nep-com New Economics Papers
on Industrial Competition
Issue of 2013‒11‒29
28 papers chosen by
Russell Pittman
US Government

  1. Downstream mode of competition with upstream market power By Manasakis, Constantine; Vlassis, Minas
  2. Price Guarantees, Consumer Search, and Hassle Costs By Pio Baake; Ulrich Schwalbe
  3. Output commitment through product bundling: Experimental evidence By Hinloopen, Jeroen; Müller, Wieland; Normann, Hans-Theo
  5. Consumer flexibility, data quality and targeted pricing By Sapi, Geza; Suleymanova, Irina
  6. Coalitional Approaches to Collusive Agreements in Oligopoly Games By Sergio Currarini; Marco A. Marini
  7. Decentralised Bilateral Trading in a Market with Incomplete Information By Kalyan Chatterjee; Kaustav Das
  8. Formal and Informal Markets: A Strategic and Dynamic Perspective By Nejat Anbarci; Pedro Gomis-Porqueras; Marcus Pivato
  9. Heterogeneity in innovation strategies, evolving consumer preferences and market structure: An evolutionary multi-agent based modelling approach By Cevikarslan, Salih
  10. A value network development model and implications for innovation and production network management By Vermeulen, Ben; De Kok, Ton
  11. Optimal patent length and patent breadth in an R&D driven market with evolving consumer preferences: An evolutionary multi-agent based modelling approach By Cevikarslan, Salih
  12. Standard-Essential Patents By Josh Lerner; Jean Tirole
  13. Do markets erode social responsibility? By Björn Bartling; Roberto A. Weber
  14. Publication bias in the returns to R&D literature By Møen, Jarle; Thorsen, Helge Sandvig
  15. Feedback Equilibria in a Dynamic Renewable Resource Oligopoly: Pre-Emption, Voracity and Exhaustion By Luca Lambertini; Andrea Mantovani
  16. Bank competition and financial (in)stability in Europe: A sensitivity analysis By Samantas, Ioannis
  17. Competition in bank-provided payment services By Wilko Bolt; David Humphrey
  18. The impact of interbank and public debt markets on the competition for bank deposits By Carlos Pérez Montes
  19. Switching Costs and Network Effects – How Much Do they Really Matter in Mobile Telecommunications? By Mikołaj Czajkowski; Maciej Sobolewski
  20. Efficiency of Uniform Pricing in Universal Service Obligation By Jean-Christophe Poudou; Michel Roland
  21. Competition for a better future? Effects of competition on child care quality By Y. Emre Akgunduz; Janneke Plantenga
  22. Restaurant wars By Dakshina G. De Silva; C F Elliott; R Simmons
  23. Price and Quality Dispersion in an Offshoring Market: Evidence from Semiconductor Production Services By David Byrne; Brian K. Kovak; Ryan Michaels
  24. Competition and uncertainty in a paper's news desk By Ascensi—n Andina D’az
  25. Solvency II: A driver for mergers and acquisitions? By Stoyanova, Rayna; Gründl, Helmut
  26. The Law NOME: Some Implications for the French Electricity Markets By Pouyet, Jérôme; Sanin, Maria Eugenia; Creti, Anna
  27. Structural embeddedness and contractual relationships of chain stores and their suppliers in Russian emerging markets By Zoya Kotelnikova
  28. Innovation and survival of new firms in Chinese manufacturing, 2000-2006 By Zhang, Mingqian; Mohnen, Pierre

  1. By: Manasakis, Constantine; Vlassis, Minas
    Abstract: In a two-tier oligopoly, where the downstream firms are locked in pair-wise exclusive relationships with their upstream input suppliers, the equilibrium mode of competition in the downstream market is endogenously determined as a renegotiation-proof contract signed between each downstream firm and its exclusive upstream input supplier. We find that the upstream-downstream exclusive relationships credibly sustain the Cournot (Bertrand) mode of competition in the downstream market, when the goods are substitutes (complements). In contrast to previous studies, this result holds irrespectively of the degree of product differentiation and the distribution of bargaining power between the upstream and the downstream firm, over the pairspecific input price. --
    Keywords: Oligopoly,Vertical relations,Wholesale prices,Equilibrium mode of competition
    JEL: D43 L13 L42
    Date: 2013
  2. By: Pio Baake; Ulrich Schwalbe
    Abstract: The paper deals with the competitive effects of price guarantees in a spatial duopoly where consumers can search for lower prices but have to incur hassle costs if they want to claim a price guarantee. It is shown that symmetric equilibria with and without price guarantees exist but price guarantees will have no effect on prices if search costs are low, hassle costs are high and the number of uninformed consumers is small. However, when both firms use price guarantees, there also exist payoff-dominant equilibria where both firms use mixed pricing strategies in the form of "high-low" pricing schemes, provided that the search costs are sufficiently high.
    Keywords: Price Matching Guarantees, Search Costs, Oligopoly Pricing
    JEL: L11 L13 L15 L41
    Date: 2013
  3. By: Hinloopen, Jeroen; Müller, Wieland; Normann, Hans-Theo
    Abstract: We analyze the impact of product bundling in experimental markets. One firm has monopoly power in a first market but competes with another firm à la Cournot in a second market. We compare treatments where the multi-product firm (i) always bundles, (ii) never bundles, and (iii) chooses whether to bundle. We also contrast the simultaneous and the sequential order of moves in the duopoly market. Our data indicate support for the theory of product bundling: with bundling and simultaneous moves, the multi-product firm offers the predicted number of units. When the multi-product firm is the Stackelberg leader, the predicted equilibrium is better attained with bundling, especially when it chooses to bundle, even though in theory bundling should not make a difference here. In sum, bundling works as a commitment device that enables the transfer of market power from one market to another. --
    Keywords: product bundling,commitment,Cournot,experiments,Stackelberg
    JEL: C92 D43 L11 L12 L41
    Date: 2013
  4. By: Ofer H. Azar (BGU)
    Abstract: Experimental evidence suggests that consumers are affected by reference prices and by relative price differences ("relative thinking"). A linear-city model of two retailers that sell two goods suggests how this consumer behavior affects firm strategy and market outcomes. A simple model analyzes the case in which all consumers want to buy both goods. An extended version adds consumers who want only one good. Relative thinking leads firms to increase the markup on the good with the higher reference price and decrease the markup on the other good, possibly to a negative markup. Stronger relative thinking increases the firms' profits.
    Keywords: Behavioral economics; Relative thinking; Heuristics and biases; Competitive strategy; Spatial differentiation; Loss leaders; Retailing.
    JEL: L13 D43 M31 M20 D11
    Date: 2013
  5. By: Sapi, Geza; Suleymanova, Irina
    Abstract: We investigate how firms' incentives to acquire customer data for targeted offers depend on its quality. A two-dimensional Hotelling model is proposed where consumers are heterogeneous both with respect to their locations and transportation cost parameters (flexibility). Firms have perfect data on the locations of consumers while data on their flexibility is imperfect. When consumers are relatively homogeneous in their flexibility, in equilibrium both firms acquire customer data regardless of its quality. This increases profits but harms consumers. When consumers are relatively differentiated in flexibility, data acquisition incentives depend on its quality. Only if the data is sufficiently precise, both firms acquire it and their profits decrease, while consumers are better-off. Our model has particular relevance for location-based marketing such as in mobile telephony, where firms have near-perfect information on the proximity of customers but may have imperfect knowledge of other consumer characteristics. --
    Keywords: Price Discrimination,Customer Data,Market Segmentation
    JEL: D43 L13 L15 O30
    Date: 2013
  6. By: Sergio Currarini (University of Leicester, Universita' di Venezia and Euro-Mediterranean Center on Climate Change); Marco A. Marini (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")
    Abstract: In this paper we review a number of coalitional solution concepts for the analysis of cartel and merger stability in oligopoly. We show that, although so far the industrial organization and the cooperative game-theoretic literature have proceeded somehow independently on this topic, the two approaches are highly inter-connected. We first consider the basic problem of the stability of the whole industry association of firms under oligopoly and, for this purpose, we introduce the concept of core in oligopoly games. We show that different assumptions on the behaviour as well as on the timing of the coalitions of firms yield very different results on the set of allocations which are core-stable. We then consider the stability of associations of firms organized in coalition structures different from the grand coalition. To this end, various coalition formation games recently introduced by the so called endogenous coalition formation literature are critically reviewed. Again, different assumptions concerning the timing and the behaviour of firms are shown to yield a wide range of different results. We conclude by reviewing some recent extensions of the coalitional analysis to oligopolistic markets with heterogeneous firms and incomplete information.
    Keywords: Cooperative Games, Coalitions, Mergers, Cartels, Core, Games with Ex- ternalities, Endogenous Coalition Formation
    Date: 2013
  7. By: Kalyan Chatterjee (Department of Economics, Pennsylvania State University.); Kaustav Das (Department of Economics, University of Exeter)
    Abstract: We study a model of decentralised bilateral interactions in a small market where one of the sellers has private information about her value. There are two identical buyers and another seller, whose valuation is commonly known to be in between the two possible valuations of the informed seller. We consider two in?nite horizon games, with public and private simultaneous one-sided o¤ers respectively and simultaneous responses. We show that there is a stationary perfect Bayes?equilibrium for both models such that prices in all transactions converge to the same value as the discount factor goes to 1.
    Keywords: Bilateral Bargaining, Incomplete information, Outside options, Coase conjecture.
    JEL: C78 D82
    Date: 2013
  8. By: Nejat Anbarci; Pedro Gomis-Porqueras; Marcus Pivato
    Abstract: In formal markets, to attract buyers, sellers must publicly advertise their prices and locations. But in informal markets, sellers must remain anonymous from government authorities. Since agents' payoffs depend on the ratio of buyers and sellers in each of these markets, all agents try to position themselves in the market which can yield them the highest possible payoff. This strategic interaction in turn critically affects the time evolution of these two markets. In our benchmark model, in which only sellers can switch between these markets, there exists a unique stable dynamic equilibrium where formal and informal markets co-exist. Sellers switch from the formal to the informal market whenever costs of trading in the informal market decrease, and vice versa. In a richer environment, where both sellers and buyers can switch between markets, and the sellers' and buyers' costs of trading in the formal market net of those in the informal market have opposite signs, there exists a unique stable dynamic equilibrium where formal and informal markets co-exist.
    Keywords: Price posting, bargaining, matching, formal sector, informal sector
    JEL: C7 D49
    Date: 2013–11–20
  9. By: Cevikarslan, Salih (UNU-MERIT, and SBE, Maastricht University)
    Abstract: The aims of this paper are twofold. The first is to analyse the interaction between research and development (R&D) activities of firms and heterogeneous consumer preferences in structuring the evolution of an industry. The second is to explore the heterogeneity in firms' innovation strategies. Is heterogeneity sustainable in the long-term and what happens to the market shares of firms having different innovation strategies when a structural market characteristic (market size) or a behavioural rule (R&D intensity) is changed? To answer these research questions, an evolutionary, multi-agent based, sector-level innovation model is designed. The model addresses supply and demand sides of the market simultaneously with the co-evolution of heterogeneous consumer preferences, heterogeneous firm knowledge bases, and technology levels at the micro level.
    Keywords: Heterogeneity, innovation strategies, evolutionary economics, agent-based modelling
    JEL: B52 L11 O33
    Date: 2013
  10. By: Vermeulen, Ben; De Kok, Ton
    Abstract: In managing their value network, firms have to balance current and future value concerns and own and network partners' concerns. Firms generate immediate value through manufacturing and selling the current generation of products together with other firms in their production network. Firms generate future value by developing a new product generation with other firms and research institutes in their innovation network. Product innovation and production often take place simultaneously and recurrently. We take the discernible production and innovation activities to occur in co-evolving layers of the same network. We formulate a biplex value network development model that lays out the temporal pattern of production and innovation activities in the value network. We introduce terminology to pinpoint temporal interactions between the innovation and production activities. We study several exemplary complications in the cross-table of inter- and intragenerational interactions versus interactions within and across network layers.
    Keywords: value network; network management; network development; innovation network; production network; temporal complication
    JEL: D85 L14 L23 M11 O32
    Date: 2013–07
  11. By: Cevikarslan, Salih (UNU-MERIT, and SBE, Maastricht University)
    Abstract: The aims of this paper are twofold. The first is to analyse the interaction between research and development (R&D) activities of firms and heterogeneous consumer preferences in structuring the evolution of an industry. The second is to explore the effects of patent life and patent breadth on market outcomes. To answer these research questions, an evolutionary, multi-agent based, sector-level cumulative innovation model is designed. The model addresses supply and demand sides of the market simultaneously with the co-evolution of heterogeneous consumer preferences, heterogeneous firm knowledge bases and technology levels at the micro level. In line with the evolutionary modelling tradition, we have a search algorithm-innovation and imitation of products by firms - a selection of algorithm-revealed preferences of the consumers - and a population of objects in which variation is expressed and on which selection operates: namely, firms (Windrum, 2004). Firms compete on quality and price of their products in an oligopolistic market whereas consumers, constrained by their computational limits, act to maximize their utility with their product choices in a boundedly rational way. There is continuous firm entry and exit depending on the competitive performance of the firms.
    Keywords: Patents, industrial dynamics, evolutionary economics, agent-based modelling
    JEL: B52 L11 O34
    Date: 2013
  12. By: Josh Lerner; Jean Tirole
    Abstract: A major policy issue in standard setting is that patents that are ex-ante not that important may, by being included into the standard, become standard-essential patents (SEPs). In an attempt to curb the monopoly power that they create, most standard-setting organizations require the owners of patents covered by the standard to make a loose commitment to grant licenses on reasonable terms. Such commitments unsurprisingly are conducive to intense litigation activity. This paper builds a framework for the analysis of SEPs, several types of inefficiencies attached to the lack of price commitment, shows how structured price commitments restore competition, and analyzes whether price commitments are likely to emerge in the marketplace.
    JEL: D43 L24 L41 O34
    Date: 2013–11
  13. By: Björn Bartling; Roberto A. Weber
    Abstract: This paper studies the stability of socially responsible behavior in markets. We develop a laboratory product market in which low-cost production creates a negative externality for third parties, but where alternative production with higher costs entirely mitigates the externality. Our data reveal a robust and persistent preference for avoiding negative social impact in the market, reflected both in the composition of product types and in a price premium for socially responsible products. Socially responsible behavior in the market is generally robust to varying market characteristics, such as increased seller competition and limited consumer information. Fair behavior in the market is slightly lower than that measured in comparable individual decisions.
    Keywords: Social responsibility, markets, externalities, competition, fairness
    JEL: C92 D03 D62
    Date: 2013–11
  14. By: Møen, Jarle (Dept. of Business and Management Science, Norwegian School of Economics); Thorsen, Helge Sandvig (Dept. of Economics, Norwegian School of Economics)
    Abstract: The returns to R&D literature is large and has been surveyed on several occasions. We complement previous surveys by using formal meta analytic techniques to analyse publication bias. We find evidence consistent with a strong positive bias in the part of the literature that controls for unobserved firm fixed effects. The reason may be that fixed effects specifications are particularly susceptible to measurement errors and therefore have a high probability of producing implausibly low return estimates. Implausible estimates are likely to be filtered out before being reported, and our analysis suggest that 26 % of a hypothetical complete literature is missing. Future reviews should take into account that the full effect of negative specifications biases may be masked by reporting and publication bias.
    Keywords: Returns to R&D; Meta-analysis; Publication bias; Funnel asymmetry; Trim-and-fill method; FAT-PET
    JEL: C83 D24 O31
    Date: 2013–11–21
  15. By: Luca Lambertini (Department of Economics, University of Bologna, Italy; ENCORE, University of Amsterdam, The Netherlands; Barcelona Institute of Economics (IEB), Spain; RCEA, Rimini, Italy); Andrea Mantovani (Department of Economics, University of Bologna, Italy; Barcelona Institute of Economics (IEB), Spain; RCEA, Rimini, Italy)
    Abstract: We revisit Benchekroun (2008) to describe a differential oligopoly game of resource extraction under static, linear feedback and nonlinear feedback strategies, to show that (i) feedback rules entail resource exhaustion for a finite number of firms; and (ii) feedback strategies are more aggressive than static ones as long as the resource stock is large enough, in accordance with the acquired view based on the traditional pre-emption argument associated with feedback information.
    Keywords: dynamic oligopoly, renewable resources, feedback strategies
    JEL: C73 L13 Q2
    Date: 2013–10
  16. By: Samantas, Ioannis
    Abstract: This study examines the effect of market structure variables on stability subject to regulation and supervision variables. The Extreme Bound Analysis (EBA) is employed over a sample of banks operating within the enlarged European Union during the period 2002-2010. The results show an inverse U-shaped association between market power and bank soundness and stabilizing tendency in markets of less concentration, where policies lean towards limited restrictions on non-interest bearing activities, official intervention to bank management and book transparency. However, in markets with higher share of foreign owned assets, the pattern is inverted. The significant impact of regulatory variables contributes to the ongoing reform as a stability channel of bank competition.
    Keywords: Market power; financial stability; regulation; extreme bound analysis
    JEL: D24 D4 G21 L11 L51
    Date: 2013–11
  17. By: Wilko Bolt; David Humphrey
    Abstract: Banks supply payment services that underpin the smooth operation of the economy. To ensure an efficient payment system, it is important to maintain competition among payment service providers but data available to gauge the degree of competition are quite limited. We propose and implement a frontierbased method to assess relative competition in bank-provided payment services. Billion dollar banks account for around ninety percent of assets in the US and those with around $4 to $7 billion in assets turn out to be both the most and the least competitive in payment services, not the very largest banks.
    Keywords: Payments; competition; banks; frontier analysis
    JEL: G21 L80 L00
    Date: 2013–11
  18. By: Carlos Pérez Montes (Banco de España)
    Abstract: The growth in the interest rates paid on Spanish public debt since 2008 and the impairment of the interbank market have generated concerns about their effects on competition for bank deposits in Spain. I combine a nested logit model of bank deposit supply with a structural model of competition to measure the impact of the reference interest rates on public debt and interbank markets on the returns on deposits and funding policy of Spanish banks in the period 2003-2010. The interbank rate is found to be more closely correlated with the return on deposits than the interest rate on public debt, but the connection between interbank rates and deposit returns is significantly weaker in the crisis period 2008-2010. Counterfactual analysis shows a significant effect of the interbank rate and investment opportunities in public debt on deposit rates and bank profits, and that observed deposit rates are on average 115bp above collusive levels
    Keywords: Bank Competition, Interbank Rates, Public Debt, Nested Logit, Counterfactual Analysis
    JEL: G21 D43 L1
    Date: 2013–11
  19. By: Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Maciej Sobolewski (Faculty of Economic Sciences, University of Warsaw)
    Abstract: Our study focuses on the identification and the measurement of switching costs and network effects in mobile telecommunications. Although these two phenomena create similar consumer lock-in mechanisms, there are no empirical studies that integrate them into one model of subscriber’s behavior. Our study fills this gap by applying stated preference valuation methods to a representative sample of individual mobile phone users in Poland. We find that number portability can be attributed to only approximately 50% of the total switching costs associated with changing either the provider or the service and the remaining part is associated with status quo inertia. Additionally, we show that because network effects play an important role in service valuation, they lead to strengthening the lock-in mechanisms even further. Our study provides the first empirical measurements of the relative importance of these simultaneous effects and provides the estimates of their monetary value.
    Keywords: Switching costs, network effects, mobile telecommunications, mobile number portability, brand valuation, stated preference, non-market valuation, discrete choice experiment, random parameters multinomial logit model
    JEL: L1 L86 O3
    Date: 2013
  20. By: Jean-Christophe Poudou; Michel Roland
    Abstract: We provide an efficiency justi…cation for the imposition of the uniform pricing constraint in universal service obligations (USO), where USO are de…fined as a set of constraints imposed on fi…rms belonging to a network industry. Besides the uniform pricing (UP) constraint, which is an obligation to serve all consumers at an identical price, constraints considered are the coverage constraint (CC), an obligation imposed to one of the …firms to serve a given segment of the market, as well as the license constraint (LC), a minimum or a maximum coverage restriction imposed on entrants. We show that adding the UP constraint to both a CC and a LC brings an increase in welfare. Our contribution comes from the full recognition of the role of a LC in well-designed USO and we illustrate this role with the particular case of linear demand.
    Date: 2013–11
  21. By: Y. Emre Akgunduz; Janneke Plantenga
    Abstract: Little is known about how competition affects child care centers' quality. This paper examines the impact of competition on the quality of Dutch child care centers. The results show that high density of child care centers in an area improves scores in quality assessment measures. The positive relationship persists when either the density of primary schools or births in the area are used to instrument the density of child care centers. The effects of competition are exclusive to child care centers that operate in a private market. Despite concerns about the parents' ability to distinguish between low and high quality child care, market competition in the Dutch child care sector appears to improve quality.
    Keywords: child care, ECEC, pedagogic quality, competition
    JEL: J13 H42 L19
    Date: 2013–11
  22. By: Dakshina G. De Silva; C F Elliott; R Simmons
    Abstract: This paper investigates spatial competition and the price-quality relationship in the UK gourmet restaurant sector using a comprehensive panel data set compiled from the UK Good Food Guide. A positive relationship between meal prices and restaurant quality as assessed by the Guide is identified. Moreover, restaurants appear to raise prices when the number of restaurants in close proximity that offer similar cuisine increases. Yet restaurants are found to reduce prices in line with standard competitive market responses when there are a greater number of similar restaurants placed further apart.
    Date: 2013
  23. By: David Byrne; Brian K. Kovak; Ryan Michaels
    Abstract: This paper studies price and quality differences across international intermediate input suppliers. We develop price measures that account for (i) differences in product characteristics, (ii) unobserved quality differences, and (iii) pure (frictional) price dispersion across suppliers. Using uniquely detailed transaction- level data from the semiconductor industry, we document large average price differences across suppliers for observationally identical products, and find that price differentials close over the product life cycle. We interpret this finding in a model where buyers face costs of switching suppliers. The theory demonstrates how to use the observed price dynamics to adjust prices for unobserved quality differences across suppliers. The results of this analysis reveal that pure price dispersion and unobserved quality differences are both important in this market. These two features make it difficult to construct constant-quality import price indexes, which generally assume away pure price dispersion. We document the resulting upward bias in standard price indexes, develop a quality-adjusted index for semiconductor fabrication, and propose a general method for bounding the true constant-quality price index.
    JEL: D43 L63
    Date: 2013–11
  24. By: Ascensi—n Andina D’az (Department of Economic Theory, Universidad de M‡laga)
    Abstract: We propose a model in which different types of journalists have superior information to a newspaper's editor. Journalists compete for having their report published, but when writing their reports, they are uncertain about the preferences of the editor. We analyze the effects of competition and uncertainty on the incentives of the journalists to write informative reports. We obtain that there is not a unique prediction as to the effects of competition, but the correct answer depends on how much uncertainty there is. Thus, if the editor is perceived to be honest, we show there is an equilibrium in which all the journalists write informative reports, provided that a certain level of competition is met. In contrast, if the editor is perceived to be biased, partial revelation of information exists, even in the absence of competition. Last, high levels of uncertainty inevitably results in uninformative reporting.
    Keywords: Information transmission, media bias, competing journalists, uncertainty
    JEL: D72 D82
    Date: 2013–11
  25. By: Stoyanova, Rayna; Gründl, Helmut
    Abstract: The European insurance industry is awaiting the new EU-wide harmonized Solvency II framework. Before its introduction, it is important to find out which incentive effects can arise from it. Practitioners predict a trend towards consolidation in the insurance sector due to recognition of geographic diversification effects in Solvency II's standard formula. This paper studies whether the new European regulation standards will constitute a driver for M&As in the non-life insurance sector. We identify situations in which the consolidation becomes profitable. Our results indicate that the Solvency II framework may lead to an enhanced geographic restructuring wave. However, the profitability of this restructuring depends strongly on the correct estimation of costs and the characteristics of the consolidation partner chosen. --
    Keywords: Insurance Regulation,Solvency II,Mergers and Acquisitions
    Date: 2013
  26. By: Pouyet, Jérôme; Sanin, Maria Eugenia; Creti, Anna
    Abstract: The French law `Nouvelle Organisation du March e de l'Electricit e' makes available, at a regulated price, withdrawal rights to source low-cost electricity production from nuclear plants owned by the incumbent. Downstream market retailers bene t from such a measure, up to a given amount xed by the law, to compete on a level playing eld with the historical supplier. Our analysis assesses whether this production release pro- gramme is likely to result in a lower retail price. We show that whether pro-competitive e ects arise depends not only on the amount of the preassigned capacity but also on the rules used to allocate it to retailers.
    Keywords: Nome law; Retail competition; Electricity markets; France;
    JEL: L50 D43 L94
    Date: 2013–04
  27. By: Zoya Kotelnikova (National Research University – Higher School of Economics. Department of Sociology. Senior Lecturer; Laboratory for Studies in Economic Sociology. Senior Researcher; Candidate of Sociological Sciences)
    Abstract: The core idea of the paper is to put the social embeddedness of economic phenomena as a key concept in economic sociology at the heart of empirical research. The author stresses the importance of taking into account the temporal dimension of market exchange. It is shown that the continuation of exchange relationships can be considered as a proxy for social embeddedness. The paper focuses on the contractual relationships of retail chains and their suppliers, which have been dramatically changed since the emergence of modern chain stores in Russia. The aim is to reveal to what extent contractual relationships between retailers and suppliers are structurally embedded and which factors are conducive to a greater degree of structural embeddedness of retailer-supplier relationships in emerging Russian markets. Based on Baker, Faulkner, and Fisher’s theory of the continuation of markets ties, the presented paper focuses on the influence of power, institutional forces, and competition. The paper is based on a survey of retailers and their suppliers in five Russian cities: Moscow, St. Petersburg, Yekaterinburg, Novosibirsk, and Tyumen. In 2010 questionnaires were collected from 257 managers of supplying companies and 255 retail managers from the above cities. Quantitative data was enriched with 30 in-depth interviews with suppliers and retailers in 2008. It is shown that both retailers and suppliers tend to maintain long-lasting relationships with a majority of partners. However, retailers and suppliers are prone to follow different models. Power turns out to be meaningful for retailers, while institutional forces appear to be of much more special importance for suppliers. Retailers exercise organizational power to destabilize market ties with counterparts. Suppliers use relational selection criteria and specific investments to attach relationships with exchange partners. The significant factors conducive to the prevalence of the embedded ties in the market are organizational power, relational criteria of business partner selection, specific investments, length of service in retailing, and the tenure length of managers in a given company, sector, and geographic location
    Keywords: market exchange, structural embeddedness, contractual relationship, networks, duration of a relationship, power, institutions, competition, trade revolution, emerging markets.
    JEL: Z13
    Date: 2013
  28. By: Zhang, Mingqian (Shanghai International Studies University); Mohnen, Pierre (UNU-MERIT / MGSoG)
    Abstract: Using a large dataset of over 100,000 Chinese firms created between 2000 and 2006, we explore whether there is a link between innovation effort (R&D) or innovation output (the share of innovative sales) and the firm's duration of survival. We estimate a complementary log-log model with time-varying explanatory variables controlling for individual heterogeneity. We find that innovative firms tend to survive longer, more so because of R&D than because of introducing new products. There seems to be an inverted-U relationship between R&D or innovation output and long-term survival, suggesting that too much R&D or product innovation can cause firms to die, perhaps because of excessive risk. Survival has a cyclical behaviour, and it varies across provinces. It also varies with ownership. State-owned firms have a higher hazard rate than privately-owned firms, which have a higher hazard rate than foreign-owned firms.
    Keywords: firm survival, complementary log-log duration models, China, innovation
    JEL: L25 O32 O38
    Date: 2013

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