Editorial

Citation

Moutinho, L. (2007), "Editorial", Journal of Modelling in Management, Vol. 2 No. 1. https://doi.org/10.1108/jm2.2007.29702aaa.001

Editorial

Here we are. The beginning of the second year of publication of the Journal of Modelling in Management (JM2)! Thanks to all the contributors and reviewers that made it possible to have a successful first year of publications with academic research robustness and rigour. In this first issue of Volume 2, we have an interesting diversity of topics, debates, analytical discussions and modelling approaches.

The effect of corporate governance on firm performance has long been of great interest to financiers, economists, behavioural scientists, legal practitioners and business operators. An array of research on this issue leads to the development of a corporate governance mechanism, which induces agents or managers to act on the interest of performance improvement. Bonazzi and Islam developed a model to resolve the on-going issue of agency theory in financial economics: how can CEOs be effectively monitored by the board of directors? The result is based on:

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  a framework which takes into account the probability of success representing a CEO's ability, and

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  the active monitoring (which is represented by the numbers of visits) function carried-out by the directors.

The model is designed to identify the optimal level of monitoring to maximize share value, as a guide to both internal and independent directors. The design of the model is also aimed at identifying an optimal level of monitoring, which will maximises share value, to guide internal and independent directors.

In the second article, Qureshi uses system dynamics methodology to see how investment, financing and dividend policies may affect firm value. The results show that adequate investment in productive assets is the first step towards the achievement of the value maximization objective. Low debt capital structure plays a dominant role to maximize the firm value, contrary to the suggestions generally found in the corporate finance literature. The study indicates a trend towards a rather insignificant role of firm's short-term financing policy. It also advocates the positive role of a consistently stable dividend policy in pursuit of firm value maximization.

The next paper suggests a methodology for building a causality process to dynamically investigate system performance linkages, as implied by a strategic frame such as a quality management frame or the Balance Scorecard frame. To assist in building the causality process, Dror develops aggregated process control tools in a data mining structure. Data mining is an effective approach for exploring linkages between different types of existing databases, e.g. internal indicators and financial indicators. Data mining is applied in an innovative way to detect changes in the system performances and to discover time lag linkages between changes. These serve as building blocks of causality path types across the strategic levels outlined by a given frame.

In the next paper of this issue, Tarzijan asks: “Should national brand manufacturers produce private labels?” Anecdotal evidence shows that this is a common question for managers in different industries and countries. This paper examines this question, focusing especially on the effects of producing private labels on manufacturers' profits when their provision may affect both the consumers' perception of the quality of the private label and the national brand manufacturer's costs. The analysis allows for different degrees of competition in the retail market, and for linear and non-linear pricing. The author shows that national brand manufacturer' gains from producing private labels are increasing with the concentration of the retail market. The results presented in this paper may help managers to identify key variables that may affect the profitability of producing private labels.

Finally, and by extending the IDEF0 (Integrated Definition for Function Modelling)-based modelling approach, Rashid and Ismail demonstrate how to calculate the effectiveness of the process and the quality of the process output based on the quality of inputs, the controls and the tools used within the process. To illustrate and validate the proposed approach, the authors apply it to a case study of a product development process incorporating incomplete, fuzzy and uncertain inputs and resources. This technique is a valuable tool to assess the robustness and sensitivity of the process to changes in the quality of inputs, controls and tools, and can be integrated into businesses processes and management systems, and used as a tool to support continuous business and manufacturing decisions at any point of time.

I sincerely hope that you enjoy reading this “batch” of research contributions which make up a new year of research dissemination for JM2!

Thanks once again for your interest.

Luiz Moutinho