nep-bec New Economics Papers
on Business Economics
Issue of 2006‒11‒12
thirteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Rationalising Inefficiency: A Study of Canadian Bank Branches By Mette Asmild; Peter Bogetoft; Jens Leth Hougaard
  2. Investor-to-State Dispute Settlement in Infrastructure Projects By Catriona Paterson
  3. When Does Co-location of Manufacturing and R&D Matter? By Mikko Ketokivi
  4. Reducing Start-up costs for New Firms: The Double Dividend on the Labor Market By Paul Frijters; Uwe Dulleck; Rudolf Winter-Ebmer
  5. Failing Firm Defense with Entry Deterrence By Alessandro Fedele; Massimo Tognoni
  6. Strategic Incompatibility in ATM Markets By Christopher R. Knittel; Victor Stango
  7. Adverse Network Effects, Moral Hazard, and the Case of Sport-Utility Vehicles By Matthew G. Nagler
  8. Stable and Efficient Electronic Business Networks: Key Players and the Dilemma of Peripheral Firms By Kai Suelzle
  9. A note on performance measures for failure prediction models By H. OOGHE; C. SPAENJERS
  10. Performance Implications of In-role and Extra-role Behavior of Frontline Service Employees By D. VANDAELE; P. GEMMEL
  11. The Hidden Surplus From Research Joint Ventures: An Application Of Systems Reliability Theory By Manfredi M.A. La Manna 
  12. Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earnings Differentials By Block, Joern; Wagner, Marcus
  13. Mobile Phone Mergers and Market Shares Short Term Losses and Long Term Gains By Jeremy T. Fox; Hector Perez

  1. By: Mette Asmild (Nottingham University Business School); Peter Bogetoft (Department of Economics, Royal Agricultural University); Jens Leth Hougaard (Institute of Economics, University of Copenhagen)
    Abstract: Many studies have attempted to explain estimated inefficiency, for instance by bounded rationality, ignorance, lack of incentives or motivation etc. However, the presence of inefficiency remains in conflict with the neo-classical idea of economic rationality. This paper suggests ways in which the outcomes of Data Envelopment Analysis-type efficiency models can be rationalised. To illustrate the concepts we consider a data set of Canadian bank branches. The empirical results are encouraging since what appears to be inefficiency in some branches can be argued to be the outcome of rational decisions regarding resource allocation.
    Keywords: Banking, Data Envelopment Analysis (DEA), Rationalising Inefficiency, Resource utilization, Allocation
    Date: 2006–01–11
  2. By: Catriona Paterson
    Abstract: This paper was prepared in the context of the Investment Committee’s project on International Investor Participation in Infrastructure. It summarises information available in the public domain about investor-state dispute settlements in the infrastructure sectors. The document as a factual survey, however, does not necessarily reflect the views of the OECD or those of its Member governments. It cannot be construed as prejudging ongoing or future negotiations or disputes pertaining to international investment agreements. The purpose of the paper is to provide an indication of some of the challenges to international investor participation in infrastructure that have in the past led to the breakdown of working relationships between public and private partners. This paper was prepared by Catriona Paterson, a Consultant in the OECD Investment Division.
    Date: 2006–03
  3. By: Mikko Ketokivi
    Keywords: location decisions, co-location, functional integration, organization theory
    JEL: D21 L23 M11 O32 R32
    Date: 2006–11–03
  4. By: Paul Frijters; Uwe Dulleck; Rudolf Winter-Ebmer (School of Economics and Finance, Queensland University of Technology)
    Abstract: Starting a firm with expansive potential is an option for educated and high-skilled workers. If there are labor market frictions, this additional option can be seen as reducing the chances of ending up in a low-wage job and hence as increasing the incentives for education. In a matching model, we show that reducing the start-up costs for new firms results in higher take-up rates of education. It also gives rise—through a thick-market externality—to higher rates of job creation for high-skilled labor as well as average match productivity. We provide empirical evidence to support our argument.
    Keywords: Matching; education; start-up costs; venture capital; bureaucratic hurdles
    Date: 2006
  5. By: Alessandro Fedele; Massimo Tognoni
    Abstract: Under the principle of the Failing Firm Defense (FFD) a merger that would be blocked due to its harmful effect on competition could be nevertheless allowed when (i) the acquired firm is actually failing, (ii) there is no less anti-competitive alternative offer of purchase, (iii) absent the merger, the assets to be acquired would exit the market. We focus on potential anti-competitive effects of a myopic application of the third requirement by studying consequences of a horizontal merger on entry in a Cournot oligopoly with a failing firm. If the merger is blocked entry occurs and, when the industry is highly concentrated, consumer welfare is bigger because gains due to augmented competition exceed losses due to shortage of output.
    Keywords: Failing Firm Defense, Entry Deterrence, Consumer Surplus
    JEL: K21 L13 L41
    Date: 2006–10
  6. By: Christopher R. Knittel (University of California, Davis); Victor Stango (Tuck School, Dartmouth)
    Abstract: We test whether firms use incompatibility strategically, using data from ATM markets. High ATM fees degrade the value of competitors’ deposit accounts, and can in principle serve as a mechanism for siphoning depositors away from competitors or for creating deposit account differentiation. Our empirical framework can empirically distinguish surcharging motivated by this strategic concern from surcharging that simply maximizes ATM profit considered as a standalone operation. The results are consistent with such behavior by large banks, but not by small banks. For large banks, the effect of incompatibility seems to operate through higher deposit account fees rather than increased deposit account base.
    Date: 2006–09
  7. By: Matthew G. Nagler (Lehman College, The City University of New York)
    Abstract: The paper examines a class of phenomena that combine adverse network effects with moral hazard, using the motor vehicle market as an example to develop and illustrate the key concepts. It is hypothesized that consumers behave as if there is a network externality with respect to vehicle size: the more large vehicles there are on the roads, the greater a consumer’s propensity to seek protection from them by driving a large vehicle herself. One consequence of this is that motor vehicle manufacturers are discouraged from making large vehicles less hazardous to other motorists. The paper measures the network effect and consequent moral hazard using disaggregate data on choice of vehicle type and related household characteristics, combined with a state-level measure of the incidence of traffic fatalities. The results show that for each 1 million light trucks that replace cars, between 961 and 1,812 would-be car buyers decide to buy a light truck instead, in reaction to the increased risk of death posed by the incremental light trucks. This network effect, when run in reverse, creates egregious incentives for vehicle manufacturers: for every life saved due to safety innovations that make light trucks less deadly to other motorists, manufacturers can expect to sell about 31 fewer light trucks.
    Keywords: Network Externalities, Moral Hazard, Highway Safety, Discrete Choice Models
    JEL: D00 D12 K10
    Date: 2005–10
  8. By: Kai Suelzle (Ifo Institute for Economic Research at the University of Munich & Dresden University of Technology)
    Abstract: This paper studies a spatial model of electronic business network formation where firms build links based on a cost-benefit analysis. Benefits result from directly and indirectly connected firms in terms of knowledge flows, which are heterogeneous: a "key-player" (e.g. a firm providing an exchange platform in a business-to-business network) provides a higher level of knowledge flows than "peripheral" firms (e.g. tier 3 suppliers in a vertically differentiated industry). For intermediate cost values of link formation, stable and efficient network structures comprise only a subset of the total set of firms, excluding peripheral firms which are most distantly located to the key player. When link formation implies a certain degree of network congestion, the stable and efficient network size is smaller than in a model with bilateral decisions upon link formation between two firms.
    Keywords: Network Formation, Business-to-Business, Spatial Model
    JEL: C70 D85 L22
    Date: 2005–10
    Abstract: Since decades, the topic of business failure prediction has been an important research area for both academics and practitioners. Bankruptcy prediction involves the classification of firms in a failing and a non-failing group3. Generally, this classification is based on (1) a prediction model that attributes a ‘score’ to each firm in the data set and (2) a certain cutoff point. To evaluate the classification results, several performance measures can be used. This note outlines these measures and illustrates the connections between them with numerical examples. This may help the reader to better understand (and possibly use) these classification measures.
    Date: 2006–08
    Abstract: Despite the growing body of literature on different employee behaviors such as organizational citizenship behavior or boundary spanning behavior, few research studies have investigated the impact of both in-role and extra-role behavior on performance outcomes, especially in business services settings. In this study we investigate how in-role behavior, extra-role behavior, and their interrelation influences employee performed productivity and quality in business security services. Data from 1,174 frontline service employees is analyzed using structural equation modeling. The results indicate that performance quality is directly influenced by in-role employee behavior oriented towards customers, while performance productivity is influenced by both in-role and extra-role employee behavior oriented towards employees and customers. Opportunities for future research and managerial implications of the results are discussed.
    Date: 2006–09
  11. By: Manfredi M.A. La Manna 
    Abstract: The paper’s aim is two fold: (a) to model some key features of the research process as a multi-component system, as understood by the mathematical theory of systems reliability; and (b) to apply the resulting model to Research Joint Ventures, showing that a potentially very large surplus can be realized purely by organizing research efficiently, i.e. even without any changes in R&D investment.
    Keywords: optimal organization, systems reliability, Research Joint Ventures, parallel and series systems, majorization, organizational surplus.
    JEL: O32
    Date: 2006–11
  12. By: Block, Joern; Wagner, Marcus
    Abstract: Our paper uses data from the German Socio Economic Panel Study (GSOEP) to analyze how necessity and opportunity entrepreneurs differ in kind and in earnings and what the determinants of the latter are. We estimate probit and random effects panel data models in order to address these questions. We find that the two types of entrepreneurs differ as concerns age, gender and other characteristics, but not with regard to education levels. Furthermore, opportunity entrepreneurs earn significantly more in our sample and the determinants of earnings levels differ to some degree. We conclude that our findings indicate a need to distinguish between the two groups in entrepreneurship policy-making. The results also show that commonly used specifications of earnings equations in labour economics seem to work better for opportunity than for necessity entrepreneurs.
    Keywords: opportunity entrepreneurship; necessity entrepreneurship; earnings equation; wage equation; entrepreneurship; Germany; GSOEP
    JEL: J23
    Date: 2006–04–01
  13. By: Jeremy T. Fox (University of Chicago); Hector Perez (University of Chicago)
    Abstract: The US mobile phone industry has dramatically consolidated through mergers. We investigate whether a merger increases the performance of a combined carrier over the sum of its constituent parts. We first directly compare the quantities of post-merger carriers to those of their pre-merger predecessors. This analysis considers only two years after a merger, as most carriers engage in new mergers after that time. To examine possible long run implications, we also explore the cross sectional relationship between outcomes and measures of firm size, as firm size is increased in a merger. We examine the market share of new subscribers. We also examine two measures of firm size: the amount of a carrier’s geographic coverage and its past subscriber count.
    Date: 2006–09

This nep-bec issue is ©2006 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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