Spillovers,integrated production and the theory of the firm

Recent econometric literature has demonstrated the existence of significant technological spillovers within and around groups of advanced (R&D-intensive) firms. I demonstrate thatcompetence blocks of advanced firms operate as technical universities and research institutes, unintentionally providing free educational and research services, often in areas where such services are not supplied by existing educational institutions or where the nature of competence makes traditional educational institutions incapable of supplying them. I demonstrate that the competence that diffuses from such competence blocks is botheconomic andtechnological, that it only diffuses under particular market circumstances, notably characterized by competition, and that the outcomes are typically experimental.Integrated production is an organizational technique to coordinate complex production in mechanical engineering industry within firms and over specialized consultants and subcontractors in the market. Such organizational competence is typically tacit and difficult to communicate outside its production context. Hence, such a production organization often functions as a competence block that spills knowhow throughout the industry. This organizational form is also very useful in illustrating the nature of the firm, the nature of the organizational competence that forms the backbone of western industrial technology and how that competence generates economic growth through the intermediation of firms. I use Swedish aircraft industry as a case illustration.     

The role of foreign subsidiaries in strategic decision-making in swedish multinational corporations

The paper describes how six large Swedish multinational corporations manage the task of assuring strategic integration between headquarters and foreign subsidiaries. Swedish companies are shown to address the problem in an informal way and by leaving their foreign subsidiaries a great deal of autonomy. However, in many instances the necessary integration is not assured. Cases of strategic conflict between parts of companies are analysed, characteristics of and trends in the environment of multinational corporations are identified, and theoretical considerations are applied. With this discussion as a basis, some suggestions are advanced about how to involve subsidiaries more in strategic decision making.     

Why don't we see more action? A metasynthesis of the investor impediments to integrate environmental,social, and governance factors

Investors increasingly commit to consider environmental, social, and governance (ESG) factors in their investment decisions. However, the challenges of investors for a holistic integration of ESG factors in their investment decisions are manifold and endanger reaching urgent societal goals. The paper uses metasynthesis to develop a comprehensive understanding of these impediments from a diverse set of papers. Supported by textual analysis, it identifies 161 different topics, which are subsumed within groups and aggregated along a four‐pillar framework of market‐, firm‐, regulatory‐, and individual‐based impediments. The most prominent impediments are found in the areas of a perceived lack of a business case, the quality of data, the absence of clear standards and definitions, and various behavioral biases. Moreover, a considerable research–practice gap in framing the relevant research questions that contribute to the slow‐moving integration process is discovered. Focusing additionally on potential blind spots on the investor and research sides will prove to be important for swifter ESG integration.     

The Economics of Sustainable Land Management Practices in the Ethiopian Highlands

This article uses data from household‐ and plot‐level surveys conducted in the highlands of the Tigray and Amhara regions of Ethiopia. We examine the contribution of sustainable land management (SLM) practices to net value of agricultural production in areas with low vs. high agricultural potential. A combination of parametric and non‐parametric estimation techniques is used to check result robustness. Both techniques consistently predict that minimum tillage (MT) is superior to commercial fertilisers (CFs), as are farmers’ traditional practices (FTPs) without CFs, in enhancing crop productivity in the low agricultural potential areas. In the high agricultural potential areas, in contrast, use of CFs is superior to both MT and FTPs without CFs. The results are found to be insensitive to hidden bias. Our findings imply a need for careful agro‐ecological targeting when developing, promoting and scaling up SLM practices.     

Estimating returns to soil conservation adoption in the northern Ethiopian highlands

Land degradation in the form of soil erosion and nutrient depletion presents a threat to food security and sustainability of agricultural production in many developing countries. Governments and development agencies have invested substantial resources to promote soil conservation practices as part of an effort to improve environmental conditions and reduce poverty. However, limited rigorous empirical work has been done on the economics of soil conservation technology adoption. This article investigates the impact of stone bunds on value of crop production per hectare in low and high rainfall areas of the Ethiopian highlands using cross-sectional data from more than 900 households, with multiple plots per household. We have used modified random effects models, stochastic dominance analysis (SDA), and matching methods to ensure robustness. The parametric regression and SDA estimates are based on matched observations obtained from the nearest neighbor matching using propensity score estimates. This is important, because conventional regression and SDA estimates are obtained without ensuring that there actually exist comparable conserved and nonconserved plots on the distribution of covariates. We use matching methods, random effects, and Mundlak's approach to control selection and endogeneity bias that may arise due to correlation of unobserved heterogeneity and observed explanatory variables.
We find that the three methods tell a consistent story. Plots with stone bunds are more productive than those without such technologies in semi-arid areas but not in higher rainfall areas, apparently because the moisture conserving benefits of this technology are more beneficial in drier areas. This implies that the performance of stone bunds varies by agro-ecology type, suggesting the need for designing and implementing appropriate site-specific technologies.     

Evaluating the Potential of Index Insurance Schemes to Reduce Crop Yield Risk in an Arid Region

We evaluate yield risk reduction through weather index, area yield index and farm yield insurance contracts for wheat farms in Kazakhstan by employing data from 1980 to 2002. We use the usual mean variance (MV) approach and also a second‐degree stochastic dominance (SSD) criterion. While MV is not necessarily consistent with the expected utility (EU) theory, SSD results only in a minimum but EU‐consistent benefit from insuring. Differences in the estimation results for both approaches underline the advantage of applying both criteria to analyse the risk‐reducing potential of crop insurance. Bootstrapping results show that none of the analysed insurance schemes provides statistically significant risk reduction for every single farm. In addition, weather‐based index insurance is found to provide less risk reduction than area yield insurance based on the rayon (county) yield. Moreover, rayon yield index insurance can reduce yield risk more effectively for Kazakhstan's wheat producers than farm yield insurance with a low strike yield.     

A dynamic perspective on minimum quality standards under Cournot competition

Imposing a minimum quality standard (MQS) is conventionally regarded as harmful if firms compete in quantities. This, however, ignores its possible dynamic effects. We show that an MQS can hinder collusion, resulting in dynamic welfare gains that reduce and may outweigh the static losses which are caused by regulation’s distortive effect on equilibrium qualities.