Author Archive

Before They Were Famous

| Randy Westgren |

If we point to “The Nature of the Firm” (1937) as the moment when Ronald Coase earned is place in the Pantheon, then we can go back two years (and 16 years before his doctorate was awarded) to a period when he was lecturing at LSE and working on public utilities to find the beginning of a series of papers in Economica (with R.F. Fowler) on the English pig industry (see here, here, here, and here for JSTOR links). The story line is about the effects of anticipated prices (based on lags) for hogs and corn on production decisions and the consequent cobweb model of dynamic prices. A classic in agricultural economics.

Another giant figure, Sewell Wright, examined the same phenomenon in the US in an obscure publication ten years earlier: Corn and Hog Correlations, USDA Department Bulletin # 1300, July 1925. Wright was an animal husbandman (and guinea pig breeder) at USDA after completing a doctorate in genetics at Harvard. (more…)

2 June 2008 at 10:17 pm Leave a comment


| Randy Westgren |

This weekend, I am planning to drive to Columbia, Missouri, the home of Peter Klein. I had to check the map this afternoon, as there is a wire service report that Max Motors in Butler, MO, is offering each car buyer $250 toward the purchase of a gun or gasoline. According to the report, “General manager Walter Moore said that, so far, most buyers have chosen the gun, adding that he suggests they opt for a semiautomatic model because it holds more rounds.”

I note that Butler is on the other side of Columbia from my route of ingress, though I will remain watchful. I suppose it is the curse of being an economist that causes me to believe that cars and guns sold together are complementary goods. . . .

28 May 2008 at 8:18 pm Leave a comment

InBev and Bud . . . In Bed?

| Randy Westgren |

Recent news about the impending bid by InBev for Anheuser-Busch was interesting subtext for my current study tour on EU agri-food supply chains. We normally schedule a stop at InBev when we spend our first week based in Leuven, Belgium, which is InBev’s HQ. This year, they told us a visit was impossible. I had assumed that it was due to shake-ups in the management following a weak first quarter, but I guess there was more in the air!

You will note that A-B shares rose on the news. The strategic fit is stunning. InBev is strong in its traditional markets (Belgium and Germany from the Interbrew parent; Brazil from the Ambev parent) as is A-B, who also has an equity strategic alliance with Tsingtao in China. Not much overlap geographically and lots of opportunities for building on existing distribution alliances. A merged firm gets serious presence in mature markets as well as the growing ones.

The other thing that the market will react to is the InBev style. They drive growth with a limited number of global brands; they pare local brands over time. And they are relentless cost-cutters. Look at the top management team for a “Belgian” brewer. It has only taken a few years for the “tradition-oriented” Belgians to be succeeded by aggressive Brazilians. (I know this smacks of ethnic profiling, but ask around. . . .) The corporate culture of InBev is palpable.

24 May 2008 at 5:36 pm 3 comments

From Rumination to Rumelt via Dobzhansky

| Randy Westgren |

I was perusing the website of the Oxford Symposium on Food and Cookery to find the references to last year’s theme: food and morality. Some interesting reads there. I noticed that the Symposium awards the Sophie D(obzhansky) Coe Prize in Food History annually. Dr. Coe was an anthropologist who wrote on pre-Columbian diets and was the daughter of Theodosius Dobzhansky, one of “the Four Horsemen” of the modern synthesis of genetics and evolution (American Philosophical Society). Dobzhansky emigrated from the University of Kiev in 1927 to Columbia University, thence to Caltech, where he and his colleagues bred squillions of generations of fruit flies and provided the empirical basis for the mathematical models of evolution of the other horsemen: Haldane, Fisher, and Wright.

In 1937, Dobzhansky had two publications. One was his landmark book, Genetics and the Origin of Species, which was the siren song that drew Ernst Mayr and other biologists to the field of evolutionary biology. Mayr has often been credited with developing the concept of the isolating mechanism as the basis for speciation. Methinks that Mayr’s long shadow at Harvard fell on Richard Rumelt, who ported the concept to strategic management without much attribution in his 1984 and 1987 pieces. Mahoney and Pandian must be credited with the most complete exposition of the concept. (more…)

24 May 2008 at 3:24 pm 1 comment

Pensées de l’Alsace

| Randy Westgren |

Sorry to carry no intellectual weight tonight. One day remains of a 14-day whirlwind tour of the EU with 24 students of business, international studies, and agriculture. No student has had as much as 4 hours of sleep any night this week and I am in awe of their willingness to throw themselves into long days of travel and company visits. I am beat. Much of my day was spent translating between English and French, between US weights and measures and EU metrics (including such oddballs as quintals and hectolitres), and between currencies. Luckily, there was beer.

In honor of Peter Klein’s francophilia, I note the following from our second day outside Strasbourg.

(1) Cousin Naomi’s book has been translated as La Stratégie de Choc and sells as a trade paperback for 25 euros. It is not flying off the shelves. Evidently, there aren’t enough intellectuals in Europe’s second capital to make a sale.

(2) Not that polemics aren’t big press here. I bought Le Monde Selon Monsanto by Marie-Monique Robin. Evidently (on first read) Monsanto is behind the dioxin poisoning in Belgium, agent orange use, hormones in beef, and lost biodiversity in Mexico. Complete crap, but worthy of two hours on national TV earlier this year. Something for Naomi Klein to aspire to.

(3) We dined at a restaurant in the beautiful village of Obernai tonight. The specialty of the house is choucroutte (sauerkraut) served in a 2 kilo pile topped with 4 kilos of sausages, meatballs, pork chops and belly slices. What sweet revenge on the sour, self-absorbed vegetarian in the group (add emoticon here)! Magnificent food!

Bonne nuit.

22 May 2008 at 4:43 pm 2 comments

An Organization and a Market

| Randy Westgren |

REO Veiling trading roomYesterday I visited a unique auction in the small town of Roeselare, in Western Flanders. A cooperative organization of vegetable and strawberry growers, REO Veiling, operates a 7 hectare receiving and shipping facility that serves their members and buyers (wholesale, supermarkets, export) from all over northern Europe. The trading floor has six electronic Dutch auction clocks that operate simultaneously, two for the Roeselare site, two for a sister site in Mechelen, and two for small lots/direct delivery. Mechelen has a matching facility and there are dozens of remote terminals for buyers. Prices are pooled across lots within a given crop and quality category; all growers receive an identical payout, even if their particular lot of a given quality drew a higher/lower bid. All transactions clear within the day. All product is turned and shipped within 18 hours of delivery. The combined exchange has a 95% market share for Belgium.

The grower/owners pay the exchange costs from their revenues. This includes third-party grading and sorting and third-party production monitoring.They own a brand name in common for the top quality shipped from the facility (which earns a significant premium) and individual growers may pack for a private label and accept the pool price from the day of delivery. The exchange will collect from the private label buyer upon shipment from the auction warehouse.

A very innovative hybrid organization. I’ll have to formalize a case study.

20 May 2008 at 4:39 pm 3 comments

Something to Abuse Graduate Students

| Randy Westgren |

I carried a few articles along with me to punctuate the tedium of consuming as many Belgian beers as one can, in tacit competition with 24 20-year olds. One of these is “The Sociology of Markets” by Neil Fligstein and Luke Dauter, from the 2007 Annual Review of Sociology (ungated version here). Those of you who throw brickbats at sociology will find this an interesting read, as Fligstein and Dauter describe the three major camps and a few lesser cabals as a “cacophony of voices” talking past each other. For others, the piece is a useful entry point for students to see the clear expositions of the development of network theory (i.e. Burt, White, and Granovetter) and institutional theory (i.e. DiMaggio and Powell, Durkheim, and Fligstein, himself). They also review the performativity school — unfortunately named and unfortunately constituted. They tie the review to March and Simon, Williamson, and some of the corporate governance literature, and discuss the roles efficiency plays in the alternative conceptions of markets.There is also some useful allusion to equilibrium and disequilibrium conceptions of markets. This is worth a read, or at least, worth making your grad students read. The entree to seminal literature that undergirds current articles in the management journals is useful.

I’d fault the review only for its insistence on trying to make population ecology appear to be a useful piece of sociology for the study of markets, though the authors admit it really isn’t true. Pop ecology should, like an overly large litter of unwanted kittens, be placed in a burlap sack with a large stone and cast into a deep river.

15 May 2008 at 1:42 pm 1 comment

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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).