An Adjustment‐Cost Rationalization of Asset Fixity Theory

1990 ◽  
Vol 72 (2) ◽  
pp. 298-308 ◽  
Author(s):  
Shih‐Hsun Hsu ◽  
Ching‐Cheng Chang
Keyword(s):  
Adjustment Cost

Product Development Resources and the Scope of the Firm

2005 ◽  
Vol 69 (2) ◽  
pp. 15-23 ◽  
Author(s):  
Birger Wernerfelt
Keyword(s):  
Supply Chain ◽  
Product Development ◽  
Full Advantage ◽  
Theory Of The Firm ◽  
Adjustment Cost ◽  
Scope Of The Firm ◽  
The Relationship

This article examines the relationship between a firm's strength in product development and its optimal scope. Firms with product development strength have two options: They can leverage it in horizontally related markets, and they can reach into the supply chain to take full advantage of it. The question is how this should be done. One possibility is for the firm to expand its scope, and another is to manage the linkage through contracts. On the basis of the adjustment cost theory of the firm, the author argues that the former solution is more appropriate when product development is fast-paced. This study tests the argument in a sample of several thousand firms and reports four tests. For both types of expansion, the author examines the incidence and the productivity of increased scope. The author uses several measures and finds results that are consistent with the theory.

ENTREPRENEURIAL OPTIMISM, THE NATURE OF ENTREPRENEURIAL EXPERIENCE AND DEBT DECISION FOR BUSINESS START-UP

2018 ◽  
Vol 22 (03) ◽  
pp. 1850024 ◽  
Author(s):  
HÉDIA FOURATI ◽  
RIHAB BEN ATTITALAH
Keyword(s):  
Earnings Forecasts ◽  
Adjustment Cost ◽  
Debt Ratio ◽  
Entrepreneurial Experience ◽  
Panel Data Estimation ◽  
Quality Of Control ◽  
Start Up ◽  
Serial Entrepreneurs ◽  
Data Estimation

This paper studies the entrepreneurial optimism and debt decisions for business start-up. By analysing a sample of 160 business start-up and by using the panel data estimation, we study entrepreneurs’ optimism and its impact on debt decision of business start-up. The measure of entrepreneurial optimism is based on the entrepreneur earnings forecasts initiated by Lin et al. (2005). Meanwhile, the nature of entrepreneurial experience (serial and portfolio entrepreneur) has an effect on entrepreneurial optimism and leads to more or less optimistic entrepreneur. The results reveal that optimistic entrepreneur prefers equity in funding the financial deficit. Serial entrepreneurs tend to use more debt funding. In the dynamic model, the entrepreneur acquiring business concurrently adjusts slowly to debt ratio. Nevertheless, the sequential entrepreneurial experience leads to more optimism and so on more debt use. Given the governance role played by banks, the high adjustment cost for start-up is a consequence of the efficiency of the quality of control exercised by banks that in spite of entrepreneurial optimism, the entrepreneur does not convince the financiers to be so confident on the prospect of the business.

scholarly journals Macroeconomic uncertainty and cost stickiness

2020 ◽  
Vol 214 ◽  
pp. 01031
Author(s):  
Ziyang Li ◽  
Xi Cheng ◽  
Mengwei Zhang ◽  
Xian Wen
Keyword(s):  
Cost Management ◽  
Adjustment Cost ◽  
Economic Determinants ◽  
Listed Firms ◽  
Macroeconomic Uncertainty ◽  
Cost Asymmetry ◽  
Cost Behavior ◽  
Core Issue ◽  
The Cost ◽  
Cost Stickiness

Cost management is the core issue related to the development of enterprises, and studying enterprise cost behavior will contribute to optimizing enterprise decisions. However, an enterprise is not an independent organization. Instead, it exists and is affected by the macroeconomic environment. So it is conducive for company to apply macroenvironment information to cost management behaviors. This paper studies the cost stickiness based on the perspective of macroeconomic uncertainty, and takes “adjustment cost” and “agency problems” as the internal logic to integrate into the existing interpretation framework of cost stickiness. We analyze SG&A costs for Chinese listed firms over the period 2013 – 2019 after controlling for known economic determinants. The results show a positive relation between the macroeconomic uncertainty and the degree of cost asymmetry. In particular, the macroeconomic uncertainty makes the cost stickiness of human resource cost weaken.

scholarly journals Price Transmission and Factors Influencing the Price of Onions in Tanzania

2020 ◽  
pp. 67-76
Author(s):  
Yohana James Mgale
Keyword(s):  
Error Correction ◽  
Error Correction Model ◽  
Price Transmission ◽  
Adjustment Cost ◽  
Producer Price ◽  
Correction Model ◽  
Factors Affecting ◽  
Long Run ◽  
Short Run ◽  
The Impact

This article analyzes the transmission of prices between marketing agents and the factors affecting onion prices at the consumer level. The Error Correction Model-Engle Granger (ECM-EG) was used to test the price transmission by including the impact of the rise and fall of producer, wholesale and retail prices in past periods. The Error Correction Model (ECM) was applied to the factors affecting onion prices. The test results showed that price transmission was asymmetrical in the short and long-run. With regard to factors, the results show that consumer price in the short-run was influenced by wholesale prices, producer prices and the price of fuel while in the long-run it was influenced by wholesale prices, producer price, price of fuel and consumer prices in the previous period (t-1). These results suggest the existence of a short-term adjustment cost and a long-term market power which distorts price transmission.

scholarly journals Estimating Adjustment Frictions Using Nonlinear Budget Sets: Method and Evidence from the Earnings Test

2020 ◽  
Vol 12 (1) ◽  
pp. 1-31 ◽  
Author(s):  
Alexander M. Gelber ◽  
Damon Jones ◽  
Daniel W. Sacks
Keyword(s):  
Adjustment Cost ◽  
Marginal Tax Rate ◽  
Tax Rate ◽  
The Social ◽  
Before And After ◽  
Short Run ◽  
Earnings Test ◽  
Social Security Earnings Test ◽  
The Cost ◽  
Induced Changes

We introduce a method for estimating the cost of adjusting earnings, as well as the earnings elasticity with respect to the net-of-tax share. Our method uses information on bunching in the earnings distribution at convex budget set kinks before and after policy-induced changes in the magnitude of the kinks: the larger is the adjustment cost, the smaller is the absolute change in bunching from before to after the policy change. In the context of the Social Security Earnings Test, our results demonstrate that the short-run impact of changes in the effective marginal tax rate can be substantially attenuated. (JEL H24, H31, H55, J22, J31)

scholarly journals Dynamic factor demand in the Japanese manufacturing industry

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sangho Kim
Keyword(s):  
Manufacturing Industry ◽  
Adjustment Costs ◽  
Dynamic Structure ◽  
Adjustment Cost ◽  
Dynamic Factor ◽  
Dynamic Learning ◽  
Content Type ◽  
Long Run ◽  
Factor Demand ◽  
Dynamic Factor Demand

PurposeThis study investigates the dynamic production structure of the Japanese manufacturing industry by using the adjustment cost approach. The study is to shed some light on the unique dynamic structure of the Japanese manufacturing industry. The study attempts to help design and predict industrial policies that are implemented to enhance domestic investments by the Japanese government.Design/methodology/approachThis study obtains a system of dynamic factor demand and output supply equations by applying the dual approach to the intertemporal value function as represented by the Hamilton–Jacobi equation. By using industrial panel data for 1973–2012 of the Japanese manufacturing industry, the study estimates the system of the behavioral equations and corresponding elasticities. The study uses hypothesis tests and dynamic elasticities to investigate the dynamic structure of the Japanese manufacturing industry.FindingsEstimation results show that labor and capital are quasi-fixed variables that adjust about 0.2 percent annually to the long-run optimum levels. Estimated adjustment rates are very slow as often presumed about the Japanese manufacturing industry, which uses lifetime employment practice and slow decision-making process in investment decisions. The results also show that output supply and factor demand elasticities vary greatly depending on time horizon. Factor demand increases when its own price increases in the short run, suggesting that factor adjustment is mostly determined factor prices in the past due to sluggish factor adjustment. However, factor demand becomes a normal downward-sloping curve in the long run as factor adjustment gets completed.Originality/valueJapanese manufacturing firms hire employees through lifetime contract to exploit the benefits of dynamic learning-by-doing and execute investments carefully considering all the possible impacts. Under the strategy, adjustment costs for changing workers and capital stock are minimized. Dynamic adjustment model is expected to shed some light on the unique dynamic structure of the Japanese manufacturing industry. However, researches regarding the dynamic factor adjustment of the Japanese manufacturing industry are hard to find. This study is expected to fill the research vacuum.

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