The Dark Side of Managing for the Long Run: Examining When Family Firms Create Value

Family firms take a substantial fraction of economic activities and significantly influence a nation’s economic sustainability. Despite the considerable amount of research efforts to determine their performance implications, there is still a lack of consensus. This study aims to address this dissensus in two ways. Theory-wise, we introduce two interdependent contingencies that interactively determine the relative strength of positive and negative effects of family involvement: inside chief executive officers (CEOs) and business fluctuations. Method-wise, we employ an advanced econometric technique, the system generalized method of moments (GMM) estimator, to control for endogeneity. Using panel data of Korean family firms listed on the Korea Composite Stock Price Index (KOSPI) stock market during the periods between 2013 and 2016, we find (1) that family firms underperform non-family firms, (2) that the negative effect of family involvement decreases under the management of inside CEOs, and (3) that this positive moderation effect of inside CEOs decreases in the face of business fluctuations. This study furthers our understanding of how the family influences firm performance and, eventually, economic sustainability.

Finance and economic evolution

The final chapter of Part II highlights Schumpeter's seminal theory of economic development as a deliberate monetary conception and its genuine account of the nexus between finance and the real economy. Innovation and creative destruction critically depend on the creation and reallocation of purchasing power through finance. The chapter offers a brief reconstruction, which assimilates Schumpeter's further elaborations on selected themes in his later publications along several basic premises, such as open opportunity sets, entrepreneurship and innovation, temporary monopoly profits, or discontinuous change. Furthermore, venture investors must trust the entrepreneurs' vision and provide them with the purchasing power needed to control the means of production in advance. Successful innovations induce imitation and their progressive diffusion annihilates the temporary monopoly surplus, thereby decreasing prices, raising demand and fostering the overall growth of real income. Moreover, innovations do not occur independently, but are clustered, generating overlapping waves of business fluctuations.

Print Email The Godley–Tobin memorial lecture

John Maynard Keynes's (1936) concept of ‘animal spirits’ or ‘spontaneous optimism’ as a major driving force in business fluctuations was motivated in part by his and his contemporaries' observations of human reactions to ambiguous situations where probabilities couldn't be quantified. We can add that in such ambiguous situations there is evidence that people let contagious popular narratives and the emotions they generate influence their economic decisions. These popular narratives are typically remote from factual bases, just contagious. Macroeconomic dynamic models must have a theory that is related to models of the transmission of disease in epidemiology. We need to take the contagion of narratives seriously in economic modeling if we are to improve our understanding of animal spirits and their impact on the economy.

Learning from House Prices: Amplification and Business Fluctuations

We formalize the idea that house price changes may drive rational waves of optimism and pessimism in the economy. In our model, a house price increase caused by aggregate disturbances may be misinterpreted as a sign of higher local permanent income, leading households to demand more consumption and housing. Higher demand reinforces the initial price increase in an amplification loop that drives comovement in output, labor, residential investment, land prices, and house prices even in response to aggregate supply shocks. The qualitative implications of our otherwise frictionless model are consistent with observed business cycles and it can explain the economic impact of apparently autonomous changes in sentiment without resorting to non-fundamental shocks or nominal rigidity.

Regional business cycles in Poland

Purpose: The main goal of the considerations presented hereinbelow is a presentation of the course of action as well as an analysis of crucial features of cyclical fluctuations differentiated as entities in the Polish economy as well as in all provinces in the period of the first quarter of 2005 until the second quarter of 2019 based on the rate of the sold production of industry. Design/methodology/approach: A share of the respective regions in the structure of the sold production of industry was assessed. Finally, an attempt of assessing the rate of convergence in terms of morphology of a national chain with time chains of the respective regions was undertaken. In the thesis, a hypothesis is being stated that the most synchronised with the cycle of Poland are regions having the biggest share in the sold production of industry. Methodological bases of the research process as well as an empirical assessment of the regional business cycles in Poland were preceded by theoretical analyses concerning the notion, the core as well as the morphological features of the regional business fluctuations. Findings: Making an assessment of the progression of business cycle fluctuations of the economy of Poland as a whole as well as business cycle fluctuations of Polish provinces in the period between the first quarter 2005 and the second quarter of 2019, one may conclude the progression is not uniform. The variation depends to a large extent on the specificity of development of each region. Provinces which have a lower share in the national structure of the sold production of industry demonstrate higher sensitivity to economic shocks. The highest degree of compliance with the national cycle has been demonstrated in provinces with the highest rate of share in the structure of the sold production of industry. Research limitations/implications: The conducted research, as well as the obtained results might thus be a basis for taking up more extensive analyses in that field, comprising a discussion on the remaining morphological features of business cycles. Originality/value: Determining the course of cyclical fluctuations in Poland as well as in its respective provinces has been made.

Cyclical fluctuations in freight transport in selected european union countries. Synchronization, or not?

Fluctuations of the economic activity in transport result from the operation of many factors of a demand and supply nature in all sectors of the economy. These factors determine both the common and specific characteristics of such fluctuations. The aim of this paper is not only to examine the morphological features of cyclical fluctuations on the transport market in Poland and selected countries of the European Union, but also the degree of their synchronization. The latter can be understood in the external context (between fluctuations in the transport production of various countries), but also in the internal one, where the subject of comparisons are fluctuations in transport and basic macroeconomic variables. The properties of business fluctuations will be examined by classical procedures for the separation of cyclical components and the detection of their turning points.