In the Journals

9 September 2011 at 5:48 pm 2 comments

| Peter Klein |

Three newly published papers of likely interest to O&Mers:

While cumulative knowledge production is central to growth, little empirical research investigates how institutions shape whether existing knowledge can be exploited to create new knowledge. This paper assesses the impact of a specific institution, a biological resource center, whose objective is to certify and disseminate knowledge. We disentangle the marginal impact of this institution on cumulative research from the impact of selection, in which the most important discoveries are endogenously linked to research-enhancing institutions. Exploiting exogenous shifts of biomaterials across institutional settings and employing a difference-in-differences approach, we find that effective institutions amplify the cumulative impact of individual scientific discoveries.

This paper studies a retail chain that introduced a sales incentive plan that rewarded for exceeding a sales target and subsequently cut the incentive intensity in addition to increasing the target. Utilizing monthly panel data for 54 months for all 53 units of the chain the paper shows that the introduction of the sales incentive plan increased sales and profitability, whereas the changes in the plan lead to a marked drop in sales and profitability. Thus, modifying the incentive plan proved costly for the firm. The results are consistent with the gift-exchange model of labor contracts.

We discuss how the use of field experiments sheds light on long-standing research questions relating to firm behavior. We present insights from two classes of experiments—within and across firms—and draw common lessons from both sets. Field experiments within firms generally aim to shed light on the nature of agency problems. Along these lines, we discuss how field experiments have provided new insights on shirking behavior and the provision of monetary and nonmonetary incentives. Field experiments across firms generally aim to uncover firms’ binding constraints by exogenously varying the availability of key inputs such as labor, physical capital, and managerial capital. We conclude by discussing some of the practical issues researchers face when designing experiments and by highlighting areas for further research.

Entry filed under: - Klein -, Innovation, Institutions, Papers, Strategic Management, Theory of the Firm. Tags: .

“Micro Chauvinists” Pushing Back … Pirrong on Regime Uncertainty

2 Comments Add your own

  • 1. Michael Marotta  |  10 September 2011 at 9:15 pm

    It is an example of social stratification that I am expected to afford the purchase of this article. No doubt, it is worthy, but does it not come without a direct cost to those of higher social status?

    Be that as it may, I was looking forward to the “gift exchange” aspect as I perceive ritual gift exchange as the primitive origin of economic transactions. And it continues, apparently.

    To speak to the point, I have to wonder that the managers who decided to change the rules apparently never worked in retail sales themselves. Did they think no one would notice? Or (really stupid) did they expect everyone to work that much harder to meet the new targets and lower rewards in order to keep up with their previous earnings?

    Having worked in retail, I met a lot of dumb sales people: never read Plato; never heard of Max Weber; never listened to Beethoven. One thing they always understood was their commissions.

  • 2. Roundup Sept 15 at Catallaxy Files  |  14 September 2011 at 9:13 am

    [...] on institutions, incentives and field experiments with [...]

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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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