Inter‐organizational Quality Management: The Use of Contractual Incentives and Monitoring Mechanisms with Outsourced Manufacturing

Quality‐related incidents involving contract manufacturers (CMs) are becoming increasingly prevalent. The quality management (QM) literature, however, has focused mostly on QM within a single firm. Thus, the need for data‐driven research on managing quality with outsourced production is evident. We investigate the use and effectiveness of external failure penalties and audits of CMs’ facilities to manage inter‐firm quality. Building on agency theory and extant QM literature, this study addresses two research questions: (i) whether the control mechanisms of quality audits and contractual external quality failure penalties are substitutes or complements in use and (ii) whether they are substitutes or complements in their effectiveness at aligning the quality interests of customers and their CMs. Our analysis uses dyadic data gathered from brand‐owning firms and their CMs representing 95 contract manufacturing relationships in Food and Drug Administration (FDA)‐regulated industries. The results indicate that more severe external failure penalties correspond to a lower use of facility audits (i.e., they are substitutes‐in‐use). We also find that both external failure penalties and facility audits have a unique positive effect on the CM's perception of relative quality importance. Finally, some evidence supports the hypothesis that each mechanism is more effective in the presence of the other (i.e., they are complements‐in‐effectiveness).     

Women's Labor Supply,Marriage, and Welfare Dependency

Abstract. This paper provides a rational choice model that simultaneously analyses women's decisions about welfare dependency, labor supply, and marriage. The model is based on the Demand and Supply (D&S) models of marriage inspired by Becker's theory of marriage. In addition to reproducing old insights about income effects and marriage market effects on welfare dependency, the model offers new insights regarding the effects on welfare dependency of sex ratios, divorce laws, cohort size, and traditional expectations about marriage and family. The model helps understand why welfare is more common among black women in the USA and offers a new interpretation for past trends in American women's welfare dependency: the big increase in welfare dependency in the late 1960s is interpreted as a baby‐boom phenomenon and recent reductions in welfare dependency are partially seen as the expression of young women's better marriage market opportunities.     

THE EFFECT OF JOINT CUSTODY ON FAMILY OUTCOMES

Since the 1970s almost all US states have introduced a form of joint custody after divorce. I analyze the causal effect of these custody law reforms on different family outcomes. My identification strategy exploits the different timing of reforms across the US states. Estimations based on state panel data suggest that the introduction of joint custody led to an increase in marriage rates, an increase in overall fertility (including a shift from nonmarital to marital fertility), and an increase in divorce rates for older couples. Accordingly, female labor market participation decreased. Further, male suicide rates and domestic violence fell in treated states. The empirical evidence is consistent with the hypothesis that joint custody increased the relative bargaining power of men within marriage.     

Shortcuts in complex engineering systems: a principal-agent approach to risk management

In this article, we examine the effects of shortcuts in the development of engineered systems through a principal-agent model. We find that occurrences of illicit shortcuts are closely related to the incentive structure and to the level of effort that the agent is willing to expend from the beginning of the project to remain on schedule. Using a probabilistic risk analysis to determine the risks of system failure from these shortcuts, we show how a principal can choose optimal settings (payments, penalties, and inspections) that can deter an agent from cutting corners and maximize the principal's value through increased agent effort. We analyze the problem for an agent with limited liability. We consider first the case where he is risk neutral; we then include the case where he is risk averse.     

Maternal Incarceration and Children's Education and Labor Market Outcomes

I estimate the effect of maternal incarceration on education and labor market outcomes. I link mother–child panels and estimate maternal fixed effects to control for unobservable household heterogeneity. Maternal incarceration from birth to age 10 is associated with increased grade retention and dropout rates. Conditional on completing high school, incarceration from 15 to 17 is associated with decreased college attendance. Maternal incarceration does not appear to have a further effect on employment, but some wage penalties are apparent. Propensity score analysis suggests that controlling for unobservable household characteristics is vital when examining the link between incarceration and labor outcomes.     

Is There a Motherhood Wage Penalty in the Finnish Private Sector?

This paper investigates the effects of children on women's wages in the Finnish private sector. The paper finds evidence of the motherhood wage penalty, the penalty varying with the length of the child‐related career break. Mothers staying at home no longer than for 2 years face considerably smaller penalties than mothers spending longer periods at home. The negative wage effects of children decrease, however, quickly with time. For example, mothers who experience a career break of 2 years or less do not lag behind non‐mothers in terms of wages after the second year from the return to employment. There is also variation in the motherhood wage penalty across the wage distribution. The penalty is higher at the top of the distribution than in the middle of it, especially in the cases of prolonged child‐related career breaks.     

Effect of Inventory Information Discrepancy in a Drop‐Shipping Supply Chain

This article investigates the impact of information discrepancy between a drop‐shipper and an online retailer on the drop‐shipping supply chain performance. The inventory information misalignment between them contributes to the failure of order fulfillment and demand satisfaction, and hence the associated penalties are incurred. In this article, we first analyze the penalties of ignoring such information discrepancy on both the drop‐shipper and the online retailer. We then assess the impact of information discrepancy on both parties when the drop‐shipper understands the existence of the information discrepancy but is not able to eliminate the errors. The numerical experiments indicate that both parties can have significant amount of the percentage cost reductions if the information discrepancy can be eliminated, and the potential savings are substantial especially when the errors have large variability. Furthermore, we observe that the online retailer is more vulnerable to information discrepancy than the drop‐shipper, and the drop‐shipper is likely to suffer from the online retailer's underestimation of the physical inventory level more than the problem of its overestimation. Moreover, even if eliminating errors is not possible, both parties could still benefit from taking the possibility of errors into consideration in decision making.     

The private life of CEOs; A strategic leadership perspective

Major events in the private lives of CEOs have been a source of fascination for decades. However, despite gaining traction, studies on the relevant phenomena (e.g., marriage, divorce, parenthood, illness) remain scattered in parallel across disciplines. We thematically review the interdisciplinary evidence on the fast-emerging literature on CEO private life events (72 unique studies) to consolidate our understanding of how private life events can become reflected in the professional domains of CEO influence. Through this approach, we comprehensively intersect empirical progress on CEO life events with key strategic leadership outcomes (i.e., performance, strategy, socio-ethical issues, innovation, governance), allowing us to identify key gaps and highlight inconsistencies. We then propose several research opportunities and challenges to move the field from phenomenon-driven standalone studies to a more coherent research program on the blurred boundaries between the private and professional lives of CEOs.     

Female Labor Participation in the Arab World: Evidence from Panel Data in Morocco

Female Participation Rates (FPRs) in the Arab world are low compared with the level of economic development of Arab countries. Beyond anecdotal evidence and cross‐country studies, there is very little evidence on what could explain this phenomenon. This paper models FPRs in Morocco using the richest set of panel data available for any Arab country to date. It finds marriage, secondary education, and GDP per capita to lower FPRs. These findings are robust to different estimators, endogeneity tests, specifications of the FPR equations, and sources of data. The explanation seems to reside in the nature of economic growth and gender norms. Economic growth has not generated jobs for women with secondary education and this factor reinforces the institution of marriage as a permanent alternative to work.     

Solving the Feldstein–Horioka Puzzle With Financial Frictions

Unlike the prediction of a frictionless open economy model, long‐term average savings and investment rates are highly correlated across countries—a puzzle first identified by Feldstein and Horioka (1980). We quantitatively investigate the impact of two types of financial frictions on this correlation. One is limited enforcement, where contracts are enforced by the threat of default penalties. The other is limited spanning, where the only asset available is noncontingent bonds. We find that the calibrated model with both frictions produces a savings–investment correlation and a volume of capital flows close to the data. To solve the puzzle, the limited enforcement friction needs low default penalties under which capital flows are much lower than those in the data, and the limited spanning friction needs to exogenously restrict capital flows to the observed level. When combined, the two frictions interact to endogenously restrict capital flows and thereby solve the Feldstein–Horioka puzzle.     

Measuring the quality of economic forecasts

Most evaluations of forecasts have hitherto been primarily based on measure of statistical accuracy. Attention is drawn to the need for concentrating instead on the forecast components bearing on managerial decisions and on the economic effects of such decisions. The method suggested highlights the changing locus of the most influential errors over various time horizons. It also takes account of the economic consequences of under-estimates and over-estimates in forecasting, as well as of the penalties of belated correcting actions. Finally, some broader implications of this approach are discussed.     

逆向选择条件下带奖惩金的两期保险契约模型及其Pareto改进性研究

为了更有效的规避影响保险市场交易效率的逆向选择问题，本文分投保人风险类型为两种和多种情形建立了带奖惩金的两期保险契约模型，首次提出可以用奖励金和惩罚金有效甄别投保人的风险类型。该模型根据投保人第一个保险期内的索赔情况在第二个保险期对其进行奖励或惩罚，高风险类型的投保人如果选择为低风险类型投保人设计的保险契约，则其在第二阶段受到惩罚的概率要远远大于得到奖励的概率，即风险越高的投保人越害怕惩罚金，因此所建模型满足斯彭斯-莫里斯分离条件。带奖惩金的两期保险契约模型中保险公司的期望利润仍然为0，并不会给投保人带来额外的经济负担，却能够实现对传统部分保险契约简单重复两次的严格帕累托改进。最后采用一个算例说明了该模型的有效性。     

Differential Overeducation in East and West Germany: Extending Frank's Theory on Economic Returns Changes the Picture of Disadvantaged Women

We test the theory of differential overeducation which predicts that women and particularly partnered women are more affected by overeducation than men. Our OLS and FE estimations based on German SOEP data confirm that women indeed exhibit more years of excess education in both regions. Women's higher educational mismatch accounts for 5 pp of the West German pay gap. However, women suffer lower wage penalties from overeducation than men in both regions and, for partnered people, higher female wage penalties vanish in the FE estimations. Hence, women are more rationed than men concerning overeducation magnitude, confirming Frank's theory, but rather less disadvantaged with respect to economic returns.     

Mobilising knowledge across organisational boundaries: addressing human issues in the telecommunications industry

The key question addressed in this research is ‘how can we effectively manage and mobilise knowledge in the extended enterprise?’. We explore how knowledge sharing and transfer occur when developing new products, with special reference to the telecommunications industry. The benefits of implementing knowledge management strategies have been proven but research has largely focused on technology as a solution. Working together with European-based telecommunication companies, we focus instead on the softer, human issues. The main human barriers identified include international differences, accuracy and protection of knowledge, maintenance of communication channels, lack of time, fear of penalties and market position.     

Designing Service Level Agreements for Inventory Management

Service level agreements (SLAs) are widely employed forms of performance‐based contracts in operations management. They compare performance during a period against a contracted service level and penalize outcomes exceeding some allowed deviation. SLAs have a number of design characteristics that need careful tuning to ensure that incentives are properly aligned. However, there is little theoretical research in this area. Using an example of an SLA for outsourcing inventory management, we make a number of recommendations. First it is preferable, if possible, that penalties be proportional to the underperformance rather than lump‐sum ones. This goes a long way towards mitigating strategic (“gaming”) behavior by the supplier. Second, it might be thought that giving “bonuses for good performance” rather than “penalties for bad performance” are essentially identical apart from the former being a more positive approach to management. This turns out to be incorrect in the case of large percentage service rate targets and that penalties will normally be preferred by the buying firm. Third, in order not to incorrectly penalize underperformance resulting purely from “noise” rather than supplier efforts, management might think it best to make allowed deviations from the target generous. Again intuition is not a helpful guide here: for proportional penalties, acceptable performance deviations should be close to the target. Although these results come from a particular inventory application, it is likely that the lessons are applicable to SLAs in general.     

Estimation of Nonparametric Conditional Moment Models With Possibly Nonsmooth Generalized Residuals

This paper studies nonparametric estimation of conditional moment restrictions in which the generalized residual functions can be nonsmooth in the unknown functions of endogenous variables. This is a nonparametric nonlinear instrumental variables (IV) problem. We propose a class of penalized sieve minimum distance (PSMD) estimators, which are minimizers of a penalized empirical minimum distance criterion over a collection of sieve spaces that are dense in the infinite‐dimensional function parameter space. Some of the PSMD procedures use slowly growing finite‐dimensional sieves with flexible penalties or without any penalty; others use large dimensional sieves with lower semicompact and/or convex penalties. We establish their consistency and the convergence rates in Banach space norms (such as a sup‐norm or a root mean squared norm), allowing for possibly noncompact infinite‐dimensional parameter spaces. For both mildly and severely ill‐posed nonlinear inverse problems, our convergence rates in Hilbert space norms (such as a root mean squared norm) achieve the known minimax optimal rate for the nonparametric mean IV regression. We illustrate the theory with a nonparametric additive quantile IV regression. We present a simulation study and an empirical application of estimating nonparametric quantile IV Engel curves.     

Stable matching problems with exchange restrictions

We study variants of classical stable matching problems in which there is an additional requirement for a stable matching, namely that there should not be two participants who would prefer to exchange partners. The problem is motivated by the experience of real-world medical matching schemes that use stable matchings, where cases have arisen in which two participants discovered that each of them would prefer the other’s allocation, a situation that is seen as unfair. Our main result is that the problem of deciding whether an instance of the classical stable marriage problem admits a stable matching, with the additional property that no two men would prefer to exchange partners, is NP-complete. This implies a similar result for more general problems, such as the hospitals/residents problem, the many-to-one extension of stable marriage. Unlike previous NP-hardness results for variants of stable marriage, the proof exploits the powerful algebraic structure underlying the set of all stable matchings. In practical matching schemes, however, applicants’ preference lists are typically of short fixed length, and we describe a linear time algorithm for the problem in the special case where all of the men’s preference lists are of length ≤3.     

Project Portfolio Selection: A Newsvendor Approach

We consider the problem of balancing the penalties associated with budgetary slack (being underbudget) and cost overruns in the project portfolio selection problem by addressing randomness in project costs and making individual project budgets decision variables. Setting the budget for a single project is shown to be analogous to the newsvendor problem. For related versions of the project portfolio selection problem we provide optimal and heuristic procedures. Numerical experiments are used to test the procedures and provide managerial guidelines. We show project budgets should be set so that each project in the portfolio has the same probability of running over budget, it is better to have a larger number of projects with less than ideal funding compared to a smaller number of projects with ideal funding, and substantial opportunities to select more projects with a higher expected profit are available if an aggregate portfolio budget is used.     

证券监管效率和承销商声誉——基于南方证券“麦科特事件”的案例研究

本文以“麦科特事件”为研究对象,分析了证券监管对承销商声誉资本的影响,从一个侧面考察了我国证券监管的效率。实证结果表明,证券监管通过影响目标承销商未来的市场份额,给承销商的声誉资本带来了负面影响。但成熟市场上显示的承销商声誉和IPO客户声誉的关联性在本文的案例分析中没有得到验证。我国证券监管在信息传递方面的缺陷以及投资者对承销商声誉的不关注,导致监管行动对承销商声誉的间接惩罚效应不足。我们认为,直接处罚和间接处罚并进,对于促成承销商声誉机制的形成、提高证券监管的效率具有重要的理论和现实意义。     

Optimal replacement strategies in network infrastructures under quality penalties

As a consequence of liberalization, electric utilities have developed different asset management strategies with the aim of reducing total maintenance costs by prolonging replacement cycles. A cost-minimizing network operator has to optimize the trade-off between costs for early replacement and quality penalties he faces in the case of outages (due to a resulting higher number of failures). The basic purpose of this paper is to identify the optimal decisions for a network operator under output-based quality regulation and to determine the main drivers for his decisions. In order to derive general insights, an analytical framework is chosen for this paper. This work builds on the foundations of optimal maintenance and replacement strategies as developed across Operations Research, Production Economics and Engineering Production Theory. As main results we are able to analytically derive optimal replacement strategies for network components depending on the characteristics of their failure distributions linked to the equipment’s cost, respective replacement cost, and quality penalties.