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A Novartis social business in India completely separated the activities of its social and business units—the former engaging in raising the health awareness of villagers and encouraging them to visit free health camps, while the latter developed affordable medicine delivered directly to village pharmacies. Connections between these units were made through open and fluid market-type mechanisms, and by appealing to the needs and interests of villagers with incentives. This synchronized business model was developed partly because Novartis believed in villagers' self-initiated behavior for health improvements, which made it not interfere into marginalized institutions, and more significantly because it used its internalized control and coordination systems with clear goals of social contribution in operating the business unit. Consequently, Novartis achieved economies of scale, business sustainability, and social contribution.

The literature on organizational change has long acknowledged the need to balance stability and economic efficiency with the need to be flexible and to change. Authors, certainly in the dynamic capabilities tradition but also in other perspectives, have stressed the importance of more open and loosely coupled systems to promote adaption. However, many organizations do not operate on such premises but rather rely on creating efficient business units through tight coupling, building strict social and administrative control, and jointly relying on common systems. In this study, we conduct 46 interviews with employees from three different retail organizations to investigate how units in such tightly coupled systems change within the framework of the set standards. Through contrasting the characteristics of high and low functioning units, we identify three mechanisms that seem to enable the units to successfully and repeatedly realign and establish new configurations. We conclude that the orchestrator of all three realignment mechanisms is the middle manager, and we discuss the middle manager's role and the different activities that enable a successful realignment.

The paper published below was prepared by Taylor Ostrander for Frank Knight’s course, Economic Theory, Economics 301, during the Fall 1933 quarter.

The authors discuss a large system transformation project they designed and implemented in Slovenia at the start of its independence in the early 1990s. Post-mortem insights are useful for practitioners who embark on similarly broad transformation processes. Design issues are discussed such as structuring the pre-contracting phase to guarantee inclusive stakeholder representation and participation throughout the transformation process and how intervention design needs to allow for experimentation and multi-stakeholder alliance building. Application of action research and action learning in a risk-averse environment typical of central governments helped create a sense of ownership, control, and collective accountability in the partner country.

The role of management control has not received sufficient attention in the literature on value creation so far. Therefore, this paper aims to investigate the role of control in value creation in industrial networks. More specifically, the aim is to examine the management and control of interfaces between key resources within and between firms, in the networks surrounding firms, when they attempt to create value. All the firms that take part in a value-creation process have both formal and informal control systems: these firms have budgets, specific routines, reward systems, and sanctioned “ways to behave.” The paper relates the Industrial Marketing and Purchasing (IMP) group's research on interaction, relationships, and networks with control literature, and presents a framework for controlling resource interfaces in a network setting. Two in-depth cases illustrate the role of control in value creation. The first case covers the development of a low-weight newspaper grade that Holmen and its paper mill Hallsta initiated. The second case examines the attempt to develop and commercialize a new, energy efficient pulping technology.

Vector error-correction models (VECMs) have become increasingly important in their application to financial markets. Standard full-order VECM models assume non-zero entries in all their coefficient matrices. However, applications of VECM models to financial market data have revealed that zero entries are often a necessary part of efficient modelling. In such cases, the use of full-order VECM models may lead to incorrect inferences. Specifically, if indirect causality or Granger non-causality exists among the variables, the use of over-parameterised full-order VECM models may weaken the power of statistical inference. In this paper, it is argued that the zero–non-zero (ZNZ) patterned VECM is a more straightforward and effective means of testing for both indirect causality and Granger non-causality. For a ZNZ patterned VECM framework for time series of integrated order two, we provide a new algorithm to select cointegrating and loading vectors that can contain zero entries. Two case studies are used to demonstrate the usefulness of the algorithm in tests of purchasing power parity and a three-variable system involving the stock market.

We study a microfounded search model of exchange in the laboratory. Using a within-subjects design, we consider exchange behavior with and without an intrinsically worthless token object. While these tokens have no redemption value, like fiat money they may foster greater exchange and welfare via the coordinating role of having prices of goods in terms of tokens. We find that welfare is indeed improved by the presence of tokens provided that the economy starts out with a supply of such tokens. In economies that operate for some time without tokens, the later surprise introduction of tokens does not serve to improve welfare. We also explore the impact of announced changes in the economy-wide stock of tokens (fiat money) on prices. Consistent with the quantity theory of money, we find that increases in the stock of money (tokens) have no real effects and mainly result in proportionate changes to prices. However, the same finding does not hold for decreases in the stock of money.