Business model schema: business model innovation tool based on direct causal mechanisms of profit

ABSTRACT

Defining business model as the logic/mode/way/framework to seek profit/money and glancing at the evolution of concept business, this paper develops a business model schema (BMS) as a holistic two-dimensions multi-level tool/method for business model innovation (BMI) based on the direct causal mechanisms of profit (DCMP). First, this paper takes DCMP as the logical/theoretical framework by which business model innovation process is identified and specified. And according to that process, it develops a BMS, illustrates an example of BMS to show up its practical usefulness, compares the similarities and differences between BMS and the existing powerful one business model canvas (BMC), and finally asserts that BMS must be a good and useful method in theory and practice because it stands on DCMP that ensures the genuine causality of profit and also it turns out practically useful, recalling the Kurt Lewin’s maxim (1945), “There is nothing so practical as a good theory.     

Real wages,productivity and economic growth in the G7, 1960–2002

Abstract

This paper investigates empirical real wage and productivity dynamics in the G7 countries using annual data for 1960–2002. The findings suggest that the level of labor productivity is positively related to GDP growth in all countries, and real wages are positively related to growth in some of them. The results tend to confirm the ‘profit paradox’. This postulates a positive relationship between economic growth and the aggregate profit share, and suggests that the frequent support of business interests for deflationary economic policies is a puzzle.     

On the role of domestic and international financial cyclical factors in driving economic growth

ABSTRACT

We investigate the effects of (domestic and international) financial cyclical factors on the US business cycle over the period 1890–2013 using an augmented stochastic version of the neoclassical growth model. In our setting, financial factors enter as determinants of the total factor productivity cyclical pattern. By means of static and dynamic estimations we find that (i) the inclusion of financial cyclical factors improves the model’s performance; (ii) the sensitivity of economic growth to financial factors is time-varying; (iii) domestic financial factors have a key role in explaining short-run output fluctuations only in the first half of the 20th century; (iv) US business cycle fluctuations have been mainly driven by global financial factors (i.e., financial integration) over the last three decades.

JEL CODES: O40, E32, C32     

Has liberalization affected profit margins in Indian Industry?

In this article, we analyse the determinants of firm‐level profit margins in Indian manufacturing. The model we estimate is rich in its dynamic characterization allowing as it does for lagged terms, trend movements, business cycle effects and a structural break in 1991. We hypothesize that the reforms undertaken by the government in 1991 constitute a structural break that influences a firm's independence to react to other firms as well as the extent of competition faced by these firms. Inserting this into the standard industrial organization model of profits, we obtain a dynamic market model. Estimating this model for 1980–98, we find that the 1991 reforms did have a significant impact on profit margins in Indian industry. The reforms have worked through their impact on a firm's behavioural variables – advertising, Research and Development (R&D), capital–output ratios and managerial remuneration – though the precise variables that were significant varied from sector to sector. We find that relatively inefficient firms make significantly lower profits than others both before and after the liberalization as expected.     

Inverse probability weighting to control for censoring in a post hoc analysis of quality-adjusted survival data from a clinical trial of temsirolimus for renal cell carcinoma

Abstract

Objectives: The Belgian third-party payer wishes to set reimbursement tariffs at a level that reflects the costs of orthotic braces. This article aims to calculate production and distribution costs of a prefabricated hard neck and knee brace and to explore whether Belgian tariffs and actual retail prices correspond with estimated costs of these two braces.

Methods: The cost model considered manufacturing costs, general overheads, research and development costs, warehousing costs, profit and distribution margins. Data were gathered from manufacturers, a production site visit, desk research, a decomposition of finished products and stakeholder interviews. The price year was 2007.

Results: The cost model estimated a retail price of €55–€150 for the neck brace, depending on assumptions. The estimated retail price for the neck brace was lower than the reimbursement tariff of €194 and the actual retail price of €241. The estimated retail price of €331–€694 for the knee brace was lower than the actual retail price of €948.

Conclusions: Actual retail prices and reimbursement tariffs for a neck brace and a knee brace exceeded prices based on estimated costs. Therefore, there appears to be scope for reducing tariffs.     

Marx and Kalecki on aggregate instability and class struggle

Abstract

Michal Kalecki developed his original model of the business cycle in the early 1930s. Several versions referred as versions I, II and III have been developed until the late 1960s from which Kalecki draw three central propositions on instability and class struggle: (1) the capitalist system “cannot break the impasse of fluctuations around a static position” unless it is shocked by “semi-exogenous factors”, (2) the dynamics of the profit rate and investment – as in version I and II – may be disconnected from “class struggle” and (3) when class struggle impacts the dynamics of the economy – as in version III – this is happening in a context in which expected profitability of new investment projects is negatively related to the profit share. In this article, we want to show that each of these three proposals represents key differences with Marx.     

The Determinants of Firm Profitability in Australian Manufacturing

This study provides new evidence on the determinants of the profitability of Australian manufacturing firms by analyzing a unique firm-level data set of firm performance over the period 1984-93. The panel nature of the data permits the estimation of dynamic profitability models over the business cycle, to test both the persistence and cyclicality of firm profitability. Econometric results suggest that lagged profitability is a significant determinant of current profit margins, and that industry concentration is positively related to firm profit margins. Also, profit margins are found to be procyciical in concentrated industries but counter-cyclical in less concentrated industries.     

The extensive margin,sectoral shares,and international business cycles

Abstract This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. We find that the non‐traded output share is as volatile as aggregate GDP and for most countries is countercyclical. While the standard international real business cycle model has difficulty in accounting for these properties of the data, an extended model that allows for sectoral adjustment along both the intensive and the extensive margins does a much better job of replicating these statistics. The model also matches better the correlation between relative consumption growth and real exchange rate changes, a key measure of international risk‐sharing.     

A Kaleckian model of business cycle synchronization

Abstract

A non-linear, two-country Kaleckian model of the business cycle was developed for investigating business cycle synchronization. The model includes three components: a country-specific business cycle-generating equation, a transmission mechanism and time delays in the transmission mechanism. The model constructed is a non-linear delay-differential equation system. Solutions to the model without time delays in transmission are derived using the averaging method. The solutions show that the model produces limit cycles representing business cycles. The model with time delays in transmission is then solved numerically in order to investigate the role played by the coupling strength and coupling delay in transforming otherwise independent country-specific cycles into a synchronized business cycle. The degree of synchronization of the business cycle is shown to be positively related to the coupling strength. Moreover, coupling delays above a certain threshold play a desynchronizing role.     

The time-varying characteristics of the Chinese financial cycle and impact from the United States

ABSTRACT

Although there have been many empirical studies about the financial cycle since the financial crisis of 2008, few have analysed the structural changes in the Chinese financial cycle over time. The Chinese financial development process is short, and it is difficult to obtain accurate results on the measurement of the financial cycle. Based on wavelet analysis, this paper analyzes the time-varying characteristics of the Chinese financial cycle and the relationship between the financial and business cycles. In addition, we measure the impact from the United States. This paper draws three conclusions. Firstly, in terms of the characteristics of cycles, the existence of Chinese business cycle and financial cycle is proved, while the credit cycle, leverage cycle, stock market cycle and property cycle are quite different. Specifically, China has a 5.8-year credit cycle, an 8-year stock market cycle, 3.4-year and 12-year business cycles and a 15-year leverage cycle. Secondly, the financial cycles can serve as leading indicators of the business cycle, though the relationships between them are change overtime. Finally, the United States has a significant impact on the Chinese financial cycle with a ‘decoupling-recoupling’ effect, which is mainly reflected in the leverage cycle and the stock market cycle.     

Marx's analysis of the falling rate of profit in the first version of Volume III of capital

Abstract

This paper provides an analysis of the Hodgskin section of Theories of Surplus Value and the general law section of the first version of Volume III of Capital. It then considers Part III of Volume III, the evolution of Marx's thought and various interpretations of his theory in the light of this analysis. It is suggested that, as late as the 1870s, Marx had hoped to be able to provide a demonstration that the rate of profit must fall. The main conclusions are that (1) Marx's major attempt to show that the rate of profit must fall occurred in the general law section, (2) Part III does not contain a demonstration that the rate of profit must fall and (3) Marx was never able to demonstrate that the rate of profit must fall and he was aware of this.     

The Effects of Business Cycles on Growth - Time Series Evidence for the G7-countries Using Survey-based Measures of the Business Cycle

The paper analyses whether business cycle fluctuations affectlong-run growth. This hypothesis is tested using quarterly timeseries for the G7-countries. A vector-autoregressive model containingtotal factor productivity and a survey-based direct measureof the business cycle is estimated. In this vector-autoregression,technology and business cycle shocks are identified based onthe assumption that productivity-improving measures need sometime and, thus, there is no contemporaneous response of productivityto a business cycle innovation. The results suggest that positivebusiness cycles shocks have a small negative impact on long-runproductivity. However, the results appear to be not robust againstchanges in the empirical model.(JEL E32, O41)     

Is there a profit premium for market-oriented firms? A panel data investigation

ABSTRACT

This paper provides an empirical investigation of the impact of market orientation on firms' economic performance during the period 1998–2012 using a panel of Italian manufacturing firms. We introduce a dynamic concept of market orientation, in that we define a market-oriented firm as one that persistently undertakes product and marketing innovation, while at the same time introducing organizational changes and training efforts to manage and improve its knowledge assets over the long term. This notion of market orientation is therefore crucially related to the so-called dynamic capability approach. The related empirical model shows that being a market-oriented firm significantly affects profitability, in a framework in which this latter is simultaneously estimated with productivity, thus allowing for more precise estimates of the profit premium which is earned accordingly.     

Sraffa in historiographical perspective: a provisional statement

The paper explores the theory of the aggregate price, profit, and business fluctuations in Keyne's Treatise for its implications for modern macro-economic analysis. As in the Treatise, profits are first defined within a theory of the agregate price level, as aggregate investment minus saving. Deriving aggregate total revenue and aggregate total cost from this price theory, the paper shows how to construct a version of the Keynesian cross diagram. The cross construction suggests an important qualification for fiscal policy, that total cost does not shift. Then, using a neoclassical definition of profit and the total-cost / total-revenue approach, the paper derives aggregate supply, and then adds aggregate demand in an integrated framework. Comparative statics of the AS-AD analysis and the central role of profit in the Treatise suggest that a focus on profit might be useful in identifying exogenous technology shocks of real business cycle theory.     

Vacancies and Unemployment in Australia

This article examines the extent to which the Mortensen–Pissarides model of labour market search can quantitatively match business cycle fluctuations in Australia. With productivity and job‐separation‐rate shocks, the model fails to produce substantial volatility among unemployment or vacancies, a result similar to Shimer's (2005) findings for the United States. Examining a broader range of shocks significantly increases the magnitude of business cycle fluctuations, but still only explains roughly 25 per cent of labour market volatility. The implied volatility of wages in the model is similar to that in the data and hence excessive wage flexibility is unlikely to be central to the failure of the model as claimed in the literature.     

From profit margins to income distribution: Joan Robinson's odyssey from marginal productivity theory

The point of departure for this paper is a 1941 Note on profit margins co-authored by Joan Robinson and Nicholas Kaldor that remained unpublished until 2000. Robinson's reviews of Henry Clay's The Problem of Industrial Relationships, Bresciani Turroni's The Economics of Inflation, and Roy Harrod's Towards a Dynamic Economics, along with her 1965 Cambridge Inaugural Lecture, may be interpreted as analogous documents that develop her critique of neoclassical wage theory and identify the money wage as the economy's ‘key’ price. These publications were critical steps toward the wage mark-up hypothesis and Post-Keynesian support of incomes policy to contain inflation. Robinson's Harrod review anticipated her later ideas about economic growth. With Kalecki's notion of ‘the degree of monopoly’ and her own concept of neo-mercantilism (from the Inaugural Lecture), these themes are nascent in the Robinson–Kaldor Note on profit margins.     

GLOBAL BUSINESS CYCLES: CONVERGENCE OR DECOUPLING?*

We analyze the evolution of the degree of global cyclical interdependence over the period 1960–2008. Using a dynamic factor model, we decompose macroeconomic fluctuations in output, consumption, and investment into a global factor, factors specific to country groups, and country‐specific factors. We find that during 1985–2008, there is some convergence of business cycle fluctuations among industrial economies and among emerging market economies. Surprisingly, there is a concomitant decline in the relative importance of the global factor. We conclude that there is evidence of business cycle convergence within each of these two groups of countries but divergence (or decoupling) between them.     

Devaluation and Marx's Law of the tendential fall in the rate of profit

Marx's law of the tendential fall in the rate of profit predicts that the rate of profit will decline over the long term as the forces of production develop, and move cyclically in a way that explains crises and economic recoveries. This interpretation is substantiated with textual evidence, and with a method for measuring the dynamic of devaluation and revaluation which Marx uses to explain the profit rate cycle. This method is shown to be consistent with temporalism, meaning it avoids the transformation problem created by dual system interpretations, and the problem of the Okishio Theorem created by simultaneist interpretations. The article also includes a temporalist way to estimate the Monetary Expression of Labour Time, and empirical results for the effect of devaluation on the stock of fixed assets in the United States since 1930.     

The Productivity Slowdown Puzzle. Technological and Non-technological Shocks in the Labor Market

Abstract

In this paper we examine the relationships between business cycles in the G7 countries. We focus on whether recessionary periods in one country are independent of the timing of recessions in other countries in the G7, using three different methods for dating recessions. We find that the evidence is mixed on whether phases of the business cycle in North America and in European countries are independent, or whether there is a common phase structure in the business cycle across all the G7 economies. NBER dates suggest that business cycles are synchronised, while other methods for generating business cycle chronologies are more consistent with regional, rather than international cycles. We also find mixed evidence on whether the UK is synchronised with European countries, while Japan quite clearly has the cycle that is most independent of other G7 countries.