The Wheat War of 1994

Following the signing of the 1989 Canada–United States Free Trade Agreement, sales of Canadian wheat to the United States grew rapidly. This resulted in a series of trade disputes, culminating in an investigation by the U.S. International Trade Commission (USITC) into the impacts of U.S. imports of Canadian wheat on the U.S. wheat farm program. A USITC finding of "material interference" would have led to a recommendation to implement tariffs or quantitative restrictions against Canadian wheat under Section 22 of the U.S. farm program legislation. The U.S. Department of Agriculture (USDA) claimed such material interference, but the U.S. flour millers, pasta makers and grain handlers, along with Canadian grain industry interests, testified that the true effects of imports are in the order of one–tenth of the effects claimed by the USDA. USITC staff analysis led to intermediate estimates of effects. This study explores the impacts of Canada–U.S. wheat trade on U.S. wheat prices and program costs, explains some of the differences in measured effects, and reports the outcome of the dispute.     

Proximity, knowledge integration and innovation: an agenda for agent-based studies

In this paper, we develop a theoretical model able to capture some of the main features that govern knowledge sharing and innovation. We pursue our target developing an agent-based model in which the social network of interactions is specified as a knowledge resource, and knowledge integration is seen as the process by which the resource can be applied to innovation. The results of the simulation exercises show that the initial architecture of acquaintance networks is a crucial factor for innovation. Innovating has proven to be more than simply equating endowments of initial skills with firm performance. In fact, the performance of the system showed high sensitivity to the arrangement of the firm’s initial location in the social network. Moreover, the way in which acquaintance networks were mobilized emerged as a key determinant of innovation patterns. The model presented here is a relatively theoretical, stylized model and we employ it to draw some general, albeit preliminary conclusions, while illustrating some of the theory relevant to the issues discussed. It is argued that the model might serve the purpose of setting an agenda for further research along this line of investigation—that is, knowledge integration patterns and firms partnerships formation.     

Don't lose money with your technology upgrade

Hospitals nationwide have seen revenue drop after implementing new financial and clinical IT platforms, typically because their adoption teams did not plan for the impact on downstream revenue. Technology is rarely a panacea. Although an upgrade can catch some problems, it can also add a new level of complexity that will make it harder to fix poor processes if they are not addressed up front. Finance departments should be involved in design and testing phases of all IT system changes--even nonfinancial systems--to protect revenues before, during, and after implementation.     

International Propagation of the Credit Crisis: Lessons for Bank Regulation*

The authors use a large sample of non‐U.S. banks to examine the origins and spread of the 2007–2009 crisis. Using both stock market and structural variables, they test whether the effects of the crisis on individual banks are better explained by crisis models or by the VaR‐type analysis of the Basel system. The latter emphasizes risk weightings for individual assets while ignoring linkages that could leave banks exposed to systemic shocks. Consistent with crisis models, the authors find that a small set of pre‐crisis measures of a bank's international linkages, leverage, and the fragility of its liability structure does a good job of discriminating between banks that suffered a large impact and those that did not. (Indeed, these measures explain almost 50% of the differences among banks' stock returns during the crisis period, and almost 40% of the changes in the variability of those returns.) The authors also provide evidence of both a direct linkage among banks' stock returns and an indirect linkage that could reflect either linkages in the real economy or common demands by investors for liquidity. The authors run a “horse race” that demonstrates that simple measures of book leverage were better predictors of bank performance than the Basel capital ratios. They find that banks with lower Basel risk weightings prior to the crisis proved, on average, to be more exposed to the crisis. The authors' explanation is that banks with lower Basel risk measures tended to operate with higher leverage and more aggressive funding strategies, which in turn exposed them to greater crisis risk (even as they conformed to the letter of the Basel system in terms of asset risk measures). Finally, the authors find no evidence that substandard governance was a separate contributing factor to crisis exposure. Banks with substantial international business that were exposed to systemic shocks had high governance scores.     

Disability Risk Management and Postinjury Employment of Workers With Back Pain

We analyze the outcomes of occupational back pain among four large employers that use one or more of the following disability management practices: aggressive return to work, claims management, medical management, or time‐limited job accommodations. Outcomes measured at 6 and 12 months postonset include: duration of initial work absence and the probability of returning to stable employment. Employment outcomes are better in firms with more proactive return‐to‐work policies than in firms with more restrictive policies. We devise a statistical test for attrition bias and conclude that sample attrition does not significantly alter our results.     

How Does the FOMC Learn About Economic Revolutions? Evidence from the New Economy Era, 1994–2001

Forecasting is a daunting challenge for business economists and policymakers, often made more difficult by pervasive uncertainty. One such uncertainty is the reaction of policymakers to major shifts in the economy. We explore the process by which the Federal Reserve Open Market Committee (FOMC) came to recognize and react to the productivity acceleration of the 1990s. Initial impressions were formed importantly by anecdotal evidence. Then, FOMC members—and chiefly Federal Reserve Board Chairman Alan Greenspan—came to mistrust the data and the forecasts. Eventually, revisions to published data confirmed initial impressions. Our main conclusion is that the productivity-driven positive supply side shocks of the 1990s were initially viewed favorably. However, over time they came to be viewed as posing a threat to the economy, chiefly through unsustainable increases in aggregate demand growth that threatened to increase inflation pressures. Perhaps nothing so complicates business planning and forecasting as policymakers who initially embrace an unanticipated shift and later come to abhor the same shift.     

The search for asterisks: Compromised statistical tests and flawed theories

This paper discusses repeated tests and the resultant reporting of statistical significance when it is actually not present. These errors interact with professional norms such as biases against both replication studies and ‘non‐results’ to undermine the efficacy of our base of empirically tested theory. This raises serious issues for the future of strategic management research. Suggestions are made for dealing with these issues substantively and in terms of professional norms. Copyright © 2011 John Wiley & Sons, Ltd.     

Price floors and technical inefficiency in India's sugar processing industry

In India, cane is processed into sugar by cooperatives, public enterprises, and private (for‐profit) firms. The Indian government sets a unique floor price for each processor that is increasing in the firm's effectiveness in converting cane into sugar. The floor price binds for public and private firms but not for cooperatives, which rebate profits to members. We argue that this price floor policy creates a disincentive for private and public firms to be technically efficient in converting cane to sugar. In support of this hypothesis an analysis of 593 Indian sugar factories from 1992 to 2007 reveals statistically significant differences in technical efficiency, with cooperatives being the most efficient and public firms least efficient. We estimate welfare losses due to the technical inefficiency attributable to the price‐floor policy and argue that it can be eliminated by enacting policy to base price floors upon quality of the cane input received by a factory.     

Farmers’ Willingness to Pay for a Tuberculosis Cattle Vaccine

We use contingent valuation (CV) and choice experiment (CE) methods to assess cattle farmers’ attitudes to and willingness to pay (WTP) for a bovine tuberculosis (bTB) cattle vaccine, to help inform vaccine development and policy. A survey questionnaire was administered by means of telephone interviews to a stratified sample of 300 cattle farmers in annually bTB‐tested areas in England and Wales. Farmers felt that bTB was a major risk for the cattle industry and that there was a high risk of their cattle getting the disease. The CE estimate produced a mean WTP of £35 per animal per single dose for a vaccine that is 90% effective at reducing the risk of a bTB breakdown and an estimated £55 for such a vaccine backed by 100% insurance of loss if a breakdown should occur. The CV estimate produced a mean WTP of nearly £17 per dose/per animal/per year for a vaccine (including 100% insurance) which, given the average lifespan of cattle, is comparable to the CE estimate. These WTP estimates are substantially higher than the expected cost of a vaccine which suggests that farmers in high risk bTB ‘hotspot’ areas perceive a substantial net benefit from buying the vaccine.