NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Nelson Repenning

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September 2010Making the Numbers? "Short Termism" & the Puzzle of Only Occasional Disaster
with Rebecca M. Henderson: w16367
Much recent work in strategy and popular discussion suggests that an excessive focus on "managing the numbers" --delivering quarterly earnings at the expense of longer term investments--makes it difficult for firms to make the investments necessary to build competitive advantage. "Short termism" has been blamed for everything from the decline of the US automobile industry to the low penetration of techniques such as TQM and continuous improvement. Yet a vigorous tradition in the accounting literature establishes that firms routinely sacrifice long-term investment to manage earnings and are rewarded for doing so. This paper presents a model that can reconcile these apparently contradictory perspectives. We show that if the source of long-term advantage is modeled as a stock of capability th...

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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