nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2008‒01‒05
twenty-two papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. The international entrepreneurial firms' social networks By Manuel Portugal Ferreira; Fernando Ribeiro Serra; João Carvalho Santos
  2. Global Value Chains and Technological Capabilities: A Framework to Study Learning and Innovation in Developing Countries By Andrea Morrison; Carlo Pietrobelli; Roberta Rabellotti
  3. Technical Efficiency in the Indian Textiles Industry: A Nonparametric Analysis of Firm-Level Data By Anup Kumar Bhandari; Subhash C. Ray
  4. It Risk Management: From IT Necessity to Strategic Business Value By Westerman, George
  5. The Power of Integrality: Linkages between Product Architecture, Innovation, and Industry Structure By Fixson, Sebastian K.; Park, Jin-Kyu
  6. Opportunity Spin-offs and Necessity Spin-offs By G. Bünstorf
  7. Insider Ownership and Firm value: Evidence from Indian Corporate Sector By Pant, Manoj; Pattanayak, Manoranjan
  8. Corporate Governance and Firm Performance: Results from Greek Firms By Toudas, Kanellos; Karathanassis, George
  9. Hawks and doves in segmented markets : a formal approach to competitive aggressiveness By Claude, DASPREMONT; Rodolphe, DOS SANTOS FERREIRA; Jacques, THEPOT
  10. Banknorth: Designing IT Governance for a Growth-Oriented Business Evironment By Weill, Peter; Hoffmann, Francisco Gonzalez-Meza
  11. Hearing Loss and Disability Exit: Measurement Issues and Coping Strategies By Vibeke T. Christensen; Nabanita Datta Gupta; Martin V. Rasmussen
  12. The strategic bequest motive: evidence from SHARE By Viola Angelini
  13. International Schumpeterian Competition and Optimal R&D subsidies By Giammario Impullitti
  14. Corporate diversification and R&D intensity dynamics By Cesar Alonso-Borrego; Francisco Javier Forcadell
  15. Firm growth and productivity growth evidence from a panel VAR. By Alex Coad; Tom Broekel
  16. Organizing Growth By Luis Garicano; Esteban Rossi-Hansberg
  17. The international specialization pattern of the Italian local economic systems: Concentration or diversification? By Alessia Amighini; Marinella Leone; Roberta Rabellotti
  18. Dynamic order submission strategies with competition between a dealer market and a crossing network By Hans Degryse; Mark Van Achter; Gunther Wuyts
  19. Strategic analysis of petty corruption with an intermediary By Ariane Lambert-Mogiliansky; Mukul Majumdar; Roy Radner
  20. Sources of Comparative Advantages in Brazil By Beatriz Muriel; Cristina Terra
  21. The Dynamics of Research Joint Ventures: A Panel Data Analysis By Tomaso Duso; Enrico Pennings; Jo Seldeslachts
  22. THE EFFECTS ON ENVIRONMENTAL INVESTMENT OF CHANGES IN TOURISM DEMAND By Accinelli, Elvio; Brida, Juan Gabriel; Carrera, Edgar; Pereyra, Juan

  1. By: Manuel Portugal Ferreira (Instituto Politécnico de Leiria); Fernando Ribeiro Serra (Unisul Business School); João Carvalho Santos (Instituto Politécnico de Leiria)
    Abstract: ABSTRACT This paper investigates theoretically the importance and impact of the international entrepreneurial firms? (IEFs) social networks on selected firms? strategies. We focus specifically on some core attributes of IEFs and the impact of social networks on such strategies as the choice of the foreign markets to operate and the foreign entry modes. The social networks are a major driver of the internationalization from inception and help in overcoming a variety of physical and social resource limitations as well as transactional hazards. We conclude that it is likely that both some fundamental characteristics of the IEFs and those of the foreign markets entered account for these firms reliance on their social networks.
    Keywords: entrepreneurship, international entrepreneurial firms, social networks, internationalization
    JEL: M1
    Date: 2007–12
  2. By: Andrea Morrison; Carlo Pietrobelli; Roberta Rabellotti (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: This paper presents a critical review of the Global Value Chain literature in light of the “Technological Capabilities” approach to innovation in LDCs. Participation in GVC is beneficial for firms in LDCs, which are bound to source technology internationally. However, the issues of learning and technological efforts at the firm-level remain largely uncovered by the GVC literature. We propose a shift in the empirical and theoretical agenda, arguing that research should integrate the analysis of the endogenous process of technological capability development, of the specific firm-level efforts and of the mechanisms allowing knowledge to flow within and between different global value chains into the GVC literature.
    Keywords: global value chains, technological capabilities, learning, innovation, LDCs
    JEL: F23 L22 O31
    Date: 2007–12
  3. By: Anup Kumar Bhandari (Indian Statistical Institute, Kolkata); Subhash C. Ray (University of Connecticut)
    Abstract: The Indian textiles industry is now at the crossroads with the phasing out of quota regime that prevailed under the Multi-Fiber Agreement (MFA) until the end of 2004. In the face of a full integration of the textiles sector in the WTO, maintaining and enhancing productive efficiency is a precondition for competitiveness of the Indian firms in the new liberalized world market. In this paper we use data obtained from the Annual Survey of Industries for a number of years to measure the levels of technical efficiency in the Indian textiles industry at the firm level. We use both a grand frontier applicable to all firms and a group frontier specific to firms from any individual state, ownership, or organization type in order to evaluate their efficiencies. This permits us to separately identify how locational, proprietary, and organizational characteristics of a firm affect its performance.
    Keywords: Data Envelopment Analysis; Meta-Frontier; Technology Closeness ratio
    JEL: L67 C61
    Date: 2007–11
  4. By: Westerman, George
    Abstract: With information technology becoming an increasingly important part of every enterprise, managing IT risk has become critically important for CIOs and their business counterparts. However, the complexity of IT makes it very difficult to understand and make good decisions about IT risks. CISR research has identified four business risks - Availability, Access, Accuracy, and Agility - that are most affected by IT. Since nearly every major IT decision involves conscious or unconscious tradeoffs among the four IT risks, IT and business executives must understand and prioritize their enterprise's position on each. Three core disciplines - IT foundation, risk governance process, and risk aware culture - constitute an effective risk management capability. Enterprises that build the three core disciplines manage risk more effectively and their business executives have better understanding of their IT risk profile and risk tradeoffs. When done well, IT risk management matures from a set of difficult compliance and threat-reduction activities to become a true source of agility and business value.
    Keywords: IT related risk, IT governance, IT architecture, business agility,
    Date: 2007–12–07
  5. By: Fixson, Sebastian K.; Park, Jin-Kyu
    Abstract: A substantial literature stream suggests that many products are becoming more modular over time, and that this development is often associated with a change in industry structure towards higher degrees of specialization. These developments can have strong implications for an industry€ٳ competition as the history of the PC industry illustrates. To add to our understanding of the linkages between product architecture, innovation, and industry structure we study an unusual case in which a firm €Ӡthrough decreasing its product modularity €Ӡturned its formerly competitive industry into a near-monopoly. Using this case study we explore how existing theories on modularity explain the observed phenomenon, and show that most consider in their analysis technological change in rather long-term dimensions, and tend to focus on efficiencyrelated arguments to explain the resulting forces on competition. Expanding on these theories we add three critical aspects to the theory construct that connects technological change and industry dynamics. First, we suggest re-integating as a new design operator to explain product architecture genesis. Second, we argue that a finer-grained analysis of the product architecture shows the existence of multiple linkages between product architecture and industry structure, and that these different linkages help explain the observed intra-industry heterogeneity across firms. Third, we propose that the firm boundary choice can also be a pre-condition of the origin of architectural innovation, not only an outcome of efficiency considerations.
    Keywords: Product Architecture, Integrality, Modularity, Technological Change, Intra-industry Heterogeneity, Industry Structure, Competition, Strategy,
    Date: 2007–04–13
  6. By: G. Bünstorf
    Abstract: Necessity spin-offs are organized by employees of incumbent firms to escape deteriorating job conditions. This paper proposes a conceptual model of the spin-off process. Necessity spin-offs are distinguished from opportunity spin-offs on the basis of their triggering events. An empirical analysis of German laser spin-offs traces differences in the performance and determinants of the two types of spin-offs. Necessity spin-offs are important to limit the devaluation of individual competences by the market process. They are particularly relevant in growth crises of innovative firms, and in the restructuring of economies with protected or state-owned companies.
    Keywords: Spin-offs, necessity entrepreneurship, opportunity discovery, market process, laser industry Length 32 pages
    JEL: L25 L26 M13
    Date: 2007–12
  7. By: Pant, Manoj; Pattanayak, Manoranjan
    Abstract: We examine the effect of insider ownership on corporate value in India for the period of 2000-01 to 2003-04, using 1833 Bombay stock Exchange listed firms. More specifically we have investigated the nature of relationship between insider’s equity holding and firm value. While ‘convergence of interest’ or ‘monitoring’ hypothesis predicts a positive relationship, the ‘entrenchment’ hypothesis predicts a negative one between insider shareholding and firm value. In India, most of the firm’s have insiders/promoters as the dominant shareholder. The feature of family based governance system is also widely prevalent in Indian corporate sector. This paper provides evidence that the relationship between insider shareholding and firm value is not linear in nature. We document a significant non-monotonic relationship between insider shareholding and firm value. Tobin’s Q first increases, then declines and finally rises as ownership by insiders rises. Besides, we confirm that foreign promoter/collaborator shareholding has significant positive impact on firm value.
    Keywords: Insider ownership; Corporate governance; family ownership
    JEL: O16 G3
    Date: 2007–04–21
  8. By: Toudas, Kanellos; Karathanassis, George
    Abstract: In this paper, we construct a Governance Index for a sample of Greek companies quoted on the Athens Stock Exchange. We then classify firms, using each firm governance index, into three governance portfolios. Furthermore, the Fama and French model, extended to include a momentum variable, is tested for each of the three governance portfolios. Our findings suggest that most of the firms in our sample are semi-democracies followed by democracies and dictatorships respectively. Good governance appears to be of value in as much as we found higher Tobin’s q ratios for democracies followed by semi-democracies and dictatorships. We, also, report significant negative abnormal returns for shareholder-friendly and manager-friendly firms. The findings of significant negative abnormal returns are consistent with inefficient capital markets. At a practitioner level, the results imply that firms should practice vigorously good governance, as it is a policy of value to shareholders and possibly to other stakeholders.
    Keywords: Corporate Governance; Firm Performance; Democratic and Dictatorship Firms
    JEL: G14 G30
    Date: 2007–12–20
    Abstract: Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where each one of two firms supplies two connected markets segments, one captive the other contested. To begin with, firms are simply assumed to maximize profit subject to two constraints, one related to competitiveness, the other to market feasibility. The competitive aggressiveness of each firm, measured by the relative implicit price of the former constraint, is then endogenous and may be taken as a parameter to characterize the set of equilibria. A further step consists in supposing that competitive aggressiveness is controlled by each firm through its manager hiring decision, in a preliminary stage of a delegation game. When competition is exogenously intensified, through higher product substitutability or through larger relative size of the contested market segment, competitive aggressiveness is decreased at the subgame perfect equiibrium. This decrease partially compensates for the negative effect on profitability of more intense competition
    Date: 2007–12–06
  10. By: Weill, Peter; Hoffmann, Francisco Gonzalez-Meza
    Abstract: This case describes the challenges of implementation of IT Governance in a regional New England bank experiencing explosive and very profitable growth through mergers and acquisitions. Led by the CIO the new IT governance framework and implementation go well beyond the IT department to include; business processes, culture and strategies. Six months after implementation the CIO assess the effectiveness of the new IT governance framework and thinks about fine tuning.
    Keywords: IT governance, governance framework,
    Date: 2007–04–20
  11. By: Vibeke T. Christensen (Danish Institute of Governmental Research); Nabanita Datta Gupta (Danish National Centre for Social Research and IZA); Martin V. Rasmussen (Employment and Integration Administration of the Municipality of Copenhagen)
    Abstract: Using unique representative data containing self-reported functional and clinically measured hearing ability for the Danish population aged 50-64, we estimate the effect of hearing loss on receipt of disability benefits accounting for potential endogeneity of functional hearing. Our identification strategy involves simultaneous estimation of labor supply, functional hearing and coping strategies i.e. using assistive devices at work or informing one’s employer about the problem. We find that functional hearing disability significantly increases the likelihood of receiving disability benefits for both men and women. Using assistive devices at the work place decreases the likelihood of going on disability for both genders, whereas telling the employer about the disability increases disability-related exit for both genders, but considerably more so for women.
    Keywords: hearing loss, disability exit, functional hearing, clinical audiometry test, gender differences
    JEL: J26 I12
    Date: 2007–11
  12. By: Viola Angelini (University of Padua)
    Abstract: This paper examines whether the empirical evidence supports the strategic bequest motive, as opposed to pure altruism, using SHARE data on ten European countries. The availability of internationally comparable data, as in SHARE, allows exploiting the cross-country variability in inheritance laws and cultural backgrounds to identify the operation of a strategic bequest motive determining the attention that adult children provide to their elderly parents.
    Keywords: intergenerational transfers, strategic bequest, inheritance laws, multiple imputation.
    JEL: D12 J14
    Date: 2007
  13. By: Giammario Impullitti
    Abstract: This paper studies the welfare effects of international competition in the market for innovations, and analyzes how competition affects the costs and the benefits of cooperative and non-cooperative R&D subsidies. I set up a two-country quality-ladder growth model where the leader, the home country, has R&D firms innovating in all sectors of the economy, and the follower, the foreign country, shows innovating firms only in a subset of industries. The measure of the set of sectors where R&D workers from both countries compete for innovation determines the scale of international Schumpeterian competition. Both governments engage in a strategic R&D subsidy game and respond optimally to changes in competition. For a given level of subsidies, increases in foreign competition raise the quality of goods available (growth effect) and lowers domestic profits (business-stealing effect); the overall effect of competition on domestic welfare depends on the relative strength of these two counteracting forces. When governments play a strategic subsidy game, increases in foreign competition trigger a defensive innovation policy mechanism that raises the optimal domestic R&D subsidy. Cooperation in subsidies leads both countries to set higher subsidies. Finally, while cooperation is beneficial for the global economy, there exists a threshold level of competition below which the home country experiences welfare losses under cooperation.
    Keywords: international competition, endogenous technical change, growth theory, strategic R&D subsidies, international policy cooperation
    JEL: O41 O31 O38 F12 F43
    Date: 2007
  14. By: Cesar Alonso-Borrego; Francisco Javier Forcadell
    Abstract: We study the dynamic bidirectional relationship between firm R&D intensity and corporate diversification, using longitudinal data of Spanish manufacturing companies. Our empirical approach takes into account the censored nature of the dependent variables and the existence of firm-specific unobserved heterogeneity. Whereas we find a positive linear effect of R&D intensity on related diversification, the evidence about the effect of related diversification on R&D intensity takes the form of an inverted U. Hence, the effect of related diversification on R&D intensity is positive but marginally decreasing for moderate levels of related diversification, but such effect can turn out negative for high levels of related diversification. Additionally, the consequences of the dynamic relation are that the effects are substantially larger in the long-run than in the short-run.
    Date: 2007–12
  15. By: Alex Coad (Max Planck Institute of Economics et Centre d'Economie de la Sorbonne); Tom Broekel (Max Planck Institute of Economics)
    Abstract: This paper offers new insights into the processes of firm growth by applying a reduced form vector autoregression (VAR) model to longitudinal panel data on French manufacturing firms (1996-2004). We observe the co-evolution of key variables such as growth of employment, sales, and gross operating surplus, as well as growth of multifactor productivity. It seems that employment growth is negatively associated with subsequent growth of productivity. This latter result, however, is sensitive to our choice of productivit indicator, i.e. multifactor productivity or labour productivity.
    Keywords: Firm growth, Panel VAR, productivity growth, industrial dynamics, non-parametric frontier analysis.
    JEL: L25 L20
    Date: 2007–12
  16. By: Luis Garicano; Esteban Rossi-Hansberg
    Abstract: We study the impact of information and communication technology on growth through its impact on organization and innovation. Agents accumulate knowledge through two activities: innovation (discovering new technologies) and exploitation (learning how to use the current technology). Exploitation requires the development of organizations to coordinate the work of experts, which takes time. The costs and benefits of such organizations depend on the cost of communicating and acquiring information. We find that while advances in information technology that lower information acquisition costs always increase growth, improvements in communication technology may lead to lower growth and even to stagnation, as the payoff to exploiting innovations through organizations increases relative to the payoff of new radical innovations.
    JEL: D23 E32 L23 O31 O40
    Date: 2007–12
  17. By: Alessia Amighini; Marinella Leone; Roberta Rabellotti (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: We study the evolution of specialization patterns of the Italian provinces over 1995-2005 by analyzing the dynamics of the sectoral distribution of the Balassa index of revealed comparative advantages for several manufacturing sectors. Our results show that behind a relatively stable distribution of national comparative advantages over time, there are wide variations in local performances: only a few provinces strengthened their specialization patterns over the last decade, while the majority of them slightly weakened their specialization patterns. We also find a higher average degree of persistence for district provinces, but no systematic differences between provinces with and without industrial districts. We find a variety of behaviour for provinces with industrial districts in the footwear, textiles and clothing and machinery industries: a few of them are concentrating on their past comparative strengths, while many others are changing their specialization patterns.
    Keywords: trade specialization; Balassa comparative advantage; Italian provinces
    JEL: F14 R11
    Date: 2007–12
  18. By: Hans Degryse (CentER, Tilburg University; University of Leuven); Mark Van Achter (University of Bonn); Gunther Wuyts (University of Leuven; National Bank of Belgium, Research Department)
    Abstract: We present a dynamic microstructure model where a dealer market (DM) and a crossing network (CN) interact. Sequentially arriving traders with different valuations for an asset maximise their profits either by trading on a DM or by submitting an order for (possibly) uncertain execution via a CN. We develop the analysis for three different informational settings: transparency, "complete" opaqueness of all order flow, and "partial" opaqueness (with observable DM trades). A key result is that the interaction of trading systems generates systematic patterns in order flow for the transparency and partial opaqueness settings. The precise nature of these patterns depends on the degree of transparency at the CN. While unambiguous with a transparent CN, they may reverse direction if the CN is opaque. Moreover, in all three informational settings, we find that a CN and a DM cater for different types of traders. Investors with a high willingness to trade are more likely to prefer a DM. The introduction of a CN next to a DM also affects welfare as it increases total order flow by attracting traders who would otherwise not submit orders ("order creation"); in addition, it diverts trade from the DM ("trade diversion"). We find that the coexistence of a CN and DM produces more trader welfare than a DM in isolation. Also, more transparent markets lead to greater trader welfare but may reduce overall welfare.
    Keywords: alternative trading systems, crossing network, dealer market, order flow, transparency, welfare
    JEL: G10 G20
    Date: 2007–12
  19. By: Ariane Lambert-Mogiliansky; Mukul Majumdar; Roy Radner
    Abstract: This notes reports part of a larger study of "petty corruption" by government bureaucrats in the process of approving new business projects. Each bureaucrat may demand a bribe as a condition for approval. Entrepreneurs use the services of an intermediary who, for a fee, undertakes to obtain all the required approvals. In a dynamic game model we investigate (1) the multiplicity of equilibria, (2) the equilibria that are "socially efficient", and (3) the equilibria that maximize the total expected bureaucrat's bribe income. We compare these results with those for the case in which entrepreneurs apply directly to the bureaucrats.
    Date: 2007
  20. By: Beatriz Muriel; Cristina Terra
    Date: 2007–12
  21. By: Tomaso Duso (Humboldt University and Wissenschaftszentrum Berlin (WZB) Reichpietschufer 50, 10785 Berlin, Germany E-Mail : Tel: +49 30 2549 1403); Enrico Pennings (Dept. of Applied Economics, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands E-mail: Tel: +31 10 40 82166); Jo Seldeslachts (Wissenschaftszentrum Berlin (WZB) Reichpietschufer 50, 10785 Berlin, Germany E-Mail: Tel: +49 30 2549 1404)
    Abstract: The aim of this paper is to test the determinants of Research Joint Ventures’ (RJVs) group dynamics. We look at entry, exit and turbulence in RJVs that have been set up under the US National Cooperative Research Act, which allows for certain antitrust exemptions in order to stimulate firms to cooperate in R&D. Accounting for unobserved project characteristics and controlling for inter-RJV interactions and industry effects, the Tobit panel regressions show the importance of group and time features for an RJV’s evolution. We further identify an average RJV’s long-term equilibrium size and assess its determining factors. Ours is a first attempt to produce robust stylized facts about cooperational short- and long-term dynamics, an important but neglected dimension in research cooperations.
    Keywords: research joint ventures, dynamics, panel data
    JEL: C23 L24 O32
    Date: 2007
  22. By: Accinelli, Elvio; Brida, Juan Gabriel; Carrera, Edgar; Pereyra, Juan
    Abstract: In this short paper we analyze the impact of tourist demand in hotel rooms on the investment of hotels on environmental quality. We show that when income of the tourists increases, then to maintain the demand for rooms, the hotels must in-crease the investment on the environmental quality of the region where there is an increment of the tourist activity. In the particular case where we have three differ-ent hotel chains located in three different tourist regions, we show that the incen-tive of hotel chains to invest in environmental quality depends on the demand for days of rest on the part of tourists and on the level of aggregate income. We also show that if total income increase, then the incentive to invest in environmental quality increases in the region where the price of a hotel room is lower.
    Keywords: environmental investment; hotelling competition; service quality; sustainable tourism
    JEL: M0 D0 L83
    Date: 2007–11

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