'Tying the manager's hands': constraining opportunistic managerial intervention

We discuss and examine empirically a firm-level equivalent ofthe ancient problem of ‘tying the King's hands’,namely how to avoid managerial intervention that is undertakento reap private benefits but is harmful to overall value creation,that is, ‘managerial opportunism’. The link frommanagerial intervention to firm-level value-creation is moderatedby employee motivation. Thus, intervention in the form of managersoverruling employees or reneging on delegation may demotivateemployees, particularly when the intervention is perceived asbeing unfair, undertaken for personal gain, etc. We argue thata number of mechanisms, such as managers staking their personalreputation, employees controlling important assets, strong tradeunions, etc. may function as constraints on managerial proclivitiesto intervene, thus reducing the problem of managerial opportunism.We derive four hypotheses from these ideas, and test them, usingpath-analysis, on a rich dataset, based on 329 firms in theSpanish food and electric/electronic industries.     

Wage formation in historical perspective: the French experience

Translator's note: In this article Robert Bayer introduces thenotion ‘regulation’ as a key concept in analysesof the labour market. The term refers to the balance of social,institutional and economic forces which characte rise at a particulartime the economic system as a whole or particular parts of it.I considered translating ‘regulation’ as ‘order’,‘regime’, ‘system’ or ‘formation’;but these terms are either too static or already bear inappropriateconnotations. It was therefore decided to retain the Frenchexpression in the English text.     

The global business revolution, the cascade effect, and the challenge for firms from developing countries

The global business revolution since the 1980s has witnessedan unprecedented degree of industrial consolidation and concentrationof business power at a global level. Firms with powerful, globallyrecognised technologies and/or brands constitute the ‘systemsintegrators’ at the apex of extended supply chains. Thispaper examines the supply chains in four different sectors:aerospace, telecommunications, automobiles and beverages. Itfinds that these sectors have striking similarities in the wayin which the core systems integrators have stimulated industrialconcentration across the whole supply chain. This ‘cascadeeffect’ has profound implications for firms from developingcountries in catching up at the firm level.     

The concept of routines: some clarifications

The concept of an ‘organisational routine’ is centralto the evolutionary theory of the firm. However, the conceptitself is still unclear. There is not much consensus in theliterature regarding its dimensions, its characteristics andits functions. Despite increasing use of the concept, not muchconceptual progress has been made in recent years, as remarkedby several of the leading writers on the topic. The objectiveof this paper is to contribute to further theoretical developmentof the concept of ‘organisational routine’, andto elaborate the research agenda on organisational routines.Both of these measures contribute to clarifying the conceptand enabling its application in empirical research in the socialsciences, thereby unlocking its potential for understandingorganisations and organisational change. Several problems forconceptual progress are identified. Implications for the conceptualisationof ‘organisational routines’, and for the researchagenda on organisational routines are drawn.     

ACCUMULATION, CAPACITY UTILISATION AND DISTRIBUTION

This paper examines three approaches to the process of accumulationwhich are based on the ‘Keynesian premise’: the‘neo-Keynesian’, the ‘Kaleckian’ andthe ‘Sraffian’. Making some criticisms of the firsttwo from the viewpoint of the third and from a certain formal/conceptualperspective, we propose a synthetic model which is free fromthese criticisms and in which the adjustment of savings to investmentin the long period is achieved through all the three routesemphasised separately by these approaches: changes in the long-perioddegree of utilisation; changes in the ‘normal’ distributionof income; and variations in the size of productive capacity.The key to the synthesis is the hypothesis that, in the longperiod, the ‘normal’ degree of utilisation is endogenouslydetermined to coincide with the average level through mutualinfluence effected by investment in the short period. Our syntheticmodel, like the first two approaches, is in the line of steady-stateanalysis, but in a way compatible with the ‘Keynesianpremise’.     

Preferences, reductionism and the microfoundations of Analytical Marxism

Analytical Marxism has recommended that Marxian theory shouldconform to ‘normal’ scientific methods and thatthis should involve the development of microfoundations. Thelatter has involved the adoption of rational choice theory andits corresponding assumptions regarding agents' behaviour. Thispaper seeks to question this position and highlight a numberof problems which Analytical Marxism faces, particularly inthe domain of economic theory. The different views of scienceespoused by Analytical Marxists display a tension between ‘positivist’and ‘realist’ perspectives, and the arguments forindividualist and anti-reductionist approaches to social andeconomic theory are also argued to be problematic. The approachof Analytical Marxism, it is suggested, can involve the uncriticaladoption of many of the assumptions of standard economic theoryand, as such, it is subject to a number of substantive criticisms,some of which have been elaborated from within mainstream economictheory.     

A simple model of three economies with two currencies: the eurozone and the USA

This paper presents a Keynesian model which describes threecountries trading merchandise and financial assets with oneanother. It is initially assumed that all three countries haveindependent fiscal policies but that two of the countries sharea currency, hence the model can be used to make a preliminaryanalysis of the conduct of economic policy in ‘the eurozone’vis-à-vis the rest of the world—‘the USA’.The main conclusion will be that, if all three countries doindeed operate independent fiscal policies, the system willwork under a floating currency regime, but only so long as theEuropean central bank is prepared to modify the structure ofits assets by accumulating an ever rising proportion of billsissued by any ‘weak’ euro country.     

Money, cycles and capital formation: von Mises the 'Austrian' vs. Robertson the 'Dynamist'

A ‘disequilibrium’ between saving and investmentdecisions determines a maladjustment in production, the disruptionof capital, and a downturn in economic activity, according tothe ‘Austrian’ approach. By contrast, the ‘Dynamists’argue that it may lead to economic growth, as disequilibriummay well be instrumental to capital accumulation. What explainsthese different predictions in otherwise similar models? Thekey is in the interplay between the analytical features andthe ideological options underlying each of these approaches:alternative lines of thought, entirely compatible with theiranalytical models, were abandoned by some of these authors whenthey conflicted with their pre-analytical views. This paperillustrates the argument by exploring the models of two ‘fathers’,von Mises and Robertson.     

Uncertainty: individuals, institutions and technology

In an attempt to refine the concept of uncertainty, this paperelaborates an ontology of the social world concentrating onindividuals, institutions and technology. It shows the strongentwinement of the ontological aspects of the conceptualisationof uncertainty and epistemological ones. It highlights the ontologicaland epistemological dimensions of different concepts of uncertainty,such as fundamental uncertainty, procedural uncertainty, ambiguityand weak uncertainty (or risk). It also comments on a few writingsthat distinguish varieties of uncertainty with adjectives suchas ‘ontological’ and ‘epistemological’or ‘epistemic’.     

The functions of the family in the great society

Criticisms by Hodgson and others that Hayek and other Austrianscannot offer a theory of the family are responded to with adiscussion of the functions of the family in a market society.The family can be understood as a bridge between what Hayekterms ‘organisations’, or face-to-face social institutionsand ‘orders’, or the anonymous social institutionsof the Great Society. The family's necessary role is then linkedto familiar Hayekian themes of knowledge and incentives. Familieshelp us to learn the explicit and tacit social rules necessaryfor functioning in the wider world, and families are uniquelypositioned to do so, because it is those closest to us who havethe knowledge and incentives necessary to provide that learning.     

Schumpeter, Hegel and the vision of development

This paper suggests that the intellectual origins of the visionunderlying Schumpeter's evolving theory of economic developmentcan in significant measure be traced to Hegel. Like Hegel, Schumpeteridentified two essential moments in history—the preservationof the existing order or ‘circular flow’, on theone hand, and its destruction and replacement by a new orderor ‘development’, on the other. Like Hegel, Schumpetersaw change being effected by individuals who grasped what wasessentially new and developing in the particular historicalcircumstances of their own age.     

The Schumpeterian role of financial innovations in the New Economy's business cycle

Alan Greenspan claims that modern financial innovations, especiallyfinancial derivatives, were major contributors to a Schumpeterianprocess of ‘creative destruction’ which produceda high-growth ‘New Economy’ and opposes their regulation.A different perspective emerges when it is recognised that the‘New Economy’ followed the general contours of aSchumpeterian business cycle, and the role of modern financialinnovations is examined in that context. The authors argue thatthe primary role of financial derivatives has been in contributingto ‘reckless finance’ and speculative excesses inthe second phase of that cycle, and that Schumpeter would favoursubjecting the use of derivatives to more regulation.     

Price rigidity and market-clearing: a conceptual clarification

This article tests the view (derived from Hicks and Patinkin)that non-market clearance may be caused by slow adjustment (‘processrigidity’). There are models where market-rationing ispresent and derives from some form of rigidity, but this rigiditycannot be considered as process rigidity. It is similarly possibleto accommodate the idea of process rigidity within the Marshallianresearch programme. What is missing is that market-rationingmight be its corollary. The reason such a causal link is oftenbelieved to exist lies in a generic use of the concept of rigidity,used to designate alternative and incompatible phenomena: ‘exogenousend-state rigidity’ and ‘equilibrium end-state rigidity’,as well as process rigidity. It is true that these first twoforms of rigidity create market rationing. The belief that slowadjustment also generates market rationing results from theunwarranted extension to process rigidity of conclusions whichare only valid for the first two.     

Free banking and the stability of early joint-stock banking

Proponents of free banking argue that systems adopting theirpolicies will be stable. In this paper, we present evidencesuggesting that, in general, early joint-stock banking systemsdid not adopt free banking, and those that did proved to beunstable. In particular, we demonstrate that those systems imposingregulations were generally stable. We rationalise the successof regulation as a pragmatic solution to the time-inconsistencyproblem arising from the peculiar nature of the banking firm.Notably, we find that the ‘golden age’ of free bankingstability can be attributed to restrictions on the organisationalform of the early banking firm.     

The Asian crisis and the shaping of 'proper' economies

The latter half of the 1990s saw a new international agendadevelop: the ‘strengthening of the international financialsystem’ through the globalisation of standards and codesof ‘best practice’. The author calls for criticalreflection on this normalisation of ‘free market’capitalism and its global enforcement through a comprehensivesystem of economic standardisation and surveillance. To thisend, Michel Foucault's analysis of liberalism is shown to behighly relevant.