nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2008‒02‒09
sixteen papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. Can institutional forces create competitive advantage? An empirical examination of environmental innovation By Berrone, Pascual; Gelabert, Liliana; Fosfuri, Andrea; Gomez-Mejia, Luis R.
  2. Overcoming Managerial Challenges to Realize Growth Spurts: Insights from Cases of Three Enterprises By Dixit Mukund R.; Sharma Sunil; Karna Amit
  3. The Process of Creative Construction: Knowledge Spillovers, Entrepreneurship and Economic Growth By Rajshree Agarwal; David Audretsch; MB Sarkar
  4. Employment Growth of New Firms By Erik Stam; Petra Gibcus; Jennifer Telussa; Elizabeth Garnsey
  5. A Unified Theory of Capability Building: Need and Response By Dixit Mukund R.; Karna Amit; Sharma Sunil
  6. How (not) to measure competition By Jan Boone; Jan van Ours; Henry van der Wiel
  7. Vertical Integration and Technology: Theory and Evidence By Daron Acemoglu; Philippe Aghion; Rachel Griffith; Fabrizio Zilibotti
  8. Technology Clubs and Growth Patterns: Evidence from EU Manufacturing By Jaap W. B. Bos; Claire Economidou; Michael Koetter
  9. Globalization and Innovation in Emerging Markets By Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine
  10. From strategic to price taking behavior By Leonidas Koutsougeras
  11. Performance of the Dutch non-life insurance industry: competition, efficiency and focus By Jacob A. Bikker; Janko Gorter
  12. The impact of quick response in inventory-based competition By Caro, Felipe; Martinez de Albeniz, Victor
  13. Constructing regional advantage: Platform policies based on related variety and differentiated knowledge bases By Alexander Cole
  14. Branching Strategies in a Branch-and-Price Approach for a Multiple Objective Nurse Scheduling Problem By B. MAENHOUT; M. VANHOUCKE
  15. Interrelatedness, Dynamic Factor Adjustment Patterns and Firm Heterogeneity in Austrian Manufacturing By Sandra Martina Leitner
  16. Does the Chinese Banking System Promote the Growth of Firms? By Panicos O. Demetriades; Jun Du; Sourafel Girma; Chenggang Xu

  1. By: Berrone, Pascual (IESE Business School); Gelabert, Liliana (Universidad Carlos III); Fosfuri, Andrea (Universidad Carlos III); Gomez-Mejia, Luis R. (Arizona State University)
    Abstract: We examine institutional pressures as antecedents of environmental innovation. Drawing on institutional theory and a resource-based view of the firm, we argue that regulatory and normative forces influence companies' propensity to innovate in environment-related projects. Furthermore, we suggest that this relationship is contingent on the availability and specificity of the companies' resources. These relationships were tested using environmental patents and citations of 340 publicly-traded companies from polluting industries in the U.S. Results suggest that institutional pressures can be a source of competitive advantage, and regulatory forces are becoming more strongly associated with environmental innovations as the intensity of companies' R&D activities increase.
    Keywords: environmental innovation; institutional theory; resource-based view;
    Date: 2007–11–21
  2. By: Dixit Mukund R.; Sharma Sunil; Karna Amit
    Abstract: Organizations face several managerial challenges during their growth period. Growth spurts are realized when organizations overcome these challenges. Though the literature is full of studies on the enterprise growth, the knowledge about how these challenges facilitate or hinder growth is limited. We conceptualize and explain five challenges faced by an enterprise along its growth trajectory. For evidence, we then look at history of three organizations from different sectors and trace their strategies to overcome the challenges faced by them. The firm and the environment interact and make certain strategic choices, which in turn results in growth spurts in the organization. We draw insights from their growth stories and discuss the different strategies and interactions between the firm and the environment.
    Date: 2008–01–31
  3. By: Rajshree Agarwal (University of Illinois at Urbana Champaign); David Audretsch (Max Planck Institute of Economics); MB Sarkar (University of Central Florida)
    Abstract: Questioning the underlying assumptions of the process of creative destruction, we conceptualize an alternative process of creative construction that may characterize the dynamics between entrants and incumbents. We discuss the underlying mechanism of knowledge spillover strategic entrepreneurship whereby knowledge investments by existing organizations, when coupled with entrepreneurial action by individuals embedded in their context, results in new venture creation, heterogeneity in performance and subsequent growth in industries, regions and economies. The framework has implications for future research in entrepreneurship, strategy and economic growth.
    Keywords: growth, spillovers, creative destruction, entrepreneurship
    JEL: L16 L21 M13 O11 O40 O57
    Date: 2008–01–30
  4. By: Erik Stam (University of Cambridge, Netherlands Scientific Council for Government Policy, Utrecht University and Max Planck Institute of Economics, Jena); Petra Gibcus (EIM Business and Policy Research); Jennifer Telussa (EIM Business and Policy Research); Elizabeth Garnsey (University of Cambridge)
    Abstract: This paper analyses the association between dynamic capabilities and new firm growth, controlling for measures of firm resources, characteristics of the entrepreneur, and aspects of the environment. The central research question is: How strong is the relationship between dynamic capabilities and the growth of new firms? The paper opens with a review of empirical studies on employment growth in new firms and then moves on to a discussion on the role of dynamic capabilities in the explanation of new firm growth. After a description of the data and variables the results and implications of this study are discussed.
    Keywords: new firms, firm growth, innovation, dynamic capabilities
    JEL: D21 L23 L25 L26 M13 M21
    Date: 2008–01–30
  5. By: Dixit Mukund R.; Karna Amit; Sharma Sunil
    Abstract: Strategy literature is replete with isolated contributions to the jigsaw puzzle of building capabilities by firms. The isolation is primarily caused by the way resource-based view and capability literature has developed over time. There is a need to overcome this isolation and build a unified theory of capability building process which takes into account both internal as well as external perspective and explains it for new as well as established firms, successful as well as not so successful firms . We respond to this need with a unified theory that explains deliberate and emergent process of capability building by recognizing the independent and interdependent contributions of the firm and its external environment. The capability building process is characterized as a three phased process with different starting points for different categories of firms. The phases in capability building – Participative, Competitive, and Leadership – reflect the strategic intent of the firm and its position vis-à-vis the environment. Each phase in the process witnesses capability building through an interaction between internal firm dynamics and corresponding external environmental forces. The theory encompasses the evolution of capabilities not only by exploiting the opportunities but also by overcoming the external constraints and the rigidities inherent in the capability. It incorporates context, processes, antecedents and consequences within each stage and across different stages. It answers important questions like why firms are different in terms of their capability building approach. The theory is unique as it unearths the unexplored process of capability building with a holistic and temporal perspective.
    Date: 2008–01–31
  6. By: Jan Boone; Jan van Ours; Henry van der Wiel
    Abstract: We discuss and apply a new measure of competition: the elasticity of a firm’s profits with respect to its cost level. A higher value of this profit elasticity (PE) signals more intense competition. Using firm level data we compare PE with the most popular competition measures such as the price cost margin (PCM). We show that PE and PCM are highly correlated on average. However, PCM tends to misrepresent the development of competition over time in markets with few firms and high concentration, i.e. in markets with high relevance for competition policy and regulation. So, just when it is needed the most PCM fails whereas PE does not. From this, we conclude that PE is a more reliable measure of competition.
    Keywords: competition; profit elasticity; measures of competition; concentration; price cost margin; profits
    JEL: D43 L13
    Date: 2007–12
  7. By: Daron Acemoglu; Philippe Aghion; Rachel Griffith; Fabrizio Zilibotti
    Abstract: This paper investigates the determinants of vertical integration. We first derive a number of predictions regarding the relationship between technology intensity and vertical integration from a simple incomplete contracts model. Then, we investigate these predictions using plant-level data for the UK manufacturing sector. Most importantly, and consistent with theory, we find that the technology intensities of downstream (producer) and upstream (supplier) industries have opposite effects on the likelihood of vertical integration. Also consistent with theory, both these effects are stronger when the supplying industry accounts for a large fraction of the producer’s costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation strategies, and with or without controlling for a number of firm and industry-level characteristics.
    Keywords: Hold-up, incomplete contracts, internal organization of the firm, investment, residual rights of control, R&D, technology, UK manufacturing, vertical integration.
    JEL: L22 L23 L24 L60
    Date: 2007–12
  8. By: Jaap W. B. Bos; Claire Economidou; Michael Koetter
    Abstract: This paper investigates growth patterns in a panel of EU manufacturing industries over the period 1980-1997. A structural and flexible modeling strategy is adopted that accounts for (i) inefficient use of resources, and (ii) differences in the production technology across industries. With our model we are able to identify technical, efficiency, and input growth for endogenously determined technology clubs. Both the technology clubs and the parameters within each club are modeled as a function of R\&D intensity. This framework allows us to explore the importance of the components of output growth in each club, potential technology spillovers and catch-up issues across industries and countries.
    Keywords: growth, efficiency, R&D, stochastic frontier analysis, latent class
    JEL: C33 L60 O32 O47
    Date: 2008–01
  9. By: Gorodnichenko, Yuriy (University of California, Berkeley); Svejnar, Jan (University of Michigan); Terrell, Katherine (University of Michigan)
    Abstract: Globalization brings opportunities and pressures for domestic firms in emerging market economies to innovate and improve their competitive position. Using recent data on firms in 27 transition economies, we test for the effects of globalization through the impact of increased competition and foreign direct investment on domestic firms’ efforts to raise their capability (innovate) by upgrading their technology or their product/service (improving quality or developing a new one), taking into account firm heterogeneity. We find support for the prediction that competition has a negative effect on innovation, especially for firms further from the frontier, and that the supply chain of multinational enterprises and international trade are important channels for domestic firm innovation. We do not find support for the inverted U effect of competition on innovation. There is partial support for the hypothesis that firms in a more pro-business environment invest more in innovation and are more likely to display the inverted U relationship between competition and innovation.
    Keywords: competition, innovation, emerging markets, spillovers
    JEL: F23 O16
    Date: 2008–01
  10. By: Leonidas Koutsougeras
    Date: 2007
  11. By: Jacob A. Bikker; Janko Gorter
    Abstract: This paper investigates competition in the Dutch non-life insurance industry indirectly by measuring scale economies and X-inefficiency, assuming that strong competition would force insurance firms to exploit unused scale economies and to push down inefficiencies. We observe substantial economies of scale (on average 11%) that are larger for smaller firms. Despite considerable consolidation in the industry over the last decade, scale economies have increased, as the optimal scale has outgrown the actual one. Comparing estimates across aggregation levels, we find that scale economies are smaller for groups and lines of business than they are for firms. Besides scale, focus and organizational form are important cost determinants as well: generally, specialized insurers have lower costs and face greater economies of scale. Estimates of thick frontier efficiency point to huge cost differences across firms and within lines of business. Overall, our results suggest that there is a lack of competitive pressure in the Dutch non-life insurance industry.
    Keywords: Non-life insurance, economies of scale, market structure, concentration, competition, X-efficiency, total cost function, aggregation: insurance groups, firms and lines of business
    JEL: D4 D61 G22 L1
    Date: 2008–01
  12. By: Caro, Felipe (UCLA Anderson School of Management); Martinez de Albeniz, Victor (IESE Business School)
    Abstract: We propose a multi-period extension of the competitive newsvendor model of Lippman and McCardle (1997) to investigate the impact of quick response under competition. For this purpose, we consider two retailers that compete in terms of inventory: customers that face a stockout at their first-choice store will look for the product at the other store. Consequently, the total demand that each retailer faces depends on the competitor's inventory level. We allow for asymmetric reordering capabilities, and we are particularly interested in the case when one of the firms has a lower ordering cost but can only produce at the beginning of the selling season, whereas the second firm has higher costs but can replenish stock in a quick response manner taking advantage of any incremental knowledge about demand (if it is available). We visualize this problem as the competition between a traditional make-to-stock retailer that builds up inventory before the season starts versus a retailer with a responsive supply chain that can react to early demand information. We provide conditions for this game to have a unique pure-strategy subgame-perfect equilibrium, which then allows us to perform numerical comparative statics. Our results confirm in a competitive setting the intuitive fact that quick response is more beneficial when demand uncertainty is higher, or exhibits a higher correlation over time. Finally, we find that part of the competitive advantage from quick response arises from the asymmetry in response capabilities.
    Keywords: quick response; fast fashion; inventory competition;
    Date: 2007–11–21
  13. By: Alexander Cole
    Abstract: The knowledge-based theory of the geographic cluster represents a major attempt to re-conceptualize clusters, in essence arguing that the localization of firms in similar and related industries stimulates learning and innovation, giving a competitive advantage to clustered firms. This paper critically examines the knowledge-based theory the cluster, arguing that it has greatly overstated the advantages of co-location to firms and misidentified the mechanisms through which learning occurs in clusters. In particular, the theory is criticized on three points: the flexible, under-specified way that it defines its object of study; the focus on firms as an explanatory variable instead of more fundamental processes of resource accumulation; and the functionalist mode of theory that employs as an explanation. Ways to address of each of these issues are discussed. In a final section I suggest that the rather static notions of learning put forward in the knowledge-based theory of the cluster be replaced by a developmental theory of regional dynamics that focuses on both learning and structural transformation.
    Keywords: geographic cluster, localization, relatedness, knowledge-based theory
    Date: 2007–11
    Abstract: The efficient management of nursing personnel is of critical importance in a hospital’s environment comprising a vast share of the hospital’s operational costs. The nurse scheduling process affects highly the nurses’ working conditions, which are strongly related to the provided quality of care. In this paper, we consider the rostering over a mid-term period that involves the construction of duty timetables for a set of heterogeneous nurses. In scheduling nursing personnel, the head nurse is typically confronted with various (conflicting) goals complying with different priority levels, which represent the hospital’s policies and the nurses’ preferences. In constructing a nurse roster, nurses need to be assigned to shifts in order to maximize the quality of the constructed timetable satisfying the case-specific time related constraints imposed on the individual nurses’ schedules. Personnel rostering in healthcare institutions is a highly constrained and difficult problem to solve and is known to be NP-hard. In this paper, we present an exact branch-and-price algorithm for solving the nurse scheduling problem incorporating multiple objectives and discuss different branching and pruning strategies. Detailed computational results are presented comparing the proposed branching strategies and indicating the beneficial effect of various principles encouraging computational efficiency.
    Keywords: Nurse Scheduling, Branch-and-Price, Branching Strategies
    Date: 2008–01
  15. By: Sandra Martina Leitner (Department of Economics, Johannes Kepler University Linz, Austria)
    Abstract: The aim of this paper is twofold: one, it analyzes the dynamic factor adjustment patterns and performance changes of firms in response to periods of rapid adjustment of capital, labor, production and non-production labor; and, two, it sheds light on the role of firm characteristics on the probability of any input spike occurring. Firm-group information incorporated in the Austrian Industry Statistics Survey provides the empirical platform for the analysis. The analysis shows that all input factors considered represent strategic complements and, in the light of skill-technology complements, it proves the absence of any skill bias to the adoption of leadingedge technologies embodied in new machinery and equipment. Furthermore, there is evidence of significant temporary disruptive effects of input spikes on labor productivity and profitability. Non-negligible firm heterogeneity also prevails in Austrian Manufacturing with larger firm-groups and firm-groups facing lower average personnel costs being more likely to experience any input spike. And the strongly regulated labor market in Austria appears to favor non-production workers.
    Date: 2008–01
  16. By: Panicos O. Demetriades; Jun Du; Sourafel Girma; Chenggang Xu
    Abstract: Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.
    Keywords: Chinese banking system development; value added and TFP growth; panel dataset
    JEL: E44 O53
    Date: 2008–02

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