frictionless commerce a comparison of internet and conventional retailers there have been many claims that the internet represents a new nearly frictionless market our research empirically analyzes the characteristics of the internet as a channel for two categories of homogeneous products books and cds using a data set of over 8 500 price observations collected over a period of 15 months we compare pricing behavior at 41 internet and conventional retail outlets we find that prices on the internet are 9 16 lower than prices in conventional outlets depending on whether taxes shipping and shopping costs are included in the price additionally we find that internet retailers price adjustments over time are up to 100 times smaller than conventional retailers price adjustments presumably reflecting lower menu costs in internet channels we also find that levels of price dispersion depend importantly on the measures employed when we compare the prices posted by different internet retailers we find substantial dispersion internet retailer prices differ by an average of 33 for books and 25 for cds however when we weight these prices by proxies for market share we find dispersion is lower in internet channels than in conventional channels reflecting the dominance of certain heavily branded retailers we conclude that while there is lower friction in many dimensions of internet competition branding awareness and trust remain important sources of heterogeneity among internet retailers

operating flexibility global manufacturing and the option value of a multinational network the multinational corporation is a network of activities located in different countries the value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed we model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries a stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option the value of which is dependent upon the real exchange rate the model is extended to analyze hysteresis effects and within country growth options we show that the management of across border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing

budget constrained search abstract a consumer with diminishing marginal utility in consumption who can search for lower prices will balance the gains from spreading consumption evenly through time against the benefits of delaying consumption until lower prices are revealed optimal programs of consumption savings and price are characterized for a general formulation of this problem intertemporal substitutability is measured by relative risk aversion that relative risk aversion is small is sufficient for the intuitive solution as the best current price rises more search and less consumption is done the general model is adapted to special cases among other things this shows that linear utility and sequential search implies ex nte calculable reservation prices and consumption only when search stops however this characterization is a consequence of the restriction to linear utility outside of this context reservation prices and consumption may not be calculable ex ante

intangible capital market share and corporate strategy this paper theoretically and empirically identifies the determinants of firm profitability and market share for twelve broadly defined us manufacturing industry groups the effects of advertising research and development and diversification on profitability and market share are econometrically tested for each industry group and corporate strategy implications of the results are considered one major result of the analysis is that research and development r d tends to be much more effective as a means of enhancing firm profitability than advertising and research and development spending decisions are more closely related to the profitability of r d than advertising decisions are related to the profitability of advertising

ownership based entry mode strategies and international performance this study examines the relationship between ownership entry modes and performance the ownership entry modes examined are the wholly owned modes of acquisition and new venture entry and the non wholly owned mode of joint venture entry a theoretical relationship is developed for international entry modes that is based on the contingency characteristics of resource requirements and organizational control factors this model suggests that different entry modes have different performance outcomes based upon their resource and organizational control demands the theoretical model although developed using the eclectic theoretical approach is based largely on concepts and relationships previously delineated in contingency theory our hypotheses suggest that new ventures should outperform joint ventures and joint ventures should outperform acquisitions an empirical test using a sample of 321 japanese firms entering the north american market provides supporting evidence

prices and price dispersion on the web evidence from the online book industry using data collected between august 1999 and january 2000 covering 399 books we examine pricing by thirty two online united states based bookstores at the aggregate level we find that both advertising and competitive structure had the predicted effects more competition led to lower prices and to lower price dispersion holding competitive structure constant more widely advertised items also had lower prices at the firm level we observe considerable heterogeneity in behavior firms had differentiated or attempted to differentiate on dimensions such as brand price and selection

retail strategies on the web price and non price competition in the online book industry two conflicting predictions have emerged regarding the effect of low cost information on price the first states that all internet retailers will charge the same low price for mass produced goods the second states that internet retailers will differentiate to avoid intense price competition using data collected in april 1999 on the prices of 107 books in thirteen online and two physical bookstores we find similar average prices online and in physical stores and substantial price dispersion online analysis of product differentiation yields no clear results the substantial premium charged by amazon provides indirect evidence of product differentiation

the intertemporal behavior of economic profits abstract the intertemporal behavior of economic profits is examined tests show that profit rates are not independent of their initial level a set of tests for the nature of the profit adjustment mechanism is proposed and a stock market based profit measure is employed despite intertemporal dependence we find evidence of profit rate adjustment patterns roughly consistent with neoclassical theory for negative profits in some but not all cases the probability of maintaining positive profits appears less than the probability of moving toward zero profits

lessons from the united states s antitrust history abstract the united states s antitrust policy spans more than 100 years for most of its history the united states has had the toughest antitrust laws and enforcement policies of any country in the world a shift to a more permissive attitude with regard to antitrust matters has occurred in recent years however this paper traces the changes in antitrust policy that have occurred and the concurrent shifts in thinking among economists on antitrust questions following this review the paper offers a critical appraisal of both the economic underpinning of the new learnings on antitrust matters and the changes in antitrust policy that have accompanied them it closes with a discussion of the implications of the analysis for european antitrust competition policy

capacity investment and market power in the economic value of energy firms regulation of energy firms faces the complex problem of balancing private earning a fair rate of return on investment and public assure safe and reliable supply of energy at the lowest possible costs goals tobin s q is a forward looking indicator on investment opportunities and on market power of firms that energy regulators can use for more effective regulation this paper presents the empirical evidence on the determinants of differences in observed values of tobin s q for a sample of large listed energy firms from 10 different countries in the period 2000 2006 we find that adjustment costs represent around sixty percent of the difference between economic and book value of the assets for the representative firm while rents from market power represent the other forty percent therefore across countries there is room for regulatory actions aiming at reducing energy prices but less than what may be inferred from the observed average q values

information technology effects on firm performance as measured by tobin s q despite increasing anecdotal evidence that information technology it assets contribute to firm performance and future growth potential of firms the empirical results relating it investments to firm performance measures have been equivocal however the bulk of the studies have relied exclusively on accounting based measures of firm performance which largely tend to ignore it s contribution to performance dimensions such as strategic flexibility and intangible value in this paper we use tobin s q a financial market based measure of firm performance and examine the association between it investments and firm q values after controlling for a variety of industry factors and firm specific variables the results based on data from 1988 1993 indicate that in all of the five years the inclusion of the it expenditure variable in the model increased the variance explained in q significantly the results also showed that for all five years it investments had a significantly positive association with tobin s q value our results are consistent with the notion that it contributes to a firm s future performance potential which a forward looking measure such as the q is better able to capture

firm size and the nature of innovation within industries the case of process and product r d the effect of firm size on the allocation of r d effort between process and product innovation is examined it is hypothesized that relative to product innovations process innovations are less saleable in disembodied form and spawn less growth this implies that the returns to process r d will depend more on the firm s output at the time it conducts its r d than the returns to product r d incorporating this distinction in a simple model the authors derive and test predictions about how the fraction of r d devoted to process innovation varies with firm size within industries

measuring advertising intensity and intangible capital in the greek food industry the objective of the present paper is to examine market conduct and its determinants in the greek food industry and to measure how and to what degree the industry and the firm s structural characteristics affect advertising intensity an advertising intensity model giving emphasis to intangible capital is formulated data from icap have been used on a four digit classification for the food industry during the 1990 1997 period the empirical results indicate that intangible capital positively affects the advertising intensity of the firm and plays an important role in strategies that affect total cost demand and structure of the market

cost value and foreign market entry mode the transaction and the firm this paper compares and contrasts the mode of foreign market entry decision from the transaction cost internalization and organizational capability perspectives each of these perspectives operates at a different level of analysis respectively the transaction and the firm and consequently differs in the primary arena of attention namely transaction characteristics and the capabilities of firms in making the comparison a key distinction is made between the cost and the value aspects in the management of know how based on which issues pertaining to the transfer of knowledge within and across firm boundaries and the exploitation and enhancement of competitive advantage are closely examined the main purpose of this paper is to demonstrate the implications of a shift in frame from cost to value in the analysis of decisions related to firm boundaries entry into foreign markets is used primarily as a vehicle for the accomplishment of this purpose the paper shows how the value based framework of the organizational capability perspective radically and fundamentally shifts the approach towards the governance of firm boundaries and argues that even though tc internalization theory raises some valid concerns the organizational capability framework may be more in tune with today s business context some of the assumptions of the tc internalization perspective both direct opportunism exploitation of existing advantage and indirect preservation of the value of know how across locational contexts asymmetry between bounded rationality for transaction and production purposes are critically examined and questioned implications of a shift from a cost to a value based framework are discussed and the need for a shift in research focus is emphasized

why don t poor countries catch up a cross national test of an institutional explanation early neoclassical analyses predicted that poor countries would grow faster than wealthy countries because of technological advances and diminishing returns to capital in the latter the reverse has occurred poor countries are falling back rather than catching up we suggest here that deficient institutions underlie this divergence employing various indicators of institutional quality including the rule of law the pervasiveness of corruption and the risk of expropriation and contract repudiation we show that the ability of poor countries to catch up is determined in large part by the institutional environment in which economic activity in these countries takes place jel o00 o10

foreign direct investment and investment under uncertainty we show that in uncertain environments ownership and internalization advantages may be negatively rather than positively associated with fdi this reversal from extant theory occurs because ownership advantages often serve to make fdi delayable while internalization advantages often serve to make it less reversible when fdi becomes either more delayable or less reversible it is less likely to occur at a point in time our approach enriches the who where and why explanations offered by current fdi theory to incorporate the question of when

search and consumer theory a consumer faces list prices for commodities but can buy one at a discount discounts vary randomly between sellers the number of quotations sought depends on list prices search costs and wealth this function is homogeneous of degree zero and provided some sufficient conditions are satisfied is increasing in wealth decreasing in search cost independent of the list price of the discounted commodity if indirect utility is multiplicatively separable increasing in the list price if the commodity is a necessity increasing in the list price of substitutes slutsky s equation is generalized to include search

choice of foreign market entry mode impact of ownership location and internalization factors firms interested in servicing foreign markets face a difficult decision with regards to the choice of an entry mode the options available to a firm include exporting licensing joint venture and sole venture several factors that determine the choice of a specific foreign market entry mode have been identified in previous literature these factors can be classified into three categories ownership advantages of a firm location advantages of a market and internalization advantages of integrating transactions this study examines the independent and joint influences of these factors on the choice of an entry mode multinomial logistic regression model is employed to test the hypothesized effects

analyzing foreign market entry strategies extending the internalization approach a new fully integrated analysis of the foreign market entry decision is presented encompassing the choice between exporting licensing joint venturing and wholly owned foreign investment the choice between acquisition and greenfield investment is examined and so too are options based on subcontracting and franchising the model extends the insights of internalization theory and draws on concepts from the economics of industrial organization a special feature of the model is the distinction between investment in production facilities and investment in distribution facilities an important practical distinction that has been overlooked in much of the international business literature the strength of competition from indigenous rivals is emphasized as a determinant of entry strategy into both production and distribution

the impact of order and mode of market entry on profitability and market share market share performance and profitability of overseas business activities has long been an important issue in international business in this study we explore the impact of order and mode of market entry into an overseas market we find that early entrants have significantly higher market shares and profitability than late followers we also find that equity joint ventures have a higher profitability than either wholly owned operations or contractual joint ventures a significant interaction exists between order and mode of market entry as expected firm efficiency and size affect the performance of firms these results are based on the business activities of a sample of 14 466 foreign firms in china in 1995

firm specific assets multinationality and financial performance a meta analytic review and theoretical integration through a meta analysis of 120 independent samples reported in 111 studies we test the predictions of internalization theory in the context of the multinationality performance relationship findin

solving theoretical and empirical conundrums in international strategy research linking foreign entry mode choices and performance several theoretical and empirical developments in the literature on foreign entry mode and performance and on international strategy more generally were influenced or prefigured by brouthers 2002 jibs decade award winning paper regarding theory brouthers is an archetype of the integration of transaction cost and institutional perspectives i argue that it is also relevant to the growing literature that aims at synthesizing these and other perspectives methodologically brouthers 2002 contributed several uniquely direct and rich measures furthermore it not only displayed awareness of endogeneity specifically self selection issues but also was among the pioneers in the comparative analysis of governance choices for a given firm or transaction i elaborate on the promising if challenging use of such what if imputation to identify the impact of more or less well aligned choices overall i argue that such methodological advances cannot be decoupled from the conceptual advances that enable them and which they reinforce

sequential search without reservation price abstract for a consumer who searches sequentially from a known distribution but subject to a budget constraint the optimal search policy does not necessarily have a reservation price and may generate demand curves with positively sloped segments however absence of risk aversion and inferiority is sufficient to avoid these implications

modeling the search for the least costly opportunity abstract with the continuing growth in the number of opportunities available at virtual stores over the internet there is also a growing demand for the services of computer programs capable of scanning a large number of stores in a very short time we assume that the cost associated with each scan is linear in the number of stores scanned and that the resulting list of price quotes is not always satisfactory to the customer in which case an additional scan is performed and so on in such a reality the customer wishing to minimize her expected cost must specify the requested sample size and a rule control limit to stop the search in the context of search theory the above search model can be categorized as fixed sample size sequential with infinite horizon according to this model the expected search cost is a function of two decision variables the sample size and the control limit we prove that for arbitrary sample size the expected search cost is either quasi convex or strictly decreasing in the control limit and that the optimal expected search cost is quasi convex in the sample size these properties allow an efficient calculation of the optimal policy we also develop analytic formulas to calculate the cost s variance allowing customers to choose a slightly higher expected cost if there is a considerable decrease in the variance finally we present detailed examples for price quotes that are distributed uniformly or exponentially

government policies market imperfections and foreign direct investment the internalization eclectic theory of foreign direct investment includes the important insight that government policies create market imperfections which make foreign direct investment an economically rational strategic alternative for firms this paper reexamines the effects of government policies on market imperfections and foreign direct investment fdi it broadens and refines the analysis of the impact of government policies by developing the following arguments 1 there is a wide range of government policies that affect firms fdi decisions via their effects on market imperfections 2 there are numerous dimensions of variability in government policies that need to be identified in order to understand fully the effects of government policies on market imperfections and hence fdi flows 3 some of the effects of government policies on market imperfections and fdi are the opposite of those previously noted in the fdi literature 4 the effects of government policies vary across the several individual components of fdi flows the paper thus examines the following variables and relationships more extensively and precisely than has the previous literature government policy variables as causal factors affecting fdi market imperfection variables as intervening factors in the causal connections between government policies and fdi and the multiple indicators of the various dimensions of fdi as dependent variables

the hierarchical model of market entry modes in this study we propose and test a hierarchical model of market entry modes entry modes can first be viewed as equity based versus non equity based within equity based modes the choice is between wholly owned operations and equity joint ventures while within non equity based modes the choice is between contractual agreements and export empirically we demonstrate that there are factors that exert substantial influences at the equity versus non equity level but rather weak influences at the lower level of choice hierarchy the empirical results are based on a sample of over 10 000 foreign entry activities into china between 1979 to 1998 the findings provide supportive evidence for the hierarchical model of market entry modes

global strategy and multinationals entry mode choice this paper makes a case directed towards establishing the importance of global strategic considerations in choosing multinationals entry mode specifically it is our contention that beyond the environmental and transaction specific factors well established in the literature to affect the entry mode decision we should also consider the strategic relationship a multinational envisages between its operations across borders in reaching this decision after incorporating various global strategic variables into an eclectic framework of the factors influencing the entry mode choice this paper tests both the validity of the overall framework and the importance of each entry mode determinant in differ entiating among entry modes this is done based on ninety six multinational managers responses to a survey questionnaire concerning their entry mode decision experiences the results suggest that an express incorporation of global strategic variables into an analysis of the entry mode decision is warranted

the eclectic paradigm of international production a restatement and some possible extensions this article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade and restates its main tenets the second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to mne activity as well

the optimal timing of a foreign direct investment analyses of the optimal timing of foreign direct investment fdi decisions have been curiously lacking in the general literature on multinational enterprises cf buckley 1979a b although comparative static analyses exist comparing exporting to the host country with market servicing from a production unit sited in the host country horst 1971 hirsh 1976 the only attempt to predict the timing of the switch from exporting to foreign based production is that of aliber 1970 although vernon 1966 gives a cost based rationale for the switch this chapter attempts to fill this gap in the theory of fdi section 2 1 outlines and criticises previous attempts to deal with the problem sections 2 2 4 present a simple model which ignores set up costs and sections 2 5 and 2 6 give a more detailed analysis including such costs further extensions of the theory are considered in section 2 7 and the conclusions are summarised in section 2 8 the problem emerges as being more complex than had previously been appreciated

the returns to r d in tobin q models and the option value of future r d abstract this paper argues that the tobin q literature under estimates the r d stock used by investors in calculating market values and significantly over estimates the returns to r d thereby questioning the conclusion that there is private under investment in r d

strategic investments by us firms in transition economies studies in international business have considered both theoretical and empirical analyses of investment strategies by multinational firms in transition economies however there is scant research on the impact of firm specific factors on the likelihood timing and mode of entry decisions in these economies we provide evidence on three aspects of the strategic decisions by us firms to invest in transition economies first we find that firms entering the region have greater advertising intensity and sales growth than industry peers that did not enter the region suggesting that market seeking considerations motivate expansion second we find that earlier entry is undertaken by firms with fewer industry competitors and higher sales growth suggesting that the desire to secure market share ahead of competitors motivates entry timing finally we investigate the choice of entry mode into the region and find that firms from concentrated industries are more likely to enter the region with high equity commitment consistent with market seeking motives we also find that firms incorporate the degree of progress with market oriented reforms in making decisions concerning entry timing and mode

measuring the degree of internationalization of a firm in spite of both positivistic and instrumental research the reliability of measuring the degree of internationalization of a firm remains speculative we collected data on nine attributes of seventy four american manufacturing mncs alpha factor and frequency analyses revealed a linear combination of five variables with a reliability coefficient of 79 as a measure of the degree of internationalization of a firm we discuss the statistical and conceptual properties of the scale and their implications for content and construct validity

measuring design investment in firms conceptual foundations and exploratory uk survey abstract the importance of design to company and national performance has been widely discussed with a number of studies investigating the value or impact of design on performance however none of these studies has measured design investment as an input against which performance can be compared as yet there is no established way in which design investment might be measured without such a method we cannot develop a reliable picture akin to that for r d spending on the impact of design spending on company performance this paper presents a conceptual framework for the measurement of design investment and applies this framework in a survey of uk firms the framework describes design as being part of the creation and commercialization of new products and services the survey highlights some surprising patterns of design spend in the reported sample and demonstrates the viability of the underpinning framework a revised framework is proposed that situates design investment in the context of r d the model has implications for policy makers trying to understand the role and scale of design in the private sector for managers wishing to optimize their design investments and for academics seeking to measure the value of design

oligopolistic pricing with sequential consumer search n identical stores compete by choosing prices for a homogeneous good with constant marginal costs consumers search sequentially with perfect recall for the lowest price one class of consumers called shoppers have zero search costs while all other consumers have a positive search cost c there is a unique symmetric nash equilibrium price distribution with the property that it changes smoothly from marginal cost pricing when all consumers are shoppers and or c 0 and monopoly pricing when no consumers are shoppers remarkably as the number of stores increases the nash equilibrium becomes more monopolistic copyright 1989 by american economic association

intangible capital aspects of advertising and r d expenditures twenty years have passed since economists first emphasized the intangible capital aspects of advertising according to this view consumers tend to forget brands and continuous advertising is needed to maintain a given rate of sales thus advertising expenditures can be viewed as a capital good that depreciates over time and needs maintenance and repair 22 p 197 more recently weiss 25 among others has suggested that research and development r d costs might also be capitalized as such expenditures yield benefits mainly in the future 25 p 421 unfortunately most analyses of the intangible capital issue have been limited to advertising largely because no comprehensive data on r d were available until quite recently however important recent theoretical contributions on the topic and improvements in data availability now make it possible more completely to consider the intangible capital aspects of both advertising and r d expenditures here the intangible capital issue is investigated through use of a market valuation model in this approach significant future intangible capital effects of advertising and r d are suggested to the extent that current expenditures have significant effects on the market value of the firm given positive market value influences individual coefficient estimates can be used to estimate both the total stock of intangible capital as well as average annual depreciation rates for advertising and r d while these depreciation rate estimates are interfirm averages and undoubtedly err in individual instances they can be quite useful in indicating the general magnitude of corporate profit and tax misstatement due to current reporting and tax policies in section i below various articles closely related to this study are reviewed section ii develops a valuation model embodying intangible capital considerations the data are discussed in section iii and estimation results are presented in section iv and finally conclusions and implications for public policy are discussed in section v

the measurement of profitability and the diagnosis of market power this paper develops a model which yields the specification of an empirical test for the difference between price and marginal revenue which will be significantly positive if a firm exercises market power the test can be carried out with any of a number of commonly used measures of accounting profitability and embodies a specific functional form for the consideration of nonconstant returns to scale the model is estimated for four firms in the medical surgical supply industry and four firms in the motor vehicle industry the results are consistent with the hypothesis that product differentiation is an important basis for firm specific market power import quotas are shown to increase market power in the motor vehicle industry claims that accounting data cannot be used to analyze market power are rejected

timing of investment and international expansion performance in china this study examines the multivariate and univariate performance effects of timing of fdi in an emerging economy at the business unit level a longitudinal analysis of industry wide firm specific data on fdi timing and foreign venture performance in china reveals that timing has a significant influence on overall as well as on individual aspects of venture performance it is observed that early entrants outperform late movers in terms of local market expansion and asset turnover whereas late movers are superior to early entrants with regard to risk reduction and accounting return during the initial period of international expansion factor analysis confirms that the importance of timing in affecting fdi decisions is as significant as that of internalization ownership or location factors

union rent seeking intangible capital and market value of the firm abstract this study considers the effect of unions on intangi ble capital investment and profitability within the context of a market value rather than a more traditional accounting based approach theory is provided suggesting unions are able to affect profitability by sharing in the economic returns to firm specific intangible capital in support of this hypothesis we find unionization reduces the returns to r d and produces a corresponding limiting influence on r d investment at the firm level i introduction a n extensive literature in economics has ex amined the determinants of profitability with much of the focus centering on the role of market structure only recently however have the effects of labor unions on profitability been analyzed ths is surprising since labor economists long have emphasized union influences on wages and productivity that in turn may affect profitabil ity in recent studies freeman 1983 and karier 1985 report a significant limiting influence of unions on price cost margins in high concentra tion manufacturing industries using firm level data and the market based tobin s

testable competing hypotheses from structure performance theory efficient structure versus market power this paper provides a structure performance theory that can accommodate leading firm efficiency as well as several competing market power hypotheses the author derive s testable implications distinguishing the simple collusion product differentiation and scale economy hypotheses from the innovative lea ding firm alternative it is shown that recent evidence of a positive market share price cost margin pcm relationship and a nonpositive concentration pcm relationship can reject the scale economy and simpl e collusion hypotheses in homogeneous product markets unfortunately this same evidence cannot reject the product differentiation hypothe sis in favor of leading firm efficiency copyright 1988 by blackwell publishing ltd

expert mediated sequential search abstract this paper studies markets such as internet marketplaces for used cars or mortgages in which consumers engage in sequential search in particular we consider the impact of information brokers experts who can for a fee provide better information on true values of opportunities we characterize the optimal search strategy given a price and the terms of service set by the expert and show how to use this characterization to solve the monopolist expert s service pricing problem our analysis enables the investigation of three common pricing schemes pay per use unlimited subscription and package pricing that can be used by the expert we demonstrate that in settings characteristic of electronic marketplaces namely those with lower search costs for consumers and lower costs of production of expert services unlimited subscription schemes are favored finally we show that the platform that connects consumer and experts can improve social welfare by subsidizing the purchase of expert services the optimal level of subsidy forces the buyer to exactly fully internalize the marginal cost of provision of expert services in electronic markets this cost is minimal so it may be worthwhile for the platform to make the expert freely available to consumers

inter industry differences in profitability the legacy of the structure efficiency debate revisited this study presents a simple model on the sources of inter industry variation in profitability and tests its empirical implications in order to shed new light on the long lasting debate over industry profitability the model identifies four key factors that jointly influence an industry s price cost margin i the intensity of strategic investment e g r d and advertising ii the skewness of the distribution of market share or market concentration iii the appropriability of strategic investment and iv the extent to which firms market shares are determined by the intensity of their strategic investment these factors are expected to be positively related to industry profitability and our empirical analysis provides supportive evidence the model also suggests that the conventional single dimensional hypotheses on profitability the market power or market structure hypothesis and the efficiency hypothesis are overly simplified more importantly existing empirical results allegedly supporting each of these hypotheses are spurious to the extent that the distribution of firm specific strategic competence reflects firm heterogeneity in efficiency and at the same time underlies the distribution of market share or market concentration copyright 2009 oxford university press

foreign direct investment by japanese electronics firms in the united states and canada modelling the timing of entry this paper examines the relationship between attributes of japanese electronics firms and the sequence of their investments in the u s and canada it is argued that a useful way to model foreign direct investment fdi decisions is to recognize explicitly the uncertainties involved in them a probabilistic model of fdi is specified the following hypotheses are incorporated in the model 1 the higher the risk adjusted expected net benefits from foreign direct investment ceteris paribus the higher the probability of making an investment at any particular moment and thus the probability of investing earlier 2 risk adjusted expected net benefits from fdi by a firm are a function of its possession of certain types of intangible transportable assets 3 the uncertainties involved with fdi may be reduced with the passage of time and with increased experience with foreign operations 4 parent company attributes that facilitate market intelligence capabilities permit early recognition of investment opportunities and 5 timing of entry may reflect strategic considerations such as responding to growing foreign market opportunities the need to ensure market access and the presence of opportunities to obtain abnormal profits due to market concentration the models are estimated using cox s proportional hazards regression model results generally confirm the hypotheses that size and financial capabilities as well as possession of some knowledge based firm specific strategic assets are significantly related to early fdi they also confirm that timing of entry is affected by market opportunities and in some cases by the need to ensure market access we did not find evidence in this sector that differences in market concentration significantly affected the timing of fdi analyses are also provided of inter period changes in the importance of different types of intangible assets in explaining earlier fdi as well as changes that reflect differences in host country environments

international joint venture partner selection the role of the host country legal environment this study attempts to enhance our understanding of how a host country s legal environment influences international joint venture ijv partner selection criteria empirical results based on survey data collected on 169 ijvs revealed that host country rule of law perceptions negatively influence appropriation and coordination cost concerns which positively influence partner related criteria furthermore these concerns mediate the relationship between perceptions of host country rule of law and partner related criteria

an empirical analysis of dynamic nonprice competition in an oligopolistic industry this article develops a dynamic model of nonprice competition in an oligopolistic industry and uses it to analyze advertising competition in the u s cigarette industry the model generalizes existing studies by allowing advertising to affect both firm market shares and the total size of the market the model also allows dynamic conjectural variations to arise from the intertemporal links created by the durability of advertising we use these dynamic conjectural variations to distinguish alternative models of competitive interaction we estimate the complete model of firm production demand and advertising choice by using data for u s cigarette producers the results indicate that firm advertising primarily affects the level of market demand with a firm s effect on rival firms market shares arising through variations in the number of brands sold empirical results on firm behavior suggest that firms act as if their advertising choices will alter the future advertising choices of rival firms in both the high tar and low tar cigarette markets

market value r d and patents abstract a significant relationship is found between the market value of the firm and its intangible capital proxied by past r d expenditures and the number of patents based on a time series cross section analysis of data for large u s firms

what makes and what does not make a real option a study of equity shares in international joint ventures this paper examines the boundaries of real options logic with an application to joint ventures jvs we distinguish between forms of uncertainty that are resolved endogenously and those that are resolved exogenously and theorize that only exogenous uncertainty will have the impact predicted by real options theory on a foreign investor s choice of how large an equity share to take in a jv we theorize that macroeconomic and institutional variables generate exogenous uncertainty whereas by contrast cultural distance and choices pertaining to corporate scope and product or process development activities involve endogenous sources of uncertainty that investors can both assess and act upon without having to wait and see using a sample of 6472 sino foreign jvs we find support for our predictions we discuss and implement proper methods to test for the existence of null effects as is relevant to establish the boundaries of a theory such as real options theory we draw implications for research and practice on jvs specifically equity share decisions which deserve more attention and real options including suitable uses and desirable extensions of the concept

the order and size of entry into international markets abstract when entering markets managers must decide when to enter as well as how many resources to commit to the entry the study finds that larger initial resource commitments do not result in higher market share and market survival in international markets instead to improve performance in international markets managers should strive to be first entrants further first entrants typically commit fewer resources suggesting that this strategy can be pursued by firms with limited resources

the durability of advertising revisited recent cross section studies find that advertising is relatively long lived providing support for treating advertising as capital this paper models the firm s advertising decision treating advertising and product quality as complements the model predicts that failing to control for differences in firm specific factors positively correlated with the return to advertising will understate advertising s direct effect on sales and overstate its durability the authors empirical study using several years of data for over four hundred firms confirms these predictions advertising s apparent life shrinks dramatically when firm specific factors are held constant they also find no support for the steady state assumptions critical to intangible assets models copyright 1994 by blackwell publishing ltd

market structure and market value while the use of market models to determine the sources of economic profits is quite new at least two empirical studies considering the market structure and market value relation have appeared to date interestingly they conflict thomadakis 1977 found a close positive relation between the four firm concentration ratio and relative excess valuation measured as the difference between the market value of the firm and the book value of tangible assets all normalized by sales as a result thomadakis argued that industry concentration plays a role in the determination of excess profits from currently held assets and those expected from the firm s investment options p 185 in contrast lindenberg and ross 1981 reported no significant relation between concentration and tobin s q ratio measured as the ratio of the market value of the firm to the replacement cost of tangible assets this result disputes thomadakis s findings and a purely structuralist interpretation of economic profits according to lindenberg and ross market power may or may not be evident in highly concentrated markets since high q s can occur in concentrated or unconcentrated markets and conversely low q s indicating no significant market power can occur in markets that have high degrees of concentration p 28

financial performance and survival of multinational corporations in china this study investigates the impact of entry timing mode of entry market focus and location advantages on the financial performance and survival of multinational corporations mncs in china three major results were found first mncs that entered china in an earlier year had a higher level of profit than those that entered in a later year second equity joint ventures ejvs had a higher profit level than cooperative operations or wholly foreign owned subsidiaries third mncs that utilized well the location advantages in china had a higher profit we also found that ejvs were more likely to survive compared to cooperative operations while wholly owned subsidiaries did not differ from ejvs the findings are based on a 2 year study of about 1000 mnc operations in china copyright 1999 john wiley sons ltd

a new view of the market structure performance debate ion typically considered in market structure performance studies data on cross sections of firms or industries are unlikely to be sufficiently 2 the question of data selection has been discussed fairly thoroughly by weiss 44 and demsetz i 5 among others although there appears to be little agreement on the direction of bias in the most commonly used samples the question of exogeneity has been less thoroughly discussed although in specific instances e g schmalensee 37 martin 27 it has been dealt with explicitly this content downloaded from 157 55 39 35 on sat 03 sep 2016 05 57 53 utc all use subject to http about jstor org terms 400 james l bothwell thomas f cooley and thomas e hall informative to make such empirical analysis useful it may therefore be more productive to return to industry specific analysis there will undoubtedly be some who are unconvinced by this argument and for them we offer the observation that further empirical studies based on weak deductive foundations are likely to be convincing only to the extent that they account explicitly for the role of prior beliefs and specification uncertainty ii determinants of profitability the conventional market structure conduct performance paradigm has guided vast amounts of empirical research in the field of industrial organization for the past three decades like empirical research in other areas of economics the maintained hypotheses that are considered reflect to a large extent the prior beliefs of the researchers the result is that there is always a suspicion that what is being engaged in is more advocacy than objective empirical analysis in the market structure performance literature the most important alternative prior beliefs maintained hypotheses appear to fall into six categories which we characterize as follows i seller concentration explains profits high rates of return are thought to be caused by monopoly power conferred by high degrees of seller concentration this is the basic collusion specification of bain i 2 seller concentration and entry barriers explain profits high rates of return are thought to reflect monopoly power resulting from both high seller concentration and high barriers to entry this prior comes from the traditional market structure performance paradigm of industrial organization and accounts for the peristence of collusive gains it is prevalent in the work of mann 26 weiss 45 46 comanor and wilson i i qualls 34 1j35 and many other researchers 3 absolute or relative firm size explain profits this prior reflects the demsetz i4 i5 and peltzman 133 notion that high rates of return result from superior firm efficiency or innovativeness and not from oligopolistic collusion and joint profit maximization this prior has also been adopted by others e g shepherd 39 gale i7 who assume that high market shares indicate high barriers to entry 4 risk differentials explain profitability differences this reflects the notion that high rates of return reflect neither monopoly power nor superior efficiency but the payment of positive risk premiums to risk averse investors it underlies much of the work of stigler 4i fisher and hall i6 cootner and holland i3 and many others there are however considerable differences in beliefs about which measure of risk variability of return over time financial leverage or nondiversifiable risk is relevant this content downloaded from 157 55 39 35 on sat 03 sep 2016 05 57 53 utc all use subject to http about jstor org terms the market structure performance debate 40i 5 advertising intensity explains profits this reflects the notion of bloch 4 and others that differences in reported accounting profit rates result from differences in the amounts of omitted intangible capital resulting from advertising expenditures because advertising is assumed by some to be a source of product differentiation this prior also may reflect the belief that the extent of product differentiation is a major determinant of profitability comanor i o schmalensee 13 7 6 growth explains profits this reflects brozen s 6 7 disequilibrium hypothesis that profitability differences result not from monopoly power but from adjustments in capacity lagging behind changes in demand given a particular maintained hypothesis about the most important determinant of profitability there remains uncertainty about the rest of the specification of the model if the results are not robust with respect to uncertainty about the conditioning set of variables then it cannot be concluded that the data are very informative about the hypothesis in question the next section discusses the methodology used to determine whether the results are robust to such specification uncertainty iii specification uncertainty the hypotheses discussed in the previous section all specify the primary determinants of profitability in each case however the investigator must have in mind a set of possible conditioning variables that may or may not belong in the regression although uncertainty about the inclusion or exclusion of such variables is not often explicitly acknowledged it is an inevitable and important aspect of virtually all empirical investigations the primary concern for the problem at hand is the extent to which this specification uncertainty leads to uncertainty in the estimated parameters of primary interest consider the regression model

buyer search and price dispersion a laboratory study we study markets with costly buyer search in which sellers simultaneously post prices buyers costlessly observe one or with probability 1 q two of the posted prices and can accept one or pay to search again the experiment varies q the search cost and the number of buyers equilibrium theory predicts a unified very low high price for q 0 q 1 and predicts specific distributions of dispersed prices for q 1 3 and 2 3 actual prices conform closely to the predictions in some treatments buyers reservation prices are biased away from the extremes however and sellers prices have positive autocorrelation and cross sectional correlation

the impact of corporate governance practices on r d efforts a look at shareholders rights cross listing and control pyramid the paper considers the impact of multiple shareholder oriented governance practices on rd decisions based on a sample of 5 528 firms belonging to 110 large french listed business groups our results substantiate the idea that shareholder oriented governance practices and a lower position in a control pyramid are better for rd investment the introduction of any additional shareholder oriented practice is found to result in more rd we show however that this anglo americanization of the french corporate governance system is only partial we provide evidence of the co existence of an old french system of corporate governance with a hybrid model of corporate governance the lack of concrete results on complementarity among shareholder oriented governance practices casts doubt on the stability of this hybrid model in the french context

rates of return on corporate investment in the last two decades productivity has lagged in the united states markets have been lost to foreign competition real income per capita has grown slowly this experience has led to considerable discussion of possible causes 7 one possible cause often mentioned is the quality of managerial investment decisions managers have been accused of overinvesting in obsolete technologies of underinvesting in risky projects with long run payoffs of undertaking unprofitable mergers and of overall poor judgment in their investment policies 39 this paper presents evidence on the returns on investment over the 1970 88 period for a sample of 699 large corporations that is consistent with this view

profit rates and intangible capital a central question in industrial organization is why profit rates differ so dramatically across firms and industries one of the many explanations offered for this phenomenon is the failure of conventional accounting methods to adjust for intangible capital stocks i e it is argued that profit rates do not differ dramatically when capital stocks are correctly calculated to include intangible r d and advertising capital to test this hypothesis individual advertising capital stocks are calculated for firms in the toys distilled beverages cosmetics and pharmaceuticals industries and r d stocks are calculated for the pharmaceuticals firms the adjustments do not eliminate the wide dispersion in profit rates copyright 1991 by mit press

on the specification of structure performance relationships this paper argues that most estimated structure profitability equations in industrial economics have not been derived from a single coherent view of the behaviour of firms the independent variables in such equations have often been derived on the basis of a literature search and by appeal to conflicting approaches e g constrained and unconstrained profit maximisation the use of a coherent approach indicates that structure performance equations are likely to be highly non linear and that simultaneous equation estimation is neither required nor appropriate in some cases single equation estimation is adequate and in other cases reduced form equations are needed

timing of entry in international market an empirical study of u s fortune 500 firms in china this study attempts to explain the timing of entry of firms in international markets based on the existing literature we propose a framework that consists of firm specific factors industry market factors and host country factors empirical results based on the entry information of u s fortune 500 firms in china between 1979 and 1996 show that larger firms with greater level of internalization and scope economies are likely to enter this foreign market earlier in addition non equity modes competitors behavior in the product market and lower levels of country risk are significantly associated with early entry

a review of research on the growth of multinational enterprises a penrosean lens abstract we provide a comprehensive review of the growth of multinational enterprises mnes based on a quarter century 25 years of scholarly international business publications we synthesize research insights on the determinants of the growth of mnes through the lens of penrose s theory of firm growth which is the most influential theoretical perspective on firm growth the review takes stock of the research findings on the facilitators constraints and the trajectory of growth of mnes and elaborates on the commonalities and differences between research on the growth of mnes that draws on penrose s theory and research that does not this comparison highlights the opportunity to build an internally coherent theory of the growth of mnes that is a theory that connects what an mne is to what determines an mne s growth it also indicates that past research placed a strong emphasis on exogenous factors e g cross country distances as key constraints on growth even though the penrosean lens suggests a close consideration of endogenous factors that drive international growth as well as endogenizing the ostensibly exogenous growth determinants the review highlights the importance of firm specific managerial knowledge and learning which shapes the direction of the growth of mnes and ensures its administrative coherence

the accumulation of wealth and the cyclical generation of new technologies a search theoretic approach in this paper sustained technological progress results from the feedback between technical change and the accumulation of wealth the production technology is affected by a productivity factor which ensues from research and development the research and development process is described as a sequential search problem in which optimal decisions depend on current levels of wealth and technology the resulting growth path displays invention cycles a discovery of a significant technological improvement at the end of a search phase is followed by periods of growth without search eventually sufficient wealth is accumulated research and development resumes and a new cycle begins copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association