Analysts' Forecasts of German Firms' Earnings: a Comparative Analysis

This paper examines analysts' forecasts of the annual earnings per share of German firms over the period of February 1987 to December 1995. The German case is particularly interesting as the accounting and institutional structures vary from those in more thoroughly researched markets such as the U.S. or U.K. The paper therefore considers the features of the German forecasting environment which distinguish it from the Anglo-American model, and whether these might be reflected in forecasting performance. The results for Germany show that the accuracy of analysts' forecasts improves as the forecast horizon shortens, are less accurate than a naive prediction model over longer horizons, and contain a positive bias. When the results for Germany are contrasted with the results for the U.K., as reported in a recent paper, they are found to be a little less accurate but the positive bias is greater in U.K. forecasts. Taken overall the forecasting process in Germany appears to be less efficient than in the U.K., but this may be due to the distinct features of the German forecasting environment.     

Architectural innovation in product development through early supplier integration

The paper explains how an important opportunity exists to pro-actively integrate suppliers at an early stage in the concept exploration and definition stages of product development. Research suggests that the concept of architectural innovation can be extended so that product features are matched with the associated specialized technical skills of partners in the development team.
In addition to the establishment of integrated product teams, key enablers include: long-term commitment to suppliers; co-location; joint responsibility for design and configuration control; seamless information flow; and retaining flexibility in the definition of system configuration. Important contributing factors include: supplier-capability-enhancing investments; target costing; and incentive mechanisms. To promote innovative outcomes in military and government programmes, attention is drawn to the importance of governments championing closely-knit customer-supplier relationships.
Firms can build enduring competitive strength by leveraging the specialized knowledge bases of their supplier networks. Two case-studies provide lessons to improve current approaches to the creation of long-term partnerships, or strategic alliances, with suppliers.     

Linear versus process tracing approaches to judgment modelling: A new perspective on cue importance

For a bankruptcy prediction problem, the judgment formation process is studied using linear models and process tracing models. The linear models are constructed using traditional linear discriminant analysis techniques. The process tracing models are constructed using computer-generated algorithmically-based decision nets. All the models presented show good predictive accuracy. However, the linear models and process tracing models diverge widely on several measures of cue importance. This divergence, for a fairly straightforward problem, is intriguing since virtually all the evidence in the accounting literature about cue importance is based on linear models research. The importance of different information cues to decision-makers is clearly a critical issue in the design of effective accounting information systems. Thus, this study suggests the need for much more careful attention to the complex question of assessing cue importance.