BSAD 8480
EXECUTIVE MBA
APPLICATIONS IN ECONOMICS: TECHNOLOGY
Fall 2004
(last revised: August 29,
2004)
Arthur
Diamond
Office: RH 512E
Office
Phone: (402) 554-3657
Office
Hours: 12:50 - 2:00 PM
Tues. & Thurs.; and by appointment.
Email
address: adiamond@mail.unomaha.edu
World
Wide Web home page:
http://cba.unomaha.edu/faculty/adiamond/web/diahompg.htm
Course Objectives:
Economics consists of tools of analysis that have proven
useful in explaining a wide variety of human behavior. Roughly one third of the course aims to
familiarize the student with those tools from price theory in general, and the
theory of the firm in particular, that promise to be especially useful to the
business manager in anticipating and affecting the economic situation of the
firm. Included in this part of the
course will be: the basic tools of
supply and demand, the determinants of demand, and the general prospects for
accurate economic forecasting. Roughly
the other two thirds of the course will focus on the main driver of economic
growth, opportunities for profit, and risks due to a changing environment: new technology, with a special emphasis on e-business. One of the aims of this part of the course to
see if we can reach useful generalizations about which new technologies and eBusiness
models are likely to succeed and which are likely to fail.
Texts:
Economics
custom McGraw-Hill Primis Online selection from: Brickley, Smith & Zimmerman. Managerial
Economics and Organizational Architecture, 3rd ed., McGraw Hill, 2003. [ISBN # 0-390-49026-1]
Christensen, Clayton M.
The Innovator's Dilemma: The Revolutionary Book that Will Change the
Way You Do Business.
Christensen, Clayton M. and Michael E. Raynor. The
Innovator's Solution: Creating and
Sustaining Successful Growth.
Christensen, Clayton M., Scott D.
Anthony, and Erik A. Roth. Seeing What's Next: Using Theories of Innovation to Predict
Industry Change.
Summary of
Read Brickley, Smith and Zimmerman text, Chs. 1-7 (omit the appendices
in Chs. 4 and 5).
Details:
Read Christensen, The Innovator’s Dilemma, read:
Introduction (pp.
xi-xxxii); Ch. 1 up to appendix 1.1 (pp. 3-26).
Read Christensen,
Clayton M. and Michael E. Raynor. The Innovator's Solution, read:
whole book.
Read Christensen,
Clayton M., Scott D. Anthony, and Erik A. Roth.
Seeing What's Next, read: Ch. 1 "The Signals of Change:
Where Are the Opportunities?", pp. 3-27; Ch. 7 "Whither
Moore's Law? The Future of
Semiconductors", pp. 155-177; Conclusion, pp. 267-273.
Course Outline:
Some
aspects of the schedule are tentative, depending on uncertain events (such as
the timing of the publication of the third Christensen book).
Assignment to prepare for
Session 1:
Read Brickley, Smith and Zimmerman text, Chs. 1-3. [See “Summary of Reading Assignments” on p. 2
of this syllabus for pages assigned.]
Work on reading book you selected for your critical review.
Session 1—September 24:
Main topics:
·
Why technology matters.
·
What to expect from course.
·
Basic price theory:
supply and demand.
·
Elasticity.
·
Research tools in economics of technology and eBusiness;
writing and presenting clearly.
·
Double Oral Auction experiment.
Assignment to prepare for
Session 2:
Read Brickley, Smith and Zimmerman text, Chs. 4-7 (omit the
appendices in Chs. 4 and 5). [See
“Summary of Reading Assignments” on p. 2 of this syllabus for pages assigned.]
[The Christensen books below, will not be discussed for a
couple more sessions, but are “assigned” here, to clear time for other
activities, like studying for the midterm, and preparing the
papers/presentations.]
Read Christensen, The Innovator’s Dilemma, Introduction (pp.
xi-xxxii); Ch. 1 up to appendix 1.1 (pp. 3-26).
As time
permits, read Christensen, Clayton M. and Michael E. Raynor. The
Innovator's Solution, read: whole book.
As time
permits, read Christensen, Clayton M. et al. Seeing
What’s Next, read: Ch. 1, Ch. 7, and Conclusion.
Continue reading book you selected for your critical review.
Session 2—October 8:
Main topics:
·
The goals of the firm.
·
Production and costs.
·
Pure competition model.
·
Economics as optimizing at the
margin; implications for internal firm pricing; implications for management
theories promoting "teams," "just‑in‑time," and
"total quality management."
·
Standard account of monopoly.
·
Price discrimination.
·
In between competition and
monopoly.
·
The standard account of
monopolies vs. Schumpeter's process of "creative destruction."
·
Government regulation of firms.
·
The law of comparative advantage
and international trade.
·
Economic analysis of "Buy
the Big O First" campaign.
Assignment to prepare for
Session 3:
Study for midterm.
Session 3—October 22:
Main topics:
·
2 hour midterm
·
Application of economics to
International Experience projects.
·
Discussion of evidence and
elaborations of Schumpeter.
o
Discussion of Creative Destruction.
o
Discussion of Only the Paranoid Survive.
·
Discussion of The Innovator’s Dilemma.
Assignment to prepare for
Session 4:
Finish reading Christensen,
Clayton M. and Michael E. Raynor. The Innovator's Solution, read:
whole book.
Complete reading and writing for critical review.
Choose topic for second presentation/paper and email choice to
Diamond.
Session 4— November 5:
Main topics:
·
Discussion of Christensen’s The Innovator’s Solution, incorporating
critical review presentations of books relevant to Christensen.
·
Briefer discussion of
Christensen’s Seeing What’s Next,
emphasizing assigned chapters. (This may
be held over until session 5, if time is short.)
·
5 page critical reviews due.
·
Student 5 minute oral summaries
of critical reviews.
Assignment to prepare for Session 5:
Work on research on Christensen case study paper/presentation.
Session 5— November 12:
Main topics:
·
Economic vs. mechanical
forecasting.
·
Discussion of Business @ the Speed of Thought.
o
Does eBusiness Make the Market More Efficient: Prices, Information, and Variety of Products.
o
Does eBusiness Make Firms More Efficient: Marketing, Forecasting, Inventory/Production,
Human Resources; Decentralization.
o
Does eBusiness Benefit the Worker, and the Small Firm?
·
Discussion of Telecosm.
o
The Economics of Infrastructure and Bandwidth.
·
Discussion of Information Rules.
o
Exploration and analysis of auction sites.
·
15 minute quiz at end of class.
Assignment for Session 6:
Complete Christensen case-study 12 page paper and 10 minute
presentation.
Session 6—December 3:
Main topics:
·
Christensen case-study 12 page
paper due.
·
Christensen case-study 10 minute
presentations.
·
Course evaluation.
Grades:
Grades will be based on: a
midterm (30 points), an early 5 page critical review (35 points), a case study
12 page paper (70 points), an early 5 minute presentation (10 points), a later 10
minute presentation (15 points), and a 15 minute, multiple choice, quiz mainly
on lecture material on economics of technology and eBusiness (10 points). The total number of points in the course is
170.
The
grading scale for the course will be no harsher than the following standard
scale:
|
Grade |
Percents |
Points |
|
A+ |
97-100 |
165-170 |
|
A |
93- 96 |
158-164 |
|
A- |
90- 92 |
153-157 |
|
B+ |
87- 89 |
147-152 |
|
B |
83- 86 |
141-146 |
|
B- |
80- 82 |
136-140 |
|
C+ |
77- 79 |
130-135 |
|
C |
73- 76 |
124-129 |
|
C- |
70- 72 |
119-123 |
|
D+ |
67- 69 |
113-118 |
|
D |
63- 66 |
107-112 |
|
D- |
60- 62 |
102-106 |
|
F |
59 or less |
101 or less |
Missing
Tests or Deadlines:
Handing
in a paper late, or giving a presentation late, or getting a test done late,
will result in a 10% penalty for up to three weeks late, 15% penalty for 3-5
weeks late, 20% penalty for 5-7 weeks late, etc. With credible explanation, each student may
be late in completing an assignment once during the semester (for up to three
weeks), without accruing any penalty.
Any
student who misses more than two full class sessions, will be given an
incomplete for the course and will need to take the course again the following
year.
Plagiarism:
Copying
the work of others without attribution is a form of intellectual theft known as
plagiarism, and is a major offense among scholars (and other civilized people).
Most
clearly, any material that is directly quoted, should appear within quotation
marks, if a sentence or less, or indicated with a ‘block indent’ if more than a
sentence (which means that the whole quote is indented 5 spaces from the left
edge of the text). Failure to use either quotation marks, or block indent, with direct
quotations will result in zero points for the assignment.
When a
source is used in the text, internal references should be given in the text
that consist of a parenthetical mention of the author's last name, the date of
the publication and a specific page number (if appropriate For each brief
parenthetical reference, a complete bibliographic reference should be provided
in the Bibliography.
Critical Review and Presentation:
Each student will
write a five page critical review that summarizes and evaluates a book on the
list circulated before class. Most of
the books on the list are ones that are praised as important and useful in
Christensen and Raynor’s The Innovator’s
Solution. A few of the books are
recent book on some intriguing topic in technology, eBusiness or
innovation. The student will also give a
five minute oral PowerPoint presentation of the critical review. The written
critical review, and associated PowerPoint slides, should be submitted in paper
form and also in digital form in Diamond’s digital drop box in Blackboard. Please name the file with an abbreviated
title of your book. The review, with due
attribution to you as the author, will be posted either to Blackboard or to
Diamond’s web site (or both) for future students to read and study.
The review should summarize the substantive
content of the book, stating the main themes or theses in each major
section. The review should state the
intended audience for the book, the clarity of the writing style, and the
accuracy and usefulness of the information and analysis in the book. The first PowerPoint slide for the
presentation should include the presenter’s name, the date of presentation, the
book authors, and book title.
Christensen Case-Study Paper and Presentation:
Each student will select a case of a
company that participated in a successful disruptive innovation. The source of such cases is the list on pages
56-65. Disruptions that focus on one
company should be selected, in order to make the assignment manageable. The paper
should be submitted in paper form and also in digital form in Diamond’s digital
drop box in Blackboard. The short paper,
with due attribution to you as the author, will be posted either to Blackboard
or to Diamond’s web site (or both) for future students to read and study.
The fundamental question to be focused on, in
each case, is how well the case supports the claims made in the Christensen and
Raynor book about how a firm can best manage a disruptive innovation. For example, some of the main questions
answered, would usually be:
1.
Was the firm patient for growth, but impatient for
profits?
2.
Did the firm pursue emergent strategy when appropriate,
and deliberate strategy when appropriate?
3.
Did the firm as what “job” the product was going to do
for the customer?
4.
Was the CEO, and other lead management, picked more for
having the “right stuff” or for having gone through the right preparatory
experiences?
5.
Was there any incumbent firm for which the innovation
could have been a sustaining innovation?
Sample Form for Bibliographic References for the 12-Page Paper
The
following sample bibliography is intended to illustrate the required reference
format for several different kinds of publications. The last entry is for a web resource, and
gives an example where a lot of information is available---you may not always
be able to provide quite as much detail, but should provide what you can. (The last entry is adapted from: http://www.lib.ohio-state.edu/guides/chicagogd.html)
Ackermann,
Robert John. Data, Instruments and Theory.
Acs, Zoltan J.,
David B. Audretsch and Maryann P. Feldman. "Real Effects of Academic
Research: Comment." The American
Economic Review 82, no. 1 (March 1992): 363-367.
Adams, James D.
"Fundamental Stocks of Knowledge and Productivity Growth." Journal of Political Economy 98, no. 4
(August 1990): 673-702.
Alchian, Armen
A. "Private Property and the Relative Cost of Tenure." In Economic Forces at Work.
American
Chemical Society. Directory of Graduate
Research l989.
Becker, William
E., Jr. "Maintaining Faculty Vitality through Collective
Bargaining." In Shirley M. Clark
and Darrell R. Lewis, eds. Faculty
Vitality and Institutional Productivity: Critical Perspectives for Higher
Education.
Davis,
Diamond, Arthur M.,
Jr. "Age and the Acceptance of Cliometrics." The Journal of Economic History 40, no. 4 (December 1980): 838-841.
"The
Career Consequences of Accepting a Scientific Mistake." working paper,
1992.
Friedman,
Garfield, Eugene,
(chairman). Science Citation Index.
Lucas, Robert
E., Jr. "Incentives for
Ideas." New York Times (April 13,
1981): 23.
Moore, Rich.
"Compaq Computer: COMPAQ Joins the Fortune 500 Faster Than Any Company in
History." In Businesswire [database online].
Instructions for Writing
(Applies Both to Critical Review of
Book, and to Christensen Case-Study 12-Page Paper)
The analysis should be written to be
understandable by the CEO of an average, middle‑sized firm. That means you should assume that you are
writing for someone who is intelligent, interested, and short on time.
The body of the critical review
should be three to five pages, not counting the title page. A bibliography should be included that gives
a full citation for the book reviewed. (Meaning: authors, full title, city of publication,
publisher, and year of publication.) No
other sources need be used for the critical review, but if they are, the
sources should be included in the bibliography.
The body of the paper (not including
title page and bibliography) should be seven pages in length. Each page in the body of the paper should be
consecutively numbered. All pages of
both the critical review and the short paper should be double spaced, with a 12
point font size. Margins should be an
inch and a half all around, to accommodate the instructor’s poor
handwriting. Please do not put your
paper in a special binder that would limit the space for my comments. Instead, staple or clip it together.
Endnotes
should be used only if really necessary.
When a source is used in the text, internal references should be given
in the text that consist of a parenthetical mention of the author's last name,
the date of the publication and a specific page number (if appropriate). Copying the work of others without attribution
is a form of intellectual theft known as plagiarism, and is a major offense
among scholars (and other civilized people).
For each brief parenthetical reference, a complete bibliographic
reference should be provided in the Bibliography. For bibliography form, use the sample
bibliography, provided later in this syllabus.
For issues not covered in the sample bibliography, use style form A as
discussed in The Chicago Manual of Style
(e.g., see section 16.5 in the 13th edition).
Before you turn in your final draft, be sure to submit it to a spell‑checking
program (available with all major word‑processing programs).
As you work on the text of your critical review or paper, be sure to periodically backup your latest draft onto a floppy disk. Also be sure to keep a clean copy of your paper for your files‑‑the copy you turn in to me will be marked‑up in red ink.
Some Core Price Theory Competencies
that You
Should Have from the Course:
The following list highlights some core competencies that you should master during the first third of the course. You can reasonably expect that several of these competencies will be tested in some form on the midterm exam. Other material from the first two sessions of the course may also appear on the midterm. But mastering all of these competencies would take you a long way in preparing successfully for the midterm.
1.
Know the central message of Hayek’s
“The Use of Knowledge in Society” and its implications for the relative merits
of the market and central planning, as methods of allocating resources.
2.
Know the most common types of
elasticities of supply and demand, and how to interpret them.
3.
Know the main determinants of
differences in the magnitude of price elasticity of demand.
4.
Know how the value of elasticity
varies along a demand curve.
5.
Know how price changes effect total
revenue when the demand is elastic and when it is inelastic.
6.
Know how to use a supply and demand
curve graph to do basic comparative statics analysis.
7.
Know the implications of the Double
Oral Auction experiment for demand theory.
8.
Know how to interpret the standard
graphical analysis of the optimal quantity, price, and profit level for firms
under pure competition and under monopoly.
9.
Know the likely impact of government
price floors and price ceilings.
10.
Know the meaning of “opportunity
cost.”
11.
Know how to identify the point of
diminishing returns on a graph of the firm’s output curve (as a function of an
input).
12.
Know the four basic conditions that
define perfect competition.
13.
Know what price discrimination is, and
what the conditions are for it to be feasible and profitable.
14.
Know the difference between the
long-run equilibrium of a monopolistically competitive industry with the
long-equilibrium of a perfectly competitive and a monopolistic industry.
15.
Know what a natural monopoly is.
16.
Know how the prisoner’s dilemma game
is useful in analyzing the behavior of cartels.
17.
Know the meaning of the “capture”
theory of regulatory agencies.
18.
Know how Schumpeter’s account of
monopoly differs from the standard account.
19.
Know the significance of the Standard
Oil and Brown Shoe cases, including why the courts reached decisions against
each company.
20.
Know the meaning of the “law of
comparative advantage.”
Recommended Supplementary
Some Sources Mentioned in Lectures:
Baily, Martin Neil. “Distinguished Lecture on Economics in
Government: The New Economy: Post Mortem or Second Wind?” Journal of Economic Perspectives 16, no.
2 (Fall 2000): 23-48.
Bettmann, Otto L. The
Good Old Days-They Were Terrible!
Boorstin, Daniel J. “An Odd Couple: Discoverers and Inventors, Ch. 3 in Cleopatra’s Nose: Essays on the Unexpected.
Bresnahan, Timothy F., Erik
Brynjolfsson, and Lorin M. Hitt.
“Information Technology, Workplace Organizational and the Demand for
Skilled Labor: Firm-level Evidence.” Quarterly Journal of Economics 117 (Feb.
2002): 339-376. (Earlier draft downloadable at: http://ecommerce.mit.edu/erik/ITW-final.pdf)
Brown, Jeffrey R. and Austan
Goolsbee. “Does the Internet Make
Markets More Competitive? Evidence from
the Life Insurance Industry.” Journal of
Political Economy 110, no. 3 (June 2002):
481-507.
Brynjolfsson, Erik, A. Renshaw
and Marshall Van Alstyne.
“The Matrix of Change: A Tool for Business Process Reengineering.” Sloan
Management Review (Winter
1997): 37-54.
Brynjolfsson, Erik and Lorin M.
Hitt. “Beyond Computation: Information Technology, Organizational Transformation
and Business Performance.” Journal of
Economic Perspectives 14, no. 4 (Fall 2000): 23-48.
Brynjolfsson, Erik and Michael
D. Smith. “Frictionless Commerce? A Comparison of Internet and Conventional
Retailers.” Management Science 46, no. 4 (April 2000): 563-585. (Earlier draft downloadable at:
http://ecommerce.mit.edu/papers/friction/friction.pdf)
Brynjolfsson, Erik, Thomas W.
Malone, Vijay Gurbaxani, and Ajit Kambil.
"An Empirical Analysis of the Relationship Between Information
Technology and Firm Size.” Management Science 40, 12 (1994)
(Earlier draft downloadable at: http://ccs.mit.edu/papers/CCSWP123/CCSWP123.html)
Buchanan, James M. and Yong J.
Yoon, eds. The Return to Increasing Returns.
Carroll, Paul. Big
Blues: The Unmaking of IBM.
Chernow, Ron. Titan: the Life of John D. Rockefeller, Sr.
Christensen, Clayton M., and Michael E. Raynor. Innovator’s
Solution: Creating
and Sustaining Successful Growth.
Christensen, Clayton M., Scott D. Anthony and Erik A. Roth. “Innovation in the Telecommunications
Industry: Separating Hype from
Reality.” Oct. 2001 working paper.
Collins, James C. and Jerry I.
Porras. Built to Last: Successful Habits
of Visionary Companies.
Crandall, B.C., ed. Nanotechnology: Molecular Speculations on Global Abundance.
Darnton, Robert. George
Washington's False Teeth: An
Unconventional Guide to the Eighteenth Century. W.W. Norton & Company, 2003. [ISBN: 0393057607]
Darnton, Robert. "George Washington's False Teeth."
David, Paul A., "The
Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox." American Economic Review 80, no. 2 (May 1990): 355-361.
DeLong, J. Bradford and
Foster, Richard and Sarah
Kaplan. Creative Destruction: Why
Companies that Are Built to Last Underperform the Market---and How to
Successfully Transform Them.
Currency Books, 2001. [ISBN # 0385501331],
Gates, Bill. Business @ the Speed of Thought.
_____.
Gilder, George. Telecosm: The World After Bandwidth Abundance. Touchstone Books, 2002. {paperback
edition} [ISBN # 0743205472]
Grove, Andrew S. Only the Paranoid Survive: How to Exploit the Crisis Points that
Challenge Every Company. Bantam
Books, 1999. [ISBN # 0385483821]
{paperback edition} {Warren Buffett says this is a great book.)
Hippel, Eric von. The
Sources of Innovation.
Kritzman, Mark. "What Practitioners Need to Know About
Regressions." Financial Analysts Journal 47, no. 3 (May-June 1991): 12-15.
Landes, David S. The
Wealth and Poverty of Nations.
Mansfield, Edwin. Technological
Change.
McCloskey, Donald. "Economical Writing." Economic
Inquiry 23 (April 1985):
187-222. (HB21.W43)
Mokyr, Joel. The
Lever of Riches: Technological Creativity and Economic Progress.
Mowery, David C. and Nathan
Rosenberg. Technology and the Pursuit of Economic Growth.
Nordhaus, William D. "Do Real-Output and Real-Wage Measures
Capture Reality? The History of Light Suggests Not.” In Robert J. Gordon and Timothy F. Bresnahan,
eds., The Economics of New Goods.
Packard, David. The
Passell, Peter. "Wine Equation Puts some Noses Out of
Joint." The New York Times (March 4, 1990): 1.
Peters, Thomas J. and Robert H.
Waterman, Jr. In Search of Excellence: Lessons
from
Rich, Ben R. and Leo
Janos. Skunk Works: A Personal Memoir
of My Years at Lockheed.
Robinson, Peter. "Paul Romer.” Forbes.
(
Rosenberg, Nathan. Exploring
the Black Box.
Rosenberg, Nathan. Inside
the Black Box: Technology and Economics.
Ross, Jeanne.
"E-Business at Delta Air Lines:
Extracting Value from a Multi-Faceted Approach."
Trajtenberg, Manuel. Economic
Analysis of Product Innovation: The Case of CT Scanners.
Tufte, Edward R. The
Visual Display of Quantitative Information.
Scherer, F. M. Innovation
and Growth: Schumpeterian Perspectives.
Shapiro, Carl and Hal R. Varian. Information
Rules: A Strategic Guide to the Network
Economy.
Smith, Bruce L. R. and Claude
E. Barfield. Technology, R&D, and the Economy.
Sobel, Dava. Longitude:
The True Story of a Lone Genius Who Solved the Greatest Scientific Problem of
His Time.
Stross, Randall E. The
Trajtenberg, Manuel. Economic
Analysis of Product Innovation: The Case
of CT Scanners.