Monday, January 27, 2020
The inter relationship between firm growth and profitability
The inter relationship between firm growth and profitability Abstract There is a widespread presumption that there is a close relationship between firm growth and firm profitability. However, most of the past studies on firm growth and profitability have been conducted without mutual associations. Only a few studies, thus far, have examined the inter-relationship between firm growth and profitability and the results have been inconsistent. The reason for the inconsistency is mainly due to the lag structure of the models in each study. To address the issue, this study conducted panel unit-root tests on firm growth and profitability separately and then made appropriate models using dynamic panel system GMM estimators. Through the analyses of the models, this study found that in restaurant firms the prior years profitability had a positive effect on the growth rate of the current year, but the current and prior years growth rates had a negative effect on the current years profitability. This outcome implies that profit creates growth but the growth impede s profitability in the restaurant industry. More implications are also discussed in this paper. Keywords: Firm growth; Profitability; Panel unit-root test; Dynamic panel system GMM 1. Introduction The dynamics of firm growth and profitability (or profit rate) is an important issue for industrial practitioners as well as academic researchers (Goddard, McMillan and Wilson, 2006). Theoretically, if firm growth rate is unrelated to firm size and prior growth rate, then firm growth follows random walk and the variance of firm size can increase indefinitely. This is known as the Law of Proportionate Effect (LPE). This stochastic growth process implies unlimited industry growth in the long run. However, if growth rate is inversely related to firm size, firm growth would converge in the long run. On the other hand, Mueller (1977) claimed that firm profitability converges at a certain level due to market competition, which is referred to as Persistence of Profit (POP). The POP literature argues that firm entry and exit are sufficiently free to quickly eliminate any abnormal profit and that the profitability of all firms tends to converge toward the long-run average value. However, Goddard, Molyneux and Wilson (2004) stated, even though it is generally presumed that firm growth and profitability effect each other, that firm growth and profitability are not necessarily connected. Overall, the impact and direction of this relationship remains ambiguous. The ambiguity is associated with various econometric issues. First, due to the endogeneity it is difficult to capture a clear causality and direction between them. Further, if firm growth and profitability time lags are incorporated into the models the endogenous relationship becomes more complicated due to the unknown effects of different time lags. Recently, there have been a couple of attempts to investigate the inter-relationship between firm growth and profitability (Coad, 2007; Davidsson, Steffens, and Fitzsimmons, 2009). Although it is worth exploring the relationship, the results of the studies turned out to be inconsistent. In the previous studies, two types of methodologies were used: panel unit-root test and dynamic panel system GMM estimator. The panel unit-root test is appropriate for testing the convergence hypotheses of firm growth and profit rates. It is also useful for finding the significance of the lag term in a simple autoregressive model, but it is difficult to control the endogenous effect in the model. Moreover, the panel unit-root test cannot directly examine the inter-relationship between firm growth and profitability. Dynamic panel system GMM estimator can control for endogeneity and test the inter-relationship, but determining the number of lag terms remains ambiguous. Thus, in order to address the analysis problems in the previous literature, we first employed the panel unit-root test and subsequently made a testable model for the dynamic panel system GMM estimator. Through those analyses, we intended to investigate the inter-relationship between firm growth and profitability under various time lags. More specifically, the objectives of this study were: 1) to examine the panel unit-root test on the series of firm growth and profitability separately and to find an appropriate lag structure; and 2) to make an appropriate model to investigate the inter-relationship between them through a vector autoregression (VAR) model via dynamic panel system GMM estimator. We used restaurant firms for the study sample and, thus, the results are useful for understanding the dynamics of firm growth and profitability in the restaurant industry. In the following section, we summarize prior LPE and POP literature and present the potential inter-relationships between firm growth and profitability. Next section outlines the details of the study methodology. The following section shows the results of panel unit-root test and dynamic panel system GMM regarding the inter-relationship between firm growth and profitability. Finally, we conclude this study with managerial implications and suggestions for further studies. 2. Literature Review 2.1. Law of Proportionate Effect (LPE) and Persistence Of Profit (POP) The notion that firm growth rate is independent of firm size and past growth rate is known as the Law of Proportionate Effect (LPE) (Gibrat, 1931). According to the LPE, firm growth happens by chance and thus past growth is not a reliable predictor of future firm growth (Goddard et al., 2006). Hence, deterministic factors of firm growth (i.e., managerial capacity, innovation and efficiency) are randomly distributed across firms. However, recent empirical studies have claimed that there is an inverse relationship between firm growth and firm size, rejecting the LPE (Hall, 1987; Evans, 1987; Dunne and Huges, 1994; Geroski and Gugler, 2004). Most empirical studies of LPE used cross-sectional regression models through a simple autoregressive model (for example, AR(1)), but the models were criticized due to their arbitrariness in choosing lag terms. Recently, Chen and Lu (2003) and Goddard et al. (2006) tested the LPE using panel unit-root models because the LPE assumes non-stationarity i n the time series analysis. The benefit of the panel unit-root test on LPE lies in its ability to test a long series effect in non-stationarity, while the weakness of the test is its inability to include control variables that may affect firm growth (i.e., prior profitability, leverage, and market competition). Conversely, researchers on persistence of profit (POP) argue that firm profitability converges at a certain level across all firms and no firms could achieve an above average profit rate in the long run. Mueller (1977) developed the deterministic time-series model for testing the POP and subsequently (Mueller 1986) demonstrated profit rate convergence through an autoregressive model. Since Mueller (1986), most studies on POP have adopted the autoregressive model. However, Goddard et al. (2006) stated that the typical methodology for POP estimated individual effects and autoregressive coefficients for each firm, so the estimated coefficients were often unreliable and the testing power was low. Hence, Goddard et al. (2006) tested the profit rate convergence hypothesis using a panel unit-root test in order to find the stationarity in a profit rate time series. 2.2. The inter-relationship between firm growth rate and profitability (or profit rate) As noted earlier, it is widely believed that firm growth and profit rates are related to each other (Goddard et al., 2004). Some prior studies have suggested that profit rate has a positive impact on growth rate. Alchians (1950) theoretical study argued that fitter firms survive and grow, but less viable firms lose their market share and exit through the evolutionary selection mechanism. Thus, if profit rate reflects the degree of fitness, it is possible to predict that profitable firms will grow. Further, according to the financing constraint hypothesis retained profits can be readily used for investment, whereas firms with low profitability could not grow even if they have positive growth opportunities. This is also consistent with the pecking-order theory, which claims that managers prefer internal capital to external capital, such as debt and equity financing. However, the influence of growth rate on profitability is inconsistent in theories and empirical studies. A Classical Ricardian perspective claims that if a firm shows high profit rates it would grow to exploit additional growth opportunities that are less profitable but still create additional profits. This notion implies three things. First, the profit rate is converges at zero from a long-term perspective. Second, high profit rates have a positive impact on growth rates until the profit rate is zero. Finally, firm growth has a negative influence on profit rate. Along similar lines, the Neoclassical view argues that firms first exploit their most profitable growth opportunities and then consider less profitable opportunities until the marginal profit on the last growth opportunity is equal to zero. Consequently, profitable firms maximize their overall level of profits through profitable growth opportunities but experience a decrease in profit rates. Even though this argument exclud es market competition, it theoretically explains the relationship between firm growth and profit rates. However, managerial growth-maximization hypothesis under market competition (Marris, 1964; Mueller, 1972) claims that the managerial objective of a firm is to maximize growth rather than profit. Thus, this hypothesis proposed that growth and profits are in a competitive relationship with each other, which suggests the possibility that growth victimizes profit. Nevertheless, there are a number of theoretical claims that growth rate has a positive impact on profit rate. First, the Kaldor-Verdoorn Law in economics (Kaldor, 1966; Verdoorn, 1949) claims that growth increases productivity and in turn the enhanced productivity increases profit rates. This notion is consistent with scale economies (Gupta, 1981). Thus, because firm growth contributes to an increase in firm size, the larger size could gain benefits from an economy of scale and in turn this affects profit enhancement. That is, growth can help increase profitability. However, empirical studies on the effects of growth rate on profit rate have not always been supportive. Capon, Farley and Hoenig (1990) reported that firm growth is related to high financial performance, but it was significant only in some industries. Chandler and Jansen (1992) and Mendelson (2000) reported a significant positive correlation between sales growth and profit rates, whereas Markman and Gartner (2002) found no significant relationship between growth and profitability. Furthermore, Reid (1995) claimed growth had a negative effect on profitability. The relationship between growth and profit rates are more complicated when time lags of the two variables are considered. Only a few empirical studies have considered the link between growth and profit rates using various time lag terms. Goddard et al. (2004) found profitability to be important for future growth in European banks. Conversely, through panel data estimates of French manufacturing firms Coad (2007) found that the opposite direction of causation (i.e., growth to profitability) might be true. Both Goddard et al. (2004) and Coad (2007) investigated the relationship between firm growth and profit rates with vector autoregressive models using dynamic panel system GMM estimators. The difference between the two studies was that Goddard et al. (2004) used a one-year time lag but Coad (2007) incorporated three-year time lags in the analysis. More specifically, Goddard et al. (2004) found that a one-year lagged profit rate had a positive significant effect on the current-years gr owth rate, but a one-year lagged growth rate did not have a significant impact on the current-years profit rates. However, Coad (2007) showed that two- and three-years lagged profit rates have a positive significant influence on the current-years growth rate and that the current-years growth rate was positively significant in terms of the current-years profit rates. As noted, Goddard et al. (2004) and Coad (2007) reported opposing empirical results, which could be attributed to the difference in lag length. Considering the scarcity of past studies on the growth-profitability relationship and the problems with analytic methods, there is a need for a study that can verify this important relationship in a more holistic way. Hence, we intended to address the above research need in this study. A detailed outline of how the study was conducted follows in the next section. 3. Data and methodology The data used in the analysis was collected from the COMPUSTAT database using SIC 5812 (eating places). The data covers fiscal years 1978 to 2007 for U.S. restaurant firms. Profit rate (or profitability) was measured as net income divided by net sales and growth rate was gauged as the difference between the current and prior years net sales divided by the prior years net sales. After deleting severe outliers in the two main variables, growth rate and profit rate, this study used 2,927 firm-year observations for the analysis. As previously indicated, this study first conducted panel unit-root tests on growth and profit rates separately. The Dickey-Fuller unit-root test was set up for testing the stationarity of a time series. For example, if à †1 is equal to a unit in equation (1), the series is non-stationary. Equation (1) could be expressed as equation (2) by subtracting Yt-1 on both sides. Yt = à †1Yt-1 + ÃŽÂ µt (1) ΆYt = ÃŽÂ ³Yt-1 + ÃŽÂ µt (ÃŽÂ ³ = à †1 1) (2) Equation (2) above is a simplified Dickey-Fuller unit-root test (DF test). The null hypothesis of a DF test is that ÃŽÂ ³ equals zero and the alternative hypothesis is ÃŽÂ ³ p ΆYt = ÃŽÂ ³Yt-1 + à ¢Ã‹â€ ‘à †iΆYt-i + ÃŽÂ µt (ÃŽÂ ³ = à †1 1) (3) i=1 However, the data structure of this study was an unbalanced panel. Thus, equation (3) could be expressed as a panel setting following equation (4): p ΆYi,t = ÃŽÂ ³Y i,t-1 + à ¢Ã‹â€ ‘à †iΆY i,t-i + ÃŽÂ µ i,t (ÃŽÂ ³ = à †1 1) (4) i=1 Equation (4) is the testable model for the panel unit-root test in this study. A few studies have developed panel unit-root tests (Im, Pesaran and Shin, 2003; Levin, Lin and Chu, 2002; Maddala and Wu, 1999). However, in the case of an unbalanced panel setting, the Fisher test is the only one available. It combines the p-values from N independent unit root tests, as developed by Maddala and Wu (1999). Based on the p-values of individual unit root tests, Fishers test assumes that all series are non-stationary under the null hypothesis against the alternative that at least one series in the panel is stationary. Unlike other panel unit-root tests, Fishers test does not require a balanced panel. Thus, this study conducted Fishers test on the growth and profit rates and selected an appropriate lag length in ADF formula. After selecting the proper lag length in ADF formula, it was transformed as follows: p ΆYi,t = ÃŽÂ ³Y i,t-1 + à ¢Ã‹â€ ‘à †iΆY i,t-i + ÃŽÂ µ i,t i=1 = ÃŽÂ ³Y i,t-1 + à †1ΆY i,t-1 + à †2ΆY i,t-2 + à †3ΆY i,t-3 + à ¢Ã¢â€š ¬Ã‚ ¦ + à †pΆY i,t-p + ÃŽÂ µ i,t = ÃŽÂ ³Y i,t-1 + à †1(Y i,t-1 Y i,t-2) + à †2(Y i,t-2 Y i,t-3) + à ¢Ã¢â€š ¬Ã‚ ¦ + à †p(Y i,t-p Y i,t-(p+1)) + ÃŽÂ µ i,t = (ÃŽÂ ³ + à †1) Y i,t-1 + (à †2 à †1) Y i,t-2 + (à †3 à †2) Y i,t-3 + à ¢Ã¢â€š ¬Ã‚ ¦ + (à †p à †p-1)Y i,t-p à †pY i,t-(p+1) + ÃŽÂ µ i,t (5) Consequently, equation (5) could be expressed as follows: Yi,t = (1 + ÃŽÂ ³ + à †1) Y i,t-1 + (à †2 à †1) Y i,t-2 + (à †3 à †2) Y i,t-3 + à ¢Ã¢â€š ¬Ã‚ ¦ + (à †p à †p-1)Y i,t-p à †pY i,t-(p+1) + ÃŽÂ µ i,t (6) Thus, if the panel unit-root test chooses p lags in ADF formula, it could be transformed to AR(p+1) model. This AR(p+1) model was then used for the dynamic panel system GMM estimator. Also, since the purpose of this study was to investigate the inter-relationship between firm growth and profitability, this study adopted the vector autoregression (VAR) model to find the reciprocal relationship between growth rates and profit rates. p+1 q+1 p+1 SGi,t = ÃŽÂ ²0 + à ¢Ã‹â€ ‘Π·iSGi,t-i + à ¢Ã‹â€ ‘à ₠¬iPRi,t-i + ÃŽÂ ²1Salei,t-i + ÃŽÂ ²2LEVi,t-i + à ¢Ã‹â€ ‘Π¶iΆDMAi,t-i i=1 i=1 i=0 + DYeart + ÃŽÂ µi,t Model 1 q+1 p+1 PRi,t = ÃŽÂ ²0 + à ¢Ã‹â€ ‘à ₠¬iPRi,t-i + à ¢Ã‹â€ ‘Π·iGRi,t-i + ÃŽÂ ²1Salei,t-i + ÃŽÂ ²2LEVi,t-i + ÃŽÂ ²3MarketSharei,t-i i=1 i=0 + DYeart + ÃŽÂ µi,t Model 2 SGi,t is the sales growth rate and PRi,t is the profit rate at time t for firm i. Salei,t is the net sales at time t for firm i. We also included control variables in both models. In the LPE literature, recent studies showed that prior firm size is inversely related with current growth rate (Evans, 1987; Hall, 1987; Geroski and Gugler, 2004). On the other hand, Baumol (1959) provided evidence that firm profitability increases with firm size, while Amato and Wilder (Kwangmin!!, Year and reference?) showed that no relationship exists between firm size and profit rate. Finally, Samuels and Smyth (1968) stated that profit rate and firm size are inversely related. Thus, we included the prior years net sales as a firm size variable in both models to control for size effect. Debt leverage (LEVi,t) was also incorporated in both models as a control variable, which was calculated as total debt divided by total assets. Theories of optimal capital structure based on the agency costs of managerial discretion suggest that the adverse impact of leverage on growth increases firm value by preventing managers from taking on poor projects (Jensen,1986; Stulz, 1990). Opler and Titman (1994) empirically found that sales growth is lower in firms with higher leverage. Thus, the influence of debt leverage on growth could be negative. However, the prior literature on the relationship between debt leverage and profit rate, has shown mixed results. Debt affects profitability positively according to Hurdle (1974), but negatively according to Hall and Weiss (1967) and Gale (1972). Debt could also yield a disciplinary effect under the free cash flow hypothesis (Jensen, 1986; Stulz, 1990). Firms with high debt leverage can reduce wasteful investment opportunities and increase f irm performance, suggesting a positive relationship between debt leverage and profit rates. However, using debt can increase conflicts between debt and equity holders. Equity holders encourage managers to undertake risky projects because the benefits are transferred only to equity holders (Stiglitz and Weiss, 1981). Thus equity holders tend to support the use of debt. However, high uses of debt could deteriorate firm profitability by taking on overly risky projects. The effect of leverage on profit rate may not be uni-directional. Consequently, we incorporated leverage as a control variable due to its important potential effects on profitability. In the growth rate equation (Model 1), we incorporated mergers and acquisitions (MA) dummy variables from time t to t-(p+1) because MA execution abnormally increases growth rates. MA executions were identified from the SDC Platinum database. In the profitability equation (Model 2), we included a market share variable, which was calculated as the net sales of firm i at time t divided by the sum of net sales at time t. According to Buzzell, Gale and Sultan (1975), market share had a positive impact on firm profitability. Because a larger market share means stronger market power, firms with large market shares could have the power to control market prices and be in a better position to negotiate with their suppliers. Thus, a positive relationship between market share and profit rates is expected. Because the current years growth could affect the current years profit rate, following Coad (2007), we included the current years growth rate in Model 2. Statistically, ordinary least square (OLS) regression requires that the right-hand side variables should be independent of the error term. However, if there is a bi-directional causation between dependent (left-hand side) variables and explanatory (right-hand side) variables, this condition is not satisfied and thus OLS regression produces biased and inconsistent estimates. This endogeneity problem could be solved by choosing appropriate instrumental variables, which are correlated with the explanatory variables but not the error term. This means that the instrumental variables should be exogenous but if they are endogenous, the equation would be over-identified. However, if the instrumental variables are weakly correlated with the explanatory variables, which is called a weak instrument, the estimates are biased and inconsistent. Arellano and Bond (1991) proposed the GMM estimator for panel data, which could control the potential endogenous explanatory variables. This method uses the first difference model, which eliminates the time-invariant firm-specific effect, and instrumental variables for the endogenous variables were generated by lags of their own level. However, if the lagged level instruments are weakly correlated with the endogenous explanatory variables, there could be a finite sample bias in estimators. In particular, if the variable series tends to show a highly persistent profit rate series (Mueller, 1977), this weak correlation between lagged level instruments and endogenous explanatory variables is problematic. Arellano and Bover (1995) and Brundell and Bond (1998) developed a dynamic panel GMM estimator that estimated with level-equation and difference equation, which is called a system GMM. Consequently, the dynamic panel system GMM estimator has better asymptotic and finite sample propertie s than the one used by Arellano and Bond (1991). Thus, this study analyzed the proposed models using the dynamic panel system GMM estimator, which produces unbiased and consistent estimates after controlling for endogeneity and firm-specific effects even when the sample period is short. Even though the full sample period of this study is 30 years, the panel structure is not balanced due to the entry and exit of firms. Bludell and Bond (1998) suggested the minimum requirement for panel length as T à ¢Ã¢â‚¬ °Ã‚ ¥ 3. Thus, we excluded firms which did not exist at least three years in the sample period. Another requirement was that there is no serial correlation of the second order error terms. We conducted the serial correlation test for panel GMM estimators developed by Arellano and Bond (1991). In order to test the exogeneity of instrumental variables, we used the Hansen test instead of the Sargan test because the Sargan test is not robust enough to detect heteroskedasticity and autocorrelation (Roodman, 2006). Finally, as Roodman (2006) suggested, we included year dummies in the models and estimated the system GMM by two-step estimator because the two-step estimator is robust enough to detect the heteroskedasticity. For comparisons with the dynamic panel system GMM estimator, we conducted ordinary least square (OLS) and fixed-effect regression. 4. Results 4.1. Panel unit-root test for firm growth and profit rates As indicated, we conducted the panel unit-root test developed by Maddala and Wu (1999) using Fishers test, which assumes that all series are non-stationary under the null hypothesis. Equation (4) was tested on both growth and profit rates. The results are presented in Table 1. For the series of sales growth and profit rates, lag(4) was justified. Thus, the law of proportionate effect hypothesis was rejected but the persistence of profit hypothesis was validated. The results indicate that the growth rates are serially correlated and the profit rates are convergent. The purpose of the panel unit-root tests on growth and profit rates was to examine the stationarity of the two series and to make an appropriate model for the dynamic panel system GMM estimator. As shown earlier, if the panel unit-root test justifies p lags, the ADF formula could be transformed to AR(p+1) model. Consequently, the testable model is AR(5) for both growth and profit rates. Based on the lag length from the pane l unit-root test, we excluded any firm that existed less than five years in testing the dynamic panel system GMM estimator. Then, we tested the proposed models using AR(5) in order to identify the inter-relationship between firm growth and profit rates in various time lag structures. (Insert Table 1 Here) 4.2. Descriptive statistics and scatter plots of growth and profit rates Table 2 shows the descriptive statistics of the major variables of this study. The average sales of the sampled restaurant firms was 541.8 million dollars and the average growth rate in sales was 16.3%. The average profit rate (return on sales) was 1.3% and total debt rate (debt leverage) was 61.3%. Thus, the figures show that the restaurant industry has a high growth rate, but its profitability is not positive and it uses more debt than equity. (Insert Table 2 Here) Before conducting the dynamic panel system GMM estimator, we checked the scatter plots between growth and profit rates using various time lags. As Coad (2007) indicated, the non-parametric scatter plots of growth and profit rates gave us a visual appreciation of the underlying phenomenon. Thus, before testing the quantitative relationship, we can obtain useful information via scatter plots. Figure 1 shows the scatter plots of growth at time t (Y-axis) and growth rates at time t-1 to t-5 (X-axis) for all samples. Except for the first plot (growth rate time t versus t-1), all other plots seem to show no relationship. The plots, excluding the first plot, look like a cloud shape but are a bit scattered horizontally. Based on the plot for growth rate time t and t-1, the current and prior years growth rates are positively correlated. However, Figure 1 represents all firms, including MA firms. Apparently, firms with MA can experience abnormally high growth rates compared with non-MA firms. Thus, we checked the same scatter plots after excluding MA firms, as presented in Figure 2. The relationship between current and prior years growth rate is clearly positive and growth rate at t-2 also looks positive on current years growth rate. However, the earlier years growth rates (i.e., t-3, t-4 and t-5) appear to have no relationship with the current years growth rate. Figure 3 shows scatter plots of profit rate at time t (Y-axis) and profit rates at time t-1 to t-5 (X-axis). Interestingly, clear heteroskedasticity is detected in the relationship between them. Thus, the usage of the two-step estimator in the dynamic panel system GMM estimator is justified by Figure 3. In all of the scatter plots there is a tendency toward a positive relationship between current and prior profit rates. (Insert Figures 1, 2, and 3 Here) Figure 4 shows scatter plots of profit rate at time t (Y-axis) and growth rates at time t-1 to t-5 (X-axis). In all plots, points were spread horizontally. It seems that there is no effect of growth rate on profit rate. Surprisingly, the scatter plot of current growth rates appears to have no relationship with current profit rate. On the other hand, Figure 5 shows that profit rates clearly have a positive influence on the current growth rate. The majority of the points were spread vertically. The scatter plots show that prior profit rates seems to have a positive influence on current growth rates, but the influence of prior growth rates on current profit rates was not found. (Insert Figures 4 and 5 Here) 4.3. Results from Dynamic panel system GMM estimator Tables 3 and 4 show the results of the proposed models explained in the methodology section. Even though yearly dummies were not reported in Tables 3 and 4, they were included in the models. As shown in Table 3, the prior years growth rate at time t-1 was found to be positively significant on current growth rates in all three regressions (OLS, fixed-effect and system GMM). However, the directions and significances of the coefficients of the other prior growth rate terms varied across the three models. As explained earlier, however, the system GMM is the most appropriate model for this study due to the endogeneity and time invariant firm-specific effect and the results of the OLS and fixed-effect regression models were used simply for the purpose of comparison. Goddard et al. (2004) reported that the prior years (time t-1) growth rate was positive but not significant. It is difficult to directly compare their results with ours due to the difference in the lag length structure. Interestingly, our study showed that growth rates at time t-1 and t-5 were positively significant on current growth rates, but growth rates at time t-2 and t-4 were negatively significant. These results suggest that short-term and long-term prior growth rates have a positive impact, but mid-term prior growth rates have a negative influence on current growth rates. Our primary interest in Model 1 was the effect of the prior years profit rates on current growth rates. The system GMM results show that profit rates at time t-1 and t-5 were positively significant. The magnitude of the coefficient of profit rate at time t-5 was small, meaning that the positive impact of long-term prior profit rates on current growth rates is small. However, the prior years (time t-1) profit rate has a positively significant effect on current growth and the magnitude of the coefficient is large. Coads (2007) study showed that profit rates at time t-1 to t-3 were all positive but the prior years (time t-1) profit rate was not significant. Coad (2007) used an AR(3) model and thus a direct comparison of ours to Coads (2007) is not possible. Yet it is clear that the direction of the coefficients were very similar. Overall, our study results provide evidence that recently profitable firms may grow faster. In terms of the relationship between prior years firm size and current growth rate, all three results show a negative coefficient but the negative effect was significant only in OLS. Also, debt leverage had a negative effect on current growth rates but the system GMM result was not significant. Additionally, all serial correlation tests were not significant, showing that there was no serial correlation problem. Also, the over-identification tests were not significant, meaning that our instruments were not endogenous and the estimates were reliable. (Insert Table 3 Here) Table 4 shows the results of the profitability equation (Model 2). The results of the system GMM shows that profit rates at time t-1, t-2 and t-5 were had positively significant effect on current profit rates. However, profit rates at time t-3 and t-4 were negatively significant. The results suggest that short-term and long-term prior profit rates have a positive impact on current profit rates, but mid-term prior profit rates have a negative influence on current profit rates. Similarly, Goddard et al.s (2004) results showed that the prior years (time t-1) profit rate was positive and significant in its AR(1) model. Table 4 also presents the effect of the prior years growth rates on current profit rates were negatively significant in time t and t-1. Unlike our results, Goddard et al. (2004) found that the prior years growth rate was posi
Sunday, January 19, 2020
Gender Studies :: essays research papers
Gender Studies My decision to take the extracts from literary discourse to illustrate the differences between the male and female manner of writing was dictated by the fact that it is more interesting to search for such differences in this very discourse, then in scientific or newspaper, where there are strict rules of how to write (non-personal narration, non-emotiveness, usage of terms; laconic phrases, etc.) In literary discourse one may write whatever one wishes. (Jane Austen. Pride Prejudice) After a week spent in professions of love and schemes of felicity, Mr Collins was called from his amiable Charlotte by the arrival of Saturday. The pain of separation, might be alleviated on his side, by preparations for the reception of his bride; as he had reason to hope, that shortly after his next return into the Hertfordshire, the day would be fixed that was to make him the happiest of men. He took leave of his relations at Longbourn with as much solemnity as before; wished his fair cousins health and happiness again, and promised their father another letter for thanks. (F. Scott Fitzgelald. Tender is the Night) Rosemary had another dinner date, a birthday party for a member of the company. Dick ran into a Collis Clay in the lobby, but he wanted to dine alone and pretended an engagement at the Excelsior. He drank a cocktail with Collis and his vague dissatisfaction crystallized as impatience – he no longer had an excuse for playing truant to the clinic. This was less an infatuation than a romantic memory. Nicole was his girl – too often he was sick at heart about her, yet she was his girl. Time with Rosemary was self-indulgence – time with Collis was nothing plus nothing. Already from the structure of the passage it is visible which passage was written by a woman and which by a man. Austen writes the events without any consequence, together with her thoughts and comments, whereas Fitzgerald, by contrast, enumerates the events in strict consecutive order. In addition, Austen uses more emotional and subjective adjectives to describe people and their state. It was counted that the female author uses verbs almost half less then the male author does (7:13). In the domain of punctuation, the gender differences are the most conspicuous: Jane Austen tends to the idiosyncratic usage of semi-columns; she does not use dashes in the given passage, whereas F. Scott Fitzgelald uses three dashes (as the indicator of reason-result understanding of events; ٭he prefers to explain the human behavior using a dash) and not a single semi-column.
Saturday, January 11, 2020
Labrouste and Ledoux
Henri Labrouste and Claude Ledoux were French architects during the 18th and 19th centuries and are pioneers of modern architecture. Henri Labrouste was born in 1801 and was the product of the renowned Ecole des Beaux Arts School of Architecture. He believed that architecture should reflect society, and his work reflects the rationalism and technical aspects of industrial society. His work also embodies the ideals of writer Victor Hugo, who believed that architecture is a form of communication, like literature, and that in the beginning phases of construction it expressed the generalization of society and social commonalities. Claude Ledoux was born in 1736 and was one of the earliest exponents of neoclassical architecture. He gained architectural relevance after marrying the daughter of someone who worked for the royal court and was offered a job for the courts Water and Forestry Department. He was considered a utopian architect and had some very modern ideas about industrial production, urban planning, and territorial intelligence. Henri Labrouste was one of the first architects to master using iron structure in an aesthetically pleasing way. Iron had already been used in structures like train stations, but never in a formal interior environment, as in a library. One example of his skillful use of iron is in the library, Bibliotheque Ste. Genevieve, where he incorporated past masonry construction practices with iron. He kept the huge arches of past churches, but instead of using heavy stones he used iron trusses for support. With this new design, the exterior walls no longer had to hold all of the forces from the arches, and the iron supports could simply rest on top of the walls. The walls were also modified with the use of iron by essentially applying reinforcement bars encased with plaster to make thinner walls, that had just as much strength as previous thicker walls. Since the new iron arches are so strong, Labrouste was able to take pieces out to create a design and pattern out of the support itself. Even the connections between the arch and columns or walls were made to look decorative and light while keeping a strong connection, which he also did in Bibliotheque Imperiale, but with domes rather than barrel vaults. In another one of his libraries, he Bibliotheque Nationale de France, he once again used massive arches and domes of antiquity, but manages to make the dome look very light by inserting oculi and supporting it by thin, reinforced columns. The dome is made from plaster, but has a web of steel to allow for it to be thinner and to support the massive openings that are covered in glass. Unlike Bibliotheque Ste. Genevieve, he hides almost all of t he steel structure so that it looks like a feat of engineering and design to have such a large dome that is so thin and supported by such thin columns. Labrouste was on the forefront of integrating new technology with past materials and design concepts. Rather than using new materials like Labrouste, Claude Ledoux used new ideas to establish a new architectural language. He designed many tollhouses around the walls of Paris through his connection to the royal court. Many of them resembled Greek and Roman temples but had new elements that gave them a modern look. He travelled to England in 1769 and became very familiar with Palladio and since then usually used a cubic style with a broken portico that allowed any structure to look important. He built several homes during his time in England, including the King’s mistress, who became a good connection for Ledoux in later years. In his work, Barriere des Bons-Hommes, he simplifies architecture down to its purest form by essentially placing a large cube on stilts, much like later architect Le Corbusier did in his Villa Savoye. One of Ledoux’s most notable works was the Royal Saltworks of Arc-et-Senans where he explored the concept of an ideal community. He located the community near a forest, rather than a source of salt water because it would be more efficient to transport water than wood for the furnaces. It was constructed in 1775 and was intended to be a multi-phase project, but after 1778 construction stopped with only the first phase complete. The design still functioned as intended with a central building for the controllers that was between the two furnaces and had a view of all of the housing. All of the buildings would act independent from one another but were still placed in a logical order to allow for maximum efficiency, such as the placement of the blacksmiths near the furnaces. The perfectly circular design was also intended to evoke the harmony of the ideal city. Ledoux was one of the first architects to design such thought out communities and maximize efficiency through the use of architecture and explore the concept of a self-sustaining utopian society. As he put, â€Å"unfortunate is the one who fails to see in reality what he is being made to see, who is unable to imagine,†showing how ahead of his time he was with his concept of designing ideal societies. Claude Ledoux and Henri Labrouste were two of the most important neoclassical architects because of their innovative thoughts and designs. Labrouste successfully experimented with the use of iron to innovate his designs and change the way buildings were built forever. Through the simplification of design and studying of geometries, Ledoux pioneered the concept of utopian communities and maximizing resources and efficiency. Ledoux and Labrouste were at the forefront of modernity and their concept of design are still used and perfected to this day.
Friday, January 3, 2020
Project Management and Innovation Past and Future
Project Management and Innovation: Past and Future Nikunj M. Prajapati Sardar Patel Institute of Technology Gujarat Technological University, Gujarat, India nmprajapati@spitcp.ac.in ABSTRACT Originally developed a way back, in the mid-20th century, project management has become a distinctive way to manage business activities nowadays. Another important development is almost virtually universal recognition of the role of innovation and technology in the corporate change, growth and profitability. It is unsurprising that development of innovation is often run as a project. Yet, theoretically both project management and innovation studies have evolved over time as distinctively separate disciplines. In this paper we make an attempt†¦show more content†¦The PWE focuses on the intrinsic value of work. Prior to the protestant reformation most people saw work either as a necessary evil, or as a means to an end. For Protestants, serving God included participating in and working hard at worldly activities as this was part of God’s purpose for each individual. From the perspective of the evolution of modern project management, these ideas were incorporated into two key philosophies, Liberalism and Newtonianism. Liberalism included the ideas of capitalism (Adam Smith), the division of labour, and that an industrious lifestyle would lead to wealthy societies Newton saw the world as a harmonious mechanism controlled by a ‘universal law’. Applying scientific observations to parts of the whole would allow understanding and insights to occur and eventually a complete understanding. LITERATURE REVIEW In this paper we seek to establish bridges between two distinctive disciplines – project management and innovation management (innovation studies). Despite seemingly interrelated nature of both subjects, these two research domains have been developing relatively isolated from each other. Innovation Studies Innovation studies are rooted in the seminal writing of Joseph Schumpeter in the 1920s-1930s (e.g. Schumpeter, 1934), whose ideas started to gain popularity in the 1960s, as the general interest among policymakers and scholars in technological change, RD and innovation increased. The field formed as a distinctiveShow MoreRelated Use of Project Management Software in Business Essay1222 Words  | 5 PagesUse of Project Management Software in Business Project Management is using the concepts of information technology in businesses to meet the requirements of a particular project. It depends on the process it needs to take to implement a project. The application of knowledge, skills, and tools and techniques is needed (http://www.asp.org/infoglossary/p). There are 3 main phases of project management, they are planning, scheduling and controlling. How the process is implemented is through differentRead MoreThe Construction Industry Of India Essay1649 Words  | 7 Pagesthe world GDP. This industry is such that, it generates a huge amount of employment that amounts to 7% of the total work force around the world. Innovation and continuous development in construction industry of every nation is very necessary for the growth and development of a nation. It creates opportunity for development within the industry. Innovation in a construction industry of every nation can be brought in by following the various international trends (developments in the field of constructionRead MoreHarley Davidson s Strategic Global Marketing1507 Words  | 7 Pagesheavyweight motorcycle market with great success. As a result, the future outlook of Harley-Davidson was not bright and many did not believe that the company would be standing at the end of the 1970’s. Over the course of the years, Harley-Davidson executives have done an excellent job keeping the Harley-Davidson image alive and profitable. However, the future of the company and market are unknown, and the management team must strategize a future plan in order to sustain the market changes. (Peter, 2013)Read MoreDesign Thinking And Project Manag ement866 Words  | 4 PagesDesign Thinking and Project Management Manage product teams which is incorporated usability and design methodologies into the design The business world is rapidly changing where design is changing. Design thinking works is not just visual design. Introduction to the design and project management Design thinking is enormously increasing in the organizations. Most leading organizations like Apple, Coca-Cola, IBM, GE, Nike are helping the project managers to build strong knowledge on design, thinkingRead MoreThe Innovative Process Of Innovation Essay977 Words  | 4 PagesThe Innovative process Important lesson learned from innovative process The innovation process is similar to evolutionary process. It is dynamically a process of improvement and adaptation that gives the organization ability to survive in a business environment and thrive. A good innovation process is proactive and not reactive and can have all or some of five elements; 1. Recognition or identification of a problem or opportunity that can be pursued. This is in terms of human aid provision. 2. InventingRead MoreEssay about Project Planning and Control Methods1441 Words  | 6 PagesProject Planning and Control Methods Project planning and control methods came to be in the 1980s with the introduction of microcomputer software. In the 1990s project management was accepted into the mainstream business as a means for developing new products and services. In the 20th century project management appears to be the solution to many of the challenges confronting global business enterprises (Gray, C. Larson, E., 2003). Trends such as the globalization of business operationsRead MoreReview of Moon Shots for Management Case Study1205 Words  | 5 PagesMoon Shots for Management by Gary Hamel Summary: Most of the fundamental breakthroughs in management (work flow design, annual budgeting, project management etc.) occurred in the early twentieth century by people like Frederick Taylor and Henry Ford. They had to solve the problems of efficiency and scale, and their solution was bureaucracy, with its hierarchical structure, cascading goals, precise role definitions, elaborate rules and procedures. Managers today face a new set of problemsRead MoreThe Role Of Governments Play An Important Role Of Business Innovation1296 Words  | 6 Pages ‘Governments play an important role in business innovation.’ Discuss in relation to two sectors. Introduction It is a common notion that it is primarily the private sector that drives innovation and economic growth, while the government, at best, plays only organization role in ‘fixing market failures’. Under this myth lies a different story, where some of the best advanced economies in the world have been shaped directly by government ¬ led investments. By not being capable to recognize the governmentRead MoreEnvironmental Sustainability At The World, Massachusetts Institute Of Technology Essay1379 Words  | 6 PagesIntroduction Environmental sustainability is a subject that has seen an exponential rise in its importance and influence since the past few decades. Since 1970, when this topic started gaining wide attention, several organizations and leaderships have been established that promote environmental sustainability. These organizations and leaders have been set up on an international, national and even at a local level. Today, businesses and institutions, whether global or local, have initiatives andRead MoreProject Management And Emotional Intelligence808 Words  | 4 PagesIntegrative Statement Project Management and Emotional Intelligence is a paradigm that when applied to the process of management implies that these milestones are predictable. When in reality, and based on the number of players and phases create an environment that the plan may experience variabilities within the acceleration or deceleration of the designed program of the project charter. The emergence of these variabilities leads to uncertainty of the project and chaotic conditions. Structural
Subscribe to:
Posts (Atom)