nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2014‒01‒10
twenty papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. Covariance structure analysis of innovation and ICT use among Japanese innovative SMEs By Idota, Hiroki; Bunno, Teruyuki; Tsuji, Masatsugu
  2. How to Define and Analyze Business Model Innovation in Service By Xavier Pavie; Eva Hsu; Hanns Justus Tillman Rödle; Raquel Orozco Tapia
  3. Perceptions of international trade barriers: Empirical study of small apparel firms By Chakrabarty, Subhajit; Nag, Biswajit
  4. Structure of technology evolution: The way on which ICT industry emerged in Korea By Kim, Kibae; Jung, Sungdo; Lee, Changjun; Hwang, Junseok
  5. Role of the public ICT networks in facilitating innovation: Lessons from India By Jain, Rekha
  6. In the wake of the global crisis : evidence from a new quarterly database of export competitiveness By Gaulier, Guillaume; Santoni, Gianluca; Taglioni, Daria; Zignago, Soledad
  7. Liderança de Mercado na Indústria Automobilística Brasileira: O Caso da Marcopolo By Luiz Ricardo Cavalcante; Bruno César Araújo
  8. Flexibility and Diversity: the putting-out system in the silk fabric industry of Kiryu, Japan By NAKABAYASHI, Masaki
  9. Russian information and communication technologies, and infrastructure formation of innovation economy By Petukhova, Svetlana; Strepetova, Margarita
  10. The impact of the exports of BRIC countries plus Turkey on the exports of Pakistan By Nakhoda, Aadil
  11. An Integration of Responsible Innovation in the Financial Sector through Design Thinking By Xavier Pavie; Daphné Carthy
  12. Nonprofit tax exemptions and market structure: The case of fitness centers By Harrison, Teresa; Seim, Katja
  13. Twenty years of rural entrepreneurship: a bibliometric survey By Maria Lúcia Pato; Aurora A.C. Teixeira
  14. Executive Compensation: Pay-for-Performance in High-Technology Firms By Paula Faria; Franscisco Vitorino Martins; Elísio Brandão
  15. Introduction of dynamic spectrum management technologies: The role of industry openness and spectrum policy By Basaure, Arturo; Sridhar, Varadharajan
  16. The digital complexity in destination branding: the case of Portugal as tourism destination By Oliveira, Eduardo
  17. Strategy scenario selection in the competition of mobile ecosystems By Lee, Hyun Joo; Kim, Jin Ki
  18. Foreign Direct Investments and Intellectual Property Rights. International Intangible Assets in Spain circa 1820–1939 By Saiz, Patricio; Castro, Rafael
  19. Growth and competitiveness as factors of Eurozone external imbalances : evidence and policy implications By Sanchez , Jose Luis Diaz; Varoudakis, Aristomene
  20. Strategic Interaction vs. Regulatory Compliance among Regulated Utilities: The Swedish Water Sector By Lundin, Erik

  1. By: Idota, Hiroki; Bunno, Teruyuki; Tsuji, Masatsugu
    Abstract: One of the common features of innovative SMEs identified from our previous surveys and in-depth interviews is innovation capability accumulated inside the firm, which enables them to create new products which meet customer needs and to cooperate with the other firms. The factors that SMEs achieve innovation are complex, and the causal relationships between factors have not been sufficiently clarified yet. This paper attempts to clarify the innovation process using covariance structure analysis, in particular focusing on the role ICT. Seven hypotheses are demonstrated by two models. The results obtained are as follows: (i) top management's participation and employee's motivation in the innovation process promote the effect of introducing ICT; (ii) this effect of ICT use raises innovation capability; in particular ability to connect external linkages; (iii) ICT use, innovation capability and external linkages enhance innovation activity; and (iv) effect of ICT use and innovation capability promote innovation directly. Thus this paper identifies that the effect of introducing ICT promotes innovation, and it is indispensable for innovation in Japanese SMEs. --
    Keywords: ICT,Innovation,innovation capability,external linkages,covariance structure analysis
    Date: 2013
  2. By: Xavier Pavie (PhD Program - ESSEC Business School); Eva Hsu (The Chinese University of Hong Kong - The Chinese University of Hong Kong); Hanns Justus Tillman Rödle (School of Business, Economics and Law - University of Gothenburg - (SWEDEN)); Raquel Orozco Tapia (Universidad Argentina de la empresa of Buenos Aires - Universidad Argentina de la empresa of Buenos Aires)
    Abstract: This research deals with the process of business model innovation in services. Definitions and explanations of both general innovation terminologies as well as specific service related once will be given and discussed. Moreover, reasons and implementation strategies will be identified and discussed. Last but not least a case will be elaborated how innovative companies in products can become innovative in services.
    Keywords: Business Model ; Business Model Canvas ; Business Model Innovation ; Change Management ; Incremental Innovation, Innovation Management, Innovation Strategy ; Radical Innovation ; Service Innovation ; Service Management
    Date: 2013–12
  3. By: Chakrabarty, Subhajit; Nag, Biswajit
    Abstract: Perceptions of international trade barriers are important in the decision of firms to export.This study makes an empirical analysis of the perceptions with respect a particular sector. Two industrial hubs (locations) were chosen. The perceptions of the firms were very different in the two locations (in the same geographical region of the country).In one of these, lack of knowledge (in particular, lack of staff for export planning) was found to be the most important barrier as perceived by the firms, while competition was found as the most important barrier in the other. We also found further clusters within each of the two industrial ‘clusters’. It is not just the firms which can be associated with some stages of internationalization but the clusters can also be in different evolutionary stages of internationalization, in view of the differences.Policy makers may note these and focus their export promotion and information dissemination plans based on cluster membership so as to improve perceptions.
    Keywords: International marketing, trade, barrier, perception, apparel
    JEL: F10 F12 F14
    Date: 2014–01–01
  4. By: Kim, Kibae; Jung, Sungdo; Lee, Changjun; Hwang, Junseok
    Abstract: The role of ICT in the economic growth in Korea is a great attraction to the telecommunication society interested in the relationship among ICT, innovation policy and economic growth. However, prior research concentrates on investigating the effect of policy on innovation and economic growth, but misses the mechanism how a policy affects the technological system which interacts with public institutes, universities and private firms. In this paper, we analyze the structure of technology evolution in Korea with empirical data of patents to understand the prosperity of ICT sector in Korea. To do so, we define a technology network, or a set of nodes and links, representing technology fields and the relations between the fields, respectively, and measure the network topology and position per year between 1970 and 2010. Our results propose that the technology network maintains the scalefree topology, but the entities of the hub positions are gradually replaced emerging entities on the invariant network topology. Our findings are expected to motivate ICT innovation studies to understand the evolutionary mechanism of ICT industry in the systematic perspective of technology, and improve the policy of ICT innovation. --
    Keywords: Industry Change,Information and Communication Technology,Network Analysis,Patent Analysis
    Date: 2013
  5. By: Jain, Rekha
    Abstract: --
    Date: 2013
  6. By: Gaulier, Guillaume; Santoni, Gianluca; Taglioni, Daria; Zignago, Soledad
    Abstract: Over the past two decades, international trade has become a privileged engine of growth for much of the developing world. With the global economy evolving continuously and rapidly, countries must pay close attention to their positioning on the map of global trade and production. Within this framework, countries must also become aware of how they fare relative to competitors and to their past export performance. Of particular importance is the extent to which their performance is driven by exporter own supply-side capacity as opposed to external or compositional factors, including product and geographical specialization and how these trends compare across countries. This paper describes a new initiative that uses quarterly data for 2005q1-2013q1 to compute comparable indicators of export performance for 228 countries and territories. The database, the Export Competitiveness Database, reveals interesting patterns in trade performance. Export performance, stripped of compositional effects, was strongest for countries from the Asia and Pacific region, on average. Moreover, such performance was almost entirely driven by exporting country specific factors, with changes reflecting growth in volume rather than price developments. All emerging and developing regions have, on average, improved export performance. The indicators in the database trace the legacy of supply-side capacity and the overall export performance of the double-dip recession in the euro area. An illustrative set of results suggests that the paper's measure of competitiveness correlates to a country's nominal and real effective exchange rate, factors that are commonly perceived as important determinants of competitiveness.
    Keywords: Currencies and Exchange Rates,Markets and Market Access,E-Business,Economic Theory&Research,Emerging Markets
    Date: 2013–12–01
  7. By: Luiz Ricardo Cavalcante; Bruno César Araújo
    Abstract: O objetivo deste trabalho é analisar os fatores que explicam a posição de liderança de mercado ocupada pela Marcopolo, que é a principal fabricante brasileira de carrocerias de ônibus. Do ponto de vista metodológico, este trabalho é um estudo de caso baseado em revisão bibliográfica e entrevistas. A hipótese subjacente é que alguns fatores idiossincráticos relativos ao mercado brasileiro levaram as multinacionais fabricantes de veículos de grande porte a renunciar à competição com os produtores brasileiros, no segmento de carrocerias de ônibus. Em relação ao conjunto do setor automobilístico, a fabricação de carrocerias de ônibus é um segmento relativamente intensivo em mão de obra – com menores níveis de faturamento – e menos intensivo em pesquisa e desenvolvimento (P&D), uma vez que as inovações tendem a ser incrementais. Estas características permitiram que as empresas brasileiras do setor conseguissem crescer em paralelo ao aumento do mercado local e ditassem os padrões de relacionamento entre fornecedores e compradores. Para tornar-se exportadora de veículos completamente desmontados (completely knocked down – CKD), a Marcopolo precisou desenvolver capacidades tecnológicas concernentes à produção enxuta, especialmente modularidade e plataformas de produtos ou famílias. Para desenvolver suas capacidades tecnológicas, esta empresa privilegiou as atividades internas de P&D e a integração vertical da cadeia de produção. Por sua vez, a cooperação da Marcopolo com universidades, centros de pesquisa e outras empresas do segmento de fabricação de carrocerias de ônibus não parece ser elemento central para o acúmulo de capacitações tecnológicas e a posição de liderança ocupada. Recentemente, a Marcopolo passou a enfatizar a internacionalização por meio da aquisição de plantas existentes, de joint ventures e do envolvimento de fornecedores locais, especialmente em países em desenvolvimento. Estes movimentos, no entanto, não se destinaram a ser fonte de novas tecnologias. Em suma, as estratégias e as decisões empregadas pela Marcopolo estiveram à frente da retórica das políticas públicas adotadas e das tendências do mercado no Brasil. Estas estratégias foram claramente mais arriscadas, mas, uma vez bem-sucedidas, ajudam a entender a posição de liderança da Marcopolo. The aim of this paper is to analyze the factors that explain the market leadership of a Brazilian bus bodywork manufacturer (Marcopolo). From a methodological point of view, the paper is a case study based on a bibliographic review and in-depth interviews.The underlying hypothesis is that some idiosyncratic factors regarding Brazilian market led the multinationals to give up contesting Brazilian incumbents in the bus bodywork segment. As compared to the automobile industry as whole, bus bodywork manufacturing is a relatively labor-intensive, smaller and less R&D-intensive industry, as innovation tends to be incremental. As a result, Brazilian companies managed to grow hand-in-hand with the local automotive market and dictated the customer-supplier relationship patterns. In order to become a relevant completely knocked down (CKD) vehicle exporter, Marcopolo had to develop technological capabilities related to stock management and lean production principles of modularity and product platforms or families. The firm relied basically on intramural research and development (R&D) and on vertical integration as a technology strategy to develop these capabilities. There seems not to be a relevant cooperative culture between Marcopolo and universities, research centers and other bus bodywork companies. However, there is cooperation between Marcopolo and companies outside the bus bodywork segment. Recently, Marcopolo found its own way to internationalization, especially towards developing countries, through acquisition of existing plants, joint-ventures and involvement of local suppliers. These movements, however, were not intended to be a source of new technologies. In short, Marcopolo’s strategies and decisions have been ahead of the public policy rhetoric and of the market trends in Brazil. These strategies were clearly riskier, but, once succeeded, help to understand Marcopolo’s leading position.
    Date: 2013–12
  8. By: NAKABAYASHI, Masaki (Institute of Social Science, The University of Tokyo)
    Abstract: Industrial clusters and factory industries are complements for industrialization and relational contracts between manufactures and subcontractors are organizational basis of such clusters. While standard repeated game models without agentsf risk attitude suggest that relational contracts serve by potential punishment on cheaters, we predict that relational transactions within a cluster help motivate risk-averse premier subcontractors not only potentially punish cheaters. This research studies Kiryu, which had been a kimono weaving cluster and rapidly expanded from the late 19th century being combined with synthetic dying techniques, and shows that premier subcontracting weavers were provided longterm relational contracts and allowed specialization.
    Keywords: Industrial clusters; repeated game; governance of trades; putting-out system; textile industry; Japan
    JEL: L14 L67 N95
    Date: 2013–12–23
  9. By: Petukhova, Svetlana; Strepetova, Margarita
    Abstract: --
    Date: 2013
  10. By: Nakhoda, Aadil
    Abstract: The BRIC countries (Brazil, the Russian Federation, India and China) plus Turkey contribute a significant proportion of the exports that originate from developing countries. The varieties imported from the BRIC countries plus Turkey in the textile, creative and leather industries are likely to take precedence over the imported varieties from smaller developing countries as either their production is relatively more efficient in labor-intensive industries or their resources are relatively more abundant. Therefore, the prominence of the exports of the BRIC countries plus Turkey can have implications for smaller developing countries that also specialize in the production of labor-intensive products, such as Pakistan. I study the impact of the exports of the BRIC countries plus Turkey on the exports of Pakistan to the set of importing countries based on their importance as major export destinations of Pakistan for each industry considered and the set of importing countries based on the geographical location of the importing countries as regional and non-regional destinations of the BRIC countries plus Turkey. In this paper, I aim to determine whether the exports from the BRIC countries plus Turkey either complement or substitute exports from Pakistan to the specific set of export destinations.
    Keywords: International trade; crowding-out of exports; complementary exports; technology upgrading; exporter and importer linkages;
    JEL: F1 F14 F15 F23 M21
    Date: 2013–12–25
  11. By: Xavier Pavie (PhD Program - ESSEC Business School); Daphné Carthy (ISIS - Institute for Strategic Innovation & Services - ESSEC Business School)
    Abstract: Over the past few years, innovation has been developing a new characteristic, it has become inherently suspect. This is partly due to the series of recent market events which have contributed to the ever-increasing attention directed at the notion of responsible innovation. The race to market for technological and non-technological innovations is ever increasing in pace and enduring pressure from an ever more globalised market. At the same time, the newly released products and services stand under constant scrutiny by the hordes of social media users, capable of destroying a company's global reputation in a matter of minutes. It is therefore now in an organisation's best interest to be responsible. Naturally, an organisation's very survival depends on its ability to create value and be profitable, in other words, innovation is essential to the modern organisation's growth and development. However, innovation and responsibility have traditionally been considered to hamper one another. How can a firm achieve the right balance to keep innovating on products, services and processes while implementing responsibility all along its activities? Research suggests that this very balance could become an invaluable source of competitive advantage. Design thinking, in analogy with industrial design, is a creative discipline which is deployed within organisations' innovation processes. As such, design thinking is a very useful tool in developing responsible innovation, since it combines scientific rigour and technique with an understanding of human needs, while also incorporating an organisation's own economic imperatives. This modern approach therefore aims to achieve a responsible development for both the organisation and its innovations. This paper will begin by determining exactly what is meant by responsible innovation. It will then describe why design thinking is an effective method for integrating responsible innovation and present the results of a study which aimed to develop a way of integrating responsibility into the innovation process, using design thinking.
    Keywords: Design Thinking ; Financial Sector ; Responsible Innovation
    Date: 2013–12
  12. By: Harrison, Teresa (School of Economics LeBow College of Business Drexel University); Seim, Katja (Department of Business & Public Policy Wharton School University of Pennsylvania)
    Abstract: Nonprofits are increasingly present in industries with a large for-profit sector, raising questions about their competitive advantage afforded by the nonprofit tax exemption. We estimate an equilibrium model of market structure for recreation/fitness centers to assess whether nonprofit and for-profit firms compete directly for the same customer base. Our results suggest that the two ownership types serve independent markets. Consequently, nonprofits do not meaningfully crowd out for-profit competitors. We find that local property taxes, as a proxy for a firm’s tax burden, significantly affect for-profit entry and that nonprofit entry would fall by 25%, without affecting for-profit entry, if the same property tax liability was imposed.
    Keywords: entry; nonprofit firms; tax exemptions
    JEL: H25 L10 L30
    Date: 2013–12–01
  13. By: Maria Lúcia Pato (Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto; OBEGEF)
    Abstract: Entrepreneurship, in general, and rural entrepreneurship, in particular, has become a dynamic field of research in the last two decades. It seems therefore timely to present a quantitative survey of the literature in this area, aimed at identifying the most important sub-topics, contributors and their geographical distribution, major outlets, main empirical methodologies employed, as well as the most frequently studied countries. Based on 181 articles published in journals indexed in Scopus (until March 2013), we found that within the entrepreneurship literature, ‘rural entrepreneurship’ has been largely overlooked and has gradually lost momentum. Rural entrepreneurship is an essentially ‘European’ concern, whose most prolific authors are affiliated in institutions located in the UK and Spain. The most important outlets for this topic are Entrepreneurship and Regional Development, International Journal of Entrepreneurship and Small Businesses, and Journal of Rural Studies. The average quality of the research on rural entrepreneurship has risen, as reflected by the journals’ impact factor, implying that it has gained a measure of scientific visibility. More research on rural entrepreneurship is being published in economics and business-related journals, losing to some extent its initial multidisciplinary scope. In the field of rural entrepreneurship, ‘Organization-related characteristics’, ‘Policy measures’ and ‘Institutional frameworks and Governance’ have attracted considerable attention in recent years, being considered as ‘emergent’ topics of research. In contrast, ‘Theory building’ has not attracted much research over the period in analysis, which suggests that the theoretical body of rural entrepreneurship is still incipient, hindering the establishment of its boundaries and of a suitable research agenda. The absence of an axiomatic and theoretical corpus prevents the full use of causality and hypotheses testing methodologies and explains to some extent the predominance of more qualitative types of research. Empirical literature on rural entrepreneurship has mainly analyzed developed countries, most notably, the UK, USA, Spain, Finland and Greece. Given the potential rural entrepreneurship represents for less developed and underdeveloped countries, more research on the topic is an imperative.
    Keywords: entrepreneurship, rural, bibliometric analysis
    JEL: L26 R58 R11 C89
    Date: 2013–12
  14. By: Paula Faria (School of Economics and Management, University of Porto); Franscisco Vitorino Martins (School of Economics and Management, University of Porto); Elísio Brandão (School of Economics and Management, University of Porto)
    Abstract: This study examines the relationship between corporate performance and the Chief Executive Officer (CEO) compensation in high-technology firms in the S&P 500. The total short- and long-term CEO compensation in high-technology was compared with other industrial sectors from standard classification codes and tested in terms of corporate performance. The ExecuComp database was used to find the variables and to create a sample of firms between 2004 and 2010. Important corporate performance variables are used in this work, such as assets, employees, sales, net income, and earnings per share (EPS), as reported by the firms for each year. A panel data GLS with a fixed effect model for time is estimated that describes total compensation for the period between 2004 and 2010. The result was aligned with the theory of executive compensations to address agency problems and to examine CEO pay-for-performance. The main objective of this paper is to consistently demonstrate that the performance is determined for the total CEO compensation for short- and long-term periods and to examine whether the total remuneration paid to CEOs in high-technology firms in the S&P 500 is related to corporate finance. This work provides a better understanding of the relationship between compensation and performance in high-technology firms. Results suggest that high-tech firms tend to use more sophisticated performance measurements to determine CEO compensation.
    Keywords: corporate finance, CEO compensation, accounting
    JEL: G30 M52 M41
    Date: 2013–12
  15. By: Basaure, Arturo; Sridhar, Varadharajan
    Abstract: The introduction of Dynamic Spectrum Management (DSM) has been challenged by several technical, economic and regulatory factors. This study analyzes market structure conditions in terms of industry openness and spectrum policy for introducing DSM technologies into mobile markets, developing a framework which combine System Dynamics modeling (top-down approach) and Bayesian network data analysis (bottom-up approach) for analyzing current mobile markets and their future evolutions possibilities. This model describes mobile-operator centric and end-user centric scenarios for a future DSM deployment. --
    Keywords: Dynamic spectrum management (DSM),industry openness,spectrum policy,System Dynamics,Bayesian network,technology diffusion,end-user centric and mobile operator centric scenarios
    Date: 2013
  16. By: Oliveira, Eduardo
    Abstract: Tourism destinations are demanding strategic thinking and dynamic methods to address the contemporary digital challenge. The application of information communication technologies (ICTs) by tourism destinations, when correctly articulated with a destination branding strategy, could be a driving force to improve their strategic positioning, competitiveness, image and to optimise the benefits they derive from tourism. The novelty of this paper lies in the strategic approach to the digital complexity in destination branding by researching developments in branding Portugal as a tourism destination. A content analysis and text mining were applied as research methodology. Perceive how tourism-oriented promotional channels characterize destination Portugal, and further discuss the best branding strategies, is a central element along the study.
    Keywords: content analysis, destination branding, digital, Portugal, strategy, text mining
    JEL: M31
    Date: 2013–12–10
  17. By: Lee, Hyun Joo; Kim, Jin Ki
    Abstract: Competition in the mobile market is centered on platforms, or operating systems, for smartphones. The current competition and market structure of the global mobile market has shifted to a competition among ecosystems that utilize the same mobile operating systems of the platform operators. This paper aims to answer those questions. The direction of competition in the smartphone industry is traced. This study tries to list the selectable strategy options for each major ecosystem. Then the strategy options for each ecosystem are tested in terms of their desirability from the viewpoint of industry experts. Finally, this study tries to put the puzzle together based on the most desirable strategy options for each ecosystem. --
    Date: 2013
  18. By: Saiz, Patricio (Departamento de Análisis Económico: Teoría Económica e Historia Económica. Universidad Autónoma de Madrid); Castro, Rafael (Departamento de Análisis Económico: Teoría Económica e Historia Económica. Universidad Autónoma de Madrid)
    Abstract: In this paper, we reflect on the links between the origin and rate of foreign direct investments (FDI) and the granting of intellectual property rights (IPRs) to foreigners in Spain during the nineteenth and the first half of the twentieth century. Our main hypothesis is that the two issues were strongly related during the extension of industrialization in Europe, although distinct interests and goals could have led to different investment and IPR strategies. This was true during the whole period studied, and especially after 1880, when the first globalization emerged, progressively favoring corporative transnational investments and international agreements on IPRs. During both centuries, foreign investors from several North Atlantic countries flooded the Spanish economy, taking thousands of patents and trademarks. Based on outstanding data on FDI and foreign IPRs in Spain, the scope of this complex relation is explored. In doing so, our hypothesis is confirmed and distinct international strategies and performances in the Spanish economy disentangled. Thus, our study provides a better understanding: 1) of the spread of international capitalism and multinationals, 2) of the competition among pioneers and first followers in the international markets, and 3) of the role of IPRs in that process. Our findings also shed light on the current debates regarding the relation of international investments and the protection of intangible assets in today’s global markets.
    Keywords: foreign investments, patents, trademarks, Spain
    JEL: F21 N73 N74 O34
    Date: 2013–07
  19. By: Sanchez , Jose Luis Diaz; Varoudakis, Aristomene
    Abstract: The paper assesses the contribution of key factors associated with external imbalances in the Eurozone through the estimation of a panel-data vector autoregressive model over 1975-2011. Growth fluctuations, initially associated with demand booms triggered by unusually low interest rates and later with demand contractions resulting from the crisis and policy adjustments, have been key drivers of current account fluctuations. Changes in competitiveness, measured by real exchange rates or unit labor costs, have played a less important role. Demand shocks have contributed more to current account balance dynamics in the Eurozone periphery than in the core, whereas competitiveness has been a less prominent factor in the periphery but relatively more important in the core. Changes in competitiveness are positively associated with changes in growth. Preventing imbalances from building up in a context of growing financial integration and easy finance warrants enhanced mutual surveillance of fiscal imbalances, but also better regulation of credit markets to prevent excess leverage and concentration of lending in investments prone to speculative bubbles. Coordination of fiscal policy across the Eurozone would facilitate the management of external imbalances without placing an often unwarranted burden on fiscal tightening in countries with sound fiscal positions affected by credit booms. The policies of internal devaluation implemented in the periphery, aimed at promoting external competitiveness, may have had only limited effectiveness in restoring the external balance to equilibrium.
    Keywords: Currencies and Exchange Rates,Economic Theory&Research,Debt Markets,Emerging Markets,Macroeconomic Management
    Date: 2013–12–01
  20. By: Lundin, Erik (Research Institute of Industrial Economics (IFN))
    Abstract: This study provides the first empirical test of strategic interactions in the pricing decisions of regulated utilities. Since publicly owned water utilities in Sweden are governed by a cost-of-service regulation, prices in neighboring municipalities should not affect the own price other than through spatially correlated cost factors. In contrast, spatial dependence is pronounced. This behavior can be explained in terms of an informal yardstick competition: When consumers use neighboring utilities' prices as benchmarks for costs or as behaviorally based reference prices, utilities will face the risk of consumer complaints and successive regulatory reviews if deviating too much from neighbors' prices.
    Keywords: Yardstick competition; Spatial econometrics; Public economics; Utilities
    JEL: D40 L10 L50 L90
    Date: 2013–12–18

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