Cost Uncertainty and Unilateral Abatement

Unilateral abatement is sometimes advocated in order to set a good example that will make other countries follow. The aim of this paper is to investigate whether existence of correlated cost uncertainty provides an incentive for a country to undertake unilateral abatement. The theoretical model is driven by two main mechanisms; first, a learning effect, as the follower country might reduce its risk premium as it can observe the cost level in the leader country. Second, there is the public good effect, i.e., the marginal benefit of abatement declines when abatement is a public good and other countries contribute to pollution reductions. Results shows that unilateral abatement would be efficient in reducing uncertainty about the unit costs of abatement if a country with low cost uncertainty would undertake abatement first, while a country with initially high cost uncertainty would follow. However, countries may prefer to act simultaneously because of the larger uncertainties that are inherent in a sequential game.      

The knowledge management strategy and the formation of innovative networks in emerging industries

This paper presents an agent-based simulation model with local network externality to analyze strategic interactions over investment on new economic knowledge. R&D knowledge flows and spillovers are the results of non-cooperative games played between neighboring agents in the model. The model demonstrates a situation where no agents have incentives to hide their economic knowledge, a situation that is observed in open source software development projects. The likelihood of obtaining a stable situation where new economic knowledge is openly shared is increased when heterogeneity of agents is introduced.      

Integrating design metrics within the early supplier selection process

It has been found from the contemporary research in the fields of supply chain management and concurrent engineering that significant benefits can be achieved if suppliers are involved in product development. However, recent investigations in manufacturing industries have revealed that early supplier involvement in the design process is not widely practiced. One issue is the lack of an appropriate customer–supplier interface to assess the suitability of suppliers with reference to design criteria. This paper proposes a mechanism for evaluating supplier involvement during product development. The assessment tool includes four types of distinctive indices to measure supplier involvement in the design process, namely: Satisfaction Index, Flexibility Index, Risk Index, and Confidence Index. These indices measure the extent to which both the customer requirements and the supplier capabilities match or mismatch and therefore reflect the potential or risk of signing a project contract. The proposed methodology is discussed within a multinational telecommunications company and preliminary analysis indicates that the approach provides an effective mechanism for selecting suppliers involved in the product development process.     

The flypaper effect and political strength

Simple models of local government behavior predict equal effects of private income and unconditional federal grants on local government expenditures. Numerous empirical analyses, however, find that the effect of grants is larger than the income effect. We argue that this flypaper effect may be a result of weak political leaderships in multi–issue and multi–party decision–making environments. In multi–issue institutions, a strong political leadership may reduce inefficiency due to interest group influence and inter–party bargaining in the local council. Utilizing data for Norwegian local governments in the 1930s, we find that political strength reduces the size of the flypaper effect. When the local council consists of only one political party, we cannot reject absence of a flypaper effect, while the flypaper effect is large in fragmented local councils. Received: June 2000 / accepted: February 2001     

Announced layoffs: Their effect on corporate financial performance

Conventional wisdom holds that when a firm gets into trouble due to lagging sales and rising costs, cutting the size of the organization to reduce fat and waste is a normal and effective response. In this study, evidence was found to suggest that just the opposite might be true. The financial performance of Fortune 100 companies was tracked over a five-year period—two years prior to the announced layoff, the year of the layoff announcement, and two years following it. Contrary to expectations, the results indicate that financial performance worsened, rather than improved, following announced layoffs. Strategic and human resource implications for the management of corporate downsizing are provided.     

Action Research is Similar to Design Science

In management information systems (MIS) action research is long considered as promising but low-level research approach. It has an utmost relevance because action researchers are working with practitioners to solve the important practical problem. Design science outlined some years ago is just winning a wider audience. Action research was traditionally classified into qualitative research methods. But it seems to be the “wrong” home of action research. We shall show that after comparison of the seven aspects: concrete results of the study, knowledge produced, activities, the intent and the nature of a study, the division of labor in a study and generation, use and test of knowledge, the concordance between the characteristics of action research on the one hand and of design science on the other hand is very good. Hence, action research and design science should next be considered as similar research approaches, and this is a turning point in the history of both action research and design science.     

Marginal distributions of sequential and generalized order statistics

Expressions for marginal distribution functions of sequential order statistics and generalized order statistics are presented without any restrictions imposed on the model parameters. The results are related to the relevation transform, to the distribution of the product of Beta distributed random variables, and to Meijers G-functions. Some selected applications in the areas of moments, conditional distributions, recurrence relations, and reliability properties are shown. Key words:Order statistics; Generalized order statistics; Sequential order statistics; Record values; Distribution theory; Meijers G-function; Recurrence relations; Reliability properties.     

Don’t kill the messenger! Whistle-blowing in America — A review with recommendations

Whistle-blowing in America business and industry has increased as interest in ethical business behavior and the cost of unethical behavior have grown. Whistle-blowing plays the important role of helping to fill the gaps in the regulatory system that is designed to check the abuse of organizational power. However, the practice of whistle-blowing is controversial and whistle-blowers often pay a high price for their actions. Firms can engage in a number of actions to encourage whistle-blowing. Creating a climate that encourages employees to report organizational wrong doing and that protects the whistle-blower is critical. To create such a climate the organization must build trust and cooperation by educating employees in the benefits of ethical and legal behavior.     

Insuring against the shortfall risk associated with real options

We would like to insure against the risk that a geometric Brownian motion, correlated with the price process of a certain traded asset, is in a set E at time T. In this paper it is shown that the best action one can take to insure against this risk is to buy a binary option on the traded asset. We give explicit formulas in the case that E is an infinite interval. The setting of all our investigations is the Black-Scholes model. Mathematics Subject Classification (2000): 91B28, 60J65, 62P05, 91B30, 62F03 Journal of Economic Literature Classification: G31