Archive for October, 2008

Best-Selling Ivey Cases for 2007-08

| Peter Klein |

  1. Starbucks, Mary M. Crossan, Ariff Kachra
  2. Ellen Moore (A): Living and Working in Korea, Henry W. Lane, Chantell Nicholls, Gail Ellement
  3. Eli Lilly in India: Rethinking the Joint Venture Strategy, Charles Dhanaraj, Paul W. Beamish, Nikhil Celly
  4. Swatch and the Global Watch Industry, Allen Morrison, Cyril Bouquet
  5. Leo Burnett Company Ltd.: Virtual Team Management, Joerg Dietz, Fernando Olivera, Elizabeth O’Neil
  6. Brand in the Hand: Mobile Marketing at Adidas, Andy Rohm, Fareena Sultan, David T. A. Wesley

The Ivey School, as you probably know, is second only to Harvard in the production of business cases.

28 October 2008 at 12:46 am 1 comment

Dan and Chip Heath on Presentations

| Peter Klein |

A new entry for our PowerPoint series: Dan and Chip Heath’s “How to Avoid Making a Bad Presentation,” from the current issue of Fast Company. They’re the Made to Stick guys, in case you forgot. (Not, sadly, the people behind my all-time favorite ice cream.)

27 October 2008 at 1:31 pm Leave a comment

New NBER Working Papers

| Peter Klein |

Three new NBER papers likely to interest the O&M crowd. (Aggressive Googlers can probably find ungated versions.)

Railroads and the Rise of the Factory: Evidence for the United States, 1850-70 by Jeremy Atack, Michael R. Haines, and Robert A. Margo

Over the course of the nineteenth century manufacturing in the United States shifted from artisan shop to factory production. At the same time United States experienced a transportation revolution, a key component of which was the building of extensive railroad network. Using a newly created data set of manufacturing establishments linked to county level data on rail access from 1850-70, we ask whether the coming of the railroad increased establishment size in manufacturing. Difference-in-difference and instrument variable estimates suggest that the railroad had a positive effect on factory status. In other words, Adam Smith was right – the division of labor in nineteenth century American manufacturing was limited by the extent of the market.

The Limited Partnership in New York, 1822-1853: Partnerships Without Kinship by Eric Hilt and Katharine O’Banion

In 1822, New York became the first common-law state to authorize the formation of limited partnerships, and over the ensuing decades, many other states followed. Most prior research has suggested that these statutes were utilized only rarely, but little is known about their effects. Using newly collected data, this paper analyzes the use of the limited partnership in nineteenth-century New York City. We find that the limited partnership form was adopted by a surprising number of firms, and that limited partnerships had more capital, failed at lower rates, and were less likely to be formed on the basis of kinship ties, compared to ordinary partnerships. The latter differences were not simply due to selection: even though the merchants who invested in limited partnerships were a wealthy and successful elite, their own ordinary partnerships were quite different from their limited partnerships. The results suggest that the limited partnership facilitated investments outside kinship networks, and into the hands of talented young merchants.

Inside the Black of Box of Ability Peer Effects: Evidence from Variation in Low Achievers in the Classroom by Victor Lavy, Daniele Paserman, and Analia Schlosser

In this paper, we estimate the extent of ability peer effects in the classroom and explore the underlying mechanisms through which these peer effects operate. We identify as low ability students those who are enrolled at least one year behind their birth cohort (repeaters). We show that there are marked differences between the academic performance and behavior of repeaters and regular students. The status of repeaters is mostly determined by first grade; therefore, it is unlikely to have been affected by their classroom peers, and our estimates will not suffer from the reflection problem. Using within school variation in the proportion of these low ability students across cohorts of middle and high school students in Israel, we find that the proportion of low achieving peers has a negative effect on the performance of regular students, especially those located at the lower end of the ability distribution. An exploration of the underlying mechanisms of these peer effects shows that, relative to regular students, repeaters report that teachers are better in the individual treatment of students and in the instilment of capacity for individual study. However, a higher proportion of these low achieving students results in a deterioration of teachers’ pedagogical practices, has detrimental effects on the quality of inter-student relationships and the relationships between teachers and students, and increases the level of violence and classroom disruptions.

27 October 2008 at 11:47 am Leave a comment

Kirzner’s Tapestry

| Peter Klein |

One of the points I make in my forthcoming SEJ paper is that Kirzner’s metaphor of entrepreneurial discovery is, like Freud’s cigar, just a metaphor. It’s invoked by Kirzner to explain the tendency of markets to clear, not to describe a particular behavior or personality type. Applied entrepreneurship studies aimed at identifying what kinds of people really “are” more alert to opportunities, in some sense we can measure with a survey or experiment, misses the point of the metaphor. Likewise, Kirzner does not mean that opportunities literally are given, objectively, in the environment, independent of human creativity. “Discovery” is an analytical construct, an instrumental device, not a description of behavior.

Kirzner explains all this in a 1997 interview:

Q: What do you mean in saying something is “waiting” to be discovered?

A: Philosophically, people have objected to that. I do not mean to convey the idea that the future is a rolled-up tapestry, and we need only to be patient as the picture progressively unrolls itself before our eyes. In fact, the future may be a void. There may be nothing around the corner or in the tapestry. The future has to be created. Philosophically, all this may be so. But it doesn’t matter for the sake of the metaphor I have chosen.

Ex post we have to recognize that when an innovator has discovered something new, that something was metaphorically waiting to be discovered. But from an everyday point-of-view, when a new gadget is invented, we all say, gee, I can see we needed that. It was just waiting to be discovered.

Q: Consumer demand was there, resources were there, and the technology was there. . .

A: Yes, so there was no reason why it wasn’t being done. The entrepreneur is alert to this reality, to the profit opportunity it represents, and responds creatively to it.

Notice the emphasis on opportunities “metaphorically waiting to be discovered,” not literally waiting to be discovered. Kirzner isn’t offering a particular ontology or epistemology, just proposing an analytical device, designed for a specific purpose (to understand market clearing). Some of the literature comparing “discovery” and “creation” as alternative conceptions of the entrepreneurial act seems to me to read too much into Kirzner.

24 October 2008 at 3:14 pm 12 comments

Economic Notes From the Underground

| Peter Klein |

An interesting call for proposals from EconJournalWatch:

Fyodor Dostoevsky’s novella Notes from Underground (1864) is a classic of introspection and confession. The symposium takes its title from Dostoevsky’s work.

The prospective symposium will consist of confessional essays by economists about their existence as economists. Only genuine narrative and sincere reflection are welcome. However, essays may be anonymous.

Here are the kinds of confessions the editors have in mind:

  • Building models one does not really believe to be useful or relevant.
  • Making simplifications that obscure or omit important things.
  • Using data one does not really believe in.
  • Focusing on the statistical significance of one’s findings while quietly doubting economic significance.
  • Engaging in data mining.
  • Drawing “policy implications” that one knows are inappropriate or misleading.
  • Keeping the discourse “between the 40 yard lines” so as to avoid being outspoken; knowingly eliding fundamental issues.
  • Tilting the flavor of policy judgments to make a paper more acceptable to referees, editors, publishers, or funders.
  • Disguising one’s methodological or ideological views, such as by omitting revealing activities or publications from one’s vitae.
  • For government, institute, or corporate economists: Having to significantly play along with things one does not believe in.

My reaction: Can a single symposium issue possibly hold them all?

24 October 2008 at 8:54 am 1 comment

Want to Understand the Financial Crisis?

| Lasse Lien |

This clip will tell you what you need to know.

HT: Erik Døving

24 October 2008 at 3:51 am 3 comments

Dead Founders

| Lasse Lien |

Here is a link to a very nice paper in the somewhat morbid empirical tradition of using death as a natural experiment. Hans K. Hvide looks at the value of the founder to a newly established firm by examining the performance effects of founder death (or the death of a member of the founding team). Using several empirical tests and an impressive battery of robustness checks, he concludes that the negative impact of founder death is almost unnoticeable on all the classic performance variables. Apparently the importance of the founder is as a discoverer of opportunities and an initiator. As a manger the founder appears to be quite substitutable (on average).

24 October 2008 at 3:35 am 2 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).