RESERVATIONS ABOUT THE ‘NUDGE’ PHILOSOPHY1

The government has embraced the Nudge philosophy. Its enthusiasm is misplaced. It undermines freely chosen paternalistic mechanisms and has no guarantee of producing better government decision making about whether to intervene in a free economy.     

Economic benefits of enterprise resource planning systems: some empirical evidence

The present study provides empirical evidence on the economic benefits of enterprise resource planning (ERP) systems. We use a modified value chain approach and identify several ratios for each component of the value chain to reflect improvements as a result of the adoption of ERP systems. These financial ratios are tracked for 2 years for a group of companies that adopted ERP systems versus a group of companies that did not adopt ERP. Both univariate and multivariate statistics are used to test for differences. The key result of the present study is that the adoption of ERP systems leads to sustained operational efficiencies and improved overall liquidity. In addition, some support is found for increased profitability 2 years after the adoption of ERP and for improvements in accounts receivable management.     

The tax treatment of UK defined contribution pension schemes

The paper aims to clarify the tax status of pension schemes in the UK and, by using economic and other arguments, to establish a theoretical benchmark that could be considered the ‘appropriate’ tax regime for pension saving. We consider existing tax regimes for saving (such as the ‘ISA’ regime) and theoretical regimes (such as a pure expenditure tax and a comprehensive income tax) and we compare the costs different tax regimes impose on defined contribution pension schemes. We conclude that an expenditure tax is an appropriate benchmark tax regime for pension saving, and that other tax regimes impose additional financial as well as administrative costs.     

SIMPLIFYING THE TAXATION OF PENSIONS

The current tax framework for pensions is now economically incoherent. The changes in the 1997 Budget made it more so. Changes can be made to restore its coherence. However, any attempt to remove tax relief at the higher rate, as has been discussed by academics and commentators recently, would be wrong in principle and could not work in practice. The pension fund tax codes and the rules for annuitisation should also be simplified significantly. The Inland Revenue no longer needs to design detailed rules to prevent people 'abusing' tax relief. Such detailed rules are extremely costly to implement and, because they make the whole system impenetrable, stop people from using pension vehicles for saving.     

Project Hindsight: Exploring Necessity and Possibility in Cycles of Structuration and Co-Evolution

The successful management of strategic change requires an understanding of which moves are possible in specific contexts, and thus of how specific contexts variously require, forbid, or permit certain organizational or policy actions. Appreciation of such modal issues of necessity and possibility thus becomes essential in understanding organizational and technological dynamics. This paper introduces the concept of modal narratives: forms of analytically structured narrative that explore questions of necessity, possibility and contingency. After a brief review of two common types of modal narrative—counterfactuals and scenarios— the potential of a third form is suggested: the superfactual. An extended example of a superfactual is provided in the Project Hindsight case, and the implications for strategic action are discussed.     

Unemployment persistence

We estimate dynamic panel data models of unemployment incidencefor men using the British Household Panel Survey. Econometricissues concerning unobserved individual heterogeneity, genuinestate dependence, and the initial conditions problems are addressedin detail. We find strong evidence of state dependence consistentwith the scarring theory of unemployment - an individual's previousunemployment experience has implications for his future labourmarket experience. This suggests that policies reducing shortrun employment incidence will have longer-run effects by reducingthe equilibrium or natural rate of unemployment.     

Book reviews

Powering Apollo: James E. Webb of NASA W. Henry Lambright Baltimore, MD, The Johns Hopkins University Press, 1995, 271 pp, £30.00 (hbk), ISBN 0-8019-4902-0.

Managers and Innovation: Strategies for a Biotechnology John Howells London, Routledge, 1994, £40, ISBN 0-415-08590-X.

Mastering the Dynamics of Innovation James Utterback Boston, MA, Harvard University Press, 1994, $24.95, ISBN0-87584-342-5.

Leadership in Action Helmut Mauche McGraw Hill, 1994, £19.95, ISBN 0-07-041041-0.

International Business: Environments and Operationsf John D. Daniels & Lee H. Readbaugh Addison-Wesley, 7th Edn, 1995, 788 pp, £25.95, ISBN 0-201-59293-2.

Intenational Business: A Strategic Managment Approach Alan M. Rugman & Richard M. Hodgetts McGraw-Hill, 1995, 630 pp, £21.95, ISBN 0-07-113635-5.

International Business: Competing in the Global Marketplace Charles W.L. Hill Irwin, 1994, 615 pp, £ 26.95, ISBN 0-256-15682-4.     

THE CHOICE BETWEEN CALLABLE AND NONCALLABLE BONDS

We examine the choice and the offer spreads between callable and noncallable bonds. We find significant differences by industry sector and therefore segment our results by financial and nonfinancial industries. For the financial sector, the popularity of callable and noncallable bonds is significantly related to the economic environment. Financial and high‐grade nonfinancial callable bonds are also more likely to be issued via a shelf prospectus. Although firms that issue callable bonds do not consistently display the characteristics associated with severe agency problems, the issue choice for below‐investment‐grade nonfinancial and lower rated financial bonds, where we can expect agency problems to be more severe, is more consistent with agency theory than is the issue choice for higher rated bonds.