Returns to scale and externalities in the consumption and investment sectors

Using data on US manufacturing, I estimate internal returns to scale and external effects for the consumption and investment sectors. I construct panels of data at the industry level and use results of gross output production function estimation to derive implied estimates in a value added specification. For the investment sector, returns to scale appear to be slightly increasing, with evidence of a positive external effect. For consumption, the evidence indicates decreasing to constant returns to scale. I discuss the implications of these results for the empirical plausibility of indeterminacy in recent multi-sector models of the business cycle.     

A model of periodic job training

This paper examines conditions under which a demand-constrained, cost-minimizing firm will provide industry-specific on-the-job-training to its employees, when a flexible stock of outside labor is available for hire. The term industry-specific is used to describe training with general components valued by other firms in the industry. This definition of on-the-job-training offers the possibility that trained workers could be poached by competing firms and provides limited opportunities for newly trained workers to seek alternative employment. The firm's decisions involve whether or not to invest in on-the-job-training, and whether to use in-house labor exclusively or a mix of in-house and outside labor. The cost-minimizing strategy is crucially dependent upon the mutual loyalty of the firm and its workers.This paper has benefited from numerous comments from the participants of the 41st International Atlantic Economic Conference in Paris, March 12–19, 1996.     

Offering a globally-linked international accounting course in real time: a sharing of experiences and lessons learned

This article reports the experiences from offering an online international accounting course that involved students from Japan, Spain, Switzerland, and the USA participating in real time via both audio and video links. In addition to interacting among themselves, students also interacted with accounting practitioners and standard setters from these countries. The latter attended class either in person or “virtually” via audio and video links. The paper also discusses the major benefits from the course, as identified by student feedback and direct faculty observations. A number of challenges in offering a course of this type also are identified. These insights can assist accounting educators interested in implementing a similar international accounting course at their institutions. They also have implications for applying distance-learning approaches in courses with a domestic focus.     

Economics of total quality management

This paper presents two models of the economics of total quality management. In the first, the concept of quality management is viewed as a technological innovation that requires investment. To reduce cost and improve quality, firms must make investments that are largely sunk. The effect of market competition on quality related technology investments is studied. Several results follow. With new quality technologies, price falls, quality rises and average cost declines. Firms must anticipate rivals' technology choices and the market prices when justifying quality technology investments. When all firms quickly adopt quality technology, returns of such investments are normal, that is, have a zero net present value. However, firms that do not invest in quality related technology are forced from the market. A firm that is faced by competitors that are slow to adopt quality related technology, can earn positive returns by early adoption. The firm invests more in quality related technology, and produces higher quality products, charges a higher price and earns higher profits than competitors. The firm's quality, price and profit advantages persist over time. In the second model, we show that firm value increases when customer satisfaction is used as an objective by aligning incentives. This explains the common use of customer satisfaction measures in TQM programs.     

European Momentum Strategies,Information Diffusion,and Investor Conservatism

In this paper we conduct an out‐of‐sample test of two behavioural theories that have been proposed to explain momentum in stock returns. We test the gradual‐information‐diffusion model of Hong and Stein (1999) and the investor conservatism bias model of Barberis et al. (1998) in a sample of 13 European stock markets during the period 1988 to 2001. These two models predict that momentum comes from the (i) gradual dissemination of firm‐specific information and (ii) investors’ failure to update their beliefs sufficiently when they observe new public information. The findings of this study are consistent with the predictions of the behavioural models of Hong and Stein's (1999) and Barberis et al. (1998) . The evidence shows that momentum is the result of the gradual diffusion of private information and investors’ psychological conservatism reflected on the systematic errors they make in forming earnings expectations by not updating them adequately relative to their prior beliefs and by undervaluing the statistical weight of new information.     

Ownership effects on operating strategies: Evidence of expense-preference behavior in the hospital industry

Expense preference offers an alternative to profit-maximization theory in explaining firms' operating strategies (Williamson, 1963; Rees, 1974). Expense-preference theory suggests that when disctretionary behavior is allowed, corporate managers may choose to maximize individual utility instead of corporate profit. Expense-preference behavior tends to be evidenced by higher expenditures on items for which managers have a positive personal preference than would be justified by profit maximization. Conditions under which significant managerial discretion can emerge include weak competition, strictly controlled entry, a high degree of regulation, separation of ownership and control, and existence of a strong public interest character for the firm or industry (Awh and Primeaux, 1985; Edwards, 1977). The hospital industry may be characterized as operating under all the above conditions. Hospital ownership can be classified as being either not-for-profit or proprietary. Profit-maximization influences are generally not present in not-for-profit hospitals, thus further increasing managerial discretion with respect to operating expenses. This study provides support for the contention that expense-preference behavior exists in not-for-profit hospitals as compared to proprietary hospitals. Specifically, we present evidence of considerable managerial discretion in the allocation of resources in not-for-profit hospitals.     

Dimensions of Performance Effectiveness In High-Involvement Work Organisations

Sharon Parker, Sean Mullarkely and Paul Jackson, who are researchers in the MRC/ESRC Social and Applied Pyschology Unit at the University of Sheffield, draw on detailed case study evidence to consider the substantial changes to the shop floor roles entailed in high involvement work organisations. They argue that specification of the performance requirements of such roles will facilitate employees taking on appropriate behaviours, reduce role confusion, and enable consistency in human resource practices. They discuss the use of repertory grids to explore the models of effective performance held by production managers and derive nine critical dimensions of shop floor employee performance from the analysis. These contain specific behavioural examples and are grouped around four higher-order dimensions: ‘process ownership’, ‘social skills’, ‘personal style’, and loss prevention’. These dimensions form the basis of a broader specification of the skills, knowledge and general orientations required by shopfloor employees in high involvement roles.