Introducing Practical Wisdom in Business Schools

This article echoes those voices that demand new approaches and ‹senses’ for management education and business programs. Much of the article is focused on showing that the polemic about the educative model of business schools has moral and epistemological foundations and opens up the debate over the type of knowledge that practitioners need to possess in order to manage organizations, and how this knowledge can be taught in management programs. The article attempts to highlight the moral dimension of management through a reinterpretation of the Aristotelian concept of practical wisdom. I defend the ideas that management is never morally neutral and that Aristotelian practical wisdom allows the recovery of moral considerations in management practice. I analyze the impact and implications that the introduction of practical wisdom in business schools entails for the conception and objectives of management education. This view reconfigures management education in terms of attention to values, virtues and context. Therefore, management programmes should prepare students to critically evaluate what they hear and to make decisions coherent with their values and virtues. In the final section, I reflect on the pedagogical implications of this approach. I point out that an integrated model of ethics and practical wisdom promotes education of cognition and education of affect as well. I provide an example to illustrate my perspective and to support my conclusions.     

Corporations as Political Actors – A Report on the First Swiss Master Class in Corporate Social Responsibility

This paper presents a report on the first Swiss Master Class in Corporate Social Responsibility, which was held between the 8th and 9th December 2006 at HEC Lausanne in Switzerland. The first section of the report introduces the topic of the master class – ?Corporations as Political Actors – Facing the Postnational Challenge’ – as well as the concept of the master class. The second section gives an overview of papers written by nine young scholars that were selected to present their research. The brief summary of each paper also includes a summary of comments from the masters, practitioners, and NGO representatives at the event. The third section brings in the perspectives of one master and one NGO representative on the discussed issues. The final section offers a brief wrap-up of the discussed topics and outlines ways to structure future conceptual and empirical research.     

Effects of brand-related and market signals on franchisees’ entrepreneurial decisions: a multi-country panel data analysis

This paper analyses the influence of market and brand-related signals on franchisees’ decisions when choosing a franchise brand with which to open an outlet for the first time. Panel data methodology was used to analyse a sample of 1277 chains operating in Spain, Mexico and Peru between 2004 and 2013. The results show that market signals prevail over brand-related signals. Within brand-related signals, franchisees first seek information relating to the brand’s sector and then seek information relating to the brand’s value. Franchisors should match the content of the signals they send to the market to the true characteristics of the franchise. Franchisors should also endeavour to ensure the country where they operate has general and franchise-specific legislation that fosters business activity by both franchisor and franchisee. The use of institutional quality as a signal in a multi-country study represents a significant contribution to the literature on franchising.

     

Bootstrapping Financial Time Series

It is well known that time series of returns are characterized by volatility clustering and excess kurtosis. Therefore, when modelling the dynamic behavior of returns, inference and prediction methods, based on independent and/or Gaussian observations may be inadequate. As bootstrap methods are not, in general, based on any particular assumption on the distribution of the data, they are well suited for the analysis of returns. This paper reviews the application of bootstrap procedures for inference and prediction of financial time series. In relation to inference, bootstrap techniques have been applied to obtain the sample distribution of statistics for testing, for example, autoregressive dynamics in the conditional mean and variance, unit roots in the mean, fractional integration in volatility and the predictive ability of technical trading rules. On the other hand, bootstrap procedures have been used to estimate the distribution of returns which is of interest, for example, for Value at Risk (VaR) models or for prediction purposes. Although the application of bootstrap techniques to the empirical analysis of financial time series is very broad, there are few analytical results on the statistical properties of these techniques when applied to heteroscedastic time series. Furthermore, there are quite a few papers where the bootstrap procedures used are not adequate.     

Excessive Investment in Hospital Capacities

In the present study I identify an inherent characteristic of health care markets that may lead to excessive investment by hospitals even when compensated according to a prospective reimbursement rule. It is demonstrated that the stochastic nature of the demand for medical services combined with the lumpiness of investment decisions may give rise to excessive investment when multiple hospitals select independently their levels of capacities. The source for the excessive incentives to invest is the difficulty of one hospital to internalize properly the externality generated by its investment decisions. Such an externality arises because when one hospital expands its capacity, it is more likely to be able to serve not only patients residing in its region but patients residing in neighboring regions as well.     

Discounting and altruism to future decision-makers

Is discounting of future decision-makers’ consumption utilities consistent with “pure” altruism toward those decision-makers, that is, a concern that they are better off according to their own, likewise forward-looking, preferences? It turns out that the answer is positive for many but not all discount functions used in the economics literature. In particular, “hyperbolic” discounting of the form used by Phelps and Pollak (Rev. Econ. Studies 35 (1968) 201) and Laibson (Quart. J. Econ. 112 (1997) 443) is consistent with exponential altruism towards future generations. More generally, we establish a one-to-one relationship between discount functions and altruism weight systems, and provide sufficient, as well as necessary, conditions for discount functions to be consistent with pure altruism.     

Multiprincipal Agency Relationships as Implied by Product Market Competition

This paper surveys recent work in contract theory that relates to the allocation of tasks among agents within an organization as well as to the effect of product market competition upon optimal contracting and agency costs.     

On the Equivalence of Ad Valorem Tariffs and Specific Tariffs under Duopoly*

Using a quantity conjectural variation model, this paper examines whether an ad valorem tariff and a specific tariff are equivalent under duopoly. We show that if the average per‐unit import tax is the same for the two tariffs, domestic output will be smaller while foreign output will be larger under an ad valorem tariff. We further show that for any value of a specific tariff, there is a Pareto‐superior ad valorem tariff for all values of conjectural variation except in the case of perfect competition where the two tariffs are equivalent.     

Allocating Ideas: Horizontal Competition in Tournaments

We develop a stylized model of horizontal and vertical competition in tournaments with two competing firms. The sponsor cares not only about the quality of the design but also about the design location. A priori not even the sponsor knows his preferred design location, which is only discovered once he has seen the actual proposals. We show that the more efficient firm is more likely to be conservative when choosing the design location. Also, to get some differentiation in design locations, the cost difference between contestants can be neither too small nor too big. Therefore, if the sponsor mainly cares about the design location, participation in the tournaments by the two lowest-cost contestants cannot be optimal for the sponsor.