Towards the end of last year, Wiley was proud to publish Microeconometrics in Business Management. This book introduces the application of microeconometric methods for modelling various aspects of economic activity for small to large size enterprises, using methods that are based on both time-series and cross-section approaches. The information obtained from using these estimated models can then be used to inform business decisions that improve the efficiency of operations and planning.
- Introduces econometric methods which can be used in the modelling of economic activity and forecasting, to help improve the efficiency of business operations and planning.
- Describes econometric entities through multiple-equation and single-equation microeconometric models.
- Explores the process of building and adapting basic microeconometric tools.
- Presents numerous micromodels based on time-series data and statistical cross-sectional sequences, which can be used in any enterprise.
- Features numerous real –world applications along with examples drawn from the authors own experience.
- Is supported by a companion website featuring practice problems and statistical data to aid students to construct and estimate micro models.
- Features end of chapter exercises with examples present in free software GRETL.
This book serves as a valuable resource for students, business management practitioners and researchers in econometric micro-model construction and various decision-making processes.
1. Congratulations on the publication of Microeconometrics in Business Management which introduces the application of microeconometric methods for modelling various aspects of economic activity for small to large size enterprises, using methods that are based on both time-series and cross-section approaches. The information obtained from using these estimated models can then be used to inform business decisions that improve the efficiency of operations and planning. How did the book come about in the first place?
Application of the methods from the area of econometrics and statistics in an enterprise has fascinated me ever since the time of my economic studies. My master’s thesis and doctoral dissertation addressed this issue precisely. During the 1980’s, I experienced fascination with the methods of econometrics, especially complicated ones; the more complicated they were, the more they engaged me. A book published in 1986, entitled Econometric Study of Qualitative Phenomena. Methodological Study resulted from that. It did not reach – for many reasons – as large a readership as I would have expected. While considering the reasons for this, I came to a conclusion that one should endeavour to write such works, which the reader would be able to comprehend easily. In other words – it is not the task of science to complicate simple matters, but exactly the contrary: to simplify complicated economic problems to such an extent, as it is necessary, but not more. After the collapse of the previous system in Poland, simultaneously with my academic work, I started running my own business. Initially, the purpose of my business venture was to secure my family economically. A few years later, I came to a conclusion that the company may constitute a real and unique ‘testing ground’. Analogically, just as a professor of medicine owns a practice e.g. at his/her own clinic, an economics professor enterprise can have such a ‘clinic’ in the form of his/her own enterprise. Such an approach made me recognize the information needs of a small business as well as the information processing adequate to those needs, using less sophisticated methods of statistics and econometrics. This made preparing and making business decisions easier for me. The issues dominating my interest involve simple decision-making instruments from the area of econometrics and statistics, which are possible to be used in a small-sized enterprise.
2. What were the primary objectives that you had in mind when writing the book?
The main initial goal of my research was to determine the most important information needs essential in managing a small business. Creation of a statistical data catalogue which would provide indispensable knowledge of my own business allowed indication of elementary statistical tools that were including. This, in turn, allowed defining the manner of applying the results into rationalization of the managerial decisions in the company. Ultimately, the goal of applying the presented methods and solutions in management of a medium and large-sized enterprise was successfully reached.
3. Basic models used in the modelling of the business (single-equation and multiple-equation systems) are introduced whilst a wide range of economic activity including major aspects of financial management, demand for labour, administrative staff and labour productivity are also explored. Please could you give us a taster of one of the examples used?
Application of an econometric model in managing company’s finances is an example of a new approach to solving important company issues. What is considered is the problem of financial liquidity of an enterprise, in connection with effectiveness of debt collection. I introduce a simplified tool for defining financial liquidity, which is expressed in the form of time series. It therefore allows for a dynamic analysis in confrontation with the measure of efficiency of debt collection that has been defined in the book. Such analysis allows an increase of financial security, thus making management easier, especially in a small-sized company.
4. If there is one piece of information or advice that you would want your reader to take away and remember after reading your book, what would that be?
Knowledge of the business conducted plays a fundamental role in management. This implies the need for identification of the most important information on the company’s inside as well as on its surroundings. The information generated in the accounting system is, to a large extent, regulated by the state and mainly serves the fiscal needs. A business should create its own system for collecting important information, which is not mandatory, but necessary for rationalization of business decisions. At the same time, it is important to remember that too much information can be just as harmful as its deficiency. My book gives an account on how to process important statistical information in business.
5. Who should read the book and why?
I recommend the book, above all, to all persons teaching business management. Those educating others, however, must possess elementary knowledge of statistics and econometrics. They can obtain this knowledge after studying the first two chapters of the book. Those teaching business can encourage students to study the entire book or its parts, depending on the needs and interests. Finally, the book can interest those preparing managerial decisions in an enterprise. Owners of small-sized enterprises, who have adequate business education, can be interested in the solutions I demonstrate. I hope that they will find the solutions I propose useful in preparation of decisions. Another important group of readers can encompass enthusiasts of applied econometrics, both in academic institutions as well as in business practice.
6. Why is this book of particular interest now?
Computerization of the world, universal access to the Internet, emergence of free packages, such as GRETL, allows access, collection and processing of statistical information. Application of the solutions that are proposed in the book, using modern information and computer technologies, can improve efficiency of business management, and thereby accelerate creation of wealth.
…I opened my own company. I learned management…I could experiment at my own expense and risk. The company became my testing ground, which allowed me to generate effective decision-making solutions. As a result, my business became more efficient. This is where my interest in managerial engineering, which was also a requirement of that period, appeared. I also noticed that the economists who had no contact with real business often propose – in line with their own imagination – solutions of the issues that are marginal for a business practice. Meanwhile, practitioners notice important business issues, which are difficult for them to define and at the same time they cannot be resolved. Therefore, for economic theory, its real connection with the practice of business management is important.
7. Were there areas of the book that you found more challenging to write, and if so, why?
I began working on this book about a quarter of a century ago. From the outset, tracking down and obtaining statistical information necessary for verification of the formulated hypotheses was the most difficult task. In the final phase of the book writing (the last 2 years), I struggled to obtain statistical data, in the form of relevant time series, for description of a small-sized or a large enterprise. Ultimately, with the help of my students, I acquired time series which allowed the construction of an econometric model of a medium-sized enterprise. Unfortunately, specificity of this company did not allow me to fully verify the model hypothesis presented in the book, in the form of a scheme containing the mechanisms of links in a medium (large) enterprise.
8. What is it about microeconometrics that fascinates you?
If economy, in the shortest definition, signifies the science of creating wealth, then an enterprise is the most important entity generating wealth. I understand microeconometrics a bit differently than other authors dealing with this issue. Microeconometrics is a part of microeconomics. There are far less scientific works dedicated to application of econometric tools in particular entities conducting business than those concerning the entire economy, which macroeconomics deal with. During my practice in company management, I gained knowledge on the analytical needs of an enterprise, which still have not been satisfied. This applies particularly to small-sized enterprises, which are mot numerous. Therefore, the need to seek new solutions in microeconometrics is both necessary and fascinating.
9. What will be your next book-length undertaking?
I still remain within the area of microeconometrics as part of microeconomics. I would like to undertake two subjects: a) econometric models of large enterprises, solving which will help establish common rules of behaviour of this type of business entities; and b) econometric models of the costs; this subject is neglected in literature because of the difficulty of access to statistical data. Costs belong in the category of sensitive data, being a closely guarded company secret.
10. You are a Professor in the Department of Econometrics and Statistics at Nicholas Copernicus University. Please could you tell us about your educational background and what inspired you to pursue your career in engineering, then business management?
Before I began my economic studies, I had been working as an accountant. At that point in my life, I understood, on one hand, the importance and the gravity of information in management, and on the other, the absurdity of the redundant information that emerged in the company. After graduation, I was working, almost continuously, on the issues of application of econometrics and statistics in an enterprise. For a brief period, I dealt with econometric-ecologic models. Enterprise became my passion even more so when, thanks to the changes in the Polish political system and economic systems, I opened my own company. I learned management. I also noticed the informational deficiency of a small business. I could experiment at my own expense and risk. The company became my testing ground, which allowed me to generate effective decision-making solutions. As a result, my business became more efficient. This is where my interest in managerial engineering, which was also a requirement of that period, appeared. I also noticed that the economists who had no contact with real business often propose – in line with their own imagination – solutions of the issues that are marginal for a business practice. Meanwhile, practitioners notice important business issues, which are difficult for them to define and at the same time they cannot be resolved. Therefore, for economic theory, its real connection with the practice of business management is important.
11. Please could you tell us about your current research interests? Are you working on anything currently? What are your main objectives and what do you hope to achieve through the results?
Apart from sticking to the area microeconometrics, which I have mentioned, econometric-ecologic models still remain exciting for me. I stand a chance to come back to this issue, because my doctoral student is preparing a dissertation in this area of study. This issue is now particularly important for our civilization. Everything, however, depends on the resources of time, which in my case are significantly limited.
12. You have been awarded numerous awards and prizes. Is there a particular award of which you are most proud?
I appreciate the rewards which I received as a competitive athlete. Then the rules were clear: you are first at the finish – you win the first place. The same is true for business: you conduct your business well – you get a reward in the form of adequate economic benefits; you run your business poorly – you are punished with losses. From the awards I have received, I still appreciate the most my Red Rose Diploma for the best student of the year, which I got in 1971 at the University of Gdansk. It is worth adding, that many celebrities from the present political and economic life studied there at the same time I did.
13. Are there people that have been influential in your career?
I studied at the University of Gdansk, under the academic supervision of Professor Teodor Kulawczuk, who introduced me to the fascinating world of econometrics. Also at that university, Dr. Jerzy Kozubski was an unattainable role model in working with students. Likewise, Arthur S. Goldberger has brought me closer to the world of econometrics by his book Econometric Theory (John Wiley & Sons, 1966), in which I still keep finding new research inspirations. Finally, my last book, which I prepared for John Wiley & Sons, was written under the influence of my daughter Ewelina Sokołowska (the author of numerous economic papers published by publishing houses worldwide), who made me realise that I had used my potential poorly and that it is worth to leave a trace of oneself on the global scientific market.