Job Loss and Entrepreneurship

We examine the impact of job loss on entrepreneurship behaviour. Our identification strategy relies on the use of mass layoffs caused by bankruptcies as indicators of exogenous displacement. Building on Norwegian register data, we find that working in a company which is going to close down due to bankruptcy in the near future raises the subsequent entrepreneur propensity by 155% for men and 180% for women, compared to working in a stable firm. These estimates are much larger than previously reported in the literature. Taking into account that many workers lose their jobs in the comparison group of stable firms also, we suggest that the full effects of displacement are even larger.     

The significance of sustained entrepreneurial orientation on performance of firms – A longitudinal analysis

This study focuses on the importance of changes in entrepreneurial orientation (EO) over time for subsequent firm performance, and the significance which inimitable resources (networks, governance system and unique competence) might have in this connection. Hypotheses are developed to test the effects that changes in EO level over a time period and resources have on subsequent firm performance. The study is based on data from 168 Norwegian SMEs, interviewed both in 2000 and 2003. The primary contribution of this study is that a change in EO over time (increased or decreased), may be of importance for a firm's performance represented by performance compared to competitors, and employment growth. A focus on entrepreneurial activities seems to be beneficial in the long run (increasing EO), while the opposite is the case if the EO level decreases. It is especially encouraging to see that firms focusing on EO (increased or the same) are positively associated with employment growth, one of the primary policy goals world-wide. Another contribution from this study is that resources that may be inimitable for firms have some influence on performance compared to competitors. Implications for policy-makers, practitioners and further research are discussed.     

Unemployment insurance and incentives

In this paper we present a partial economic equilibrium model of the labor market in which we maximize the workers' expected discounted utility level, while implying a zero expected profit for the firms. The model we use for the labor market takes into consideration transitions between the various states of employment and the time periods spent in each state. The probability distribution of these time periods may be arbitrary, not restricted to being exponential, as is the case for ordinary time-continuous Markov processes. The basic principles and difficulties arising from monitoring problems and moral hazard are discussed. In order to analyze unemployment insurance schemes that include incentives for workers to avoid unemployment, we depart from the simplest form of the principle of equivalence in insurance. Several different alternatives are discussed, all giving rise to partial insurance and thus incentives. We also analyze the effects that early retirement have on unemployment. Here, we include social security benefits in the economic model. Finally, we show that the optimal solutions entail quantity rationing.     

Cooperation and Competition in the Context of Organic and Mechanic Worldviews – A Theoretical and Case based Discussion

In this study we argue that there is an interconnection between; the mechanistic worldview and competition, and the organic worldview and cooperation. To illustrate our main thesis we introduce two cases; first, Max Havelaar, a paradigmatic case of how business might function in an economy based upon solidarity and sustainability. Second, TINE, a Norwegian grocery corporation engaged in collusion in order to force a small competitor out of the market. On the one hand, in order to encourage market behaviour that integrates economic, societal and environmental values we find that transparent cooperation within a context of an organic worldview takes care of important intrinsic as well as instrumental values. On the other hand, we find evidence for asserting that cooperation based upon a mechanistic worldview, typically leads to group egotistical consequences undermining the long term common good.     

V Chemnitz East Forum 21–23 March 2001 "Human Resource Management in Transition"

Call for Papers

V Chemnitz East Forum 21–23 March 2001 "Human Resource Management in Transition"     

How Economic Incentives May Destroy Social,Ecological and Existential Values: The Case of Executive Compensation

Executive compensation has long been a prominent topic in the management literature. A main question that is also given substantial attention in the business ethics literature—even more so in the wake of the recent financial crisis—is whether increasing levels of executive compensation can be justified from an ethical point of view. Also, the relationship of executive compensation to instances of unethical behavior or outcomes has received considerable attention. The purpose of this paper is to explore the social, ecological, and existential costs of economic incentives, by discussing how relying on increasing levels of executive compensation may have an adverse effect on managerial performance in a broad sense. Specifically, we argue that one-dimensional economic incentives may destroy existential, social, and systemic values that influence the manager’s commitment to ensure responsible business conduct, and have negative spillover effects that may reduce the manager’s performance. There are well-documented findings that demonstrate that reliance on sources of extrinsic motivation (such as economic incentives) may displace intrinsic motivation. Our perspective is a holistic one, in the sense that we will explore the influence of sources of extrinsic motivation on the manager’s intrinsic commitment to different types of values. We will in particular investigate how it may influence the manager’s ethical reflection and behavior or lack thereof.     

Effects of Transport Regulation on the Oil Market: Does Market Power Matter?

Instruments used to regulate the consumption of oil in the transport sector include fuel taxes, biofuel requirements, and fuel‐efficiency standards. However, the effects that these have on oil consumption and price vary. If market power is present in the oil market, the directions of change in consumption and price might contrast with those in a competitive market. As a result, the market structure affects not only the effectiveness of the policy instruments used to reduce oil consumption, but also the terms of trade and carbon leakage. In particular, reduced oil consumption, as a result of increased fuel‐efficiency standards, will unambiguously increase the price of oil under a monopoly.     

Idiosyncratic risk and debt maturity dispersion

We investigate the relation between idiosyncratic asset risk and debt maturity dispersion. Idiosyncratic asset volatility represents significant risk, which can impede the ability to obtain or maintain external debt financing necessary for business operations, and is difficult to control given its unpredictable nature. We find that this risk is managed through the maturity structure of debt: firms with higher idiosyncratic asset volatility also have more dispersed maturity structures. Consistent with active management of rollover risk, this relation is weaker for younger firms and stronger for firms without significant credit lines.     

Global emissions effects of CDM projects with relative baselines

CDM is an offset mechanism designed to reduce the overall cost of implementing a given global target for greenhouse gas (GHG) emissions in Annex B countries of the Kyoto Protocol. A problem with CDM is that it provides incentives to increase, if possible, the baseline emissions for CDM projects, to optimize the value of CDM credits. Under a “relative baselines” crediting rule, the CDM may also unduly increase energy consumption even during the CDM implementation phase. Less than full offset of emissions is then likely, and the CDM will lead to increased global GHG emissions. We show that this is a potentially serious problem, due to asymmetric information between project hosts and the regulator, the CDM Executive Board, and to the basic rules for crediting CDM quotas. In certain cases, the use of “relative baselines” to credit CDM quotas could fully eliminate any emissions reductions achieved by CDM projects. Remedies to overcome the problems are discussed. They may involve setting the baseline independently of initial energy intensity and final output for the project; or involve information revelation mechanisms that minimize policy losses and net rent capture by project sponsors.