Corporate Strategies for Managing Climate Risks

This paper focuses on organizations and their management of climate risks. Climate risks stem from continued changes in climate means and the increase in frequency and intensity of extreme weather events. We ask whether companies also apply the usual process of corporate risk management to climate risks. In seeking to answer this question, we review several literature streams in order to set out an initial theoretical reflection. Based on this we conducted an exploratory case study with 11 electric utilities. Our results illustrate that these companies perceive climatic changes as a material issue for their business. However, management has restricted knowledge about such climatic changes and thus cannot precisely determine the potential negative impacts on business activities. As a consequence, the companies have implemented a climate risk management that does not differ from the usual process of managing other business risks. Our results further illustrate that there is some variation in how individual firms manage climate risks: While risk identification and risk assessment are equally important for all electric utilities, there are differences in how management determines the direction of the individual response to climate risks. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

One-stage estimation of the effects of operational conditions and practices on productive performance: asymptotically normal and efficient,root-<Emphasis Type="Italic">n</Emphasis> consistent StoNEZD method

Understanding the effects of operational conditions and practices on productive efficiency can provide valuable economic and managerial insights. The conventional approach is to use a two-stage method where the efficiency estimates are regressed on contextual variables representing the operational conditions. The main problem of the two-stage approach is that it ignores the correlations between inputs and contextual variables. To address this shortcoming, we build on the recently developed regression interpretation of data envelopment analysis (DEA) to develop a new one-stage semi-nonparametric estimator that combines the nonparametric DEA-style frontier with a regression model of the contextual variables. The new method is referred to as stochastic semi-nonparametric envelopment of z variables data (StoNEZD). The StoNEZD estimator for the contextual variables is shown to be statistically consistent under less restrictive assumptions than those required by the two-stage DEA estimator. Further, the StoNEZD estimator is shown to be unbiased, asymptotically efficient, asymptotically normally distributed, and converge at the standard parametric rate of order n ^−1/2. Therefore, the conventional methods of statistical testing and confidence intervals apply for asymptotic inference. Finite sample performance of the proposed estimators is examined through Monte Carlo simulations.     

Laffer strikes again: Dynamic scoring of capital taxes

We set up a neoclassical growth model extended by a corporate sector, an investment and finance decision of firms, and a set of taxes on capital income. We provide analytical dynamic scoring of taxes on corporate income, dividends, capital gains, other private capital income, and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium. We then calibrate the model for the US and explore quantitatively the revenue effects from capital taxation. We take adjustment dynamics after a tax change explicitly into account and compare with steady-state effects. We find, among other results, a self-financing degree of corporate tax cuts of about 70–90% and a very flat Laffer curve for all capital taxes as well as for tax depreciation allowances. Results are strongest for the tax on capital gains. The model predicts for the US that total tax revenue increases by about 0.3–1.2% after abolishment of the tax.     

Budget impact analysis of secukinumab versus adalimumab in the treatment of ankylosing spondylitis

Background: Biologic treatments have enhanced the treatment outcomes of patients with active ankylosing spondylitis (AS). Until recently, TNF-alpha-inhibitors have been the only biologics approved for the treatment of active AS. The objective of this study was to assess the potential financial impact of the first non-TNF-alpha biologic secukinumab (fully human IL-17A-inhibitor) vs adalimumab (TNF-alpha-inhibitor) in the treatment of AS in Finland.

Materials and methods: In this model-based budget impact analysis, patients were treated either with secukinumab (150?mg) or adalimumab (40?mg). The number of patients and market share of different biologics were based on national reimbursement registry data. Adalimumab was the most commonly used biologic treatment for AS, and in the base case analysis all adalimumab patients are assumed to switch to secukinumab. Response rates were based on a matching-adjusted indirect comparison between secukinumab and adalimumab. Patients not achieving response were switched to another biologic treatment.

Results: Treating AS patients with secukinumab instead of adalimumab leads to potential savings of 18.2 million euros within a 5-year time period. The total costs within the follow-up time were 59.5 million euros and 77.7 million euros with and without secukinumab, respectively. According to sensitivity analyses, a higher adoption rate of secukinumab corresponds to higher potential savings.

Conclusions: Secukinumab is a cost-saving treatment option compared with adalimumab in the treatment of AS in Finland. More patients could be treated with a biologic by allocating resources more efficiently.     

Language and the Circuits of Power in a Merging Multinational Corporation

abstract    We argue in this paper that corporate language policies have significant power implications that are easily overlooked. By drawing on previous work on power in organizations ( Clegg, 1989 ), we examine the complex power implications of language policy decisions by looking at three levels of analysis: episodic social interaction, identity/subjectivity construction, and reconstruction of structures of domination. In our empirical analysis, we focus on the power implications of the choice of Swedish as the corporate language in the case of the recent banking sector merger between the Finnish Merita and the Swedish Nordbanken. Our findings show how language skills become empowering or disempowering resources in organizational communication, how these skills are associated with professional competence, and how this leads to the creation of new social networks. The case also illustrates how language skills are an essential element in the construction of international confrontation, lead to a construction of superiority and inferiority, and also reproduce post-colonial identities in the merging bank. Finally, we also point out how such policies ultimately lead to the reification of post-colonial and neo-colonial structures of domination in multinational corporations.     

Changes in the fiscal stance and the composition of public spending

We consider the impact of both cyclical and structural changes in the fiscal stance on public spending composition for a panel of EU countries, including individual components of public investment. We find that both cyclically induced and structural changes in the fiscal stance affect the composition of public spending, with fiscal tightening of both types increasing the relative share of investment and loosening favouring consumption expenditure. Of the components of public investment, infrastructure and redistribution respond to cyclical changes in the fiscal stance, while investment in hospitals and schools responds most clearly to structural changes.     

The warnings puzzle: an upstream explanation

Enforcement agencies issuing warnings are an empirical regularity in the enforcement of laws and regulations, but a challenge to the standard economic theory of public enforcement. A number of recent contributions explain the popularity of warnings as a response to information asymmetries between regulator and regulatee. We offer a distinct, but complementary explanation: Warnings can serve as a signaling device in the interaction between the enforcement agency and its budget-setting authority. By using costly warnings for minor offenses that would otherwise not be pursued, the agency can generate observable activity to escape budget cuts in subsequent periods. We show in a stylized model that warnings may indeed occur in an equilibrium of a game in which warnings are entirely unproductive in the agency-regulatee interaction, and thereby derive a testable hypothesis on regulatory agency behavior.     

Innovation speed under uncertainty and competition

Innovation speed is widely considered to be a key factor for a firm's ability to maintain competitive advantage. Primarily, empirical evidence has found contradictory interdependencies regarding the role of innovation speed. The prevailing proposition of “the faster the better” has been challenged by results of empirical studies heavily depending on the methodological setup used. In contrast, we propose a model of the complete innovation process to study innovation speed under uncertainty and competition. We find that higher market uncertainty speeds up innovation and encourages firms to innovate incrementally. Strong competition tends to reduce innovation speed and encourages rather radical innovation.