Author Archives: support

The enduring wisdom of Sanpo-yoshi for modern businesses

There is an increasing focus on corporations’ need to assess their impact on the environment, society, and stakeholders. This broad concern falls under the umbrella of Environmental, Social, and Governance (ESG) criteria, encompassing practices like the use of sustainably sourced materials, reduction of carbon emissions, enhancement of labour practices, cultivation of positive community relationships, and promotion of ethical corporate conduct, including combating anti-competitive actions and corruption.

The concept of ESG first emerged in a 2004 UN report titled “Who Cares Wins.” However, conducting business ethically has deep roots, dating back centuries in Japan. During the 17th to 19th centuries, the Ohmi merchants from Japan’s Shiga Prefecture (formerly Ohmi Province) adhered to a business philosophy known as “Sanpo-yoshi,” translated as “three-way good.” This philosophy advocates for business practices that benefit buyers, sellers, and society. The legacy and business philosophies of the Ohmi merchants are still celebrated in Shiga Prefecture, where museums, breweries, and warehouses stand as testaments to the enduring principles of Sanpo-Yoshi. Despite the similarities between the concepts of Sanpo-yoshi and ESG, more research needs to be conducted to explore the impact of Sanpo-yoshi on a company’s ESG performance.

To fill this significant research gap, a team led by Associate Professor Pengda Fan from Ritsumeikan University in Japan embarked on a groundbreaking study. They explored whether the principles of Sanpo-yoshi influence the ESG performance of Japanese companies. Their findings, which were initially made available online on February 20, 2024, and later published in the Journal of Behavioral and Experimental Finance on March 01, 2024, are set to revolutionise our understanding of the intersection between business ethics and corporate governance.

Dr Fan explained, “Our research aims to highlight the impact of ‘Sanpo-yoshi’ on the ESG performance of Japanese firms and to promote the richness of Japanese culture globally, akin to the international recognition of Confucian culture.”

Corporate policies are typically shaped by top management, including CEOs and corporate executives, whose personal experiences, cultural values, and attitudes influence decisions. The researchers theorised that individuals in top management familiar with Sanpo-yoshi might be more likely to integrate these principles into their firm’s decision-making processes, especially those related to ESG.

The study examined the ESG performance of 467 publicly listed Japanese companies from 2001 to 2018, encompassing 6693 firm-year observations. The ESG performance was assessed using the combined ESG score (ESGC), including the environmental, social, and governance pillars and the ESG controversies scores. This data was then linked with information about the companies’ Boards of Directors and CEOs to investigate the relationship between the executives’ backgrounds and the companies’ ESG performances. The findings indicated that companies with more directors and CEOs connected to Shiga Prefecture showed superior ESG performances. These results were further confirmed through Propensity Score Matching (PSM) and Difference-in-Differences (DID) analyses, which supported the initial findings. The research also considered the influence of the local political environment, the prosocial attitudes of top management, key economic indicators, and female leadership on the relationship between Sanpo-yoshi and a company’s ESG performance, finding that these factors did not alter the primary conclusions and highlighted the positive influence of the Sanpo-yoshi philosophy on ESG scores.

Dr Fan commented, “We introduce a novel stakeholder-centric model that incorporates the ethical principles of Sanpo-yoshi into the essence of corporate governance. Our approach aims to enhance ESG metrics and promote inclusivity, transforming this ancient Japanese philosophy into a universal framework for sustainable and equitable business practices.”

In summary, promoting the values of Sanpo-yoshi can enhance the ESG performance of Japanese companies and help set a global standard for responsible business practices.

More information: Thi Khanh Giang Nguyen et al, Sanpo-yoshi, top management personal values, and ESG performance, Journal of Behavioral and Experimental Finance. DOI: 10.1016/j.jbef.2024.100903

Journal information: Journal of Behavioral and Experimental Finance Provided by Ritsumeikan University

A recent study reveals that domestic corporate misconduct negatively impacts international sales

Leave a Reply

The recent findings, a significant contribution to the Global Strategy Journal, shed light on a pressing issue for businesses-the impact of corporate misconduct on international sales. This research, which delves into the effects of corruption, discrimination, and exploitative practices within supply chains, reveals a tangible negative effect on sales. The global awareness of unethical business behaviours is leading consumers and investors to respond with disapproval in their local markets.

Nuruzzaman Nuruzzaman from the University of Manchester, a contributing author to the study, explains that socially irresponsible actions have far-reaching effects that extend beyond local boundaries, adversely impacting the performance of foreign subsidiaries.

Nuruzzaman conducted the research along with Erin E. Makarius and Debmalya Mukherjee of the University of Akron and Ajai Gaur of Rutgers University. They observed the sales growth of 335 subsidiaries across 109 countries over nine years, correlating these figures with the frequency of reported corporate social irresponsibility (CSI) incidents involving their parent companies. Their findings were clear: sales at subsidiaries suffered regardless of whether the incidents occurred locally or internationally.

Makarius emphasized the scope of their research, noting, “We focused on the global spread of negative news and the reaction of stakeholders to incidents outside their immediate geographic area. Our data suggests that the location of the misconduct is irrelevant; the negative impact remains substantial.”

The study also delved into whether diversionary tactics could alleviate the repercussions of a parent company’s misdemeanours. It compared the effectiveness of marketing campaigns and product innovations. The results showed that while promotions and contests had little effect in mitigating reputational damage, launching two or more innovations in products or services could positively influence sales growth despite ongoing CSI incidents.

Mukherjee commented on the findings, suggesting, “Consumers may see marketing campaigns as insincere, whereas innovation, being more resource-intensive, likely has a more substantial positive effect.”

Although the research confirms that subsidiaries can counteract the adverse effects of negative media coverage regarding their parent company’s actions, the authors stress a broader implication: the potential widespread consequences of CSI. They advise management at parent companies and their international subsidiaries to know that misconduct, even far from where they operate, can swiftly affect their international sales performance.

Gaur concludes with a strong call to action for global corporations, emphasizing the importance of maintaining high ethical and social responsibility standards across all operations. He also highlights the need for open communication with subsidiaries to swiftly address and mitigate the effects of socially irresponsible behaviours, further reinforcing the issue’s urgency.

More information: N. Nuruzzaman et al, MNCs’ corporate social irresponsibility and foreign subsidiary performance, Global Strategy Journal. DOI: 10.1002/gsj.1502

Journal information: Global Strategy Journal Provided by Strategic Management Society

Optimal practices in new product development: what distinguishes the best from the rest?

Leave a Reply

“I believe that fundamentally, we should perceive innovation as the capability to learn and observe ongoing developments. If we cease this, it’s akin to growing old. And we all know the consequences of aging, right?” remarks Max von Zedtwitz, a professor at the School of Economics and Business at Kaunas University of Technology, Lithuania, and a co-author of the study, while discussing the findings of the PDMA survey.

The 2021 Global Best Practices Research by the Product Development & Management Association (PDMA) is the fifth instalment of the PDMA Best Practice studies (BP5). Initiated in 1990, the survey’s latest edition, in 2012, boasts the most global representation, with 62% of the 651 respondents based in Europe and the UK and a mere 6% (39 individuals) from North America.

The criteria distinguishing the best companies from the rest were established in 1997. Although these criteria focus primarily on new product development and market success, the researchers contend that the definition of the best companies is expansive, covering all business types and measuring success in broader terms.

“The survey broadly addresses product development: it includes consulting firms, banks, travel agencies, tech companies, and more. We inquire if these companies meet their financial goals, revenue targets, and product development objectives. Are they performing better than others? Thus, if a company qualifies as the Best according to PDMA standards, it is not only financially profitable but also competitive. Essentially, these companies excel in their expectations regarding products and programs. Simply put, these are the best companies,” states Von Zedtwitz.

Benchmark studies such as PDMA’s serve to refine practices universally. Hence, one of the key takeaways for practitioners is that evolving new product development capabilities is essential for any company wishing to remain competitive as circumstances and environments shift.

Conducted during the pandemic, the fifth edition of the PDMA’s global survey incorporated queries about how companies tackled the challenges posed by COVID-19. Were their strategies unchanged, reduced, or differently approached? The survey disclosed that despite the crisis, Best continued to invest in new product development, increasing manpower, budgets, and overall investments, whereas the rest adopted a more defensive strategy.

“The Best were unanimous in intensifying their investment in product development rather than scaling back; they adopted a more assertive approach. On the other hand, the rest either maintained their status quo or planned to reduce investments to bolster financial reserves in case of market declines or significant revenue drops,” explains von Zedtwitz.

In BP5, 213 companies were classified as the Best (32.3%) and 416 as the rest (67.7%). However, similar to previous PDMA Best Practice studies, BP5 did not identify a unique practice that distinctly separated the two groups.

“To be honest, we were also somewhat disappointed that we did not identify a single factor. Perhaps the most notable difference between the Best and the rest was the speed at which the Best companies developed new products. They are significantly faster. However, this isn’t necessarily a skill per se, but rather a result of adeptly managing various elements simultaneously,” mentions von Zedtwitz, a KTU School of Economics and Business professor.

The survey’s paper highlights new product development capabilities and practices where the Best Companies excel. For instance, they emphasize radical over incremental innovation (the study shows that companies with radical innovations comprising 21%–50% of their total innovation projects are likely to be among the Best). Regarding portfolio execution, the Best focuses more on penetrating new markets, applying new technologies, taking more significant risks, and adopting a more long-term outlook.

“Compared to previous “studies, it became more apparent this time that Best companies manage their new product portfolios more effectively,” adds von Zedtwitz.

“Overall, Best adopts more innovation-oriented strategies, reflected in their higher proportion of radical innovation projects. However, Best concentrates more on radical innovation and invests more in innovation projects.

Innovation is synonymous with progress, competitive capability, and economic growth today. Yet, to better understand companies’ approaches to new products and services, it’s crucial to differentiate between radical and incremental innovation.

According to von Zedtwitz, also the Director of GLORAD Center for Global R&D and Innovation, the distinction between radical and incremental innovation resulting from product development is evident from the customer’s perspective. Innovation involves minimal changes from the customer’s viewpoint: customer or service remains essentially the same in appearance and function, with only slight improvements. An example might be transitioning from one smartphone model to the next, where the new model might be slightly larger, have more memory, and perform marginally better. Conversely, radical innovation often entails a significant transformation in the product-customer interaction.

“For instance, switching from an old-style cell phone to a smartphone represents a radical

Introducing a new medication or therapy that treats a previously incurable disease would be a radical innovation. Engaging in fundamentally different activities or using things in fundamentally different ways typically characterizes radical innovation,” elucidates von Zedtwitz.

He notes that companies are invariably driven to innovate in a free market—to do things differently to stay competitive. If the environment is constantly changing, companies must adapt and avoid becoming complacent.

“One of the gradual changes we all attempt to adapt to is climate change. Today, it’s difficult to enviit’s a company that ignores this issue. The COVID-19 pandemic demonstrated the capacity of companies to respond swiftly to more immediate changes. In the survey, we see how this ability is crucial in distinguishing the Best from the rest,” concludes von Zedtwitz.

More information: Mette Praest Knudsen et al, Best practices in new product development and innovation: Results from PDMA’s 2021 global survey, Journal of Product Innovation Management. DOI: 10.1111/jpim.12663

Journal information: Journal of Product Innovation Management Provided by Kaunas University of Technology

A recent study unveils the punitive repercussions faced by companies that neglect climate risks within their operational strategies

Leave a Reply

The University of Florida’s groundbreaking investigation, which meticulously quantified the exposure of corporations to climate change risks, is a significant contribution to the field. It encompasses threats such as hurricanes, wildfires, and climate-related regulations and delves into the profound impact of these risks on market valuations. The study’s key finding – companies that actively manage climate risks outperform those that disregard them-is a crucial insight for investors, corporate executives, financial analysts, and policymakers.

By analysing earnings call transcripts from nearly 5,000 publicly traded companies in the United States, researchers devised innovative metrics to gauge firms’ susceptibility to physical climate risks stemming from extreme weather events and the “transition risks” associated with the global transition towards a low-carbon economy. These transition risks encompass challenges such as adapting to renewable energy sources and reducing carbon emissions. The study uncovered that companies facing significant transition risks, such as regulatory changes impacting emissions, often face devaluation by investors.

Qing Li, Clinical Assistant Professor at the University of Florida Warrington College of Business, elaborated on the shifting landscape of investor attention towards climate change. Li stated, “In recent years, overall investor attention to climate change has increased,” noting that companies heavily exposed to transition risks tend to incur market penalties.

However, this valuation penalty does not extend to companies actively engaged in adapting their business models to mitigate climate impacts. Such proactive firms demonstrate a commitment to sustainability through increased investments in green technologies and sustainable practices. These proactive measures shield them from market devaluation even amidst intensifying transition risks.

Conversely, companies adopting a passive stance towards transition risks often resort to drastic measures such as slashing research and development (R&D) budgets and downsizing when confronted with heightened climate exposure. This reactive approach poses a potential threat to their long-term competitiveness.

Researcher Yuehua Tang, Emerson-Merrill Lynch Associate Professor, highlighted the stark disparity in outcomes between proactive and nonproactive firms. Tang observed, “The divide in strategies and outcomes between proactive and nonproactive firms is quite stark,” emphasising that companies that are transparent about their climate vulnerabilities and proactive in mitigating risks tend to garner favour with markets.

These findings emerge against a backdrop of mounting pressure from investors, regulators, and activists for companies to disclose climate risks publicly. The introduction of new regulations by the Securities and Exchange Commission (SEC) in 2024, mandating public corporations to report climate change impacts and, in some instances, their greenhouse gas emissions, underscores the increasing importance of climate risk management in the business landscape. This regulatory context is crucial for investors, corporate executives, financial analysts, and policymakers to be aware of and prepared for.

While adapting to physical and transitional climate risks incurs business costs, the study led by Li, Tang, Hongyu Shan from the China Europe International Business School, and Vincent Yao from Georgia State University indicates that proactive efforts could potentially enhance valuations and resilience. This finding offers a glimmer of hope, suggesting that companies cannot only survive but thrive in a rapidly evolving market environment by embracing proactive climate risk management. Investors are increasingly factoring climate threats into their investment decisions, amplifying the importance of these efforts.

More information: Qing Li et al, Corporate Climate Risk: Measurements and Responses, Review of Financial Studies. DOI: 10.1093/rfs/hhad094

Journal information: Review of Financial Studies Provided by University of Florida

Should we retire the best-before date?

Leave a Reply

A group of inventors has developed a series of tests that can be integrated into food packaging to indicate contamination, as discussed in their recent publication in Nature Reviews Bioengineering. These tests are designed to be cost-effective, adding only a few cents to each package, yet they face resistance from food producers wary of passing additional costs onto consumers. The tests form part of a proposed intelligent packaging system that, according to McMaster University researchers, could significantly mitigate the financial and reputational damages typically associated with foodborne illness outbreaks and drastically cut down on food waste.

The proposed technology holds immense potential to save the global economy hundreds of billions of dollars annually. By reducing the need for large-scale recalls, minimizing healthcare and associated costs from foodborne illnesses, and decreasing the amount of food unnecessarily discarded due to conservative expiration dates, it could revolutionize the food industry. Despite these compelling benefits, the implementation of such smart packaging would necessitate extensive changes to existing food regulations and packaging practices, changes that might encounter substantial resistance.

Tohid Didar, the paper’s lead author and a biomedical engineer and entrepreneur, emphasized the dilemma consumers face: the desire for safer food versus the reluctance to pay higher prices amidst already rising food costs. The paper argues for initiating dialogues among researchers, policymakers, corporations, and consumers to explore viable solutions to these challenges. While public agencies acknowledge the potential of this new technology and are keen to deploy it, the transition requires a comprehensive overhaul of current practices.

The researchers also critique the current practice of using ‘best before’ dates on perishable foods, which they claim is arbitrary and leads to significant food wastage. In Canada alone, approximately $40 billion worth of food is wasted each year, a figure that outstrips per capita food waste in the US and the UK. However, with the implementation of intelligent food packaging technology, this wastage could be significantly reduced, offering a glimmer of hope in the fight against food scarcity and the disposal of unused food and packaging.

Since 2018, the McMaster team has developed and validated various methods for detecting spoilage through packaging. These include Sentinel Wrap, a plastic wrap that changes colour when the food product inside spoils; a handheld device that provides real-time spoilage results; and Lab-on-a-package, a tiny, integrated test that signals when food has gone wrong. Additionally, they have created a sprayable, food-safe gel containing bacteriophages that target and eliminate bacteria responsible for food contamination.

Despite the proven efficacy of these innovations, transitioning from the lab to the market has presented challenges. However, the researchers are not alone in this journey. They are actively collaborating with industry partners and regulatory bodies, such as the Canadian Food Inspection Agency, to navigate these challenges and facilitate the adoption of these technologies. This collaborative approach ensures that the technology is developed and implemented in a way that benefits all stakeholders.

The shift from a calendar-based to a detection-based system for managing food freshness and safety represents a significant endeavour. Nonetheless, the paper’s authors are optimistic about the widespread benefits of such a shift, asserting that it is time to modernize our technology to reflect current capabilities in food safety management better.

More information: Shadman Khan et al, Smart food packaging commercialization, Nature Reviews Bioengineering. DOI: 10.1038/s44222-024-00190-5

Journal information: Nature Reviews Bioengineering Provided by McMaster University

According to a study, ambitious employees set aside office politics when their employer is facing challenges

Leave a Reply

New research indicates that workers adapt their competitive strategies for promotion or salary increases depending on their organisation’s performance compared to competitors. Academics delved into the overtaking manoeuvres of motorcycle riders in MotoGP from 2004 to 2020, examining how their approach was influenced by their team’s competitive landscape and available resources. The study, led by Professor Hans Frankort from Bayes Business School, City, University of London, observed how often riders attempted to overtake both teammates (internal overtakes) and riders from rival teams (external overtakes).

Professor Frankort, in his insightful analysis, draws a parallel between sports, particularly motorsports, and various industries like consultancy and financial services. He underscores how these industries mirror the competitiveness seen in MotoGP. The published paper in the Academy of Management Journal unveils a fascinating aspect of this competitiveness-riders adjusting their overtaking strategies in response to their team’s competitive circumstances and the resources of rival teams.

The research emphasised that employees typically compete to enhance their organisational standing, often resorting to actions like poaching clients or disrupting colleagues’ work. However, ambitious workers adapt these behaviours based on their organisation’s performance. If the company shows potential to outperform rivals, employees may focus on actions that contribute to that success, such as client poaching. Conversely, during times of threat, like losing market share, internal conflicts may be viewed negatively, prompting employees to direct their competitive efforts externally.

The study indicated employers could influence employee behaviour by highlighting threats from smaller competitors or opportunities against larger rivals. Furthermore, contractual arrangements with the team also influenced riders’ overtaking behaviour. Like agency workers in MotoGP, replacement riders tended to attempt more overtakes against teammates when the team was thriving and against all riders when the team was struggling. This behaviour could be interpreted as replacement riders trying to showcase their abilities in hopes of securing a permanent contract.

The paper concludes with significant implications for both employers and employees. It highlights how riders whose contracts were not being renewed exhibited distinct behaviour on the track, challenging teammates more aggressively but showing less inclination to overtake riders from other teams. This behaviour, which suggests a sense of detachment or dissatisfaction with the team, could serve as a warning sign for employers. These findings offer valuable insights into how employees on different contract types navigate competitive environments, providing a roadmap for organisations to manage and leverage competitive dynamics.

More information: Patrick Hallila et al, Revving Up or Backing Down? Cross-Level Effects of Firm-Level Tournaments on Employees’ Competitive Actions, Academy of Management Journal. DOI: 10.5465/amj.2022.0946

Journal information: Academy of Management Journal Provided by City, University of London

Landmark advances in employment reframing the outlook for people with disabilities in the post-pandemic era

Leave a Reply

A recent commentary published in The Journal of Spinal Cord Medicine sheds light on the unprecedented upward trajectory in employment opportunities for individuals with disabilities, propelled by the economic recovery phase following the COVID-19 pandemic. Entitled “Employment and people with disabilities: Reframing the dialogue in the post-pandemic era” and released on February 22, 2024, the piece delves into the multifaceted factors contributing to the recent surge in employment rates among this demographic. The authors delve into the intersection of elements fuelling the remarkable increase in employment levels among individuals with disabilities. This surge is underpinned by a conducive labour market, evolving attitudes among employers, and adopting inclusive workplace policies.

A series of reports by the National Trends in Disability Employment (nTIDE) from the Kessler Foundation and the University of New Hampshire Institute on Disability have been instrumental in exploring the various contributions made by different subgroups within the disability community towards this positive shift. One pivotal factor has been the swift adaptability exhibited by employers in response to the acute labour shortages precipitated by the pandemic. Innovations in recruitment, onboarding, training, and employee retention have broadened the opportunities available to individuals with disabilities.

A notable revelation from a 2022 survey conducted by the Kessler Foundation was the significant shift in supervisors’ perceptions towards more inclusive hiring practices and accommodations. This shift signifies a tangible and sustainable transformation in workplace culture, promising a more inclusive environment for individuals with disabilities.

However, the authors acknowledge uncertainties regarding these advancements’ longevity as the pandemic’s direct impact diminishes. The widespread adoption of remote work, which has been recognised as advantageous for many employees, including those with disabilities, faces a future fraught with mixed prospects as workplaces undergo readjustments and physical offices resume operations. Nonetheless, evidence suggests that remote and hybrid work arrangements will persist as viable options, supporting equity in employment opportunities for individuals with disabilities.

The article underscores the urgent need for ongoing research and policy development to sustain the upward trajectory in employment rates for individuals with disabilities. By acknowledging both the accomplishments and challenges illuminated during the post-pandemic recovery period, stakeholders can collaboratively strive to further narrow the employment disparity and nurture a more inclusive economy.

More information: Carolann Murphy et al, Employment and people with disabilities: Reframing the dialogue in the post-pandemic era, Journal of Spinal Cord Medicine. DOI: 10.1080/10790268.2024.2315927

Journal information: Journal of Spinal Cord Medicine Provided by Kessler Foundation

AI possesses the potential to assume critical managerial roles within scientific research

Leave a Reply

Maximilian Koehler, a PhD candidate at ESMT, and Henry Sauermann, a professor of strategy at ESMT, delve into the dynamic role of artificial intelligence (AI) within scientific research. Rather than merely functioning as a “worker” executing specific research tasks like data collection and analysis, AI is explored as a “manager” overseeing human workers engaged in these tasks. This concept, known as algorithmic management (AM), heralds a significant paradigm shift in research project execution, potentially enhancing scalability and operational efficiency.

As the landscape of scientific research becomes increasingly intricate and expansive, Koehler and Sauermann’s study highlights AI’s capacity not only to replicate but also to potentially surpass human managers. This is achieved by harnessing AI’s instantaneous, comprehensive, and interactive capabilities. By examining algorithmic management in crowd and citizen science contexts, the researchers showcase examples where AI effectively fulfills five vital managerial functions: task division and allocation, direction, coordination, motivation, and supporting learning.

Their investigation involved scrutinising projects through online documentation, conducting interviews with organisers, AI developers, and project participants, and actively participating in some projects. This multifaceted approach enabled the researchers to pinpoint projects utilising algorithmic management, comprehend how AI executes management functions, and discern scenarios where AM might offer heightened efficacy.

The proliferation of use cases underscores the potential significance of adopting AM in enhancing research productivity. Koehler asserts, “The capabilities of artificial intelligence have reached a point where AI can now significantly enhance the scope and efficiency of scientific research by managing complex, large-scale projects.”

In a quantitative analysis comparing projects utilising AM with a broader sample, the study uncovers that AM-enabled projects tend to be larger and often associated with platforms providing access to shared AI tools. This trend suggests that while AM facilitates scalability, it also necessitates technical infrastructures that standalone projects might struggle to develop. These findings hint at evolving sources of competitive advantage in research and may hold significant implications for research funders, digital research platforms, and larger research entities such as universities or corporate R&D labs.

However, the integration of AI into management functions does not imply the obsolescence of principal investigators or human managers. Sauermann emphasises, “If AI can assume some of the more algorithmic and routine managerial functions, human leaders could redirect their focus towards strategic and interpersonal tasks such as identifying high-value research objectives, securing funding, or cultivating an effective organisational culture.” This underscores the potential for AI to augment human decision-making rather than replace it entirely, fostering a symbiotic relationship between AI and human expertise in scientific research management.

More information: Maximilian Koehler et al, Algorithmic management in scientific research, Research Policy. DOI: 10.1016/j.respol.2024.104985

Journal information: Research Policy Provided by ESMT Berlin

Economic prosperity could be associated with happiness in China when inequality is minimal

Leave a Reply

In a groundbreaking study published on April 10, 2024, in the open-access journal PLOS ONE, Feng Huang from the Chinese Academy of Sciences and his team present a fresh perspective. They suggest that economic prosperity in a country can indeed enhance the well-being of its citizens, challenging long-held beliefs.

Philosophers have debated the complex relationship between financial wealth and happiness for centuries. Notably, Aristotle and Solon were sceptical about wealth’s joy-bringing capabilities. Conversely, the Easterlin Paradox posits that a nation’s economic strength can positively affect the health and happiness of its people. However, there has been little evidence to back this assertion in China, where there has been significant financial growth and swift industrialization recently.

To explore this further, Huang and his colleagues examined how national economic growth affected subjective well-being—a measure of personal happiness—across 31 mainland China provinces from 2010 to 2020. The researchers used two vital financial indicators from the National Bureau of Statistics of China: the per capita gross domestic product (GDP) and the Gini coefficient, which measures income inequality. To assess the subjective well-being of Chinese citizens, they analyzed content from 644,243 users of Weibo, a popular microblogging platform, using natural language processing techniques to determine the sentiment of each post.

The findings reveal that from 2010 to 2020, subjective well-being generally improved as GDP per capita increased—specifically, a 0.38-unit increase in well-being for every 46.70% rise in GDP per capita. However, higher income inequality correlated with lower subjective well-being, with a decrease of 1.47 units for every 0.09 unit increase in the Gini coefficient. Furthermore, the study found that once the Gini coefficient surpasses 0.609, the positive correlation between the economy and mental health dissipates.

The majority of the study participants were from the more prosperous regions of Eastern China and were all literate social media users, which could limit the broader applicability of the findings. The researchers suggest that future studies could focus on wealth disparities within smaller geographic areas, such as cities or communities, rather than entire provinces. Despite these limitations, the study champions a balanced approach to economic policy, advocating for strategies that address income disparities and promote sustainable growth.

In conclusion, the study underscores the delicate balance between economic growth and income equality in enhancing well-being in China. It highlights the complex relationship between achieving prosperity and maintaining fair wealth distribution for genuine happiness.

More information: Feng Huang et al, Does wealth equate to happiness? an 11-year panel data analysis exploring socio-economic indicators and social media metrics, PLoS ONE. DOI: 10.1371/journal.pone.0301206

Journal information: PLoS ONE Provided by PLOS

VAT information could assist nations in better preparing for crises

Leave a Reply

“How would an armed conflict, an epidemic, or a flood impact the economy? The ability to assess—and potentially predict—the economic repercussions of such crises is crucial for mitigating and counteracting the damage,” remarks Christian Diem from the Complexity Science Hub (CSH).

A groundbreaking study in PNAS Nexus has unveiled a new frontier in crisis preparedness. It emphasises that countries could significantly enhance their readiness by harnessing an exceptionally detailed supply chain data set. For the first time, CSH researchers have demonstrated that the conventional sector-level economic data often underestimates the economic impact of crises by as much as 37%, in comparison to highly detailed company-level data.

This unique study utilised a comprehensive dataset of value-added tax (VAT) information from Hungary, encompassing 243,399 companies and over 1.1 million supply relationships, representing the entire national economy. Stefan Thurner from the CSH explains that this extensive dataset enabled the researchers to conduct a thorough analysis comparing the economic effects of crises, using either the 88 economic sectors defined by the European Union or detailed supply chain data at the company level, which includes all companies and their customer-supplier relationships.

The research involved simulating 1,000 hypothetical crisis scenarios to ensure that the models closely mirrored real-world crises. The scenarios were informed by empirical data on the economic effects of the Covid-19 crisis in early 2020.

It was a significant finding that the impact of each simulated crisis was consistently underestimated—by up to 37%—when only sector-level data was used, which has been the traditional method. Conversely, the results at the company level aligned much more closely with the actual recession outcomes in the second quarter of 2020, indicating that sectoral-level assessments typically underestimate the full extent of a crisis’s impact compared to company-level data.

Thurner further elaborates, “Traditionally, a country’s economy has been viewed predominantly through the lens of entire economic sectors. For instance, discussing the overall impact on the automotive industry due to supply bottlenecks. However, this new dataset allows us to observe the ‘atoms’ of the economy—the individual companies—and how they interact within the supply chain. This offers a novel and fascinating perspective into economic science.”

The approach allows for a nuanced calculation of how individual companies within sectors are affected by a crisis instead of generalising across an entire industry. “The difference is substantial between stating that a sector might incur a 20% loss and using simulations to identify which specific companies within that sector are likely to be affected,” Diem adds. This method also highlights how these effects propagate through the supply network, impacting direct and indirect trading partners.

Globally, more than 160 countries implement a VAT system and could theoretically use it to reconstruct their supply networks. However, only a select group of countries, including some EU members like Spain, Belgium, and Hungary, as well as nations such as India, China, and some in Africa and Latin America, actively collect the necessary data to facilitate this kind of analysis.

For nations like Germany and Austria that currently do not collect VAT data in a manner conducive to this analysis, a minor adjustment in the VAT reporting by firms could bridge the gap, potentially automated through firm accounting software, according to Diem. This adjustment could not only aid in reducing VAT fraud but also significantly contribute to their crisis preparedness.

Diem concludes, “This study underscores the significant discrepancies between aggregated sector-based estimates and those derived from detailed company-level data, highlighting the importance of collecting and analysing granular data. Accurate data is imperative, irrespective of the nature of the threat—be it a natural disaster, environmental issues, or political interventions—as it enables authorities to anticipate potential consequences and respond swiftly and effectively.”

More information: Christian Diem et al, Estimating the loss of economic predictability from aggregating firm-level production networks, PNAS Nexus. DOI: 10.1093/pnasnexus/pgae064

Journal information: PNAS Nexus Provided by Complexity Science Hub

Which countries are most vulnerable in the global supply chain?

Leave a Reply

Researchers from the Complexity Science Hub (CSH) have conducted a groundbreaking study using firm-level data from the global supply network to assess countries’ vulnerability to production losses triggered by firm defaults abroad. Their findings are of utmost importance, revealing that affluent countries are primarily at risk from supply chain disruptions originating from other wealthy nations. In stark contrast, less developed and poorer nations face risks from disruptions across all countries, underscoring the global nature of supply chain vulnerabilities.

Tobias Reisch, a CSH scientist, explains their data’s robustness: “Our data, sourced from Standard & Poor’s Capital IQ platform, holds information on most of the world’s significant companies. It covers around 230,000 companies across 206 countries, offering an unparalleled comprehensive overview of the global supply chain network.” Reisch, one of the primary authors of the study published in Nature Communications, adds that the data includes details on almost one million corporate relationships, meticulously mapping the flow of goods and services internationally.

The team at CSH also simulated various economic shocks to understand their potential impact on the supply chain. These hypothetical scenarios included infrastructure failures, like a bridge collapse in Baltimore, and natural disasters, like an earthquake in Taiwan. They studied how these disruptions would interrupt the flow of goods and services and observed the propagation of these shocks within the networks.

Stefan Thurner, the study’s senior author and president of CSH, noted that while high-income countries tend to have a broader impact, spreading systemic risk beyond their regions, low-income countries suffer disproportionately from high exposure levels. This finding contradicted their initial expectations. “We thought that richer, industrialized countries would be more affected due to their deeper integration into global value chains. However, it turns out they are less affected by economic shocks but are instead major contributors to these shocks,” says Reisch. He points out that these countries often have more diversified economies or occupy different positions within the supply networks, thereby exposing other countries more than they are exposed to.

The study also highlights that exposure to supply chain disruptions is highly structured on a regional level, suggesting that companies are most vulnerable to shocks within their borders. “This underscores the strong local or national integration of firms within their supply chains, with similar regional dependencies observed in Africa and Europe,” Reisch elaborates.

The CSH researchers also address the issue of structural inequality in supply networks between countries. They suggest that it is crucial to understand the processes that allow firms from various income levels to engage in production and trade relations—and how to do so with reduced risk exposure to poorer nations. The authors propose a potential strategy for creating more resilient, fair, and sustainable supply chains: introducing a ‘systemic risk tax’ on international supply networks. “This idea draws on concepts we previously developed for enhancing resilience in financial markets. The complexity of supply chains means more research is needed to refine this taxing scheme,” explains Thurner.

More information: Abhijit Chakraborty et al, Inequality in economic shock exposures across the global firm-level supply network, Nature Communications. DOI: 10.1038/s41467-024-46126-w

Journal information: Nature Communications Provided by Complexity Science Hub

Optimising electronic health records: study reveals improvements in departmental productivity

Leave a Reply

In a recent publication in the Annals of Family Medicine, the Marshall University Joan C. Edwards School of Medicine revealed significant improvements in departmental productivity through electronic health record (EHR) optimisation. This research, which emphasises the crucial role of cooperative efforts among clinicians and IT specialists, found that such collaboration can greatly enhance the utility of EHR systems, now widely implemented across healthcare settings.

The initiative, led by a healthcare team within a family medicine department, embarked on a focused four-month EHR optimisation effort with IT experts. This project stood out from previous endeavours, which often concentrated on broad institutional achievements, by zeroing in on the refinement of EHR interface development and its impact on clinical workflow.

Adam M. Franks, M.D., interim chair of family and community health at the Joan C. Edwards School of Medicine and the study’s lead researcher, shared his insights on the prevailing challenges: “There has been a persistent gap between EHR developers and end-users, leading to interfaces that often overlook the nuances of clinical workflows. Our study was designed to address this issue and highlight the concrete benefits of cooperative optimisation initiatives.”

The research methodology incorporated a comprehensive quality improvement process that involved clinicians and clinical staff at various levels. The optimisation was categorised into four types: accommodations (departmental adjustments to align with EHR workflows), creations (new workflows designed by IT), discoveries (identification of previously unnoticed workflows within the EHR), and modifications (IT-made adjustments to existing workflows).

The study results were quite promising, showing substantial boosts in productivity metrics: Monthly charges increased from 0.74 to 1.28, and payments rose from 0.83 to 1.58. Although the increase in monthly visit ratios from 0.65 to 0.98 was observed, it did not reach statistical significance.

One of the study’s significant revelations was that many solutions to usability issues were already present within the EHR system itself, suggesting that a deeper exploration and understanding of existing workflows are essential. Moreover, the findings regarding accommodation optimisations highlighted the importance of better pre-implementation collaboration between EHR developers and end-users, pointing towards the potential for more user-friendly design approaches.

“Our research not only proves the effectiveness of departmental collaboration with IT in optimising EHR but also stresses the importance of meticulous workflow analysis to boost productivity,” explained Dr. Franks.

This study offers invaluable insights for healthcare organisations striving to fully leverage their EHR systems. Its broader implications include enhancing patient care, operational efficiency, and overall organisational performance.

More information: Adam M. Franks et al, Optimization of Electronic Health Record Usability Through a Department-Led Quality Improvement Process, The Annals of Family Medicine. DOI: 10.1370/afm.3073

Journal information: The Annals of Family Medicine Provided by Marshall University Joan C. Edwards School of Medicine