Economics and operations management: towards a theory of endogenous production speed

A firm chooses the production speed and amount of labor that maximizes profit in a perfectly competitive market. Faster production raises management expenses and the unit cost of production mistakes. Adding workers enhances the division of labor on the production line and raises work‐in‐process inventory. When the division of labor is high, a rise in the wage can increase the optimal production speed and quantity of output. When price falls, optimal production speed and optimal division of labor can move in opposite directions. Output quantity can also rise, generating a downward sloping supply curve in the absence of increasing returns to scale. Copyright © 2002 John Wiley & Sons, Ltd.     

Corruption, inflation and growth

We present a model in which the embezzlement of tax revenues by public officials leads the government to rely more on seigniorage to finance its expenditures. This raises inflation which depresses investment and growth via a cash-in-advance constraint.     

Capital Theory and the Process of Inter-Temporal Coordination: The Austrian Contribution to the Theory of Economic Growth

Appreciation of the necessity of the inter-temporal coordination of heterogeneous capital goods is the chief contribution of Austrian economics to the theory of economic growth. Austrian theory illustrates why an institutional environment of freely formed prices predicated on private property is essential for economic growth. This leads Austrians to have a unique take on Solow growth theory, the financing gap model, national economic planning, and aggregative development measures.     

Excess cash holdings and shareholder value

We examine the determinants of corporate cash holdings in Australia and the impact on shareholder wealth of holding excess cash. Our results show that a trade‐off model best explains the level of a firm’s cash holdings in Australia. We find that ‘transitory’ excess cash firms earn significantly higher risk‐adjusted returns compared to ‘persistent’ excess cash firms, suggesting that the market penalises firms that hoard cash. The marginal value of cash also declines with larger cash balances, and the longer firms hold on to excess cash. The results are consistent with agency costs associated with persistence in excess cash holdings.     

Mega-sporting events and children’s rights and interests – towards a better future

Abstract

The public subsidy of Olympic Games and FIFA World Cup hosting opportunities is invariably justified on the basis that they will secure a range of public good outcomes. Problematically, the information available inspires less confidence that these ambitions will be met and highlights how social costs and benefits are unevenly distributed. As a result, interest in the social dimension of hosting has grown, yet the knowledge to support responsive and evidence-based events policy remains relatively underdeveloped, particularly in relation to the specific needs and experiences of affected communities. The impact on children as a particularly stakeholder group reflects this context of recognition and knowledge gap. For example, while it is accepted that immovable deadlines and risk of reputational consequences raise a variety of social justice concerns throughout the event lifecycle, the nature and scale of these impacts on children is poorly understood and frequently mismanaged. Findings drawn from research commissioned by Terre des Hommes International Federation which explored the intersections between children’s rights and social justice concerns highlights how such initiatives present risks and opportunities that cannot be managed effectively until children are included within associated planning processes as a specific stakeholder group with distinct needs and interests.     

Do university executive development programs pay off?

University executive development programs are solidly entrenched, but questions have been raised concerning their cost-and benefits. A study of large U.S. business corporations reveals that most lack established policies concerning selection of the participant and the choice of a program. In addition, measurement of individual and group change related to the program is neglected. Nevertheless, companies report favorably on participants' job performance. The participants themselves feel they have gained status, but sometimes are ready to implement changes for which the organization is not prepared. University programs do not seem to be in any immediate trouble, but need to develop and maintain closer relations with participating organizations and to become more deeply involved in evaluation.     

Competitive advantage: logical and philosophical considerations

Strategic management theories invoke the concept of competitive advantage to explain firm performance, and empirical research investigates competitive advantage and describes how it operates. But as a performance hypothesis, competitive advantage has received surprisingly little formal justification, particularly in light of its centrality in strategy research and practice. As it happens, the core hypothesis—that competitive advantage produces sustained superior performance—finds little support in formal deductive or inductive inference, and the leading theories of competitive advantage incorporate refutation barriers that preclude meaningful empirical tests. This article explores the logical and philosophical foundations of the competitive advantage hypothesis, locating its philosophical foundations in the epistemologies of Bayesian induction, abductive inference and an instrumentalist, pragmatic philosophy of science. Copyright © 2001 John Wiley & Sons, Ltd.     

Cognitive hurdles in the use of decision support systems to enhance problem understanding

Computer-assisted decision support systems have been widely promoted as a means of enhancing problem understanding in crisis and noncrisis decision making. Clinical observation of actual applications of a particular category of software for interactive decisions (CONAN, DECISIONMAKER) have identified cognitive hurdles in the use of such systems. These hurdles not only pose a challenge to the development of such normative interventions in the decision process, but also an opportunity for furthering the shift to a new psychologically informed paradigm for decision making.     

Financial dependence analysis: applications of vine copulas

This paper features the application of a novel and recently developed method of statistical and mathematical analysis to the assessment of financial risk, namely regular vine copulas. Dependence modelling using copulas is a popular tool in financial applications but is usually applied to pairs of securities. Vine copulas offer greater flexibility and permit the modelling of complex dependence patterns using the rich variety of bivariate copulas that can be arranged and analysed in a tree structure to facilitate the analysis of multiple dependencies. We apply regular vine copula analysis to a sample of stocks comprising the Dow Jones index to assess their interdependencies and to assess how their correlations change in different economic circumstances using three different sample periods around Global Financial Crisis (GFC).: pre‐GFC (January 2005 to July 2007), GFC (July 2007 to September 2009) and post‐GFC periods (September 2009 to December 2011). The empirical results suggest that the dependencies change in a complex manner, and there is evidence of greater reliance on the Student‐t copula in the copula choice within the tree structures for the GFC period, which is consistent with the existence of larger tails in the distributions of returns for this period. One of the attractions of this approach to risk modelling is the flexibility in the choice of distributions used to model co‐dependencies. The practical application of regular vine metrics is demonstrated via an example of the calculation of the Value at Risk of a portfolio of stocks.