Firm-employee relationship strength—A conceptual model

This paper posits a model of firm-employee relationship strength that permits the future measurement of an index of the strength of intra-firm relationships between the firm and the employees of that firm. The relationship marketing literature currently provides no clear direction as to how to represent and measure the strength of firm-employee relationships. The proposed model emerges from an examination of previous marketing and non-marketing literature through exploration of possible concepts to represent measuring strong and productive work relationships, focusing on relationship strength as the construct of interest. The review of the literature on the concept of relationship strength results in the development of an index model of firm-employee relationship strength predicted by cooperation, balanced power, communication, attachment, shared goals and values, trust and the absence of damaging conflict. The article concludes with a list of contributions that the model provides to the relationship marketing literature, as well as suggestions for future research. This includes examination of the impact of the relationship that a firm has with employees on external firm relationships, most particularly with customers.     

Audit committee financial expertise and properties of analyst earnings forecasts

An important role of financial accounting information is to aid financial statement users in forming expectations about the firm's future earnings. Prior research finds that accounting financial expertise of the audit committee is associated with higher financial reporting quality. We extend this literature by examining the association between audit committee financial expertise and analysts' ability to anticipate future earnings. We find a significant association between accounting financial expertise on the audit committee and analyst earnings forecasts that are more accurate and less dispersed. In contrast, we do not find a significant association between non-accounting financial expertise (i.e., supervisory expertise) and forecast accuracy or forecast dispersion. These findings contribute to our understanding of the benefits of accounting expertise in audit committees by demonstrating an association between accounting financial expertise and improvements in analyst earnings forecasts.     

Challenges in quantitative economic analysis in support of multilateral trade negotiations

A wide range of economic analysis of agricultural trade liberalization was performed prior to and during the Uruguay Round of trade negotiations. Views differ as to the effectiveness of this research, although most would agree that it became less relevant as the negotiations progressed. This paper reviews the contributions of economists to the trade liberalization debate, with an emphasis on the quantitative assessment of multilateral agricultural trade liberalization. With a new round of agricultural trade negotiations scheduled to begin in 1999 it is crucial that the quantitative work required to support these negotiations begin in the near future. The authors conclude that the Uruguay Round outcome provides numerous challenges and opportunities in analyzing the traditional agenda of agricultural trade liberalization. In addition, new issues will be added to the agenda of the next round of negotiations. These include: trade and the environment, competition policy and intellectual property rights. It is important that economists begin to develop a research agenda that can address these issues and become activists in addressing these topics in public forums.     

Information uncertainty and auditor reputation

This paper explores the relationship between information uncertainty and auditor reputation revealed by the failure of Arthur Andersen (AA). AA’s reputation deteriorated considerably when it announced on January 10, 2002, that it had shredded documents related to its audit of Enron. AA’s demise was sealed on March 14, 2002, with its indictment for obstruction of justice. We find that on these dates the clients of AA and other Big Five auditors that are characterized by higher information uncertainty experience relatively larger share price declines compared to clients with lower information uncertainty. The findings suggest that the market relies more heavily on auditor reputation for higher information uncertainty firms, which implies that the value of an audit is greater when a firm is harder to value. Our results highlight the importance of information uncertainty in financial markets: where there is a shock to auditor reputation, firms with greater information uncertainty suffer the largest losses.     

The only way is up

Just because the world is in a business downturn, it doesn't mean that you and your business can't be up about your future prospects. Don Sull has specialized on the upside of turbulence.     

Turning New Product Development into a Continuous Learning Process

Product developers understand the difficulties of trying to hit a moving target from atop a runaway train. Competitors come and go, technological change occurs at an ever-increasing rate, customer wants and needs are constantly shifting, and a product's life cycle may be shorter than its development time. We can't meet these challenges with a methodical, step-by-step approach to product development. In such a fast-paced environment, product development must be transformed into a continuous, iterative, learning process focused on customer value. G. David Hughes and Don C. Chafin describe one means for making this transformation: the value proposition process (VPP). The objectives of this development approach are continuous learning, identifying the certainty of knowledge used for decision-making, building consensus, and focusing on adding value. The VPP consists of a framework of continuous planning cycles, called the value proposition cycle (VPC), and an integrated screening methodology, called the value proposition readiness assessment (VPRA). The VPC comprises four iterative loops, addressing the following activities: Capturing the market value of the proposition (Does the customer care?); Developing the business value (Do we care?); Delivering a winning solution (Can we beat the competition?); and, Applying project and process planning (Can we do it?). Somewhat akin to stage-gate methods (but with the added dimension of continuous cycling), the VPRA involves screens along each loop in the VPC. This screening methodology summarizes the company's critical success factors, allowing the project team to assess the success potential of a new product idea. Each screen involves a structured set of questions. For each question, respondents provide three measures: their evaluation of that success factor's favorability to the company's position, the certainty of their evaluation, and their estimate of the relative importance of that success factor. Rather than building a model that computes a weighted-sum score for predicting the success of a new idea, the VPRA serves as a consensus facilitator, allowing team members to see how closely they agree. The certainty measures help the team identify knowledge gaps, and the importance measures help the team set priorities for successive iterations of the VPRA.