- (en)The Case For Spain (ARCANO) (PDF, 80 pages)
- (en)The Case For Spain (ARCANO) Summary (PDF, 38 pages)
- (es)The Case For Spain (ARCANO) Resumen PDF
Feb 7, 2013
April 8, 2013, INSEAD Knowledge"small, non-committal steps"
“It’s interesting to note that the Chinese ideogram for crisis has two key characters,” says INSEAD Professor of Organisational Behaviour, Herminia Ibarra. “One stands for opportunity and the other for danger.”
...“We like to think that the key to a successful career change is knowing what we want to do next then using that knowledge to guide our actions,” she writes. “But studying people in the throes of career change crisis led me to a startling conclusion: change actually happens the other way around. Doing comes first, knowing second.”
March 15, 2013. Ioannis Ioannou (@iioannoulbs), Assistant Professor of Strategy and Entrepreneurship at London Business School and Heather Hancock, Managing Partner, Innovation Talent and Brand at Deloitte discuss corporate social innovation and how large organisations can use their skills, expertise and synergies to help solve major environmental and social challenges.
When Princeton professor Anne-Marie Slaughter published an essay in The Atlantic titled, "Why Women Still Can't Have It All," in July 2012 (most popular article of all-time of The Atlantic), she touched a nerve across generations and among both men and women, setting off a renewed public debate on women's progress and work-life balance.
Slaughter recently visited campus as a guest lecturer in the Authors@Wharton series and spoke directly to the people who she says inspired her to write the piece: this generation's students. In an interview for Knowledge@Wharton with Stewart Friedman, Wharton practice professor of management and director of the Wharton Work/Life Integration Project, Slaughter, former director of policy planning for the U.S. State Department, shares what it was like to draw back the curtain on her life as someone perceived to "have it all," and why she passed up the promotion of a lifetime to be with her family. She also suggests how companies can make life better for both women and men, and what society collectively must do to support the next generation.
An edited transcript of the conversation follows...
"The longer the capital is invested, the lower rate it’s taxed at, until it gradually approaches zero and maybe goes negative".
Clayton Christensen Wants to Transform Capitalism, Wired.com, February 12, 2013.
Howe: You’re working on a new book now, right? The Capitalist’s Dilemma. How is that related to the Innovator’s Dilemma?
Christensen: I wrote a piece for The New York Times just before the election. I was wrestling with a paradox. If you look at the financial measures of prosperity in the economy, things seem to be going just great, especially company balance sheets. They haven’t been so strong in decades.
Howe: High market caps all around.
Christensen: It looks like the economy is emerging from the recession in an exciting way, but we’re not creating more jobs or income for the average person. And in all humility, I think I articulated a simple model that explains why. The bad actors are business school professors like me who have been teaching people what I call the Doctrine of New Finance. We’ve encouraged managers to measure profitability based on a return on net assets, or return on capital employed. That encourages companies to liberate their capital, so they invest in efficiency innovations, which means they can make more money with fewer resources. But what the economy ultimately needs are empowering innovations—like the Model T, the transistor radio. Empowering innovations require long-term investments, which tie up capital for years and years. So companies are using capital to create more capital, and consequently the world is awash in capital but the innovations we need to advance aren’t there.
Howe: What’s the solution?
Christensen: I don’t know the solution, but I believe solutions exist. The government can’t dictate, “Oh, that’s an empowering innovation and that’s not.” But what government can do is create tax rates that transform what I call migratory capital into productive capital. Migratory capital flows to investments that will maximize the speed with which it can then be withdrawn, which plays to the doctrine of new finance. Productive capital wants to stay on the job and not go truant after 366 days.
Howe: Can we structure a tax code that encourages that?
Christensen: Absolutely. The idea would be to peg a tax rate to the length of time the capital is deployed. The longer the capital is invested, the lower rate it’s taxed at, until it gradually approaches zero and maybe goes negative.
...In Ireland we see the success of Hibernia (YouTube), which operates a blended approach with mostly online lectures and some on the ground practical instruction in required areas...
...Despite the doom that is poured out that we have no university in the top 100, every single Irish university is in the top 5% of the THES rankings. Every one is world class. We have a world-class industry here. Within disciplines we have world-class researchers and teachers, in pretty much ever-single discipline.
A MOOC or 10 would demonstrate that to the public and to the wider world. Every international student is an export — lets place ourselves in the world shop window
This session was developed in partnership with Time magazine and broadcast on CNN Money.
Kelley School of Business, INDIANAPOLIS, Ind.—The Strategic Management Society (SMS, StrategicManagement.net) recently elected as president Marjorie Lyles, professor of international strategic management at the Kelley School of Business and OneAmerica Chair in Business Administration. Lyles will be the first female president in the society’s 33-year history.
“It was an election of the membership, which is quite an honor,” said Lyles, of the 3,000-member international society, with members from more than 80 countries and which publishes the highly influential Strategic Management Journal (SMJ), as well as numerous other publications. “I am looking forward to proudly representing the Kelley School of Business in this leadership role.”
The first female management professor at the Kelley School of Business, Lyles has authored more than 100 articles and chapters. Sun Yat-sen University in China recently nominated Lyles for the prestigious Chang Jiang Scholar Award, the Chinese government’s highest award to scholars. In 2011, she received from Indiana University the John W. Ryan Award for her distinguished contributions to international programs, teaching and research.
“Professor Lyles has built her career on in-depth knowledge of business in countries across the globe,” said Idalene Kesner, interim dean of the Kelley School and the Frank P. Popoff Chair of Strategic Management. “Her extensive contributions to strategic management and international business have furthered the Kelley brand. As a member of the Strategic Management Society, I am particularly enthusiastic about the fact that the first female president is from the Kelley School of Business.”..
Simon is a University Lecturer in Finance at Cambridge Judge Business School and is Director of the University of Cambridge Master of Finance (MFin) degree. An economist and former equities head analyst at JPMorgan and Citigroup, he teaches on financial markets and institutions. He has done research on the financing of nuclear power and is now working on Chinese banks. Faculty page
Every country is unique but some are more unique than others. Japan, though quite obviously not located in the geographic western hemisphere, is part of “the west” as a group of rich democracies with advanced economies. Its inclusion is not because it has any historic link to the west, unlike other eastern hemisphere economic success stories like Australia or New Zealand, or even Hong Kong and Singapore. It is the only example of an advanced economy in Asia. Or, to emphasise political science rather than economics, it is the only example so far of true non-western modernity. Other Asian economies are catching up, such as South Korea, Taiwan, Singapore and coastal China. But Japan has been in the western economic league for a century and a democracy (with some interruptions) for longer than more recent Asian converts.
But Japan, despite being the world’s third largest economy, is largely ignored in the western media. It plays a modest role in world affairs, though it is the largest giver of foreign aid. Its international cultural impact is now far less than that of South Korea. And when it is mentioned it is largely as a cautionary tale, a story of what could happen to the US or European economies if they fail to overcome the risk of stagnation.
But Japan looks to become quite interesting in the next year, for two reasons, both linked to the recent general election...
Sports Management Prof. Eduardo Fernandez-Cantelli talks about what running really means for him: Motivation, Meditation and Metamorphosis.
A lot of people run as a way to keep fit, but only few are able to extract daily life lessons from running. This is exactly the case of Management Sports Professor, Eduardo Fernandez-Cantelli. He says that when he talks about running he talks basically about the three Ms:
When he talks about these 3Ms he has in mind the book “What I talk about when I talk about running” by Haruki Murakami. If you remember well, there was a short story “What We Talk About When We Talk About Love” by Raymond Carver, from which Murakami took the title from. Bear in mind he has translated Carver´s works into Japanese. Nobody though has stablished yet what´s the relation between love and running. You wanna try it?
Prof. Fernandez-Cantelli says that there are three reasons to explain failure: Not enough training, not enoug training and not enough training. I really admire his determination and endurance.
Published on 12 Jul 2012What does the world's largest repository (Thomson Web of Science) of more than 26 million scientific papers tell us about trends in the production of scientific knowledge? There appears to be a nearly universal end to the era of the solo scientist and a rise in the supremacy of teams. The advantage of teams is growing and frontier of knowledge is reached through the invisible but complex networks through which scientists assemble teams.
Back in October when I first spoke about shooting this video of the Dean of IE University’s School of Architecture, Javier Quintana, he said he would like to compare the architecture of Venice with the architecture of New York, more specifically the Campanile in Piazza San Marco and the Metropolitan Tower. Coincidentally enough I had to travel to New York at the end of that month and had the opportunity to film some of the places he wanted to talk about. Then, in November, I joined him on a business trip to Venice. I had a great time, partly because there aren’t many cities that can beat Venice on a sunny day, or any other day for that matter, and partly because he spoke with such passion and knowledge about the two cities that I gained a new perspective of every corner, every square, and every tower.
Unfortunately, I couldn’t fit all the interesting things he said into this video, and he didn’t only talk about architecture, but also about music, cinema, and life in general. So there I had no room left to say anything about either the amazing Schubert or the fabulous Death in Venice (both the film and the book). I decided to focus more on the life side of things. You’ll be interested to know that Dean Quintana is really good company when it comes to looking round shops.
P.S.: Don´t miss Martin Rico´s (1833-1908) Venice paintings at Prado Museum. Only till February 2013.
By Harvard Professors Robert G. Eccles & George Serafeim
Globalization has concentrated economic power within a group of large companies who are now able to change the world at a scale historically reserved for nations. Just 1,000 businesses are responsible for half of the total market value of the world's more than 60,000 publicly traded companies. They virtually control the global economy.
This vast concentration of influence should be the starting point for any strategy of institutional change toward a sustainable society...
Scary: over 1000 new coal plants are planned worldwide, totaling 1400GW - like "adding another China" to GHG emissions: m.guardiannews.com/environment/20…— HBS Environment (@HBSBEI) December 7, 2012
Michael Porter, An eight-point plan to restore American competitiveness, The Economist, Nov 21st 2012
2. Simplify the corporate tax code with lower statutory rates and no loopholes. Our corporate tax code is, as our colleague Mihir Desai puts it, the worst of all worlds, with the highest tax rate among OECD countries, but actual revenue collection is low due to loopholes and deductions. Companies respond by aggressive tax planning, seeking offshore tax havens, (See video on BBC, July 22, 2012, Tax havens: Super-rich 'hiding' at least $21tn, maybe $32tn, and www.taxjustice.net +OECD reports) and locating jobs abroad.
Banking Competition, Housing Prices and Macroeconomic Stability (with Oscar Arce). The Economic Journal, (forthcoming, 2012)
Job Creation in Spain: Productivity Growth, Labour Market Reforms or both? (with J. Boscá, R. Doménech and J. Ferri). Chapter 3 in The Spanish Economy: A General Equilibrium Perspective. Boscá, J. E., Doménech, R., Ferri, J., y J. Varela (Eds.). Palgrave MacMillan (Londres, 2011).
Household Leverage and Fiscal Multipliers (with J. Boscá and J. Ferri) Banco de España, Documento de Trabajo 1215. 2012Price Rigidity and the Volatility of Vacancies and Unemployment (with R. Doménech and J. Ferri). New draft, 2011.
EFMD.BlogActiv.eu, 30 October, 2012
In his recent contribution to the EFMD business magazine Global Focus, Sir Richard Lambert, Chancellor of Warwick University, suggests four key issues that businesses will require of their future leaders: Ability to manage diversity; Capacity to deal with uncertainty; A proper understanding of the role and workings of government; A developed understanding of the role, responsibilities and purposes of business itself.
EFMD would like to share this article with its blogactiv readers as another reflection from the community of Business Schools on the future of business education and to ask if it responds to recent socio-economic transformations. It can also be seen as a reference to the current policy evolution and discussions in relation to the roles and impact of higher education institutions...
Illuminated Leadership, Wise Governance, And How The Jesuits Invented Modern Management by Paolo Quattrone, IE professor of Accounting and Management Control
How did the Jesuits accomplish tremendous expansion with endurance?
Think of an organization that, in just a few decades, grew from seven to about 13,000 members, across four continents with 495 branches to serve and manage an indefinitely growing number of clients. These are remarkable achievements by any standard..
Copyright ©2006, William M.K. Trochim (Cornell U.): In fact, some of the best "qualitative" research is often published in book form, often in a style that almost approaches a narrative story. One of my favorite writers (and, I daresay, one of the finest qualitative researchers) is Studs Terkel. He has written intriguing accounts of the Great Depression (Hard Times), World War II (The Good War) and socioeconomic divisions in America (The Great Divide), among others. In each book he follows a similar qualitative methodology, identifying informants who directly experienced the phenomenon in question, interviewing them at length, and then editing the interviews heavily so that they "tell a story" that is different from what any individual interviewee might tell but addresses the question of interest. If you haven't read one of Studs' works yet, I highly recommend them.
Louis "Studs" Terkel (Wikipedia) (May 16, 1912 – October 31, 2008) was an American author, historian, actor, and broadcaster. He received the Pulitzer Prize for General Non-Fiction in 1985 for “The Good War”, and is best remembered for his oral histories of common Americans, and for hosting a long-running radio show in Chicago...
Issue Volume 33, Issue 10, pages 1115–1134, October 2012
We examine how new biotechnology firms (NBFs) select pharmaceutical firms as R&D allies as a function of value creation and value appropriation considerations. We develop a theoretical framework to understand partnering decisions accounting for both, a potential partner's ability as well as incentives to appropriate and create value within an R&D alliance. Our empirical findings show that NBFs are more likely to ally with pharmaceutical firms with the ability to create value, as long as these firms have the incentives to use their skills to create rather than appropriate value. Our study highlights the double-edged sword nature of value creation skills and provides a deeper understanding into the contextual factors that determine when potential R&D partners will perceive such skills as increasing appropriation risks.
Copyright © 2012 John Wiley & Sons, Ltd.
Lynda Gratton is Professor of Management Practice at London Business School and is the founder of the Hot Spots Movement. She has written seven books and numerous academic articles and is considered one of the world’s authorities on people in organizations.
In 2011 she has been ranked by The Times as one of the top 15 Business Thinkers in the world today and in 2008 The Financial Times selected her as the business thinker most likely to make a real difference over the next decade. She was also in the top two of the Human Resources Magazine’s “HR Top 100: Most Influential” poll, and this year Lynda was number one of Human Resources Magazine’s “Top 25 HR Most Influential UK Thinkers 2011” poll.
We may be happy to eat the food that multinationals make, and fly in their aircraft, and even take the pills they have invented. But many of us say we don’t trust corporations, and we don’t trust the people who lead them. Some are even willing to go out onto the streets to make this clear. It seems to me that now is the time for corporations and their leaders to be more explicit and transparent about their purpose and goals.
To do this, corporations have to address three questions: how is leadership ensuring there is sufficient inner resilience to take the corporation through these turbulent times? What is the corporation doing to positively anchor itself in its neighborhood and supply chains? And what role is it playing in solving global challenges such as climate change, endemic youth unemployment, and inequality?
Some leaders are already stepping up. When Unilever’s CEO Paul Polman committed to significantly reducing the environmental footprint of his corporation, he was making a purposeful statement about climate change. When Danone’s CEO Franck Riboud committed over seventy million euros to the Danone.Communities project (www.danonecommunities.com), he was making a purposeful statement about the role of the corporation in society. When the CEOs of Indian IT giants Infosys, TCS and Wipro built a host of ways to educate Indian children, they were making a statement about their role in India.
These role models are crucial. We need to see more – and at scale!..
HBR blog network, November 9, 2012
As America turns its attention to the "fiscal cliff," the proposals on the table look at solutions that will either shrink the economy (e.g. cutting expenses and raising taxes) or make it stagnant (e.g. reduce tax rates but recover the revenue from fixing deduction loopholes).
Are there ways to expand the pie, instead? Here's one idea: turn the trade deficit into a trade surplus.
The trade deficit is goods and services we have consumed but have been provided by other countries. Over the last 10 years, the trade deficit has been between $400 billion a year and $800 billion a year.
For the purposes of this thought experiment, let us assume an average trade deficit of $600 billion a year. If every company had to pay a tax for the "deficit" they caused, and got a tax credit for the "surplus" they contributed; the goals and aspirations of entrepreneurs, businessmen and industrialists will be aligned with those of the country...
Kathleen Eisenhardt is widely known for her work on strategy, strategic decision making, and innovation in rapidly changing and highly competitive markets. She has also pioneered in building theories from case study research. Even though only a portion of Eisenhardt’s work can be directly and explicitly labeled as ‘entrepreneurship’ research, she has made significant contributions to this relatively new and rapidly evolving field. Her main contribution to the entrepreneurship field is her work on ‘corporate entrepreneurship’ – how existing organizations can remain innovative, including through new venture creation.
Eisenhardt’s work links the domain of entrepreneurship research to the fields of dynamic capabilities, strategy and decision making processes, and organization theory and design. She has examined how established organizations can introduce a continuous stream of novel products and services through better new product development processes as well as more efficient ways of organizing their activities. She has also looked at how ‘strategic decisions’ are taken, especially with respect to how new ventures are formed and how they forge linkages with competitors, how they grow and survive through innovation as well as by shaping the rules of competition.
In sum, Kathleen Eisenhardt has made substantial, original and influential contributions both theoretically and empirically that establish entrepreneurship research more solidly in both the management and the economics literature.
See a short summary from the 2012 Award Ceremony.
papers.ssrn.com..March 30, 2011Ioannis Ioannou London Business School, George Serafeim Harvard University - Harvard Business School
We examine the effect of mandatory corporate sustainability reporting (MCSR) on several measures of social responsibility using both country and firm-level data. Using data for 58 countries, we show that after the adoption of MCSR laws and regulations, the social responsibility of business leaders increases and both sustainable development and employee training become a higher priority for companies. Moreover, for companies in countries with MCSR, corporate governance improves and on average, companies implement more ethical practices, bribery and corruption decrease, and managerial credibility increases. These effects are larger for countries with stronger law enforcement and more widespread assurance of sustainability reports. We complement the country-level analysis using environmental, social and governance metrics at the firm-level in conjunction with a differences-in-differences research design and we find that for the treatment group, energy as well as waste and water consumption significantly decline, while investments in employee training significantly increase after the adoption of MCSR laws and regulations.
Richard A. D’Aveni is the Bakala Professor of Strategy at the Tuck School of Business at Dartmouth College and author of Strategic Capitalism: The New Economic Strategy for Winning the Capitalist Cold War (McGraw-Hill; 1 edition (July 31, 2012), 304 pages)
With the rise of China as an economy, a question hangs in the air: Can America beat state capitalism? The evidence is not encouraging. The U.S. has lost millions of jobs to the Chinese. It will lose millions more if China, as it proposes, turns itself into a high-tech giant in critical industries ranging from telecommunications to aviation.
The rise of state capitalism has put the U.S. at a competitive disadvantage. State capitalism operates with zero-sum rules, in which one country gains as another loses. This is hardball competition, dog eat dog. And the Chinese dog is eating the American one in products ranging from cell phones to steel.
Zero-sum capitalism is not the form of capitalism U.S. policymakers see as the challenge in global markets. U.S. policymakers are guided instead by the idea of a win-win world. When everyone trades freely, business expands across the board. Every country wins. This free-market, open-trade approach is enshrined in the World Trade Organization...
The Other Side blog, "A special marriage", October 22, 2012
Before Professor of Strategic Management Caterina Moscheri gives an address on corporate governance at a conference being held at Judge Business School in Cambridge, we have agreed to shoot this video about a “Special Marriage”.
8 a.m. We don’t have much time before she is due to speak, but on the plus side we are very pleasantly surprised to find that despite a horrendous weather forecast, the sky is blue and the sun is shining. So England 1, rest of the World 0. As Shakespeare said, “Something is rotten in the state of Denmark”.
this video Professor Moscheri talks about one of the subjects of her
research, (cross-border) Mergers and Acquisitions (M&As) (in Europe in the decade before the economic crisis), and takes us to a rugby
pitch, King’s College…
By the time we finish, the sky is gray and threatening rain. So now it’s England 1, rest of the world 1.
Finita la Comedia!!!
Professor Moscheri is fluent in several European languages, and runs almost every day.
P.S. Did you know that Pink Floyd is a Cambridge Band? Also she recommended an excellent film, “Moneyball”. You should try it!!!
Professor of Ocean Physics, and Head of the Polar Ocean Physics Group in the Department of Applied Mathematics and Theoretical Physics, University of Cambridge.
Prof Peter Wadhams calls for “urgent” consideration of new ideas to reduce global temperatures.
As sea ice shrinks to record lows, Prof Peter Wadhams warns a 'global disaster' is now unfolding in northern latitudes
Winston Churchill: "The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is"“The extra radiation that’s absorbed is, from our calculations, the equivalent of about 20 years of additional CO2 being added by man,” Prof Wadhams said.
Practical case study on how Tide became a long-term money machine using consumer-focused innovation http://ow.ly/dxwDB
Patrick Barwise (email@example.com) is Emeritus Professor of Management and Marketing at London Business School. Seán Meehan (firstname.lastname@example.org) is the Martin Hilti Professor of Marketing and Change Management at IMD. Their book Beyond the Familiar: Long-Term Growth through Customer Focus and Innovation (www.beyond-the-familiar.com) is published by Jossey-Bass.
IE's Monika Hamori on the T50 radar. Probably the best b school researcher in the HR field. read her latest HBR article:
"Why Top Young Managers Are in a Nonstop Job Hunt", Harvard Business Review, July/August, by Monika Hamori, Jie Cao, and Burak Koyuncu.
You might suspect that your best young managers are looking for a better gig—and you’re probably right. Research shows that today’s most-sought-after early-career professionals are constantly networking and thinking about the next step, even if they seem fully engaged. And employee-development programs aren’t making them happy enough to stay.
We reached these conclusions after conducting face-to-face interviews and analyzing two large international databases created from online surveys of more than 1,200 employees. We found that young high achievers—30 years old, on average, and with strong academic records, degrees from elite institutions, and international internship experience—are antsy. Three-quarters sent out résumés, contacted search firms, and interviewed for jobs at least once a year during their first employment stint. Nearly 95% regularly engaged in related activities such as updating résumés and seeking information on prospective employers. They left their companies, on average, after 28 months.
And who can blame them? Comparing the peripatetic managers’ salary histories with those of peers who stayed put, we found that each change of employer created a measurable advantage in pay; in fact, a job change was the biggest single determinant of a pay increase...
MANILA, Philippines - The Philippine business process outsourcing industry breathed a sigh of relief as the US Senate rejected the so-called "Bring Jobs Home Act."
The bill, which would have elimated existing tax breaks for US firms that ship jobs to other countries, was blocked by Republicans at the US Senate. This despite President Barack Obama's earlier push for legislation that would encourage companies to bring back jobs to the US.
"Outsourcing business services to the Philippines helps make American companies more competitive and profitable. Profitable companies hire more workers, both here, and in the United States," Benedict Hernandez, Business Processing Association of the Philippines (BPAP) president and CEO, said, in a statement.
BPAP cited a study showing that outsourcing does not have an impact on job losses in the US.
"Dartmouth’s Tuck School of Business economist Matthew Slaughter, in a study of the hiring practices of 2,500 US multinationals, found that for every job outsourced, nearly two new jobs are created in the US," Hernandez said.
As the US unemployment rate remains high and its economy continues to sputter, some sectors have blamed American companies for outsourcing jobs to countries like the Philippines.
Many American firms have outsourced call center services to the Philippines and India in recent years, since wages here are much lower than in the US.
However, Slaughter's study showed that American jobs created by subsidiaries of foreign multinationals almost doubled over a generation, employing 5.4 million US workers...
The S&P/Case-Shiller Home Price Indices are the leading measures for the US residential housing market, tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions
...In the 1971 book “The Logic of Collective Action: Public Goods and the Theory of Groups,” the economist Mancur Olson argued that collective action problems are pervasive, plaguing nations and economic groups alike. “Most groups cannot provide themselves with optimal amounts of a collective good,” he said, because they cannot manage a “selective incentive” or arrange “coercion or some reward.”...
...If such mortgage principal reductions could be applied on a large scale, there could be large neighborhood effects, raising a sense of optimism among homeowners and bolstering the value of all homes and, ultimately, the whole economy. But mortgage lenders in all their different forms lack a group strategy...
Let’s hope Hollande was lying to get elected
by INSEAD Finance Professor Theo Vermaelen
François Hollande has promised to promote growth by increasing government spending such as hiring 60,000 more “fonctionnaires” and creating 150,000 government subsided jobs for young people. He will increase the minimum wage, shorten the retirement age and increase taxes, including essentially confiscating salaries above 1 million euros and punishing the “enemy” (increase taxes on the financial sector). He also will not sign the European fiscal treaty without a commitment to spend more European tax payers’ money. In my opinion this spells disaster for France as well as for Europe. France and Europe need the opposite strategy: reducing government spending and encouraging growth through the private sector by lowering taxes and social charges, as well as introducing labour market reforms to introduce labour market flexibility including the possibility to fire government bureaucrats.
The election also sends a disturbing message to politicians all over Europe: if you endorse fiscal responsibility and attack the European Social Model, you are likely to lose your job. Restructuring government finances, which essentially means creating short-term pain in order to promote long-term gain, is not obvious in a democracy. Too many people are addicted to the “free” lunches handed out by the massive growth of government witnessed during the last 50 years.
Financial Market Impact
If the much-hated financial market believes that Hollande is serious, French interest rates will rise, and the deficit will increase. Ambitious people will refrain from investing and working in a country hostile to income inequality (inevitable consequence and driver of economic success) and as a result unemployment will rise as well. It is unlikely that Europe and the euro can survive another economic basket case after the PIGS (economies of Portugal, Italy, Greece and Spain). Some of my more optimistic colleagues argue that when Hollande witnesses the failures of his policies, he will make a U-turn as Mitterrand did in the early 1980s. But I am afraid this will be too little too late. In 1980 the French government debt was 20 percent of GDP, while today it is 80 percent. What is more likely is that economic chaos will encourage the growth and influence of more extremist political parties, both on the right and the left, with unpredictable consequences.
Of course my pessimism is based on the assumption that Hollande will do what he said he will do. I am still hoping that he was simply lying to get elected.
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Plus Ca Change…
by INSEAD Economics Professor Antonio Fatas
From an economic point of view, the French election will probably not create much change. Some of François Hollande’s economic ideas are different from those of Sarkozy but not that different.
It is true that his election will add to the strength of the argument that austerity is not the way out for Europe (or the world). But he is not alone. The European Commission just admitted that they will be lenient when judging budget deficits given economic conditions; the IMF is advocating for being more pro-growth given the circumstances... so Hollande will be one more voice in that direction. As an economist, I think this is good for Europe and the world economy that we question the model that says that coordinated austerity is the solution - it is not!
Budgets and Taxes
Regarding the budget, Hollande has promised increased spending in some areas (education) and higher taxes for those with very high incomes. While some of his ideas might seem radical to many, we need to put them in perspective. His proposal to tax income above 1 million euros at a rate of 75 percent might sound completely out of touch with reality - but we have seen similar or even higher marginal tax rates in other countries before (Sweden or even the U.S. during the 1960s) with limited impact on growth. France today has a significantly lower marginal tax rate than a country like the U.K. (that recently raised the top marginal tax rate by about 10 percentage points). Having said that, he will face strong opposition and resistance and it is likely that he will not go as fast as he said he would. The reality of government budgets is one of continuous negotiation and juggling among the pressures of so many different groups.
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A Matter of Degree
by INSEAD Political Science Professor Douglas Webber
Don’t expect any fundamental changes in the nature and direction of French government policy, including European policy; instead, look for some differences of emphasis and degree.
François Hollande is bound by his election promises to push hard for changes (or additions to) the EU fiscal treaty. Over the last few weeks and months, an ever wider consensus has begun to develop to the effect that a fiscal policy of austerity alone will not solve the euro crisis. Most of the governments in southern Europe will welcome a stronger “growth” component in the treaty (or, for example, in a protocol attached to the treaty). Similar noises have been made in the last few days and weeks by the chairman of the ECB and the European Commissioner in charge of economic and monetary affairs. The German Social Democrats, who are likely to join the federal government after elections in September 2013, are pretty much on the same wave-length. I therefore expect Hollande and Merkel to reach some kind of compromise on this issue. Otherwise, as both leaders – and, for the most part, their respective parties - are basically pro-European, they are likely, despite likely initial frictions, to work together closely and quite well. They may actually reach a modus vivendi more quickly than Sarkozy and Merkel did. Their initial relations were very difficult and they never got on very well at a personal level.
Hollande vs Sarkozy
Hollande’s election platform in respect of fiscal policy differed from Sarkozy’s only by proposing that the French budget be balanced over a period of five rather than four years, that the deficit be reduced more by increasing taxation than public spending, and increasing taxation on very high income-earners. His biggest challenge will arise if and when economic growth is slower than anticipated and his government is forced either to increase taxation or cut spending more radically than his platform proposed. Given the renaissance of the radical Left in France (as shown by the quite high vote for Jean-Luc Mélenchon in the first round of the elections), he and his government may then find themselves torn in diametrically opposed directions by the international financial markets, on the one hand, and an important segment of his majority and the trade union movement, on the other. “Structural” reforms, such as those aimed at liberalising the labour market and making it easier for firms to hire and fire employees, will be politically well-nigh impossible.
First of all, of course, Hollande has to ensure that the Socialist Party and its allies win a majority in the Parliamentary elections in June. He will take some popular, largely “symbolic” decisions (such as cutting his and government ministers’ salaries) in the next few days and weeks to maximise the likelihood of this outcome. The Left would then control not only the presidency and both chambers of parliament, but also most French regions and most large cities, making it stronger in terms of the occupation of public office than it has been at any other point in French political history.
However, if the Eurozone crisis continues or, worse, deepens, Hollande’s honeymoon as president is likely to prove very short and the Left’s stranglehold on French politics ephemeral. If, after Sarkozy and the traditional Right, Hollande and the Socialists should also fail, the extreme right-wing National Front and its leader Marine Le Pen may emerge a lot stronger from elections in 2017 than they are already today. Then yesterday’s and next month’s elections will look in retrospect like a curtain-raiser to the main event, which would involve a fundamental transformation of the French – and with it, the European - political landscape.
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Antonio Fatas is Professor of Economics and the Portuguese Council Chaired Professor of European Studies. Theo Vermaelen is Professor of Finance and the Schroders Chaired Professor of International Finance and Asset Management. He is the Programme Director for Corporate Financial Strategy in Global Markets and Co-Director for Global Investors Workshop, part of INSEAD’s portfolio of executive education programmes. Douglas Webber is Professor of Political Science.
NPR article, 23 April, 2012, "America's 12 million amateur innovators"
In his latest New York Times Magazine column, Adam Davidson reports that independent inventors are creating products faster than ever, but few are succeeding at patenting and selling their work. We asked Eric Von Hippel of MIT to explain why so many Americans are inventing new products at home when the odds of commercial success are stacked against them. His response is below.
(EvH): Nearly 12 million Americans create or modify products they use at home, according to our research. But the vast majority – more than 90 percent – will never get a patent on their innovations. So what motivates them?
The innovators we studied (their innovations may or may not meet the criteria for inventions) are user innovators – a very different breed than independent inventors...
...In one compilation of studies by him of 1193 commercially successful innovations across nine industries, 737 (60%) came from customers ("lead users")..
Most widely cited paper: "The Promise of Research on Open Source Software", Georg von Krogh; Eric von Hippel, Management Science, 52, 7. Jul 2006.
"The guru of customer-centered innovation blazes new ground in this masterpiece. He shows managers how to get the most out of a world where customers and communities pioneer new ideas and reconfigure what they buy. Other books tell you that co-creating innovations with customers is important. Von Hippel tells you how to make it happen." Philip Anderson, INSEAD Alumni Fund Professor of Entrepreneurship, and Director, International Centre for Entrepreneurship
"In a concise 200 pages, von Hippel traces the empirical studies on user innovation, determining that between 10 and 40 percent of users engage in developing or modifying products. These 'lead users' are ahead of the curve and often create improvements that other users will want to share." HBS Working Knowledge
"Future Works" (Wikipedia)
Professor Von Hippel’s plans for the future include getting concepts into government statistics to measure how many users innovate and what types of people do this type of work.
Then he would like to show that most innovation is still user innovation. He finds it interesting that in the UK, 8% (3-4 million people) of consumers modify the product that they use. He also noted that hospitals have the right to develop and use ideas as long as they do not sell them and he would like to get the institutional review board to approve development in hospital use. In this way, doctors would do innovation first, and then companies would harness this innovation in order to develop. He stressed the fact that the number of consumers modifying products and thereby innovating outweighs the number of people doing this in companies! We should be able to harness this natural innovation and use it to our benefit to market!
If you've not yet heard of telemedicine or think that it's not a great way to deliver quality health care, you may want to read this. Telemedicine, made possible by the availability of mobile networks, is revolutionizing health care. But not in the U.S.
You have to look to India, where telemedicine is already widely used in the delivery of health care — and is saving lives even in the most rural corners of the country...
www.doingbusiness.org/rankings (2012 is the 9th publication)
Argentina is 113th in the world and Spain 44th.
After the expropriation of YPF from Repsol by the Argentinian government, and if the same criteria are used for the analysis in the report of 2013 as those of 2012, Argentina will worsen its position in the table at the end of this year when the data of Doing Business 2013 will be published, which will be updated or conducted with data of the 1st June 2012.
"Doing Business in a More Transparent World" (2012) (doingbusiness.org/reports)
...Nine years of Doing Business data, together with other data sets, have enabled a growing body of research on how specific areas of business regulation—and regulatory reforms in those areas—relate to social and economic outcomes. Some 873 articles have been published in peer-reviewed academic journals, and about 2,332 working papers are available through Google Scholar...
...Over the past 9 years more than 12,000 professionals in 183 economies have assisted in providing the data that inform the Doing Business indicators...
...In addition, the World Bank Group has been working with a consultative group—including labor lawyers, employer and employee representatives, and experts from civil society, the private sector, the (United Nations) International Labour Organization (ILO) and the OECD— to review the methodology and explore future areas of research...
Moving from the worst one-fourth of nations to the best one-fourth implies a 2.3 percentage point increase in annual growth.)
VIEWPOINT: Professor Ignacio de la Torre – Academic Director, Master in Finance Programs (blog), IE Business School.
Professor Ignacio de la Torre is bullish with optimism in spite of - even because of - the latest financial crises: “This provides us with a world of once-in-a-lifetime opportunities,” he says.
Speaking before a talk entitled Financial History: What Can We Learn from Our Mistakes? – the Director of IE’s Master in Finance Programs outlined the less well-documented ‘glass-half-full’ view of the on-going global financial turbulence.
Financial crises give rise to positive change: “Look at the US - in the 6 years after the banking crisis of the early 1980s the US economy went from being made up of 20% markets and 80% banks – to vice versa.” That was a big, positive change in just six years – brought about by a financial crash. “I’m optimistic about Europe today because countries will finally take on reforms they haven’t looked at in 60 years.”
A big opportunity for positive change for de la Torre is the chance to educate a new generation of socially responsible financiers – something that, in his role at IE Business School, he feels both duty-bound and well-positioned to do. Deciding what and what-not to teach young, soon-to-be influential financiers is a big responsibility and one of the big decisions he has made at IE is to take certain ‘long-term view’ modules – and make them compulsory for every finance student...
...Gayle Allard, a professor of managerial economics from Spain's IE Business School, has this analogy.
"You have the Greek model, or the Irish model," she said. "You can either go kicking or screaming, or you can bite the bullet, like people have done in Ireland."...
Some countries, like the UK can decide whether they do tough austerity or not. But Spain doesn't have that choice," she said.