Regularized conditional estimators of unit inefficiency in stochastic frontier analysis,with application to electricity distribution market

In stochastic frontier analysis, the conventional estimation of unit inefficiency is based on the mean/mode of the inefficiency, conditioned on the composite error. It is known that the conditional mean of inefficiency shrinks towards the mean rather than towards the unit inefficiency. In this paper, we analytically prove that the conditional mode cannot accurately estimate unit inefficiency, either. We propose regularized estimators of unit inefficiency that restrict the unit inefficiency estimators to satisfy some a priori assumptions, and derive the closed form regularized conditional mode estimators for the three most commonly used inefficiency densities. Extensive simulations show that, under common empirical situations, e.g., regarding sample size and signal-to-noise ratio, the regularized estimators outperform the conventional (unregularized) estimators when the inefficiency is greater than its mean/mode. Based on real data from the electricity distribution sector in Sweden, we demonstrate that the conventional conditional estimators and our regularized conditional estimators provide substantially different results for highly inefficient companies.

     

Latina entrepreneurship

We utilize individual panel data from the 1996 and 2001 Survey of Income and Program Participation (SIPP) to analyze the relative success of self-employed female Hispanics. To allow for a meaningful comparison of earnings between self-employed and wage/salary women, we generate different earnings measures addressing the role of business equity. We compare earnings of Hispanic female entrepreneurs to both Latina wage/salary workers and to self-employed female non-Hispanic whites. Latina entrepreneurs are observed to have lower mean earnings than both white female entrepreneurs and Latina employees. However, our findings indicate that Latina entrepreneurs often do well, once differences in mean observable characteristics, such as education, are taken into account. Self-employed Latinas are estimated to earn more than observationally similar non-minority white female entrepreneurs and slightly less than observationally similar wage/salary-employed Latinas.     

Communicating about Ethics with Small Firms: Experiences from the U.K. and Spain

This article introduces the important issue of communicating with small firms about ethical issues. Evidence from two research projects from the U.K. and Spain are used to indicate some of the important issues and how small firms may differ from large firms in this area. The importance of informal mechanisms such as the influence of friends, family and employees are highlighted, and the likely ineffectiveness of formal tools such as Codes and Social and Ethical Standards suggested. Further resarch in the area of small firms and ethics is essential.     

Decision neuroscience and consumer decision making

This article proposes that neuroscience can shape future theory and models in consumer decision making and suggests ways that neuroscience methods can be used in decision-making research. The article argues that neuroscience facilitates better theory development and empirical testing by considering the physiological context and the role of constructs such as hunger, stress, and social influence on consumer choice and preferences. Neuroscience can also provide new explanations for different sources of heterogeneity within and across populations, suggest novel hypotheses with respect to choices and underlying mechanisms that accord with an understanding of biology, and allow for the use of neural data to make better predictions about consumer behavior. The article suggests that despite some challenges associated with incorporating neuroscience into research on consumer decision processes, the use of neuroscience paradigms will produce a deeper understanding of decision making that can lead to the development of more effective decision aids and interventions.     

Multisensory design: Reaching out to touch the consumer

Touch plays an important, if often underacknowledged, role in our evaluation/appreciation of many different products. It is unsurprising, therefore, that there has been such a recent growth of interest in “tactile branding” and tactile marketing. This article reviews the evidence from the fields of marketing, psychology, and cognitive neuroscience, demonstrating just how important the feel of a product, not to mention the feel of its packaging, can be in determining people's overall product evaluation. Problems for tactile design associated with the growth of the aging population, and the growth of Internet‐based shopping, are highlighted. The critical role that touch can play in multisensory product design, appreciation, and marketing is also discussed, as is the increasingly frequent use by marketers of synesthetic correspondences to evoke tactile sensations via the visual and auditory modalities. We put forward the argument that tactile stimulation may influence multisensory product evaluation by means of affective ventriloquism: Our suggestion is that the hedonic attributes of a product perceived via one modality (such as touch) can “pull” (or bias) a person's estimates of the quality and pleasantness of the product derived from other sensory modalities into alignment, and by so doing, modulate a person's overall (multisensory) product experience. What is more, powerful mathematical modeling approaches now exist to predict the magnitude of this kind of intersensory (or crossmodal) interaction effect, hence offering the promise of a more scientific approach to tactile design/marketing in the coming years. © 2011 Wiley Periodicals, Inc.     

Entrepreneurship and the theory of taxation

A review of the literature on firm taxation reveals that the economics of entrepreneurship has not sufficiently been taken into consideration. We discuss how this affects conclusions derived from standard models of capital taxation when applied to entrepreneurial income. Some defining features of entrepreneurship important for analyzing the effects of taxation of owner-managed firms are identified. These include the lack of a well-functioning external market for entrepreneurial effort, limited access to external capital and complementarities between entrepreneurial innovation, effort and capital. Due to these constraints, the entrepreneurial project is tied to the individual owner–manager. The entrepreneur is unable to decouple saving decisions from investment decisions, and makes joint decisions on the supply of effort and capital. The return from successful entrepreneurial ventures can therefore not be readily divided into labor and capital income, in deep contrast to what is typically assumed in taxation theory. It is argued that when distinct attributes of entrepreneurship are taken into account, certain conclusions of capital taxation models may no longer hold, including the neutrality of capital taxation in owner-managed firms. Cost of capital formulas derived from the behavior of public firms could underestimate distortions when applied to the investment behavior of entrepreneurial firms. For tax purposes and otherwise, it becomes useful to analyze return to entrepreneurial activity as income of a distinct factor of production. In this context, conceptual issues and the difficulties of measuring entrepreneurial income are discussed.     

National Culture and Takeover Contest Outcomes

We examine the effects of cultural differences on the outcome of takeover contests. Our main focus is on individuality, which we posit to have an effect on firm behavior in international takeover contests. In a sample of international acquisitions with bidders from multiple countries, we find that individuality positively relates to the probability of placing the winning bid. We further find that takeover contest winners with high individuality scores experience lower announcement returns. Our results are consistent with the literature that links individuality to overconfidence. Our evidence suggests that firms should control culture‐related behavioral biases in their mergers and acquisitions activity.     

Net entry behaviour in Greek manufacturing: consumer, intermediate and capital goods industries

This research explores the nature and causes of net entry of firms in three groups of Greek manufacturing industries–consumer, intermediate and capital goods. The research questions whether or not the determinants of net entry rates across sectors are different. Econometric analyses reveal that, indeed, there are significant differences in the determinants of net entry rates across industry groups, but also there is strong within-group correlation across sectors.