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Critical decision in crisis management: Rational strategies of decision making
Get PDFAbstract. Turbulent environment can create crises that management has to soles in a limited time with critical decisions. Critical decisions are an attempt to apply efficient modes of cognition and action to enable the organization to cope with consequential environmental threats or take advantage of important opportunities in the presence of highly restricted time in turbulent markets and/or specific situations. Critical decisions involve a process of the organization’s leadership to think, consult, act, gain acceptance for optimal solutions to complex problems in the presence of highly restricted time in crisis given by scarce resources, uncertain factors, aversive environment, environmental difficulties, ambiguous circumstances, unclear and volatile situations, or a combination of these factors. This study presents the endogenous and exogenous types of crises for organizations and vital factors for critical decisions that can be categorized in responsitive, proactive and recovery critical decisions. After that, the study shows strategic operations and steps of critical decisions in a perspective of reductionism, and a rational structure based on tree diagram to systematize the process of decision making. The study here also suggests strategies for critical decisions in different environments based on theory of rational choice, such as max-min, max-max and min-max approaches, described with a vital example. Final part of this study shows how a complex problem can be treated in different ways in a wider perspective of ecological rationality by approaches of resolution, solution and dissolution. The implications of strategic management are that the approach of dissolution of a complex problem requires design of a critical decision that may incorporate research and trial and error activities. Overall, then, this paper suggests one of the most effective way of solving systemic and complex problems by private and public organizations operating in, more and more, turbulent markets and volatile environments.Keywords. Strategic management, Decision making, Critical decision, Crisis management, Competitive advantage, Strategies, Strategic change, Business Strategy, Operational excellence, Problem solving, Bounded rationality, Decision rule, Decision theory, Natural disasters, Risk management, Bounded rationality, Environmental threats, Ecological rationality, Theory of rational choice.JEL. C44, D70, D81, D91, H12, M51, Q54
Is the Balassa-Samuelson Hypothesis still relevant? Cross-country evidence from 1950 -2017
Get PDFAbstract. We revisit the Balassa and Samuelson hypothesis based on the relationship between real exchange rate and total factor productivity relative to the United States and investigate with panel data set of 182 countries from 1950 to 2017. Results, suggest that there is an inverse relationship between the two, an increase in productivity results in an increase in real exchange rate and the findings supports the hypothesis. We use a range of tests including Arellano-Bond Dynamic Panel Data (both fixed and random effect) estimator and findings validates the hypothesis. All these additional tests confirm that the relationship between real exchange rate and relative factor producity are related in the long-run also.Keywords. Balassa–Samuelson effect; Exchange rate, Fixed effect model, Random effect model, Trade and globalization.JEL. C15, E31, F31, F41
The impact of increasing VAT rate on state revenue, a South African case
Get PDFAbstract. The study seeks to evaluate the impact of the increase in VAT rate from 14% to 15% on the state revenue as well as on future VAT collections. VAT historical data spanning from April 2009 to March 2018 (108 observations) on a fixed rate of 14% was obtained. Assuming no change on the 14% VAT rate, was fitted to the data to predict the collection of R311.2bn and R326.7bn for 2018/19 and 2019/20 respectively. The difference between prediction (at 14% rate) and actual realisation of R324.8bn and R346.7bn for the same period (at 15%rate) was computed to get the impact. Based on the model fitted values, a percentage increase in VAT rate increased payments by 4.2%in 2018/19 and 5.8%in 2019/20.This results in a slight increase in the total state revenue of 1.1% and 1.5% in 2018/19 and 2019/20 respectively. Furthermore, the model forecast R313.9bn to be collected in 2020/21 at 15% rate, the lower collection is due to the covid-19 impact on revenue collection. The usage of these types of models will assist the South African government in their budgetary plans and future decisions by taking into account more accurate projected VAT collection. However, monitoring of the model is crucial as the prediction power deteriorate in the long run.Keywords. South African Revenue Service (SARS), Value Added tax (VAT) and Seasonal Autoregressive Integrated Moving Averages (SARIMA).JEL. H24, C15, E37
Determinants of national innovation capacity in developing countries: An empirical survey
Get PDFAbstract. National innovation capacity is seen as the main source of sustainable growth and prosperity of countries. National innovation capacity, being both an economic and political asset, is defined as the potential of a country to produce innovation. At the same time, measuring the capacity of national innovation provides important information about the dynamics of innovation in the field of economics. Also, it is seen that most of the studies on national innovation capacity have focused on developed countries. In this study, it is aimed to make an empirical analysis of the determinants of national innovation capacity in developing countries in comparison with developed countries. For this purpose, variables considered to be determinants of national innovation capacity are classified under three headings as national technological capability and infrastructure factors, external factors, and institutional factors. In most studies in the literature, national innovation capacity is represented only by the number of patents in the empirical analysis. However, in most of these studies, the disadvantages and deficient aspects of representing national innovation capacity only with the number of patents are mentioned and almost no alternative methods have been suggested. Based on the suggestions and methods in empirical studies, the national innovation capacity index is calculated and represented as a new output variable representing the national innovation capacity in the effort to fill the relevant gap in the literature. In the study, data in the period of 1996-2016 are analyzed by the panel data analysis method for 18 developing countries and 31 developed countries. The effects of national technological capabilities and infrastructure factors of national innovation capacity in developing countries are seen to be weak. At the same time, it is seen that external factors have a positive effect on national innovation capacity in these countries and this indicates the dependence on foreign technologies in the development of technological capabilities.Keywords. National Innovation Capacity, National Technological Capability, Developing Countries, Panel Data Analysis.JEL. O32, O33, C23
Effect of crypto currency on the government backed currency
Get PDFAbstract. As international financial systems are becoming political tools to manipulate the exchange of money for good, cryptocurrency, and its potential to avoid the international banking system becomes more popular. Thus, the question becomes what happens to the nation’s monitory system if cryptocurrency’s electronic payment transaction and system replace the current system? Most nation’s central bank controls the financial systems, which affect institutions, rules, regulations, and laws of the land that affect this system. Robinson (2016) suggests money as a commodity in the national scope. International banks use BIC for transferring money with each other. Cryptocurrency, so far, does not need BIC to transfer money from one location to another. Bitcoin, the system is a peer-to-peer internet currency allowing verified, and decentralized transfers of value between individuals and businesses. This article is a short introduction discussing the legacy money and cryptocurrency and the potential of cryptocurrency as a new currency and its possible implications.Keywords. Cryptocurrency, Blockchain, Currency, Money, Bitcoin, BIC, SWIFT.JEL. O30, O35, O36
Proliferation of globalization and its impact on labor markets in advanced industrial nations and developing nations
Get PDFAbstract. The purpose of this paper is to provide insights into how the proliferation of globalization has impacted labor markets both in a advanced industrialized nations and well as developing nations. Insightful analysis will be drawn from Oatley (2011) on division of labor, Jaumotte & Tytell (2007) on labor compensation, Hahn & Narjoko (2013) on the impact on South Asian Countries, Basu (2016) on wage as a share of GDP and Wallace, Gauchat & Fullerton (2011) on the impact of globalization and labor markets on inequality.Keywords. Globalization, Labor Markets.JEL. F66, L52, Β50
The allocation of time in public administrations subject to bribery in developing countries: The basic model of labour supplu revisited
Get PDFAbstract. The purpose of this article is to revisit the basic model of labour supply taking into account the existence of corruption in public administrations in developing countries. The worker-consumer programme modified by the integration of bribery shows that at equilibrium, the optimal solution leads to a Marginal Rate of Substitution of leisure consumption equal to the real contractual wage rate plus the actual bribe rate. Because of the latter, the reserve wage is no longer an essential determinant for participating in the labour market. Corruption seems to amplify the substitution and income effects.Keywords. Time allocation, Bribery-Marginal rate of consumption, Leisure substitution, Reserve wage, Substitution effect, Income effect.JEL. G11, G17, C53, C58