nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2007‒01‒28
fifteen papers chosen by
Joao Jose de Matos Ferreira
University of the Biera Interior

  1. Location decisions of foreign banks and competitive advantage By Claessens, Stijn; Van Horen, Neeltje
  2. Comparative Industrial Evolution and the Quest for an Evolutionary Theory of Market Dynamics By G. Buenstorf
  3. The impact of innovation activities on productivity and firm growth: evidence from Brazil By Goedhuys, Micheline
  4. Employment Protection, Firm Selection, and Growth By Markus Poschke
  5. Entrepreneurial Learning, the IPO Decision, and the Post-IPO Drop in Firm Profitability By Pástor, Lubos; Taylor, Lucian; Veronesi, Pietro
  6. On the Convergence of Evolutionary and Behavioral Theories of Organizations: A Tentative Roadmap By Giovanni Dosi; Luigi Marengo
  7. Trading strategies in the Italian Interbank Market By Giulia Iori; Roberto Renò; Giulia de Masi; Guido Caldarelli
  8. Emerging Hubs in Central-Eastern Europe, Trade Blocs and Supply Chain Restructuring By Giuseppe Tattara
  9. Supervised regionalization methods, a survey. By Juan Carlos Duque; Raul Ramos; Jordi Suriñach
  10. Management of Knowledge Workers By Hvide, Hans Krogh; Kristiansen, Eirik Gaard
  11. JOINT VENTURE INSTABILITY: A LIFE CYCLE APPROACH By Roy Chowdhury, Prabal; Roy Chowdhury, Indrani
  12. Activation Strategies and the Performance of Employment Services in Germany, the Netherlands and the United Kingdom By Peter Tergeist; David Grubb
  13. Entry Liberalization, Export Subsidy and R&D By Roy Chowdhury, Prabal
  14. Competitiveness and export market shares in high tech industries in the US and the EMU countries: a comparative study By Sarah Guillou
  15. Value chain analysis and market power in the commodity processing with application to the cocoa and coffee sectors By Christopher L. Gilbert

  1. By: Claessens, Stijn; Van Horen, Neeltje
    Abstract: While institutional differences have been found to affect country growth patterns, much has remained unexplained, including how economic actors " overcome " institutional weaknesses and how internationalization helps or hinders development. Banking is an institutionally-intensive activity and the location decision of foreign banks provides a good test of how institutional differences are dealt with and how they may affect economic choices. Specifically, the authors examine whether banks seek out those markets where institutional familiarity provides them with a competitive advantage over other foreign competitor banks. Using bilateral data on banking sector foreign direct investment in all developing countries and controlling for other factors, they find that competitive advantage is an important factor in driving foreign banks ' location decisions. The findings suggest that high institutional quality is not necessarily a prerequisite to attract foreign direct investment in banking and that there are specific benefits, as well as risks, to international financial integration between developing countries.
    Keywords: Banks & Banking Reform,Foreign Direct Investment,Country Strategy & Performance,Corporate Law,Economic Theory & Research
    Date: 2007–01–01
  2. By: G. Buenstorf
    Abstract: The paper makes the case for an empirically grounded, "bottom-up" approach to theory building in evolutionary industrial economics. This approach is based on studying systematically selected industries that are comparable in key dimensions. It opens up opportunities for testing the relevance, preconditions, and generality of explanatory factors in industry evolution. An illustration of the approach is subsequently given by presenting some findings on the evolution of the historical U.S. farm tractor industry. Length 23 pages
    Date: 2006–12
  3. By: Goedhuys, Micheline (UNU-MERIT and University of Antwerpen)
    Abstract: Using micro data from Brazilian manufacturing firms, this paper investigates the impact of a wide set of innovation activities on firms' total factor productivity (TFP) and its subsequent effect on firm growth, measured by sales. Controlling for size and age of the firms, productivity levels and productivity growth of firms over time are found to be key drivers of firm size adjustments. The activities leading to higher productivity levels are organizational change, cooperation with clients, human capital development, ICT usage, product innovation and learning by exporting, with an R&D effect only in the long run. Though the intensity with which firms engage in these innovation activities is sector dependent, innovation activities are in all sectors important for explaining sales growth differences, also in the more traditional sectors in which Brazilian firms have a competitive advantage.
    Keywords: Technological Change, Research and Development, Innovation, Productivity, Manufacturing Industry, Total Factor Productivity, Brazil
    JEL: O12 D24
    Date: 2007
  4. By: Markus Poschke
    Abstract: This paper analyzes the effect of firing costs on aggregate productivity growth. For this purpose, a model of endogenous growth through selection and imitation is developed. It is consistent with recent evidence on firm dynamics and the contribution of firm entry and exit to aggregate productivity growth. In this model, growth arises endogenously via market selection among heterogeneous incumbent firms. It is sustained as entrants imitate the best incumbents. In this framework, besides inducing misallocation of labor and reducing entry, firing costs also discourage exit of low-productivity firms. This makes selection less severe and reduces growth. However, exempting exiting firms from firing costs speeds up the exit of inefficient firms and thereby growth, with little change in job turnover. These effects are stronger in sectors where firms face larger idiosyncratic shocks, as in services, fitting evidence that here, EU-US growth rate differences are largest. Introducing firing costs of one year’s wages in a benchmark economy calibrated to the US business (services) sector then leads to 0.1 (0.3) points lower growth. A brief empirical analysis of the impact of firing costs on the size of exiting firms supports the model’s conclusions.
    Keywords: endogenous growth theory, firm dynamics, labor market regulation, firing costs, entry and exit, firm selection
    JEL: E24 J63 J65 L11 L16 O40
    Date: 2006
  5. By: Pástor, Lubos; Taylor, Lucian; Veronesi, Pietro
    Abstract: We develop a model in which an entrepreneur learns about the average profitability of a private firm before deciding whether to take the firm public. In this decision, the entrepreneur trades off diversification benefits of going public against benefits of private control. The model predicts that firm profitability should decline after the IPO, on average, and that this decline should be larger for firms with more volatile profitability and firms with less uncertain average profitability. These predictions are supported empirically in a sample of 7,183 IPOs in the U.S. between 1975 and 2004.
    Keywords: Diversification; IPO; Learning
    JEL: G1 G3
    Date: 2007–01
  6. By: Giovanni Dosi; Luigi Marengo
    Abstract: The behavioral theory of the firm has been acknowledged as one of the most fundamental pillars on which evolutionary theorizing in economics has been built. Nelson and Winter’s 1982 book is pervaded by the philosophy and concepts previously developed by Cyert, March and Simon. On the other hand, some behavioral notions, such as bounded rationality, though isolated from the context, are also at the heart of some economic theories of institutions such as transaction costs economics. In this paper, after briefly reviewing the basic concepts of evolutionary economics, we discuss its implications for the theory of organizations (and business firms in particular), and we suggest that evolutionary theory should coherently embrace an “embeddedness” view of organizations, whereby the latter are not simply efficient solutions to informational problems arising from contract incompleteness and uncertainty, but also shape the “visions of the world”, interaction networks, behavioral patterns and, ultimately, the very identity of the agents. After outlining the basic features of this perspective we analyze its consequences and empirical relevance.
    Date: 2007–01–22
  7. By: Giulia Iori (Department of Economics, City University, London); Roberto Renò; Giulia de Masi; Guido Caldarelli
    Abstract: Using a data set which includes all transactions among banks in the Italian money market, we study their trading strategies and the dependence among them. We use the Fourier method to compute the variance-covariance matrix of trading strategies. Our results indicate that well defined patterns arise. Two main communities of banks, which can be coarsely identified as small and large banks, emerge.
    Date: 2006–04
  8. By: Giuseppe Tattara (Department of Economics, University Of Venice Ca’ Foscari)
    Abstract: Many European countries have faced the erosion of the competitive advantage in the international market with a mixed strategy of productivity increase at home and labour cost reduction abroad, through the international fragmentation of production and subcontracting in low wage countries. Italy in particular, has delocalized segments of its industrial production in Eastern Europe. The advantage of delocalization abroad – with particular reference to East European countries – is due to the low cost of labour, depends from the capability to transmit information efficiently and the availability of a complete supply-type blueprint in the receiving country.The paper discusses the prospects open to Italia apparel firms and presents a case study dealing with the development of outsourcing by the Benetton group in the last decades.
    Keywords: Vertical Integration, Global Organization of Production, Macroeconomics
    JEL: F23 L16 L22 L23
    Date: 2006
  9. By: Juan Carlos Duque (Regional Analysis Laboratory (REGAL). San Diego State University.); Raul Ramos (Faculty of Economics, University of Barcelona.); Jordi Suriñach (Faculty of Economics, University of Barcelona.)
    Abstract: This paper reviews almost four decades of contributions on the subject of supervised regionalization methods. These methods aggregate a set of areas into a predefined number of spatially contiguous regions while optimizing certain aggregation criteria. The authors present a taxonomic scheme that classifies a wide range of regionalization methods into eight groups, based on the strategy applied for satisfying the spatial contiguity constraint. The paper concludes by providing a qualitative comparison of these groups in terms of a set of certain characteristics, and by suggesting future lines of research for extending and improving these methods.
    Keywords: regionalization, constrained clustering, analytical regions.
    JEL: C21 R12 C61
    Date: 2006–12
  10. By: Hvide, Hans Krogh; Kristiansen, Eirik Gaard
    Abstract: We study how complementarities and intellectual property rights affect the management of knowledge workers. The main results relay when a firm will wish to sue workers that leave with innovative ideas, and the effects of complementary assets on wages and on worker initiative. We argue that firms strongly protected by property rights may not sue leaving workers in order to motivate effort, while firms weakly protected by complementary assets must sue in order to obtain positive profits. Firms with more complementary assets pay higher wages (and have lower turnover), but such higher pay has a detrimental effect on worker initiative. Our analysis suggests that strengthened property rights protection reduces turnover costs but weakens worker initiative.
    Keywords: Entrepreneurship; Innovation; IPR; Litigation; Personnel economics; R&D; Start-ups
    JEL: E00
    Date: 2007–01
  11. By: Roy Chowdhury, Prabal; Roy Chowdhury, Indrani
    Abstract: Joint ventures represent one of the most fascinating developments in international business. In the last few decades, the rate of joint venture formation has accelerated dramatically. Nowadays joint ventures are much more widespread and occur in industries like telecommunications, biotechnology etc. At the same time, however, it must be noted that joint ventures are very unstable. In this paper we survey the phenomenon of joint venture instability. We draw on the relative recent theoretical literature on joint venture instability to provide a unified explanation of joint venture life-cycles, formation, as well as breakdown. Further, we do this for both research oriented, as well as production joint ventures.
    Keywords: : Joint ventures; formation; breakdown; synergy; moral hazard; learning.
    JEL: F23 L13
    Date: 2001
  12. By: Peter Tergeist; David Grubb
    Abstract: Strategies to ?activate? the unemployed with the help of high-quality employment services have continuously gained importance in the policy debate. The purpose of this report is to examine how activation strategies and the performance of employment services are addressed in three countries which have undertaken considerable reforms in recent years, namely Germany, the Netherlands and the United Kingdom. All three review countries have implemented a ?mutual obligations? approach, under which benefit recipients are expected to engage in active job search and improve... <BR>La question des stratégies pour « activer » les chômeurs avec l?aide de services de l?emploi compétents a continuellement pris de l?importance dans le débat politique. L?objet de ce rapport est d?examiner comment les stratégies d?activation et la performance des services de l?emploi sont formulées dans trois pays qui ont entrepris des réformes considérables ces dernières années : l?Allemagne, les Pays-Bas et le Royaume-Uni. Les trois pays examinés ont mis en place une approche dite « d?obligation mutuelle » selon laquelle les personnes recevant des prestations...
    JEL: J20 J60 J63 J64 J68
    Date: 2006–12–08
  13. By: Roy Chowdhury, Prabal
    Abstract: We examine, in the context of less developed countries, the R&D behaviour of igopolistic firms who compete over R&D, as well as output levels. We also assume that the firms can sell in either of the two markets - the domestic, or the foreign. We show that entry liberalization, despite increasing the level of competitiveness, does not affect the level of R&D. An increase in export subsidy may, however, lead to an increase in domestic R&D. Both these results contradict the popular argument that the levels of domestic R&D is positively related to the level of domestic competitiveness. We also demonstrate that any foreign firm that may enter selects a level of R&D that is atleast as efficient as that selected by any domestic firm. Finally, we demonstrate that entry liberalization has a positive effect on exports, as well as aggregate output.
    Keywords: Entry liberalization; export subsidy; R&D; competitiveness.
    JEL: F13 O32
    Date: 2006–02
  14. By: Sarah Guillou (Observatoire Français des Conjonctures Économiques)
  15. By: Christopher L. Gilbert
    Abstract: Value chain analysis extends traditional supply chain analysis by locating values to each stage of the chain. This can result in a “cake division” fallacy in which value at one stage is seen as being at the expense of value at another. Over the past three decades, the coffee and cocoa industries have witnessed dramatic falls in the producer (i.e. farmer) share in rental price. Both industries are highly concentrated at the processing stage. Nevertheless, developments in the producer and retail markets are largely unconnected and there is no evidence the falls in the producer share are the result of exercise of monopoly-monopsony power. The explanation of declining producer shares is more straightforward – processing, marketing and distribution costs, incurred in consuming countries have tended to increase over time while production costs at the origin have declined.
    Date: 2006

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