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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. 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, vol. 101(3), pages 410-42, June.
  2. Ann P. Bartel & Nachum Sicherman, 1997. "Technological Change and Wages: An Inter-Industry Analysis," NBER Working Papers 5941, National Bureau of Economic Research, Inc.
  3. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  4. Oi, Walter Y, 1983. "Heterogeneous Firms and the Organization of Production," Economic Inquiry, Western Economic Association International, vol. 21(2), pages 147-71, April.
  5. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January.
  6. 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, vol. 98(2), pages 265-94, April.
  7. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
  8. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  9. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
  10. Katsuya Takii, 2000. "Prediction ability and investment under uncertainty," Economics Discussion Papers 518, University of Essex, Department of Economics.
  11. Gretsky, Neil E. & Ostroy, Joseph M. & Zame, William R., 1999. "Perfect Competition in the Continuous Assignment Model," Journal of Economic Theory, Elsevier, vol. 88(1), pages 60-118, September.
  12. Demers, Michel, 1991. "Investment under Uncertainty, Irreversibility and the Arrival of Information over Time," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 333-50, April.
  13. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  14. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
  15. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
  16. 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, vol. 87(4), pages 719-48, August.
  17. 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, vol. 15(1), pages 99-118, February.
  18. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September.
  19. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
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Citations

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Cited by:
  1. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January.
  2. Katsuya Takii, 2004. "The Value of Adaptability," Industrial Organization 0406004, EconWPA.
  3. Katsuya Takii, 2000. "Prediction ability and investment under uncertainty," Economics Discussion Papers 518, University of Essex, Department of Economics.
  4. 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 UQO-DSA-wp2102011, D├ępartement des sciences administratives, UQO.
  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 12E006, Osaka School of International Public Policy, Osaka University.
  6. Katsuya Takii, 2008. "The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms in a Rapidly Changing Environment," OSIPP Discussion Paper 08E003, Osaka School of International Public Policy, Osaka University.
  7. Katsuya Takii, 2004. "Fiscal Policy and Entrepreneurship," Econometric Society 2004 Far Eastern Meetings 698, Econometric Society.
  8. Li, Fei & Ueda, Masako, 2005. "CEO-Firm Match and Principal-Agent Problem," CEPR Discussion Papers 5119, C.E.P.R. Discussion Papers.
  9. Katsuya Takii, 2004. "Entrepreneurial Efficiency: An Empirical Framework and Evidence," Macroeconomics 0411006, EconWPA.
  10. Katsuya Takii, 2004. "Entrepreneurial Efficiency: Theory," Macroeconomics 0411005, EconWPA.
  11. Katsuya Takii, 2009. "Entrepreneurial competition and its impact on the aggregate economy," Journal of Economics, Springer, vol. 97(1), pages 1-18, May.
  12. Katsuya Takii, 2007. "The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms," Discussion Papers in Economics and Business 07-10, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  13. Takanori Adachi & Takao Asano, 2011. "Entrepreneurial Choice and Knightian Uncertainty with Borrowing Constraints," KIER Working Papers 803, Kyoto University, Institute of Economic Research.
  14. Katsuya Takii, 2004. "Entrepreneurial Efficiency," Macroeconomics 0406007, EconWPA.

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