nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2007‒11‒10
eighteen papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. The change of ownership after a buyout: Impact on performance By Goossens, L.; Manigart, S.; Meuleman, M.
  2. Standards and markets for university-originated organizational intelligence By Prejmerean, Mihaela Cornelia; Vasilache, Simona
  3. Performance evaluation in research departments: from the Balanced Scorecard to the Strategy Map By Antonella Cugini; Giovanna Michelon
  4. Combining spin-out and spin-in activities – the spin-along approach By Rohrbeck, Rene; Döhler, Mario; Arnold, Heinrich M.
  5. Capital market and corporate governance: growth strategy of cotton spinning enterprise in the modern Japan By Takenobu Yuki
  6. Cluster Life Cycles - Dimensions and Rationales of Cluster Development By Max-Peter Menzel; Dirk Fornahl
  7. International Competition in Vertically Differentiated Markets with Innovation and Imitation: Trade Policy versus Free Trade By Eugen Kovac; Kresimir Zigic
  8. Firms' Differential Innovative Success and Market Dynamics By Uwe Cantner
  9. Protecting the Domestic Market: Industrial Policy and Strategic Firm Behaviour By Jens Metge
  10. Functional Chains of Knowledge Management - Effects on Firms' Innovative Performance By Uwe Cantner; Kristin Joel
  11. On the dynamics of knowledge generation and trust building in regional innovation networks. A multi method approach By Maria Daskalakis; Martina Kauffeld-Monz
  12. Understanding the Lack of Competition in Natural Gas Markets: The Impact of Storage Ownership and Upstream Competition By Michal Mravec
  13. Procesos de globalización de las cadenas de valor en la industria de vestuario en Portugal: implicación en las estructuras de trabajo By Moniz, António; Silva, Ana; Woll, Tobias; Samapaio, José
  14. Competition and Innovation: An Experimental Investigation By Dario Sacco
  15. The strategic Marshallian cross By Alex Dickson; Roger Hartley
  16. Cognition and Strategy: A Deliberation Experiment By Eric Dickson; Catherine Hafer; Dimitri Landa
  17. Public Infrastructure, Strategic Interactions and Endogeneous Growth By Charles Figuières; Fabien Prieur; Mabel Tidball
  18. Distribution of Resources in a Competitive Environment By udith Avrahami; Yaakov Kareev

  1. By: Goossens, L.; Manigart, S. (Vlerick Leuven Gent Management School); Meuleman, M. (Vlerick Leuven Gent Management School)
    Abstract: This paper analyses the impact of the change in ownership after a management buyout on both post-buyout efficiency and growth. We contrast family firm buyouts with divisional buyouts, and private equity (PE) financed buyouts with non-PE financed buyouts. We analyse the four-year post-buyout growth and efficiency of 167 Belgian companies (of which 43 are transfers from family owned businesses) that did a buyout between 1996 and 2003. Results show that the source of a buyout (family owned buyout versus divisional buyout) has no impact on the post-buyout growth, but the presence of a PE has. PE-backed buyouts grow less in assets, but more in employees. Neither sales growth nor efficiency are different between different types of buyouts.
    Keywords: buyout, ownership, private equity, performance
    Date: 2007–11–08
  2. By: Prejmerean, Mihaela Cornelia; Vasilache, Simona
    Abstract: The aim of this paper is to bring to discussion ways to diagnose university’s organizational intelligence and to put forward some ways of measuring it. The main steps pursued refer to defining and describing the organizational particularities of universities, which modulate in specific ways organizational intelligence strategies implementation, applying the organizational intelligence standards to universities, and examining the features of the intelligence markets. The manner in which the paradigm of the traditional university is being changed, and finally eliminated, by the social stimuli which claim for a different type of intelligence originating in universities and which are the beneficiaries of the new model of university, as an organization in-between – preserving its idiosyncratic position, but engaging in mutually profitable alliances, is an issue we address to.
    Keywords: organizational intelligence; academic strategic management; intelligence markets
    JEL: I21 Z13 I23
    Date: 2007–05–20
  3. By: Antonella Cugini (Università di Padova); Giovanna Michelon (Università di Padova)
    Abstract: Notwithstanding a growing interest towards performance management systems for universities, little is known on their application to academic departments. Being an institution dedicated to research, a department presents specific characteristics: creativity, professional autonomy, low degree of repetitiveness, uncertainty on results, unclear relation between input and output. Such peculiarities make the evaluation and measurement of its performance particularly difficult. The purpose of the paper is the exploration and development of a performance evaluation approach which is suitable for the particular features of an academic department. As this paper is explorative in nature, we use a qualitative methodology, to identify dimensions of performance evaluation suitable for application to an academic department. Data are collected for the case study of a department of the University of Padua, Italy. After identifying the relations between the four perspective of the balanced scorecard and identifying the strategic maps, the case study proposes a set of goals and measures which are suitable to satisfy the managerial needs of the analyzed department. The paper contributes to the performance evaluation literature in three main ways. It extends the concept of customer by considering a wider systems of stakeholders; it emphasize the strategic role of the financial dimension as a driver for achieving the mission and it highlights the need to coordinate the different stakeholders involved in the enhancement of strategy, from academic and administrative staff, to different types of customers and the community in general.
    Keywords: performance measurement, strategy map, balanced scorecard, university, departments
    JEL: M10 M41
    Date: 2007–11
  4. By: Rohrbeck, Rene; Döhler, Mario; Arnold, Heinrich M.
    Abstract: After a long period of restructuring and outsourcing, companies are increasingly looking for new growth opportunities. Growth with existing prod-ucts or by expansion in new markets is limited. Therefore, companies are searching for ways to expand their activities in new businesses. A frequently used tool of multinational enterprises is corporate venturing. Within cor-porate venturing a further differentiation can be made in internal venturing and external venturing. Internal venturing promotes business ideas generated within the organization whereas external venturing promotes business ideas developed outside the company. Research has been able to show that venturing activi-ties both internal and external can create value. In this paper we explore a special case of venturing which we call the ‘spin-along approach’. It can be seen as a combination of internal and external ven-turing. In the spin-along approach, a company encourages its employees to take their business idea external and to found a company. Successful companies might later be bought back and integrated into the parent company or the paren-tal will exit the company by selling its equity share. Through literature re-view we have identified different motivations, best practices, and barriers to the successful implementation of a spin-along approach. Furthermore, two case studies will be discussed and compared. We conclude that the approach can successfully complement internal innovation management.
    Keywords: Corporate venturing; spin-along; venture leader; spin-out; spin-in; Deutsche Telekom Laboratories; Cisco Systems
    JEL: M13 M10 M0
    Date: 2007–06–17
  5. By: Takenobu Yuki (Graduate School of Economics, Osaka University)
    Abstract: This paper examines how the corporate governance of the Japanese cotton spinning enterprise was formed in 20th century beginning. The establishment of the corporate governance which makes long-term growth possible has been thought to be reached by the rise of the professional manager who pursued growth strategy in the modern Japanese business history. However, it was not professional manager's rise, but this paper showed that a capital market played a decisive part so that the cotton spinning enterprises might do growth in the period between 1903 and 1918. Then, the incentive which followed the evaluation of the capital market was being given to a professional manager because of a professional manager's reward system's working with the stock prices together. The professional manager chose strategy corresponding to the evaluation of the capital market. The labor productivity of the enterprises that growth became possible was high relatively, and gained a high profit. The factor of this high labor productivity relatively was a labor equipment ratio.
    Keywords: Cotton industry, Modern Japanese business history, Corporate governance, Direct financing, Growth strategy
    JEL: D92 G34 N25
    Date: 2007–10
  6. By: Max-Peter Menzel (University of Bern, Institute of Geography, Economic Geography and Regional Studies); Dirk Fornahl (University of Karlsruhe (TH), Institute for Economic Policy Research (IWW), and Max Planck Institute of Economics, Jena)
    Abstract: We present a model that explains how a cluster moves through a life cycle and why this movement differs from the industry life cycle. The model is based on three key processes: the changing heterogeneity in the cluster describes the movement of the cluster through the life cycle; the geographical absorptive capacity enables clustered companies to take advantage of a larger diversity of knowledge and the stronger convergence of clustered companies compared to non-clustered companies results in a reduction of heterogeneity. We apply these processes to four stages of the cluster life cycle: emergence, growth, sustainment and decline.
    Keywords: cluster evolution, life cycle, heterogeneity
    JEL: R11 O30 L25
    Date: 2007–10–30
  7. By: Eugen Kovac; Kresimir Zigic
    Abstract: The important characteristic of international competition between developed and less developed countries is vertical product differentiation, where firms' quality choices represent strategic decisions. Unlike the previous literature, we allow for a leadership in quality choice and the possibility of imitation and learning by the domestic firm. We compare both positive and normative aspects of this setup in the free trade and the strategic trade policy regime and show that the value of leadership may change dramatically when moving from free trade to trade policy. We also identify conditions under which trade policy can initiate the change in the quality ladders (known as quality reversal) and demonstrate that such a policy has a somewhat limited scope to achieve it. Thus, free trade can still be an optimal trade arrangement.
    Keywords: Vertical differentiation, free trade, strategic trade policy, quality rever-sal, leadership, imitation.
    JEL: D43 F12 F13 L13
    Date: 2007–08
  8. By: Uwe Cantner (Friedrich Schiller University Jena, Faculty of Economics and Business Administration)
    Abstract: This paper deals with innovative activities of firms, the resulting market success as well as the interdependencies between both. In a first theoretical part, different cases of those interdependencies are investigated by the way of a simple model based on replicator dynamics. It is shown that the resulting differential success (in those activities) of firms in a market leads to specific characteristic pattern of industry dynamics. The second empirical part of the paper is used to get an account of the working of replicator dynamics mechanism within German manufacturing. Doing so changes in firms' market shares and the relation to their respective relative technological performance and to their or innovative performance are investigated with productivity levels as a proxy for technological performance and productivity changes as proxy for innovative performance.
    Keywords: Innovation, market competition, replicator dynamics, productivity decomposition
    JEL: O3 L1 D24
    Date: 2007–11–01
  9. By: Jens Metge
    Abstract: Foreign firms to break into a new market commonly undercut domestic prices and, hence, subsidise the consumer's costs of switching in order to get a positive market share. However, this may constitute the act of dumping as drawn in Article VI of the General Agreement on Tariffs and Trade (GATT). Consequently, domestic firms trying to protect themselves against potential competitors often demand an anti-dumping (AD) investigation. In a two-period model of market entry with horizontally differentiated products and exogenous switching costs, it is demonstrated that the mere existence of switching costs and AD-rules may result in an anti-competition effect: the administratively set minimum-price rule protects the domestic firm and yields larger prices. Therefore, there are some consumers who will not buy either product in both periods although they would have done so in absence of AD. Consequently, competition policy should reassess the AD-regulation.
    Keywords: Industrial Policy; Anti-Dumping; Hotelling; Switching Costs; Market Entry
    Date: 2007–10
  10. By: Uwe Cantner (Friedrich-Schiller University Jena, School of Economics and Business Administration, Chair of Microeconomics); Kristin Joel (Friedrich-Schiller University Jena, School of Economics and Business Administration, Chair of Microeconomics)
    Abstract: The aim of this paper is to investigate the role of Knowledge Management (KM) for the innovation success of firms. It is assumed that the functional chains of KM lead directly and indirectly to more innovative success via enhancing the recombination of internal and external knowledge assets. To analyse the embedding of KM in a firm's internal system of innovation we establish a structural equation model. We capture KM as latent concept and trace different functional chains by which KM impacts. Using data on KM and innovation success of 351 German firms of the manufacturing sector and knowledge-intensive services located in Thuringia and Hesse, our findings confirm the (dynamic) capability function of KM, which leads via improving exploitation of internal and external innovation assets to more innovation success.
    Keywords: Knowledge management, innovation, absorptive capacity, resource-based view, structural equation modelling
    JEL: O32 D21 C3
    Date: 2007–11–05
  11. By: Maria Daskalakis (Department of Economics, University of Kassel); Martina Kauffeld-Monz (Department of Economics, University of Kassel)
    Abstract: Researchers in the field of innovation networks have acknowledged the important role knowledge and interaction play for the emergence of innovation. However, not much research has been done to investigate the behavioural dynamics necessary for the success of innovation networks. Our article deals with this issue in a threefold manner: we combine a theoretical analysis with an empirical validation and set up a multi-agent system based on both, simulating the behavioural dynamic of collaborative R&D. With regard to the theoretical foundation, the cognitive foundations of knowledge generation under bounded rationality are conceptualized. This is linked to a discussion about the role trust plays in the course of economic interaction. Trust itself proves to be a relevant mode of economic (inter)action which enables agents to overcome social dilemmas that might arise in the process of collaborative R&D. For empirical validation, a unique data set is used (23 German innovation networks, containing about 600 agents). Results of the analyses highlight the dynamics and interdependence of knowledge generation and trust as well as the sources of trust building in terms of three different components (generalised trust, specific trust, and institutional trust). The multi-agent system comprises the theoretical and empirical findings, e.g. in incorporating heterogeneity with regard to adaptive capacity, reciprocity and the tolerance of non-reciprocal behaviour. The results give evidence of the (changing) relevance of trust in the course of collaborative R&D. The success of collaborative R&D is determined through a co-evolution of individual and interactive processes of knowledge transformation und trust building.
    Keywords: Regional Innovation System, Innovation Networks, Behavioral Economics, Trust, Knowledge Transfer.
    Date: 2007–05
  12. By: Michal Mravec
    Abstract: Motivated by the failure of competition to emerge after the natural gas market in the Czech Republic was liberalized, I explore the impact of natural gas storage ownership and upstream competition on the downstream level. I extend standard Cournot models to understand current and likely future developments, paying particular attention to the impact of market liberalization on a country characterized by a lack of domestic production, limited foreign upstream competition, and highly concentrated (and bundled) control over an essential input in the production of the final product: gas storage. I show that the upstream producer may practice his market power to capture some of the benefits of liberalization and increase the wholesale price, which hinders the desired decline of the end-user price in the long run. This pricing change in turn makes the entry of new players in the transition period more difficult. I furthermore analyze three prominent storage structure scenarios and conclude that higher consumer welfare can be reached only in the case of regulated storage access.
    Keywords: Natural gas, liberalization, deregulation, successive oligopoly, monopoly, Czech Republic, gas storage.
    JEL: D42 D43 L11 L12 L13 L51
    Date: 2007–09
  13. By: Moniz, António; Silva, Ana; Woll, Tobias; Samapaio, José
    Abstract: Algunos de los fenómenos donde el concepto de “globalización” es aplicado incluyen la internacionalización de los mercados, la globalización de la cultura, el dominio político hegemónico del mundo por algunos estados poderosos, o grupos de estados, el poder creciente de organismos supranacionales, y el desarrollo de una división global de trabajo. De acuerdo con Radice, la globalización é generalmente definida como “un proceso a través de lo cual una proporción creciente de transacciones económicas, sociales e culturales ocurre directamente o indirectamente entre partners de países distintos” (Radice, 2004: 154). Un ponto de partida para entender la división global del trabajo debe ser la investigación de los modos como las empresas se reestructuran, una vez que son los actores-llave en la decisión sobre que trabajo debe ser encontrado y donde. Las “cadenas de valor” descriven cada etapa en el proceso productivo de un producto o un servicio final. La palabra “valor” en la frase “cadena de valor” dice respecto al valor añadido. Cada etapa en la cadena de valor implica recibir inputs, procesarlos, y entonces pasarlos a la unidad siguiente en la cadena, con el valor que está sendo adicionado no proceso. As unidades separadas da cadena de valor pueden estar dentro da misma empresa (in-house) o en distintas empresas (outsourced). Similarmente pueden estar en un mismo local, o en otra localización. La normalización de muchos procesos del negocio, combinada con la digitalización da información y el desarrollo de redes de telecomunicaciones de elevada capacidad ha tornado posible el trabajo tele-mediado, pudiendo este ser externalizado y/o re-localizado, conduciendo à introducción de una división de trabajo internacional no trabajo de procesamiento de información. Esta comunicación presentará algunos resultados derivados do proyecto europeo WORKS, donde son estudiados casos portugueses de empresas que justamente se integran en cadenas de valor globalizadas, sendo analizadas en detalle implicaciones en los modelos de organización del trabajo y de las (nuevas) estructuras profesionales.
    Keywords: globalisation; value chains; clothing industry; textile industry; Europe; Portugal
    JEL: F02 J44 F59 L67 O25
    Date: 2006–11
  14. By: Dario Sacco (Socioeconomic Institute, University of Zurich)
    Abstract: The paper analyzes the effects of competitive intensity on firms' incentives to invest in process innovations through an experiment based on two-stage games, where R&D investment choices are followed by product market competition. An increase in the intensity of competition is modeled as an increase in the number of Þrms or as a switch from Cournot to Bertrand. The theoretical prediction is that more intense competition is unfavorable to investments for both cases. In the experiment it turns out that the way of modeling the intensity of competition is essential. The theoretical prediction is confirmed for the number effects. On the other hand, the comparison of Cournot and Bertrand shows that more intense competition is beneÞcial for investments.
    Keywords: R&D investment, intensity of competition, experiment
    JEL: C92 L13 O31
    Date: 2007–10
  15. By: Alex Dickson (Keele University, Centre for Economic Research and School of Economic and Management Studies); Roger Hartley (Department of Economics, University of Manchester)
    Abstract: We prove existence and uniqueness of non-autarkic equilibria in bilateral oligopoly assuming only that preferences are binormal and satisfy a weakened version of gross substitutes. We permit complete heterogeneity of preferences and our analysis exploits the fact that payoffs depend only on own strategy and two universal aggregates. This allows us to define strategic versions of supply and demand curves such that non-autarkic Nash equilibria are in 1-1 correspondence with intersections of these curves. The same approach can be used to establish comparative statics under the assumptions above. As examples, we focus on adding players and changing endowments. This competitive approach also allows us to conclude that much of conventional Marshallian analysis is robust to strategic manipulation.
    Keywords: Strategic Marshallian cross, strategic manipulation, imperfect competition.
    JEL: C72 D43 D50
    Date: 2007–10
  16. By: Eric Dickson (Department of Politics, New York University); Catherine Hafer (Department of Politics, New York University); Dimitri Landa (Department of Politics, New York University)
    Abstract: A theory of deliberation must provide a plausible account both of individuals? choices to speak or to listen and of how they reinterpret their own views in the aftermath of deliberation. We describe a game-theoretic laboratory experiment in which subjects with diverse interests and information choose to speak or to listen and, after updating their beliefs, vote over a common outcome. An important feature of our strategic setting is that not receiving a specific communication is sometimes just as informative as receiving it. We analyze subjects? deliberative choices and the relationship between these choices, subjects? initial positions and arguments, and individual cognition. Our evidence shows that, although subjects behave instrumentally, their behavior reveals the existence of a cognitive hierarchy defined by differing abilities to grasp the strategic implications of different kinds of information. We trace the consequences of these underlying cognitive differences for individual deliberative choices and for the informativeness of deliberation.
    JEL: C92 D83 C12
    Date: 2007–11
  17. By: Charles Figuières; Fabien Prieur; Mabel Tidball
    Abstract: This paper develops a two-country general equilibrium model with endogenous growth where governements behave strategically in the provision of productive infrastructure. The public capitals enter both national and foreign production as an external input, and they are financed by a flat tax on income. In the private sector, firms and households take the public policy as given when making their decisions. It is shown that both a Markov Perfect Equillibrium (MPE) and a Centralized Solution (CS) exist, even when the parameters allow for endogenous growth, therefore explosive paths for the state variables. And the dynamic analysis reveals three important features. Firstly, under constant returns, the two countries' growth rates differ during the transition but are identical on the balanced growth path. Secondly, due to the infrastructure externality, assuming away constant returns to scale a country with decreasing returns can experience sustained growth provided that the other grows at a positive constant rate. Thirdly, Nash growth rates are compared with the centralized rates. We show that cooperation in infrastructure provision does not necessarily lead to higher growth for each country. We also show that, in some configurations of households' preferences and initial conditions, cooperation would call for a recession in the initial stages of development, whereas strategic investments would not. Lastly, depending also on the configuration of preferences, we show that cooperation can increase or decrease the gap between countries' growth rates.
    Date: 2007–05
  18. By: udith Avrahami; Yaakov Kareev
    Abstract: When two agents of unequal strength compete, the stronger one is expected to always win the competition. This expectation is based on the assumption that evaluation of performance is flawless. If, however, the agents are evaluated on the basis of only a small sample of their performance, the weaker agent still stands a chance of winning occasionally. A theoretical analysis indicates that for this to happen, the weaker agent must introduce variability into the effort he or she invests in the behavior, such that on some occasions the weaker agent's level of performance is as high as that of the stronger agent, whereas on others it is null. This, in turn, would drive the stronger agent to introduce variability into his or her behavior. We model this situation in a game, present its game-theoretic solution, and report an experiment, involving 144 individuals, in which we tested whether players are actually sensitive to their relative strengths and know how to allocate their resources given those relative strengths. Our results indicate that they do.
    Date: 2007–09

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