mainstream organization theory is based upon the assumption that organizations are or should be permanent; theories on temporary organizational settings (e.g., projects) are much less prevalent. In this article, we address the need for a theory of temporary organizations, thus seeking to supplement traditional project management wisdom. We also suggest some components of such a theory by elaborating on certain ideas about projects. “Action”, as opposed to “decision”, is one such component which is central to a theory of the temporary organization. In some respects we are thus dealing with antipoles, in other respects with concepts similar to those in established mainstream organizational theory. The role of “time” in the firm is different as compared to its role in the temporary organization. The differences have several important implications and we are able to suggest a coherent outline of a theory which we believe could be useful and which also covers several important aspects of temporary organizations.