|
on Economics of Strategic Management |
|
Issue of 2007‒06‒11
ten papers chosen by Joao Jose de Matos Ferreira University of the Beira Interior |
| By: | Sandra Phlippen (Erasmus Universiteit Rotterdam); Massimo Riccaboni (University of Florida) |
| Abstract: | This paper examines how a radical technological innovation affects alliance formation of firms and subsequent network structures. We use longitudinal data of interfirm R&D collaborations in the biopharmaceutical industry in which a new technological regime is established. Our findings suggest that it requires radical technological change for firms to leave their embedded path of existing alliances and form new alliances with new partners. While new partners are mostly found through the firms’ existing network, we provide some insight into distant link formation with unknown partners, which contributes to our understanding of how ‘small-worlds’ might emerge. |
| Keywords: | Pharmaceutical industry; Biotechnology industry; R&D; Technological change; Alliances; Networks |
| JEL: | O32 O31 L14 L24 M13 M21 |
| Date: | 2007–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070039&r=cse |
| By: | Sanwal, Anand |
| Abstract: | Much has been written about how finance organizations can become strategic partners with the businesses they support. While purported experts point to a variety of frameworks, scorecards and key performance indicators, etc. as the keys to bridging the gap between finance and business, these trite 'solutions' have done little to make finance the strategic business partner it seeks to be. Worse yet, pursuing these ideas has put finance organizations on a treadmill where they expend energy and resources (e.g., money and time) ultimately to get nowhere while the issue persists. So if you are still looking for a silver bullet or quick fix to this seemingly incurable problem, stop reading now. Paradoxically, the link between finance and the business has been under finance's proverbial nose for some time - resource allocation. A serious concerted effort to optimize an organization's resource allocation ultimately enables finance to develop the bridge between finance and strategy. This discipline known as corporate portfolio management works to actively manage the company's resource allocation as a portfolio of discretionary investments leveraging modern portfolio theory while considering organizational behavior. |
| Keywords: | corporate portfolio management; modern portfolio theory; resource allocation |
| JEL: | M20 M2 |
| Date: | 2007–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3345&r=cse |
| By: | Marin, Dalia; Verdier, Thierry |
| Abstract: | This paper develops a theory which investigates how firms’ choice of corporate organization is affecting firm performance and the nature of competition in international markets. We develop a model in which firms’ organisational choices determine heterogeneity across firms in size and productivity in the same industry. We then incorporate these organisational choices in a Krugman cum Melitz and Ottaviano model of international trade. We show that the toughness of competition in a market depends on who - headquarters or middle managers - have power in firms. Furthermore, we propose two new margins of trade adjustments: the monitoring margin and the organizational margin. International trade may or may not lead to an increase in aggregate productivity of an industry depending on which of these margins dominate. Trade may trigger firms to opt for organizations which encourage the creation of new ideas and which are less well adapt to price and cost competition. |
| Keywords: | international trade with endogenous firm organizations and endogenous toughness of competition; firm heterogeneity; power struggle in the firm |
| JEL: | F12 F14 L22 D23 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:1933&r=cse |
| By: | Maskus, Keith E. (Department of Economics); Ganslandt, Mattias (Research Institute of Industrial Economics (IFN)) |
| Abstract: | The existence of parallel imports (PI) raises a number of interesting policy and strategic questions, which are the subject of this survey article. For example, parallel trade is essentially arbitrage within policy-integrated markets of IPR-protected goods, which may have different prices across countries. Thus, we analyze fully two types of price differences that give rise to such arbitrage. First is simple retail-level trade in horizontal markets because consumer prices may differ. Second is the deeper, and more strategic, issue of vertical pricing within the common distribution organization of an original manufacturer selling its goods through wholesale distributors in different markets. This vertical price control problem presents the IPR-holding firm a menu of strategic choices regarding how to compete with PI. Another strategic question is how the existence of PI might affect incentives of IPR holders to invest in research and development (R&D). The global research-based pharmaceutical firms, for example, strongly oppose any relaxation of restrictions against PI of drugs into the United States, arguing that the potential reduction in profits would diminish their ability to innovate. There is a close linkage here with price controls for medicines, which are a key component of national health policies but can give rise to arbitrage through PI. We also discuss the complex economic relationships between PI and other forms of competition policy, or attempts to limit the abuse of market power offered by patents and copyrights. Finally, we review the emerging literature on how policies governing PI may affect international trade agreements. |
| Keywords: | IPR; Parallel Imports; International Arbitrage; Research and Development |
| JEL: | F15 K21 L14 |
| Date: | 2007–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0704&r=cse |
| By: | A. Coad |
| Abstract: | We survey the phenomenon of the growth of firms drawing on literature from economics, management, and sociology. We begin with a review of empirical ‘stylised facts’ before discussing theoretical contributions. Firm growth is characterized by a predominant stochastic element, making it difficult to predict. Indeed, previous empirical research into the determinants of firm growth has had a limited success. We also observe that theoretical propositions concerning the growth of firms are often amiss. We conclude that progress in this area requires solid empirical work, perhaps making use of novel statistical techniques. |
| Keywords: | Firm Growth, Size Distribution, Growth Rates Distribution, Gibrat’s Law, Theory of the Firm, Diversification, ‘Stages of Growth’ models Length 73 pages |
| JEL: | L11 L25 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2007-03&r=cse |
| By: | Gual, Jordi (IESE Business School); Mas, Nuria (IESE Business School) |
| Abstract: | In the EU, competition policy is based on three main pillars: antitrust, merger control and monitoring state aid. Our analysis focuses on antitrust policy. In this context, the Commission is concerned about restrictive agreements and practices that imply an abuse of market power. The objective of this paper is to analyze what are the main criteria used by the Commission when deciding on anti-competitive practices. In particular, our goal is to determine whether and to what extent the Commission takes into account economic analysis when deciding whether anti-competitive behavior has taken place. There is a very extensive industrial organization literature which provides the theoretical and empirical background that associates industry features with the likelihood of practices that restrict competition. However, the literature evaluating the competition authority's decisions is much scarcer and has focused mainly on the analysis of merger policy. Our paper contributes to fill this gap in the literature. We examine almost 2,000 cases submitted to the Commission for consideration from January 1999 to February 2004 with the aim of determining which industry characteristics led the Commission to decide against an investigated firm on antitrust grounds. |
| Keywords: | Competition policy; Antitrust; European Commission; Mergers; |
| Date: | 2007–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0687&r=cse |
| By: | Koson Sapprasert (Centre for Technology, Innovation and Culture, University of Oslo) |
| Abstract: | This paper explores the productive relationship between Information and Communication Technology (ICT) and services. The firm-level data is pursued to examine how ICT as a technological innovation combined with non-technological factors affect the firm’s economic performance. The study develops an argument that ICT is one of the key economic success factors in this techno-economic paradigm, particularly for service firms. The results demonstrate that the presence and intensity of ICT may be used to explain the higher growth experienced by the service industries in the last few decades. Both productivity and profitability growth are found to be significantly linked to the level of ICT intensity in service firms especially when undertaken jointly with non-technological innovations. The impact of ICT on the service sector is assessed in detail while manufacturing and other innovation activities serve as a benchmark. |
| Keywords: | Information and Communication Technology (ICT), Innovation in Services, Techno-economic paradigm, Productivity and Profitability Growth, Non-technological Innovation, Firm-level Analysis. |
| JEL: | O32 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:tik:inowpp:20070531&r=cse |
| By: | McManus, Walter |
| Abstract: | Detroit automakers have opposed mandated improvements in fuel economy since legislation was first proposed in the 1970’s. Their opposition is based, among other considerations, on the assumption that their customers value fuel economy only when fuel prices are high. This paper presents the findings of our on-going research that strongly refutes this assumption. Using data on sales, prices, and attributes of vehicles in 2005, we find that consumers are willing to pay, on average, $578 per MPG for higher fuel economy. At the price of gasoline prevailing in 2005, $2.30 per gallon, the $578 per MPG that consumers are willing to pay for fuel economy implies that consumers put more weight in choosing vehicles on future fuel savings than most analysts (including ourselves) had thought. The paper incorporates these new data-driven estimates of the value of fuel economy into an automotive market simulation model that has three components: a consumer demand function that predicts consumers’ vehicle choices as functions of vehicle price, fuel price, and vehicle attributes (the new estimates of the value of fuel economy are used to set the parameters of the demand function); an engineering and economic evaluation of feasible fuel economy improvements by 2010; and a game theoretic analysis of manufacturers’ competitive interactions. Using our model, we estimated the market shares and profits of automakers in 128 separate scenarios defined by alternative plausible values for the price of fuel and consumers’ discount rates. Under the fuel price risks and the competitive risks that automakers face, our analysis concludes that a proactive strategy of pursuing fuel economy improvements— above and beyond what is required by law—would increase annual profits for Ford ($0.5 billion to $1.4 billion), GM ($0.2 billion to $0.5 billion, and DaimlerChrysler ($0.1 billion). Even if the uncertainty over fuel price were removed, all three automakers would increase profits by pursuing fuel economy improvements, though the gains are smaller with fuel at $2.00/gallon. |
| Keywords: | automotive industry; automakers; fuel econnomy; willingness to pay; game theory; consumer demand for fuel economy; Corporate Average Fuel Economy |
| JEL: | Q59 L62 |
| Date: | 2006–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3460&r=cse |
| By: | Shirou Kuwahara (Graduate School of Systems and Information Engineering, University of Tsukuba); Katsunori Yamada (Graduate School of Economics, Osaka University) |
| Abstract: | This paper presents an endogenous growth model with population growth and an inter-generational spillover of human capital: we consider the ``local home environment externality conceptualized by Galor and Tsiddon (1997a). The model will generate a negative relationship between the population growth rate and the per capita GDP growth rate, which is also present in the data. Furthermore, multiple equilibrium paths will result. As far as we know, this is the first paper that derives a multiplicity of steady growth paths in a model with two sources of growth and the Jones technology. The paper also casts a paradox that the GDP growth rate may be higher in the society without the externality than the one in the economy with externality |
| Keywords: | multiple equilibria; R&D; Jones technology; the local home environment externality |
| JEL: | O11 O31 O41 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0722&r=cse |
| By: | Luís Cabral (New York University) |
| Abstract: | I consider a dynamic model of competition between two proprietary networks. Consumers die with a constant hazard rate and are replaced by new consumers. Firms compete for new consumers to join their network by offering network entry prices (which may be below cost). New consumers have a privately known preference for each network. Upon joining a network, in each period consumers enjoy a benefit which is increasing in network size during that period. Firms receive revenues from new consumers as well as from consumers already belonging to their network. I discuss various properties of the equilibrium, including the pricing function, the system’s expected motion, and the stationary distribution of market shares. I derive several results analytically. I then confirm and extend these results by numerical computation. Finally, I use the model to estimate the barrier to entry create by network effects. |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:pca:wpaper:22&r=cse |