Archive for February, 2008

Off to Sundance

| Nicolai Foss |

Teppo Felin has been raving about the BYU-University of Utah Winter Strategy Conference, and I decided to accept an invitation for this year’s conference which takes place at the Sundance Resort. I am off tomorrow, and should arrive after about 17 hours of travel (sigghhh!). The program (which doesn’t seem to be online) looks magnificent with talks by Michael Tushman, Dan Levinthal, and Brian Silverman, and panels with Jay Barney, Joel Baum, Jackson Nickerson and other illustrious people in the strategic management community. The conference seems to be relatively small (max. 50 people) and largely Euro-free (with the exception of Gino Cattani and yours truly), which means clear and focused. I will offer some thoughts here on O&M on what I hear at the Sundance conference.

26 February 2008 at 10:33 am 1 comment

More on Blind Freddy

| Steve Phelan |

Apologies to everyone for my lengthy absence. Since January 1, I have been working in a new administrative role in the College of Business at UNLV {shock, horror}. (Details can follow after a formal announcement is made).

Further to my argument several months ago that “blind freddy” could have seen the mortgage problems, here is a nice insider view from Calculated Risk:

But a whole lot of these loans that are failing right now were originated as 100% CLTV stated-income loans, because the guidelines agreed to by the issuer allowed that. I am scratching my head over the logic here: I spent most of the early years of this decade, just as a for instance, blowing my blood pressure to danger levels every time I looked at the underwriting guidelines published by ALS, the correspondent lending division of Lehman. ALS was a leader in the 100% stated income Alt-A junk. And I kept having to look at them because my own Account Executives keep shoving them under my nose and demanding to know how come we can’t do that if ALS does it. I’d try something like “because we’re not that stupid,” and what I’d get is this: “But if ALS can sell those loans, so can we. All we gotta do is rep and warrant that they meet guidelines that Wall Street is dumb enough to publish.” Every lender in the boom who sold to the street wrote loans it knew were absurd, but in fact they had been given absurd guidelines to write to. What on earth good did it do to have those originators represent and warrant that they followed underwriting guidelines to the letter, when those guidelines allowed stated income 100% financing on a toxic ARM with a prepayment penalty?

The argument is that mortgage originators were not so much committing massive fraud but rather that banks were following lax guidelines that those on ‘the Street’ did not view as problematic (or perhaps that the ultimate investor did not view as problematic).

26 February 2008 at 4:53 am 1 comment

Fun With Words

| Peter Klein |

You know the game where you take a common word, add or change one letter, and create a new definition? Our good friend Randy W. sends these examples, including some economics and management terms:

1. Cashtration: The act of buying a house, which renders the subject financially impotent for an indefinite period of time.

2. Ignoranus: A person who’s both stupid and an asshole.

3. Intaxication: Euphoria at getting a tax refund, which lasts until you realize it was your money to start with.

4. Reintarnation: Coming back to life as a hillbilly.

5. Bozone: The substance surrounding stupid people that stops bright ideas from penetrating.

I tried but all I could come up with is

6. Jive-forces analysis: a model analyzing the effect of intra- and
inter-industry rivalry on the truthfulness of corporate disclosures.

Dear readers, give it your best shot!

UPDATE: I thought of a few more:

7. Basset specificity: relationship specific investments dog-lovers make in their hounds.

8. Strategic compliments: what you give your significant other on Valentine’s Day.

9. Perennial gale of creative distraction: the blogosphere. (OK I changed two letters on that one.)

23 February 2008 at 11:10 am 4 comments

Impact of B-School Research

| Peter Klein |

The AACSB has released its Impact of Research Task Force Report. Key excerpt:

The Task Force believes that it is critical for business schools to find ways to continuously enhance the value and visibility of scholarship and research of all types — basic, applied, and pedagogical. Through its analysis, the Task Force has uncovered five issues that, if addressed by AACSB International, its member schools, and other organizations, could assist business schools to achieve their fullest potential from scholarship and research. First, current measures of intellectual contributions focus on inputs rather than outcomes. That is, the focus is on how faculty spend time (engagement in scholarship) and not on the value of outcomes produced (impact of scholarship on intended audiences). Second, business school and individual faculty incentives tend to create an overwhelming emphasis on discipline-based scholarship at the expense of contributions to practice and to pedagogical development. Third, the relationship between management research and teaching and the
mechanisms to support their interaction, especially when these functions are not always performed by the same people, are not well-understood. Fourth, there are inadequate channels for translating academic research to impact practice. Fifth, opportunities to support deeper, more continuous interaction between faculty and practicing managers on questions of relevance have not been fully developed.

The recommendations are fairly generic — require accredited schools to demonstrate the impact of faculty research, find ways to reward faculty for producing high-impact work, study more closely the links between scholarship, education, and practice, and so on. There’s less detail on exactly how impact should be measured, however. A few examples are given:

  • number of practitioners or firms adopting new approach or developed practice
  • awards by industry or professional associations
  • adoptions and integration in curricula of schools
  • sales of book
  • number of regional/national/international presentations
  • reviews in magazines (e.g., BusinessWeek, Forbes)

These are all fine, but it’s difficult to imagine criteria that can be applied consistently across disciplines, across types of research (basic versus applied), and so on.

Here is some commentary from Inside Higher Ed.

22 February 2008 at 11:20 am 4 comments

Economists with Verve

| Peter Klein |

Jim Heckman is one. Steve Sailer, whom I enjoy reading despite many disagreements, recently shared this Heckman nugget. Referring to Heckman’s angry 1995 review of Herrnstein and Murray’s The Bell Curve, Sailer notes:

What people didn’t realize . . . is that Heckman is almost always upset. That’s his personality. In a Medieval Big Four Humours model, he’d be The Man of Choler.

Years ago, I was participating in an email discussion with Heckman, who made all of his contributions to the conversation IN ALL CAPS.

As I recall, I privately emailed him to suggest — diplomatically, I hoped — that if he didn’t find the shift key convenient, he could just eschew upper case altogether and type using only lower case, like e.e. cummings. You see, I explained, using all caps gives other readers the impression that you are shouting.

“I AM SHOUTING!” he emailed back.

Heckman’s distinctive personality is one of the things that helps make him a great scientist.

Incidentally, this story helps place the thin-skinned scholar episode in perspective.

22 February 2008 at 10:34 am Leave a comment

Henry Manne, Academic Entrepreneur

| Peter Klein |

Henry Manne did as much as anyone to create the modern discipline of law and economics. I refer here not only to his scholarly contributions, particularly his work on the market for corporate control and on insider trading, but also his creation of institutions (such as the original Law and Economics Center at the University of Miami) to support the emerging field. So it’s nice to see this essay by Larry Ribstein, “Henry Manne: Intellectual Entrepreneur,” coming out in Pioneers of Law and Economics edited by LLoyd Cohen and Josh Wright. (Via Josh.)

Writing when there was a theory vacuum in legal academia, Manne breathed life into corporate law by using economic principles to formulate a sweeping new theory of the corporation. Then he took his show on the road with seminars, programs and ultimately a law school to create a market for his ideas. The Chapter shows that Manne was an entrepreneur not only in bringing people and ideas together, but also in the Schumpeterian sense Manne discussed in his work on insider trading — an active participant in the creative destruction of the existing paradigm rather than merely a manager of existing ideas. Manne’s career demonstrates that, under the right conditions, a single scholar can leave noticeable ripples in the stream of intellectual history. By demonstrating that corporations, and by inference other important institutions, are best analyzed in market terms, and by creating an intellectual market for these and other economic ideas, Manne changed the way scholars, judges, regulators and others think about the role of law in society.

See also this Manne essay on the emergence of the field. And these papers by my former student Alex Padilla on insider trading. (And these cool gowns worn by the examiners at Alex’s dissertation defense at l’Université d’Aix en Provence.)

21 February 2008 at 3:38 pm Leave a comment

The Nicest Thing Anyone’s Ever Said About Us

| Peter Klein |

Alf Rehn directs his readers to

my favorite gang of theorists I do not agree with at all over at Organizations and Markets (fun blog, and I have a great deal of respect for them, even though we are as far apart in thinking as people in the kinda-the-same-field-although-you-could-be-forgiven-for-thinking-otherwise can be — I even like reading Nicolai Foss’s rants, bless his little hardliner heart).

But why does he think Nicolai has a heart?

21 February 2008 at 9:22 am 2 comments

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Our Recent Books

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).