nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2006‒08‒12
thirteen papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. Gender and Transnational Migration: social networks and the forging of alliances By Annie Phizacklea
  2. Speed of innovation in high technology firms: geographic and organizational strategies By E. Echeverri-Carroll; L. Hunnicutt
  3. An Optimization-Based Decision Support System for Strategic Planning in a Process Industry: The Case of a Pharmaceutical Company in India By Dutta Goutam; Fourer Robert; Majumdar Akhilesh; Dutta Debabrata
  4. Raising Economic Performance by Fostering Product Market Competition in Germany By Andrés Fuentes; Eckhard Wurzel; Andreas Reindl
  5. Market power in the beef packing industry: is it time for a new approach? By L. Hunnicutt
  6. Mixups in the warehouse centralization and decentralization in the multi-plant firm By L. Hunnicutt
  7. The evolution of the Dutch dairy industry and the rise of cooperatives: Combining transaction cost and evolutionary approaches By Koen Frenken; Gerben van der Steege
  8. The evolution of inventor networks in the Silicon Valley and Boston regions By Lee Fleming; Koen Frenken
  9. Regulation of Natural Monopolies By Paul L. Joskow
  10. Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency By Nancy L. Rose; Kira Markiewicz; Catherine Wolfram
  11. One boss or many? Decision making and coordination in the multi-plant firm By L. Hunnicutt
  12. A theoretical and empirical investigation of the supply response in the U.S. beef-cattle industry By D. Aadland; D. Bailey; S. Feng
  13. Incentives to advertise: too strong, too weak, or just right? By L. Hunnicutt; L. Israelsen

  1. By: Annie Phizacklea
    Date: 2006–05–25
  2. By: E. Echeverri-Carroll; L. Hunnicutt
    Abstract: Competition in high technology is increasingly based on rapid innovation. But what conditions quicken innovation? Some suggest innovation is faster in firms with many related organizations located nearby. Others propose relationships with customers and suppliers as key factors in rapid innovation. We attempt to differentiate between these hypotheses. We find that local amenities determine firm location, but not innovation speed. Instead relationships with suppliers and customers are the main determinants of innovation speed.
  3. By: Dutta Goutam; Fourer Robert; Majumdar Akhilesh; Dutta Debabrata
    Abstract: We describe how a generic multi-period optimization-based decision support system (DSS) can be used for strategic planning in process industries. Built on five fundamental elements – materials, facilities, activities, time periods and storage areas – this DSS requires little direct knowledge of optimization techniques to be used effectively. It is user friendly and requires little knowledge of optimization. Results based on real data from a pharmaceuticals company in India demonstrate significant potential for improvements in revenues and profits.
    Date: 2006–08–04
  4. By: Andrés Fuentes; Eckhard Wurzel; Andreas Reindl
    Abstract: Much scope remains to make regulation of product markets more conducive to competition ? notwithstanding progress in recent years ? with substantial benefits for consumer welfare, productivity and employment. While the general competition legislation and enforcement framework is mostly effective, measures need to be taken to reduce administrative burdens on entrepreneurship and reduce the involvement of the government in business sector activities, notably through accelerated privatisation. Policies favouring small enterprises need to be revised, with a view to fully exposing them to competition and avoiding disincentives for small firms to grow. Substantial regulatory challenges exist in specific sectors, notably in the energy and railway industries where non-discriminatory access of market entrants to networks needs to be improved. Environmental objectives in energy market regulation could be achieved at lower cost. In the telecommunications industry, competition in the local loop can be strengthened. Regulation of the liberal professions is among the most restrictive in the OECD. Entry barriers need to be eliminated in crafts. and restrictions on large-scale retailing development could be eased. This paper relates to the 2006 Economic Survey of Germany ( <P>Améliorer la performance économique en stimulant la concurrence sur les marchés de produits en Allemagne <BR>En dépit des progrès accomplis ces dernières années, beaucoup reste à faire pour rendre la réglementation des marchés de produits plus propice à la concurrence, ce qui induira de substantiels avantages en termes de bien-être du consommateur, de productivité et d'emploi. Le droit commun de la concurrence et son cadre d'application sont dans l'ensemble efficaces, mais il faut alléger les charges administratives qui pèsent sur l'entrepreneuriat et réduire l'intervention de l'État dans les activités du secteur des entreprises, notamment par une privatisation accélérée. Il convient de réviser les dispositifs favorables aux petites entreprises, pour les exposer pleinement à la concurrence et éviter de les décourager de croître. De sérieux problèmes de réglementation persistent dans certains secteurs, notamment l'énergie et les chemins de fer, où l'accès non discriminatoire des entrants aux réseaux demande à être amélioré. Les objectifs environnementaux de la réglementation des marchés de l'énergie pourraient être réalisés à moindre coût. Dans l'industrie des télécommunications, la concurrence sur la boucle locale peut être renforcée. La réglementation des professions libérales est parmi les plus restrictives de la zone OCDE. Dans le secteur de l'artisanat, les obstacles à l'entrée doivent être supprimés, et il convient d'assouplir les restrictions qui limitent le développement des magasins de grande surface. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Allemagne 2006 (
    Keywords: network industries, industrie de réseau, competition, privatisation, Germany, Allemagne, concurrence, privatisation, competition law, productivity and growth, droit de la concurrence, productivité et croissance, regulatory policies, politique de réglementation
    JEL: K21 K23 L16 L40 L43 L51 L53 O52 Q3
    Date: 2006–08–04
  5. By: L. Hunnicutt
    Abstract: Consolidations in the U.S. beef packing industry have prompted concern within the government and interest among academics over whether packers possess and are able to exercise market power. Economists have generated numerous studies to test for and measure market power in beef packing, but the empirical studies have failed to provide definitive results on the presence of market power and whether any existing market power is exercised. The thesis of this paper is that the standard approach to measuring market power, conjectural variations, is based on a model which may not accurately describe competition between packing firms. I first discuss the institutional factors of beef packing that are not captured by the conjectural variations approach. I then present a theoretical extension of the CV approach which is based on a more realistic description of competition between packing firms. The paper concludes by suggesting alternative techniques for measuring market power.
  6. By: L. Hunnicutt
    Abstract: Single-plant firms choose quantity/quality levels to maximize profits. Multi-plant firms face this decision and must also choose how many decision makers to have. This paper presents two case studies and a model of a multi-plant firm in which overhead costs are lower with one decision-maker (centralization), but the mass of information and the need for timely decisions make occasional mixups unavaoidable. Multiple decision makers (decentralization) solves the mixup problem. Standardization—treating different outlets similarly in response to costly mixups—appears in the case studies, and is demonstrated as a result in the model.
    JEL: D21 L23
  7. By: Koen Frenken; Gerben van der Steege
    Abstract: The thesis advanced in this paper holds that any transaction cost explanation of the diffusion of a particular organizational form requires an evolutionary analysis of differential performance of competing organizational forms over time. Using data on 1141 dairy factories in The Netherlands, we find evidence that cooperative factories performed significantly better than private factories, which can be explained by cooperatives’ lower transaction costs. However, superior performance is observed only in the Northern part, while cooperatives were more dominant in the Southern part. This suggests that entry conditions for cooperative factories in the South were more favourable than in the North.
    Keywords: transaction cost economics, survival analysis, industry lifecycle, dairy industry, cooperatives
    Date: 2006–07
  8. By: Lee Fleming; Koen Frenken
    Abstract: While networks are widely thought to enhance regional innovative capability, there exist few longitudinal studies of their formation and evolution over time. Based on an analysis of all patenting inventors in the U.S. from 1975 to 2002, we observe dramatic aggregation of the regional inventor network in Silicon Valley around 1989. Based on network statistics, we argue that the sudden rise of giant networks in Silicon Valley can be understood as a phase transition during which small isolated networks form one giant component. By contrast, such a transition in Boston occurred much later and much less dramatically. We do not find convincing evidence that this marked difference between the two regions is due to regional differences in the propensity to collaborate or the involvement of universities in patenting. Interviews with key network players suggest that contingent labor mobility between established firms in Silicon Valley, in particular resulting from IBM’s policy as a central player in patenting activity, promoted inter-organizational networking, leading to larger inventor networks.
    Keywords: evolutionary economic, inventor networks
    Date: 2006–07
  9. By: Paul L. Joskow
    Abstract: This chapter provides a comprehensive overview of the theoretical and empirical literature on the regulation of natural monopolies. It covers alternative definitions of natural monopoly, regulatory goals, alternative regulatory institutions, price regulation with full information, regulation with imperfect and asymmetric information, and topics on the measurement of the effects of price and entry regulation in practice. The chapter also discusses the literature on network access and pricing to support the introduction of competition into previously regulated monopoly industries.
    Date: 2005–04
  10. By: Nancy L. Rose; Kira Markiewicz; Catherine Wolfram
    Abstract: Although the allocative efficiency benefits of competition are a tenet of microeconomic theory, the relation between competition and technical efficiency is less well understood. Neoclassical models of profit-maximization subsume static cost-minimizing behavior regardless of market competitiveness, but agency models of managerial behavior suggest possible scope for competition to influence cost-reducing effort choices. This paper explores the empirical effects of competition on technical efficiency in the context of electricity industry restructuring. Restructuring programs adopted by many U.S. states made utilities residual claimants to cost savings and increased their exposure to competitive markets. We estimate the impact of these changes on annual generating plant-level input demand for non-fuel operating expenses, the number of employees and fuel use. We find that municipally-owned plants, whose owners were for the most part unaffected by restructuring, experienced the smallest efficiency gains over the past decade. Investor-owned utility plants in states that restructured their wholesale electricity markets had the largest reductions in nonfuel operating expenses and employment, while investorowned plants in nonrestructuring states fell between these extremes. The analysis also highlights the substantive importance of treating the simultaneity of input and output decisions, which we do through an instrumental variables approach.
    Date: 2004–11
  11. By: L. Hunnicutt
    Abstract: Multi-plant organizations have trouble including both local and global information in their decisions. Outlets know local conditions but headquarters is able to coordinate outlets. In allocating decision-making power, firms must balance coordination and flexibility. I model this tradeoff, and show that the decentralized firm may standardize to avoid costs due to miscoordination. That is, increasingly variable local conditions cause ecentralized choices to become less variable. Ex ante, decentralization is more profitable; neither form dominates ex post. Signals from outlets to headquarters improve the performance of the centralized firm, but one can always find conditions under which decentralization is preferred.
    Keywords: decentralization, information, multi-plant firms
    JEL: L23 D21
  12. By: D. Aadland; D. Bailey; S. Feng
    Abstract: This paper investigates the response of beef cattle producers to changes in the price of cattle. Previous research has suggested that there may be a negative short-run supply response to a permanent increase in the price of cattle. We build a dynamic, rational expectations model that predicts that the supply response is generally positive, even for permanent shocks in the short run, and nests the negative supply response as a special case for appropriately restricted demand shocks. Using annual U.S. time-series data (1930-1997) and a simultaneous-equations econometric approach, we find a positive short-run supply response in the cow market and mixed evidence in the heifer market.
  13. By: L. Hunnicutt; L. Israelsen
    Abstract: There is some debate about whether firms advertise too much or too little. We present a simple model to examine the incentives of a firm to advertise, and distinguish between the market expansion effects and business stealing effects of advertising. When products are homogeneous, firms advertise too little relative to the amount that would maximize total industry profits. In differentiated products markets, the possibility of stealing customers from competitors causes firms to advertise too much. Finally, we derive conditions that determine when an expansion in one firm’s advertising level increases rival advertising.

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