Collaboration,motivation, and the size of organizations

We present an analytical model of an organization that offers operational drivers of limits on team size. The model trades off benefits from collaborative problem solving against the disadvantages of diminishing motivation when groups get large. Collaboration is represented as parallel employee activity combined with frequent sharing of partial information, with a resulting superlinear performance increase over team size. Motivation is modeled by team members periodically setting an effort level either to contribute to the best of their ability or to “cruise”; at the minimum level not recognizable as shirking. Each individual decision is limited by bounded rationality based on team rewards, the time horizon of team interaction, and individual expectations about colleagues’ behavior. The decision collapses to a simple “barrier rule”;. Work hard when a certain “barrier percentage”; of team members work hard, and otherwise shirk. The influence of team size on this barrier percentage depends on the extent of benefits from collaboration: As long as performance increases quadratically with team size, the increased benefits resulting from collaboration exactly balance the temptation to shirk, with the barrier percentage approaching a fixed limit for large team sizes. As soon as the performance increase slows to anything less than quadratic, shirking eventually sets in and limits the possible size of the team. This implies that cooperation is sustainable in large organizational units, provided the problem‐solving processes used are powerful enough to ensure sufficient performance increases. Thus, effective problem‐solving methods are of double value, improving direct productivity and mitigating the social dilemma from team production. A manager should enlarge his or her organization up to the minimum of the limit set by the cooperation barrier and the exogenous performance limit.     

THE RELATIVE IMPORTANCE OF EFFORT, ORGANIZATION, AND TECHNOLOGICAL CHANGE IN CHINESE FACTORIES

Production reports from a set of Chinese factories reveal very rapid productivity growth from 1980 to 1991. To understand the underlying factors, the effects of work effort and labor organization are separated from the productivity estimates. Data analysis reveals that these two effects jointly explain most of the measured productivity growth during this period. This result suggests that (1) very substantial productivity growth can be realized for economies in the take-off stage even without substantial pure technological advancement, and (2) in reforming the Chinese state factories, there will have to be a more difficult second stage to confront their technological backwardness.     

TECHNICAL NOTE : THE VARIABLE FINANCIAL INDICATOR IRR AND THE CONSTANT ECONOMIC INDICATOR NPV

The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an economic indicator of a capital investment. The former gives the private investor's point of view and the latter the society's point of view. The value of ERR varies with the change of Financial arrangement of an investment. The NPV, however, does not but remains constant no matter how the financial arrangement changes. This paper uses an illustrative example to show their intrinsic differences and then describes a mathematical proof to substantiate the different natures of IRR and NPV.     

Are Parental Characteristics Important for Child Survival? The Case of Vietnam

While remaining one of the poorest countries in the world, Vietnam's infant and child mortality rates have been much lower than those observed for countries with similar or even higher levels of real income per capita. The paper investigates the role of parents' characteristics in affecting survival of their children, using a logistic discrete-time model and data from the Vietnam Demographic and Health Survey 1988 . It is found that infant mortality is significantly higher for children of mothers with no formal education. However, parents' other socioeconomic characteristics, including mothers attaining levels of education higher than the primary level, are not important for explaining differences in child survival. There is some evidence that children of higher orders of birth face higher risk. Results on the effects of maternal education diverge from findings for other countries, but can perhaps be explained by the country's distinctive features.     

Consumer attitudes toward in-flight shopping

This study examines the relationship between perceived risk, perceived value, convenience and attitudes toward in-flight shopping and behavioral intentions using a sample of international air travelers in Taiwan. The results suggest that both perceived value and convenience have significantly positive effects on attitude, but the path between perceived risk and attitude is not significant. In addition, the findings also demonstrate that attitude has significant effects on customer intention. Specific theoretical and managerial implications are discussed at the end of this work.     

Using Market Structure to Regulate a Vertically Integrated Monopolist

A natural monopolist whose cost is private information produces a good which is combined with another good that can be produced by the monopolist or by other firms. The agency that regulates the monopolist can impose any of several different market structures in the industry: integrated monopoly, vertical separation with free entry downstream, or liberalization downstream (both integrated and independent production). When several firms produce downstream, a Cournot quantity-setting game with free entry determines the market price. We derive the optimal contracts to offer the monopolist under all three market structures and examine the influence of downstream cost differences on access prices.We then study the optimal regulatory policy where the regulator can condition the downstream market structure on the monopolist's cost report to the regulator. The optimal regulatory policy awards a monopoly to a low-cost upstream firm, but requires free entry downstream if the monopolist reports high upstream costs. Thus, the choice of market structure is an additional tool to limit rent extraction by the monopolist. Simulation analysis reveals the possibility of significant welfare gains from this additional regulatory tool.     

A policy perspective on incremental innovation in small and medium sized enterprises

The increased importance of small and medium sized enterprises (SMEs) in industrial economies is explained and the very large variance in their degree of participation in the innovation process is established. Evidence from Canadian research clarifies the difficulties that smidl and medium sized firms, even in technology intensive industries, experience in developing new products and implementing new designs. Innovation theory is reviewed and the importance of inputs from specialist consultants is established for SMEs undertaking incremental innovation. Transaction costs concepts are then used to explain the difficulties SMEs encounter in arranging these linkages. A recommended form of policy to help to correct this type of market imperfection is derived and used to describe a gap in Canadian policies and to evaluate initiatives in Australia and UK.