Showing papers by "Stockholm School of Economics published in 1993"

Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation

Abstract: Firms are social communities that specialize in the creation and internal transfer of knowledge. The multinational corporation arises not out of the failure of markets for the buying and selling of knowledge, but out of its superior efficiency as an organizational vehicle by which to transfer this knowledge across borders. We test the claim that firms specialize in the internal transfer of tacit knowledge by empirically examining the decision to transfer the capability to manufacture new products to wholly owned subsidiaries or to other parties. The empirical results show that the less codifiable and the harder to teach is the technology, the more likely the transfer will be to wholly owned operations. This result implies that the choice of transfer mode is determined by the efficiency of the multinational corporation in transferring knowledge relative to other firms, not relative to an abstract market transaction. The notion of the firm as specializing in the transfer and recombination of knowledge is the foundation to an evolutionary theory of the multinational corporation

Is Fixed Investment the Key to Economic Growth

Abstract: This paper examines shares of fixed capital formation in GDP and rates of economic growth for more than 100 countries over successive five-year periods between 1965 and 1985 to determine the direction of causality between them. Simple regressions and multiple regressions including several standard determinants of growth, as well as a simple causality test, provide more evidence that increases in growth precede rises in rates of capital formation than that increases in capital formation precede increases in growth. High rates of fixed capital formation accompany rapid growth in per capita income, but we find no evidence that fixed investment is the only or main source of ignition for economic growth.

The contingent-valuation method.

Abstract: CV method was used to measure the value of supplemental health care in Israel, i.e., the willingness to pay for consulting a specialist of the patient’s choice and the willingness to pay for choosing a surgeon and reduce the waiting time for surgery. A sample of about 1,000 families in the metropolitan area of Haifa were included in the study, and interviews at home visits were carried out to elicit the willingness-to-pay responses. The respondents were asked whether they would use each of the services at four different prices. To estimate the total willingness to pay in the population it was assumed that the maximum willingness to pay was equal to the highest price where the respondent would still use the service. The validity of the willingness-to-pay responses was analysed in a regression analysis. A polychotomous logit model was used that estimates the probabilities of the five possible responses to the willingness-to-pay question (i.e., the five different ranges for willingness to pay implied by the four prices). The regression results were roughly in accordance with the predictions of the authors and they conclude that the willingness-to-pay estimates derived in the study reasonably reveal consumer preferences and that the studied supplemental health care services seem to be beneficial from a societal viewpoint (i.e., that benefits exceed costs). Although the study by Golan and Shechter is interesting, and was based on a well-executed survey, some issues can be raised in connection with it. A limitation

Ideas and actions: Justification and hypocrisy as alternatives to control

Abstract: Popular hierarchical models of organizations and societies contain two assumptions about the relation between the ideas of constituencies and leaders on the one hand and organizational, and societal actions on the other: that ideas and actions are consistent, and that ideas control actions. In this article some practical difficulties in achieving consistency and control are discussed. Consistency is difficult to achieve when what can be done cannot be said and vice versa, and control is difficult to combine with consistency when ideas change more rapidly than action. The difficulty of achieving consistency and control can be partially overcome by combining ideas and actions in two other ways. One combination involves justification, and the other hypocrisy.

Cost-Benefit Analysis of Environmental Change

Abstract: This book is an advanced text in applied welfare economics and its application to environmental economics. The author goes far beyond the existing literature on the valuation of environmental benefits, deriving sets of cost-benefit rules which can be used to assess private and public sector projects which affect the environment. He explains how valuation studies can be augmented so as to yield the information necessary for decision-making, showing how externalities, taxes, unemployment, risk, irreversibilities, flow and stock pollutants, discounting, and intergenerational distribution should be treated in social cost-benefit analysis. Drawing on a number of empirical illustrations, this book will be of interest not only to those taking advanced courses in environmental economics, welfare economics, and public economics, but also as a reference for those undertaking project evaluations in government and business.

The internationalization process: Impact of competition and experience

Abstract: The process, or evolution, through which multinational firms have reached their present international position is often referred to as “the internationalization process of the firm.” The most widely accepted theory of this phenomenon explains this slow, and sequential process in terms of organizations’ growth and learning. It is every now and then argued that this approach has lost some of its explanatory value. The purpose of this article is to discuss the validity of this model against the backdrop of assumptions in two key dimensions, namely, firms’ experience of international business and the industry's degree of internationalization.

Comparing continuous and discrete contingent valuation questions

Abstract: This paper explores two commonly used methods to elicit an individual's willingness to pay (WTP) for a public good in contingent valuation studies. Currently, the most preferred method is the “take-it-or-leave” valuation question, or discrete valuation question (DVQ), where the respondent accepts or rejects a suggested cost for the good. The traditional method, the continuous valuation question (CVQ), simply asks an individual to state his WTP for the suggested change in the provision of a public good like cleaner air. We introduce a simple way to compare the results from these two methods. We also test the anchoring behavior suggested in the psychological literature on choice under uncertainty. The results do not support the anchoring hypothesis, but suggest the hypothesis that people perceive the two tested valuation questions differently.

Economic evaluation of pharmaceuticals: a European perspective.

Abstract: In recent years there has been a large increase in the number of economic evaluations of pharmaceuticals. Many of these studies have been commissioned by individual pharmaceutical companies, in support of new or existing products. In 2 countries, Australia and Canada (in the province of Ontario), draft guidelines issued by the government have outlined the requirements for economic evaluations to be submitted in support of requests for reimbursement (government subsidy) of particular products. One consequence of the guidelines is that they clarify what is required, and in specifying the procedure for submission of dossiers, identify a clear audience for the economic evaluation. In contrast, the situation in Europe is diverse. A wide range of healthcare systems exist, including national health services and more liberal systems, involving a wide range of insurers and providers. European countries also differ widely in their approach to the pricing and reimbursement of pharmaceuticals. Because of this diversity, the nature, conduct and impact of economic evaluation in Europe is not clear. It is therefore difficult for pharmaceutical companies to develop appropriate strategies for economic evaluation and for analysts to decide on appropriate study methodology. This article reviews the nature of any official guidance or requirements for economic evaluation, the potential for use of economic evaluation, the range of studies carried out and the identifiable impacts. There is currently no official guidance in any country, although some countries are considering issuing guidelines. In some countries there is official encouragement to pharmaceutical companies to undertake studies, and where economic data have been presented they have been considered by the relevant committees. The potential uses of economic evaluation vary widely from country to country. These can be classified in terms of a potential role in undertaking national price negotiations, deciding on reimbursement status or copayment level, deciding on inclusion in local formularies or in treatment guidelines, or in improving prescribing decisions. Approximately 80 economic evaluations of pharmaceutical products have been conducted to date in Europe, covering a wide range of clinical areas. There are relatively few examples of identifiable effects of such studies. In part this is because it is often difficult to assess the part played by various items of data. Nevertheless, the overriding conclusion is that economic evaluation of medicines is likely to be more relevant in Europe in the future. The problem for the pharmaceutical industry is in determining when and how.

Is Fixed Investment the Key to Economic Growth

Abstract: This paper examines shares of fixed capital formation in GOP and rates of economic growth for more than 100 countries over successive 5-year periods between 1965 and 1985 to determine the direction of causality between them. Simple regressions and multiple regressions including several standard determinants of growth, as well as a simple causality test, provide more evidence that increases in growth precede rises in rates of capital formation than that increases in capital formation precede increases in growth. High rates of fixed capital formation accompany rapid growth in per capita income, but we find no evidence that fixed investment is the only or main source of ignition for economic growth.

Managing cooperative research and development: Partner selection and contract design

Abstract: This paper explores the influence of partner selection and the design of contracts and agreements on the chances for a collaborative R&D venture to 'succeed'. It is based on questionnaire data regarding 49 such ventures undertaken by companies based in four Nordic countries. The age distribution of the sample is taken into account through use of statistical event history analysis, testing hypotheses regarding the determinants of the hazard rate. The results show that prior contacts with prospective partners improve the chances that a cooperation will succeed. Such contacts help prevent difficulties due to differences in corporate culture, inadequate technical capabilities, incongruous strategic intentions, etc. The analysis also suggests that contracts and agreements should avoid detailed specifications of the procedures to be followed during implementation. Such stipulations create problems by reducing the flexibility required in inherently uncertain R&D collaborations. Granting relative resource self-sufficiency and managerial autonomy to the venture organisation improves its chances of success.

Russian Currency and Finance: A Currency Board Approach to Reform

Abstract: As the new Russian state struggles with the transition to a market economy, the need for radical monetary reform becomes increasingly urgent. The choice of reform is crucial, for it will largely determine Russia's future economic performance. In order to break free of the lingering effects of Soviet central planning, the new Russian state needs a stable, convertible currency. Steve H. Hanke, Lars Jonung and Kurt Schuler propose that Russia establishes a currency board which would issue a Russian currency fully convertible with international currency, backed 100 per cent by international bonds. The international community would aid in establishing the currency board by providing the initial reserves. Early supplies of this new Russian currency would be distributed free to Russian citizens. The authors give detailed explanations of how the currency board could be established and how it would work.

Forecasting with generalized bayesian vector auto regressions

Abstract: The effects of using different distributions to parameterize the prior beliefs in a Bayesian analysis of vector autoregressions are studied. The well-known Minnesota prior of Litterman as well as four less restrictive distributions are considered. Two of these prior distributions are new to vector autoregressive models. When the forecasting performance of the different parameterizations of the prior beliefs are compared it is found that the prior distributions that allow for dependencies between the equations of the VAR give rise to better forecasts.

The cost-effectiveness of treating hypertension in elderly people-an analysis of the Swedish Trial in Old Patients with Hypertension (STOP Hypertension)

Abstract: . Objectives. The aim of this study was to estimate the cost-effectiveness of antihypertensive treatment in elderly people based on the results of the Swedish Trial in Old Patients with Hypertension (STOP Hypertension). Design. The STOP Hypertension study was a randomized trial comparing active antihypertensive treatment with a placebo. The risk of stroke, cardiovascular disease and total mortality was significantly reduced in the actively treated group compared to placebo. Setting. One hundred and sixteen primary health care centres in Sweden. Subjects. A total of 1627 hypertensive patients aged 70–84. No patient was lost to follow-up. Interventions. Antihypertensive treatment with beta blockers and diuretics for a mean follow-up of 25 months. Main outcome measure. The cost-effectiveness ratio estimated as the net cost (the treatment cost minus saved costs of reduced cardiovascular morbidity) divided by the number of life-years gained (the increase in life expectancy from treatment). Results. The cost per life-year gained was estimated as SEK 5000 for men and SEK 15000 for women ($1 = SEK6; £1 = SEK10). The cost per life-year gained did not exceed SEK100000 in any of the sensitivity analyses. Conclusions. It is concluded that treatment of elderly hypertensive patients with beta blockers and/or diuretics is cost-effective according to the results of the STOP Hypertension study.

Policies to Encourage Inflows of Technology Through Foreign Multinationals

Abstract: Do host countries aiming to maximize the inflows of technology through foreign multinationals have any policy alternatives to formal technology transfer requirements and performance requirements? To answer this question, the present paper examines some possible determinants of the technology imports of U.S. majority-owned foreign affiliates in 33 host countries. The results show that the affiliates' technology imports increase with the host countries' domestic investment levels and education levels, but that various performance requirements are negatively related to technology transfer. This suggests that policies promoting local investment, competition, and education may sometimes be alternatives to direct controls and requirements.

Organizational Innovations in a Long-Term Perspective: Legitimacy and Souls-of-Fire as Critical Factors of Change and Viability

Abstract: What may be learned from organizational innovations in a long-term perspective? This article is based on eight studies over a period of 10-20 years. An insurance department is used as an illustrative and representative case. The department manager was a successful soul-of-fire (i.e., champion) during the change process. The continuous defense of the organization's values and culture distanced him from the rest of the company. Legitimacy (especially top management acceptance) is something that has to be continuously regenerated. The soul-of-fire faces two major dilemmas: first, the learning dilemma, i.e., the need to balance the efforts for internal learning and development in the unit with diffusion activities and the creation of external legitimacy; second, the change dilemma, i.e., the need to balance the direction and control of change with support for employee autonomy and influence.

A comparative analysis of the impact of accounting differences on profits and return on equity

Abstract: The purpose of this paper is to make a quantitative comparative analysis of differences between Swedish accounting practice and US GAAP. The empirical data consisted of eighty-four US GAAP reconciliations of income statements and shareholders' equity, disclosed in Swedish annual reports during 1981–90. Prior qualitative research has suggested that Swedish accounting practice is conservative compared with that in the USA. However, the empirical analysis of profits and return on equity provided little support for this hypothesis. Instead, there were indications of a less conservative accounting treatment in the Swedish accounts compared with US GAAP. The most material differences between Swedish profits and those calculated using US GAAP were caused by differences in treatment of foreign currency translation, income taxes, sale and leaseback transactions and business combinations.

Willingness to pay for lipid lowering: a health production function approach

Abstract: This Paper reports the results of an experiment of measuring willingness to pay (WTP) for lipid lowering. WTP is derived from a theoretical model of health risk reductions, using a health production function approach. A survey of about 700 persons randomized into a lipid lowering trial in Sweden is used to estimate WTP. The willingness to give up time (WTGT) to take part in a lipid lowering programme is also measured in the survey, to assess its relationship to WTP. The response rates on the WTP and WTGT qusetions are 94% and 96%, respectively, and the patients are on average perpared to pay about Skr 350 per month or devote about 5 h of leisure time per week to get normal lipid levels. The Correlation of WTP and WTGT is 0.45 and highly significant. The results of regression of WTP and WTGT are in accordance with the theoretical predictions with a higher valuation for a greater perceived difference in health status with and without treatment. The income elasticity is also positive as expected.

Organizing Frameworks in Emerging Organizations: A Cognitive Approach to the Analysis of Change

Abstract: This article presents a study designed to relate the way decision makers think about organizing to emerging changes in organizations. The complexity and content of the organizing frameworks of key actors in three cases of introduction of computer aided design were analyzed. This resulted in a typology describing actors as analysts, facilitators, or organizers. A correspondence was found between the way these actors thought about organization and the emerging organizations observed in three cases. The study is used to develop a cognitive actor's approach to organizational change.

Public reaction to radiation : fear, anxiety, or phobia ?

Abstract: Public fear reactions to ionizing radiation are discussed in a social psychological context. The common use of the terms fear, anxiety, panic, and phobia is related to their clinical meanings, and the authors stress the importance of caution when using certain psychiatric terms for interpreting public reactions to radiation. Differences related to existing knowledge and belief structures, trust, and preferences, create obstacles to effective communication; however, the study of such differences also offers explanations to different reactions and different viewpoints. More information and communication on radiation, clear behavioral guidelines in situations of increased radiation levels, and respect for citizens' concerns about radiation protection would counterbalance lay people's fears and feelings of vulnerability. Such measures may enhance familiarity with radiation, increase perceived personal control in anxiety-creating situations, and develop trust in authorities and their expertise.

Economic evaluation of health care technologies.

Abstract: Despite two decades of developments, economic evaluation of medical therapies is still in its infancy. The first decade was mainly a search for a relevant methodology, a period when it was important to establish that new medical technologies carried not only costs but also economic benefits. The costs-of-illness methodology was the most convenient to use and served well to show that new medical technology produced economic benefits. It was obvious, however, that the method had its limitations, particularly in health care systems devoting more and more resources to the elderly, not an economically active part of the population. For other people also, health per se is more important than health as a human capital that improves work capacity. The studies undertaken in the 1970s were mainly based on epidemiological data and undertaken at arms' length from clinical activities in hospitals and in general practice. At the beginning of the 1980s, it became clear that in order to become more relevant, economic evaluations have to be linked much more closely to the clinical evaluation of new technologies. Clinicians and economists have to work together to produce good and relevant studies. The beginning of the 1980s saw such an increase in collaboration between economists and clinicians, and some important studies were undertaken. These studies were mainly concerned with calculating costs for different clinical actions and determining cost-effectiveness using, for example, number of life-years gained. During the last 5 years, interest has been focused on the problems and opportunities of including quality of life and utility estimates in economic evaluations.(ABSTRACT TRUNCATED AT 250 WORDS)