Archive for November, 2012

Permeable Boundaries

| Dick Langlois |

The new table-of-contents alert from Industrial and Corporate Change carries an interesting new paper by Carliss Baldwin and her coauthors called “The Architecture of Transaction Networks: A Comparative Analysis of Hierarchy in Two Sectors.” Here’s the abstract:

Many products are manufactured in networks of firms linked by transactions, but comparatively little is known about how or why such transaction networks differ. This article investigates the transaction networks of two large sectors in Japan at a single point in time. In characterizing these networks, our primary measure is “hierarchy,” defined as the degree to which transactions flow in one direction, from “upstream” to “downstream.” Our empirical results show that the electronics sector exhibits a much lower degree of hierarchy than the automotive sector because of the presence of numerous inter-firm transaction cycles. These cycles, in turn, reveal that a significant group of firms have two-way “vertically permeable boundaries”: (i) they participate in multiple stages of an industry’s value chain, hence are vertically integrated, but also (ii) they allow both downstream units to purchase intermediate inputs from and upstream units to sell intermediate goods to other sector firms. We demonstrate that the 10 largest electronics firms had two-way vertically permeable boundaries while almost no firms in the automotive sector had adopted that practice.

As I was downloading the article from the ICC website, a link to the Best Twenty ICC Articles from First Twenty Years of Publication (1992-2011) caught my eye. Definitely some interesting and important articles on this list, which was chosen by the editors. But I was struck that there is no overlap at all between this list and the list of 20 most cited articles in ICC. On a quick and sloppy count, there is an overlap of only 3 with the top 50 most cited. (Similar story for most read, where there is one overlap with the top 20.) Given my interest in this odd fact, perhaps you can guess on which lists my own articles lie.

30 November 2012 at 9:59 am 6 comments

Business and Poetry

| Peter Klein |

Wallace Stevens was one of America’s greatest poets. The author of “The Emperor of Ice-Cream” and “The Idea of Order at Key West” was awarded the Pulitzer Prize for Poetry in 1955 and offered a prestigious faculty position at Harvard University. Stevens turned it down. He didn’t want to give up his position as Vice President of the Hartford Accident and Indemnity Company.

This lyrically inclined insurance executive was far from alone in occupying the intersect of business and poetry. Dana Gioia, a poet, Stanford Business School grad, and former General Foods executive, notes that T.S. Eliot spent a decade at Lloyd’s Bank of London; and many other poets including James Dickey, A.R. Ammons, and Edmund Clarence Stedman navigated stints in business.

Sure, quants rule, but literary types have a role to play in business too. And some of the great literary and artistic figures, such as Dickens, Rubens, and even Shakespeare, were successful business managers. The quoted passage is from John Coleman’s “The Benefits of Poetry for Professionals” in the HBR blog.

29 November 2012 at 7:03 pm 2 comments

Call for Proposals: Austrian Economics Research Conference

| Peter Klein |

Below and here are the details about the 2013 Austrian Economics Research Conference. Submissions are due December 31, 2012. For an example of the high-quality keynotes speeches, see this one from 2012!

Austrian Economics Research Conference
March 21–23, 2013
Ludwig von Mises Institute
Auburn, Alabama

The Austrian Economics Research Conference (formerly the Austrian Scholars Conference) is the international, interdisciplinary meeting of the Austrian School, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Ludwig von Mises Institute at its campus in Auburn, Alabama.

Proposals for individual papers, complete paper sessions or symposia, and interactive workshops are encouraged. Papers should be well developed, but at a stage where they can still benefit from the group’s discussion. Preference will be given to recent papers that have not been presented at major conferences. All topics related to Austrian economics, broadly conceived, and related social-science disciplines and business disciplines including management, strategy, and entrepreneurship are appropriate for the conference. Proposals from junior faculty and PhD students are especially encouraged.

This year’s conference features a keynote lecture from Dominick Armentano and a themed symposium on competition theory and policy to celebrate the 30th anniversary of Armentano’s landmark book Antitrust and Monopoly: Anatomy of a Policy Failure. A lecture from Brendan Brown, author of The Global Curse of the Federal Reserve (Palgrave Macmillan, 2011) will celebrate the 50th anniversary of Murray Rothbard’s classic America’s Great Depression. Nikolay Gertchev of the European Commission and Robert Wenzel of Economic Policy Journal will also give keynote speeches. (more…)

29 November 2012 at 1:59 pm 2 comments

Dilbert on Multitasking

| Peter Klein |

Speaking of agency theory, today’s Dilbert deals with multitasking and, as usual, gets the problem exactly right:

28 November 2012 at 11:58 pm 2 comments

Behavioral Agency Theory

| Nicolai Foss |

Kathleen Eisenhardt’s 1989 Academy of Management Review paper is likely still the first, but hopefully not the last, exposure many management scholars have to agency theory. The paper is somewhat imprecise, and it shows its age, but as an introduction to the theory, one can do worse. However, much has in fact happened in agency theory since 1989 in terms of extensions and refinements of the theory, and also in terms of critical reactions, some of which have been partly aligned with the theory.

In particular, (some) economists and (more) management scholars (e.g., Wiseman and Gomez-Mejia) have tried to bring behavioral perspectives into agency theory. In a new paper (forthcoming in the Journal of Management), Alexander Pepper of the LSE and Julie Gore of the University of Surrey provide a useful overview of “behavioral agency theory,” somewhat in the style of Eisenhardt’s earlier review (i.e., with propositions that summarize the earlier literature). They include, for example, prospect theory, work on inequity aversion and even self-determination theory under the behavioral hat, and thus bring both cognitive and motivational issues into the orbit of behavioral agency theory.

A few mildly critical comments.

  • There is no claim in the paper that the various behavioral ideas are consistent and “add up,” but this is something that should perhaps have been discussed. Standard theory may make extreme assumptions but it is a highly consistent and neat theory. In contrast, behavioral agency theory is a bouillabaise of very different ingredients that are linked to the standard theory in a somewhat ad hoc manner.
  • The authors position and motivate the paper in terms of gaining more insight into executive compensation, but of course the scope of behavioral agency theory is much broader.
  • The authors, like Eisenhardt, repeats Michael Jensen’s distinction between “positive agency theory” and “principal-agent theory,” which makes as little sense today as it did in 1983 ;-)

Still, Pepper and Gore’s paper is definitely worth a read and I highly recommend it.

28 November 2012 at 9:12 am 1 comment

Miscellaneous

| Nicolai Foss |

A few interesting links, Tyler-style:

27 November 2012 at 3:03 pm Leave a comment

Book Seminar: Institutional Foundations of Impersonal Exchange: The Theory and Policy of Contractual Registries

| Lasse Lien |

Very shortly O&M will host a Virtual Seminar on former guest blogger Benito Arruñada’s important new book, Institutional Foundations of Impersonal Exchange: The Theory and Policy of Contractual Registries (University of Chicago Press, 2012). The blurb:

Governments and development agencies spend considerable resources building property and company registries to protect property rights. When these efforts succeed, owners feel secure enough to invest in their property and banks are able use it as collateral for credit. Similarly, firms prosper when entrepreneurs can transform their firms into legal entities and thus contract more safely. Unfortunately, developing registries is harder than it may seem to observers, especially in developed countries, where registries are often taken for granted. As a result, policies in this area usually disappoint.

So stay tuned for this. While we are finalizing the last details of the virtual seminar, you may want to attend one of Benito’s presentations:

27 November 2012 at 3:23 am 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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