Archive for May, 2008

Incentives

| Randy Westgren |

This weekend, I am planning to drive to Columbia, Missouri, the home of Peter Klein. I had to check the map this afternoon, as there is a wire service report that Max Motors in Butler, MO, is offering each car buyer $250 toward the purchase of a gun or gasoline. According to the report, “General manager Walter Moore said that, so far, most buyers have chosen the gun, adding that he suggests they opt for a semiautomatic model because it holds more rounds.”

I note that Butler is on the other side of Columbia from my route of ingress, though I will remain watchful. I suppose it is the curse of being an economist that causes me to believe that cars and guns sold together are complementary goods. . . .

28 May 2008 at 8:18 pm Leave a comment

New Center for the History of Political Economy

| Peter Klein |

Bruce Caldwell is joining Duke University’s HOPE group as founding Director of a new Center for the History of Political Economy. Bruce explains:

The purpose of the Center is to promote and support both research in and the teaching of the history of political economy, broadly defined. Though operating on a somewhat reduced scale next year (AY 2008-2009), we anticipate that once it is up and running it will include an active visitors program for post-docs and more senior fellows, both short and long term; a regular seminar series; and programming, possibly in the summer, aimed at promoting teaching in the field.

The Center’s web page is not yet up but you can contact Bruce for more information.

28 May 2008 at 9:25 am Leave a comment

There’s Still Hope for Foss and Klein

| Peter Klein |

Psychologists have not considered wisdom and creativity to be closely associated. This reflects their failure to recognize that creativity is not exclusively the result of bold discoveries by young conceptual innovators. Important advances can equally be made by older, experimental innovators.

That’s from the newest paper in David Galenson’s art history series, “Wisdom and Creativity in Old Age: Lessons from the Impressionists.” I notice the SSRN page has the title misspelled as “Wisom,” suggesting an old person typed it in.

Turning to entrepreneurship, there’s a common myth that entrepreneurial creativity declines sharply after age 30 but little systematic evidence for this. Given a suitably broad concept of entrepreneurship (i.e., not simply the establishment of new companies), we might expect entrepreneurial ability to increase with age and experience. Indeed, looking even at the conventional definitions, we find that the likelihood of self-employment and the probability of new-venture success are positively correlated with age and business experience (see Parker 2004 for details).

27 May 2008 at 10:53 am 2 comments

Remixed Movie Trailers

| Peter Klein |

As I noted in my review of Yochai Benkler’s The Wealth of Networks, I think that Web 2.0 enthusiasts tend to overstate the novelty of “user-generated content.” It’s true that the costs of creating and disseminating movies, music, and even the written word have, in many settings, fallen dramatically (look at blogging, for goodness’ sake). On the other hand, as Paul Cantor, Tyler Cowen, and others have pointed out, commercial culture has always been, in an important sense, consumer culture. Benkler tends to portray twentieth-century consumers as passive recipients of culture, easily manipulated by Hollywood and Madison Avenue. Yet individuals have always played an active role in shaping the plays, books, songs, and shows made available to them, in their decisions to buy or not to buy, to patronize or not to patronize, to support or reject particular artistic producers and particular products.

Having said this, I do enjoy clever bits of user-generated content. For instance, check out this trailer for Sleepless in Seattle — number 5 on this list of The 20 Worst Chick Flicks of All Time — remixed as a horror movie. It reminds me of the brilliant Brokeback to the Future trailer from a couple of years back.

Of course, the greatest of all such parody shorts is Kevin Rubio’s Troops, now more than a decade old. And don’t miss George Lucas in Love.

26 May 2008 at 11:11 pm 2 comments

Do What Consultants Say, Not What Other Firms Do

| Peter Klein |

McKinsey suggests this strategy: when other firms ignore strategy consultants, earn rents by listening to strategy consultants.

  • Companies don’t react to competitive threats in the way management theory says they should, according to a McKinsey Global Survey.
  • Instead of undertaking extensive, sophisticated analyses when faced with a competitive threat, most companies assess just a few responses, and they often choose the most obvious one.
  • These practices give companies an opportunity to seize a competitive advantage by understanding how their competitors are likely to react to their moves.

The pointer is from the ever-valuable Luke Froeb. Most economists are puzzled management consulting, believing that consultants add little real economic value. I am sympathetic to a signaling explanation with a separating equilibrium in which high-quality firms can afford to signal quality by hiring expensive consultants and low-quality firms cannot. But I haven’t studied this closely. Can anyone recommend literature on the economics of consulting?

26 May 2008 at 8:55 am 8 comments

InBev and Bud . . . In Bed?

| Randy Westgren |

Recent news about the impending bid by InBev for Anheuser-Busch was interesting subtext for my current study tour on EU agri-food supply chains. We normally schedule a stop at InBev when we spend our first week based in Leuven, Belgium, which is InBev’s HQ. This year, they told us a visit was impossible. I had assumed that it was due to shake-ups in the management following a weak first quarter, but I guess there was more in the air!

You will note that A-B shares rose on the news. The strategic fit is stunning. InBev is strong in its traditional markets (Belgium and Germany from the Interbrew parent; Brazil from the Ambev parent) as is A-B, who also has an equity strategic alliance with Tsingtao in China. Not much overlap geographically and lots of opportunities for building on existing distribution alliances. A merged firm gets serious presence in mature markets as well as the growing ones.

The other thing that the market will react to is the InBev style. They drive growth with a limited number of global brands; they pare local brands over time. And they are relentless cost-cutters. Look at the top management team for a “Belgian” brewer. It has only taken a few years for the “tradition-oriented” Belgians to be succeeded by aggressive Brazilians. (I know this smacks of ethnic profiling, but ask around. . . .) The corporate culture of InBev is palpable.

24 May 2008 at 5:36 pm 3 comments

From Rumination to Rumelt via Dobzhansky

| Randy Westgren |

I was perusing the website of the Oxford Symposium on Food and Cookery to find the references to last year’s theme: food and morality. Some interesting reads there. I noticed that the Symposium awards the Sophie D(obzhansky) Coe Prize in Food History annually. Dr. Coe was an anthropologist who wrote on pre-Columbian diets and was the daughter of Theodosius Dobzhansky, one of “the Four Horsemen” of the modern synthesis of genetics and evolution (American Philosophical Society). Dobzhansky emigrated from the University of Kiev in 1927 to Columbia University, thence to Caltech, where he and his colleagues bred squillions of generations of fruit flies and provided the empirical basis for the mathematical models of evolution of the other horsemen: Haldane, Fisher, and Wright.

In 1937, Dobzhansky had two publications. One was his landmark book, Genetics and the Origin of Species, which was the siren song that drew Ernst Mayr and other biologists to the field of evolutionary biology. Mayr has often been credited with developing the concept of the isolating mechanism as the basis for speciation. Methinks that Mayr’s long shadow at Harvard fell on Richard Rumelt, who ported the concept to strategic management without much attribution in his 1984 and 1987 pieces. Mahoney and Pandian must be credited with the most complete exposition of the concept. (more…)

24 May 2008 at 3:24 pm 1 comment

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

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