Rob King’s 2011 AAEA Presidential Address, “The Science of Design,” takes its cue from Herbert Simon.

[M]uch of what we do as economists is akin to what Simon calls natural science. We develop theories about how the economy works, and we conduct empirical studies that test these theories or estimate the parameters of key economic relationships that explain how general results derived from our theories manifest themselves in a particular context.We strive for results that explain what is or that predict what will be. . . .

Economists also design economic artifacts (e.g., markets, contracts, organizational structures, public policies) that reshape economic systems in order to better meet human needs. This work, which I will call economic design, is complementary with but differs fundamentally from economic analysis. While economic analysis is motivated by a question or a puzzle and focuses on explaining what is and predicting what will be, economic design is motivated by a problem or opportunity and focuses on what can be and ought to be or on what will yield a satisfactory outcome. . . .

While we are comfortable in recognizing “good science” in economic analysis, I believe we have devoted less attention to developing a shared understanding of “good science” in economic design.

It is certainly true that economists are increasingly involved in economic design (a trend that accelerated around WWII) though I am less sure this is a good idea. A lot of economic design — specifying “optimal” contracts, for example — might be considered the domain of entrepreneurs, not social scientists. But applied policy work is certainly of this character, so the essay may be read as a call for applied economists to pay closer attention to issues like decomposability, modularity, search, creativity, etc.  (See Dick’s work for rich discussions of these issues.)

Kudos to Rob for a thoughtful and intelligent piece. A friend calls it “perhaps the most interesting President’s Address from AAEA in the last 20 years.”

Most people don’t know that France is McDonald’s second-most popular market, despite the presumed French distaste for les choses américaine. Knowledge@Wharton has a nice piece suggesting that the firm’s willingness to cater to French tastes explains its success over local and multinational rivals:

In France, barely 10% of meals are eaten outside the home, compared to nearly 40% in the U.S. and the U.K. Unlike their Anglo-Saxon counterparts, French consumers rarely snack between breakfast, lunch and dinner. As a result, French meal times also last longer, and more food is consumed through multiple courses, creating unique opportunities and challenges for fast-food dining. McDonald’s decided to capitalize on the opportunity. Rather than run promotions that encourage snacking, the company freed up valuable labor by installing electronic ordering kiosks, which are used by one out of every three customers in more than 800 of its restaurants. McDonald’s has capitalized on the French cultural preference for longer meals by using surplus labor to provide table-side service, particularly in taking orders from lingering diners inclined to order an additional coffee or dessert item. Thanks to such initiatives, the average French consumer spends about US$15 per visit to McDonald’s — four times what their American counterparts spend.

Adding the McCafé — featuring macaroons baked by the same company that supplies Ladurée — was another savvy move.

Following up Nicolai’s post, here’s another job listing for O&M readers interested in vertical integration and supply-chain issues in food, fiber, and natural resources (forwarded at the  request of Karin Hakelius). Feel free to share similar listings with us and we’ll post them here. (We assume most of you already see the announcements posted at JOE, the BPS and ENT lists of AoM, etc.).

Many US bloggers try to post something clever on Thanksgiving about religious freedom, agricultural productivity, colonialism, property rights, immigration, etc. We’ve done it ourselves. But this year I thought I’d share something different: nerdy academic stuff about — what else? — the economic organization of the turkey industry. Tomislav Vukina’s 2001 paper on vertical integration in poultry is instructive. For example:

The pattern of vertical integration is less uniform in the turkey industry than in the broiler industry. A turkey company is less likely to own its own hatchery but is more likely to have company owned production farms (Martin et al. 1993). There is also more variation among production contracts in terms of division of risks and profits from growing turkeys than in the broiler industry. The processing plant is the center for control of placement.

A processor may contract directly with farmers or contract with a feed supplier who in turn contracts with farmers. In the turkey industry, there are still some independent producers with formal marketing contracts with processors. Such marketing contracts do not always provide any price or margin guarantees to producers.

And here’s information on pricing:

An interesting feature of the existing contractual arrangements is the simultaneous presence of distinct remuneration schemes in these two similarly organized industries. The broiler industry almost completely adopted a two-part piece-rate tournament whereas some turkey companies use tournaments and others use some form of a fixed performance standard. In a two-part piece-rate tournament scheme the grower receives a bonus if his performance is better than the group average and a penalty if his performance is below the group average. In a fixed-performance-standard scheme the performance of a grower is compared to a predetermined technological standard.

There’s even a whole section on turkey contracts:

During the last two decades turkey production was organized mainly through contract production with a standard technological production unit consisting of one brooder house and two finishing houses covered by one contract. In recent years, mainly as a result of the outbreak of the disease Poult Enteritis Mortality Syndrome (PEMS) — popularly known as spiking mortality — and other bio-security reasons, the production technology is gradually changing towards separate (off-site) brooding and finishing operations. The rationale for the change is to avoid the presence of multiple generations of turkeys on the same farm at any given time. With the new management practice the farmer specializes in either brooding or finishing of turkeys, and the two stages of the production process are covered by separate contracts. The old production technology (joint brooding and finishing) is still very much in existence. Turkey contracts use some combination of a flat fee and a feed-conversion bonus paid per pound of live meat produced to determine growers’ compensation.

Many more details are provided in the original. See also James MacDonald and Steven Martinez.

The Call for Papers for the 2012 ISNIE conference, 14-16 June 2012 at the University of Southern California, is now posted. Proposals are due 30 January 2012, so start working on those abstracts!

I have been involved with ISNIE for many years and currently serve as the organization’s treasurer. The conferences are terrific, with a variety of papers, panels, and keynotes spanning the broad range of institutional and organizational social science research.

Trivia: I first met the good Professor Foss at the inaugural ISNIE conference in 1997 in St. Louis So if it weren’t for ISNIE, this blog might not exist. . . .

O&M friend Brent Ross sends along this CFP for a track session of the 2012 Wageningen International Conference on Chain and Network Management. The session, “Managing Wicked Problems: The Role of Multi-Stakeholder Engagements for Resource and Value Creation,” is linked to a special issue of the International Food and Agribusiness Management Review. Info below the fold:

Management scholars and practitioners recognize that engagement with stakeholders is crucial for a firm to gain the necessary resources and capabilities to innovate, compete and create shared value (Teece and Pisano 1997; Freeman 2005; Kramer and Porter 2006). Furthermore, multi-stakeholder engagements have become a common means in the agri-food sector to address the increasingly presence of “wicked problems” such as sustainability (Batie 2008, Peterson 2009). “Wicked problems” cannot be framed and solved in any traditional way because they have no closed-form definition, deal with complex systems in which cause and effect relationships are either unknown or highly uncertain, and have multiple stakeholders with strongly-held, diverse, and conflicting values related to the problem. From the point of view of the firm, managing “wicked problems” requires the engagement of multiple stakeholders (De Wit and Meyer 2010, Peterson 2011) such as supply chain partners, universities, government agencies, NGOs and civil society.

Managing interactions and undertaking initiatives simultaneously with multiple stakeholders can represent an effective strategy for organizations in the agri-food sector to tackle “wicked problems”, share and co-create the resources and capabilities, and to create shared value. In practice, however, managing multi-stakeholder engagements present numerous challenges. Organizations need adequate initial resources and capabilities to start interacting with multiple stakeholders; the process of sharing and co-creating resources and learning from multiple stakeholders has to be efficient and effective; the expected outcomes of sharing and co-creating resources have to be identified and measured; the risk of possible negative outcomes of multi-stakeholder interactions has to be managed.  Alternative governance mechanisms are often used to address these important multi-stakeholder issues.

Given the nature and the importance of “wicked problems”, this call for papers aims to deepen management scholars’ and practitioners’ understanding of how an organization can effectively undertake multi-stakeholder interactions to develop resources and capabilities and ultimately create shared value. Therefore, we encourage submissions of papers that tackle a broad range of questions, including (but not limited to) the following:

·  What is the impact of multi-stakeholder engagements on the sharing and co-creation of resources and capabilities, and value creation?  Can value be created for both private firms and their stakeholders in the presence of “wicked problems”? What is the relationship between reaching commonly agreed sustainability objectives and creating value for the firm?

·  Which resources and capabilities are necessary and/or sufficient to create shared value in the context of “wicked problems” such as sustainability?  Which stakeholders can provide them and under which conditions? In turn, what are the initial resources and capabilities needed to effectively engage with multiple stakeholders? Is there a critical mass of stakeholders and/or resources and capabilities that is required to initiate and sustain engagement? How does the process of multiple stakeholders sharing and co-creating resources and capabilities take place?

·  Are reputation and legitimacy resources co-created or shared in multi-stakeholder engagements? Does the member composition of the multi-stakeholder engagement matter? Which member inclusion/exclusion mechanisms are effective to enhance stakeholders’ reputation and legitimacy? What is the impact of a stakeholder drop-out on the reputation and legitimacy of the multi-stakeholder engagement? What is the relationship between stakeholder heterogeneity or representativeness, on legitimacy and reputation of the multi-stakeholder engagement?

·   Which organizational structures and governance mechanisms are most effective to allow multiple stakeholders to share and co-create resources and capabilities and create value? In particular, what is the effect of managing a formal multi-stakeholder alliance versus an informal network of multi-stakeholder interactions?

·  How do multi-stakeholder engagements evolve over time? What are the causes and effects of change and the implications for stakeholders? What are the challenges and implications of downscaling global multi-stakeholder initiatives to a local level? What are the challenges and implications of up-scaling local multi-stakeholder initiatives to an international level?

Both empirical and conceptual papers are welcome and we strongly encourage multi-disciplinary submissions from scholars in areas such as management, law and economics, public administration and policy, marketing, organizational behavior, communication, education, development, sociology, and psychology among others. In addition to the track session, submissions will be subject to a double-blind review process and will be considered for publication in a special issue of the International Food and Agribusiness Management Review on managing multi-stakeholder engagements.

To insure full consideration for the track session and for the special issue of the IFAMR, please submit/upload your full papers using the IFAMR submission process found at www.ifama.org. You should submit/upload your paper under the folder WICKED no later than January 5th, 2011.  Papers should follow the manuscript guidelines posted for IFAMR.

References

Batie, S. (2008). “Wicked Problems and Applied Economics.” American Journal of Agricultural Economics 90 (5), 1176–1191.

De Wit, B. and Meyer, R. (20100. Strategy Synthesis: Resolving Strategy Paradoxes to Create Competitive Advantage. 2^nd Edition, Cengage Learning.

Freeman, R.E., J. S. Harrison, A. C. Wicks, B.L. Parmar, S. de Colle (2010). Stakeholder Theory: The State of the Art. Cambridge University Press.

Peterson, C. (2009). “Transformational supply chains and the ‘wicked problem’ of sustainability: aligning knowledge, innovation, entrepreneurship, and leadership.” Journal of Chain and Network Science  9(2): 71-82.

Peterson, C. (2011). An Epistemology for Agribusiness: Peers, Methods, and Engagement in the Agri-food-bio System. Forthcoming on the International Food and Agribusiness Management Review.

Porter, M.E. and Kramer, M.R. (2006). “Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility.” Harvard Business Review (12/2006), 1-16.

Teece, D. and Pisano, G. (1997). “The Dynamic Capabilities of Firms: an Introduction.” Industrial and Corporate Change 3 (3), 537-556.

Deadline for WICANEM Full Paper Submission: January 5th, 2012.

Deadline for IFAMR Full Paper Submission: January 5th, 2012.

Timeline for IFAMR double-blind review only (additional information soon on www.ifama.org):

Deadline for IFAMR Full Paper Submission:              January 5th, 2012.

Notification of Acceptance/Revision/Rejection:       March 30th, 2012.

Deadline to Revise Accepted Papers:                    June 10th, 2012.

Final Notification of Acceptance/Rejection:            September 15th, 2012.

I’m very excited about Doug Allen’s forthcoming book The Institutional Revolution (University of Chicago Press). Trained by Yoram Barzel (and hence part of the Tree of Zvi), Doug is a leading contemporary scholar on property rights, transaction costs, contracting, and economic history. His work on agricultural contracting with Dean Lueck, including their 2002 book The Nature of the Farm, is a classic contribution to the economics literature on economic organization. He also has a very good introductory textbook. More information is at Doug’s informative (and amusing) website.

Here’s the cover blurb for the new book:

Few events in the history of humanity rival the Industrial Revolution. Following its onset in eighteenth-century Britain, sweeping changes in agriculture, manufacturing, transportation, and technology began to gain unstoppable momentum throughout Europe, North America, and eventually much of the world—with profound effects on socioeconomic and cultural conditions.

In The Institutional Revolution, Douglas W. Allen offers a thought-provoking account of another, quieter revolution that took place at the end of the eighteenth century and allowed for the full exploitation of the many new technological innovations. Fundamental to this shift were dramatic changes in institutions, or the rules that govern society, which reflected significant improvements in the ability to measure performance—whether of government officials, laborers, or naval officers—thereby reducing the role of nature and the hazards of variance in daily affairs. Along the way, Allen provides readers with a fascinating explanation of the critical roles played by seemingly bizarre institutions, from dueling to the purchase of one’s rank in the British Army.

Engagingly written, The Institutional Revolution traces the dramatic shift from premodern institutions based on patronage, purchase, and personal ties toward modern institutions based on standardization, merit, and wage labor—a shift which was crucial to the explosive economic growth of the Industrial Revolution.

Bonus: Here’s the syllabus from Doug’s course on the economics of property rights.

• ISNIE, 16-18 June in Palo Alto. Registrations are closed but latecomers could try lobbying the Treasurer to accept a late payment — never mind, that’s me, don’t bother.
• “Open Source, Innovation, and New Organizational Forms,” 1 August in Johannesburg. “This first IPEG conference intends to explore new theoretical and empirical advances in open source organization: the interest is not just on voluntary Open Source Software production and its potential innovation implications, but also on such related ‘open source’ phenomena as collective invention, online collaboration (e.g., Wikipedia), online social networking (e.g., Facebook), open innovation, open science, open source biology, and open standards.” The conference website is not live as of this posting, but organizer Giampaolo Garzarelli can provide details. O&M’s Dick Langlois is a keynote speaker. 500-word abstracts are due 24 June.
• “Achieving Coexistence of Biotech, Conventional & Organic Foods in the Marketplace,” 26-28 October in Vancouver. Speakers include FAO Deputy Director General Ann Tutweiler and Canadian Ag Minister Gerry Ritz. Coexistence conferences have been held every other year since 2003; the first 3 conferences came out of EU Commission efforts, the next was in Australia, and this one is the first to be held in North America. A co-organizer tells me “we hope to bring a more ‘practical’ view of coexistence than is commonly held in Europe.”

Earlier this academic year I assumed the Directorship of the McQuinn Center for Entrepreneurial Leadership here at the University of Missouri. My colleague (and former O&M guest blogger) Randy Westgren retains the position of McQuinn Chair. The McQuinn Chair was established in 2004 through a generous gift from Al and Mary Agnes McQuinn, and the Center was created soon afterwards by Bruce Bullock, the inaugural McQuinn Chair.

Look for a slate of exciting programs and activities about entrepreneurship, organization, innovation, strategy, and more in the coming months. To keep you up to date on the Center’s activities, as well as news and information from the wider world of entrepreneurship, we’re blogging as well at entrepreneurship@McQuinn.

The current issue of AAEA Exchange, the newsletter of the Agricultural and Applied Economics Association (formerly American Agricultural Economics Association), features three perspectives on the long-term viability of maintaining separate departments of economics and agricultural economics. (Much of the discussion would apply to business economics departments too.) Ron Mittelhammer of Washington State argues for consolidation, Ken Foster of Purdue for keeping separate departments, and Rob King of Minnesota for the transformation of agricultural economics departments to applied economics departments.

The issues are organizational and strategic and familiar to O&M readers. Mittelhammer emphasizes tangible resources and a shared intellectual heritage and downplays accumulated routines and capabilities, organizational culture, etc.:

Arguably above all other rationale, mergers are also warranted because, fundamentally, economics is economics. Agricultural economics is a field of economics, not some other paradigm of economics, and is no more distinct from its parent discipline than other fields such as labor economics, international economics, health economics. . . .

Too often of late, it appears that the last ditch attempt at justifying the separation of economic units degenerates to the issue of faculty personalities, the correlated issue of seemingly unbridgeable differences in “professional cultures,” and the fear of open faculty warfare that might be ignited by a merger, rather than the existence of truly distinct and defensible differences in the methodologies used to do economic analysis in agricultural and applied, versus the “other” economics disciplines. In fact, the frequently proclaimed “professional cultural differences” is often merely a euphemism used, by other economists, to categorize agricultural-type economists as being “down and dirty,” atheoretic, and highly empirical, and by the agricultural-type economists to categorize “other” economists as being ethereally theoretical and producing tight economic conclusions based on logically elegant methods at the expense of substantial simplifications that render a model solvable, but also result in conclusions that are often devoid of real world relevance and divorced from reality. These are straw men; a quick perusal of the journals and other professional output of the “two camps” makes it abundantly clear that members of each camp produce economic analyses that run the gamut between both polar views, and there are an ample number of professionals in each camp practicing the so-called cultures of the other.

Foster, by contrast, suggests that agricultural economics departments possess unique core values, associated in particular with the outreach mission of the land-grant university. King describes Minnesota’s hybrid approach which maintains separate economics and applied economics departments but operates a combined graduate faculty of economists from colleges of agriculture, business, public affairs, and public health.

Interesting stuff for those interested in higher-education reform and those interested in the application of organization and management theory to the nonprofit services sector.