|Up a level|
The theoretical distinction between information efficiency and fundamental efficiency suggests an important question for accounting research, which is whether (and to what extent) there exists an equilibrium mechanism whereby fund managers investment decisions can be fully informed. This question is approached in this paper by means of developing a grounded theory of the market for information. The theory is derived from a (mostly interview-based) empirical analysis of the economic incentives of finance directors, analysts and fund managers with respect to stock market information flows. The evidence suggests a two-part theory. First, it is argued that ‘raw’ data flowing directly from companies is of considerably greater importance to fund managers than ‘processed’ data generated by analysts. Second, analysts are nevertheless argued to play an important role in the market for information, as both mechanisms of information efficiency and as providers of benchmarks for consensus valuation. This theory implies that the research literature has paid insufficient attention to the role of accounting information in direct communication between companies and fund managers and, related to this, that the role of analysts in share price determination has been overstated and only superficially understood.
In this paper, I study the early development of two organizational forms: credit unions and Morris Plan banks which, in the early twentieth century became socially acceptable money-lenders. Three forms of legitimacycognitive, moral, and pragmaticare important in understanding their evolution and social integration. Cognitive legitimacy corresponds to what is usually considered by organizational ecologists to be legitimacy as 'taken-for-grantedness'. Organizations have moral legitimacy in so far as they have the moral approval of most members of society. Pragmatic legitimacy 'rests on the self-interested calculations of an organization's most immediate audiences' (Suchman 1995). The analysis goes beyond previous work in two ways. First, new mechanisms of legitimation are introduced into models of organizational founding and growth. Second, organizations are assumed to be able to deliberately influence their legitimacy by their actions. Empirical tests combine quantitative analyses of founding and growth rates with a qualitative analysis of historical material. In addition to density-dependent processes of legitimation, the organizations are found to act in a social-movement-like manner, thereby enhancing their moral legitimacy. This increases their founding and growth rates, and gives them a competitive advantage over earlier forms of money-lending that lacked moral legitimacy. I also find evidence that pragmatic legitimacy is spread via social networks.
Deregulation has stimulated much economic and political interest. This paper develops a framework for understanding the effects of deregulation from an ecological perspective and reports empirical studies of financial institutions (banks, thrifts and mutual funds) at two levels of analysis: the system and the population. These both show that deregulation bad a dramatic impact on the level of competitive intensity within the financial industry. The main contributions of this paper are the application of a general sociological theory of organizational dynamics to understanding deregulation and the development of a general approach to modelling which could lead to new ways to evaluate the organizational consequences of major environmental changes.
A case study of clinical practice in adult asthma is presented. The case is part of a larger project, funded by the North Thames NHS Executive Research and Development Programme, that sought to explore the part played by clinicians in the implementation of research and development into practice in two areas: adult asthma and glue ear in children. The first case of glue ear in children was reported in a previous issue of this journal (Quality in Health Care 1999;8:99-107). Background information from secondary sources on the condition, treatment, and organisation and location of care is followed by an account of the results of semistructured interviews with 159 clinicians. The findings are reported in two sections: clinical management and the organisation of care, and clinicians' accounts of what, why, and how they introduce changes into their practice. The way clinicians talk about their learning, their expressed views on acceptable practice, and their willingness to change were shown to be informed by construction of legitimate and sufficient evidence, respected colleagues, and accumulated individual experience. There was little open acknowledgment of the influence of organisational factors in influencing practice. To investigate whether relationships between task performance and organisational arrangements found in other sectors apply to UK health, more robust measures by which performance can be evaluated are needed.
This paper uses primary data collected from the Central Bank reports to examine the influence of financial sector policies on the average productivity of capital in five South East Asian economies. The data include measures of `repressionist' policies encompassing interest rate controls, directed credit programmes and reserve and liquidity requirements. We use time series techniques to examine whether these policies have a statistically significant influence on the average productivity of capital, conditioning on variables suggested by economic theory. These policies are found to have a significant negative effect on productivity in most cases with the important exception of South Korea, for which we find significant positive effects.
Investigates the conditions under which the use of information technology (IT) produces performance advantages. Advantages of IT in resource- based conceptual synthesis; Lack of correlation between ITs in empirical studies taking place in the retail industry; Combination of IT with intangible complementary resources including flexible culture.
The Report of the Technical Committee on Business Taxation is the first comprehensive study of business taxation in Canada in many years and is arguably of a scope that compares favourably with the business tax volume of the Royal Commission on Taxation. In May 1998, at the meetings of the Canadian Public Economics Study Group, the report was discussed by a panel consisting of Michael P. Devereux, Roger Gordon, and John Helliwell. This article is an edited version of that discussion. The panelists considered a wide range of theoretical and practical issues concerning business taxation, matching the scope of the report itself, and their comments reflect both criticism of and praise for the report’s analyses and recommendations. Following the panelists’ presentations, there is a short question-and-answer section and then a concluding comment by Jack Mintz, chair of the committee.
This paper investigates a set of strategic decisions facing US firms. We develop a simple theoretical framework in which firms choose whether or not to serve a foreign market, and if so whether by exporting, or by becoming a multinational. The model is applied to a sample of US firms choosing whether and how to supply the European market. We take Europe to be a single market and allow the firms to choose to produce in one of the UK, France and Germany. In the empirical application we find that the average effective tax rate plays an important role in the choice of location. Our central estimate is that, conditional on the firm having decided to locate production in Europe, a one percentage point increase in the average effective tax rate in the UK would lead to a one percentage point reduction in the probability of locating in the UK. The equivalent figure for Germany is around three-quarters of a percentage point, and for France around one-third of a percentage point. This suggests that tax is a quantitatively significant factor in location decisions. However, in general, the evidence suggests that taxation is not a significant factor in the decision of whether to locate in Europe - either as opposed to exporting to Europe or not serving the European market at all. Other factors predicted by the theory also play a significant role. Most striking are the agglomeration benefits of being located close to other firms within the industry which undertake R&D. These agglomeration benefits affect both the decision as to whether to locate abroad and, conditional on that decision, where to locate. Also, firms with high plant level fixed costs are less likely to produce abroad.
This article describes the emerging changes in psychological contracts being experienced by British middle managers in relation to their employing organizations, the middle managers' negative reactions to these changes and organizational responses to such negativity. By analysing case studies of 16 organizations, a classification of changes to five elements of the psychological contract are identified: knowledge, motivation, goals and means, role behaviour and ethics. By analysing the semi-structured interviews of 37 middle managers, selected from a much larger database for their obvious negative reactions, a continuum of such reactions is considered: uncertainty, contrariness and double-bind. This consideration leads, then, to suggestions for further research.
In this paper, we examine the link between talk and action in interorganizational collaboration. We integrate research on the micro-dynamics of conversations with narrative theory to focus on both conversational activity – the who, where, and when of conversations – and the narratives and stories produced – the what of conversations. We argue that the activity and content of conversations discursively produce identities, skills and emotions which, in turn, enable and constrain action. We then apply this model to a case study of interorganizational collaboration.
In this paper, we examine two definitions of trust commonly found in the management literature; one that defines trust as predictability, and one that emphasizes the role of goodwill. We suggest that neither approach is satisfactory since both ignore issues of asymmetrical power and conflicting interests, and provide little insight into how trust can be created. We propose a third definition, one that combines expectations and goodwill, and conceptualizes trust as a process of sense-making that rests on shared meaning and the involvement of all participants in a communication process. From this conceptualization, we are able to distinguish between trust-based and power-based interorganizational relationships and to develop a model that identifies both forms and façades of trust. We provide examples to illustrate the implications of this approach for research and practice.
Although most companies confine their operations organizations to restricted, tactical roles, in some of the most successful firms operations has served as the foundation for-indeed, the driver behind-successful strategic attacks and defenses. This is most clearly seen in cases where small companies-although lacking the advantages of size, marker position, and proprietary technology-take on big companies and in a relatively short time push their way to industry dominance. In such cases, the key to success often is an operations-based advantage. The peculiar nature of this advantage provides insight into the reasons many former industry leaders did not react more promptly and vigorously to such attacks, and why others, in contrast, were able to defend themselves successfully.
Venture capitalists often hold extensive control rights over entrepreneurial companies, including the right to fire entrepreneurs. This article examines why, and under what circumstances, entrepreneurs would voluntarily relinquish control. Control rights protect the venture capitalists from hold-up by the entrepreneurs. This provides the correct incentives for the venture capitalists to search for a superior management team. Wealth-constrained entrepreneurs may give up control even if the change in management imposes a greater loss of private benefit to them than a monetary gain to the company. The model also explains why entrepreneurs accept vesting of their stock and low severance.
In this note I develop some further thoughts that build on my paper entitled a "A Theory of Corporate Venturing." In this paper I develop a formal economic model of why corporations may face difficulties when making venture capital investments. In thinking broadly about the reasons why corporations may have difficulties when investing in entrepreneurial companies, I see three main sets of issues. The first set of reasons revolves around issues of intellectual property rights. The second set relates to strategic conflicts of interest. The third set concerns issues of organizational design and conflict within the corporation. The theory paper deals directly with the second set of issues, the conflicts of interest that result from the strategic objectives of the corporation. In this note I therefore want to focus on the first and third area of problems. Many would argue that entrepreneurs don't want corporate investors because they do not want their intellectual property stolen. I would actually argue that, while intellectual property is important, these problems should not be overstated.
The performance and effectiveness of financial institutions are important considerations for policy-makers concerned about economic growth. Growth, after all, is heavily dependent on investment, and a significant fraction of all investment flows through financial institutions. Furthermore, incidences of financial instability in some countries have shown that poor financial policies can have serious consequences. For example, when the Southern Cone countries liberalized financial markets before achieving macroeconomic stability and low inflation, banks in those countries performed disastrously. In the United States the partial deregulation of the savings and loans (S&L) industry invited a great deal of gambling and looting of depositors ' funds, ultimately costing taxpayers hundreds of billions of dollars. Partly because the financial sector of the east Asian high-growth economies grew substantially, financial development has received special attention recently in several developing countries. King and Levine (1993a, 1993b) demonstrated in a broad cross-country study that financial deepening had strong explanatory power for differential growth performance. If financial stability and financial deepening are worthy goals, what are the mechanisms that policy-makers can employ to achieve such goals?
This volume encompasses the latest thinking on international business strategy and organization. It spans topics ranging from the influence of national culture on international business strategies, to the reorganization of corporate strategies in the context of the European single market. It represents an international coverage of the leading edge research findings in this area.
The authors propose and demonstrate a discourse model of the dynamic relationships between consumption practices and consumption texts. They use discourse theory to show how product meanings are created, negotiated, and altered. Then they demonstrate an interpretive method based on the model, using data drawn from television commercials and television programs. They also document the influence of historical discourse on contemporary product meaning.
This article looks at attempts made by a case study organization, Surrey County Council, to evaluate and restructure the employment relationship in the context of a range of financial, managerial and political pressures for change. The notion of the psychological contract is used to conduct this evaluation and restructuring. A survey eliciting the views of some 6,000 Surrey employees highlights major gaps in terms of what employees expect and receive from their employer as well as discrepencies in what employees feel they owe the employer and actually give. Consideration is given to how the authority has sought to address these concerns through a new deal with employees. The article provides insights into the contingent circumstances leading to changes in the employment relationship, information on the state of the psychological contract in local government and an illustrative case of how one local authority went about addressing employee concerns in the light of major constraints.
Using the Care Programme Approach (CPA) as an example, this article examines the difficulties of implementing change within the National Health Service (NHS). A framework is suggested which aims to clarify the nature of change by distinguishing where, when and how decisions are made. It is argued that structural change in the NHS and the related emergence of new institutions, systems, relationships and operational principles, have generated new uncertainties and ambiguities. A fuller appreciation of how the decision-making process operates is necessary to an understanding of how different policy objectives are pursued.
Occupational communities represent bounded cultures populated by people with similar work identities that transcend organizational settings. In this paper, I examine the relationship between an occupational community's culture and its ability to control strategic resources that advantage its members. Drawing on an empirical examination of the Canadian forensic accounting, I argue that reputation acts as a strategic resource, not only for individual members, but for the community as a whole. The community's practice standards and membership rules work to heighten the importance of individual practitioners' reputations, which in turn benefits client communities by conferring legitimacy on their claims, and restricts entry into forensic accounting. The role of reputation in Canadian forensic accounting serves to illuminate the importance of resources that, rather than being held in some proprietary fashion, are shared among actors who are, ostensibly, in competition with one another.
Christian De Cock's article contributes to organization studies by exploring the usefulness of a postmodern perspective for understanding the dynamics, and especially the frequent failure, of Total Quality Management (TQM) and Business Process Re-engineering (BPR). In this article, the authors extend his argument by exploring two theoretical questions that we feel are confused in his paper: (a) what can postmodernism tell us about the dynamics of TQM/BPR; and (b) what role do power and politics play in TQM/BPR and how can critical theory be used in their analysis. The authors conclude with a discussion of the role of postmodernism and critical theory in organization and management studies more generally.
This book re-examines management theory `after Globalization'. Combining key names and studies from across the world, it explores the local realities that resist universal theories and that permeate the daily lives of practising managers.
The book provides a comprehensive and critical reflection on the widely documented phenomenon of globalization in business. It assesses the implications of the diversity of individual economies and enterprises for general theories of management and concludes by presenting new approaches to the study and research of management and organizations.
This paper examines the relation between capital markets and corporate control in France, Germany and the UK. It compares levels of takeover activity in the three countries and describes the degree to which takeovers are associated with changes in corporate control. The paper examines the influence of regulation on forms of corporate ownership and control. It compares regulation pertaining to the rights of employees, managers and shareholders in the three countries and finds that regulatory rules are related to patterns of ownership and control changes. The paper suggests that a fundamental objective of control changes is to correct managerial failure, and that takeovers are suited to the correction of particular classes of managerial failure that cannot be readily rectified by contracts. Thus, markets with low levels of takeovers may suffer from a low level of correction of managerial failure. However, by changing ownership, takeovers may give rise to an inability of owners to commit themselves to the long-term interests of managers and employees. As a consequence, financial systems with active takeover markets may be associated with inadequate investment in firm-specific assets and an unduly short-term investment horizon. There is, therefore, a tradeoff between alternative methods of correcting managerial failure. This is particularly important for European countries facing an extension of UK takeover activity to the Continent. The process is being encouraged by the European Commission which aims to harmonize regulation on a UK-style takeover code. Harmonization of regulation may have far-reaching consequences for the structure of different countries' capital markets and, in view of the tradeoff, is of uncertain merit.
The paper is an overview of international variations in financial systems and corporate governance. Traditional theories of the firm emphasize the importance of managerial incentives, disciplining and finance in corporate governance. The paper argues that these are not the fundamental distinguishing features of different financial systems. Instead, ownership and control emerge as displaying more substantial variations across countries. These differences are associated with the formulation, implementation and adaptation of corporate strategy. The insider systems of Continental Europe and Japan may be superior at implementing policies which involve relations with stakeholders. Outsider, Anglo-American, systems may be more responsive to change.
This paper examines the three cases of hostile takeovers in Germany in the post Second World War period. It describes the important role played by banks in affecting the outcome of the bids: bank representatives were chairmen of the supervisory board in all three cases and banks voted a large number of proxies in important decisions affecting the bids. The paper reports that low returns were earned by shareholders of two of the target firms and offers an explanation in terms of bank control and the regulatory regime operating in Germany.
We investigate a modified sine-Gordon equation which possesses soliton solutions with long-range interaction. We introduce a generalized version of the Ginzbug-Landau equation which supports long-range topological defects in D = 1 and D > 1. The interaction force between the defects decays so slowly that it is possible to enter the non-extensivity regime. These results can be applied to non-equilibrium systems, pattern formation and growth models.
Existing theories have recognised the importance of expert knowledge in the formation and survival of professional service firms (PSFs), such as accounting and consulting firms, but have not fully explained its role. We argue that knowledge is a key determinant of the organisational structure and performance of PSFs. We examine forms of knowledge and knowledge management strategies within PSFs and develop a framework linking the firm's knowledge base and organisational structure. Two contrasting case studies are presented to illustrate these arguments. The paper concludes with a set of propositions to guide further research.
Policy fit is a central plank of much of the prescriptive and strategic HR literature because of the assumed performance benefits deriving from it (Guest, 1997: 264-266). Fit refers to the alignment of organisational policies with the requirements of the environment and alignment of second order policies, such as human resources, with the goals and strategy of the organisation to facilitate their implementation (Jackson and Schuler, 1995). In addition, there is assumed to be a cumulative and exponential benefit from aligning individual HR policies and practices so that they interact appropriately and reinforce each other (Huselid, 1995: 667-668).
Empirical research in HRM has increasingly concentrated on issues of fit, by testing whether firms' policies are aligned or whether they gain the expected benefits, but few studies have looked at whether firms seek or achieve fit in the development of policies. In particular, research on the adoption of policies across an industry or sector where firms are facing the same sort of environment is rare, not least because such events are unlikely to occur often. The article aims to bridge this gap by studying the adoption of formal evaluation across a group of firms in one sector. It examines the links to other HR policies in these firms, as well as the strategy of the firm. We also examine adoption in relation to other systems of control through which performance is monitored at the individual and organisational levels, as evaluation has been seen as an important means by which managerial control over behaviour and attitudes may be established (Townley, 1993).
Examines the extent to which new forms of profit-sharing based on individual performance have been introduced in professional firms. Data on large law firms; Results showing that profit-sharing are limited in scope; Possible link with the more systematic control of the core of professional staff and more business-like methods of managing; Factors driving profit-sharing policies.
A shift away from "up-or-out," the conventional promotion system in professional service firms, has been explained as part of a wider set of changes in internal labor market arrangements and management methods. This is investigated empirically in a sample of large partnerships in one profession. Up-or-out was used by less than one-third of the sample of firms but is common among the largest firms. Internal reforms to the professional firm do not fully explain its rarity; up-or-out appears to be adaptable to new forms of management and internal labor market policies. This raises a number of questions about the utility of theoretical explanations of how professional service firms work or are changing.
This study uses data from a questionnaire survey of UK firms to examine the ways in which benefits and costs are divided in buyer-supplier relationships. These results are analyzed in the light of Burnes and New's (1996) framework for considering supply chain improvement. The results indicate that some caution is required in the applicability of the notion of "win-win" in buyer-supplier collaborations. Conclusions are drawn for theory and practice.
The effects of green purchasing on the environmental performance of firms in a supply chain network are studied, by exploring the activities of the UK hardware retailer B&Q as an example of green purchasing and supply in action.
This paper models the capital structure of a multinational firm. The analysis shows that differences between legal systems in the enforcement of creditor rights, (recently documented by empirical research) can explain the complex mix of parent and subsidiary financing observed in most multinational firms, even in the absence of both tax differentials and private information. Optimal capital structures minimize the default premia associated with the multinational's overall financing package by equating the marginal enforcability of debt contracts in the host and home countries. The implications of this model are consistent with the extant empirical research and suggest a number of new testable implications for the financing of multinational firms.
This paper determines the set of rational responses by shareholders to unconditional takeover offers at prices between the pre-acquisition and post-acquisition price of the firm. Two cases are considered. In the first case, coordination across shareholders is not presumed. In this case, the game is analyzed using the Rationalizability criteria (Bernheim, 1984). It is demonstrated that the Rationalizable strategy vectors include all pure strategy vectors. In the second case, the set of strategies consistent with coordination through preplay communication, the Coalition Proof Nash Equilibria (Bernheim, Peleg, and Whinston, 1987) are analyzed. It is shown that, given even a minimal degree of divisibility of shareholdings, the raider’s per share profit is bounded from below by a positive constant independent of the number of shareholders. These results imply that preplay coordination between shareholders eliminates the “free-rider” problem.
This article reports novel empirical findings on the conduct and behaviour of the boards and directors of the top 500 UK firms by capital employed. The particular focus of the article is the relative power and influence of part-time board members (chairmen and non-executive directors) compared with full-time board members (chief executive officers and executive directors). The empirical data are interpreted by a four-part conceptual framework examining the interactive effects of context, structure, power sources, and will and skill in using power to deliver intended effects. The conceptual approach to power is illustrated by two case examples of the mobilization of power to dismiss board members with the greatest positional power.
This is four-part work providing an international view of climate change which is designed to complement the Intergovernmental Panel on Climate Change Second Assessment report. The complete work is a benchmark document summarising current understanding of of the contributions of the social sciences to the interdisciplinary issues of global climate change. It brings together widely scattered information and highlights both current research strengths and key areas for further research. The books survey the state of the art of the social sciences with regard to global climate change research; recognise global climate change research as policy relevant; review what is currently known, uncertain, and unknown in the social science areas relevant to global change; assemble and summarise findings from the international research community; report these findings within behavioural and interpretive frameworks as appropriate; and assemble this information to enlighten the future formulation and conduct of policy-relevant scientific research. The volumes in this four-part work cover resources and technology (Volume 2); tools for policy analysis (Volume 3); and, in Volume 1, begin with the societal framework. Volume 4 is presented as a readable summary for non-professionals. The first chapter of Volume 4 comprises the introductory section of each of the three more specialist volumes.
Examines the extent of the penetration of electronic commerce, specifically via the Internet, in the retail trade in Europe. Assessment of the use of the Internet in mail order and direct marketing operations; Application of the Internet in grocery retailing; Examination of the penetration of electronic commerce in the United States.
This paper studies the flows of funds into and out of equity mutual funds. Consumers base their fund purchase decisions on prior performance information, but do so asymmetrically, investing disproportionately more in funds that performed very well the prior period. Search costs seem to be an important determinant of fund flows. High performance appears to be most salient for funds that exert higher marketing effort, as measured by higher fees. Flows are directly related to the size of the fund's complex as well as the current media attention received by the fund, which lower consumers' search costs.
A civic society is distinguished by its language and its law. In this paper I suggest a theory that links these institutions via the notion of a standard contract. The theory is based upon two observations: that contracts are compiled in words, and that more common (standardized) words are easier to comprehend than less common ones. I will argue that these observations have far-reaching implications: that private contracting is restricted by past history, and that the State should play a role in the formation of contractual and legal standards.
A novel proposal for combining forecast distributions is to use quantile regression to combine quantile estimates. We consider the usefulness of the resultant linear combining weights. If the quantile estimates are unbiased, then there is strong intuitive appeal for omitting the constant and constraining the weights to sum to unity in the quantile regression. However, we show that suppressing the constant renders one of the main attractive features of quantile regression invalid. We establish necessary and sufficient conditions for unbiasedness of a quantile estimate, and show that a combination with zero constant and weights that sum to unity is not necessarily unbiased.
This paper discusses a potential cost of corporate risk management strategies that are based on cash-flow hedging. Cash-flow hedging strategies allow firms to avoid the deadweight costs of external financing by setting their internal cash flows equal to their investment needs. In the presence of agency conflicts between managers and shareholders, these hedging strategies can be used to reduce shareholder wealth, insofar as they remove the valuable discipline that obtaining new external financing imposes on managers.
In early 1997, Cephalon, awaited an FDA panel's decision on whether its drug, Myotrophin, would be approved. If the drug was approved, the firm might need substantial additional funds to commercialize as well as to buy back rights to it (which had been sold earlier to finance its development). The firm's CFO is considering a variety of financing strategies, including buying call options on the firm's own stock and paying for those options by issuing shares at the current time.
This paper studies the exposure of North American gold mining firms to changes in the price of gold. The average mining stock moves 2 percent for each 1 percent change in gold prices, but exposures vary considerably over time and across firms. As predicted by valuation models, gold firm exposures are significantly negatively related to the firm's hedging and diversification activities and to gold prices and gold return volatility, and are positively related to firm leverage. Simple discounted cash flow models produce useful exposure predictions but they systematically overestimate exposures, possibly due to their failure to reflect managerial flexibility.
The first in a four-part series, this case details the financial policies and practices at General Motors from 1990 to 1996. This part provides a brief introduction to the company.
The second in a four-part series, the case details the financial policies and practices at General Motors from 1990 to 1996. This part describes the stated financial policies of the firm, including its approach to capital structure, liability structure, equity structure, dividends, cash balances, and risk management.
The third in a four-part series, this case details the financial policies and practices at General Motors from 1990 to 1996. This part describes the firm's financial responses to the business stresses it faced in the 1992 time period.
The fourth in a four-part series, the case details the financial policies and practices at General Motors from 1990 to 1996. This case describes the set of financial decisions taken by the firm as its business recovered, and focuses on an immediate decision faced by GM's treasurer in 1996. He must decide whether to recommend that the board hold "excess" cash, disburse it to shareholders via a dividend increase, or repurchase shares. In addition, the repurchase alternative offers a number of tactical choices, including whether to engage in a put-writing program or an accelerated share repurchase.
This exploratory paper examines one class of decision related to learning and operations improvement: how and where to develop new manufacturing technologies as part of a program of continuous improvement. We examine the reasons for both the selection and the relative effectiveness of two methods for manufacturing improvement: learning by doing (in-process learning) on the shop floor and learning by development and experimentation away from the shop floor (off-line learning). We then explore how the development strategy selected affects the subsequent decision-making process, and how strongly initial choices about improvement methods affect later ones. Empirical data are presented from two Korean shipbuilding companies. While the structural characteristics of a plant, such as its layout and equipment, do appear to influence the improvement method it selects, we find that other factors, such as corporate philosophy and plant history also play an important role in the initial selection of improvement method. However, these determining factors fade in importance sharply over time, as the plant develops its ability to improve using that particular method. The fact the plant has practised improvement by one method (and, therefore, has often become relatively better at that mode of learning), begins to dominate the selection of future improvement techniques. Although this process is quite rational at each planning step, it can result in improvement processes in which small changes in initial circumstances and managerial choices cause large changes in the overall improvement path. The results also suggest that when managers choose any improvement methodology, they are not only learning about their manufacturing systems—they are choosing how their operation will learn, and indeed may lock themselves into that mode of learning for a longer duration than that of the current set of improvement projects.
This paper empirically investigates the effect of advanced manufacturing technology on process stability during flexible production in a process industry. A sample of 61 North American fine paper plants is used to examine the relationship between the level of automation installed for controlling changes between paper grades and the incidence of paper web breaks. These web breaks are catastrophic failures; they require the entire plant to be stopped, reinitialized, and restarted. Because a large fraction of breaks occurs shortly after changeovers, they are an important determinant of the aspect of plant flexibility, called mobility, or the ability to move between products with only small penalties.
In an attempt to ensure stable and mobile production, many plants have implemented changeover automation. We find, however, that higher levels of this automation are significantly associated with higher rates of catastrophic failure among the plants studied. We suggest that this finding becomes less paradoxical when considered in light of a recent stream of research on advanced manufacturing technologies, loosely called the usability perspective. According to this perspective, automation designed and implemented with the narrow, technical goal of replacing human operators or removing their discretion over a production process is misguided, especially in environments in which requirements are changing rapidly.
In part, cultural differences between Japan and the West have been cited as contributing to fundamentally different manufacturing strategy orientations. One cultural difference is psychological attitudes toward time, which may lead to different emphases on long-term and short-term goals and objectives, i.e., differing strategic time orientations. This paper reports on the analysis of data from an international research study of manufacturing strategy that gathered data from 600 companies in 20 countries. Data on the rates of adoption of strategic manufacturing practices and links between corporate and manufacturing strategy were analysed to test for differences. The results show strong contrasts between Japan and the West and are consistent with a difference in strategic time orientation between the two regions.
This is the third report on the ‘Made in Europe’ research programme. Earlier reports concentrated on the maturity of implementation of ‘best practice’ in both the design and manufacturing processes of larger European companies. Here, the authors shift the focus to small and medium-sized enterprises (SMEs) particularly in Britain and Italy. While few SMEs are in the world-class category, small company practices are customer-oriented, responsiveness-focused and concerned with new products. SMEs’ competitive edge typically comes from speed, responsiveness and closeness to customers. SMEs exhibit a greater level of confidence than larger companies in their ability to make change, but neglect training and education. Within the SME sector there are sharp differences between micro (5–20 employees), small (21–50) and medium-sized (51–200) companies while those which are subsidiaries of larger companies have significantly higher levels of best practice. There are differences between countries and regions.