A multiplicative model for efficiency analysis

This paper develops theory and algorithms for a “multiplicative” Data Envelopment Analysis (DEA) model employing virtual outputs and inputs as does the CCR ratio method for efficiency analysis. The frontier production function results here are of piecewise log-linear rather than piecewise linear form.     

Using data envelopment analysis to measure the efficiency of not-for-profit organizations: A critical evaluation—comment

This note responds to Nunamaker (1985) who supposedly deals with deficiencies in Data Envelopment Analysis (DEA) as an approach for (1) measuring efficiencies of not-for-profit entities identified as Decision Making Units (DMUs) and (2) locating sources and amounts of inefficiencies in each of the inputs used and in each of the outputs produced by each DMU. Corrections and comments are offered with references supplied for interested readers who wish to examine more detailed treatments of the topics covered.     

A new contract for welfare: partnership in pensions

The government's Green Paper proposes reducing state pension costs whilst encouraging private sector provision. The success of the proposed ‘stakeholder pension schemes’ depends on regulation. However, regulation can penalise those it is intended to protect. This is a sensitive issue, since stakeholder pension schemes are expected to attract financially vulnerable, lower paid, employees. Whilst the flat rate accrual of the state second pension confers some benefit, certain groups are put in a difficult position by the retention of means-tested benefits.     

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.     

Cost‐reflective pricing: empirical insights into irrigators’ preferences for water tariffs

Using prices to improve the efficiency with which water resources are allocated is now widely accepted in principle if somewhat difficult to achieve in practice. Whilst there are some technical difficulties associated with full‐cost recovery in irrigation, the lack of political will to tackle reform remains a significant impediment. This article reports the results of an empirical investigation into farmers’ preferences for changes to water prices and tariff structures. We conclude that some of the preferences of farmers are conducive to price reform. We also find evidence that public subsidy of infrastructure in irrigation is not always aligned with the preferences of farmers.     

The components of risk in new product development: Project New Prod

Although new product development is one of the riskiest activities of a modern corporation, relatively little account is taken of risk measurement in the R & D project selection literature. The existing consensus is that risk is measured by some combination of the total amounts at stake and the uncertainties of the situation. The paper describes a project aimed at more exactly identifying and defining the components of risk as perceived by a decision-maker within a firm undertaking new product ventures. The project is based on data from a study of the behaviour of 103 firms and 197 ventures.
The results show broadly that managers perceive risk to be highest when the product shows least synergy with the firm's current business. In contrast, the possibility of reducing uncertainty components of risk through information-seeking seems to be of little account in risk perception. The author concludes from this that decision-makers are much more influenced by factors that control the amounts at stake (in general, the less the synergy the greater the resources needed to back a new product entry) than by uncertainty as to the outcome. The latter must constitute an important element of risk in reality. Its neglect may be because managers find they can deal conceptually more easily with concrete matters like the amount at stake than with the intangibles of uncertainty reduction. This may explain why many firms fail to integrate information into their new product development process.     

Performance typologies of new product projects

New product success is a vital but elusive goal for many firms. The last two decades have witnessed numerous studies into new product successes and failures in an attempt to uncover what makes a winner. Indeed, myriad characteristics, factors, and practices have been found that appear to discriminate between successful and unsuccessful new products.With few exceptions, much of this research has tended to view new product performance on a unidimensional continuum, usually financial performance (e.g., profitability). Whereas immediate profitability is no doubt an admirable goal, there are other ways of looking at a new product's performance—for example, degree of technical success, time-to-market, and its overall impact on the company.The current investigation takes a broader view of new product success. A number of measures of new product performance were captured, rather than just the single measure continuum; this resulted in a performance map with two major and quite independent underlying dimensions of performance. A typology of performance was then developed—a classification of new product projects by how well they performed: five scenarios or clusters of projects are identified on this map, each with its unique performance characteristics. We then investigate in detail each project type and probe what drives the performances of these five different clusters of projects: that is, what makes for new product success of these five project types, when success is measured in different ways. The study was undertaken in world class multinationals in the chemical industry in four countries, but its results appear to have validity across a broad spectrum of industry.