Credit evaluation,information production,and financial intermediation

Financial intermediaries such as banks, saving and loan institutions, and insurance companies play a large and important role in highly developed economies. The economic significance of financial intermediaries results from their making arrangements between borrowers and lenders more efficiently than if these agents had to trade directly. The intent of this article is to provide a better understanding of the advantage that a financial institution has over an individual lender. This research treats intermediaries as producers of information in the credit evaluation process. The lender produces borrower information that revises the expected profit of the credit decision. Though the production of credit itself holds no economic advantage for institutions over individuals. The opportunity to produce information will provide economies of scale in lending and will help to explain the existence of financial intermediaries.     

Evaluating the effect of soft business support upon small firm performance

The paper applies robust econometric techniques to assess theimpact of publicly-provided subsidised ‘soft’ businesssupport on the performance of small and medium-sized enterprises(SMEs). It considers the assistance for consultancy advice providedtowards marketing under the UK Enterprise Initiative, lookingat its effect on sales turnover, employment and survival, andmaking explicit allowance for selection effects. It is foundthat the policy has no impact on the survival of smaller SMEs,and that it is most effective in the mid-range SMEs, where itraises survival rates by about 4% over the longer run and growthrates in surviving firms by up to 10% per annum. Overall, thescheme has a substantial impact, but the paper draws attentionto the possible displacement effects.     

THE TREATMENT OF STOCK APPRECIATION IN THE MEASUREMENT OF NATIONAL INCOME*

In the latest official national income publication the Australian Commonwealth Statistician has altered the treatment of stock appreciation in the measurement of national income at current prices. Previously, stock appreciation had been included in both national expenditure and national product. Now the amount of stock appreciation (the difference between the change in the value of stocks and the value of the change in stocks) has been deducted from investment in stocks, and consequently national expenditure, and from trading incomes, and consequently national income. The former procedure (including stock appreciation in national expenditure and national product) had been advocated by the present author, when editor of the first official national income publications issued by the Commonwealth Statistician. In this note an attempt is made to set out the reasons for this view. A new approach is also suggested for handling the item of stock appreciation in national income accounts, which does not rest on the assumption that stock appreciation is a capital gain which should be excluded from trading incomes and national product.     

A Critique of the Empirical Methods of Integrative Social Contracts Theory

Integrative social contracts theory (ISCT) uses empirical methods to develop guidelines for international business ethics. This article criticizes ISCT in terms of the way people actually think about contracts and agreements around the globe. Differences in orientations to communications context, moral reasoning, and institutional and structural conditions make the identification of authentic norms, hypernorms, and relevant communities problematic. The difficulties of the empirical methods suggest recourse to more traditional theoretical approaches for the identification of hypernorms as well as a stronger test for the compatibility of authentic norms with hypernorms.     

The Augmented Service Offering: A Conceptualization and Study of Its Impact on New Service Success

Unlike companies that produce tangible goods, service firms typically cannot rely on product advantage as a means for ensuring the success of a new service. Developing a competitive response to a tangible product may require significant investments of time and effort. In many cases, however, competitors can easily duplicate the core elements of a firm's new service. This fundamental difference between new products and new services means that managers who hope to find the keys to new-service success must look to factors other than sustainable product advantage. Chris Storey and Christopher Easingwood suggest that managers must understand the totality of the service offering from the customer's perspective. They explain that the purchase of a service is influenced not only by the service itself, but also by such factors as the service firm's reputation and the quality of the customer's interaction with the firm's systems and staff—in other words, by the augmented service offering (ASO). Using the results of a study they conducted in the consumer financial services industry in the U.K., they identify the components of the ASO, and they examine the relative contributions of these components to the success of new services. In their model, the ASO comprises three elements: the service product, service augmentation, and marketing support. The core of the ASO—the service product—includes such dimensions as product quality, product distinctiveness, and perceived risk. The study's results suggest that improvements in the service product open up new opportunities for the firm, but have only modest effects on sales and profitability. Rounding out the ASO model are service augmentation and marketing support. Service augmentation encompasses such dimensions as distribution strength, staff-customer interactions, and reputation. The customer recognizes and responds to these elements of the ASO, but they are not part of the product core. Marketing support involves those marketing and management actions that affect the quality of the product and its augmentation, even though customers typically are not aware of them. These elements include knowledge of the marketplace, training of contact staff, and internal marketing. Enhanced service augmentation has significant effects on profitability and sales for the firms in this study, but it does not offer enhanced opportunities. The marketing support elements contribute significantly to all aspects of performance for the firms in this study.     

Editorial

Small Business Economics -