nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2007‒09‒24
twelve papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. The Effect of Contractual Complexity on Technology Sourcing Agreements By Hansen, Zeynep; Higgins, Matthew
  2. The Role of the Common Prior in Robust Implementation By Dirk Bergemann; Stephen Morris
  3. Partnerships vs. Firms Entry Strategies By Michele Moretto; Gianpaolo Rossini
  4. Seeking Opportunities: Migration as an Income Diversification Strategy of Households in Kakamega District in Kenya By Lena Giesbert
  5. Trade liberalization, competition and growth By Omar Licandro; Antonio Navas-Ruiz
  6. Subsidy Competition and the Role of Firm Ownership By Mittermaier, Ferdinand
  7. Estrategias de gestión de carteras, Evaluación de performance, Fondos de inversión de renta fija By Silvia Bou
  8. Do Mergers of Potentially Dominant Firms foster Innovation? An Empirical Analysis for the Manufacturing Sector By Elena Cefis; Anna Sabidussi; Hans Schenk
  9. What Is the Value of Entrepreneurship? A Review of Recent Research By C. Mirjam van Praag; Peter H. Versloot
  10. Measuring Regional Innovativeness - A Methodological Discussion and an Application to One German Industry By Tom Broekel; Thomas Brenner
  11. The Role of Innovation in Merger Policy: Europe’s Efficiency Defence versus America’s Innovation Markets Approach By Elena Cefis; Mark Grondsma; Anna Sabidussi; Hans Schenk
  12. Why Managers Hold Shares of Their Firms: An Empirical Analysis By Ulf von Lilienfeld-Toal; Stefan Ruenzi

  1. By: Hansen, Zeynep; Higgins, Matthew
    Abstract: Most research on strategic alliances ignores the underlying contracts that govern the terms of the relationship. This is problematic since it is how these contracts are structured that determines how firms will benefit from a relationship. We present a novel method to analyze contractual complexity in a multi-dimensional framework in an attempt to link together the contractual complexity and control rights literatures. We find that the stage of development, age and prevalence of the underlying technology most influence complexity. Contractual complexity also influences the allocation of control rights. We also explore the importance of prior relationships on the underlying contract.
    Keywords: Contractual complexity; Control rights; Strategic alliances; Biopharmaceutical industry; Contractual design
    JEL: L2 G3
    Date: 2007–09–17
  2. By: Dirk Bergemann (Cowles Foundation, Yale University); Stephen Morris (Dept. of Economics, Princeton University)
    Abstract: We consider the role of the common prior for robust implementation in an environment with interdependent values. Specifically, we investigate a model of public good provision which allows for negative and positive informational externalities. In the corresponding direct mechanism, the agents' reporting strategies are strategic complements with negative informational externalities and strategic substitutes with positive informational externalities. We derive the necessary and sufficient conditions for robust implementation in common prior type spaces and contrast this with our earlier results without the common prior. In the case of strategic complements the necessary and sufficient conditions for robust implementation do not depend on the existence of a common prior. In contrast, with strategic substitutes, the implementation conditions are much weaker under the common prior assumption.
    Keywords: Common prior, Correlated equilibrium, Ex post equilibrium, Mechanism design, Robust implementation, Rationalizability, Strategic complements, Strategic substitutes, Uniqueness
    JEL: C79 D82
    Date: 2007–09
  3. By: Michele Moretto (Università di Padova); Gianpaolo Rossini (Università di Bologna)
    Abstract: From 1997 to 2001 we observe a faster growth in the number of Nonemployer businesses (mostly Partnerships) vis-à-vis Firms in the USA, a country with the mildest asymmetries between the two types of enterprise with respect to taxation, administrative entry barriers and other institutional aspects. The different speed of net entry may be due to the internal organisation of the two types of enterprise and its relation to some market features. In a continuous time stochastic environment, with sunk costs, we model entry as a growth option. Partnerships and Firms display speci…c entry patterns in terms of output price and size since they react in diverse fashions to market uncertainty. In most cases, the Partnership is less risky and better suited to enter under conditions of high volatility, as during the years between 1997 and 2001.
    Keywords: Entry Strategies, Uncertainty, Partnership, Firm
    JEL: L21 L3 J54 G13
    Date: 2007–09
  4. By: Lena Giesbert (GIGA Institute of African Affairs)
    Abstract: Migration and remittances are widely seen as major components of diversification strategies aimed at coping with risky environments in developing countries. The debate in the literature mainly concentrates on effects of and access to the strategy of migration. Against this background, the paper investigates patterns, determinants and the impact of internal migration on households based on data from a densely populated rural area in Western Kenya. The motivation behind migration is largely economic in kind. Accordingly, remittances account for a substantial share of household incomes. Results derived from a probit model estimation indicate that the likelihood of migration is independent from the wealth position of households. Instead, demographic household factors, education-related variables and migrant networks are of central importance. Migration and remittances are obviously more easily accessible than other opportunities of income diversification beyond farming for households across all levels of wealth, including the poorest households.
    Keywords: Migration, remittances, income diversification, coping strategies, sub-Saharan Africa, Kenya.
    JEL: R23 Q12 D13
    Date: 2007–09
  5. By: Omar Licandro; Antonio Navas-Ruiz
    Abstract: The aim of this paper is to understand whether international trade may enhance innovation and growth through an increase in competition. We develop a twocountry endogenous growth model, both countries producing the same set of goods, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition. Since countries produce the same set of goods, trade openness makes markets more competitive, reducing prices and raising the incentives to innovate. More general, a reduction on trade barriers enhances growth by reducing domestic firms`market power.
    Date: 2007–09
  6. By: Mittermaier, Ferdinand
    Abstract: This paper addresses the role that foreign vs. domestic ownership of companies plays for governments in asymmetric countries' competition for a multinational's subsidiary. I argue that equilibrium subsidies as well as a foreign investor's location decision in policy competition between these countries critically depend on the ownership structure of incumbent firms. This shows that small countries with few national incumbents in an industry may be successful in attracting multinationals.
    Keywords: Subsidy competition; foreign direct investment; regional location
    JEL: F12 F23 H25 L13
    Date: 2007–09
  7. By: Silvia Bou (Departament d'Economia de l'Empresa, Universitat Autonoma de Barcelona)
    Abstract: Este trabajo tiene como objetivo estudiar el impacto de las estrategias activas de gestión en la performance de los fondos de inversión de renta fija y se realiza en tres fases, en primer lugar, a partir de la información homogénea disponible para cualquier partícipe se elabora un perfil de riesgo de los fondos a partir de los tipos de riesgo asociados a la renta fija. En segundo lugar, se propone una medida de performance que permite la comparación entre fondos, a dos niveles: por un lado, tomando como benchmark una cartera puramente pasiva y por otro lado, adecuando el benchmark al vencimiento de la cartera. En tercer lugar se realiza un contraste con el fin de determinar el impacto en la performance de los fondos estudiados de los indicadores de actividad de la estrategia asociados al perfil de riesgo del fondo.
    Keywords: Estrategias de gestión de carteras, Evaluación de performance, Fondos de inversión de renta fija
    Date: 2007–09
  8. By: Elena Cefis; Anna Sabidussi; Hans Schenk
    Abstract: We investigate the effects of M&A on innovation in the specific context of potential or realized market dominance. Authorities are challenged by balancing both detrimental and beneficial effects of mergers on innovation, especially when a merger threatens to result in market dominance, while firms would wish to uncover all the potential benefits arising from M&A. The effects of M&As on innovation have been tested on a panel dataset, constructed from the Dutch Community Innovation Survey and the Dutch Business Register, including around 1000 manufacturing companies. We have adopted a comprehensive approach, taking into consideration three dimensions of innovation: innovation inputs, innovation outputs and efficiency. The results show that M&As performed in the previous 3-5 years have a positive and significant effect on innovation except R&D expenses and innovation efficiencies. The results also suggest that technological regimes are critical to understanding the patterns of innovation.
    Keywords: Mergers and Acquisitions, Innovation, Market Dominance
    JEL: C14 D21 L11 L25
    Date: 2007–09
  9. By: C. Mirjam van Praag (University of Amsterdam, Tinbergen Institute, Max Planck Institute of Economics Jena and IZA); Peter H. Versloot (University of Amsterdam and Tinbergen Institute)
    Abstract: This paper examines to what extent recent empirical evidence can collectively and systematically substantiate the claim that entrepreneurship has important economic value. Hence, a systematic review is provided that answers the question: What is the contribution of entrepreneurs to the economy in comparison to non-entrepreneurs? We study the relative contribution of entrepreneurs to the economy based on four measures that have most widely been studied empirically. Hence, we answer the question: What is the contribution of entrepreneurs to (i) employment generation and dynamics, (ii) innovation, and (iii) productivity and growth, relative to the contributions of the entrepreneurs’ counterparts, i.e. the ‘control group’? A fourth type of contribution studied is the role of entrepreneurship in increasing individuals’ utility levels. Based on 57 recent studies of high quality that contain 87 relevant separate analyses, we conclude that entrepreneurs have a very important - but specific - function in the economy. They engender relatively much employment creation, productivity growth and produce and commercialize high quality innovations. They are more satisfied than employees. More importantly, recent studies show that entrepreneurial firms produce important spillovers that affect regional employment growth rates of all companies in the region in the long run. However, the counterparts cannot be missed either as they account for a relatively high value of GDP, a less volatile and more secure labor market, higher paid jobs and a greater number of innovations and they have a more active role in the adoption of innovations.
    Keywords: entrepreneur, entrepreneurship, self-employment, productivity, economic development, growth, employment, innovation, patents, R&D, utility, remuneration, income
    JEL: D24 D31 E23 E24 J21 J28 J31 L26 M13
    Date: 2007–08
  10. By: Tom Broekel (Max Planck Institute of Economics, Evolutionary Economics Group); Thomas Brenner (Max Planck Institute of Economics, Evolutionary Economics Group)
    Abstract: The regional or national innovation performance has been repeatedly measured in the literature; but it has so far not been discussed what this means, especially in relation to a region. What is the contribution of a region to innovation output? The usual approaches implicitly assume that higher innovation outputs per inhabitant, employee, or R+D employee can be assigned to a region. We argue that more insights are gained if we distinguish between various mechanisms that influence the innovation activities in a region. Different analyses need to be conducted, using different variables and including different local factors. Furthermore, we see no justification for using a linear dependence of innovation activity on the number of inhabitants or employees as a benchmark for performance. We use a method that takes into account these arguments and apply it to the Electrics + Electronics industry in Germany.
    Keywords: Regional innovation performance, regional innovativeness, non-parametric performance analysis, measurement of regional innovativeness
    JEL: R11 R15 O31
    Date: 2007–09–17
  11. By: Elena Cefis; Mark Grondsma; Anna Sabidussi; Hans Schenk
    Abstract: Changes in the world’s economies and discussions in the literature about the growing importance of innovation to firms have given rise to a demand for expanding the analysis of merger policy. The present study focuses on the different criteria used to assess the impact of M&A activities on innovation. The analysis is both theoretical and empirical. From a theoretical perspective, two main approaches are discussed: the efficiency defence approach, adopted in Europe, and the innovation markets doctrine as developed in the United States. The present paper contributes to the literature by suggesting that an integration of the two approaches would significantly improve M&A assessment. On the empirical side, two cases that have been scrutinised by both the European Commission and the U.S. Federal Trade Commission are discussed. The results show the relevance of the different approaches used when dealing with innovation in the assessment of mergers.
    Keywords: Mergers and Acquisitions, Innovation, Efficiency Defence
    JEL: C14 D21 L11 L25
    Date: 2007–09
  12. By: Ulf von Lilienfeld-Toal; Stefan Ruenzi
    Abstract: We examine the relationship between CEO ownership and stock market performance. Firms in which the CEO voluntarily holds a considerable share of outstanding stocks outperform the market by more than 10% p.a. after controlling for traditional risk factors. The effect is most pronounced in firms that are characterized by large managerial discretion of the CEO. The abnormal returns we document are one potential explanation why so many CEOs hold a large fraction of their own company’s stocks. We also examine several potential explanations why the existence of an owner CEO is not fully reflected in prices but leads to abnormal returns.
    Keywords: CEO-Ownership, Asset Pricing with large shareholders.
    JEL: G12 G30
    Date: 2007–09

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