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This study adopts behavioural contract theory through a mathematical model and clarifies the situation in which a fixed–salary contract is preferable to an incentives–based one for the principal. T...

This study explores the effect of financial managers’ organizational identity (OI) on improving financial performance under fixed salary contracts and balanced budget restrictions in Japanese local governments (LGs). LGs enter compensation contracts based on fixed salaries with financial managers and demonstrate a strict fiscal policy based on balanced budget restrictions. How and under what conditions should OI contribute to improving financial performance in LGs? In the context of financial managers in Japanese LGs, we place organizational identities using the principal (mayor)–agent (financial manager) model under fixed salary contracts and a strict fiscal policy. Our mathematical results reveal that the impact of OI on financial performance in LGs depends on the extent of a strict fiscal policy and the reserve fund. Studying 452 survey responses of financial managers in Japanese LGs, we find evidence consistent with our hypotheses based on the theoretical model. The result contributes to management and government accounting studies by showing that the extent of financial policies and the reserve fund are drivers for OI to work effectively on improving financial performance in governments.

This study explores the effect of employee organizational identity on developing effective compensation contracts to improve organizational performance. We adopt the economic identity theory to mathematically model and test this model using data from a Japanese listed firm that uses an exogenous, uniform incentive scheme based on a seniority system. Situating low-level sales managers as agents and department managers as principals in the mathematical analysis reveals that when organizations do not set optimal compensation contracts, the expected utility of department managers is not high — even if they have high levels of organizational identity — because utility depends on the magnitude of incentive coefficients. Empirical results show that the coefficient of organizational identity has a significant positive relationship with organizational performance. However, surprisingly, when the incentive coefficient is high, the relationship between organizational identity and performance is negative. These results indicate that organizational identity is a “double-edged sword” in incentive schemes with a seniority system, and managers should tune their targets and incentive schemes more finely to optimize firm performance.

Because of effective machining operations with a very small amount of cutting fluids, near-dry machining attracts increasing attentions for environmental and economical benefits. MQL machining has so far been recognized as the most representative near-dry method and it is highly successful in machining of most ordinary steels. Recent concern for environmentally friendly manufacturing further encourages the attempts at applying near-dry operations to machining of difficult-to-cut materials. Since titanium alloys are typical difficult-to-cut materials, this paper investigates the cutting performance of various near-dry methods in turning of a titanium alloy from the view point of elongating the tool life. Those near-dry operations include supply methods of regular MQL mist, coolant mist and hybrid mists, where the coolant mist is atomized water-soluble cutting fluid and hybrid mists are the mixture of MQL and coolant mists. The regular MQL operation provided longer tool life than that of dry machining. In addition, compared with MQL machining, the hybrid mist operations could further extend tool life and, in particular, the single coolant mist operations demonstrated the possibility of making the tool life longer than that of ordinary wet machining with flood cutting fluid supply.

Near-dry machining attracts increasing attentions for environmental and economical benefits, and MQL machining has been recognized as the most representative near-dry method. It is highly successful in machining of most ordinary steels, and synthetic biodegradable polyol esters play a significant role as an effective cutting fluid with a very small amount. Recent concern for environmentally friendly manufacturing further encourages the attempts at applying near-dry operations to machining of difficult-to-cut materials. Since titanium alloys are typical difficult-to-cut materials, this paper investigates the cutting performance of various near-dry methods in turning of a titanium alloy from the view point of elongating the tool life. Those near-dry methods include regular MQL and hybrid mist supply operations, where the hybrid mist is a mixture of MQL mist and coolant mist which is atomized water-soluble cutting fluid. The regular MQL operation provided considerably long tool life compared with that of dry machining and the hybrid mist operation showed the possibility of making the tool life longer. The cutting performance was largely influenced by the type of MQL lubricants. In particular, a synthetic polyol ester lubricant having low viscosity indicated the successful cutting performance when it was combined with the coolant mist supply in the hybrid mist application.