Archive for August, 2007

How Would You Know Him from Any Other French Professor?

| Peter Klein |

Phantom French Professor Claims Salary for 15 Years

PARIS (Reuters) — A French tax official cheated the government out of 600,000 euros (407,000 pounds) by creating a phantom identity as a university professor and claiming a salary for some 15 years, the government said on Monday.

Sorry, I couldn’t resist. But I’m excused.

27 August 2007 at 4:58 pm 1 comment

Corporate Asset Purchases and Sales

| Peter Klein |

There’s a huge literature on mergers and sell-offs (see this excellent, if slightly dated, survey) but less work on the purchase and sale of corporate assets short of full acquisition or divestiture. Studying asset purchases and sales is a good way to learn about firms’ growth and retrenchment strategies because these transactions are not complicated by issues of corporate control.

Missaka Warusawitharana, a recent Wharton PhD now at the Federal Reserve Board, is doing interesting work in this area. In a forthcoming Journal of Finance paper he finds strong evidence that efficiency, not agency, considerations drive most asset purchases and sales. This contrasts with the M&A literature, in which the evidence on investment efficiency is mixed. A companion paper (with Sugata Ray) compares the sensitivity of acquisition returns to transaction value for both asset purchases and full acquisitions, finding evidence for value creation when corporate assets are purchased but not when an entire firm is acquired.

27 August 2007 at 9:53 am Leave a comment

Write Like a Management Consultant

| Peter Klein |

With Mike Shor’s MBA Sentence Generator you can craft fine prose like this: “To proactively manage profit, our frictionless infrastructure parallels our world-class thought leadership.” You don’t even need an MBA!

HT to Luke Froeb, who also recommends Fred Kahn’s “My War Against Bureaucratese.”

26 August 2007 at 2:39 pm 2 comments

Think Globally, Drink Locally

| Peter Klein |

Railing against corporate dictatorship, helps consumers find locally-owned cafes, bookstores, and movie theatres in their area — alternatives to the “invasion” of Starbucks, Borders, and their ilk. The site itself is actually quite an interesting capitalist idea in its freshness and creativity, and people certainly should eat or drink or shop where they are most comfortable. That’s the beauty of competition! And the kind of community-building that often takes place at familiar, time-tested, local shops is to be encouraged.

But to say local businesses possess some kind of moral magic simply by virtue of being family-owned and homey is preposterous.

That’s Brooke Levitske, writing on the Acton PowerBlog. Recently a friend asked what I thought of Wendell Berry and his agrarian, anti-industrial philosophy. My response was similar: If people wish to live according to these principles, more power to them. I object only when materialist urbanites are forbidden by law from pursuing their own path to enlightenment.

Incidentally, does anyone remember the WSJ article a few years back suggesting that local cafes benefit when Starbucks moves to town? The theory is that the presence of a Starbucks increases local demand for premium coffee, providing spillover benefits to local stores. I haven’t seen any systematic evidence on this, however.

25 August 2007 at 10:24 am 1 comment

Summary of Kirzner’s Contributions

| Peter Klein |

Israel Kirzner received the 2006 International Award for Entrepreneurship and Small Business Research. Here is an article by Robin Douhan, Gunnar Eliasson, and Magnus Henrekson from the current issue of Small Business Economics summarizing Kirzner’s contributions to entrepreneurship theory.

25 August 2007 at 8:29 am 1 comment

Investor Protection and Firm Governance: Substitutes or Complements?

| Peter Klein |

The new institutional economics often treats the institutional environment and institutional arrangements as substitutes. In countries with stable legal institutions, relatively efficient courts, and reasonable default rules for contract terms, for example, contracts tend to be less complete. If contracting parties can trust the courts to fill in the gaps, why bother to write out every contingency? Likewise, if a country has an efficient external capital market, firms can be small and specialized, relying on the capital markets to allocate resources among business units, but if the external capital market performs poorly, diversified business groups may arise to exploit their internal capital markets.

It is thus surprising to learn, from a new paper by Reena Aggarwal, Isil Erel, René Stulz, and Rohan Williamson, that firms tend to establish better mechanisms for corporate governance in countries that already have strong rules for investor protection. “[O]ur evidence suggests that firm-level governance attributes are complementary to rather than substitutes for country-level investor protection, so that better country-level investor protection makes it optimal for firms to invest more in internal governance.” The better the institutional environment, in this case, the more effort agents put into designing efficient institutional arrangements.

Clearly more work is needed to understand the interactions between “macro” and “micro” institutions. What are some other good papers in this area?

24 August 2007 at 9:57 am 4 comments

Does Management Research Need to Become More Empirical?

| Nicolai Foss |

Or, to put it more precisely, does management research (i.e., the journals) need to become more empirical in the specific sense of allowing for research that is pre-theoretic, but addresses an issue of relevance or detects a pattern to organizational stakeholders, that is, identifies a potentially important stylized fact? (more…)

23 August 2007 at 2:25 pm 8 comments

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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).