R&D, Investment, and Industry Dynamics

We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations followed by subsequent embodiments in physical capital. Traditionally, the only distinction between R&D and physical investment was one of labeling: the first process accumulates an intangible stock, knowledge, while the second accumulates physical capital. Both stocks affect output in a symmetric fashion. We argue that the story is not that simple, and that there is more to it than differences in the object of accumulation. Our model stresses the causal relationship between past R&D expenditures and current investments in machinery and equipment. This causality pattern, which is supported by the data, also explains the observed higher volatility of physical investment relative to that of R&D expenditures.     

The effects of workers' participation on enterprise performance: Empirical evidence from French cooperatives

The results of estimating production functions augmented by various measures of workers' participation on a large enterprise level data set of French cooperatives are reported. Value added is found to be an increasing function of participation in profits, in collective membership and in ownership, even when a wide assortment of enterprise specific and environmental factors are taken into account. This finding is very robust, surviving tests between alternative specifications of technology, for reverse causality, for simultaneous equation bias and for multicollinearity. The typical productivity effect from participation, however, is small, around 5% of output. The results suggest that Western policymakers should investigate ways to increase workers' participation in capital stakes and profit shares.     

Extending the economics of disorganization

Many of the states of the former Soviet Union have experienced a dramatic collapse of output during transition, which has not yet been reversed in a sustainable way. The economics of disorganization, proposed by Blanchard (1997) and tested empirically by Blanchard and Kremer (1997), reasons that this phenomenon can be explained by specificity of inputs and the breakdown of traditional domestic supply linkages. We replicate the Blanchard-Kremer study for Ukraine and Kazakhstan, and also find that longer and more complex domestic supply chains are associated with greater reductions in output. When we extend their analysis to incorporate measures of the complexity of the Commonwealth of Independent States (CIS) trade and non-CIS trade however, we find that complexity of non-CIS trade is the significant factor in explaining the output collapse. We therefore argue that the disintegration of the Council for Mutual Economic Assistance and the requirement of hard currency trade, are equally, if not more, significant in explaining the output declines experienced by Ukraine and Kazakhstan.     

Opportunities and tripwires for foreign investors in Eastern Europe

This article discusses how the local environment influences the strategic decisions of foreign investors entering Central and Eastern Europe. The current economic transition of the region offers unique opportunities arising from virgin markets and low labor costs. Foreign businesses have been eager to exploit the former, often pursuing first-mover advantages. However, the underlying structural problems of the economies in transition inhibit the development of business: in adapting to the new market environment, firms are in a process of fundamental restructuring. Moreover, the privatization process in the region creates both opportunities and obstacles for entry by acquisition. While the institutional framework is developing toward Western models, it remains incomplete. © 1998 John Wiley & Sons, Inc.     

USING ELICITED CHOICE PROBABILITIES TO ESTIMATE RANDOM UTILITY MODELS: PREFERENCES FOR ELECTRICITY RELIABILITY*

When choice data are not available, researchers studying preferences sometimes ask respondents to state the actions they would choose in choice scenarios. Data on stated choices are then used to estimate random utility models, as if they are data on actual choices. Stated and actual choices may differ because researchers typically provide respondents less information than they would have in actuality. Elicitation of choice probabilities overcomes this problem by permitting respondents to express uncertainty about behavior. This article shows how to use elicited choice probabilities to estimate random utility models and reports estimates of preferences for electricity reliability.     

Satisfaction with international marketing channels

This article examines factors leading to a firm’s satisfaction with its marketing channels. The authors build on existing studies of consumer satisfaction and the channels literature. They add a transaction cost factor and use the discrepancy model to examine the determinants of satisfaction. Findings from a survey of Canadian exporters show that a firm’s domestic performance, its previous experience, the uncertainty it faces, and its ability to change channels and monitor channel operations all provide significant explanations for management satisfaction. He received his Ph.D. degree from the University of Toronto. His research interests are in the areas of international marketing, channels of distribution, and marketing strategy. Professor Klein has published articles in theJournal of the Academy of Marketing Science, andJournal of Marketing Research, andInternational Marketing Review. He received his Ph.d. degree from the University of Toronto. His research interests are in the areas of new product development, satisfaction research, and retailing. Professor Roth has published articles in theJournal of Marketing Research, theServices Industry Journal, andInternational Marketing Review.