DOCTORAL RESEARCH

Maureen H. Berry, Editor
UNIVERSITY OF ILLINOIS

The doctoral dissertations reviewed in this issue cover a very broad spectrum in terms of time span and focus of interest. Yet, there is a common thread running through the tapestry: the evolu-tion of economic institutions, and their changing roles, in the American business environment.

Our survey commences, in colonial times, with Hitz’s study of the development of American woolen manufacture to 1832. The colonies had depended on the mother country for much of their finished textiles, particularly fine broadcloth, and this policy was fostered after independence by the Jeffersonian view that native industry was unnecessary and uneconomical. Shifting sentiments and economic opportunity, combined with American inventiveness, provided the springboards for factories which soon overtook their transatlantic counterparts in technology and mechanization. Cost finding, and the problems of designing cost accounting systems given the various economic factors at play in those early days, are also dealt with in this research. We then move ahead some ten years or so to review Acosta’s investigation of the profound changes affecting the development of financial institutions and industrial structure in the 1840’s and 1850’s, culminating in the financial panic of 1857. An interesting feature of this dissertation is its use of two contrasting monetary theories as tools for understanding the very rich economic history of this period.

Commencing with Posey’s thesis, attention is focused on specific economic incentives for industrial development, namely the investment tax credit. This program was signed into law by President Kennedy in October 1962 after very mixed public reaction to the proposal. Posey is basically concerned with analyzing the events preceding adoption of the credit and its subsequent modifications and, once again, the reader is treated to novel research methodology: in this case, a blending of several philosophies and methods. Wunder’s research leads on from Posey’s by attempting to establish empirically the degree to which the investment tax credit was related to investment during the period 1965-1974. Using information available from the Internal Revenue Service, and such methods as regression and sensitivity analysis, the author concluded that responses by the twenty-two industries examined were highly individual, suggesting a need for differential rates and further research in individual industries. The motivating factor of attention to consumer issues is an element of the economic environment which has gradually been influencing business policy in relatively recent years. Barsellotti’s research contribution was to develop a set of evaluative criteria for examining management response to its social obligation.

She then successfully tested these criteria in a field study, conducted in a large savings and loan institution, and was able to suggest how these criteria could be utilized in a program of social performance evaluation for both internal and external information users. The public at large is, of course, interested not only in how social responsibility is viewed by private companies but also how it is perceived and acted upon by publicly-supported institutions. Given the increasing demands on the public purse, attention has been concentrating on both the public budgeting process and the need for details about the level of service which these public bodies provide. Such output information, which is a feature of program budgeting, is often lost sight of when the budget structure remains fairly constant from year to year as is true of the incremental approach. Schick’s research deals with the problem of identifying the underlying basis of budgeting prevalent in the public sector and he selected the subject of personnel allocations in a public university for a case study. His results, which supported the incremental assumption, have most significance where research and large Ph.D. programs are involved. While it does not seem surprising that personnel allocations follow research funding, an element of alarm is signalled by his finding that large Ph.D. programs suffer from personnel reallocations: a fact which highlights lack of perceived value of such personnel resources for terminal degree programs.

The social responsibility of the accounting profession, to itself and to the public it serves, is the theme underlying our last dissertation, by Lubell. This study looks into organizational conflict between certified and noncertified public accountants and speculates as to its significance on the legislative evolution of the profession in the United States. In his review of the development of the major pro-fessional associations, the American Institute of Certified Public Ac-countants and the National Society of Public Accountants, and their eventual troubled truce through formal committee relations, the author points out the deleterious effect which the process of con-frontation and compromise has had on both the development of uni-form accountancy regulations and the professionalization of the certified public accountant. LubelI suggests that some ameliorative measures, such as membership acceptance of arrangements concurred in at interorganizational committee meetings can be effected in order to mediate this situation.

A Technical and Business Revolution: American Woolens to 1832 (New York University, 1978; 39/12, pp. 7482-3-A)1 by Elizabeth Hitz. This monograph examines the evolution of American woolen manufacture, particularly’ broadcloth, cassimere, and satinet, from colonial days through 1832. From the 17th to the early nineteenth centuries, broadcloth was considered the finest of textiles and a considerable amount was imported from England as the colonists’ attempt to manufacture it were not particularly successful. In England, three textile industries used woolen fiber: the basic woolen cloth industry; the worsteds and stuffs; and home manufacture whereby the basic processes of carding, spinning, and weavings were carried out in the home and a local fulling mill completed the work. Home manufacture was also very prevalent in America but began to wane after 1810. By the 1770’s the English were introducing new technology and the Americans did likewise after the end of the War for Independence. Manufacturing was stimulated by the War of 1812, with its resulting shortages and high prices, and by 1820 a number of factories had sprung up in New York and New England because of such available resources as: transportation and water-power, raw materials, entrepreneurship, and capital. By 1832, the United States had more than 300 woolen factories, and all woolen cloth manufacture had become mechanized.

In the industry’s early years, some cost analysis was performed by the entrepreneurs but accounting methods became more sophisticated as mechanization was introduced into the various production processes. As machinery increased productivity, new accounting methods were devised to calculate cost savings. Major obstacles impeding the development of cost accounting and cost estimating at that time were such conditions as: the wildly fluctuating prices for fine wool; the extremely elastic market for woolen goods; and the difficulties of calculating depreciation and obsolescence when machinery was new and rapidly changing. By 1832, however, many firms, whose technologies by this time outclassed those in England, had incipient cost accounting systems.

The Financial Panic of 1857: Two Monetary Approaches to the Economic History of the United States, 1842-59 (Washington University, 1978; 39/11, pp. 6888-9-A) by Edmundo Olvera Acosta. This study is concerned with significant changes in the industrial structure and financial institutions of the United States during the period 1842-59. These included: the gold discoveries in California; the boom in railroading during the 1850’s; foreign trade growth, particularly in cotton; and the immigration waves. In the absence of a central monetary authority, units of the financial sector forged a financial system as they performed a variety of functions under a variety of state banking regulations. In his analysis of these events, the author employed two distinct techniques: the Friedman-Schwasrtz approach and the financial instability hypothesis. The Friedman-Schwartz approach specifies the main determinants of fluctuations in economic activity by emphasizing changes in the money supply and it identified California gold as the exogenous main source of expansion during the 1850’s. Subsequent slowing in the growth of the money stock, followed by a sharp decline in money, neither of which was attributable to exogenous events, preceded the financial panic in 1857.

An alternative approach is offered by the financial instability hypothesis which focuses on debt markets’ practices: particularly the behavior of debtors and creditors and mainly in the financial center of New York City. Given the booming expansion of the early 1850’s, banks extended credit to stock-, brokers as values of securities rapidly increased. Resulting endogenous innovations in the financial system left these institutions vulnerable to the debt-deflation process typical of the 1857 panic. The study concludes by contrasting these two analytical models with more extensive use of the financial instability hypothesis advocated because of its perceived advantage in evaluating linkages and processes by going beyond the monetary aggregates emphasized by Friedman-Schwartz.

An Historical Analysis of the Events Leading to the Establishment of the Investment Tax Credit and Its Modification Through June 30, 1977 (Oklahoma State University, 1978; 39/12, pp. 7397-8-A) by Clyde Lee Posey. This history of the investment tax credit (ITC) commences immediately following World War II and concludes in June 1977. Using such library sources as the New York Times, the Congressional Record, Congressional reports, IRS rulings, and court cases, the study explores the various social, political, and economic considerations which led to the choice of tax credits as a tool for effecting public policy. The bill enacting the ITC was signed into law by John Kennedy in October 1962 following almost two years of vigorous debate and lobbying: mainly by those who opposed this type of economic intervention. During these hearings, the Congress proved very responsive to the witnesses and other sources of public opinion, as evidenced by its adoption of various suggestions put forward. The various strategies adopted during the the legislative process were analyzed by the author as an aid to understanding the resulting decisions and policies. This research also illuminates the reversal of initial antipathy towards the ITC following the OPEC oil embargo when major power blocs, such as the AFL-CIO, threw its support to the ITC concept. In addition to the historical analysis, the study also contains a chapter which outlines some of the features of historical research methodology as well as several historical philosophies. The approach to structure and narrative technique used by the author relies heavily on Hexter, although features were also adapted from Hempel, Nagel, and Col-lingwood. The main conclusions were that: (1) inputs from various witnesses during Congressional hearings were acted on and implemented; and (2) the on-again, off-again nature of ITC legislation mitigates against using the tax for its intended purpose.

Capital Formation and the Investment Tax Credit: An Empirical Study (University of South Carolina, 1978; 39/10, p. 6192-A), by Haroldene Fowler Wunder. The main objective of this study was to evaluate suggestions that extension of the investment tax credit could obviate a potential shortage of capital funds in the 1980’s. Five research hypotheses were formulated: three concerning the relationship between the investment tax credit and investment, and the remaining two testing for industry differences. Twenty-two industries were selected, including five major classes of industry: utilities, extractive, construction, manufacturing, and transportation, as well as a sixth “other” grouping. The Hall and Jorgen-son model was used and, as surrogates for model variables, industry tax return data were obtained from the Internal Revenue Service Corporate Source Book tapes for the period 1965-1974. Application of the Hall and Jorgenson model disclosed that for eleven of the twenty-two industries, and at levels of significance up to ten percent, there was a significant relationship between investment and the change in the optimum level of capital. Using the same model, the author then selected one industry from each of the six groupings to perform an analysis to determine sensitivity of investment functions to the credit. It was found that when a ten percent credit rate was assumed, six of the twenty-two industries displayed an increase in the significance level for the optimal-level-of-capital variable.

A simple regression analysis was also performed, regressing the monetary amount of the investment credit on gross depreciable assets, and, for eight of the twenty-two industries, the investment oredit was determined to be significant at levels up to ten percent. Of the three major null hypotheses, two were rejected for communication services, building construction, banking, and petroleum extraction and refining. In the author’s view, this supported assumptions that a significant relationship existed between the credit and investment. Problems were encountered in attempting to use analysis of covari-ance in testing the two null hypotheses concerning industry differences, due to interaction between the independent variables and the concomitant variable. The two general conclusions reached were that: (1) to achieve increased capital formation, differential investment tax oredit rates are necessary; and (2) future empirical research in this subject area should be carried out at the individual industry level.

Social Responsibility: Organizational Policy Evaluative Criteria with California Savings and Loan Field Test Case Study (Claremont Graduate School, 1979; 39/11, pp. 6849-50-A) by Dolores Ann Bar-sellotti. Social responsibility of business is the underlying concern of this study which examined organizational policies and practices with respect to consumer issues in order to derive and develop a qualitative set of evaluative criteria. The data base for developing such criteria was the considerable amount of literature, reflecting values from many segments of society, which has been gradually building up over the past three decades. From this literature survey, the author constructed forty evaluative criteria which she tested in a field study. Preceding this field study, the researcher ex-amined particular social affairs issues affecting the savings and loan industry and notes that much of the relevant information sur-faced in U.S. Congressional hearings rather than in periodicals.

The test site was Great Western Savings and Loan Association in California: the savings and loan industry having been selected because of the fact that it had attracted relatively small attention in the mass media and the periodical literature. The methodology employed basically consisted of interviewing management personnel and reviewing available documentation for evidence of response in the way of policies, procedures, and programs, to particular issues related to consumer affairs. The results of the case study showed that organizational strengths and weaknesses in pursuing socially responsible programs could be measured and identified by the evaluative criteria, and that these criteria could also be used to develop a quantified social audit and a social performance reporting system useful for both management and the general public.

One University’s Budget: The Study of Personnel Allocations to Academic Departments (University of Kansas, 1979; 39/11, pp. 6863-4-A) by Allen Gerald Schick. Studies which suggest that budgeting in the public sector is incrementally-based have come under fire from critics taking issue with the use of correlational analyses of total budgets. In their view, a preferable approach would be to analyze annual budgetary change. Accordingly, this study was undertaken to evaluate this charge as well as to determine just what factors are critical in the budgeting process. The College of Liberal Arts and Sciences, with twenty-two departments, of a public university was selected as the field site. Budgeting data were gathered for the period 1965-1 978 and were statistically evaluated by multiple regression and correlation analyses, using personnel categories as the dependent variables and proposed decision criteria as the inde-pendent ones.

Because the availability of resources is a major determinant of allocation decisions, the data base period was dichotomized into periods of optimistic growth and uncertain growth. It was found that, regardless of personnel category or type of period, annual budgeting followed an incremental pattern. Such factors as patterns of student enrollment, changes in employee workload ratios, and initial levels of employee workload ratios, influenced decision criteria during optimistic growth periods. During periods of uncertain growth, personnel allocations were favored for departments with increasing enrollments and high employee workload ratios. As might be expected, departments with secured research funds received personnel allocations, but not those with large Ph.D. programs. The study concluded that environmental considerations are strong factors helpful in explaining research findings and that the criteria used in making personnel allocations were affected by the type of growth period, the increasing or decreasing nature of enroll ments, and the personnel category involved. During both types of growth period, administrators appeared to be attempting to achieve workload equality across departments. Apparently the strongest and most negative impact of personnel allocation decisions fell on the departments granting large numbers of Ph.D. de-grees.

The Significance of Organizational Conflict on the Legislative Evolution of the Accounting Profession in the United States (University of Maryland, 1978; 39/11, pp. 6837-8-A) by Myron Samuel Lubell. Perceived organizational conflict between certified public accountants (CPAs) and noncertified accountants, and its significance with respect to the legislative evolution of the accounting profes-sion in the United States provided the research questions for this study. Data were gathered from the following sources: interviews with officials of the American Institute of CPAs (AICPA) and the National Society of Public Accountants (NSPA); examination of the correspondence, minutes, and internal documents of these two or-ganizations; and a review of the sociology literature concerning pro-fessional evolution, with main concentration on the topic of conflict.

The first CPA law was enacted in 1896 in New York and represented a compromise between those who supported self-regulation through national association membership and those who favored state board regulation and licensing. Several national associations were formed during the period 1896 to 1924 and the profession steadily became polarized as a result of expanding efforts to certify professionals through the CPA examination, on the one hand, and legislative attempts to attain certification without passing this test, on the other. The AICPA’s role was primarily directed towards establishing a uniform CPA examination nationwide. By 1936, CPAs, represented by the American Society of Certified Public Accountants, were engaged in costly and inconclusive legislative battles with state and national societies of noncertified accountants. These conflicts initiated or fostered inconsistency in accountancy laws because of necessary compromises. In the author’s view, the CPAs professionalization has been significantly hindesed by the frequent conflicts engaged in since 1945 between the AICPA and state societies of CPAs and the National Society of Public Accountants. In 1959, the AICPA established formal committee relationships with the NSPA as a remedial tool. However, none of the agreements reached by committees at joint meetings have been formalized by organizational approval at the national level. Consequently, the conflict still continues.