nep-ind New Economics Papers
on Industrial Organization
Issue of 2019‒08‒12
ten papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. What drives differences in management practices? By Bloom, Nicholas; Brynjolfsson, Erik; Foster, Lucia; Jarmin, Ron; Patnaik, Megha; Saporta-Eksten, Itay; Van Reenen, John
  2. The Non-Neutrality of the Arm's Length Principle with Imperfect Competition By Moreno Ruiz, Diego; Lemus Torres, Ana Belén
  3. Competition and Pass-Through: Evidence from Isolated Markets By Christos Genakos; Mario Pagliero
  4. Corporate Culture and Merger Success By Francesco Saverio Stentella Lopes; Franco Fiordelisi; Ornella Ricci
  5. Patents, Data Exclusivity, and the Development of New Drugs By Gaessler, Fabian; Wagner, Stefan
  6. Differential Price Pass-Through in Organic and Conventional Food Markets By Li, Qingxiao; Cakir, Metin; Beatty, Timothy; Park, Timothy A.
  7. The Impact of NAFTA on Prices and Competition: Evidence from Mexican Manufacturing Plants By Ayuma Ken Kikkawa; Yuan Mei; Pablo Robles Santamarina
  8. Competition Between Public and Private Maternity Care Providers in France: Evidence on Market Segmentation By Herrera-Araujo, D.;; Rochaix, L.;
  9. Ownership and Productivity in Vertically-Integrated Firms: Evidence from the Chinese Steel Industry By Loren Brandt; Feitao Jiang; Yao Luo; Yingjun Su
  10. Narrowing the 'Digital Divide': The Role of Complementarities Between Fixed and Mobile Data in South Africa By Ryan Hawthorne; Lukasz Grzybowski

  1. By: Bloom, Nicholas; Brynjolfsson, Erik; Foster, Lucia; Jarmin, Ron; Patnaik, Megha; Saporta-Eksten, Itay; Van Reenen, John
    Abstract: Partnering with the US Census Bureau, we implement a new survey of "structured" management practices in two waves of 35,000 manufacturing plants in 2010 and 2015. We find an enormous dispersion of management practices across plants, with 40 percent of this variation across plants within the same firm. Management practices account for more than 20 percent of the variation in productivity, a similar, or greater, percentage as that accounted for by R&D, ICT, or human capital. We find evidence of two key drivers to improve management. The business environment, as measured by right-to-work laws, boosts incentive management practices. Learning spillovers, as measured by the arrival of large "Million Dollar Plants" in the country, increase the management scores of incumbents.
    JEL: L25 D24 L60 M11 M50
    Date: 2019–05–05
  2. By: Moreno Ruiz, Diego; Lemus Torres, Ana Belén
    Abstract: The Arm's Length Principle (ALP) has been broadly adopted by OECD countries to avoid the use of firms' internal transfer pricing as a device for shifting profits into low tax jurisdictions. While the ALP does not affect market outcomes under perfect competition, we show that under imperfect competition its adoption is non-neutral: a strict (lax) application of the ALP softens competition among subsidiaries (parents). Thus, under imperfect competition regulating transfer pricing optimally requires trading off its impact on market outcomes and tax revenue.
    Keywords: Vertical Separation; Imperfect Competition; Arm'S Length Principle; Transfer Pricing Regulation
    JEL: H26 L51 L13
    Date: 2019–07
  3. By: Christos Genakos; Mario Pagliero
    Abstract: We measure how pass-through varies with competition in isolated oligopolistic markets with captive consumers. Using daily pricing data from gas stations, we study how unanticipated and exogenous changes in excise duties (which vary across different petroleum products) are passed through to consumers in markets with different numbers of retailers. We find that pass-through increases from 0.44 in monopoly markets to 1 in markets with four or more competitors and remains constant thereafter. Moreover, the speed of price adjustment is about 60% higher in more competitive markets. Finally, we show that geographic market definitions based on arbitrary measures of distance across sellers, often used by researchers and policy makers, result in significant overestimation of the pass-through when the number of competitors is small.
    Keywords: pass-through, tax incidence, gasoline, market structure, competition
    JEL: H22 L1
    Date: 2019–07
  4. By: Francesco Saverio Stentella Lopes; Franco Fiordelisi (University of Rome III and Middlesex Business School); Ornella Ricci (University of Rome III)
    Abstract: What role does corporate culture play in merger success? We show that corporate culture influences both the probability to act as an acquirer and the outcome of the deal itself. We use text analysis to measure corporate culture for all US listed companies relying on the Competing Values Framework. We disentangle companies culturally oriented inside their organization (focused on collaboration and cost control) from companies oriented outside their organization (focused on competition and innovation). We then study the impact of corporate culture on merger participation and outcome: we show that an internally-oriented corporate culture significantly decreases the participation to merger deals, but has a positive impact on the merger outcome as captured by announcement returns and by post-merger operating performance. Our results suggest that companies focused on collaboration and on their internal processes create more value through their acquisitions.
    Keywords: corporate culture; competing values framework; mergers; operating performance.
    JEL: G34
    Date: 2019–04
  5. By: Gaessler, Fabian (MPI-IC Munich); Wagner, Stefan (ESMT Berlin)
    Abstract: Pharmaceutical firms typically enjoy market exclusivity for new drugs from concurrent protection of the underlying invention (through patents) and the clinical trials data submitted for market approval (through data exclusivity). Patent invalidation during drug development renders data exclusivity the sole source of protection and shifts the period of market exclusivity at the project level. In instrumental variables regressions we quantify the effect of a one-year reduction in expected market exclusivity on the likelihood of drug commercialization. The effect is largely driven by patent invalidations early in the drug development process and by the responses of large originators. We hereby provide first estimates of the responsiveness of R&D investments to market exclusivity expectations.
    Keywords: patents; drugs; data exclusivity; clinical trials;
    JEL: K41 L24 L65 O31 O32 O34
    Date: 2019–08–05
  6. By: Li, Qingxiao; Cakir, Metin; Beatty, Timothy; Park, Timothy A.
    Keywords: Marketing
    Date: 2019–06–25
  7. By: Ayuma Ken Kikkawa; Yuan Mei; Pablo Robles Santamarina
    Abstract: This paper assesses the impact of the North American Free Trade Agreement on Mexican manufacturing plants’ prices and markups. We distinguish between Mexican goods that are exported and those sold domestically, and decompose their prices separately into markups and marginal costs. We then analyze how these components were affected by reductions in Mexican output tariffs, intermediate input tariffs, and U.S. tariffs. We find that declines in these tariffs led to significant reductions in the marginal costs of Mexican products. However, prices of exported goods slightly increased as exporters increased their markups in response to declines in U.S. tariffs.
    Date: 2019
  8. By: Herrera-Araujo, D.;; Rochaix, L.;
    Abstract: The French market for hospital care is shared by public and private providers. In addition to covering a number of mandates usually not undertaken by the private sector such as training, research, and disease prevention, public hospitals are required to provide basic care across the French territory. To investigate the existence of market segmentation between public and private care providers, we focus on maternity care and first examine to what extent public and private maternity units substitute each other on an extensive margin, to then analyze how competition plays out on an intensive margin. Consistent with the public mandate, our findings indicate that, after a private unit closure, public maternity units are less likely to exit a low-populated area than a high-populated area. In addition, we find evidence of an asymmetric intensive margin substitution between private and public maternity units. Maternity users tend to substitute private units (non for-profit and for-profit) for public units more often than the reverse.
    Keywords: maternity units; substitution; demand estimation; public-private;
    JEL: D03 D12 L13 L22 L81
    Date: 2019–07
  9. By: Loren Brandt; Feitao Jiang; Yao Luo; Yingjun Su
    Abstract: We study productivity differences in vertically-integrated Chinese steel facilities using a unique data set that provides equipment-level information on material inputs and output in physical units and equipment size for each of the three main stages in the steel value chain, i.e., sintering, pig-iron making, and steel making. We find that private vertically-integrated facilities are more productive than provincial state-owned (SOEs) facilities, followed by central SOEs. This ranking lines up with our productivity estimates in the two downstream production stages, but central SOEs outperform in sintering, most likely because of their superior access to higher quality raw materials. The productivity differential favoring private facilities declines with their size, turning negative for facilities larger than the median. These patterns are linked with equipment-level TFP in private firms as size expands, and the internal configuration of vertically-integrated facilities, which reflect the greater constraints facing private firms. Increasing returns to scale at the stage and facility-level partially offset these costs and rationalize firms' choice on larger vertically-integrated facilities.
    Keywords: Total Factor Productivity, Vertically-Integrated, Steel, SOEs, Private, China
    JEL: D24 L11 L23 L61
    Date: 2019–07–31
  10. By: Ryan Hawthorne; Lukasz Grzybowski
    Abstract: We study substitution between fixed and mobile broadband services in South Africa using survey data on 134,000 individuals between 2009 and 2014. In our discrete-choice model, individuals choose fixed or mobile voice and data services in a framework that allows them to be substitutes or complements. We find that voice services are complements on average but data services are substitutes. However, many consumers see data services as complements. Our results show that having a computer and access to an internet connection at work or school are more important than reducing mobile data prices by 10% in driving broadband penetration.
    Keywords: fixed-to-mobile substitution, mobile broadband, fixed broadband
    JEL: L13 L43 L96
    Date: 2019

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