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Prediction Ability

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  • Katsuya Takii

    (Osaka University)

Abstract

This paper models the value of managerial human capital as a function of the ability to predict profitability in the presence of risk. The model implies that the marginal productivity of prediction ability increases with increasing risk and that managers with high prediction ability will tend to work in risky industries. This prediction contrasts with the traditional view that talented managers concentrate in large firms. Business School placement data supports this hypothesis; talented Business School graduates choose to work in risky industries. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(02)00009-1
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 1 (January)
Pages: 80-98

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Handle: RePEc:red:issued:v:6:y:2003:i:1:p:80-98

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Related research

Keywords: manager; entrepreneur; human capital; risk; complementarity; assignment;

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References

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  1. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
  2. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January.
  3. Gretsky, Neil E. & Ostroy, Joseph M. & Zame, William R., 1999. "Perfect Competition in the Continuous Assignment Model," Journal of Economic Theory, Elsevier, Elsevier, vol. 88(1), pages 60-118, September.
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  5. Demers, Michel, 1991. "Investment under Uncertainty, Irreversibility and the Arrival of Information over Time," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 333-50, April.
  6. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 13(3), pages 827-46, September.
  7. Katsuya Takii, 2000. "Prediction ability and investment under uncertainty," Economics Discussion Papers, University of Essex, Department of Economics 518, University of Essex, Department of Economics.
  8. Ann P. Bartel & Nachum Sicherman, 1999. "Technological Change and Wages: An Interindustry Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(2), pages 285-325, April.
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  12. Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(2), pages 265-94, April.
  13. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 73(1), pages 228-33, March.
  14. Oi, Walter Y, 1983. "Heterogeneous Firms and the Organization of Production," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 21(2), pages 147-71, April.
  15. Kihlstrom, Richard E, 1974. "A Bayesian Model of Demand for Information About Product Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 99-118, February.
  16. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  17. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(4), pages 719-48, August.
  18. Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  19. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 410-42, June.
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Citations

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Cited by:
  1. Katsuya Takii, 2004. "Fiscal Policy and Entrepreneurship," Macroeconomics, EconWPA 0406006, EconWPA.
  2. Katsuya Takii, 2007. "The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms," Discussion Papers in Economics and Business, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) 07-10, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  3. Katsuya Takii, 2000. "Prediction ability and investment under uncertainty," Economics Discussion Papers, University of Essex, Department of Economics 518, University of Essex, Department of Economics.
  4. Katsuya Takii, 2008. "Entrepreneurial Competition and Its Impact on the Aggregate Economy," OSIPP Discussion Paper, Osaka School of International Public Policy, Osaka University 08E010, Osaka School of International Public Policy, Osaka University.
  5. Masaru Sasaki & Katsuya Takii & Junmin Wan, 2012. "Horizontal Transfer and Promotion: New Evidence and an Interpretation from the Perspective of Task-Specific Human Capital," OSIPP Discussion Paper, Osaka School of International Public Policy, Osaka University 12E006, Osaka School of International Public Policy, Osaka University.
  6. Takanori Adachi & Takao Asano, 2011. "Entrepreneurial Choice and Knightian Uncertainty with Borrowing Constraints," KIER Working Papers, Kyoto University, Institute of Economic Research 803, Kyoto University, Institute of Economic Research.
  7. Katsuya Takii, 2004. "Entrepreneurial Efficiency," Macroeconomics, EconWPA 0406007, EconWPA.
  8. Katsuya Takii, 2004. "Entrepreneurial Efficiency: An Empirical Framework and Evidence," Macroeconomics, EconWPA 0411006, EconWPA.
  9. Li, Fei & Ueda, Masako, 2005. "CEO-Firm Match and Principal-Agent Problem," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5119, C.E.P.R. Discussion Papers.
  10. Katsuya Takii, 2004. "Entrepreneurial Efficiency: Theory," Macroeconomics, EconWPA 0411005, EconWPA.
  11. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January.
  12. Katsuya Takii, 2008. "The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms in a Rapidly Changing Environment," OSIPP Discussion Paper, Osaka School of International Public Policy, Osaka University 08E003, Osaka School of International Public Policy, Osaka University.
  13. Larrisa V. Shavinina, 2011. "What Do We Know About Managerial Talent? The Case-Study of Richard Branson as a Great Project Manager," RePAd Working Paper Series, Département des sciences administratives, UQO UQO-DSA-wp2102011, Département des sciences administratives, UQO.
  14. Katsuya Takii, 2004. "The Value of Adaptability," Industrial Organization, EconWPA 0406004, EconWPA.

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