INFORMATION GATHERING BY A PRINCIPAL*

In the standard principal–agent model, the information structure is fixed. In this article the principal can choose to acquire additional information about the state of the world before he contracts with an agent. In the event that the principal acquires this information, the agent never learns what the principal knows about the state of the world. I examine cases where the agent can and cannot observe whether the principal has acquired the additional information. The implications for risk sharing, information acquisition, investment, and welfare are examined for both cases.     

The happy story of small business financing

We examine two data sets, one from the UK (n = 15,750) and one from the US (n = 3239), to show that SME financial behaviour demonstrates substantial financial contentment, or ‘happiness’. We find fewer than 10% of the UK firms seek significant growth and only 1.32% of US firms list a shortage of capital other than working capital as a problem. Financial performance indicators (growth, return on assets, profit margin) were not found to be determinants of SME financing activities, as might be expected in a ‘rational’ risk–return environment. Younger and less educated SME owners more actively use external financing – even though more education reduces the fear of loan denial – while older and more educated (‘wiser’) SME owners are found to be being less likely to seek or use external financing. The contentment hypothesis for SME financing also extends to high-growth firms in that we show that they participate more in the loan markets than low-growth firms. By way of contrast to the finance gap hypothesis, the contentment hypothesis observes the importance of social networks (connections) [for finance] and confirms the ‘connections – happiness’ linkage in the literature on happiness while doubting the theoretical suitability of Jensen and Meckling [Jensen, M., Meckling, W., 1976. Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics 3, 305–360.] base-case analysis for SMEs.     

Ecological services to and from rangelands of the United States

The over 300 million ha of public and private rangelands in the United States are characterized by low and variable precipitation, nutrient-poor soils, and high spatial and temporal variability in plant production. This land type has provided a variety of goods and services, with the provisioning of food and fiber dominating through much of the 20th century. More recently, food production from a rangeland-based livestock industry is often pressured for a variety of reasons, including poor economic returns, increased regulations, an aging rural population, and increasingly diverse interests of land owners. A shift to other provisioning, regulating, cultural, and supporting services is occurring with important implications for carbon sequestration, biodiversity, and conservation incentives. There are numerous goods and services possible from rangelands that can supply societal demands such as clean water and a safe food supply. The use of ecologically-based principles of land management remains at the core of the ability of private land owners and public land managers to provide these existing and emerging services. We suggest that expectations need to be based on a thorough understanding of the diverse potentials of these lands and their inherent limits. A critical provisioning service to rangelands will be management practices that either maintain ecological functions or that restore functions to systems that have been substantially degraded over past decades. With proper incentives and economic benefits, rangelands, in the U.S. or globally, can be expected to provide these historical and more unique goods and services in a sustainable fashion, albeit in different proportions than in the past.     

The National Audit Office's Evaluation of RIAs: Reflections on the Pilot Year

In 2003, the National Audit Office undertook its first year of evaluations of the quality of a sample of Regulatory Impact Assessments (RIAs). This article reflects on the experiences of this pilot year. It sets out the background to the National Audit Office's work, describes the methodology adopted, and then explains the main findings. Finally, it considers the benefits and limitations of this type of ex-post evaluation of the quality of RIAs.     

Evaluating the human resource shared services model: evidence from the NHS

This paper examines the shared service model of organizing the human resource management function. It reports the results from a study of the introduction of human resource shared services (HRSS) in four NHS organizations. Findings suggest that the HRSS model has a number of advantages for organizations but that it has difficulty addressing the transformational HR agenda. In contrast, with the exception of a small cadre of staff, there is few advantages for HR employees themselves in HRSS systems. We suggest that the apparent neglect of the work experience of HR staff under HRSS models may significantly undermine the potential for its wider successful implementation.     

How effective human resource management promotes corporate entrepreneurship: evidence from China

Strategic human resource management (SHRM) represents a set of HRM practices that are aligned with firm strategies. The relationship between SHRM and organizational performance has been extensively examined; however, whether and how SHRM influences corporate entrepreneurship remains unknown. Based on the resource-based perspective, this study examined a model linking SHRM with corporate entrepreneurship. The importance of HRM people's political skill for a firm's development of devolved management through SHRM implementation was also examined. Data from a survey of 201 Chinese manufacturing firms confirm a significant relationship between SHRM and corporate entrepreneurship and that the relationship is partially mediated by a devolved management style. The relationship between SHRM and devolved management was shown to be stronger for firms with more politically skillful HRM people.     

Private takings

This paper examines the implications associated with a recent Supreme Court ruling, Kelo v. City of New London (2005). Kelo can be interpreted as supporting eminent domain as a means of transferring property rights from one set of private agents—landowners—to another private agent—a developer. Under voluntary exchange, where the developer sequentially acquires property rights from landowners via bargaining, a holdout problem arises. Eminent domain gives all of the bargaining power to the developer and, as a result, eliminates the holdout problem. This is the benefit of Kelo. However, landowners lose all their bargaining power and, as a result, their property investments become more inefficient. This is the cost of Kelo. A policy of eminent domain increases social welfare compared to voluntary sequential exchange only when the holdout problem is severe, and this occurs only if the developer has very little bargaining power. We propose an alternative government policy that eliminates the holdout problem but does not affect the bargaining power of the various parties. This alternative policy strictly dominates a policy of eminent domain, which implies that eminent domain is an inefficient way to transfer property rights between private agents.