nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2014‒07‒05
twenty papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. Closing the Gap: An Empirical Evidence on Firm’s Innovation, Productivity, and Exports By Tavassoli, Sam; Jienwatcharamongkhol, Viroj
  2. Propensity to patent, R&D and market competition : dynamic spillovers of innovation leaders and followers By Szabolcs Blazsek; Álvaro Escribano
  3. Innovation in the Service Sector and the Role of Patents and Trade Secrets By Masayuki Morikawa
  4. Southern Innovation and Foreign Direct Investment By Suzuki, Keishun
  5. Export Mix Changes and Firm Performance: Evidence from Chile By Roberto Álvarez; Andrés Zahler
  6. Antinomies of Crisis Management and Organizational Learning By Batorski, Jarema
  7. The Spillover Effects of Publicly Supported Private R&D : Analysis of NEDO Follow-up Survey Data By Matsushima, Kazunari; Aoshima, Yaichi
  8. Do multinational retailers affect the export competitveness of host countries? By Angela Cheptea
  9. The Acquisition and Commercialization of Invention in American Manufacturing: Incidence and Impact By Ashish Arora; Wesley M. Cohen; John P. Walsh
  10. Measuring competition in banking: A critical review of methods By Florian LEON
  11. Firm Growth Dynamics: The importance of large jumps By ARATA Yoshiyuki
  12. The role of external linkages and gatekeepers for the renewal and expansion of U.S. cities’ knowledge base, 1990-2004 By Stefano Breschi; Camilla Lenzi
  13. Growth Effect of FDI in Developing Economies: the Role of Institutional Quality By Cristina Jude; Grégory Levieuge
  14. Restructuring China’s Research Institutes: Impacts on China’s Research Orientation and Productivity By Daniel L.Tortorice; Gary H. Jefferson; Renai Jiang
  15. Bank Competition, Borrower Competition and Interest Rates By Carlos Bellón
  16. Strategic Management in Times of Crisis By Groh, Maximilian
  17. The Culture of Entrepreneurship By Chakraborty, Shankha; Thompson, Jon; Yehoue, Etienne
  18. The Effect of Credit on the Export Performance of Colombian Exporters By Danielken Molina; Mónica Roa
  19. Learning About Commodity Cycles and Saving- Investment Dynamics in a Commodity-Exporting Economy By Jorge Fornero; Markus Kirchner
  20. Examining the Relationships between Labour Market Mismatches, Earnings and Job Satisfaction among Immigrant Graduates in Europe By McGuinness, Seamus; Byrne, Delma

  1. By: Tavassoli, Sam (CSIR, Blekinge Inst of Technology); Jienwatcharamongkhol, Viroj (Department of Economics, Lund University, Sweden)
    Abstract: It is well known that exporters are productive firms. But the source of their productivity is left unexplained. This paper aims to endogenize the productivity heterogeneity of exporting firms by incorporating innovation in a structural model framework. In doing so, we close the gap between the innovation-productivity and productivity-export literature. Two waves of Swedish Community Innovation Survey (CIS) are merged. This allows for a setup that takes into account the links from innovation input to innovation output and also from innovation output to productivity and exports. The main findings highlight that exporters are productive firms with innovation output in the past, which in turn was driven by prior R&D and other innovation activity investments.
    Keywords: innovation; productivity; export; firm-level; structural model; community innovation survey
    JEL: C31 L60 O31
    Date: 2014–06–01
  2. By: Szabolcs Blazsek; Álvaro Escribano
    Abstract: Dynamic interactions among stock return, Research and Development (R&D) expenses, patent applications based on R&D investment, and the propensity to patent are studied in this work for a panel of firms from the United States. The panel includes technologically similar firms, neck-to-neck, mostly from the drugs product-market sector. Firms’ propensity to patent is modeled by a dynamic latent-factor patent count data model that separates patented and non patented R&D. Patent innovation leader and follower firms are identified according to their knowledge stock. Significant and positive dynamic spillover effects are obtained among patent application leaders and followers. We observe that neck-to-neck firms in patent innovation activity produce an inverted-U relationship between market competition and innovation. Furthermore, firms’ propensity to patent is positively correlated with market competition and there is a positive feedback in both directions. Increasing the degree of competition in the market enhances innovation and patent applications, in order to help firms to appropriate part of the benefits of their R&D investments. On the other hand, firms by increasing their patent applications defend themselves from competitors, trying to improve their market share. However, due to the diffusion of knowledge through patent applications, knowledge spills over to competitors therefore, the degree of competition and innovation increases in the market.
    Keywords: propensity to patent, competition, technological proximity, patent innovation leaders and followers, latent factor patent count data model, panel vector autoregression, simulated quasi maximum likelihood, efficient importance sampling
    JEL: C15 C31 C32 C33 C41
    Date: 2014–06
  3. By: Masayuki Morikawa
    Abstract: This paper, using Japanese firm-level data, presents findings about innovative activities in the service sector and the role of patents and trade secrets on innovation. According to the analysis, first, service firms have fewer product innovations than do manufacturing firms, but the productivity of innovative service firms is very high. Second, service firms have a low propensity for holding patents, but their holding of trade secrets is comparable to that of the manufacturing firms. Third, patents and trade secrets have positive relationships with product innovations, and the effects are quantitatively similar in magnitude, in both the manufacturing and the service sectors. On the other hand, a positive relationship between trade secrets and process innovations is found only in the manufacturing sector. These results suggest a pivotal role of the law protecting trade secrets on innovation and productivity growth in the service sector.
    Keywords: innovation, service sector, patent, trade secret
    JEL: O31 O34 L80
    Date: 2014–06
  4. By: Suzuki, Keishun
    Abstract: Many empirical studies have yielded mixed results about the impact of foreign direct investment (FDI) on domestic innovation in developing countries. This paper investigates the effect of FDI-promoting policy on innovation in the South in a general equilibrium model that incorporates both the knowledge spillover effect and the market stealing effect via FDI. Specifically, we conduct the analyses of both the short-run effect and the long-run effect. While FDI-promoting policy temporarily discourages Southern innovation in transitional dynamics through the market stealing effect, the accumulation of Southern knowledge via FDI helps domestic firms begin innovation again in the long-run. In the long-run, FDI-promoting policy may generate an inverted-U effect on innovation depending on whether the knowledge spillover is strong. This paper also examines the effect of FDI-restriction policy on Southern innovation, and the model shows that FDI protectionism has only a shortterm effect and may decrease the innovation rate in the long-run.
    Keywords: Southern Innovation, Foreign Direct Investment, Market Stealing Effect, Transitional Dynamics
    JEL: F21 O11 O31
    Date: 2014–06–10
  5. By: Roberto Álvarez; Andrés Zahler
    Abstract: In this paper we analyze changes in the export mix of Chilean firms, looking particularly at differences between large firms and SMEs. To do that, we use detailed information of exported products by firms during the period 1995-2005. Our econometric results, which look at the impact of export product churning on firm performance, are heterogeneous by type of change in export mix and by firm size. In general, export mix changes are associated with improvements on productivity, although our results suggest that this positive effect is only for SMEs. In terms of employment and sales, we find that export product churning has positive effect on large firms and lower - and in some case negative - on SMEs. It seems that changes in export mix are more important for firm growth in large firms, but not in terms of productivity. In contrast, SMEs can have a higher potential for productivity improvement through export product churning but this does not translate necessarily in significant increase in sales and employment.
    Keywords: Integration & Trade, Productivity, SME, Small and Medium Size Enterprises (SMEs), Firm performance, Export mix, Large firms, New products, Product mix
    Date: 2014–04
  6. By: Batorski, Jarema
    Abstract: Organizational crises may be conducive to the process of intensive organizational knowledge acquisition. Actions undertaken in terms of crisis management often constitute the means for organizational learning. The conflict between innovative learning (double-loop learning), in which both the assumptions and the standards/strategies are modified, and routine learning (single-loop learning), which concerns only the action strategies (behaviours), constitutes a potential paradox. The conflict between exploration and exploitation can also pose a potential problem for organizational learning.
    Keywords: crisis management, organizational learning
    JEL: D83 O31
    Date: 2014
  7. By: Matsushima, Kazunari; Aoshima, Yaichi
    Abstract: Innovation creating economic values has become a vital issue due to severe global competition. Given such a circumstance, government funding has flowed not only into pure research, but into applied research and product development linked directly with commercialization as well. Such a tendency has been accelerated since “Bayh-Dole Act” was enacted, which made it easier for firms to appropriate R&D outcomes. Increased appropriablity that promotes commercialization, however, may prevent technological outcome produced by a government-funded R&D project from being widely utilized in a society. The project aimed at immediate commercialization may tend to create context-specific knowledge that can be applied only to the particular product category rather than generalized technological knowledge that can be widely available for other products or technological fields. Such a project may also have strong incentives to keep such technologies in-house. Therefore, the policy side confronts dilemma that the more government attempts to encourage private R&D activity with public support that are linked directly with market competition, the more the indirect spillover effects are sacrificed because of increased appropriability. To resolve this dilemma, we must identify the factors that influence the spillover effects of private R&D projects receiving public support. In this paper, we first classified a spillover effect in accordance with three dimensions, spillover contents, scope of the spillover, and spillover recipient field. Furthermore, spillover contents can be divided into “technological spillover,” “cognitive spillover” and “social-relations spillover.” And then, we empirically investigate the factors that influence spillover effects by analyzing data obtained from 301 private R&D projects supported by NEDO (New Energy and Industrial Technology Development Organization), Japan’s public management organization promoting private R&D. Our findings show that while the project starting at the exploratory phase had positive effects on technological spillover both within and outside the firm, and that spillover outside the firm is restricted when the project is of great strategic importance for a firm. We also found that information exchanges with other internal divisions had positive effects on not only technical spillover but on cognitive spillover and social-relations spillover. Results imply that it is necessary for supporting institutions to confirm that projects are not isolated internally and that there is a system in place to receive assistance and cooperation from other divisions.
    Date: 2014–06
  8. By: Angela Cheptea
    Abstract: The accelerated overseas expansion of multinational retailers (MRs) over the last decade transformed these companies into major regional and global actors. In this paper we question how MRs arriving in foreign markets affect the export performance of local firms. We develop a theoretical framework that explains the mechanisms by which multinational retailers establishing outlets abroad impact the export performance of local firms and test its predictions empirically for the agri-food sector. The adopted approach draws on recent empirical evidence of the effects of foreign direct investment (FDI) in the retail sector and recent developments in the literature on international trade with heterogeneous firms and on trade and intermediaries. First, incoming multinational retailers may increase the overall export capacity of local firms to any foreign market via an increase in their productivity. The growing competitive pressure in the upstream sector, induced by global retail chains, drives least productive firms out of the market and the average productivity of the sector increases. In addition, retail sector FDI generates productivity gains at the firm level: local suppliers of multinational retailers benefit from the retailers’ financial and technological support and become more productive in time. Thus, although the productivity threshold for exporting remains unchanged, some firms reach this threshold and start exporting, while firms above this threshold that experience productivity gains increase their volume of exports. Second, we consider the role of multinational retailers in matching foreign sellers and buyers. With their wide transnational networks of outlets and contacts, multinational retailers can become natural intermediaries between suppliers and consumers in countries where they operate. The local suppliers of a foreign retailer may sell more easily their products in retailer’s outlets situated in other countries, or, with the retailer’s help, identify at a lower cost potential buyers in these markets. Lower export sunk costs for retailer’s supplying firms determines the latter to export larger amounts to destination markets served by this retailer. For other destination markets these suppliers face the same export costs as other host country firms. These effects were first discussed empirically by Head, Jing and Swenson (2010), but only from an empirical point of view. They find evidence of the capability effect, but not for the linkage effect for the exports of Chinese cities. Unlike Head et al. (2010), we use a large panel of countries and data on the world’s top one hundred food retailers. We find evidence of both capability and linkage effects, but the latter does not apply to a country’s exports to the origin country of the foreign retailers it hosts.
    Keywords: multinational retailers, export competitiveness, productivity gains, transnational networks, intermediaries
    JEL: F12 F14 Q17 F23
  9. By: Ashish Arora; Wesley M. Cohen; John P. Walsh
    Abstract: Recent accounts suggest the development and commercialization of invention has become more “open.” Greater division of labor between inventors and innovators can enhance social welfare through gains from trade and greater economies of specialization. Moreover, this extensive reliance upon outside sources for invention also suggests that understanding the factors that condition the extramural supply of inventions to innovators is crucial to understanding the determinants of the rate and direction of innovative activity. This paper reports on a recent survey of over 6000 American manufacturing and service sector firms on the extent to which innovators rely upon external sources of invention. Our results indicate that, between 2007 and 2009, 18% of manufacturing firms had innovated – meaning had introduced a product that was new to the market. Of these, 49% report that their most important new product had originated from an outside source, notably customers, suppliers and technology specialists. We also estimate the contribution of each source to innovation in the US economy. Although customers are the most frequent outside source, inventions acquired from customers tend to be economically less significant than those from technology specialists. As a group, external sources of invention make a significant contribution to the overall rate of innovation in the economy. Indeed, results from a multinomial logit model suggest that, were the outside availability of innovation to be removed, the percentage of innovating firms in the U.S. manufacturing sector would drop from 18% to 10%.
    JEL: L1 O3 O30 O31 O32 O34
    Date: 2014–06
  10. By: Florian LEON (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Many studies have attempted to investigate the determinants and implications of competition in the banking industry. The literature on the measurement of competition can be divided between the structural and non-structural approaches. The structural approach infers the degree of competition from the structure of the market. The non-structural approach, based on the New Empirical Industrial Organization, assesses the degree of competition directly by observing behavior of firms in the market. This paper reviews the most frequently-used structural and non structural measures of competition in banking. It highlights their strengths and weaknesses, especially for studies based on a limited number of observations.
    Keywords: Boone indicator;Panzar-Rosse model;Conjectural variation model;Lerner index;HHI;Bank;competition
    Date: 2014–06–27
  11. By: ARATA Yoshiyuki
    Abstract: How a firm grows is one of the important themes in industrial organization literature. Recent empirical studies have demonstrated that the distribution of firms' growth rates is not Gaussian as predicted by the celebrated Gibrat's law (Gibrat, 1931), but rather is quite well fitted by the Laplace distribution. These findings challenge the existing theoretical models and also our understanding of the mechanism of firm growth. To explain the empirical distributions, we consider the firm growth dynamics in the framework of the L�vy process and infinitely divisible distributions. Our analysis shows that the growth of a firm does not result from the accumulation of small shocks as the existing models assume. Instead, it is characterized by a handful of large shocks to the firm, i.e., jumps. The result has important implications for our understanding of the nature of innovations.
    Date: 2014–06
  12. By: Stefano Breschi; Camilla Lenzi
    Abstract: This paper examines the role of external linkages and gatekeepers for the renewal and expansion of cities’ knowledge base, by presenting new evidence about co-invention networks in U.S. metropolitan areas based on European Patent Office (EPO) data for the period 1990-2004. We argue that the relative importance of direct external linkages and external relations mediated by gatekeepers varies according to specific local conditions. In particular, our findings suggest that external relations are on average a chief conduit to inject non-redundant knowledge at the local level and contribute to broadening and rejuvenating the local knowledge base. However, cities are quite heterogeneous in how they benefit from external relations. Whereas direct external connections outperform, on average, external links mediated by gatekeepers, the latter are especially important in cities with a localized and specialized knowledge base, as they enable the trans-coding and absorption at the local level of externally sourced knowledge.
    Keywords: networks, gatekeepers, knowledge base
    JEL: O31 R11
    Date: 2014–06
  13. By: Cristina Jude (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans, Facultatea de Litere - Faculté des lettres - Universitatea Babeş-Bolyai, Cluj-Napoca); Grégory Levieuge (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)
    Abstract: This paper investigates the effect of FDI on economic growth conditional on the institutional quality of host countries. We consider institutional heterogeneity to be an explanation for the mixed results of previous empirical studies and we develop several arguments to show that institutional quality modulates the intensity of FDI impact on growth. Using a comprehensive data set for institutional quality, we test this hypothesis on a sample of 94 developing countries over the period 1984-2009. The use of Panel Smooth Transition Regression (PSTR) allows us to identify both the heterogeneity and the threshold of institutional quality that influence the FDI growth effect. These results have significant implications for policy sequencing in developing countries. In order to benefit from FDI-led growth, the improvement of the institutional framework should precede FDI attraction policies. While some features of institutional quality have an immediate effect on fostering FDI-led growth, others need a consistent accumulation of efforts, therefore challenging the effectiveness of institutional reforms in developing countries.
    Keywords: FDI ; growth ; heterogeneity ; institutional quality ; PSTR ; Developing economies
    Date: 2014–06–25
  14. By: Daniel L.Tortorice (International Business School, Brandeis University); Gary H. Jefferson (International Business School, Brandeis University); Renai Jiang (Xi'an Jiaotong University)
    Abstract: This paper evaluates the impact of the Chinese government’s initiative begun in 1999 to restructure the country’s approximately 3,500 research institutes. The paper reviews the evolution of China’s research sector over the period 1995 to 2010, identifying certain issues that are analyzed using a panel of sample research institutes. The econometric analysis is based on a balanced sample of these institutes, both converted and unconverted, spanning 1998, the year prior to the restructuring initiative, to 2005. In order to control for potential endogeneity and selection bias, the paper employs various econometric methods to evaluate the impact of the restructuring program on the performance of these institutes. We find that the restructuring program appears to have achieved its fundamental goals, that is, shifting the relevant resources toward a more commercial mission for the converted S&T enterprises and a more researchoriented mission, involving the use of government grants, for the non-profit research institutes. The results show modest gains in the efficiency of patent production, but given the lengthy gestation period, a longer duration is needed to assess how the patent production of China’s research institutes will adapt to the shift in their missions and reassignment of government resources.
    Keywords: Technological Innovation, R&D, Invention, Research Policy
    JEL: O31 O32 O33
    Date: 2014–05
  15. By: Carlos Bellón
    Abstract: The effect bank competition has on interest rates should depend on the fact that borrowers compete against each other. The borrowing rate of a firm affects its ability to compete in the industrial marketplace, and ultimately, its ability to repay its loans. Thus, competition amongst borrowers acts as a limit to the amount of rents financial oligopolists can extract. I find evidence that firms that operate within areas of limited bank competition face higher rates than their peers. I also identify an innovative control group that can be used in tests of bank market structure.
    Keywords: Bank competition, Small business lending
    JEL: D43 E43 G21
    Date: 2014–06
  16. By: Groh, Maximilian
    Abstract: This aim of this article is to identify unusual strategic-management matters in times of crisis. The research scope is strategic management processes, the characteristics of the processes and methods of strategic crisis management. The study reports research on the contemporary state of strategic crisis-management problems and provides an analysis of some theoretical and methodological principles. The analysis includes a classification of the main problems which must be solved for efficient, strategic, crisis management. The article indicates strategic and tactical management methods used by corporations and raises questions about the functional distribution of strategic management within relevant authorities; it makes practical recommendations for the functional realization of strategic management goals at all stages of a crisis; it identifies the responsible supervisory entities and the main results of strategic management. The range of problems of the subsystems of strategic management in a crisis period is researched; a basic set of strategic competences of the management authorities is found; and the functional distribution of strategic management in crisis conditions is shown. The suggested mechanism for strategic management in crisis situations is the instrument for the prevention and liquidation of crisis phenomena; it increases the efficiency of the adoption and realization of strategic plans to counter crises. Using planned scenarios and mechanisms to run corporations during a crisis may provide the opportunity to maintain strict governance of the actions of corporate top management and to identify the main tasks for neutralizing crisis events as they develop during the crisis situation. Quick and effective implementation of the set tasks during a crisis will help a corporation to increase the efficiency of its anti-crisis measures.
    Keywords: Corporation, Crisis, Strategic-Management Methods, Strategic Leadership, Strategic Management
    JEL: F23 M16 M20
    Date: 2014–05–31
  17. By: Chakraborty, Shankha; Thompson, Jon; Yehoue, Etienne
    Abstract: We study the cultural process through which a society inculcates an entrepreneurial spirit. People work for a guaranteed wage or operate a firm whose return depends on business expertise. The latter is culturally acquired, within the family or outside, and people may choose an occupation different from the one they were socialized into. We show that a cultural bias towards safer occupations from colonial and post-colonial policies leads to stagnation where entrepreneurs do not upgrade technology because of their proficiency with existing methods. An aggregate productivity shock can tip this economy towards growth where cultural inertia gives way to technological progress led by established businesses. A human capital shock where existing business expertise is less useful, in contrast, causes growth through the emergence of a new class of entrepreneurs. In either case culture ceases to be destiny. We relate the theory to historical and recent episodes.
    Keywords: entrepreneurship, culture, human capital, colonization, growth
    JEL: D10 F54 L26 O30 Z10
    Date: 2014–06–26
  18. By: Danielken Molina; Mónica Roa
    Abstract: In this paper we use Colombian manufacturing data on exports and external financing for the period 1998 - 2006 to estimate the credit elasticity of exports. We use bank-firm linked data to construct a supply side instrument for a manufacturer's demand of credit, which we use to address the reverse causality between a manufacturer's export revenue and its demand for credit. We find that access to credit produces a significant increase on a manufacturer's export revenue explained by the positive effect of credit on an exporter's market reach - number of destinations -. Across manufacturers the effect of credit on a manufacturer's export revenue varies by size. While medium sized manufacturers use credit to increase their market reach, market penetration and product mix, large manufacturers only use credit to increase their market reach. Small manufacturers do not seem to benefit from bank credit.
    Keywords: Microbusinesses & Microfinance, Integration & Trade, Export revenue, Bank credit, Product mix, Export performance
    Date: 2014–05
  19. By: Jorge Fornero; Markus Kirchner
    Abstract: Despite sustained high levels of commodity prices, the current account balances of several commodity-exporting countries have deteriorated in recent years. This phenomenon is examined quantitatively using a small open economy model with a commodity-producing sector and the assumption that agents have imperfect information and learn about the persistence of commodity price shocks. A central prediction of the model is that during a persistent commodity price increase, agents believe at first that this increase is temporary but eventually revise their expectations upward as they are surprised by higher than forecasted commodity price levels. Domestic investment therefore expands in a gradual way driven by investment in the commodity sector, while domestic savings decrease such that the current account declines over time. The model is estimated with data for Chile, and the results show that through the above mechanism the model explains several stylized facts regarding the recent evolution of the Chilean economy, including part of its step-wise current account reversal since the mid-2000s. Additionally, we use the model to analyze the effects of a persistent commodity price shock under alternative monetary and fiscal policies.
    Date: 2014–05
  20. By: McGuinness, Seamus; Byrne, Delma
    Abstract: This paper uses graduate survey data and econometric methods to estimate the incidence and wage/job satisfaction effects of over-education and overskilling among immigrants graduating from EU 15 based universities in 2005. Female immigrants with shorter durations of domicile were found to have a higher likelihood of overskilling. Newly arrived immigrants incurred wage penalties? which were exacerbated by additional penalties resulting from overskilling in the male labour market and overeducation in the female labour market. Established immigrants were found to enjoy wage premia, particularly within the male labour market, with no evidence of disproportionate wage impacts arising as a consequence of mismatch. Female immigrants were generally found to have a significantly lower probability of being job satisfied relative to native female graduates.
    Date: 2014–06

This nep-cse issue is ©2014 by Joao Jose de Matos Ferreira. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.