nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2006‒05‒06
fourteen papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. Network Size and Network Capture By Gerard Llobet; Michael Manove
  2. Gibrat's Law and Market Selection in the Radio, TV & Telecommunications Equipment Industry. By F. Lotti; E. Santarelli; M. Vivarelli
  3. Simultaneous competitor and customer diffusion: a market growth model based on market space and competition By Debruyne, M.
  4. SME Financing in Europe: Cross-Country Determinants of Debt Maturity By Hernandez-Canovas, Gines; Koeter-Kant, Johanna
  5. Entry and Accommodation in Airline Markets: Easyjet Caught in the Middle on the London-Grenoble Route By Cristina Barbot
  6. A multi-level approach to program objectives: definitions and managerial implications By De Hertogh, S.; Van den Broecke, E.; Vereecke, A.; Viaene, S.; Harpham, A.
  7. Do not forget the strategic architecture of your manufacturing network while offshoring By Vereecke, A.; De Meyer, A.
  8. Path Dependence or Convergence? The Evolution of Corporate Ownership Around the World By Andrew J.Y. Yeh; Steven Lim; Ed Vos
  9. Government Outsourcing: Public Contracting with Private Monopoly By Auriol, Emmanuelle; Picard, Pierre M
  10. Market power and the need for regulation in the German airport market By Robert Malina
  11. Foreign Direct Investment, Management Practices, and Social Capital New Evidence on the Host Country Effects of Japanese Multinationals By Peter Doeringer; David G. Terkla
  12. Ownership Form and Contractual Enefficiency: Comparing Performance of Cooperatives and Private Factories in the Indian Sugar Industry By Sanghamitra Das; Dilip Mookherjee
  13. Estimating the marginal costs of airport operation by using multivariate time series model with correlated error terms By Heike Link; Wolfgang Götze; Veli Himanen
  14. Liaisons globales : Les avantages de l'investissement direct de l'étranger pour les établissements sous contrôle canadien - le rôle des liens verticaux By Lileeva, Alla

  1. By: Gerard Llobet (CEMFI); Michael Manove (Boston University, Department of Economics)
    Abstract: Most types of networks, over time, spawn the creation of complementary stocks that enhance network value. Computer operating systems, for example, induce the development of the comple- mentary stock of software applications that increase the value of the operating system. In this paper, we challenge the conventional wisdom that a large network, which induces the creation of large complementary stocks, serves as a barrier to entry that protects the incumbent from competi- tion or network capture. We show that a larger network may either deter or attract entry depending on the relation between the network quality and the cost of an innovator?s network product. The probability of entry also depends on the level of compatibility between the potential entrant?s technology and existing complementary stocks, which in turn is in?uenced by the strength of the intellectual-property-rights environment. Intellectual property rights and the associated threat of entry may a¤ect an incumbent?s choice of network size in counterintuitive ways.
    JEL: L41 O34
    Date: 2002–12
  2. By: F. Lotti; E. Santarelli; M. Vivarelli
  3. By: Debruyne, M.
    Abstract: This paper adds addresses the interaction between competitive dynamics and market evolution. Specifically, it focuses on the development of the market of a new product, in terms of customer adoption as well as competitive entry. The objective of this paper is to develop a model for the growth stage of a new market that addresses the supplier and customer diffusion process and the interaction between them. The contribution of our approach is threefold: (i) the development of a competitor diffusion model, (ii) the combination of a competitor diffusion model with a customer diffusion model, recognizing the interplay between competitive entry and market-level diffusion, and (iii) the recognition that competitive entry effects in the diffusion model are endogenous, resulting from the entry decisions of firms.
    Date: 2006–04–20
  4. By: Hernandez-Canovas, Gines (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Koeter-Kant, Johanna
    Abstract: We examine the influence of cross country differences on debt maturity for small and medium size enterprises (SMEs) using a sample of 3366 SMEs from 19 European countries. We analyze a country's legal environment, institutional environment, banking structure and economic situation while controlling for firm specific characteristic. We find that SMEs in countries with high property rights that protect their creditors or enforce existing laws are more likely to obtain long-term debt. We also show evidence that banks seem to rely more on the legal, economic, and institutional determinants when determining the length of a loan agreement for micro firms than when granting loans to medium size firms.
    Keywords: Debt maturity; Small business lending; Banks; Legal system
    JEL: G21 G30 G32
    Date: 2006
  5. By: Cristina Barbot (CETE, Faculdade de Economia, Universidade do Porto)
    Abstract: Low cost carriers (LCCs) have recently proved that they can develop aggressive behaviour towards the threat of new entrants. This paper analyses the theoretical conditions under which a low cost carrier can deter or accommodate entry by means of product proliferation, using the example of Easyjet on the London-Grenoble route. Theoretical conclusions show that they can only deter entry if they launch a service with a quality that is superior to the entrant’s and to their own previous one. Otherwise, they accommodate entry by improving their old product, when they face the entry of a full service carrier (FSC), or by launching a new service, if they are caught in the middle of a FSC and another LCC. Empirical findings about competition in the same route in monopoly, duopoly and oligopoly with three firms show that price competition depends on the existence and nature of rivals, and on the level of demand.
    Keywords: low cost carriers, entry, accommodation
    JEL: L93 L13
    Date: 2006–01
  6. By: De Hertogh, S.; Van den Broecke, E.; Vereecke, A.; Viaene, S.; Harpham, A.
    Abstract: Projects are recognized as the building blocks of strategy. Outputs, outcomes, benefits and related concepts have been put forward by the program management community to bridge the gap between strategy and projects. Yet, firstly there appears to be some discordance among authors on the exact nature of these concepts. Secondly, these frameworks may not yet fully reflect the specific nature of strategy implementation. Therefore it is hard to accept them as the basis for communication between the project/program organisation and the business management when managing strategy implementation through programs of projects. We will borrow three concepts (resources, competencies and capabilities) from the resource based view of the company (RBV). We shall use them to define three levels of program objectives. We will illustrate these levels through a case of a strategic program in a professional information services company. We conclude with implications on current program management practice and research.
    Keywords: program management, program objectives, strategy implementation, benefits management
    Date: 2006–04–25
  7. By: Vereecke, A.; De Meyer, A.
    Abstract: Offshoring manufacturing to low labor cost countries has become trendy. Nearly everyday one sees an announcement in the business press of companies moving to China or India. Whilst production cost is an important consideration in choosing a location for the factory, we argue that one should not become victim of a herd effect and that other parameters e.g. quality, flexibility, transportation and energy costs, etc. need to be taken into consideration in the determination of the optimal manufacturing network. Relocating a factory is changing the strategic architecture of the company’s manufacturing network and requires a long term view and a good model to design the architecture of the manufacturing network. Based on empirical survey research and a set of case studies we provide such a model to think about the roles of factories in the strategic manufacturing network of the firm. But we go beyond a classification and a descriptive model and we provide a set of six managerial issues that require senior management’s attention in determining the optimal manufacturing network and its dynamic evolution. We argue for example that senior management needs to build a balanced portfolio of different types of factories, has to have a performance measurement system adapted to the type of factory, as well as the appropriate leadership for each of the different types of factories and needs to actively manage the dynamics and the flows of innovation in the factory network.
    Keywords: international manufacturing, network management, outsourcing
    Date: 2006–04–26
  8. By: Andrew J.Y. Yeh (Reserve Bank of New Zealand); Steven Lim (University of Waikato); Ed Vos (University of Waikato)
    Abstract: We offer a theory that sheds light on the current debate over whether the form of corporate ownership converges to the Berle-Means image. Our analytical results are threefold. First, legal rules and firm-specific protective arrangements are complementary. Secondly, corporate ownership patterns can be convergent or path dependent depending on the relative importance of these protective arrangements. We predict, for example, diffuse stock ownership in countries that impose legal limits on blockholders’ power to expropriate minority investor rights. Thirdly, we find that convergence toward diffuse share ownership is a movement towards the social optimum. Our empirical results suggest a case for the co-existence of path dependence and functional convergence (convergence to the diffuse form of share ownership through cross-listings on U.S. stock exchanges that impose more stringent disclosure and listing requirements). These results have implications for the design of executive compensation, the case for institutional investor activism and the proposal to increase shareholder power.
    Keywords: corporate governance; ownership concentration; institutions; quality of governance; path dependence; functional convergence
    JEL: G32 G34 O17
    Date: 2006–04–01
  9. By: Auriol, Emmanuelle; Picard, Pierre M
    Abstract: The paper studies the impact of government budget constraint in a pure adverse selection problem of monopoly regulation. The government maximizes total surplus but incurs some cost of public funds à la Laffont and Tirole (1993). An alternative to regulation is proposed in which firms are free to enter the market and to choose their price and output levels. However the government can contract ex-post with the private firms. This ex-post contracting set-up allows more flexibility than traditional regulation where governments commit to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties.
    Keywords: adverse selection; natural monopoly; privatization; regulation; soft-budget constraint
    JEL: D82 L33 L43 L51
    Date: 2006–04
  10. By: Robert Malina (Institute of Transport Economics, University of Muenster)
    Abstract: With the increasing profit orientation of German airport operators the question as to weather they possess market power is gaining more importance. Whereas there have been some studies about the degree of market power of individual airports in countries as Australia and Great Britain, the German airport market has not yet been studied in detail. This paper is a part of a research project that tries to assess market power in this market. It indicates which of the 35 examined German airports possess market power and therefore need special regulatory attendence. We calculate a substitution coefficient for inter-airport competition that quantifies the quality of the best substitute for a certain airport. It is defined as the proportion of inhabitants within the relevant regional market of an airport that consider another airport, which has been identified as meeting the demands of the airlines, to be a good substitute from their perspective as well. The analysis is complemented by an assessment of intermodal substitution and countervailing power of airlines. The study gives strong indication that 23 out of the 35 German airports do not possess relevant market power. In contrast to this, four airports (HAM, FRA, MUC, STR) and Berlin Airport System (THF, TXL, SXF) have strong, five (BRE, DRS, LEJ, NUE, HAJ) have modest market power. The results provide a basis for the construction of an efficient regulatory framework for the German airport market.
    Keywords: airport competition, counterveiling power, market power, substitution
    JEL: L93 R48 D42
    Date: 2005–10
  11. By: Peter Doeringer (Institute for Economic Development, Boston University); David G. Terkla (University of Massachusetts Boston)
  12. By: Sanghamitra Das (Indian Statistical Institute, Delhi); Dilip Mookherjee (Institute for Economic Development, Boston University)
    Abstract: This paper explores the role of differing contractual relationships between sugarcane farmers and sugar factories in India resulting from differing ownership structures. In Maharashtra most sugar factories are cooperatively owned by cane farmers, while in Uttar Pradesh most factories are privately owned and purchase cane from independent peasant farmers. The key incentive problem is that residual claimants to factory profits are inclined to exploit their monopsony power and underprice cane supplied by farmers. This results in undersupply of cane to factories, the extent of which depends on who owns the factory, besides the distribution of land between small and big growers. Predictions of the model are empirically verified from panel data spanning 1982–95 for private and coop factories in the two states. We find that the respective cane price distortions overwhelm the effect of changes in cane quality, technological change, prices or irrigation in accounting for differences in growth of the industry between different ownership forms and regions over this period.
  13. By: Heike Link (German Institute for Economic Research, Berlin); Wolfgang Götze (University of Applied Sciences, Stralsund); Veli Himanen (Transplan Ltd., Helsinki)
    Abstract: The research presented in this paper was motivated by the central role of infrastructure charing in European transport policy. It is dedicated to the question whether and to what extent marginal infrastructure costs of airports, e.g. the marginal costs of maintaining, renewing and operating airport infrastructure, play a significant role for charging. The analysis presented in this paper is based on hourly cost and traffic data for the airport of Helsinki. In contrast to the standard formulation of cost function analysis our research focuses on one factor input only, the labour cost which ist the dominant cost component for the case study airport. This factor input can safely assumed to be the most relevant category for analysing cost variability and deriving marginal costs. The analysis makes use of a multivariate time series approach with specific models for correlated error terms to account for random shocks such as delays. The major result ist for almost all airport service areas a linear relationship betwenn labour cost and aircraft movements with an average marginal cost of € 22.60. An exception is the relationship between the staff costs for passenger services and international departing flights where a cubic cost relationship was estimated. Our quantitative findings are comparable with earlier findings for U.S. airports.
    Keywords: Cost functions, time series analysis, airports, marginal costs, infrastructure charging
    JEL: R48 C32
    Date: 2006–02
  14. By: Lileeva, Alla
    Abstract: À l'aide de données sur les établissements manufacturiers en exploitation au Canada de 1981 à 1997, nous estimons l'effet des variations du niveau d'investissement direct étranger (IDE) sur la productivité du travail dans les établissements sous contrôle canadien. Nous faisons la distinction entre l'IDE dans l'industrie propre des établissements sous contrôle canadien et dans les industries liées à ces établissements à titre de fournisseurs ou d'utilisateurs d'intrants intermédiaires. Nous constatons que l'IDE intensifie la croissance de la productivité des établissements sous contrôle canadien d'une façon allant de pair avec le transfert de technologie des fournisseurs étrangers vers les établissements sous contrôle canadien. Les effets positifs de l'IDE sur la productivité sont plus prononcés dans les établissements qui externalisent la production d'une grande quantité d'intrants intermédiaires et ceux qui achètent des intrants intermédiaires à vocation scientifique (c'est à dire produits électroniques, machines et équipement, produits chimiques) que dans les autres. Nous concluons aussi que la concurrence étrangère a un effet négatif sur la productivité des producteurs canadiens
    Keywords: Comptes nationaux, Fabrication, Productivité, Industries manufacturières
    Date: 2006–04–13

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.
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