nep-ind New Economics Papers
on Industrial Organization
Issue of 2008‒06‒13
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Competition, R&D and the cost of innovation By Philippe Askenazy; Christophe Cahny; Delphine Irac
  2. Distance to Frontier and Appropriate Business Strategy By Alex Coad
  3. Optimal ownership in joint ventures with contributions of asymmetric partners By Marinucci, Marco
  4. Futures of automobile industry and challenges on sustainable development and mobility By Moniz, António; Paulos, Margarida Ramires
  5. Impact of M&A on firm performance in India: Implications for concentration of ownership and insider entrenchment By Sumon Kumar Bhaumik; Ekta Selarka

  1. By: Philippe Askenazy; Christophe Cahny; Delphine Irac
    Abstract: This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes.
    Date: 2008
    URL: http://d.repec.org/n?u=RePEc:pse:psecon:2008-32&r=ind
  2. By: Alex Coad
    Abstract: This paper is an empirical test of the hypothesis that the appropriateness of different business strategies is conditional on the firms distance to the industry frontier. We use data on four 2-digit high-tech manufacturing industries in the US over the period 1972-1999, and apply semi-parametric quantile regressions to investigate the contribution of firm behavior to market value at various points of the conditional distribution of Tobin's q. Among our results, we observe that innovative activity, measured in terms of R&D expenditure or patents, has a strong positive association with market value at the upper quantiles (corresponding to the leader firms) whereas the innovative efforts of laggard firms are valued significantly less. Laggard firms, we suggest, should instead achieve productivity growth through efficient exploitation of existing technologies and imitation of industry leaders. Employment growth in leader firms is encouraged whereas growth of backward firms is not as well received on the stock market.
    Keywords: Distance to frontier, Strategy, Market value, Innovation, Firm Growth
    JEL: L25 L21 D21 O31
    Date: 2008–06–03
    URL: http://d.repec.org/n?u=RePEc:ssa:lemwps:2008/13&r=ind
  3. By: Marinucci, Marco
    Abstract: This paper faces two questions concerning Joint Ventures (JV) agreements. First, we study how the partners contribution affect the creation and the profit sharing of a JV when partners' effort is not observable. Then, we see whether such agreements are easier to enforce when the decision on JV profit sharing among partners is either delegated to the independent JV management (Management Sharing) or jointly taken by partners (Coordinated Sharing). We find that the firm whose effort has a higher impact on the JV's profits should have a larger profit shares. Moreover, a Management sharing ensures, at least in some cases, a wider range of self-enforceable JV agreements.
    Keywords: joint ventures; strategic alliances; ownership structure; asymmetries.
    JEL: L14 L13 D43 L22
    Date: 2008–04
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:8985&r=ind
  4. By: Moniz, António; Paulos, Margarida Ramires
    Abstract: Portugal had only very few foresight exercises on the automobile sector, and the most recent one was a survey held in a project on work organisation systems in the automobile industry, its recent historical paths and the special strategies of location of companies (the WorTiS project). This involved several teams with different disciplinary backgrounds and from two Portuguese universities. The provisional main results of the first round of a Delphi survey held in Portugal on the automotive sector were already published, but a further analysis was not yet done. This foresight survey was done under the WorTiS project, developed in 2004 by IET – Research Centre on Enterprise and Work Innovation (at FCT-UNL), and financed by the Portuguese Ministry of Science and Technology. Some of this experience on foresight analysis is also been transferred to other projects, namely the WORKS project on work organisation restructuring in the knowledge society that received the support from EC and still is running. The majority of experts considered having an average of less knowledge in almost all the scenario topics presented. This means that information on the automotive industry is not spread enough among academics or experts in related fields (regional scientists, innovation economists, engineers, sociologists). Some have a good knowledge but in very specialised fields. Others have expertise on foresight, or macroeconomics, or management sciences, but feel insecure on issues related with futures of automobile sector. Nevertheless, we considered specially the topics where the experts considered themselves to have some knowledge. There were no “irrelevant” topics considered as such by the expert panel. There are also no topics that are not considered a need for co-operation. The lack of technological infrastructures was not considered as a hindered factor for the accomplishment of any scenario. The experts’ panel considered no other international competence besides US, Japan or Germany in these topics. Special focus will be made in this paper on the topic 2. Public policy and automobile industries, and more specifically on the technological and/or research policies issues, where one can specify the automobile’s role in transport policies with further implications like environment, safety, energy, mobility.
    Keywords: automotive industry; scenario; economical co-operation; technology; Delphi survey
    JEL: L62 C42 A14 J11 O14
    Date: 2008–05
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:9022&r=ind
  5. By: Sumon Kumar Bhaumik; Ekta Selarka
    Abstract: performance. On the one hand, concentration of ownership that, in turn, concentrates management control in the hands of a strategic investor, eliminates agency problems associated with dispersed ownership. On the other hand, it may lead to entrenchment of upper management which may be inconsistent with the objective of profit (or value) maximisation. This paper examines the impact of M&A on profitability of firms in India, where the corporate landscape is dominated by family-owned and group-affiliated businesses, such that alignment of management and ownership coexists with management entrenchment, and draws conclusions about the impact of concentrated ownership and entrenchment of ownermanagers on firm performance. Our results indicate that, during the 1995-2002 period, M&A in India led to deterioration in firm performance. We also find that neither the investors in the equity market nor the debt holders can be relied upon to discipline errant (and entrenched) management. In other words, on balance, negative effects of entrenchment of ownermanagers trumps the positive effects of reduction in owner-vs.-manager agency problems. Our findings are consistent with bulk of the existing literature on family-owned and group affiliated firms in India.
    Keywords: mergers and acquisitions, corporate governance, manager entrenchment, firm performance, India
    JEL: G34
    Date: 2008–02–01
    URL: http://d.repec.org/n?u=RePEc:wdi:papers:2008-907&r=ind

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