nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2012‒04‒17
seventeen papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. A Regional Model of Endogenous Growth with Creative Destruction By Steven Bond-Smith
  2. Productivity Growth and Job Creation in the Development Process of Industrial Clusters By Tetsushi Sonobe; Yuki Higuchi; Keijiro Otsuka
  3. Measuring Italian university efficiency: a non-parametric approach By Monaco, Luisa
  4. State of an innovation system: theoretical and empirical advance towards an innovation efficiency index By Montalvo, Carlos; Moghayer, Saeed
  5. Linkage between productivity and innovation in different service sectors By Rõigas, Kärt
  6. Management Practices, Self-Selection into Management Training Participation, and Training Effects in the Garment Industry in Ethiopia By Girum Abebe; Tetsushi Sonobe
  7. Trust as a consequence of perceived commitment: Implications on organizational learning capability and product innovation By Joaquín; Juan Carlos
  8. Bank firm nexus and its impact on firm performance: an Indian case study By Saumitra, Bhaduri; Sunanda, Rathi
  9. Product Architecture and Human Resource Management: Comparing Japanese, Chinese, and Korean Firms Based on a Questionnaire Survey By Tsuru, Tsuyoshi; Nakajima, Kentaro
  10. Industry-based methodological approaches to the measurement of Creative Industries: a theoretical and empirical account By Sara Santos Cruz; Aurora A.C. Teixeira
  11. Technological Innovation in New European Union Markets By Ainura Uzagalieva; Evžen Kočenda; Antonio Menezes
  12. The industrial organization of competition in local bus services By Philippe Gagnepain; Marc Ivaldi; Catherine Vibes
  13. From Mind to Market: A Global, Dynamic Analysis of R&D By Hinloopen, J.; Smrkolj, G.; Wagener, F.O.O.
  14. Improving Ethical Decision-Making in Organizations through Ethical Competencies By Rafael Morales Author-1-Name-First: Rafael Author-1-Name-Last: Morales; Carmen Cabello Author-2-Name-First: Carmen Author-2-Name-Last: Cabello
  15. The Effect of Salvage Market on Strategic Technology Choice and Capacity Investment Decision of Firm under Demand Uncertainty By Kashefi, Mohammad Ali
  16. Functional approach to national systems of innovation: The case of a small catching-up country By Tamm, Dorel; Ukrainski, Kadri
  17. Competition for Managers, Corporate Governance and Incentive Compensation By Acharya, Viral V; Gabarro, Marc; Volpin, Paolo

  1. By: Steven Bond-Smith (University of Waikato)
    Abstract: We examine endogenous growth through vertical innovations in a two region model with partial regional and varietal knowledge spillovers. This paper extends the growth literature by adding a regional endogenous growth model with improvements in product quality, instead of a product variety engine for growth, where we account for partial knowledge spillovers in R&D. Starting with the quality ladders endogenous growth model we add traditional goods production by unskilled workers, location as a factor in R&D spillovers, migration of knowledge workers and vary the freeness of trade. Production of each manufactured variety is contestable through vertical innovation based on available knowledge and as a result, firms choose a location to maximise the productivity of R&D, maintain their niche monopoly and minimise transport costs. With contestability, knowledge spillovers provide for additional growth and the partial nature of spillovers causes an additional clustering effect encouraging agglomeration. Growth is highest when there is full agglomeration in one location, as knowledge spillovers are greater with manufacturing concentration. Agglomerated locations are reliant on local inter-varietal knowledge spillovers for growth while peripheral locations rely on trade and regional knowledge spillovers. In the long run, locations experience equal growth rates. If a location becomes agglomerated, it has higher long-run wages and higher growth rates during the transition to the long run. The model offers policy implications for lagging economies to improve inter-regional knowledge spillovers while agglomerated economies should be more concerned with business interaction within the region. Policies which reduce barriers to migration will increase long run growth rates by accelerating the transition to agglomeration.
    Keywords: endogenous growth; new economic geography; innovation; knowledge spillovers; agglomeration; quality ladders; creative destruction
    JEL: O41 R10
    Date: 2012–04–07
  2. By: Tetsushi Sonobe (National Graduate Institute for Policy Studies); Yuki Higuchi (National Graduate Institute for Policy Studies); Keijiro Otsuka (National Graduate Institute for Policy Studies)
    Abstract: Poor management has long been suspected as a major constraint on job creation in the manufacturing sector in low-income countries. In this sector, numerous micro and small enterprises in industrial clusters account for a large share of employment. This paper examines the roles of industrial clusters and entrepreneurship in improving productivity and creating jobs, by reviewing the literature and case studies, including recent experiments. We find that the managerial capacity of entrepreneurs largely determine firms’ employment sizes, that their innovative capacity is a major determinant of productivity growth, and that entrepreneurship consisting of these capacities boosts cluster-based industrial development.
    Keywords: job creation, labor productivity, industrial cluster, management, entrepreneurship
    Date: 2012–03
  3. By: Monaco, Luisa
    Abstract: This work analyses the performance of Italian universities taking into account technical efficiency. The study provides an assessment of levels of technical efficiency taking into account also environmental factors. We focus on the relationship between levels of technical efficiency and university students dropouts. The efficiency analysis, using Data Envelopment Analysis, w.r.t. the 2009/10 academic year, shows that universities belonging to the private sector have higher efficiency scores than public owned universities. Moreover, a difference arises on a geographical basis where centre-northern universities are generally more efficient than southern ones.
    Keywords: Technical efficiency – DEA – Second stage analysis; Technical efficiency – DEA – Second stage analysis JEL Classification:
    JEL: C14 I23 I21
    Date: 2011–12–10
  4. By: Montalvo, Carlos; Moghayer, Saeed
    Abstract: Innovation is currently seen as a cornerstone not only for economic development but also as an intrinsic human activity that could help to face the great challenges of human kind. Given the importance of innovation in the new European 2020 Strategy, measuring progress but also monitoring what drives innovation becomes crucial for policy development. Following upon this strategy the new European flag initiative “Innovation Union” called for a new “single” indicator on innovation. Currently the information infrastructure on innovation in Europe contains a number of indicators. Most of the current indicators at the national or sector levels use a performance theoretical framework based on an efficiency model of inputs and outputs. The last five editions of CIS have been a bastion of innovation policy research during the last decade. Despite this, CIS has been criticised for not having an umbrella framework that unifies its different underpinnings to explain what drives innovation to actual innovation and economic outcomes. In this paper we propose a framework that enables the theoretical and empirical linkages between the drivers of innovation to innovation performance via the integration of core features determining innovative behaviour in to a single composite. This index enables to assess the total propensity of firms to innovate and assess the relative innovation performance at the sector and country level. The approach adopted here to create the index overcomes long standing theoretical and methodological issues related to the reduction of complexity in a meaningful form, scope, aggregation, normalisation and validation of innovation composites. The empirical demonstration of the index was done using CIS4 data and the results validate the theoretical structure and robustness of the proposed model. This enables its replication for innovation policy analysis in different settings. The model underlying the proposed index provides not only a depiction of the efficiency of the innovation system but also a link to economic performance and to the factors that determine relative performance.
    Keywords: Innovation indicators; Innovation performance; innovation efficiency; innovation intensity; theory of planned behaviour; CIS; single indicator; composite indicators; sectoral innovation indicators; behavioral economics; psychological economics;
    JEL: D03 D7 C43 O3
    Date: 2011–10–28
  5. By: Rõigas, Kärt
    Abstract: The purpose of the paper is to find out whether linkages between productivity and innovation are different among Estonian service sector sub-sectors. In this paper productivity is measured as value added per employee. An original approach toward measurement of productivity is used, decomposing it into three components: labour costs, depreciation and gross profit per employee. Four types of innovation are studied: product, process, organizational and marketing innovation. The empirical analysis is based on productivity data from the Estonian Business Register and innovation data from the Estonian Community Innovation Survey 5, covering the period between 2004 and 2006. Results based on Estonian service sectors reveal that in different sub-sectors different types of innovation are linked to productivity. Still, all linkages between innovation and productivity or its components are positive. There is one exception: among assisting services marketing innovation and gross profit are negatively associated with each other. --
    Keywords: service sector,productivity,productivity components,four innovation types
    Date: 2011
  6. By: Girum Abebe (Ethiopian Development Research Institute, Ethiopia); Tetsushi Sonobe (National Graduate Institute for Policy Studies)
    Abstract: Many observational studies of micro and small enterprises have found that enterprise performance and education levels of entrepreneurs are positively associated. Does it follow that entrepreneurs’ management capacities depend on their academic achievements? This paper examines what types of entrepreneurs participated in a managerial training program held in Ethiopia, who benefited more from the program, and who had better management knowledge before the program. We find that highly educated entrepreneurs were more willing to learn about management, more knowledgeable about management, and gaining more from the training program, but that such simple relationships are missing among entrepreneurs operating larger enterprises.
    Keywords: Africa, Ethiopia, education, management practices, management training
    Date: 2012–03
  7. By: Joaquín (Departamento de Organización de empresas y Marketing, Universidad Pablo de Olavide); Juan Carlos (Departamento de Organización de empresas y Marketing, Universidad Pablo de Olavide)
    Abstract: This paper aims at explaining the role performed by organizational commitment, trust and organizational learning capability (OLC) regarding product innovation and, more specifically, testing double mediation from a manager perspective. On the one hand, we test the mediator role performed by supervisors’ trust between the employees commitment perceived by managers and organizational learning capability. On the other, we test the mediator role performed by organizational learning capability between the trust provided by supervisors and product innovation. Our findings thus indicate that, although some commitment was perceived and both supervisors’ trust and OLC show significant relationships, trust does not mediate between these variables. Also, we conclude that trust is related to product innovation through organizational learning capability, which verifies its full mediator role. We conclude that, first, OLC is the mechanism by which the trust perceived by employees has an impact on innovation, and second, the manager decides to trust those employees that display commitment..
    Keywords: North-South, growth model, innovation assimilation
    Date: 2012–04
  8. By: Saumitra, Bhaduri; Sunanda, Rathi
    Abstract: The paper examines the role of banking relationships on firm performance for a sample of Indian manufacturing firms. The two variables used to portray banking relationships are: the extent of bank borrowing and the number of banking relationships maintained by a firm. Analysis suggests that while the extent of bank borrowing has a negative impact on firm performance, the multiple banking relationships maintained by a firm positively enhances firm performance. In addition, firm performance plays an important role in influencing bank borrowing and the number banking relationships a firm maintains. While banking relationships are positively impacted by firm performance, results suggest nonlinearity between bank financing and firm performance, suggesting the possibility of a potential debt overhang concern. This implies that firms with low growth opportunities tend to borrow more from banks due to lack of other opportunities to finance their investments. However, firms beyond a certain threshold of profitability tend to employ lesser debt to finance their investments in order to prevent the wealth transfer from shareholders to creditors.
    Keywords: Bank Firm Realationship India
    JEL: E52
    Date: 2012–04–10
  9. By: Tsuru, Tsuyoshi; Nakajima, Kentaro
    Abstract: Using data from a questionnaire survey focusing on firms from Japan, China, and South Korea, this paper empirically examines the complementarity between product architecture and human resource (HR) management. The results of the analysis can be summarized as follows. First, in Japan and Korea, firms were more or less evenly divided between those employing a modular and those employing an integral architecture. On the other hand, in China, more firms employed a modular architecture. Second, with regard to HR management practices and customs, there were differences in the emphasis of internal training of new graduates and the emphasis of mid-career recruitment. Japan and China are at the two extremes, with firms in the former tending to emphasize the recruitment of new graduates and firms in the latter emphasizing mid-career recruitment, while firms from Korea were in-between, but closer to Japan. Third, we found that, in Japan, development performance was significantly higher when product architecture and HR management were appropriately combined. However, we did not find such significant effect for the case of Korea and China. And fourth, we found that when we drop the assumption that the relationship between the combination of product architecture and HR management on the one hand and development performance on the other is linear and examine the non-linear effect of the former on the latter, both in Japan and Korea, the more that firms approach the best combination, the more their development performance increases.
    Date: 2012–03
  10. By: Sara Santos Cruz (CEF.UP, Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Tec; OBEGEF)
    Abstract: The rising interest in the creative economy has encouraged several authors both in the political and academic spheres to focus on creative industries and cultural activities and assess their effects on regional and national development. The issue of measurement has, however, limited the analysis considerably. Despite progress at the theoretical and empirical levels, there is a generalized lack of clear definitions and estimations as to what represents cultural activities and creative industries. This paper critically reviews the growing corpus of literature on approaches to the measurement of creative industries. Moreover, it presents a detailed mapping of the creative sectors and estimates the relative weight of creative industries according to relevant industry-based methodologies, using a unique dataset (Quadros de Pessoal, Portugal), which includes over 3 million workers, and that permits an accurate comparative analysis of the different methodologies under study. The choice of approach when measuring creative industries is relevant in estimating the importance of such industries. Indeed, depending on the approach used, the importance of creative industries in Portugal differs, ranging from 2.5% (DCMS Model) to 4.6% (WIPO copyright model). In order to overcome the limitations of existing methodologies, we proposed a new industry-based approach focusing on core creative industries. According to the proposed methodology, core creative industries represent 3.5% of Portuguese employment, in which ‘Software publishing’ and ‘Computer/IT consultancy’ (1.0%), ‘Publishing’ (1.0%), and ‘Advertising and Marketing’ (0.4%) are the most relevant sub-segments.
    Keywords: Creative Industries; Industry-based Methodology; Measurement
    JEL: L80 R12 C80 C81
    Date: 2012–04
  11. By: Ainura Uzagalieva (Centre of Applied Economics Studies of the Atlantic at the Department of Economics and Management, the University of the Azores, Portugal); Evžen Kočenda; Antonio Menezes
    Abstract: We analyze the role of innovation in the technological development of four new EU members: the Czech Republic, Hungary, Poland and Slovakia. For that purpose, we use a novel approach by modeling the empirical relationship between intra-industrial bilateral trade flows, which proxy the level of technological progress, and innovation expenditures within the context of a gravity model with a set of appropriate instrumental variables to account for the potential endogeneity of innovation to trade. We show that innovation efforts in high-tech industries exhibit a strong effect on the technological progress of the region and they are closely linked to foreign direct investment and multinationals. As foreign-owned subsidiaries become a part of the innovation systems and industrial structure of the host country they promote overall technological growth in the region.
    Keywords: foreign direct investment, innovation, imitation, international trade, European Union
    JEL: C51 F14 F21 O31
    Date: 2012–03
  12. By: Philippe Gagnepain (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Marc Ivaldi (TSE - Toulouse School of Economics - Toulouse School of Economics); Catherine Vibes (TSE - Toulouse School of Economics - Toulouse School of Economics)
    Abstract: This article is aimed at deepening our understanding of the functioning of competition in the local bus transportation industry and to evaluate its effectiveness. It provides an overview of the competitive constraints that are at work in the industry as discussed in the economic literature, and sketches empirical tests to check whether the intuitions provided by the economists are in line with the reality of the industry.
    Date: 2011
  13. By: Hinloopen, J. (University of Amsterdam); Smrkolj, G. (University of Amsterdam); Wagener, F.O.O. (University of Amsterdam)
    Abstract: Existing models of R&D are not easily reconciled with four observable aspects of R&D: initial technologies (“ideas”) need to be developed further, only a minority of initial ideas is successfully brought to the market, production and process innovations take place simultaneously (whereby, initially, there is no production at all), and process innovations are implemented for technologies that are destined to leave the market. We present a detailed bifurcation analysis for a dynamic model of R&D that captures these observations in one, unifying framework. As we provide a global analysis, we do not limit initial technologies to carry marginal costs that are below the choke price. We show that there always exists a critical value of initial marginal cost above which the firm does not initiate any (R&D) activity; the saddle-point steady state is never globally optimal. We also sketch some policy implications of our analysis.
  14. By: Rafael Morales Author-1-Name-First: Rafael Author-1-Name-Last: Morales (Department of Business Administration, Universidad Pablo de Olavide); Carmen Cabello Author-2-Name-First: Carmen Author-2-Name-Last: Cabello (Department of Business Administration, Universidad Pablo de Olavide)
    Abstract: This research conceptualizes ethical competencies as a factor that can help to improve the understanding of ethical decision-making process in organizations. The authors discuss some limitations of existing models that describe the components of the ethical decision-making process as well as the main factors influencing on it. To overcoming these limitations, the authors propose the concept of ethical competencies as the set of knowledge, skills, and abilities acquired by experience which facilitates the engagement in ethical behaviours that produce an excellent performance in a specific job. The paper theoretically addresses how ethical competencies can influence each component of the ethical decision making process. In addition, the benefits of ethical behaviour for both individuals and organizations are discussed. Finally, some interesting managerial implications are also addressed.
    Keywords: Ethical decision-making process. Ethical competencies. Individual and Organizational Benefits. Ethical / unethical behaviour. Competencies.
    Date: 2012–04
  15. By: Kashefi, Mohammad Ali
    Abstract: This paper examines the effect of salvage market on strategic technology choice and capacity investment decision of two firms that compete on the amount of output they produce under demand uncertainty. A game theoretic model applies such that in the first stage firms choose their production technology between two alternatives: modular production process (flexible technology) or unified production process (inflexible technology). Then at the second stage they decide on the amount of capacity investment: flexible firm makes decision about general and specific components’ capacity and inflexible firm just about unified component (final product). One stage forward both enter the primary market in which demand is uncertain and play a duopoly Cournot game on the amount of quantity they manufacture and finally at the last stage, flexible firm will be able to sell its unsold general components in the secondary market (salvage market) with a deterministic price. Solving optimization problems of the model results in intractable equations which lead us to employ numerical studies considering a specific probability distribution to observe equilibrium behavior of competing firms. Broad range of parameters with respect to established relationships among them have been examined in order to cover all the possible economically reasonable scenarios. Findings are expressed explicitly in the form of observations where we demonstrate that with symmetric parameterization there is a unique symmetric Nash equilibrium in which both firms choose inflexible technology while applying asymmetric parameters has the potential to form two types of equilibrium when 1. Both firms choose inflexible technology or 2. Only one firm chooses flexible technology. Moreover it is shown that there is a specific unified cost threshold that could shift the equilibrium of the game. Finally we discuss on the case that there is no equilibrium and mention some managerial implications of the model.
    Keywords: Salvage Market; Modular and Unified Production Process; Product Postponement; Demand Uncertainty; Investment Decision; Operation Management
    JEL: D21 M11 L13 C88 C61 C72
    Date: 2012–03–20
  16. By: Tamm, Dorel; Ukrainski, Kadri
    Abstract: Although systems of innovation approach is gaining popularity among researchers and policy-makers, it is still rather difficult to apply this approach to specific policy settings and designs, because the approach is too general and does not provide many direct suggestions for building up an innovation system. It is often pointed out that in catching-up countries the innovation policy is not aligned with the specific circumstances of the innovation systems, but copies similar policies in more developed countries instead. This article finds by analysing the functional side of Estonian national innovation system, that the functions involving the provision of knowledge inputs and constituents of the innovation system, but also support services for innovating firms rather than demand-side activities are recognized by local policy designers. We suggest that by aligning the structure of the innovation system, more coherent logic of public-private co-evolution and better alignment of respective innovation policy measures should be followed. By looking at individual functions, it is clear, that the demand-side activities of innovation policy can be used more to enhance innovation activities in a more targeted way. More generally, we find that the functions that public sector performs in a national innovation system, should be designed and developed carefully in a balanced way, which is especially important for a small catching-up country, where the risk to create misalignments in the system is larger. --
    Keywords: innovation system,catching-up countries
    Date: 2011
  17. By: Acharya, Viral V; Gabarro, Marc; Volpin, Paolo
    Abstract: We propose a model in which better governance incentivizes managers to perform better and thus saves on the cost of providing pay for performance. However, when managerial talent is scarce, firms' competition to attract better managers reduces an individual firm's incentives to invest in corporate governance. In equilibrium, better managers end up at firms with weaker governance, and conversely, better-governed firms have lower-quality managers. Consistent with these implications, in a sample of US firms, we show that (i) better CEOs are matched to firms with weaker corporate governance and more so in industries with stronger competition for managers, and, (ii) corporate governance is more likely to change when there is CEO turnover, with governance weakening when the incoming CEO is better than the departing one.
    Keywords: corporate governance; executive compensation; externalities
    JEL: D82 G18 G21
    Date: 2012–04

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