Is the psychology of high profits favorable to industrial renewal? Experimental evidence for the theory of transformation pressure and Schumpeterian economics
The theory of transformation pressure sheds light on the importance of negative driving forces for economic growth and the countercyclical movement in innovations and productivity growth. The theory suggests that firms have a status-quo bias in periods of increasing profits leading to lower productivity growth. Firm agents are governed by changes in current profits through historical relativism, the peak-end rule and overconfidence. They will first abandon a status-quo bias after an actual decline in profits though both under- and overreaction is possible. On the other hand Schumpeterian economics stress that firm renewal is speeded up during recoveries, e.g. by psychological reasons. The two contradicting hypotheses were tested by a role play where a group of university students in economics completed a questionnaire acting as managers for an established company. The students had the opportunity to choose between different growth strategies and define the underlying psychological mechanism. The questionnaire also provided room for rational considerations. The role play confirmed the theory of transformation pressure more than Schumpeterian economics but primarily that the students expected that they would have reacted rationally as managers.
|Date of creation:||24 Jun 2010|
|Contact details of provider:|| Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden|
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hhs:sunrpe:2010_0013. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sten Nyberg)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.