nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2008‒10‒07
thirteen papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. Outsourcing, Complementary Innovations and Growth By Alireza Naghavi; Gianmarco I.P. Ottaviano
  2. The Future of Industrial Policies in the New Millennium: Toward a Knowledge-Centered Development Agenda By Mario Cimoli; Giovanni Dosi; Joseph E. Stiglitz
  3. FDI and FPI - Strategic Complements? By Barbara Pfeffer
  4. Monotone Comparative Statics for Games With Strategic Substitutes By Sunanda Roy; Tarun Sabarwal
  5. Regulatory Strategies By Ojo, Marianne
  6. Regional Knowledge base and productivity growth: the evidence of italian manufacturing By Quatraro Francesco
  7. Mauritius: A Competitiveness Assessment By Patrick A. Imam; Camelia Minoiu
  8. Strategic interaction between general practitioners and specialists: implications for gatekeeping By Catherine SCHAUMANS
  9. Attractiveness and agglomeration of automotive industry in Morocco and Tunisia: A comparative analysis (In French) By Jean-Bernard LAYAN (GREThA-GRES); Yannick LUNG (GREThA-GRES)
  10. Product Market Competition, Investment and Employment-Abundant versus Job-Poor Growth: A Real Options Perspective By Yu-Fu Chen; Michael Funke
  11. A Dynamic Oligopoly Game of the US Airline Industry: Estimation and Policy Experiments By Victor Aguirregabiria; Chun-Yu Ho
  12. Value Creation in the Interface of Industry and Academy - A Case Study of Intellectual Capital of Technology Transfer Offices At US Universities By Antti-Jussi Tahvanainen; Raine Hermans
  13. Direction and intensity of technical change: a micro-founded growth model By zamparelli, luca

  1. By: Alireza Naghavi; Gianmarco I.P. Ottaviano
    Abstract: This paper studies the parallel creation of complementary upstream and downstream innovations by independent labs to shed light on the impact of outsourcing on R&D when supply contracts are incomplete. In particular, we argue that outsourced upstream production contributes to the emergence of innovation networks by creating a demand for upstream R&D. We then analyze under which conditions this leads to faster innovation than in the case of vertically integrated production relying on integrated R&D. In the presence of incomplete supply contracts, the ex-post bargaining power of upstream and downstream parties feeds back to innovation. This determines whether outsourcing decisions leading to static gains from specialized production generate or not also dynamic gains in terms of faster innovation.
    Keywords: outsourcing, complementary innovations, incomplete contracts, organization of firms
    JEL: L14 L23 O32 D91
    Date: 2008–05
  2. By: Mario Cimoli; Giovanni Dosi; Joseph E. Stiglitz
    Abstract: The paper present the conclusions to the book "The Political Economy of Capabilities Accumulation: the Past and Future of Policies for Industrial Development", edited by M. Cimoli, G. Dosi and J. E. Stiglitz, Oxford University Press, forthcoming. While it is futile to search for any 'magic policy recipe' automatically yielding industrialization, the contributions to the book, we argue, do indeed help in identifying some basic ingredients and principles that successful policy arrangements historically had and have in common. In this concluding chapter we spell out some of them. They include: (i) an 'emulation philosophy' vis-à-vis the most promising technological paradigms; (ii) various measures safeguarding the possibility of 'infant industry learning', involving also the purposeful 'distortion' of market signals as they come from the international arena; (iii) explicit policies of capability-building directed both at education and training but also at nurturing and shaping specific corporate actors; (iv) a 'political economy of rent-management' favourable to learning and industrialization, while curbing the exploitation of monopolist positions; (v) measures aimed to foster and exploit a weak Intellectual Property Rights regime, especially with respect to the companies of the developed world; (vi) strategies aimed at avoiding the 'natural resource course'; (vii) 'virtuous' complementarities between industrial policies and macroeconomic management. Further the chapter discusses the opportunities and constraints associated with the current regimes of trade and IPR governance and puts forward some basic building blocks of a proposed new pro-developmental consensus fostering knowledge accumulation and industrialization in catching-up countries.
    Keywords: Development, Industrial Policies, Knowledge Accumulation, Catching-up, New International Consensus
    Date: 2008–09–26
  3. By: Barbara Pfeffer (Universität Siegen, Department of Economics)
    Abstract: We show in a dynamic investment setting whether firms choose FDI or international portfolio investment (FPI) in the presence of stochastic productivity taking into account differences in flexibility of both investments. Isolated FPI and FDI investments are compared to combined FPI and FDI investments. FDI requires higher investment specific costs than FPI. Thus, it is not possible to adjust FDI to environmental changes every period. In contrast, FPI bears lower fixed costs and can be adjusted immediately to short-term changes in the environment. Additionally, as a result of the investors control position FDI yields a higher return than FPI. Hence, there is a trade-off between flexibility and higher return for firms deciding between FDI and FPI. We explore whether as a consequence of higher investment specific fixed costs and lower flexibility in the case of FDI, small firms prefer FPI and larger firms invest in FDI. We show that a combined strategy dominates the isolated strategy always in times. Further, combined international investment comprises a higher incentive for firms to invest in r&d-investment and consequently firm productivity increase faster than with isolated international investment. Depending on the success-probability and the correlation between the various investment possibilities, even small firms (low productivity) invest in FDI.
    Keywords: FDI, Portfolio Investment, Risk Diversification, endogeneous Productivity
    JEL: F21 F23 G11
    Date: 2008
  4. By: Sunanda Roy (College of Business and Public Administration, Drake University); Tarun Sabarwal (Department of Economics, University of Kansas)
    Abstract: This paper studies comparative statics of equilibria in models where the optimal responses under consideration are (weakly) decreasing in endogenous variables, and (weakly) increasing in exogenous parameters. Such models include parameterized games of strategic substitutes. The analysis provides a sufficient condition for existence of increasing equilibria at a higher parameter value. This condition is presented first for best-response functions; it can be translated easily to payoff functions with one-dimensional individual strategy spaces, and it has a natural analogue to best-response correspondences. The condition is tight in the sense that with a weakenened condition, the same result may not obtain. The results here apply to asymmetric equilibria, and are applied to two classes of examples – Cournot duopoly and tournaments. Moreover, sufficient conditions are presented to exhibit strong comparative statics of equilibria (that is, every equilibrium at a higher parameter value is greater than a given equilibrium at a lower parameter value), and to show existence of increasing equilibrium selections.
    Keywords: Monotone comparative statics, Weakly decreasing functions, Strategic substitutes, Payoff functions
    JEL: C60 C61 C62 C72
    Date: 2008–09
  5. By: Ojo, Marianne
    Abstract: Over the years, there has been a shift from a wide command-and-control style of supervision whereby the regulator imposes detailed rules with which regulators supervise to one which consists of risk based regulatory strategies. ‘Enforced Self Regulation’, a regulatory strategy whereby negotiation takes places between the State and the individual firms, lies between the command-and-control style of supervision and meta risk regulation in that firms are still required to regulate but according to their own models. It differs from the traditional command-and-control style of bank supervision in that firms and not the regulator, are required to regulate. It is similar to meta-risk regulation in that the individual firm’s model is taken into consideration in regulating such firms. Whilst the merits and disadvantages of the individual regulatory strategies are considered, this paper concludes that all regulatory strategies should take into consideration the importance of management responsibilities – both on individual and corporate levels.
    Keywords: bank;regulation;risk;command;control
    JEL: K2
    Date: 2008–09
  6. By: Quatraro Francesco (University of Turin)
    Abstract: This paper empirically analyzes the effects of regional knowledge base on differential growth rates. Beyond the traditional view of knowledge as an homogenous asset, it considers further characteristics that qualify its heterogeneous features. The results of the empirical estimations provide support to the idea that knowledge characteristics are fare more important than knowledge capital. The check for spatial dependence suggests that crossregional externalities exert additional triggering effects on productivity growth, but without debasing the effects of knowledge. Important policy implications stem from the analysis, in that regional innovation strategies ought to be carefully coordinated so as to reach a higher degree of internal coherence and exert positive effects on productivity.
    Date: 2008–09
  7. By: Patrick A. Imam; Camelia Minoiu
    Abstract: We assess the competitiveness of Mauritius in recent years using two approaches. First, we estimate the difference between the equilibrium and the actual real exchange rate using four methods: the macroeconomic balance approach, the single-equation fundamentals approach, the capital-enhanced approach, and the external sustainability approach. The methods consistently suggest that at the end of 2007 the exchange rate was aligned with its equilibrium value. Second, we undertake a comparative analysis of structural competitiveness indicators and find that Mauritius often fares better on business climate than other small island economies and high-growth Asian economies. Nevertheless, there are areas for improvement.
    Keywords: Working Paper , Mauritius ,
    Date: 2008–09–09
  8. By: Catherine SCHAUMANS
    Abstract: We propose to estimate strategic interaction effects between general practitioners (GPs) and different specialist types to evaluate the viability threat for specialists associated to the introduction of a mandatory referral scheme. That is, we show that the specialists’ loss of patientele when patients can only contact them after a GP referral has important consequences for the viability of the specialist types whose entry decisions are strategic substitutes in GPs entry decisions. To estimate the strategic interaction effects, we model the entry decisions of different physician types as an equilibrium entry game of incomplete information and sequential decision making. This model permits identification of the nature of the strategic interaction effects as it does not rely on restrictive assumptions on the underlying payoff functions and allow for the strategic interaction effects to be asymmetric in sign. At the same time, the model remains computationally tractable and allows for sufficient firm heterogeneity. Our findings for the Belgian physician markets, in which there is no gatekeeping, indicate that entry decisions of dermatologists and pediatricians are strategic substitutes in the entry decisions of GP’s, whereas the presence of gynecologists, ophthalmologists and throat, nose and ear-specialists has a positive impact on GP payoffs of entry. Our results thus indicate that transition costs are likely upon the implementation of gatekeeping and that these costs are mainly associated to the viability of dermatologists and pediatricians.
    Keywords: entry, strategic interaction, GP’s, specialists, gatekeeping
    JEL: I11 L10
    Date: 2008–09
  9. By: Jean-Bernard LAYAN (GREThA-GRES); Yannick LUNG (GREThA-GRES)
    Abstract: The paper proposes a comparative analysis of the development of the automotive industry in Morocco and Tunisia. In its first part, it analyses the convergence in the forms of international integration, oriented towards a subcontracting towards European Union, which leads to competition and also complementarities between these two countries. The role of multinational firms and governmental policies is discussed. Location of these automotive activities is analyzed in Part 2 to evaluate the agglomeration factors and the limits of spatial concentration.
    Keywords: Automotive industry - European Union - Regional integration - Mediterranean Area - Multinational Firms - Morocco - Tunisia
    JEL: L62 F14 F23 N67 N87
    Date: 2008
  10. By: Yu-Fu Chen; Michael Funke
    Abstract: The role of product market reforms in achieving the objective of higher employment and growth has recently received much attention amongst academics. The aim of this paper is to analyse some of the channels through which cross-market effects come about and to assess their policy relevance. The analytic strategy of this paper relies upon the stochastic real options modelling approach. In a nutshell, our simulations using numerical methods indicate that comprehensive product market reforms would increase factor demand and growth significantly in the medium and long run.
    Keywords: Product market competition; Regulation; Real options; Investment; Employment
    JEL: C61 D81 D92 J23 L51
    Date: 2008–02
  11. By: Victor Aguirregabiria; Chun-Yu Ho
    Abstract: This paper studies the contribution of demand, costs, and strategic factors to the adoption of hub-and-spoke networks in the US airline industry. Our results are based on the estimation of a dynamic oligopoly game of network competition that incorporates three groups of factors which may explain the adoption of hub-and-spoke networks: (1) travelers value the services associated with the scale of operation of an airline in the hub airport (e.g., more convenient check-in and landing facilities); (2) operating costs and entry costs in a route may decline with an airline's scale operation in origin and destination airports (e.g., economies of scale and scope); and (3) a hub-and-spoke network may be an effective strategy to deter the entry of other carriers. We estimate the model using data from the Airline Origin and Destination Survey with information on quantities, prices, and entry and exit decisions for every airline company in the routes between the 55 largest US cities. As a methodological contribution, we propose and apply a simple method to deal with the problem of multiple equilibria when using the estimated model to predict the effects of changes in structural parameters. We find that the most important factor to explain the adoption of hub-and-spoke networks is that the cost of entry in a route declines very importantly with the scale of operation of the airline in the airports of the route. For some of the larger carriers, strategic entry deterrence is the second most important factor to explain hub-and-spoke networks.
    Keywords: Airline industry; Hub-and-spoke networks; Entry costs; Industry dynamics; Estimation of dynamic games; Counterfactuals with multiple equilibria
    JEL: C10 C35 C63 C73 L10 L13 L93
    Date: 2008–09–29
  12. By: Antti-Jussi Tahvanainen; Raine Hermans
    Abstract: ABSTRACT : This study scrutinizes the impact of value-creating practices in university-industry technology transfer that facilitate the diffusion of knowledge generated in academic research towards its successful application by companies on markets. To be more precise, the aim is to demarcate the role that US university technology transfer offices (TTOs), one of the consequential arrangements conjured into existence by the Bayh-Dole Act of 1980, play in matching the substance of academic research and the need-driven demand of commercial markets. In the process, they implicitly, yet strategically, guarantee the sustainability of the flow of technologies out of the laboratories towards market application, as their actions and motives uphold and sustain the incentive structures of both of the universes, the academic and the commercial. This is accomplished by performing and specializing in the very functions that neither universe has been able or willing to perform in order to take a step closer towards each other. These contributions are often hard to capture in quantitative measures, which has led to common criticism about the effectiveness of TTOs. We propose such measures to be used with care in the comparative evaluation of TTO performance, but also point at and recognize their value as parameters that can be utilized to internally monitor the performance of each TTO individually over time as a tool of management. Some alternative, Intellectual Capital based measures are suggested.
    Keywords: university technology transfer, technology transfer office, intellectual capital, knowledge management, Bayh-Dole Act, government intervention, value adding functions, value platform
    Date: 2008–09–22
  13. By: zamparelli, luca
    Abstract: This paper develops a growth model combining elements of endogenous growth and induced innovation literatures. In a standard induced innovation model firms select at no cost innovations from an innovation possibilities frontier describing the trade-off between increasing capital or labor productivity. The model proposed allows firms to choose not only the direction but also the size of innovation by representing the innovation possibilities through a cost function of capital and labor augmenting innovations. By so doing, it provides a micro-foundation both of the intensity and of the direction of technical change. The policy analysis implies that an increase in subsidies to R&D as opposed to capital accumulation raises per capita steady state growth, employment rate and wage share.
    Keywords: Induced innovation; endogenous growth; direction of technical change
    JEL: O33 O31 O40
    Date: 2008–02

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