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The Value of Adaptability

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Author Info
Katsuya Takii (Osaka School of International Public Policy)

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Abstract

This paper examines a firm's ability to respond correctly to an unexpected change in the environment (i.e., its adaptability). We develop a model that allows for empirical examination of the impact of a firm's adaptability on its expected profits. The theory shows that a firm's adaptability can be estimated by the squared correlation between an unexpected change and the firm's reaction. The estimates show that adaptability has a large positive impact on the average profit rate and the market value of a firm. We also find that an increase in risk is correlated with a rise in adaptability.

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Paper provided by EconWPA in its series Industrial Organization with number 0406004.

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Date of creation: 06 Jun 2004
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Handle: RePEc:wpa:wuwpio:0406004

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mills, David E & Schumann, Laurence, 1985. "Industry Structure with Fluctuating Demand," American Economic Review, American Economic Association, vol. 75(4), pages 758-67, September. [Downloadable!] (restricted)
  2. Maury Gittleman & Michael Horrigan & Mary Joyce, 1998. "Flexible workplace practices: Evidence from a nationally representative survey," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 52(1), pages 99-115, October.
  3. Paul Osterman, 1994. "How common is workplace transformation and who adopts it?," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 47(2), pages 173-188, January.
  4. Paul Osterman, 2000. "Work reorganization in an era of restructuring: Trends in diffusion and effects on employee welfare," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 53(2), pages 179-196, January.
  5. 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. [Downloadable!] (restricted)
  6. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-28, June. [Downloadable!] (restricted)
  7. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January. [Downloadable!] (restricted)
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  8. David Thesmar & Mathias Thoenig, 2000. "Creative Destruction And Firm Organization Choice," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1201-1237, November. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
  11. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Katsuya Takii, 2004. "Fiscal Policy and Entrepreneurship," Econometric Society 2004 North American Summer Meetings 320, Econometric Society. [Downloadable!]
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  2. Katsuya Takii, 2004. "Entrepreneurial Efficiency: An Empirical Framework and Evidence," Macroeconomics 0411006, EconWPA. [Downloadable!]
  3. Katsuya Takii, 2008. "Entrepreneurial Competition and Its Impact on the Aggregate Economy," OSIPP Discussion Paper 08E010, Osaka School of International Public Policy, Osaka University. [Downloadable!]
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