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Working papers: 1998

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WP114: Economic Geography & Patterns of International Business Activity

Lilach Nachum

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This paper examines the relevance of concepts drawn from economic geography to understanding the location decisions of financial and professional service transnational corporations. After identifying important differences between international business and economic geography theories in the explanations they propose for patterns of economic activity, it develops and tests a simple model of the spatial distribution of financial and professional service transnationals in the USA. The findings suggest that ideas from economic geography, notably agglomeration economies, possess powerful explanatory power for patterns of inward FDI in these sectors.

WP113: Marriage & Trust: Some Lessons from Business Organisation

Robert Rowthorn

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Using ideas from studies of business relationships, this paper examines the role of marriage as an institution for providing couples with the confidence to make long-term investments in their relationship. No-fault divorce has weakened the notion of marriage as a contract, thereby reducing the security offered by marriage and promoting opportunism by men. Current legal reforms will improve the economic position of divorced wives, inter alia encouraging opportunism by women. The paper argues that a return to fault-based divorce represents the only way to achieve parity between men and women and deter opportunism by either sex.

WP112: Modelling the Innovation Implementation Process in the Context of High-Technology Manufacturing: An Innovation Diffusion Perspective

Shekhar Jayanthi

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High-technology manufacturing operations are characterised by rapid and ongoing innovation implementation and knowledge transfer. This study identifies a model-based approach to capture successive innovation implementations, and tests this with detailed empirical data for a wafer fabrication plant of a semiconductor manufacturer. The model’s excellent fit is evaluated, and implications for theory, practice, public policy and future research are discussed.

WP111: Spanning the Gap: The Theoretical Principles That Connect Stakeholder Policies to Business Performance

Giles Slinger

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In examining the relevance of the stakeholder concept to business performance, this paper sets out the three principles of commitment, cooperation and rich information on which the concept is based, and discusses the development over the past 50 years of organisational psychology methods, such as those developed at the UK Tavistock Institute and US National Training Laboratories, for improving workplace relations.

WP110: The Labour Market, the Minimum Wage & the Low Pay Commission Report

Sanjiv Sachdev and Frank Wilkinson

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This paper reviews the arguments surrounding the proposed adoption in the UK of a minimum wage, and assesses the 1998 Low Pay Commission’s Report on this, and its potential impact in terms of business response. It argues that the growth of low pay since the 1970s has involved significant costs through labour market instability, challenges the orthodox labour market view that low pay reflects low skill, and argues that the Commission’s Report is unduly cautious and omits consideration of the vital question of how a minimum wage might be uprated.

WP109: The Causes of Mergers: Tests Based on the Gains to Acquiring Firms’ Shareholders & the Size of Premia

Dennis Mueller and Mark Sirower

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Investigates the issue of whether mergers increase the value of merging firms, by testing four hypotheses about why mergers occur in terms of the distribution of gains and losses from 168 mergers between large companies between 1978 and 1990. Considerable support is found for the managerial discretion and hubris hypotheses, but little or no support for the hypothesis that mergers create synergies that benefit shareholders of both the firms involved.

WP108: Rates of Return on Investment: A Cross National Comparison

Dennis Mueller and B Burcin Yurtoglu

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This study presents estimates of the ratios of returns on investment to costs of capital over the period 1985-1996 for companies from around the world, using Mueller and Reardon’s technique. It confirms the existence of significant differences between better-performing ‘Anglo-Saxon’ and poorer-performing ‘Germanic’ companies, while US companies performed much better than in earlier decades. Not surprisingly, perhaps, Asian companies performed best of all.

WP107: Growth Constraints on Small & Medium Sized Firms

Alan Hughes

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The study investigates the nature of barriers to growth experienced by a sample of manufacturing and business service SMEs in Britain during the 1990s. Using a ‘real-time’ survey methodology, it reveals a virtuous growth cycle in sustained growth firms, which reflects their adoption of a management and organisation structure involving a disciplined and transparent framework of information, reward, and marketing systems. The study suggests that policy should focus on enhancing internal human capital resources, and raising the general level and depth of SME management capability.

WP106: Would More Family-Friendly Working Arrangements Benefit Business & Families?

Fiona Scheibl and Shirley Dex

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This paper considers the extent of flexible, so-called family-friendly, working practices and evidence from published literature to address the question of whether Britain needs more of these arrangements. A review is carried out to see whether problems exist for the workforce which such policies could help to resolve, whether employers perceive problems in offering such arrangements, and whether such problems could be overcome. It concludes that more family-friendly arrangements would be welcomed by employees, that employers do perceive problems in designing flexible working arrangements, but that there are also ways of overcoming many of these problems to work towards new relationships of trust and commitment between workers and employers.

WP105: Organisational Change, Labour Flexibility & the Contract of Employment

Simon Deakin

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This paper reports the findings of an empirical study of the effects upon contracts of employment of organisational change at enterprise level, including the impact of trade union derecognition. A survey of over 30 British companies reveals that the pursuit of flexibility, in the sense of escaping from rigid job and grading structures, was widely reported as a reason for withdrawal from collective bargaining. However, the “individualised” employment contracts which replaced collective agreements were not arrived at through individual bargaining, but upon the basis of employers standardised contract terms. The paper examines the nature of these contracts, and concludes that paradoxically, the removal of collective influence can lead to decontractualisation, in the sense that many of these employment relationships bore little resemblance to a relational contract based on long-term cooperation. It is thus an open question, at this point, whether the removal of collective and public regulation from the employment relationship will bring about enhanced contractual efficiency.

WP104: Individualisation & Union Recognition in Britain in the 1990s

William Brown

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Examines the way in which the employment relationship has been “individualised” in Britain during the 1990s. In practice, individualisation has been almost exclusively concerned with procedural issues rather than with the substantive content of employment contracts. The research was based on a study of 32 firms, structured so that some which had derecognised trade unions were matched with others, in similar product niches’ which had retained recognition. There were many similarities in the economic efficiency of the matched pairs, partly because, where recognition had been retained, its scope had been substantially reduced. The contrasts thrown up by the matched comparisons were to do with the mechanisms for employee involvement and the consequential legitimation of management action. The paper discusses the implications for the future of collective bargaining at a time when the new Labour Government is proposing limited statutory recognition rights for trade unions.

WP103: UK FDI & the Comparative Advantage of the UK

Lilach Nachum, John Dunning and Geferri Jones

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Investigates the link between the industrial structure of UK outward foreign direct investment (FDI) and sectoral variations in the comparative advantage of the UK, by comparing their dynamic evolution over the last four decades. The research reveals that the largest shares of UK outward FDI are concentrated in sectors in which the UK possesses a comparative disadvantage. Furthermore, the sectors in which the UK possesses comparative advantages have characteristics different from those in which UK outward FDI is concentrated. This suggests that the differences between the industrial structure of UK outward FDI and UK comparative advantages are a matter of kind rather than of a degree. Over time, UK outward FDI appears to have become more sectorally similar to UK comparative advantage indicators, a change which seems to be related to changing motivations by UK MNEs in relation to overseas investment.

WP102: University-Industry Relations, Innovation & Power: A Theoretical Framework for the Study of Technology Transfer from the Science Base

Stephanie Blankenburg

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Critically reviews a range of existing theoretical approaches, and particularly the information economics and evolutionary/knowledge-based approaches, to studying the organisation of innovation, with the goal of assessing their contribution to a better understanding of the rationale underlying co-operation between universities and industry. Having criticised these approaches, an alternative framework is developed which regards innovation as an inherently social and political process, and conceptualises university-industry relations (UIRs) as a strategic relation of power governed by a particular “regime of production”.

WP101: Quasi-Markets, Transaction Costs & Trust: Institutional Change in Broadcasting

Simon Deakin and Stephen Pratten

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Explores tensions arising from the introduction of quasi-market relations in British broadcasting, with particular reference to relations between the independent production sector and terrestrial broadcasters and the effects of internal reorganisations within the BBC and ITV. Case studies and interviews with broadcast media representatives suggest that despite changes, decision making remains largely hierarchical, and the responsiveness of broadcasters to viewer priorities remains problematic. However, the paper argues that the most important question is whether the reforms provide a framework for effective contractual cooperation. If broadcasting quasi-markets are to be sustainable, the institutional framework must be sufficiently flexible to allow close contractual relations to develop. Under the present framework, the tensions between competition and cooperation will not be easily resolved.

WP100: Performance Standards in Supplier Relations: Relational Contracts, Organisational Processes & the Institutional Environment

Simon Deakin, Christel Lane and Frank Wilkinson

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The paper investigates the link between national institutional structures and business performance as indicated by the findings of a comparative study of supplier relations in two traditional industries – mining machinery and kitchen furniture – in Germany, Britain and Italy. It shows that both supposedly rigid performance standards based on long-term contracts and quality thresholds, and less formal social norms which operate at a conventional or customary level, can help raise industrial performance. In contrast, the absence of norms or conventions governing inter-firm cooperation may adversely affect the degree to which an industry generates high-quality and technologically sophisticated products.

WP99: The National Origin of the Ownership Advantages of Firms

Lilach Nachum and Jean Rolle

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This study examines the extent to which home country ownership advantages of selected larger US, UK and French advertising firms appear to influence their competitive position in international markets. Empirical analysis of original data from these companies suggests that the impact of home country advantages is critical, but provides only part of the explanation for the nature of the ownership advantages which advertising agencies develop. Some of these advantages are related to the attributes of individual advertising agencies and they vary in line with their unique characteristics as well as in response to the characteristics of their home countries.

WP98: Corporate Germany at the Crossroads? Americanisation, Competitiveness & Place Dependence

Christian Berndt

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Recent years have witnessed growing internationalisation and increasing dependence on global financial capital by German multinationals. This paper critically evaluates claims of a resultant cultural sea-change in German corporate governance behaviour, towards an Anglo-Saxon paradigm, using detailed evidence from three Ruhr-based transnationals. This reveals evidence of an Americanisation process, most clearly in power relations between capital owners, management and labour. However, it also identifies strong forces of institutional persistence, rooted in territorial networks and regional and national regulatory structures.

WP97: Employment Growth, Structural Change & Capital Accumulation

Andrew Glyn

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Examines long run trends in agricultural and industrial employment, the growth in population of working age, migration and changes in male and female participation rates, for a sample of OECD countries. The paper focusses particularly on how capital accumulation has shaped these processes, and analyses how employment in industry and services, and for men and women, has reacted differently to capital accumulation and labour supply expansion. This enables assessment of how structural change has affected the relative employment performance of Europe and the USA.

WP96: Local Industrial Development & Dynamics: The East Anglian Case (Out of Print)

David Keeble

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Since the 1960s, East Anglia’s economy has grown faster than that of most other British regions, reflecting a transformation from an historic dependence on agriculture to one focussed on manufacturing and services. The paper analyses the nature of and driving forces underpinning this recent industrial growth. It identifies growing and declining sectors, evaluates the role of local entrepreneurs, small firms and inward investment, assesses the reasons for the rapid expansion of high-technology industry around Cambridge, and examines institutional and policy impacts on development.

WP95: Industrial Change & Regional Development: The Case of the US Biotechnology & Pharmaceutical Industries

Mia Gray and Eric Parker

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The paper contributes to the debate over the location and organisation of innovative firms, industry renewal and regional rejuvenation, by examining the effect of technological breakthroughs in the US biotechnology industry on mature and emergent regions such as the North-East and California. Despite losing much of their preeminence in R&D, traditional pharmaceutical firms in the USA’s mature regions have managed to “capture” much later-stage manufacturing and marketing. This reflects their competitive advantages over small new biotechnology firms in drug development experience, manufacturing capabilities, and marketing.

WP94: De-Industrialization: The Case of Iceland

Ingolfur Bender and Robert Rowthorn

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In Iceland, recent de-industrialisation, defined as a declining share of manufacturing in national employment, is associated with poor productivity growth and output performance, and reflects the harmful impact of a one-off boom in marine exports. Through misguided policies, Iceland has consumed the windfall gains and allowed production to shift from exposed to sheltered sectors. This has led to unemployment and retarded long term economic growth. In conclusion, the future role of Icelandic manufacturing and associated policy issues are considered.

WP93: Juridification & Labour Law: A Legal Response to the Flexibility Debate in Australia

Richard Mitchell

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The paper examines the proposition that the introduction of the new Workplace Relations Act 1996 has brought about a “dejuridification” of Australian labour law. Notwithstanding the rigidities and inefficiencies of the traditional award-based Australian system of compulsory arbitration, the new Act has arguably introduced greater complexity, not simplicity, to the regulatory framework. This is illustrated by detailed reference to the process of individualisation of employment under the Act, through (individual) Australian Workplace Agreements. The Act is unlikely to cause noticeable change in bargaining processes.

WP92: Labour Law & Economic Theory: A Reappraisal

Simon Deakin and Frank Wilkinson

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Reassesses economic arguments for and against labour law regulation in the light of recent developments in contract theory, institutional economics, and the theory of the firm. Early analyses in the ‘law and economics’ tradition were largely hostile to labour market regulation, but more sophisticated recent work suggests that in unregulated markets, there are significant barriers to both static and dynamic efficiency. In particular, where workers invest in firm-specific skills, incentive structures should incorporate some protection against arbitrary treatment or redundancy. This new labour market theory has potential implications for public policy.

WP91: Low Pay & Social Exclusion: A Cross-National Comparison

Paul Robson, Shirley Dex and Frank Wilkinson

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Using harmonised household panel data, cross-tabulations and multivariate analysis, the paper examines whether being low paid is associated with the same set of supply-side and household characteristics in five countries, Britain, Luxembourg, Germany, Spain and the USA. Characteristics investigated include age, education, marital status, children, lone parent status, household type, employment status of spouse, and housing tenure. Similarities and differences across countries and gender groups are identified.

WP90: Longitudinal Aspects of Innovation Surveys: The CBR Experience

Andy Cosh, Alan Hughes and Eric Wood

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Reviews the experience of the Cambridge University Centre for Business Research in conducting three successive surveys of a panel of SMEs resulting in the construction of a longitudinal company dataset, with a particular emphasis on innovation behaviour. It evaluates in detail the evolution of the panel over time in terms of the effects of attrition and non-response bias on firm size, sector, age, profits, exporting and innovation. Finally, it summarises the problems associated with the creation and maintenance of such a longitudinal company panel.

WP89: Innovation Surveys & Very Small Enterprises

Andy Cosh, Alan Hughes and Eric Wood

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Reports results of a Eurostat-sponsored study into the desirability and feasibility of including “very small enterprises” (VSEs) in future European innovation surveys. The study assesses the extent of VSE economic and innovation activity in seven EU countries, and presents questionnaire-based evidence on current methods employed in these countries to survey VSE innovative activity. Finally, it examines the case for a European VSE innovation survey and provides an operational outline for a possible pilot project.

WP88: The Unequal Distribution of Job Insecurity, 1966-1986

Brendan Burchell

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The paper presents research evidence on the costs of job insecurity in terms of workers’ psychological health, marriages and motivation, and contribution to “cycles of disadvantage”. It also analyses flows out of secure and insecure jobs within British labour markets using a work-histories data set. Flows from secure to insecure jobs were more common in the 1980s than previously, while the risk of transition to an insecure job is much greater for those in less advantaged jobs. The negative consequences of this for further polarisation of the UK labour market are discussed.

WP87: Low Pay in Europe & the USA

Paul Robson, Shirley Dex and Frank Wilkinson

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Calculates the extent of low pay in Britain, Germany, Luxembourg, Spain and the USA using harmonised data based on nationally representative household panel studies. Countries’ systems of collective bargaining and minimum wage regimes are related to distributions of low pay by industry, firm size, occupation, type of contract, public-private sector and gender. Strong collective bargaining regimes and minimum wages appear to help reduce the percentage of low paid workers, but women, and especially part-time women employees, benefit much less than male employees.

WP86: Collective Learning Processes & Inter-Firm Networking in Innovative High-Technology Regions

David Keeble, Clive Lawson, Helen Lawton Smith, Barry Moore and Frank Wilkinson

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Investigates the nature and extent of regional collective learning processes and networking between local technology-based firms and other organisations, in the development and functioning of the Cambridge and Oxford regional clusters of high-technology firms. Processes such as local entrepreneur spin-off activity and professional and scientific labour recruitment, with resultant transfer of embodied expertise and continuing inter-firm links, are of particular importance, especially in the Cambridge case. Such processes however operate in parallel with active global networking and research collaboration. Local ‘institutional thickness’ is also assessed.

WP85: Co-operation, the Organisation of Work & Competitiveness

Frank Wilkinson

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The paper argues that firm operational and dynamic efficiency depends on co-operative production relationships. The incentives structure required to overcome rivalry in distribution and encourage firm co-operation is illustrated by a simple model. The competitive weakness of low-trust Anglo-American production systems is contrasted with the strength of high-trust, co-operative productive systems in Germany and elsewhere. These demonstrate the importance of representative institutions for generating trust, countering uncertainty and encouraging co-operation. The undermining of these institutions by neo-liberal policies threatens co-operation and long term operational and dynamic efficiency.

WP84: Markets, Competition & Innovation

Michael Kitson and Jonathan Michie

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Considers the role of innovation and collaboration in firm competitiveness, using empirical evidence from CBR surveys of small and medium-sized enterprises in Britain. The paper demonstrates that most SMEs report relatively few customers and competitors and complete primarily on non-price criteria. It argues that collaboration is of great importance in fostering innovation and effective competition in international markets.

WP83: On Markets in Knowledge

Suma Athreye

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Examines the conditions necessary for the emergence of specialised markets in technological knowledge, namely alienation of knowledge from its context allowing it to become a commoditisable product, and establishment of a reasonable volume of exchange transactions in that knowledge, in turn requiring cross sectoral application and horizontal integration. The paper also assesses the roles of technological convergences and institutional structure in this process.

WP82: Opportunism & the Advantage of Organisations

Matthias Kelm

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Analyses and attempts to refute Williamson’s argument that any theory of economic organisation necessarily has to rely on the behavioural assumption of opportunism, because bounded rationality alone allegedly does not imply any advantage of authority compared to market contracting. It shows that the behavioural implications of bounded rationality are sufficient to derive an inherent advantage of authority, and therefore internal organisation, as a co-ordination mechanism, and argues that Williamson’s argument to the contrary is logically flawed.