Good Cop–Bad Cop: Trust,Control, and the Lure of Integration

Based on a longitudinal case study of four interorganizational product development collaborations, this paper identifies a lure to cross‐functional integration that has hereto been neglected. In particular, findings suggest that when the buyer firm separates the Research and Development (R&D) Department from the Procurement Department, the two departments play a good cop–bad cop strategy toward the supplier. Thereby, they are able to foster a high level of goodwill trust between R&D personnel of the collaborating firms, while procurement personnel maintain a high level of formal control. Using an intricate sample design with polar cases, the study shows that cross‐functional integration of the two departments hampers interorganizational goodwill trust at the benefit of formal control. The findings offer a way forward for managers seeking to reap the benefits of collaboration, while limiting their exposure to the associated risks.     

Restricted Hodrick–Prescott filtering in a state-space framework

The current paper extends previous results on Hodrick–Prescott (HP) filtering and shows that it is possible to implement the judgement-augmented, or restricted, HP filter within the state-space framework. The implementation entails augmenting the vector of measurements and altering one of the system matrices of the state-space model for the HP filter. Restrictions can thereby be incorporated in the HP filter, making, e.g., estimation more accessible. An application to US GDP gap estimation illustrates how the restricted filter could be usefully applied in an empirical macroeconomic setting.     

Towards a ‘new normal’ growth strategy: China in comparative perspective

China’s move towards a new normal has been motivated by domestic factors and accelerated by the decline in export opportunities to developed countries. This decline, combined with the knock-on effects of China’s growth adjustments, is disrupting the favourable external environment that made developing countries’ export-led development strategies viable. This paper concentrates on a rebalancing of developing countries’ growth strategies towards a greater weight of household consumption as a potential alternative and discusses three challenges – market size, domestic purchasing power and balance-of-payments constraints. Concentrating on the latter, it analyses changes in sectoral compositions of consumer demand and patterns of international trade. Results point to the risk that a shift in growth strategy causes an import surge. The paper’s findings indicate the scope and speed of required product innovation that would prevent a rebalancing of growth strategies towards a greater role of consumption from running into balance-of-payments constraints.     

How young firms achieve growth: reconciling the roles of growth motivation and innovative activities

This special issue focuses on entrepreneurship, innovation and enterprise dynamics, as these key components of any prospering economy are at the heart of the current policy discussion. It gathers the latest national and comparative cross-country evidence about: new business venture formation and the role of framework conditions in fostering entrepreneurial activities; the determinants and outcomes of firms’ innovative activities and, more generally, of business and innovation dynamics; and the determinants and patterns of post-entry firm growth performance. The contributions synthesised in this introductory piece all rely on sound micro-level data and robust econometrics and propose novel findings that are relevant for policy making. Among them, that risk aversion encourages individuals to invest in balanced skill profiles, making them more likely to become entrepreneurs; and that while micro firms may grow when they are young, they are less likely to do so when old.     

Interethnic relations,informal trading networks,and social integration: imitation,habits, and social evolution

The ethnically homogeneous middleman groups (EHMGs), which are informal trading networks, are ubiquitous in less-developed economies where the legal infrastructure for contract enforcement is not well developed. This paper develops a formal model of social interaction among members of the EHMG as well as in more general situations in a multi-ethnic or multi-cultural society consisting of identifiable ethnic or linguistic groups. Behavioral patterns are transmitted between generations and altered via imitation in social contacts. The model demonstrates how different discriminatory behavioral patterns can evolve and persist over time. One result is that the trust between such groups can increase due to a higher frequency of inter-group contacts. In concluding the paper, we speculate about how the model can be expanded to include changes in legal structures, especially contract law. This could lead to an increase in the trust between the different groups.