Archive for June, 2008

Controversy Over JPE Paper on File Sharing

| Peter Klein |

Stan Liebowitz, no stranger to controversy (1, 2), maintains that the Oberholzer-Gee and Strumpf paper on file sharing, published last year in the Journal of Political Economy, is fundamentally flawed. Stan submitted a comment (longer version here) to the JPE which was rejected by editor Steve Levitt. Stan believes that Oberholzer-Gee and Strumpf are guilty not merely of sloppiness, but academic dishonesty, and is upset that they refuse to share their data. The German newspaper Handelsblatt has written an article about the controversy. Handelsblatt focuses on Levitt’s decision to ask Strumpf to write a reply and then to use the reply as an anonymous referee report in rejecting Liebowitz’s comment. That doesn’t trouble me as much as the authors’ unwillingness to share the data (and the JPE’s refusal to insist on it). More generally, notes the newspaper:

The impression that procedural standards of economics journals are not particularly strict is widely shared in the profession. Zurich-based economist Ernst Fehr, an associate editor of the top-five journal “Quarterly Journal of Economics” and of “Science” points to a lack of clear rules as to when an editor should recuse himself because of potential prejudice. Science journals also seem to deal more openly with the competition among scientists. “Authors who submit an article to a science journal can say who they do not want to review their article”, praises Fehr, a choice which is typically not given to economists.

One internationally renowned economist, who did not want to be named, expresses the complaint more bluntly: “Little scandals and big scandals are commonplace: editors who publish articles in their own journals, referees or editors who decide about articles submitted by their own doctoral students.”

The pointer is from Craig Newmark, who writes: “Until important empirical results in economics are, as a matter of routine, carefully scrutinized and until they are provably replicable, economics will never get the respect that physics and biology and chemistry get. And that’s a shame.”

Update: Additional comments from John Lott and John Palmer.

23 June 2008 at 12:26 pm 7 comments

Business History Bleg: British Trading Houses

| Peter Klein |

I’m advising a PhD student in sociology (yes, it’s true) who’s studying the rise of British commercial influence in the Far East. He’s particularly interested in Jardine Matheson & Company, a Hong Kong trading company founded in 1832 that grew quickly into a pre-modern industrial conglomerate. Can anyone recommend references on the organization and strategy of 19th-century trading firms, their political, social, and cultural activities and influence, and their role in trade and economic growth more broadly?

22 June 2008 at 10:35 pm 6 comments

Notes from DRUID

| Dick Langlois |

I am in Copenhagen for the DRUID 25th Celebration Conference, which finished up yesterday. It’s called the 25th Celebration because it’s the 25th DRUID conference -– there have been generally two a year since the organization started in 1995. This conference represents a transition for DRUID, which has grown considerably over the years. One indication of transition is that the old scientific advisory board, of which I had been a member since 1996, has been dissolved and a new one reconstituted. The new board is made up of a number of smart and interesting people, but it tends more toward management and economic geography and away from the theory of the firm and industry as represented by the likes of Bo Carlson, Brian Loasby, and George Richardson (and me). It was perhaps fitting that Brian was asked to press the button that touched off the fireworks over the harbor after last night’s conference dinner.

Some highlights.

Steven Klepper presented the first keynote, a further development of his long-term research program on industry structure and the birth and death of firms. (I missed the very beginning of the talk because I was having breakfast with Nicolai; fortunately, the paper is available here.) What Klepper does is essentially top-flight quantitative economic history. In this paper he takes on the conventional wisdom (A) that Silicon Valley is unique because of the rate of spinoffs it engendered and (B) that universities are crucial to the spinoff process. It turns out that the early auto industry in Detroit and the early tire industry in Akron had almost identical spinoff patterns, both sans university. (In fact, there were more spinoffs than in Silicon Valley.) In Klepper’s account -– notably different from most accounts –- clusters arise when new profit opportunities get seized by defection of key personnel rather than through internal diversification. In all cases, the cluster tend to consist of successful spinoffs from already successful firms. Genuine new entrants and spinoffs from less-successful firms seldom prosper. Defections have to do in large part with the dysfunctionality of the parent company, involving a problem either with expectations (as when the soon-to-be defectors couldn’t convince management of the value of their ideas) or of incentives (read: inadequate stock options). There is an interesting connection here with the Penrose/Chandler theory of the growth of the firm. Penrose seems to assume, and Chandler more than assumes, that firms always build internal capabilities and then use their excess resources to diversify internally into profitable related areas. Klepper shows that those opportunities often result in the formation of new firms. (more…)

21 June 2008 at 5:36 am 2 comments

Overheard at the Conference

| Peter Klein |

A prominent economic theorist, introducing a well-known business professor who has published in several fields: “In addition to his important scholarly contributions, he has also written several articles in management journals.”

19 June 2008 at 5:28 pm 4 comments

Searle Center Conference on the Economics and Law of the Entrepreneur

| Peter Klein |

I used to judge an academic conference by the number of big-name scholars in attendance. Now I look for big-name bloggers. What a delight, then, to be at the Searle Center Conference on the Economics and Law of the Entrepreneur with two of my favorite bloggers, Gordon from Conglomerate and Lynne from Knowledge Problem. The conference, organized by Dan Spulber, brings together economists and legal scholars to grapple with the challenges facing entrepreneurship research. Today’s sessions focused on venture finance and law, and tomorrow’s deal with economic growth, innovation, and the social context of entrepreneurship. I’m moderating a session featuring Simon Parker, Mirjam van Praag, Doug Cumming, Robert Miller, and Linda Yueh. The papers are available at the conference site and a selection will appear in a special issue of JEMS.

This the second Searle Center event I’ve attended this year and I’ve been impressed with both. The Center is only a year old but, under Henry Butler’s guidance, has already established itself as a major player in the fields of regulatory and entrepreneurial studies.

18 June 2008 at 11:54 pm Leave a comment

Organizational Charts from 1915

| Peter Klein |

These images come from Frank Fetter’s second principles treatise, his Economic Principles (1915), which included chapters on “Enterprise” and “Management.” Note that at the top of the hierarchy sits the “enterpriser,” a term Fetter borrowed from Frederick Hawley), instead of “entrepreneur” or “adventurer,” both of which were then in common use to describe the business person. (Adventurer meant simply “one who undertakes a venture.”) Hawley preferred enterpriser because it suggested not simply management, but “responsibility,” or “the subjection [of one’s actions] to the results of production” (Hawley, 1908, p. 470). This is essentially the concept of entrepreneurship proposed in recent Foss-Klein papers (some of which you can find here), namely judgmental decision-making about the deployment of resources in the face of Knightian uncertainty.


17 June 2008 at 12:21 pm 6 comments

Academic Journal Fakery

| Peter Klein |

As computer programs make images easier than ever to manipulate, editors at a growing number of scientific publications are turning into image detectives, examining figures to test their authenticity.

And the level of tampering they find is alarming. “The magnitude of the fraud is phenomenal,” says Hany Farid, a computer-science professor at Dartmouth College who has been working with journal editors to help them detect image manipulation. Doctored images are troubling because they can mislead scientists and even derail a search for the causes and cures of disease.

Ten to 20 of the articles accepted by The Journal of Clinical Investigation each year show some evidence of tampering, and about five to 10 of those papers warrant a thorough investigation, says Ms. Neill. (The journal publishes about 300 to 350 articles per year.)

This is from the Chronicle. The problem is partly cultural, it appears. “[Y]oung researchers may not even realize that tampering with their images is inappropriate. After all, people now commonly alter digital snapshots to take red out of eyes, so why not clean up a protein image in Photoshop to make it clearer?” Says Farid: “This is one of the dirty little secrets — that everybody massages the data like this.”

I suspect that outright fraud — making up data, changing regression coefficients — is unusual in empirical social-science research research. Sloppiness, ranging from data-entry errors to programming mistakes to misspecified regression models, is common. And social scientists typically “shade” results, e.g., by running fifty regressions and reporting only the one in which the signs and significance levels turn out to the researcher’s liking. (Hence the growing importance of the “robustness checks” section of any empirical paper.)

16 June 2008 at 9:37 am 3 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).