Finding a lasting cure for U.S. health care

In "Making Competition in Health Care Work" (July-August 1994), Elizabeth Olmsted Teisberg, Michael E. Porter, and Gregory B. Brown ask a question that has been absent from the national debate on health care reform: How can the United States achieve sustained cost reductions while at the same time maintaining quality of care? The authors argue that innovation driven by rigorous competition is the key to successful reform. A lasting cure for health care in the United States should include four basic elements: corrected incentives to spur productive competition, universal insurance to secure economic efficiency, relevant information to ensure meaningful choice, and innovation to guarantee dynamic improvement. In this issue's Perspectives section, eleven experts examine the current state of the health care system and offer their views on the shape that reform should take. Some excerpts: "On the road to innovation, let us not forget to develop the tools that allow physicians, payers, and patients to make better decisions." I. Steven Udvarhelyi; "Health care is not a product or service that can be standardized, packaged, marketed, or adequately judged by consumers according to quality and price." Arnold S. Relman; "Just as antitrust laws are the wise restraints that make competition free in other sectors of the economy, so the right kind of managed competition can work well in health care." Edward M. Kennedy "Biomedical research should be considered primarily an investment in the national economic well-being with additional humanitarian benefits." Elizabeth Marincola.     

When an executive defects

The news that one of the company's senior managers is leaving comes as a complete surprise to Paul Simmonds, CEO of Kinsington Textiles, Inc. Ned Carpenter, KTI's vice president of operations for three years, writes in his resignation letter than he is leaving for a better opportunity. Simmonds soon learns that Carpenter's new job is at Daltex, one of KTI's main rivals in the intensely competitive carpet industry. Hiring Carpenter had helped Simmonds establish his reputation as a topnotch manager. Carpenter came to KTI with lots of ideas and put his enthusiasm to good use. Three years into a five-year change program, Carpenter had turned KTI's operations from one of the worst in the industry to one of the best. He also had helped develop and plan the upcoming launch of a new fiber coating--KTI's first breakthrough in years. In this fictitious case study, Simmonds, along with the company's counsel and vice president of human resources, must figure out how much and what sort of damage control they need. What are they going to tell the company's employees and the media? Should they immediately replace Carpenter with John Brady, the second-in-command of operations? What if Carpenter is taking KTI employees--and strategic information--with him to Daltex? Should Simmonds ask all his managers to sign noncompete agreements-something Carpenter was never asked to do? Should KTI sue Carpenter? Five experts offer advice about communicating with KTI's employees, the media, and Carpenter himself, and about protecting the company's confidential information.     

Employee benefit packages for part-time workers

To successfully recruit and retain part-time workers in the decade ahead, managers will need to design more attractive employee benefit packages. This article examines which benefits part-time workers receive and value the most and which benefits they would like to receive.     

The Cost Efficiency of Real Estate Investment Trusts: An Analysis with a Bayesian Stochastic Frontier Model

Using a stochastic frontier methodology that incorporates Bayesian statistics, this paper analyzes the cost efficiency of real estate investment trusts (REITs) by observing the deviations of the measured costs of individual REITs from a defined efficient cost frontier. Using 1995–1997 data, we extend the previous research in this area and measure REIT efficiency more precisely by isolating random measurement error from the overall deviations from the efficient cost frontier. We calculate the magnitude of each REIT's managerial inefficiency, the industry inefficiency, and returns to scale. In addition, we assess specific characteristics of REITs for their contribution to inefficiency by calculating the odds ratio that a REIT with a specific characteristic is more efficient than a REIT with an alternative characteristic. The results show that, for the years studied, REITs are relatively cost efficient with most REITs facing increasing returns to scale. Additionally, the REIT's use of debt and the REIT's management style significantly affect the cost performance of REITs during the aforementioned time period. Finally, diversification across property types, as measured, does not seem to influence REIT cost efficiency.     

Why is bank debt senior? A theory of asymmetry and claim priority based on influence costs

This theory can explain why bank debt is universally senior,consistent with the presence of conflict (lawyers) and absolutepriority violations in financial distress: Better organizedbanks would more strongly contest priority in financial distressif they were junior. Because 'deterrence' can reduce creditors'total expenses in a priority contest, the ex post stronger lobbyist/litigantshould be senior ex ante. For equivalent reasons, the theorycan advise when public debt should be senior to trade creditand/or implicit contrasts, and can even suggest one rationalefor the absolute priority rule (APR). This article further showsthat Chapter 11 creditor reimbursement procedures can loweroverall costs.     

Measuring the economic benefit from R&D: results from the mass, length and flow programmes of the UK national measurement system

This study sought to measure the economic consequences of reduced expenditure on specific sections of the UK National Measurement System (NMS), part of the state-funded technological infrastructure. A method was developed which can be adapted to any publicly or privately financed R&D of which the benefits and cost-effectiveness are unclear or contested.
The recent interactions between the NMS and industry were investigated empirically. Five mechanisms were found to account for the majority of instances of successful value creation. Several case studies of each mechanism were collected, illustrating their existence beyond reasonable doubt.
Each of the cut projects would have been expected to have encouraged growth and profitability in identified sectors of the economy through one or more of these five mechanisms. The effects of the cuts were modelled over 30 years. Compared to the costs of the cut projects projected over the same period, the benefits to the economy were predicted to exceed the costs.     

The dialectics of globalization: what are the effects for management and organization in Germany and Japan

The globalization literature has been limited cumulative. Different disciplines have different accents, use different definitions, rely on divergent theories and focus on different units of analysis. As a corollary, they have come to divergent opinions on the concept of globalization, on its broader consequences as well as on the more specific consequences for organization and management. This article contributes to the literature by proposing a societal theory of institutional change to analyze globalization effects in a more systematical way. It explores the effects of globalization forces on organization and management in Germany and Japan in comparison to the US and the UK, by tracing their impact on the systems of corporate governance, industrial relations and human resources. The article shows that different patterns of change exist at different levels of analysis. These differences help us explain why no generalized pattern of convergence towards the same economic model should be expected.     

Risks in new product development: devising a reference tool

This paper describes the development and applicability of a risk reference framework (RRF) for diagnosing risks in technological breakthrough projects. In contrast to existing risk identification strategies, the RRF centers on an integral perspective on risk (i.e. business, technological and organizational) and the assessment of risks in ongoing projects. The resulting RRF consists of 12 main risk categories and 142 connected critical innovation issues and has been developed for a globally operating company in the fast-moving consumer goods industry. Our analyses show that to some extent different project members identified the same risks and that saturation occurred in the number of new risk-issues brought to light. We conclude that the success of breakthrough innovation projects improves through formal risk-assessment.