nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2008‒10‒21
eighteen papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. Service-sector competition, innovation and R&D By Gustavsson Tingvall, Patrik; Karpaty, Patrik
  2. Cooperative Games in Strategic Form By Sergiu Hart; Andreu Mas-Colell
  3. Indústria transformadora portuguesa: especialização das regiões e/ou concentração geográfica de indústrias? By Natércia Godinho Mira
  4. Occupational Distribution within Swedish Industries - an identification and market relation analysis By Mellander, Charlotta
  5. Network Structure and Strategic Investments: An Experimental Analysis By Stephanie Rosenkranz; Utz Weitzel
  6. Swedish Listed Family Firms and Entrepreneurial Spirit By Bjuggren, Per-Olof; Palmberg, Johanna
  7. Imports, Productivity and the Origin Markets -the role of knowledge-intensive economies By Lööf, Hans; Andersson, Martin
  8. Penrose Revisited: A Re-Appraisal of the Resource Perspective By Iman Seoudi; Matthias Huehn; Bo Carlsson
  9. Entrepreneurial Innovations in Network Industries By Pehr-Johan Norbäck; Lars Persson; Joacim Tåg
  10. Satisficing in strategic environments: a theoretical approach and experimental evidence By Werner Güth; M. Vittoria Levati; Matteo Ploner
  11. The sources of use knowledge – towards a framework about use, consumption and industrial dynamics By Alexander Peine
  12. Network Effects and Geographic Concentration of Industry By Zhu Wang; Daniel Yi Xu
  13. New Export Activities in Brazil: Comparative Advantage, Policy or Self-Discovery? By Armando Castelar Pinneiro Author-X-Name_First: Armando Author-X-Name_Last: Castelar Pinneiro; Regis Bonelli Author-X-Name_First: Regis Author-X-Name_Last: Bonelli
  14. Knowledge, Creativity and Regional Development By Karlsson, Charlie; Johansson, Börje
  15. Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain? By Edward L. Glaeser; William R. Kerr
  16. An Agent-based Model of Retail Location with Complementary Goods By Arthur Huang; David Levinson
  17. Consumer Behavior: Product Characteristics and Quality Perception By Pires Gonçalves, Ricardo
  18. High-Technology Entrepreneurship in Silicon Valley Opportunities and Opportunity Costs By Robert Fairlie; Aaron Chatterji;

  1. By: Gustavsson Tingvall, Patrik (China Economic Research Center (CERC)); Karpaty, Patrik (Department of Economics)
    Abstract: The central prediction of the Aghion et al. (2005) model is an inverted U-shaped relation between innovation and competition. The model is built on the assumption of a product market and has not yet been empirically tested on service-sector firms. Using detailed firm-level data, we find the inverse U-shaped relation to hold for both small and large service-sector firms. However, non-exporting service firms deviate from the overall pattern. A more detailed breakdown of innovation expenditures shows that the inverse U-shaped pattern holds for both intramural R&D and training, but not for extramural R&D. Finally, as competition increases, small firms tend to seek more strategic alliances with competitors while large firms tend to decrease their collaboration with competitors. To some extent, the behavior of large firms can be due to their greater capacity to handle innovation projects internally and as competition increases, so does the payoff of an edge to competitors.
    Keywords: R&D; innovation; competition; service sector
    JEL: D40 L10 L60 O30
    Date: 2008–10–10
  2. By: Sergiu Hart; Andreu Mas-Colell
    Date: 2008–10–12
  3. By: Natércia Godinho Mira (Universidade de Evora, Departamento de Gestão, CEFAGE-UE)
    Abstract: In spite of the relation between industrial specialisation and geographic concentration of industries, these are two different concepts. After clarifying both, the aim of this paper is to analyze the structural change on Portuguese manufacturing industry from two perspectives: the specialisation of regions in particular sectors and the regional concentration of those sectors (industries). Our empirical study uses yearly data for the period 1996 - 2004 and made use of absolute indicators to measure whether individual industries became more or less concentrated in Portuguese regions, and whether the industry structure of the Portuguese regions became more similar. In the first case we talk about geographical concentration of industries, in the second about a decrease of sectoral specialisation of regions. The results suggest a high level of concentration and a variable level of specialisation between regions.
    Keywords: European Integration; Industrial Specialisation; Geographic Concentration; Industries Location.
    JEL: F15 L60 R10 R30
    Date: 2008
  4. By: Mellander, Charlotta (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper sheds new light on the Swedish industry structure, by defining it through its occupational and educational structure. It is a merge of all Swedish private firms and all individuals employed within those firms, aggregated over industry, for the year 2001. Education is separated from creative occupations, and we also identify industries with the largest concentration of service and manufacturing occupations. The growth pattern within the industry segments between 1993 and 2001 is provided, and an examination of the spatial distribution. While there is a close relation between larger markets and knowledge, creative and service industries, we can detect a weaker link to the manufacturing industries. The effect from being located in the main urban area within the urban region, as well as within one of the three metropolitan regions, is highly significant for all industries, but relatively weaker for the manufacturing industry. The results also imply that diversity and creativity, in terms of the number of establishments, closely relate to the metropolitan regions. The concentration of activities, in terms of the number of employees, is more driven by large markets in general.
    Keywords: Occupation; Industry; Creativity; Knowledge; Market Size
    JEL: J24 R30
    Date: 2008–10–13
  5. By: Stephanie Rosenkranz; Utz Weitzel
    Abstract: This paper analyzes the effects of network positions and individual risk attitudes on individuals' strategic decisions in an experiment where actions are strategic substitutes. The game theoretic basis for our experiment is the model of Bramoulle and Kranton (2007). In particular, we are interested in disentangling the influence of global, local and individual factors. We study subjects' strategic investment decisions in four basic network structures. As predicted, we find that global factors, such as the regularity of the network structure, influence behavior. However, we also find evidence that individual play in networks is to some extent boundedly rational, in the sense that coordination is influenced by local and individual factors, such as the number of (direct) neighbors, local clustering and individuals' risk attitudes.
    Keywords: networks, experiment, coordination, strategic substitutes, risk aversion
    JEL: C91 D00 D81 D85 C72 H41
    Date: 2008–05
  6. By: Bjuggren, Per-Olof (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Palmberg, Johanna (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper investigates the entrepreneurial spirit in Swedish listed family firms. We associate family firms with entrepreneurship in the sense that there is an identifiable person that takes the uninsurable risk in the sense of Knight. This paper analysis two questions: Do entrepreneurial family firms have a higher rate of growth and do they invest in a more profit maximizing fashion than other listed firms? The analysis shows that entrepreneurial family firms in general are smaller in terms of market value and investments than non-family firms. Moreover, the entrepreneurial family firms are the ones that makes the most efficient investments.
    Keywords: Entrepreneurship; Corporate Governance; Family Firms; Investments; Firm Performance
    JEL: C23 G30 L25 L26
    Date: 2008–10–13
  7. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper investigates whether domestic firms’ productivity is an increasing function of imports from the most knowledge intensive economies in the world, i.e. the G7 countries. Using Swedish firm-level data, we confirm an instantaneous causality going from imports to productivity. We also show that productivity is increasing in the G7-fraction of total imports. Our results highlight the importance of import flows from R&D and knowledge intensive economies for productivity and are consistent with imports being a vehicle for technology diffusion. Tests of the sensitivity of the results suggest that G7 imports are particularly important for firms in high-technology sectors and for firms belonging to multinationals and domestic corporations.
    Keywords: Technology diffusion; productivity; imports; panel data; GMM
    JEL: C81 F14 L10 L60 O33
    Date: 2008–10–13
  8. By: Iman Seoudi (Faculty of Management Technology, The German University in Cairo); Matthias Huehn (Faculty of Management Technology, The German University in Cairo); Bo Carlsson (Department of Economics, Case Western Reserve University)
    Abstract: This paper presents a revision and re-structuring of the Resources/Capabilities/Competences (RCC) perspective, arguably the most important research program in strategy, based on a thorough epistemological analysis and a re-interpretation of Edith Penrose’s 1959 classic. Three distinct schools of thought are identified and differentiated according to a set of dimensions spanning the epistemological, methodological and conceptual domains. The three schools are: 1) The rational-equilibrium school; 2) the behavioral-evolutionary school; 3) the constructionist school. For each school, the pertinent literature is briefly reviewed followed by an in-depth analysis of the underlying theoretical framework. Important implications are drawn for scientific progress in the field.
    Keywords: Epistemology, Resource Based View, Core Competences, Dynamic Capabilities, Strategy
    JEL: O30 L10 L40 B40
    Date: 2008–10
  9. By: Pehr-Johan Norbäck (Research Institute of Industrial Economics (IFN)); Lars Persson (Research Institute of Industrial Economics (IFN)); Joacim Tåg (Research Institute of Industrial Economics (IFN))
    Abstract: In this paper, we study entrepreneurial innovations in an industry characterized by network effects. We show that the presence of network externalities tends to make the entrepreneur prefer sale to entry. Moreover, we also show that the incentive to innovate for entry decreases when network effects become stronger, whereas there is an increase in the incentive for innovation for sale. Moreover, we show that increasing the degree of industry-wide standardization furthers the goal of increasing entry by entrepreneurs. However, this may come at the cost of reducing the research intensity by reducing the bidding competition among incumbents over the innovations of entrepreneurs.
    Keywords: Entrepreneurship, Entry, Compatibility, Innovation, Network Effects, Standardization.
    JEL: D40 L10
    Date: 2008–09
  10. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Matteo Ploner (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany, and University of Trento, Italy)
    Abstract: The satisficing approach is generalized and applied to finite n-person games. Based on direct elicitation of aspirations, we formally define the concept of satisficing, which does not exclude (prior-free) optimality but includes it as a border case. We also review some experiments on strategic games illustrating and partly supporting our theoretical approach.
    Keywords: Strategic interaction, Satisficing behavior, Bounded rationality
    JEL: C72 C92 D01
    Date: 2008–10–16
  11. By: Alexander Peine
    Abstract: This paper reviews three strands of the innovation literature that have presented innovation as a distributed process that combines knowledge of users, designers and manufacturers: user innovations, Science and Technology Studies (STS), and the study of consumption. These literatures have explored different aspects of the micro-processes through which use and design are locally aligned. This paper pulls together insights from these literatures, and identifies an important gap: the connections between the local alignment of use and design and the macro dynamics of industrial and technological change. The paper then calls for an analysis of the social processes that link the dynamics of the use environment, where forms and meanings of use are actively created, with the technical knowledge bases of industries. It concludes with a number of propositions towards an integrated framework of use, consumption and industrial dynamics.
    Keywords: use knowledge
    Date: 2008–10
  12. By: Zhu Wang (Economic Research Department, Federal Reserve Bank of Kansas City.); Daniel Yi Xu (Department of Economics, New York University.)
    Abstract: This paper provides a theory of “family network”, in contrast to “local externalities”, to explain the geographic concentration of industry. For many industries, one most important source of entrants is spinoffs, who typically locate near parent firms and benefit from knowledge linkage and business relation within the family network. As a result, firms are more likely to enter and less likely to exit if they are associated with a large family. Using a unique dataset of US automobile industry in its early years, we identify six historically important production centers and sixty spinoff families. Our empirical analysis disentangles the effect of “family networks” from other “local externalities,” and provides strong evidence that it was the former rather than the latter that caused the geographic concentration of US automobile production.
    Keywords: Spinoffs, Entry and Exit, Geography of Industry
    JEL: J6 L0 R1
    Date: 2008–09
  13. By: Armando Castelar Pinneiro Author-X-Name_First: Armando Author-X-Name_Last: Castelar Pinneiro; Regis Bonelli Author-X-Name_First: Regis Author-X-Name_Last: Bonelli
    Abstract: This paper examines Brazil’s export discoveries in aircraft, cell phones and swine meat. All cases confirm the importance of efficiency gains and sunk costs in the expansion of exports and lead to the following conclusions: both economic policy and comparative advantage played important roles in the emergence of new export activities; economies of scale were a crucial determinant of competitiveness; and a well-known brand helped to overcome information asymmetries and facilitate entry into export markets. Exporters concentrated on design, marketing, R&D, and product assembly, making coordination with suppliers an important element in their strategies. Public policy additionally had a strong if sometimes unintended influence. While governments can foster discoveries, especially in the presence of market failures, policy alone cannot produce a successful exporter.
    Date: 2008–07
  14. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The understanding of economic development in regions in developed countries has gone through a fundamental change during recent decades. Nowadays, regions are increasingly looked upon as independent, dynamic market places that are connected via flows of interregional and international trade. Regional development is driven by changes in the economic specialisation, which can be explained by two different, but complementary theoretical frameworks for analysing location and trade, one old and one new.The old theoretical framework assumes that changes in the economic specialisation of regions depend upon changes in the supply of durable and semi-durable regional characteristics. The new theoretical framework, known as the new economic geogra¬phy, assumes that changes in the economic specialisation of regions are driven by the dynamic interaction between regional market potentials and rational firms experienc¬ing increasing returns. In their pure form, these theoretical frameworks can explain changes in regional economic specialisation and consequently regional develop¬ment without any reference to knowledge creation and other changes in knowledge assets. This is certainly a bit odd for a period of history often referred to as the era of the knowledge economy. So, does knowledge have no role to play as a force driving re¬gional spe¬cialisation and regional development? Or, is it so that the traditional “knowledge free” explanations of changes in regional specialisation and regional de¬velopment are missing important points? In this paper, we claim that knowledge infrastructure, human capital, talent, creativ¬ity, knowledge generation, knowledge protection, knowl¬edge accumulation, knowl¬edge appropriation, knowl¬edge flows, etc. as well as the creative use of knowledge are basic drivers of the spe¬cialisation of regions and hence of regional development. The purpose is to discuss the role of knowledge and talent in regional de¬velopment seen in both a regional and a global context.
    Keywords: creativity; knowledge; innovation; regional development
    JEL: O10 R10 R11
    Date: 2008–10–13
  15. By: Edward L. Glaeser (Harvard University, John F. Kennedy School of Government; Faculty of Arts and Sciences); William R. Kerr (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: Why are some places more entrepreneurial than others? We use Census Bureau data to study local determinants of manufacturing startups across cities and industries. Demographics have limited explanatory power. Overall levels of local customers and suppliers are only modestly important, but new entrants seem particularly drawn to areas with many smaller suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also strongly predict entry. These forces plus city and industry fixed effects explain between sixty and eighty percent of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns.
    Keywords: Entrepreneurship, Industrial Organization, Agglomeration, Labor Markets, Input-Output Flows, Innovation, Research and Development, Patents.
    JEL: J2 L0 L1 L2 L6 O3 R2
    Date: 2008–10
  16. By: Arthur Huang; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: This paper examines the emergence of retail clusters on a supply chain network comprised of suppliers, retailers, and consumers. An agent-based model is proposed to investigate retail location distribution in a market of two complementary goods. The methodology controls for supplier locales and unit sales prices of retailers and suppliers; a consumer's willingness to patronize a retailer depends on the total travel distance of buying both goods. On a circle comprised of discrete locations, retailers play a non-cooperative game of location choice to maximize individual proÞts. Our Þndings suggest that the number of clusters in equilibrium follow a power-law distribution and that hierarchical distribution patterns are much more likely to occur than the spread-out ones. In addition, retailers of complementary goods tend to co-locate at supplier locales. Sensitivity tests on the number of retailers and retailers' sequence of moving are also performed.
    Keywords: clustering, agent-based model, location choice, power-law distribution pattern, retailing
    JEL: R30 L22
    Date: 2008
  17. By: Pires Gonçalves, Ricardo
    Abstract: Consumers rely on signals, both extrinsic and intrinsic attributes, to solve their asymmetric information problem regarding product quality. In this study an experiment is designed to evaluate how consumers assess quality perception in terms of specific product characteristics, namely colors and shapes in product labels. According to the cue consistency theory, the prediction is that multiple sources of information are more useful when they provide corroborating information than when they offer disparate conclusions. In this sense, particular colors and shapes combinations which are consistent are expected to enhance consumers´ product quality perception, while other combinations that are inconsistent will decrease it.
    Keywords: Consumer; Behavior; Quality Perception; Label; Color; Shape
    JEL: M31 C91
    Date: 2008–09
  18. By: Robert Fairlie (University of California, Santa Cruz); Aaron Chatterji (Duke University);
    Abstract: The economic expansion of the late 1990s undoubtedly created many opportunities for business creation in Silicon Valley, but the opportunity cost of starting a business was also high during this period because of the exceptionally tight labor market. A new measure of entrepreneurship derived from matching monthly files from the Current Population Survey (CPS) is used to provide the first test of the hypothesis that entrepreneurship rates were high in Silicon Valley during the "Roaring 90s." Unlike previous measures of firm births based on large, nationally representative datasets, the new measure captures business creation at the individual-owner level, includes both employer and non-employer business starts, and focuses on only hi-tech industries. Estimates from the matched CPS data indicate that hi-tech entrepreneurship rates were lower in Silicon Valley than the rest of the United States during the period from January 1996 to February 2000. Controlling for the large concentration of immigrants and highly-educated workforce does not change the conclusion. Examining the post-boom period, we find that entrepreneurship rates in Silicon Valley increased from the late 1990s to the early 2000s. In contrast, trends in entrepreneurship rates in the United States were constant over this period. Although Silicon Valley may be an entrepreneurial location overall, the extremely tight labor market of the late 1990s, especially in hi-tech industries, may have suppressed business creation during this period.
    Keywords: entrepreneurship, Silicon Valley, hi-tech
    JEL: L26
    Date: 2008–09

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