nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2006‒02‒12
twelve papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. Competition for Railway Markets: The Case of Baden-Wuerttemberg By Rafael Lalive; Armin Schmutzler
  2. Crossing borders; when science meets industry. By Eric Canton; Debby Lanser; Joëlle Noailly; Marieke Rensman; Jeroen van de Ven
  3. Textile and Apparel: an historical and "glo-cal" perspective. The Italian case from an economic agent's point of view By Michele Tronconi
  4. Knowledge networks and innovative performance in an industrial district. The case of a footwear district in the South of Italy By Ron A. Boschma; Anne L.W. ter Wal
  5. Competition, Innovation and Growth with Limited Commitment By Ramon Marimon; Vincenzo Quadrini
  6. Organizational Downsizing and Innovation By Richtnér, Anders; Åhlström, Pär
  7. Entry and Regulation - Evidence from Health Care Professions By Schaumans, Catherine; Verboven, Frank
  8. Switch on the competition; causes, consequences and policy implications of consumer switching costs. By Marc Pomp; Victoria Shestalova; L. Rangel
  9. Price regulation and generic competition in the pharmaceutical market By Dalen, Dag Morten; Strøm, Steinar; Haabeth, Tonje
  11. Evolution on the Shoulders of Giants: Entrepreneurship and Firm Survival in the German Laser Industry By Guido Buenstorf

  1. By: Rafael Lalive (Institute for Empirical Economics, University of Zurich); Armin Schmutzler (Socioeconomic Institute, University of Zurich)
    Abstract: This paper studies the e.ects of introducing competition for local passenger railway markets in the German state of Baden-Wuerttemberg. We compare the evolution of the frequency of service on lines that were exposed to competition for the market and lines that were not. Our results suggest that competitive lines enjoyed a stronger growth of the frequency of service than non-competitive lines, even after controlling for various line characteristics that might have an independent influence on the frequency of service. Our results further suggest that the e.ects of competition may depend strongly on the operator and on characteristics of the line.
    Keywords: Competition for the market, liberalization, passenger railways, procurement auctions
    JEL: D43 D44 R48
    Date: 2005–09
  2. By: Eric Canton; Debby Lanser; Joëlle Noailly; Marieke Rensman; Jeroen van de Ven
    Abstract: Economic growth is ultimately driven by advances in productivity. In turn, productivity growth is driven by R&D and by utilisation of the public knowledge pool. This public knowledge pool is generated by universities and public research institutions. Underutilisation by firms of results from public research can deter economic growth, and the question then emerges how to bring science to the market. In this report we explore whether in Europe public knowledge is underutilised by firms, and investigate the quantitative importance of various knowledge transmission channels (such as publications, informal contacts, consulting). Next we study characteristics of universities and firms that may prevent an effective knowledge transfer. Finally we look at a number of policy initiatives designed to foster science-to-industry knowledge spillovers in the Netherlands and a selection of other countries.
    Keywords: science-to-industry knowledge spillovers; incentives; policy initiatives
    JEL: I28 O31 O38
    Date: 2005–10
  3. By: Michele Tronconi
    Abstract: What might happen to the Italian Textile and Apparel industry? Does it deserve to survive, even if in a reduced dimension, or is it going to disappear, simply being a piece of our past without a passport to our future? This paper call for debate and reach a better view of a changing industry, starting from a different perspective from the usual one which regards the Textile and Clothing industry as a sunset one for western Europe. With the end of the quota system the Italian industry is facing market disruption produced by the flood of exports from China. Too much, too soon, too cheap. Italian entrepreneurs are over-reacting to this and technological innovation is no longer regarded as an opportunity to cultivate differential competitive advantage. Anti - dumping, tariffs and quotas are considered as controversial issues in the search for a new global balance. To reach this, we shouldn't forget that both structural and strategic aspects are always in action when international competition is concerned. All in all, transparency is very important and could be supported by product traceability. This issue is connected with the difference of standards and the difficulty to make them become a purchasing and innovation driver.
    Date: 2005–09
  4. By: Ron A. Boschma; Anne L.W. ter Wal
    Abstract: The traditional district literature tends to assume that: (1) the competitiveness of firms depends on external sources of knowledge; (2) all firms in a district benefit from knowledge externalities; (3) relying on external knowledge relationships necessarily means these are confined to the district area. Our case study of the Barletta footwear district in the South of Italy suggests otherwise. Based on social network analysis, we demonstrate that the local knowledge network is quite weak and unevenly distributed among the local firms. A strong local network position of a firm tended to increase their innovative performance, and so did their connectivity to extra-local firms. So, it mattered being connected either locally or non-locally: being co-located was surely not enough. Having a high absorptive capacity seemed to raise only indirectly, through non-local relationships, the innovative performance of firms.
    Keywords: evolutionary economics, new economic geography, social networks, innovative performance, Italy
    Date: 2006–01
  5. By: Ramon Marimon; Vincenzo Quadrini
    Abstract: We study how barriers to business start-up affect the investment in knowledge capital when contracts are not enforceable. Barriers to business start-up lower the competition for knowledge capital and, in absence of commitment, reduce the incentive to accumulate knowledge. As a result, countries with large barriers experience lower income and growth. Our results are consistent with cross-country evidence showing that the cost of business start-up is negatively correlated with the level and growth of income.
    Keywords: Innovation, Knowledge Capital, Enforcement, Growth, Competition, Commitment, Recursive Contracts, Mobility
    JEL: O30 O31 O40 J24 E22 D23
    Date: 2005–12
  6. By: Richtnér, Anders (Dept. of Business Administration, Stockholm School of Economics); Åhlström, Pär (Chalmers University of Technology)
    Abstract: Companies implementing a downsizing strategy aiming at increasing cost efficiency and operational effectiveness may face the fact that their innovative ability is hampered. In this paper, we develop a model of the mechanisms through which organizational downsizing affects innovation. We use existing theory to develop propositions regarding the details of how and why organizational downsizing affects innovation. Our model contains three components: a) the organization’s stock of knowledge, b) the individual’s creativity, and c) the knowledge creation process. These are three components which previous research on innovation management has suggested strongly affects innovation. Downsizing is also likely to affect all three components in various ways. Overall, we can expect downsizing to have a negative effect on innovation, but there are aspects of the knowledge creation process which may be positively affected by downsizing.
    Keywords: Innovation; Knowledge; Knowledge creation; Organizational downsizing
    Date: 2006–01–13
  7. By: Schaumans, Catherine; Verboven, Frank
    Abstract: The health care professions in Europe have been subject to substantial entry and conduct regulation. Most notably, pharmacies have frequently received high regulated markups over wholesale costs, and have been protected from additional competition through geographic entry restrictions. We develop an entry model to study the direct impact of the regulations on the pharmacies, and the indirect impact on the physicians who provide related services. We study the case of Belgium, which is representative for many other countries with geographic entry restrictions. We find that the entry decisions of pharmacies and physicians are strategic complements. Furthermore, the entry restrictions have directly reduced the number of pharmacies by more than 50%, and indirectly reduced the number of physicians by about 7%. A policy analysis shows that a removal of the entry restrictions, combined with a large reduction in the regulated markups (by between 10-18%, down from the current 28%) would lead to a large shift in rent to consumers, without reducing the geographic coverage of pharmacies throughout the country. These findings show that the public interest motivation for the current regime has no empirical support. Our findings are also relevant in light of the renewed attention by competition authorities to liberalize professional regulation.
    Keywords: entry; professional services; regulation
    JEL: I11 K21 L10 L43
    Date: 2006–01
  8. By: Marc Pomp; Victoria Shestalova; L. Rangel
    Abstract: The success or failure of reforms aimed at liberalising markets depends to an important degree on consumer behaviour. If consumers do not base their choices on differences in prices and quality, competition between firms may be weak and the benefits of liberalisation to consumers may be small. One possible reason why consumers may respond only weakly to differences in price and quality is high costs of switching to another firm. This report presents a framework for analysing markets with switching costs and applies the framework in two empirical case studies. The first case study analyses the residential energy market, the second focuses on the market for social health insurance. In both markets, there are indications that switching costs are substantial. The report discusses policy options for reducing switching costs and for alleviating the consequences of switching costs.
    Keywords: Switching costs; consumer behaviour; competition; energy markets; health insurance
    JEL: L13 D12
    Date: 2005–09
  9. By: Dalen, Dag Morten (Norwegian School of Management and the Frisch Centre); Strøm, Steinar (Dept. of Economics, University of Oslo); Haabeth, Tonje (University of Oslo and the Frisch Centre)
    Abstract: In March 2003 the Norwegian government implemented yardstick based price regulation schemes on a selection of drugs experiencing generic competition. The retail price cap, termed “index price”, on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998-2004 for the 6 drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.
    Keywords: Discrete choice; demand for pharmaceuticals; monopolistic competition; evaluation of yardstick based price regulation
    JEL: C35 D43 I18 L11
    Date: 2005–11–25
  10. By: Rodrigo Fernando Tejada Morales
    Abstract: El objetivo de esta tesis es implementar un modelo empírico que permita comprobar si la mayor competencia en el sistema financiero tiene un efecto negativo o positivo sobre la calidad de sus activos. Como media de los cambios en la competencia y el poder de mercado de las entidades se utiliza la q de James Tobin, ya que ningún otro instrumento utilizado hasta ahora en la literatura para este fin permite capturar apropiadamente estos efectos. En la aplicación del modelo se emplearon tres paneles con información de los establecimientos de crédito para Colombia durante el periodo 1989-1997. Su aplicación permitió demostrar que las entidades experimentan un deterioro en la calidad de su cartera a medida que su poder de mercado se incrementa,
    Date: 2006–01–01
  11. By: Guido Buenstorf
    Abstract: This paper studies 40 years of evolution in the German laser industry to test the generality of evolutionary patterns observed in the U.S. laser industry. Key characteristics found in the U.S. industry are also present in Germany. There is sustained entry into the industry, and neither a shakeout nor first-mover advantages of early entrants are observed. A survival analysis finds that, similar to the U.S. industry, laser firm spin-offs have been systematically more successful than academic startups. Differences in survival and determinants of the spin-off process are traced for alternative kinds of spin-offs, including firms started by serial entrepreneurs.
    Keywords: Industry life cycle, submarkets, entrepreneurship, spin-offs, integrating distributors
    JEL: L10 M13 O33
    Date: 2006–01
  12. By: Arturo Galindo; Ricardo Bebczuk
    Abstract: We explore the impact and evolution of loan portfolio diversification during the 2001-2002 Argentine financial crisis. Using a novel dataset that combines public information on the main activity of the largest 930 Argentine firms with their borrowing from each bank operating in the country during the 1999-2004 period, we find that banks did not modify much their loan portfolio mix as a response to the crisis, even though the econometric results point to a positive effect of sectoral diversification and lending to tradeable sectors on bank profitability and risk mitigation. Our results suggest that larger banks benefit more from diversification that smaller ones, and that the benefits of diversification are greater during the downside of the business cycle.
    Date: 2005–09–15

This nep-cse issue is ©2006 by Bernardo Batiz-Lazo. 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.