nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2008‒09‒13
nine papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. Distance to Frontier and Appropriate Business Strategy By Alex Coad
  2. Internationalising to create Firm Specific Advantages: Leapfrogging strategies of U.S. Pharmaceutical firms in the 1930s and 1940s & Indian Pharmaceutical firms in the 1990s and 2000s By Athreye, Suma; Godley, Andrew
  3. Brand popularity, endogenous leadership, and product introduction in industries with word of mouth communication By Christian Dahl Winther
  4. Does Network Matter in International Expansion? Evidence from Italian SMEs By Antonia Rosa Gurrieri; Luca Petruzzellis
  5. Comparing Chinese and the Indian Software MNCs: Domestic and Export Market Strategies and Their Interplay By Niosi, Jorge; Tschang, F. Ted
  6. Entrepreneurial Competition and Its Impact on the Aggregate Economy By Katsuya Takii
  7. Innovation and growth through local and global interaction By R. Andergassen; F. Nardini; M. Ricottilli
  8. Bank competition - When is it Goog? By Christa Hainz;
  9. The Role of Competition Policy in the Promotion of Economic Growth By Lawrence J. White

  1. By: Alex Coad
    Abstract: This paper is an empirical test of the hypothesis that the appropriateness of different business strategies is conditional on the firm’s distance to the industry frontier. We use data on four 2-digit high-tech manufacturing industries in the US over the period 1972-1999, and apply semi-parametric quantile regressions to investigate the contribution of firm behavior to market value at various points of the conditional distribution of Tobin’s q. Among our results, we observe that innovative activity, measured in terms of R&D expenditure or patents, has a strong positive association with market value at the upper quantiles (corresponding to the leader firms) whereas the innovative efforts of laggard firms are valued significantly less. Laggard firms, we suggest, should instead achieve productivity growth through efficient exploitation of existing technologies and imitation of industry leaders. Employment growth in leader firms is encouraged whereas growth of backward firms is not as well received on the stock market.
    Keywords: Distance to frontier; Strategy; Market value; Innovation; Firm growth
    JEL: L25 L21 D21 O31
    Date: 2008
  2. By: Athreye, Suma (UNU-MERIT, Brunel Business School, Brunel University); Godley, Andrew (Department of Management, University of Reading Business School)
    Abstract: Internationalisation is a useful strategy to gain firm specific advantages during periods of technological discontinuity. The pharmaceutical industry offers us two such episodes as examples: when the antibiotics revolution was beginning and when the possibilities of genetic routes to new drug discovery were realised. This paper compares the strategies adopted by laggard U.S. firms scrambling to gain capabilities in antibiotics, and Indian firms equally eager to acquire positions in new biotechnology based drugs and shows that both groups used internationalisation strategies to gain technological advantages and build up their firm specific advantages.
    Keywords: Technological leapfrogging, Internationalisation Strategies, Indian Pharmaceutical industry, Antibiotics revolution, US Pharmaceuticals
    JEL: F23 L22 L25 L65 N80 O33
    Date: 2008
  3. By: Christian Dahl Winther (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: This paper considers the impact of popularity on duopolists’ entry strategies into an emerging industry, where each consumer holds a preference for one of two competing brands. Brand popularity is influenced by word of mouth communication, as early adopters recommend the brand they have bought to later buyers. Early introduction is, however, a costly strategy. The timing of product introduction is therefore of strategic importance to firms. I investigate the equilibria of the game when firms choose their time to market strategies sequentially, and observe how they relate to the popularity of the Stackelberg leader’s brand. This analysis reveals firms’ individual incentives for leader and follower roles, and the market structure that would result in this noncooperative game. As von Stackelberg showed a leader’s commitment to a strategy can preempt the follower. The present model shows that this situation, where both firms prefer the leader role, most likely occurs when brands hold equal levels of popularity. On the other hand it is interesting to observe that in certain markets, in particular where popularity is highly asymmetric, it is optimal for the dominant firm to become follower, and for the inferior firm to lead, because this facilitates soft competition. Still, the market structure may be insensitive to the order of moves. This warrants investigation of the connection between leadership and brand popularity, and the effect on market structure.
    Keywords: Endogenous leadership, product differentiation, product introduction, technological change, word of mouth communication
    JEL: D83 L11 O33
    Date: 2008–09–03
  4. By: Antonia Rosa Gurrieri (University of Foggia); Luca Petruzzellis (University of Bari)
    Abstract: In order to face the new competitive scenario, Apulian textile firms are involved in a process of change and are trying to adopt a networking approach in analysing the international propensity of SMEs. The case of the textile network in Apulia has been analysed using a semi-structured questionnaire submitted to a sample of family businesses in order to verify the influence of network on their internationalisation process. The contribution that the network can give to the single firm in its internationalisation process depends also on the level of cooperation in the network. In fact, relationships – at least dual vertical relationships – are the key to overcoming size limit and providing value to all the partners involved. The research attempted to offer a better academic understanding of the role of network in international competitive advantage. Future research should be based on cross countries analysis, in order to determine whether or not the set of internal determinants of internationalisation pensity remain stable from one country to another. The findings should also be useful to local governance for a better understanding of the network phenomenon in order to develop appropriate programmes for training and supporting SMEs in the global market. This paper provides a wide analysis of the network role in the internationalisation process in a low technology sector.
    Keywords: Internationalisation Strategies, Network Approach
    JEL: L2 D85
    Date: 2008–07
  5. By: Niosi, Jorge (Department of Management and Technology, University of Québec at Montréal); Tschang, F. Ted (School of Business, Singapore Management University)
    Abstract: China and India are emerging as major new entrants in the international software industry. Both are rapidly learning through outsourcing with multinational enterprises from advanced nations. Yet, their paths to this dynamic sector are very different. Chinese software firms have focused on their domestic market by working with foreign MNCs, while they move cautiously abroad. Indian firms, despite already being large, continue to expand overseas as well as to climb the value chain. We show that a macro perspective on the global movement of work can be gained by utilizing concepts from different approaches to the MNC. At the same time, the innovation systems perspective is necessary to explain the foundations of the industry. The paper provides hypotheses and performs an initial validation of them. It concludes that the internationalization and learning processes are somewhat different in the Chinese and Indian MNCs, and provides explanations for the different patterns.
    Keywords: outsourcing, software industry, industrial development, MNCs, MNEs, multinational enterprise, China, India
    JEL: L23 L24 O14 O32 P45
    Date: 2008
  6. By: Katsuya Takii (Associate Professor, Osaka School of International Public Policy, Osaka University)
    Abstract: This paper models entrepreneurship as the entrepreneur's information processing activity in order to predict changes in demand and reallocate resources. The results show that allocative efficiency---and therefore aggregate productivity---increases through intensified competition by entrepreneurs grasping at opportunities. This fierce competition leads to price reductions that result in the improvement of measured aggregate productivity. The price reduction also forces relatively less able entrepreneurs to become workers. As resources are then dealt with only by relatively talented entrepreneurs, this selection effect also increases aggregate productivity. The paper also discusses how the selection effect influences the distribution of firm size.
    JEL: D21 D61 D83 L25 L26
    Date: 2008–09
  7. By: R. Andergassen; F. Nardini; M. Ricottilli
    Date: 2008–06
  8. By: Christa Hainz; (University of Munich, Akademiestr. 1/III, 80799 Munich, Germany; )
    Abstract: The effects of bank competition and institutions on credit markets are usually studied separately although both factors are interdependent. We study the effect of bank competition on the choice of contracts (screening versus collateralized credit contract) and explicitly capture the impact of the institutional environment. Most importantly, we show that the effects of bank competition on collateralization, access to finance, and social welfare depend on the institutional environment. We predict that firms’ access to credit increases in bank competition if institutions are weak but bank competition does not matter if they are well-developed.
    Keywords: Strategic Experimentation, Two-Armed Bandit, Exponential Distribution, Poisson Process, Bayesian Learning, Markov Perfect Equilibrium
    JEL: D82 G21 K00
    Date: 2008–09
  9. By: Lawrence J. White
    Date: 2008

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