Cost management and value creation: the missing link

Understanding of the relationship between the costs of the firm and the value the firm provides to its customers is the key to the ability of the firm to reach its profit potential. From this perspective the firm needs to have a thorough understanding of its activities, their costs and their relation to market prices. Advanced cost management studies and practices suggest a variety of different tools that help us understand the relationship between value and cost. However, most of these studies provide us with qualitative tools only. An exception is studies related to product cost planning, as in the case of target costing or value analysis/value engineering. This paper, while being a part of emerging literature on strategic cost management, extends the existing knowledge of the relationship between costs and value by introducing the value creation model (VCM). In particular, the VCM model defines the firms' cost structure in terms of value added, non-value added but required activities, as well as of waste. A firm's cost structure is aligned with value attributes embedded in products and services. The VCM model seeks to understand the trade-off between what the customer is willing to pay for a product/service bundle (value) and the cost the firm bears to provide what the customer desires. Based on these trade-offs, VCM defines value multipliers, which help the firm determine which activities the firm should focus on in order to develop a competitive advantage.     

Bayesian Conjoint Choice Designs for Measuring Willingness to Pay

In this paper, we propose a new criterion for selecting efficient conjoint choice designs when the interest is in quantifying willingness to pay (WTP). The new criterion, which we call the WTP-optimality criterion, is based on the c-optimality criterion which is often used in the optimal experimental design literature. We use a simulation study to evaluate the designs generated using the WTP-optimality criterion and discuss the design of a real-life conjoint experiment from the literature. The results show that the new criterion leads to designs that yield more precise estimates of the WTP than Bayesian D-optimal conjoint choice designs, which are increasingly being seen as the state-of-the-art designs for conjoint choice studies, and to a substantial reduction in the occurrence of unrealistically high WTP estimates.     

Human resource management–well‐being–performance research revisited: Past,present, and future

The authors provide an up‐to‐date theoretically based qualitative review of research dealing with the relationship between HRM, employee well‐being, and individual/organisational performance (HRM‐WB‐IOP research). The review is based on a systematic critical analysis of all HRM‐WB‐IOP studies (N = 46) published in 13 core HRM and management journals in the 2000 to 2018 period. The authors first identify different theoretical models of the HRM‐WB‐IOP relationship, which they then use to map research in the area. The results show that mutual gains conceptualisations play a dominant role in extant HRM‐WB‐IOP research, at the expense of alternative conflicting outcomes and mutual losses models, which are also shown to receive very limited empirical support across the 46 studies. As part of this mapping exercise, the authors identify important knowledge gaps in the area and conclude by setting out a number of key recommendations for future research to address these gaps.     

The incentive to give incentives: On the relative seniority of debt claims and managerial compensation

We show that the relative seniority of debt and managerial compensation has important implications for the design of remuneration contracts. Whereas the traditional literature assumes that debt is senior to remuneration, there are in reality many cases in which remuneration contracts are de facto senior to debt claims in financially distressed firms and in workouts. We theoretically show that risky debt changes the incentive to provide the manager with performance-related incentives (a “contract substitution” effect). In other words, the relative degree of seniority of managers’ claims and creditors’ claims in case a bankruptcy procedure starts is crucial to determine the optimal incentive contract ex-ante. If managerial compensation is more senior than debt, higher leverage leads to lower power incentive schemes (lower bonuses and option grants) and a higher base salary. In contrast, when compensation is junior, we expect more emphasis on pay-for-performance incentives in highly-levered firms.     

Remittances and the Brain Drain: Do More Skilled Migrants Remit More?

In most destination countries, immigration policies are tiltedmore and more in favor of skilled individuals. Whether thisshift hurts economic prospects in sending countries, as arguedby the traditional brain drain literature, is somewhat controversial.The most recent literature focuses on the link between skilledoutmigration and educational achievements in the home country.This article emphasizes a different channel. It considers theargument that skilled migrants raise economic welfare at homeby sending a relatively larger flow of remittances. While skilledmigrants typically earn more, and so might be expected to remitmore, they are also likely to spend more time abroad and toreunite with their close family in the host country. These secondtwo factors should be associated with a smaller propensity toremit. Thus, the sign of the impact of the brain drain on totalremittances is an empirical question. A simple model has beendeveloped showing that skilled migrants may indeed have a lowerpropensity to remit from a given flow of earnings. An empiricalequation of remittances is estimated as a measure of the braindrain in developing countries using the Docquier and Marfouk (2004)data set. Evidence is found that the brain drain is associatedwith a smaller propensity to remit.     

Takeover duration and negotiation process

We study the relations between takeover negotiations duration, competition and learning, focusing on the private phase of bidder-initiated transactions. While the negotiation goes on, both parties learn about true deal synergies. At any moment, rival bidders can show up and compete for the target. Using a discrete-time finite-horizon dynamic programming approach, we derive the equilibrium relations between the negotiation duration, the pressure of potential competition and the learning process. Next, we perform a calibration exercise on a large sample of merger negotiations with hand-collected data from the Securities and Exchange Commission filings. Our results provide evidence of a very competitive M&A (Mergers and acquisitions) market.     

Reconsidering Union Activism and Its Meaning

Membership mobilization is widely regarded as critical for union revitalization. Estimates of the level of activism vary widely, and studies reveal puzzling inconsistencies between union members' beliefs and intentions. Drawing from Ajzen's theory of planned behaviour, we address both issues using a sample of faculty union members. Results show both consistency and discrepancy between summary self‐reports of activism and specific participation behaviours, helping account for the widely varying estimates of activism levels found in other studies. Results also indicate an important role for perceived control, a factor rarely examined in prior research on activism.     

Using Flexible Taste Distributions to Value Collective Reputation for Environmentally Friendly Production Methods

In this paper, we investigate consumer preferences for various environmentally friendly production systems for carrots. We use discrete choice multi‐attribute stated preference data to explore the effect of the collective reputation of growers from an Alpine valley with an established reputation for its environmentally friendly production: Val di Gresta ‘the valley of organic orchards.’ Data analysis of the panel of discrete responses identifies unobserved taste heterogeneity for organic, biodynamic, and place of origin along with extra variance associated with experimentally designed alternatives. The assumed parametric taste distributions are each tested using the semi‐nonparametric specification proposed by Fosgerau and Bierlaire, while the null of normality cannot be rejected for organic and biodynamic production methods, though it is for the place of origin. The latter is found to be bi‐modal, with modes at each side of zero. The use of a flexible taste distribution increases the plausibility of this form of heterogeneity and it appears promising for future applied studies. Dans le présent article, nous avons examiné les préférences des consommateurs quant à divers systèmes de production écologiques de carottes. Nous avons utilisé des données sur les préférences déclarées, la valeur attendue et les choix discrets pour examiner l'effet de la réputation collective de producteurs dans une vallée alpine réputée pour sa production écologique: Val di Gresta, dite la ?vallée des vergers biologiques?. L'analyse des données de panel discrètes a fait ressortir une hétérogénéité inobservable des goûts quant à la culture biologique, la culture biodynamique et le lieu d'origine ainsi qu’une variance supplémentaire liée à des options expérimentalement conçues. Les distributions paramétriques hypothétiques des goûts sont testées à l'aide de la spécification semi‐non‐paramétique proposée par Fosgerau and Bierlaire (2007), tandis que l'hypothèse nulle de normalité(null of normality) ne peut être rejetée pour les méthodes de production biologique et biodynamique, bien qu’elle le soit pour le lieu d'origine. Cette dernière serait bimodale, avec des modes de chaque côté de zéro. L'utilisation d'une distribution des goûts souple augmente la plausibilité de cette forme d'hétérogénéité et semble prometteuse pour les études appliquées futures.