Business Uncertainty Research Articles

Rethinking ethical issues in global business environment

In the wake of globalization and liberalization policy, business ethics phenomenon in globalised business environment has become a critical issue that has attracted business and management research scholars to engage on crucial debates and discussion at both local as well as international forum. This is because globalization policy as it were has brought about business uncertainties, changing demographics, and a push for diversity that has resulted into corporate business cultures that are less homogeneous and increasingly competitive. This paper therefore finds its relevance in the day-to-day violations of business ethics in the globalised business environment and contends that business organizations must take responsibility of these violations or omit at their own peril. The malpractices that we continue to see in business world are centered upon the self-indulgent, introspective and myopic perspectives of the business organizations that are not able to transform their thoughts to consider all possible perceptions and ramifications of their actions. Despite the diverse ideals of relativism, imperialism and universalism as philosophies geared towards finding solutions to ethical dilemmas at global level, we contend that they are much far away from the solution. The impediment of global business ethics is the phenomenon that, unlike established laws whose violation is directly punishable in a court of law, business ethics is self-regulatory. What remains difficult is to determine exactly what is ethical or not ethical. Though an alternative approach-the relationship approach has been suggested in this article, we treat it as a traditional approach that has generated a glimpse support from current body of literatures. Key words: Ethical Dilemmas, Relativism, Imperialism, Universalism, Relationship Approach, Globalization Policy

Ontology of money: Simmel, Knapp and Keynes

Debates on the origins and functions of money, one of the most important social institutions, continue to this day. This debate does not have only academic significance, but also its implications have far-reaching influence on the benefits of all economic agents. We argue that mainstream theory of money is incorrect and that origins of money lie in state's imposition of taxes. Primary function of money is to be measure of value. Also, money is not neutral, i.e. monetary system has independent and powerful influence on real sector. Thus, it is possible that in periods of high business uncertainty consumers will defer consumption decisions and, in that way deepen financial crisis.

Exploring Uncertainties: The 'Learning by Doing' Period has not Come to an End, and Will Still be at the Heart of the EU ETS

The proposed amendment of the EU ETS entails that the private actors already covered by the legal framework of the EU ETS will face new challenges, meaning that they need to adapt to a different regulatory framework. Due to the far more stringent overall reduction target, even further going compared to other greenhouse gas emitting sectors, the emissions trading regime will by nature have a larger influence on the business sector. The basic question 'who can get, under what conditions, tradable allowances' will thus even be more relevant compared to the initial regime. This paper sheds light on possible uncertainties that industries might face following the new allocation provisions of the Commission proposal. We will take both 'legal certainty', taken in a wide sense, and 'business uncertainty' regarding the price to be paid for the allowances as starting points. By nature, business uncertainty is much more existent within auctioning compared to free allocation which seems to include a larger legal uncertainty, especially for the possible exposed sectors. The paper shows moreover the difficulty of designing allocation mechanisms and some complexities that might arise from them in the course of the trading period. It is particularly highlighted that it cannot be excluded that the executive regulations for auctioning and free allocation need to be amended in order to ensure the intended outcome of the scheme. In this sense, the learning by doing period has not ended at all. The paper concludes that from a perspective of governance, any legislator should incorporate the question of legal and business uncertainty if introducing emissions trading schemes or major amendments to such schemes. In fact, the environmental effectiveness could have been achieved with the current emissions trading scheme as long as the Commission would have conducted a strict inspection on the national allocation plans. For protecting the climate and for effectuating an emission reduction of 20 percent in 2020, the fundamental review in fact was not strictly necessary. The trade off of developing a framework for a level playing field and the avoidance of windfalls in the context of emissions trading is that industries need to face new regulatory approaches, for which it is not yet completely clear how they will affect their business activities.

Insights into Land Acqusition Experiences of Private Businesses in India

Socio-political uprising against land acquisition for industrial projects, in the recent times, has emerged as a major constraining factor leading to time lags, cost over runs, business uncertainties and even shelving of projects. Varied signals from recent (diverse) private experiences right from Tata's Singur project in West Bengal, Posco's Paradeep project in Orissa to Jindal's Raigarh project in Chattisgarh showcase a variety of tactics to gain access to land for private Greenfield projects. This paper analyses the recent land acquisition styles being adopted by few private businesses. It analyzes the successful land acquisition models vs. the not so successful ones and the lessons therein for infrastructure project proponents. We observe that the chances of failure in land acquisition for the private business would be more if the land acquisition style is thickly sandwiched, by multiple layers of political contestation and authority, between the communities giving up their livelihood rights and the private business interested in the deal. This failure can be attributed to non-co-operative stance adopted by the different parties involved, information asymmetry between the locals and the private business, involvement of more number of intermediaries in communication, involvement of self interested parties (political and other rent seeking agents), and wrong signals and misinterpretation of signals between each other (primarily the locals and the private business). On the other hand, we also observe that the key ingredients of successful land acquisitions includes: less reliance on agricultural land; providing attractive compensation to local communities (with a scope for sharing potential upside); direct engagement with stakeholders; avoiding formal political alignments; and keep low profile with planned communication channels resulting in minimal information asymmetry between the key parties. Based on the study, we advocate that successful land acquisition for Greenfield projects go beyond gaining mandatory legal and environmental licenses to gaining social consent to operate from a wider stakeholder base.

The impact of war and terrorism on sovereign risk in the Middle East

The prolonged war in Iraq, the political turmoil in Lebanon, the heightened tension between the Israelis and the Palestinians, and the spectre of an attack on Iran have significantly increased business uncertainty in several countries in the Middle East and North Africa (MENA). Sovereign risk — the credit risk assessment to the obligations of central governments — is believed to have increased. In response, credit rating agencies like Moody's and Standard and Poor's have revised their ratings or placed specific countries on their watch lists, a move that normally precedes a credit rating change. Using data from Morgan Stanley and Euromoney, we propose to quantify and explain the variability of sovereign risk in five MENA countries and two control countries between 2002 and 2006 using a set of dates in which a tragic event has taken place. Our methodology will allow us to test the extent to which the heightened political tension in the Middle East has altered the risk profiles of these countries and to challenge the assumptions made by rating agencies.

IT applications portfolio management under business and implementation uncertainty

Corporations need to improve business processes in order to enhance velocity and service levels while reducing their processing costs and differentiating themselves in the face of competition. The levitation of importance beyond support roles has raised IT investment decisions to high priority in chief executive officers’ agendas. Corporate planning groups as well as lines of business are increasingly applying techniques of IT applications portfolio management in a more systematic fashion to improve decision-making and resource-allocation processes. Recent advances in software engineering and IT service delivery methodologies have achieved the logical separation of business functions from implementation. This separation has made a new breed of innovative IT project possible with a new project risk structure; the adjustment of portfolio management techniques is appropriate. We present an integrated portfolio management model so that the corporation can focus on organic growth through sources at both the department and top management levels. The research gives clear advice as to how top management can seek economic growth by selecting an entrepreneurial strategic posture, implying a strong risk-taking propensity. By integrating a risk-return model and risk-tolerance paradigm to cope with today’s risk structure, overall capabilities can improve the decision process and the corporation’s performance as well. The application of the integrated technique to a Japanese manufacturing firm is described.

The Rise and Fall of the Estonian Genome Project

This paper presents the case study of the Estonian Genome Project (EGP) during its initial phase from 2001 to 2007. In these years, the EGP was an independent foundation established by the Estonian government and almost fully financed by foreign and local private venture capital. In essence, it was a public-private partnership in science, research and development. At the end of 2004, this governance structure broke down and private funding was pulled from the project. The paper discusses what went wrong with the EGP and what the main policy lessons are, namely that particularly developing and transition countries like Estonia with low administrative and policy implementation capacity should approach public-private partnerships in high-tech research and development with high caution as conflicts of interests and loss of accountability seem likely; this is particularly the case in biotechnology because of the high scientific and business uncertainty characteristic of the field.

Bayesian belief network for box-office performance: A case study on Korean movies

Due to their definition as experience goods with short product lifetime cycles, it is difficult to forecast the demand for motion pictures. Nevertheless, producers and distributors of new movies need to forecast box-office results in an attempt to reduce the uncertainty in the motion picture business. Previous research demonstrated the ability of certain movie attributes such as early box-office data and release season to forecast box-office revenues. However, no previous research has focused on the causal relationship among various movie attributes, which have the potential to increase the accuracy of box-office predictions. In this paper a Bayesian belief network (BBN), which is known as a causal belief network, is constructed to investigate the causal relationship among various movie attributes in the performance prediction of box-office success. Subsequently, sensitivity analysis is conducted to determine those attributes most critically related to box-office performance. Finally, the probability of a movie's box-office success is computed using the BBN model based on the domain knowledge from the value chain of theoretical motion pictures. The results confirm the improved forecasting accuracy of the BBN model compared to artificial neural network and decision tree.

Entrepreneurial internationalisation: a case study of Libra company

PurposeThis paper aims to contribute to the understanding of internationalisation processes in transition economies, and to make an attempt to conceptualise a new model of entrepreneurial internationalisation.Design/methodology/approachA theoretical model of entrepreneurial internationalisation is developed, which is then tested in a case analysis of a Lithuanian company. The paper draws on Uppsala internationalisation theory, network theory and theories of international entrepreneurship.FindingsAnalysis shows that knowledge, to be a tool for decision making in the internationalisation process, is used to create beliefs or “images” of markets. Second, it is argued that incomplete, fragmented, and even contradictory knowledge results in a system of assumptions about international environment. Under the conditions of a highly turbulent business environment, risk and uncertainty could be handled once they are interpreted by creating a set of beliefs. These beliefs serve as a basis for international opportunity perception and recognition. Findings indicate that in the process of entrepreneurial internationalisation, opportunity plays a crucial role, since it shapes the mode and direction of further actions. Entrepreneurs perceive international opportunity as a future picture of reality, and their actions are organised according to this picture.Research limitations/implicationsThe paper is based upon a single case study of a company from a transition economy. Further, research development through many case studies in different countries with transition economies may enhance one's understanding of international entrepreneurship.Practical implicationsThe study provides valuable knowledge for organizations intending to operate in turbulent economic environments.Originality/valueThe internationalisation process of the companies from transition economies is scarcely discussed in international entrepreneurship theory – and hence the paper addresses an important research gap. The study introduces new elements in the chain “knowledge – internationalisation event”. It is argued in the paper that those elements are beliefs and opportunities. The model shows how these elements interact in the process of internationalisation.

Channel relationship and business uncertainty: Evidence from the Hong Kong market

This study examines the dynamics of channel relationships between an end user and multiple suppliers in Hong Kong, a major international logistics hub in Asia. Drawing on the literature on channel relationships, we examine the links between different channel relationship variables and the contingent effect of business uncertainty on the links between these variables and supplier commitment. The results of the study indicate that expected relationship continuity mediates the effects of trust and relationship quality on commitment. Furthermore, the positive effect of trust on commitment is found to be stronger when business uncertainty is high than when business uncertainty is low. As supply chain management is becoming essential for firms to succeed in today's business, industrial marketing managers need to be aware of the dynamics in channel relationships and to better manage their supply chains. The implications of our findings for research and for the practice of channel relationship management are provided.

Linking forward and reverse supply chain investments: The role of business uncertainty

This paper explores managerial efforts in reverse supply chains (RSC), where the focus is on the capture and exploitation of used products and materials. The RSC can potentially reduce negative environmental impacts of extracting virgin raw materials and waste disposal. If so, investment in the reverse supply chain should not be made in isolation, but instead must be integrated with investments selected to improve the forward supply chain. After defining and operationalizing these constructs, a survey of plant managers was used to empirically assess the linkages between supply chain investments, organizational risk propensity (i.e., willingness to take risk) and business uncertainty. Reverse supply chain investment had two primary dimensions: reconditioning (i.e., high-value recovery) and recycling and waste management (i.e., low- or no-value recovery). Ongoing investment in the forward supply chain was significantly related to investment in recycling and waste management, but not to investment in reconditioning. Moreover, risk propensity was found to mediate the relationship between the external business uncertainty and investment in the forward and reverse supply chain.

A new technology paradigm for collaboration in the supply chain

'Just-in-case inventory' is one of the traditional methods of reducing uncertainty in business. The unfortunate consequence of this approach is the bullwhip effect. An alternative approach is some form of collaborative scenario. Unfortunately, neither approach guarantees optimisation across the supply chain. The fundamental reason for this is found in the rational behaviour that participants in the process adhere to. As it is impossible to suppress rational behaviour, a solution for this problem is sought through orchestration and rigorous implementation of the Collaborative Planning, Forecasting and Replenishment (CPFR) process. A technology framework that promises to facilitate this objective is a Service Oriented Architecture (SOA) based on web services. However a new paradigm, more suited to collaborative business scenarios, is needed. Pi-calculus, coupled with business process modelling and web services, seem to offer a solution. This paper sketches the direction for future research.

Growth, Private Investment, and the Cost of Doing Business in Tunisia: A Comparative Perspective

In Tunisia's emerging, more competitive environment, the key precondition for accelerated growth and faster job creation is greater investment, compared to other high-growth countries, Tunisia's growth was driven more by public and less by investment. Comparisons with fast-growing countries also suggest that consolidating and further improving Tunisia's human capital assets, and further strengthening the macroeconomic fundamentals are additional conditions for sustained growth. But despite Tunisia's solid macroeconomic fundamentals and generous investment incentives, investment remains compressed at levels below potential compared to other fast-growing countries. Moreover, empirical evidence suggests a loss of momentum of investment since the mid-1990s. Possible reasons include the limited openness of key services to competition, heightened business uncertainty stemming from commercial risks, and weaknesses in economic governance — in particular regarding the predictability and transparency of the regulatory framework — that weaken the investment climate. The analysis examines the quality of the regulatory framework for doing business, a key underpinning of the investment climate. Tunisia ranks well in a number of regulatory areas that affect a firm's operations during its life cycle. But in other key areas regulations are not conducive for doing business: employment termination; credit information sharing; creditor's rights in bankruptcy; and business exit. Well-sequenced reform in these areas would help bridge Tunisia's private investment gap.

Business cycles and research investment

This paper examines the impact of uncertainty and the business cycle on US high-tech manufacturing firms’ research investment. Although the reliance on internal financing suggests firms will consider uncertainty and the business cycle when determining their research budget, little is known about how the business cycle and uncertainty influence research investment. Using firm-level data on sales, cash flow, and industry-level indicators of the business cycle, this paper finds that the firm's response to the business depends on the firm's industry and the industry's current location in the business cycle. The data also shows that the business cycle also depresses the firm's reaction to changes in sales and cash flow. Uncertainty clearly reduces research efforts, although non-linearly.

Value-Based Multidisciplinary Optimization for Commercial Aircraft Design and Business Risk Assessment

Traditional commercial aircraft design attempts to improve performance and reduce operating costs by minimizing takeoff weight. A better design approach also takes into account factors such as aircraft demand, market uncertainty, and development and manufacturing costs. This paper presents a design methodology that integrates an aircraft performance model with a program valuation technique based on real options theory to address uncertain market demand and managerial flexibility. The coupled performance/financial framework enables an integrated approach to technical design and programmatic decisions. In addition, the methodology provides a framework for specification of design requirements and for quantification of the financial implications associated with technical and business uncertainty. The methodology is demonstrated for an aircraft design example of the blended-wing-body concept. Comparing performance-optimized and value-optimized designs, we show that use of value as a design metric leads to a trade-off between aerodynamic efficiency and reduced manufacturing costs. Key findings demonstrate that traditional financial metrics cause the decision maker to focus overly on reducing costs in the short term. The stochastic methodology shows that a willingness to spend up-front money in the design process to ensure long-term profitability is a better strategy.

Gender differences in expected compensation for earnings uncertainty and skewness in business and education

Using data measuring the labor market expectations of college seniors and juniors, who major in business and education, this paper examines gender differences in expected compensation for earnings uncertainty and skewness. Ordinary least squares regressions indicate gender differences in uncertainty and skewness in business. Estimates of expected beginning salaries indicate higher uncertainty and skewness coefficients for women compared to men. This could reflect a greater degree of risk aversion by women in business or their plans to engage in part-time work shortly after graduation. Later salary estimates indicate lower uncertainty and skewness coefficients for women. Student error in estimating these salaries may be the cause of these results. They may also reflect the plans of women in business to devote more time to the labor market later in their careers.

Corruption and Business Uncertainty in Indonesia

��� The main purpose of the paper is to analyse the local business environment in Indonesia after decentralization. Corruption or rent-seeking behaviour is focused on bribery and the market for local (district) government regulatory goods such as business licence, fire safety inspection, compliance to environmental regulations, local tax appraisal, building permits, and employment contract inspection. We abstract from other rent-seeking activities like lobbying governments for particular projects, industrial protection, and exclusive monopoly rights. In the model, government regulation can be customized to extract rent. A firm has to spend time and money to reduce its burden. The paper uses a method based on the standard theory in economic analysis that a firm would engage in negotiation if the burden is sufficiently high, and only if the marginal effectiveness of bribes after taking into account uncertainty exceeds the marginal cost of bribes in negotiation. The empirical results of the model suggest that uncertainty plays a significant role in affecting bribe level. In addition, from the way the uncertainty variable is constructed, there is also an indication that some fragmentation of bribe collection system has taken place.

MNEs’ strategies in Central and Eastern Europe: key elements of subsidiary behaviour

Abstract * At the centre of the interface between the developmental needs of national industry and evolutionary processes in the MNEs' subsidiaries are knowledge-seeking and knowledge-generation processes. * Based on new survey evidence, we examine the strategies of MNE in Central and Eastern Europe (CEE). In particular, we investigate the knowledge characteristics of MNE subsidiaries in CEE by analysing the roles of subsidiaries, market orientation and sources of technology over time. Key Results * Initially market-seeking operations dominated in CEE, with little integration of CEE subsidiaries into global MNE networks. The relative scarcity of export-oriented efficiency-seeking operations in CEE can be explained by persistent high-levels of uncertainty in CEECs and resistance from MNEs' longer-established Western European manufacturing subsidiaries. * European MNEs pursue the most country-centred strategies while the Asian MNEs have the highest export-orientation. Also it is found that CEE subsidiaries in motor vehicle and mechanical engineering have the highest export-orientation to European Union markets. However we suggest that product differentiation using CEE creative capabilities (i.e. technology and engineering expertise) rather than cost-competitiveness, may ultimately secure a more sustainable and embedded entry into MNEs' wider European (or global) networks. * Host governments may consider targeted and coherent policies that reduce business uncertainties and, thus, may sway MNEs to locate higher value-added activities in their country. Introduction MNEs pursue a variety of strategic objectives when investing in Central and Eastern Europe (CEE), thus establishing different types of operations (Estrin/Hughes/Todd 1997, Mutinelli/Piscitello 1997), and interacting in different ways with the host economy. This paper examines which alternative strategies are being pursued by multinational enterprises (MNEs) in CEE and their implications for the processes of industrial transformation and economic development in CEE. The contributions to the host economy would greatly vary with the heterogeneity of MNEs' operations and evolutionary processes that emerge at subsidiary level. Our analysis thus aims to provide a fuller understanding of how MNEs contribute to sustainable economic development. At the centre of the interface between the developmental needs of the host-country economy and evolutionary processes in the MNEs' subsidiaries are knowledge-seeking and knowledge-generation processes. A major research concern is thus how MNEs contribute to knowledge accumulation by providing a creative component in the transformation of transition economies (Dunning 1994, Manea 2002, Meyer 2004). This study addresses these issues by analysing the characteristics of subsidiaries that may influence the nature and value of MNEs' contribution to economic development. Recent research has analysed MNE operations in CEE economies in terms of motivations for foreign investment and types of subsidiaries (Lankes/Venables 1996, Mutinelli/Piscitello 1997, Meyer 1998, Rojec 1994, Rojec/Svetlicic 1993, Estrin et al. 1997, Donges/Wieners 1994). We go beyond this literature by considering the contribution of foreign enterprises to transition economies as being caseor role-specific. Subsidiaries have different strategic roles in their MNE group and vary in many attributes and their business activities. In consequence, they differ in their interactions with the local environment and their contribution to economic development (Meyer 2004). The needs of transition economies have evolved in two distinct phases: 1) the fundamental restructuring of the industrial sector and 2) the post-transition phase with more steady changes. The second phase involves different challenges as firms and countries have to sustain international competitiveness by developing and exploiting dynamic sources of comparative advantage. …

縁日娯楽の事業化への道

The entertainment industry of pachinko, Japanized pinball machines, is a unique business to Japan. Although its total market size exceeds that of such significant industries as iron and steel and chemicals, history research has long neglected this business. Partially it is because in the mind of ordinary people the industry still remains in the gray zone of legalized yet antisocial gambling that is characterized by tax evasion and connections to organized crime. It may also be because the industry historically developed thanks to the active contributions of ethnic minorities in Japanese society like Koreans and Chinese. Actually, pachinko business including both upstream machine-making to downstream service establishments stands as the only large industry in which the minority groups have played a predominant role in Japan.Although the pachinko entertainment originated on the busy street of temple and shrine festivals in pre-World War II Japan, the modern development resulted from the legalization of pachinko gambling after the war. The number of pachinko places thus skyrocketed to 43, 452 in 1953 from 4, 818 establishments in 1949, although the number then rapidly declined to 8, 487 in 1957. The turbulent 1950s symbolized the decade in which the basic organization of the industry got established thanks presumably to the emergence of innovative machines and the alterations of police regulations regarding high-risk gambling.The present article focuses on the entrepreneurial activities of Takeichi Masamura whose mechanical improvement called Masamura-gauge revolutionized the pachinko machine that became more technically sophisticated. While Masamura did not deliberately register for the patent of his invention for the sake of the overall development of the pachinko industry, his business combining the machine-making segment and the amusement establishments still flourished thanks to the strong sales of his machines and the technical know-how his company possessed as a manufacturer.In 1955, however, police regulation got altered in order to prevent the gambling craze of pachinko, which drastically changed the performance of the industry in general. Masamura's enterprise was also hit hard as the demand for new equipment suddenly declined. His downstream pachinko amusement segment, on the other hand, could improve the profitability, because the new regulation eventually lowered the business uncertainty that had been associated to the progressively risky equipment. Given the new regulatory environment and the stabilized structure of the industry the performance of pachinko business now depended upon accumulated managerial know-how and capabilities, rather simple luck or technical skills. Principles of scale economies kicked into the industry and the average size of amusement establishments would get larger in the 1960s. The new entry thus became difficult for both machine-making and amusement segment because of the requirements for financial resources and managerial know-how.

Managing Risk and Regulation in European Food Safety Governance

AbstractThis article focuses on the state of European food safety governance and offers a view on possible future courses of regulatory policymaking. We begin by examining the deficiencies of the current multilevel governance system in European Union (EU) food safety policy, with an empirical focus on Hazard Analysis and Critical Control Point (HACCP) systems. We then submit that a regulatory agency model (centralization) might perform better than multilevel governance or renationalization in terms of reducing business uncertainty, promoting food safety enhancing innovation, and improving consumer trust in the food supply. Hence it would make European food markets more resilient to recurrent food safety crises. We also argue that the EU's precautionary approach as applied to some areas of food safety risks is tied to legitimacy enhancing objectives of EU institutional actors. Assuming that supply‐side rents will change over time, we submit that emphasis of regulatory impact analysis (i.e., cost benefit considerations) is likely to increase.