The approximation capabilities of the minflex-Laurents,translog, and generalized Leontief forms

This paper compares the approximation capabilities of the minflex-Laurents translog and minflex generalized Leontief cost functions with their translog and generalized Leontief counterparts in Monte Carlo experiments. The minflex Laurent specifications generally provided closer approximations to underlying technical and economic parameters. Imposition of nonlinear restrictions on some of the parameters of the minflex Laurent models yielded measurable improvement in estimated elasticities of substitutions, returns to scale, and rates of technical change.The refereeing process of this paper was handled through E. Appelbaum.     

Offshoring in the New Global Political Economy

abstract    This essay challenges claims by economists and management scholars that 'offshoring' is simply another form of trade with mutual benefits. I argue that reducing wages through offshoring leads to wealth creation for shareholders but not necessarily for countries and employees, and that many displaced workers have difficulty 'trading up' to higher skilled jobs. Offshoring is a new phenomenon that entails the organizational and technological ability to relocate specific tasks and coordinate a geographically dispersed network of activities. It decouples the linkages between economic value creation and geographic location. The result is the creation of global commodity markets for particular skills and a shift in the balance of market power among firms, workers, and countries.     

The Elasticity of Marginal Utility of Consumption: Estimates for 20 OECD Countries*

In social project appraisal, the policy profile of both distributional welfare weights and the social discount rate has risen considerably in recent years. This fact has important implications for the allocation of funds to social projects and policies in countries, and in unions of countries such as the EU. A key component in the formulae for both welfare weights and the social discount rate is the elasticity of marginal utility of consumption, e. A critical review of existing evidence on e suggests that the UK Treasury's preferred value of unity is too low. New evidence presented in this paper, based on the structure of personal income tax rates, suggests that, on average, for developed countries e is close to 1.4. This particular approach to the estimation of e has previously been under‐utilised by researchers.     

Pathways to Success in M&A

For many if not most publicly traded companies, acquisition capabilities remain a critical component of sustainable longterm growth and profitability. And even as investors press companies to return excess capital through dividends and stock buybacks, the market continues to assign premium valuations to companies that earn above-average returns through a combination of internal investment and judicious acquisition spending.
This article begins by describing major challenges facing acquirers in the current business and regulatory environment. Then, after showing how M&A can be used to address strategic goals, the authors identify key elements in the M&A strategies of three highly successful companies: General Electric, Danaher, and Illinois Tool Works.     

Why are there glitches in product development?

Managers and scholars emphasize the importance of inter‐departmental integration to successful product development and emphasize the importance of product development capabilities to firm performance. Interdepartmental integration can increase shared knowledge; this in turn can reduce the severity and incidence of seemingly unnecessary and costly mistakes leading to more efficient and effective product development. This paper examines the sources of shared knowledge problems across functional and product‐based groups. Using interviews, product development plans, and time‐sheet data, we look at the underlying factors behind two sources of knowledge sharing problems: (1) a serial product development process (i.e. little or no face‐to‐face communications) and (2) ineffective use of integrating mechanisms because of sticky knowledge. For each problem source, we find two key causal factors. We discuss the problems, their factors, and the implications for management and theory.     

Private borrowing during the financial revolution: Hoare's Bank and its customers, 1702–241

The financial revolution improved the British government's ability to borrow, and thus its ability to wage war. North and Weingast argued that it also permitted private parties to borrow more cheaply and widely. We test these inferences with evidence from a London bank. We confirm that private bank credit was cheap in the early eighteenth century, but we argue that it was not available widely. Importantly, the government reduced the usury rate in 1714, sharply reducing the circle of private clients that could be served profitably.     

Hedging,Financing and Investment Decisions: A Simultaneous Equations Framework

We empirically investigate the interactions among hedging, financing, and investment decisions. We argue that the way in which hedging affects a firm's financing and investing decisions differs for firms with different growth opportunities. We find that high growth firms increase their investment, but not leverage, by hedging. However, we also find that firms with few investment opportunities use derivatives to increase their leverage.     

An Economic Approach to the Psychology of Change: Amnesia, Inertia, and Impulsiveness

This paper examines the effect of memory loss on the continuity of behavior. We consider a player (individual or firm) who remembers previous actions but not underlying rationales. In a stable environment, relative to a full-recall scenario, memory loss increases the probability of following old policies (inertia). In a volatile environment, memory loss can decrease this probability (impulsiveness). The model provides a memory-loss explanation for some documented psychological biases, implies that inertia and organizational routines should be more important in stable environments than in volatile ones, and provides empirical implications relating memory and environmental variables to economic decisions.