Posts filed under ‘– Klein –’
What Do We Really Know About Organizations?
| Peter Klein |
Recently a prominent economist, having discovered O&M for the first time, emailed me: “So what have we learned about how organizations really, really work in the past decade?”
I was in an airport when I received the query, and didn’t have time to prepare a thoughtful, well-crafted response. Rather than ignore the question, however, I replied with a few off-the-cuff remarks. After reading my remarks, I’d like readers to respond with their own brief thoughts. I.e., if you had to answer this question, quickly, in 250 words or less, what would you have said?
Here’s what I wrote (with a few small touch-ups): (more…)
Essays on Schumpeterian Economics
| Peter Klein |
Mark Frank reviews Arnold Heertje’s Schumpeter on the Economics of Innovation and the Development of Capitalism for EH.Net. The book collects eleven of Heertje’s essays on Schumpeter, offering “a solid introduction into the insights of Schumpeter’s vision, as well as an interesting first-hand account on the evolution of Schumpeter’s influence within economics over the past several decades.”
PS: One of the best biographies you’ve never heard of is Robert Loring Allen’s Opening Doors: the Life and Work of Joseph Schumpeter (Transaction Publishers, 1991).
Take That, Berle and Means
| Peter Klein |
When the Board and senior management of media company VNU agreed to a buyout by a private-equity group headed by Kohlberg Kravis Roberts, shareholders did something usual: they rebelled.
The rebels — including some of the world’s largest mutual funds — proposed their own business plan and new executives, and tried to force the chairman to quit. “We took the initiative to defend long-term shareholders’ interests,” says the group’s leader, Eric Knight, head of New York-based Knight Vinke Asset Management.
After a months-long battle, shareholders eventually won a modest increase of nearly $250 million from the private-equity firms — or 2.5% more than the original deal. But that improvement was less significant than the fact that shareholders had rebelled, proposing a do-it-yourself restructuring plan that competed with a big private-equity offer accepted by management and the board.
So reports the W$J in its last Friday’s issue. The story is pitched as indicating a more-general backlash against LBOs. Warren Buffett is quoted as warning his shareholders against “deal flippers.” However, there is plenty of evidence that LBOs, on average, generate long-term gains, not only for shareholders but also for the economy as a whole. (Look for a major contribution to this literature from my PhD student John Chapman.) And isn’t it ironic to find stockholders taking an active stand against private-equity investors, given Michael Jensen’s warning of the “Eclipse of the Public Corporation”? Maybe the public corporation has life in it still.
Oskar Morgenstern on Economic Data
| Peter Klein |
Philipp Bagus rehabilitates Oskar Morgenstern’s great, and underappreciated, book On the Accuracy of Economic Observations, first published in 1950. Morgenstern’s target was national income statistics and macro-econometric forecasting, but many of the same issues apply to business forecasting as well.
Kauffman Entrepreneurship Research Portal
| Peter Klein |
The Kauffman Foundation’s Entrepreneurship Research Portal summarizes articles and working papers, events, grant opportunities, and other useful information related to entrepreneurship research. A valuable resource for those doing work in this area.
Think Globally, Act Locally: Shop at Wal-Mart
| Peter Klein |
Michael Strong, who heads the FLOW project, explains:
Between 1990 and 2002 more than 174 million people escaped poverty in China, about 1.2 million per month. With an estimated $23 billion in Chinese exports in 2005 (out of a total of $713 billion in manufacturing exports), Wal-Mart might well be single-handedly responsible for bringing about 38,000 people out of poverty in China each month, about 460,000 per year.
Read the whole thing here. And get some of these cool wristbands from the Adam Smith Institute: “I buy goods from poorer countries.”
Gordon on Private Communities
| Peter Klein |
My favorite urban economist, USC’s Peter Gordon, on private communities:
Robert Nelson has documented the current migration into private communities which now house 55-million Americans. Governance is by homeowners associations (HOAs) and markets are vetting the trade-offs of property rights protections vs rights losses that most property owners look for. The fly-in-the-ointment is an oldie: the problems of democracy are well documented and are real at all levels of government, whether it be federal, state, local or private.
This is why Spencer MacCallum has predicted that HOAs are just a waystation and better forms of governance will replace them. He suggests the hotel as his model, where governance is by contract rather than by democracy.
A Muddle on Vertical Integration
| Peter Klein |
Slate’s Daniel Gross offers a hopeless muddle on vertical integration in his latest Moneybox column. Citing several examples of forwards integration mentioned in a recent WSJ article, Gross proclaims “the return of one of the great industrial developments of the late 19th century: vertical integration.” But the reasoning is a mess.
First, there’s no systematic evidence that vertical integration ever went away. We have plenty of anecdotal information about outsourcing, increased use of networks and alliances, “refocusing,” and the like, but little systematic evidence for a comprehensive, economy-wide trend toward vertical dis-integration. (more…)
Bell Labs’s New Mandate: Make Money
| Peter Klein |
AT&T’s legendary Bell Labs — home of the transistor, the laser, UNIX, cellular telephony, and other breakthroughs — is being turned into a profit center.
Each [project] is expected to make back six times what it spends on research. Those with the biggest financial potential get the most funding. Researchers often condense their work into eight-minute PowerPoint presentations. [New head Jeong] Kim also seeks more government research grants and is aiming to speed the transformation of technology into products by seeking corporate partners and venture capital.
In earlier days, Bell Labs’ scientists might have rejected Mr. Kim’s commercial approach to science. Not now.
So reports the W$J on today’s front page. I suspect that advocates of increased public funding for R&D will take this as further evidence of the market’s inability to supply public goods. Terence Kealey demurs.
Update: The University of Illinois, recognizing the growing importance of for-profit universities such as the University of Phoenix, will establish a for-profit subsidiary. (Via Richard Vedder)
Firms, Strategies, and Economic Change
| Peter Klein |
My review of Tony Yu’s Firms, Strategies, and Economic Change: Explorations in Austrian Economics (Edward Elgar, 2005), written for the Quarterly Journal of Austrian Economics, is available for preview here.
All Firms Are Not Alike
| Peter Klein |
This may come as a shock to regulators, but all firms are not alike. No one-size-fits-all regulatory policy can possibly be effective. Yet, SOX and similar governance codes impose a host of blanket requirements (audit committees, majority of outside directors, etc.) on all companies, large and small, focused and diversified, profitable and unprofitable, and so on. Economically literate regulators must be schooled in industrial-organization models in which the “representative firm” is identical to every other firm.
This new paper by LSE economists Sridhar Arcot and Valentina Giulia Bruno examines heterogeneity among governance choices at UK companies and finds that the best-governed firms are not always those that conform to the “best practices” imposed by regulators.
A [governance] measure which accounts for different choices by companies of corporate governance is significantly associated with performance as against measures based on a tick-box approach, which are not. We find that companies departing from best practice for valid reasons perform exceptionally well and out-perform the fully compliant ones. In contrast, mere compliance with the provisions of the Code does not necessarily result in better performance.
(Via Professor Bainbridge)
Update: Dale Oesterle argues that uniform listing requirements for IPOs are depressing the US IPO market, suggesting that small firms should be allowed to make their IPOS over the Internet, as is allowed in the UK.
Management Styles: Bob Knight vs. Coach K
| Peter Klein |
Two of the most successful US college basketball coaches, Bob Knight and Mike Krzyzewski (Coach K), are as well known for their management styles as for their on-court success. Knight (the legendary Indiana University coach now at Texas Tech.) is the in-your-face, marine-style drill sergeant who tears his players down only to build them back up. Duke’s Krzyzewski (a former Knight assistant) prefers to nurture and encourage his players, trying to establish a caring, family-style atmosphere.
Upon pondering these facts, what’s a good management scholar to do? Why, make a leadership case out of them, of course. (more…)
Nicolai’s Secret Life
| Peter Klein |
My co-blogger claims to be a hard-nosed, logical, anti-postmodern realist, but guess what? He has secretly authored a book — in German, no less! — on “Women Who Changed the World,” profiles of feminist intellectuals and activists such as Virginia Woolf, Lou Andreas-Salomé, Bertha von Suttner, and Ellen Key. Here’s the proof. Perhaps he thought by writing the book in German, as Frauen, die die Welt verändern, we wouldn’t find out. Nice try, Nicolai!
Oh, wait, never mind, this is actually an Amazon.co.uk database error. The real author is Katharina Kaminski. (Or is that a pseudonym?)
Roundup of Interesting Links
| Peter Klein |
Besides the links in the right-hand-side column below, O&M readers may find the following of interest:
- Work Matters by Bob Sutton, Co-Director of Stanford University’s Center for Work, Technology, and Organization
- Marketing Profs Daily Fix Blog by, you guessed it, a group of marketing professors
- Statistical Modeling, Causal Inference, and Social Science, for the research-methods geek in all of us
- Businesspundit, a general-interest site
Academic Insults: Gordon Tullock Edition
| Peter Klein |
Nicolai recently started a thread on academic insults. Alex Tabarrok has created one exclusively for insults delivered by Gordon Tullock, a legendary put-down artist. To wit:
“Gordon,” I asked, “do you think we should ban child labor?” “No, keep working.”
The other day Gordon asked me to read one of his papers and I pointed out a few typos. “Excellent,” he said, “this will surely be your greatest contribution to economics.”
Gordon is prone to pressing people with difficult questions. One of my colleagues responded, “Gordon, I’m not that good at thinking on my feet.” Without missing a beat Gordon pulled up a chair and said “well sit down and we’ll see how you do then.”
Bob Lawson adds this one:
After going through the model and somewhat apologetically presenting my results which didn’t show what the model predicted. Gordon says to me, “That’s ok, Bob, a lot of other people haven’t found that result either.”
I Know Just What You Mean
| Peter Klein |
Headline of the day, from newsvine.com:
Redmond: FOSS makes our brain hurt
(Actually FOSS here means Free Open-Source Software and the story’s about Microsoft. But it could have just as easily been about Foss.)
Does France Have a Silicon Valley?
| Peter Klein |
Jeremy Fain says yes, in southwest Paris. Not quite Silicon Valley, perhaps, but an important innovation cluster nonetheless.
I find this sort of discussion interesting, but am troubled by the “How-can-we-create-another-Silicon-Valley” approach so common in the clustering literature. The assumption is that technology clusters are created, or at least encouraged, by government policy, and that such policies that are in principle replicable. By contrast, if clusters emerge from the bottom up, there is little that policymakers can do, besides removing obstacles to entrepreneurial activity. (See Desrochers and Sautet, “Cluster-Based Economic Strategy, Facilitation Policy and the Market Process.”)
Update: Austan Goolsbee says investing in universities is not likely to produce the next Silicon Valley.
NYU Journal of Law and Liberty
| Peter Klein |
The NYU Journal of Law and Liberty is a new journal focusing on classical liberal legal scholarship. Volume 1, Number 1 revisits Lochner v. New York, the landmark 1905 case that defended the freedom of contract and became, to its critics, a hated symbol of heartless, dog-eat-dog capitalism. (During the New Deal the word “Lochner” meant about what “Enron” means today.) Volume 1, Number 2 contains an interesting piece by Mario Rizzo, “The Problem of Moral Dirigisme: A New Argument Against Moralistic Legislation,” which opens thusly:
This Article applies a theory of rational choice to moral decision making. In this theory, agents act primarily on local and personal knowledge to instantiate moral principles, virtues, and moral goods. The State may seek to prevent them from acting as they independently determine by prescribing or proscribing certain conduct by formal legal means. If its purpose is to ensure that people act morally or become better persons, we call this “moral dirigisme.” Our thesis is that the need to use decentralized knowledge to determine the moral status of an act makes the task of the moral dirigiste well-nigh impossible.
Joel Klein, Monopolist
| Peter Klein |
Joel Klein does not have a well-developed sense of irony. As Clinton Administration antitrust czar, he became a household name with his relentless pursuit of Microsoft, a $40 billion company with 70,000 employees in 100 countries. Today Klein heads the New York City public school system, a conglomeration of 1,450 schools with 136,000 employees, 1.1 million students, and a $15 billion operating budget. Oh, did I mention that it’s a monopoly? Not a private company with a large market share, but an actual monopoly, an organization protected from competition by an exclusive government franchise.
Klein was Distinguished Executive Speaker at tonight’s Academy of Management Convocation, which I attended. The speech was disappointing — not because of Klein’s political philosophy, which I don’t share — but because it was a shallow, fluffy talk about “leadership,” “accountability,” “change agents,” and the like. (I did enjoy his voice, however, a smoother version of Jimmy Durante’s.) (more…)
Thoughts on Stakeholder Theory
| Peter Klein |
Yesterday I attended the Academy of Management session “Stakeholders: The Keys to Effective Strategy and Performance Measurement.” Panelists included Joe Mahoney, Russ Coff, Christos Pitelis, Tom Donaldson, Amy Hillman, Sybille Sachs, and Kathryn Pavolovich. I’m pretty much an unreconstructed Friedmanite on this issue so I went to raise my consciousness.
What I learned was interesting, but I still have several questions about stakeholder theory, at least in its normative version. (more…)
Organizations and Markets 
Recent Comments