Gunther Tichy

Over-optimism Among Experts in Assessment and Foresight

It is still disputed whether foresight exercises should be based on top-expert assessments or on a broader base of less specialised experts, and whether the self-rating of experts is an acceptable method. Using the German 1993 and the Austrian 1998 Technology Delphis, this study addresses both questions: Self-rating is in fact an appropriate method for selecting experts. But the assessment of self-rated top-experts tend to suffer from an optimism bias, due to the experts’ involvement and their underestimation of realisation and diffusion problems. The degree of optimism is positively correlated with the degree of self-rated knowledge, and it is more pronounced for the least pioneering and for organisational innovations. Experts with top self-ratings working in business have a stronger optimism bias than those working in academia or in the administration. Consistent with the insider hypothesis, they are most optimistic with regard to realisation, innovativeness, and potential leadership in economic exploitation. Given the optimism bias, foresight exercises should base their panels on a fair mixture of experts of different grades, with different types of knowledge and affiliation, and not only on top specialists of the respective field. Delphi-type exercises, therefore, offer an advantage relative to forum groups or small panels of specialists.

Small firms and the merger mania

Empirical research has found an average or even superior performance of small firms. This seems to be at variance with the secular concentration process and the recurrent merger waves. This paper tries to integrate size and merger research. Higher profitability of small firms is explained by their incentive structure and shorter decision lags but also by lower wages and higher individual risk (premia). Their faster growth in the eighties was, in addition, fostered by diversification of demand, miniaturization of technology, and a need for flexibility under uncertainty. The merger wave on the other hand does not necessarily prove that large firms are superior. Managers and shareholders may be seduced by stockmarket optimism, a sizeable industry of banks, agents and lawyers have their own interests in mergers, mergers may be important in declining markets and for the acquisition of technology. On average, mergers do not improve efficiency, profits or internal growth. Small and large firms serve different purposes. Performance depends on the market, incentives and technology. The establishment, growth and closure of small firms as well as mergers are attempts to find the optimal organization for utility maximization in a world of severe uncertainty and diverse needs.

What Do We Know about Success and Failure of Mergers?—Rejoinder

Responding to the comments of Coscelli, Lyons and Weston, I argue: (1) The aim of my paper was not primarily to discuss recent competition policy, but to extract stylized facts and compare them to theory; (2) utilizing all empirical merger studies published in refereed journals, instead of only the “sound” ones, does not appear to influence the results; (3) economies to scale—and consequently endogenous merger motives—are of less importance for mergers dealt with by the competition authorities; (4) a post-merger number of competitors of less than four to five steeply raises the likelihood of tacit collusion and conscious parallelism; (5) concentration is already high and still increasing in quite a number of markets; (6) mergers in network sectors are more dangerous than in manufacturing, as the number of potential competitors is small in most cases; (7) I agree with my critics that strictly banning the critical categories of mergers may be too harsh; I still hold, however, that competition authorities should take account of these critical types in a more formal way (e.g. by merger rules).

The decision Delphi as a tool of technology policy - the Austrian experience

Foresight studies have come to be an important instrument of technology policy. No standard form, however, exists; custom-tailoring to the specific needs of the specific country is afforded. The Austrian foresight exercise had to investigate the market niches with a potential for Austrian dominance within the next 15 years. As a tool for this task, the instrument of the Decision Delphi was chosen and has been further developed. A Decision Delphi is a bottom-up approach, building on the participation of those persons involved in developing the relevant technologies. It is, therefore, a tool for foresight as well as for coordinating the expectations and decentralised actions. Panels of experts developed the questions in seven fields, selected by a set of preceding studies. The Delphi investigation had two rounds with a response rate of 46%; and 71%; and a total of 1127 responses at the end. Several interesting results emerged as to the most promising fields and the design of technology policy.

The Innovation Potential and Thematic Leadership of Austrian Industries: An Interpretation of the Technology Delphi with Regard to the Old Structures/High-performance Paradox

The Austrian Technology Delphi searched for problem-oriented fieldsof potential leadership of Austrian scientists and firms. This study classifies the Delphi results according to standard industry classifications in order to facilitate their use by industrial economists and to propose an explanation of the old structures/high performance paradox. It reveals that expertsawarded the top marks for innovativeness to low- and high-qualification as well as to mainstream and research intensive industries, not to medium qualification and to marketing and labour-intensive ones. This implies that innovation is by no means restricted to high-tech industries and that the standard industry classifications are not well suited to deal with aspects of technology policy. Old structures need not hinder high performance.

Einige absorptionstheoretische Überlegungen zum österreichischen Leistungsbilanzdefizit

SummaryThe study explains the Austrian current account deficit in terms of a modified and disaggregated absorption approach. In small integrated countries absorption depends not an internal demand alone but on the difference of capacity utilisation at home and abroad. Disaggregation suggests that in years of increasing current account deficits households normally increase their net—saving while entrepreneus increase their net—indebtedness less than proportionally. It is the government which as a rule has high absorption during current account deficits. Since the government demands only few foreign goods, this correlation must be explained indirectly. Four mechanisms are suggested: First that budget deficits increase overall domestic capacity utilisation relative to that of the trade partners and so stimulate imports and restrain exports; secondly: The budget deficit may sustain full employment even if the economy has lost its international competitiveness; thirdly: An oversized public demand diverts capacities from the export industry, or fourthly: The foreign financing of budget deficits leads to a real transfer within a short time. A brief discussion of the Austrian situation attaches most weight to mechanisms one and two, a little less to point four.

Steindl on instability and stabilization policy

Steindl worked all of his life to intergrate the explanation of cycles and trends. In his most elaborate model, stochastic innovations trigger off a dynamic process among innovators and their competitors acting through multiplier distribution of income, accumulation of profit and utilization of capacities. History and institutions find ample room in this model and so stabilization policy becomes a complex process. Demand management appears secondary to income policy, competition policy, technology policy and to stabilization of expectations. Steindl refused to give direct policy advice, but indirectly the Austrian policy of Austrokeynesianism heavily learned from Steindl.

Die mittelfristigen Folgen der Wechselkurspolitik für Leistungsbilanz und Inflationsrate

SummaryNowadays it is uncontested that price elasticities of demand for exports and imports are high enough to secure an improvement of the current account of the balance of payments in the case of an exchange rate devaluation. Indeed it may take some time until the effects materialize and the primary effect may even run in the opposite direction. However, doubts arise about the favourable reaction of the current account if secondary price and wage effects are taken into consideration—what has been done more thoroughly in recent times.The present study deals with the medium term aspects of exchange rate changes in Austria. In order to quantify exchange rate effects on foreign trade and prices double weighted exchange rate indices and double weighted foreign trade price indices were computed and a simple econometric model was built. Behavioural equations for quantities and prices of exports and imports (as far as possible, disaggregated for raw materials, energy and manufactures), for domestic prices and wages were estimated. In addition to this model exchange rate effects on tourism were considered separately. In order to evaluate the consequences of the revaluation of the Austrian Schilling simulations were run under the assumption that in the period 1972 till 1976 Austria had kept constant the average exchange rate of the currencies of its main trading partners (competitors). The main results are as follows: If Austria had pursued a constant exchange rate policy in terms of the export weighted exchange rate index during the years 1972 to 1976 instead of actually revaluating the Schilling by 19 percent the volume of exports would have been higher by 1 billion Schilling (at 1970 prices) whereas the volume of imports would have been lower by 16 billions Schilling; measured in current prices exports and imports would have been higher by 59 billions and 60 billions, respectively, and the receipts from tourism would have grown faster by 12 billions. Therefore, the trade balance would have deteriorated by 1 billion and the current account would have improved by 11 billions. By 1976 consumer prices and wages would have reached a higher level (+7 3/4 percent and +5 1/4 percent, respectively). The results of this study are not in contradiction to those obtained in comparable work for other countries.There is some indication pointing to a further deterioration of the current account in the longer run: The revaluation caused profit squeeze which hits exporters as well as import competing domestic producers may weaken investment and the ability to maintain market shares. The revaluation could favour the sheltered sector of the economy in comparison to the exposed sector and shift the structure of the economy to the disadvantage of the current account.

Budgetdefizit und Leistungsbilanzsaldo-Replik

SummaryIn a previous article I explained the gradual deterioration of Austrias current balance in the seventies and its pronounced deficit in 1976 and 1977 within the framework of the relative absorption approach by reference to capacity utilization rates that were high compared to those of other countries. The high utilization rates in turn were the consequence of an expansive economic policy, in particular of an expansive fiscal policy. Guger-Wörgötter, on the other hand, interpret the deficit in the Austrian current balance as the result of weak foreign demand and view the budget deficit as an attempt to compensate for insufficient aggregate demand; they conclude that full employment policies should be continued disregarding the economic development abroad. The present paper presents additional evidence that the deficit in the current balance is attributable to the fact that Austrias economic policy maintained a higher rate of capacity utilization than abroad. Such a policy serves a useful purpose and can be financed by foreign currency reserves only in the case of a cyclical demand deficiency; in the long run, however, it can be sustained at best only under a regime of flexible exchange rates (continuing devaluation).

Die Bedeutung der Lager fr die Konjunktur: Teil A: Theoretische berlegungen

SummaryMacroeconomic inventory theory is heavily dominated by the 30 year old accelerator buffer-stock-model, which has been improved only marginally. Its main hypothesis is that entrepreneurs plan a constant inventory-sales-ratio and react on unforeseen deviations by filling in a fixed part of this gap per period, without regarding either the size of the gap nor the degree of capacity utilisation. This study emphasises the distinction between inventories of purchased goods and inventories of self-produced goods. Physical inventories of purchased goods are planned together with the stock of outstanding orders for these goods (as Mack has shown earlier); inventories of selfproduced goods are planned not autononously but together with production and sales. In the long run one should expect a declining inventory sales ratio, but less than the square root formula would suggest if stochastic considerations are taken into account. In the short run for uncertainty theoretical-reasons the planned inventory sales ratio will swing procyclically with undesired countermovements at the turns.In general therefore inventory planning enforces cyclical developments. Growing inventories of finished goods in the boom are possible only if there is no shortage of finished goods but a shortage of means of production. This however is at least not contrary to our evidence.