Applying epistemic logic and evidential theory to strategic arguments

This paper extends work originally reported in a previous SMJ article on strategic policy issues. To accomplish this extension, we draw on research from separate but related areas. Concepts from the application of first-order logic to organizational theory and formal methods from research in knowledge representation are combined using epistemic logic and evidential theory. It is shown that the original formulation of the policy evaluation problem fits neatly into this framework. This allows application of more formal and powerful methods for representing and evaluating the evidence offered in support of strategic policy statements. © 1998 John Wiley & Sons, Ltd.     

Managerial Ownership and Agency Conflicts: A Nonlinear Simultaneous Equation Analysis of Managerial Ownership, Risk Taking, Debt Policy, and Dividend Policy

This paper uses a nonlinear simultaneous equation methodology to examine how managerial ownership relates to risk taking, debt policy, and dividend policy. The results have implications for our understanding of agency costs. We find risk to be a significant and positive determinant of the level of managerial ownership while managerial ownership is also a significant and positive determinant of the level of risk. The result supports the argument that managerial ownership helps to resolve the agency conflicts between external stockholders and managers but at the expense of exacerbating the agency conflict between stockholders and bondholders. We further observe evidence of substitution-monitoring effects between managerial ownership and debt policy, between managerial ownership and dividend policy, and between managerial ownership and institutional ownership.     

Implications of the Dominant Design in Electronic Initiation Systems in the South African Mining Industry

This article analyzes an emerging technological innovation, namely, electronic initiation systems for mining explosives in South Africa. The concept of electronic initiation is presenting itself as a challenge to traditional initiation systems, particularly cap-and-fuse and shock tube technologies. From a technology strategy viewpoint, the challenge is to determine the nature of the managerial decisions that have to be addressed. The Utterback-Abernathy innovation model is used to assess the evolution of the emerging technology; it is found that the technology is still in the fluid phase and that a dominant design has not yet emerged. Since the dominant design is a very important milestone in the evolvement of the product with regard to both the technical and the business aspects, the immediate managerial focus should be on the evaluation factors that may influence the emergence of the dominant design. The emergence of a dominant design is, however, a complex process that depends on the interplay between a myriad of issues, including technological, market, social, economic, and related aspects. The paper anticipates the technological future of the innovation by exploring the factors that may influence the dominant design of electronic initiation systems, and casts the findings in a format that is useful for managerial decision support.     

An Agency Analysis of Firm Diversification: The Consequences of Discretionary Cash and Managerial Risk Considerations

Firm diversification is shown to be a function of excess discretionary cash flow and managerial risk considerations. We measure firm diversification using the concentric diversification index. The index is positively related to both the number of business units in the firm and the extent to which the business firm's segments differ. Consequently, the measure provides a proxy for how firm diversification decisions impact the risk of the firm, and the measure is found to be inversely related to both total risk and unsystematic risk. Consistent with the agency arguments of discretionary cash flow, we find the level of excess discretionary funds in the firm to be a significant positive determinant of the level of firm diversification. We also find support for both a wealth transfer hypothesis over low levels of managerial ownership, and a managerial risk aversion hypothesis over high levels of managerial ownership.     

On the choice between capital import and labor export

The paper analyses some questions arising in connection with inflow of foreign capital into a host country and its free zone. When capital is mobile between sectors capital import into any part of the economy decreases welfare. With sector-specific capital, import of capital into the protected sector (export sector) decreases (increases) welfare. If capital import into the export sector of the domestic zone is infeasible, there may be a case for establishing a free zone and allowing capital import exclusively there. With a suitable tax policy, capital import into the free zone will always be beneficial.