Statistical Properties of Business Firms Structure and Growth

We analyze a database comprising quarterly sales of 55624 pharmaceutical products commercialized by 3939 pharmaceutical firms in the period 1992--2001. We study the probability density function (PDF) of growth in firms and product sales and find that the width of the PDF of growth decays with the sales as a power law with exponent $\beta = 0.20 \pm 0.01$. We also find that the average sales of products scales with the firm sales as a power law with exponent $\alpha = 0.57 \pm 0.02$. And that the average number products of a firm scales with the firm sales as a power law with exponent $\gamma = 0.42 \pm 0.02$. We compare these findings with the predictions of models proposed till date on growth of business firms

Social Preferences and the Efficiency of Bilateral Exchange

Under what conditions do social preferences, such as altruism or a concern for fair outcomes, generate efficient trade? I analyze theoretically a simple bilateral exchange game: Each player sequentially takes an action that reduces his own material payoff but increases the other player’s. Each player’s preferences may depend on both his/her own material payoff and the other player’s. I identify necessary conditions and sufficient conditions on the players’ preferences for the outcome of their interaction to be Pareto efficient. The results have implications for interpreting the rotten kid theorem, gift exchange in the laboratory, and gift exchange in the field

The Ethics of Corporate Governance

How should corporate directors determine what is the right decision? For at least the past 30 years the debate has raged as to whether shareholder value should take precedence over corporate social responsibility when crucial decisions arise. Directors face pressure, not least from ethical investors, to do the good thing when they seek to make the right choice. Corporate governance theory has tended to look to agency theory and the need of boards to curb excessive executive power to guide directors' decisions. While useful for those purposes, agency theory provides only limited guidance. Supplementing it with the alternatives - stakeholder theory and stewardship theory - tends to put directors in conflict with their legal obligations to work in the interests of shareholders. This paper seeks to reframe the discussion about corporate governance in terms of the ethical debate between consequential, teleological approaches to ethics and idealist, deontological ones, suggesting that directors are - for good reason - more inclined toward utilitarian judgments like those underpinning shareholder value. But the problems with shareholder value have become so great that a different framework is needed: strategic value, with an emphasis on long-term value creation judged from a decidedly utilitarian standpoint

Dutch and American waterway development: identification and classification of tools for value creation

Waterways can serve society in a variety of ways. However, authorities responsible for maintenance and development of waterways often have a sectoral focus. They strive for cost efficient solutions within their restricted scope; broader development of socio-economic value receives little attention. This can be seen in e.g. the Netherlands and the USA. Both countries have strong national authorities responsible for the navigation function of waterways. The societal call for broader optimization is recognized, but a systemized response to this call is lacking. Nevertheless both authorities make attempts towards increasing the socio-economic value of their capital waterway projects by deploying tools for broader optimization. Six recent cases, in which such attempts were made, are studied with the aim of identifying and classifying the tools deployed. Identification and classification is needed to evaluate where gaps and opportunities lie for more systemized responses. From these cases a total of 15 tools are identified which stimulated broad optimization. These tools are classified by identifying the transaction characteristics associated with these tools. These characteristics can relate to cost, benefits or value capturing and can be of informative, coordinative or legislative nature. The results show overlaps and voids in the domains these tools address. For practitioners the results can be helpful to navigate through the planning and implementation phase of waterway projects. More broadly the study shows that in the waterway sector, a sector in need for adaptation and renewal, the application of a variety of mixes of governance is an emerging issue

Russia’s Legal Transitions: Marxist Theory, Neoclassical Economics and the Rule of Law

We review the role of economic theory in shaping the process of legal change in Russia during the two transitions it experienced during the course of the twentieth century: the transition to a socialist economy organised along the lines of state ownership of the means of production in the 1920s, and the transition to a market economy which occurred after the fall of the Soviet Union in the 1990s. Despite differences in methodology and in policy implications, Marxist theory, dominant in the 1920s, and neoclassical economics, dominant in the 1990s, offered a similarly reductive account of law as subservient to wider economic forces. In both cases, the subordinate place accorded to law undermined the transition process. Although path dependence and history are frequently invoked to explain the limited development of the rule of law in Russia during the 1990s, policy choices driven by a deterministic conception of law and economics also played a role.This is the author accepted manuscript. The final version is available from Springer via http://dx.doi.org/10.1007/s40803-015-0012-

Why Social Enterprises Are Asking to Be Multi-stakeholder and Deliberative: An Explanation around the Costs of Exclusion.

The study of multi-stakeholdership (and multi-stakeholder social enterprises in particular) is only at the start. Entrepreneurial choices which have emerged spontaneously, as well as the first legal frameworks approved in this direction, lack an adequate theoretical support. The debate itself is underdeveloped, as the existing understanding of organisations and their aims resist an inclusive, public interest view of enterprise. Our contribution aims at enriching the thin theoretical reflections on multi-stakeholdership, in a context where they are already established, i.e. that of social and personal services. The aim is to provide an economic justification on why the governance structure and decision-making praxis of the firm needs to account for multiple stakeholders. In particular with our analysis we want: a) to consider production and the role of firms in the context of the “public interest” which may or may not coincide with the non-profit objective; b) to ground the explanation of firm governance and processes upon the nature of production and the interconnections between demand and supply side; c) to explain that the costs associated with multi-stakeholder governance and deliberation in decision-making can increase internal efficiency and be “productive” since they lower internal costs and utilise resources that otherwise would go astray. The key insight of this work is that, differently from major interpretations, property costs should be compared with a more comprehensive range of costs, such as the social costs that emerge when the supply of social and personal services is insufficient or when the identification of aims and means is not shared amongst stakeholders. Our model highlights that when social costs derived from exclusion are high, even an enterprise with costly decisional processes, such as the multistakeholder, can be the most efficient solution amongst other possible alternatives

The transaction costs in biotechnology

This paper aims to relate the principles of Ronald Coase Theorem with negative impacts of biotechnology, taking cases of specific research groups and medium-sized companies in biotechnology. We consider an application of economic theory on transaction costs (TTC) provides a good foundation for understanding the underlying problems of this sector, even more, when analyzing the political economy of biotechnology since the transaction costs can best viewed their limitations and the limited scope of government policy. In biotechnology it is possible to get a policy that combines both equity and efficiency, that is, a wider range of policy applications to improve the living standards of people in Colombia