production lot sizing and carbon emissions under cap and trade and carbon tax regulations cap and trade and carbon tax are two emission regulations widely used to curb the carbon emissions generated from firms based on economic order quantity eoq model this paper examines the production lot sizing issues of a firm under these two regulations respectively the optimal lot size and emissions under the two regulations are achieved we then investigate the impacts of production and regulation parameters on the optimal lot size and emissions furthermore we compare the firm s optimal carbon emissions under the two regulations it is found that under the cap and trade regulation the firm s decisions of the optimal emissions as well as permits trading depend on the differentiated permits trading prices if setup incurs the same cost as holding incurs per unit of generated emissions both regulations always lead to the same optimal emissions which is also equal to that without emission regulation otherwise neither regulation always leads to lower emissions than the other does

do firms differ much with finn profitability data for a cross section of geographic markets it is possible to determine the relative importance of firm and market effects on profitability analysis of variance from a panel of multihank holditig companies in texas suggests that finn effects are more important than market effects in determining profitability and that the magnitudes of the effects vary over time in a 1985 article schmalensee takes a new approach to analysis of the structure conduct performance paradigm schmalensee chooses a purely descriptive approach to distinguish among the classical tradition of bain 1956 which takes markets as the basic unit of analysis with a particular focus on market concentration the revisionist views of demsetz 1973 and peltzman 1977 who view the observed relation between profitability and concentration as reflecting underlying inter firm profitability differences and the managerial view that profitability is determined by firm wide management practices but not necessarily by differences in market share this descriptive approach has two advantages over a structural analysis a descriptive analysis avoids imposition of the troublesome maintained hypotheses inherent in structural models further as scott and pascoe 1986 point out the explanatory power of structural models is generally only a small fraction of that of descriptive models

extending the cyert march duopoly model organizational and economic insights two studies were conducted to further explore the organizational and economic insights provided by the cyert march duopoly model c m described ina behavioral theory of the firm abtof cyert and march 1963 study 1 examined the extent to which two firms that differed solely in the decision behavior of a routine would also differ in organizational quasiresolution of conflict uncertainty avoidance problem driven search and organizational learning and economic profit price market share cost measures and impacts three such manipulations were separately examined where each manipulation altered the relative propensity of the firm to be more or less reactive to three events production growth pressure price adjustment under organizational goal conflict and initial price adjustment under profit goal failure analysis of the behaviors revealed how subtle changes in these key routines could generate complex organizational and economic effects that impact firm success the dominant result demonstrated that organizations that did not perform well organizationally did not perform well economically in addition higher reactivity resulted in higher costs in part because of quantified organizational constructs e g slack pressure study 2 examined the data from the first study to determine the extent to which the performance of the duopoly was consistent with a set of eight stylized economic facts drawn from the empirical literature on oligopoly study 2 demonstrated consistency with five of the eight stylized economic facts and provided partial support for two others we conclude that behavioral constructs of abtof as articulated in the cyert march duopoly model provide behavior and performance capabilities that bridge the gap between game theoretic models of duopoly and the computational and informational realities of organizations

product differentiation and profitability an asymmetric model the purpose of this paper is to develop a model of product differentiation in which there is an asymmetry namely that some customers are easier to serve than others it turns out that profits are negatively related to difficulty of service and that profits and market share are negatively related the results of this model are used to shed light on some aspects of the collusion versus differential efficiency debate and are also compared with vertical product differentiation models copyright 1990 by blackwell publishing ltd

accounting rates of return many economic studies provide empirical evidence regarding cross sectional differences in firm profitability in most of these studies firm profitability is measured by an accounting rate of return net income dividend by the book value of assets hereafter arr rather than an economic rate of profit franklin fisher and john mcgowan define the firm s economic rate of profit irr as that interest rate which equates the present value of its net revenue stream to its initial outlay 1983 p 82 fisher and mcgowan examine the analytic relation between a firm s arr and its irr in a series of examples and conclude that the arr is such a bad surrogate for the irr that the results of arr based empirical studies are likely to be totally misleading p 91 william long and david ravenscraft 1984 have criticized the theoretical work of fisher and mcgowan because the nature of the analytic relationship between the arr and the irr in the context of highly simplified hypothetical examples may not be indicative of the nature of the relationship in empirical settings their criticism adopts the utilitarian view that the arr has to be treated as a suitable surrogate for the irr as long as no preferable alternative measure of profitability is available for empirical work this view has merit as long as the measurement error which is contained in the arr is random rather than systematic unfortunately the nature and extent of the measurement error which is contained in the arr in a particular empirical setting can only be determined unequivocally if the irr is unequivocally known in such a case of course there would be no need to rely on the arr at all due to this unhappy circle empirical research on firm profitability has continued to rely on the arr despite the fact that many persons reasonably believe that the results of such research may be totally misleading fisher and mcgowan g c harcourt 1965 while others reasonably believe that the results are reliable enough to form a basis for policy decisions long and ravenscraft recent work by y ijiri 1978 1979 1980 and by myself 1982 has shown that conditional irr estimates can be obtained from data in firms financial statements while these irr estimates are conditional they do abstract from certain extraneous factors that influence arrs and that differ across firms consequently the conditional irr estimates are free from some of the sources of measurement error which are known to contaminate the arr thus the conditional irr estimates can be used to provide evidence on whether these sources of measurement error have or have not affected the outcome of prior studies in which profitability was measured by the arr such evidence can help to objectively resolve the conflict between the opposing views on the reliability of arr based profitability research this paper uses conditional irr estimates to examine the properties of the measurement error in the arr in a study of the relationship between firm profitability and firm size the remainder of the paper is organized as follows in section i the theoretical work of fisher and mcgowan is used professor of accounting university of iowa iowa city ia 52242 i gratefully acknowledge the comments of william albrecht dan dhaliwal gary fethke franklin fisher scott linn william r kinney jr and the participants of a workshop at the university of florida on earlier versions of this paper 1 some authors for example william long and david ravenscraft 1984 have used the sales margin ratio earnings sales as a measure of profitability however if one views profitability as return per unit of sacrifice the sales margin ratio is not a profitability measure since it ignores the sacrifice or investment required to generate a dollar of sales consequently this paper does not attempt to shed any insight into prior studies that have relied on the sales margin ratio as a measure of profitability

effect sizes and the interpretation of research results in international business journal editors and academy presidents are increasingly calling on researchers to evaluate the substantive as opposed to the statistical significance of their results to measure the extent to which these calls have been heeded i aggregated the meta analytically derived effect size estimates obtained from 965 individual samples i then surveyed 204 studies published in the journal of international business studies i found that the average effect size in international business research is small and that most published studies lack the statistical power to detect such effects reliably i also found that many authors confuse statistical with substantive significance when interpreting their research results these practices have likely led to unacceptably high type ii error rates and invalid inferences regarding real world effects by emphasizing p values over their effect size estimates researchers are under selling their results and settling for contributions that are less than what they really have to offer in view of this i offer four recommendations for improving research and reporting practices

developing acquired foreign subsidiaries the experience of mnes in transition economies drawing on subsidiary evolution and dynamic capabilities research i test how development and growth of subsidiaries recently acquired in transition economies are affected by multinational enterprise mne and target capabilities these subsidiaries often lack important resources their cross border transfer enhancement and exploitation are problematic however data on 170 acquisitions in central and eastern europe confirmed the importance of the pre acquisition experiences of both target and mne for subsidiary growth although cultural differences moderated the predicted effects notably

on the heterogeneity of firms abstract an important issue in corporate strategy is to explain persistent differences in conduct and performance among close competitors within an industry while io economists generally seek technology and market based explanations firm theorists and business policy scholars rather look for historical and organizational reasons the paper first summarizes recent findings along these two approaches it then studies sources of persistent differences between two firms competing a la cournot on two identical markets in this context both types of explanations are found to matter we show that the firms respective capabilities i e the parameters that determine their cost of producing the two goods would diverge only if some difference in the firms respective initial capabilities exists or there is an appropriate combination of organizational inertia the cost for updating current capabilities and market conditions

efficiency versus collusion a reformulation of the weiss test the weiss test has been used to discriminate between the efficiency and collusion hypotheses using a conventional oligopoly model we show that the test is valid for the former hypothesis but not the latter contrary to recent emperical studies we find that a negative coefficient on concentration in profitability equations does not refute the collusion hypothesis in fact this finding supports the hypothesis if the sample is dominated by small firms

competition policy burdens and state owned enterprise reform one of the most important remaining issues in china s transition to a market economy is the reform of state owned enterprises soe s when reforms started in late 1978 soe s dominated china s industrial sectors in every aspect after 18 years of gradual transition the soe share in china s total industrial output has declined from 77 6 percent in 1978 to 28 8 percent in 1996 however in 1996 soe s still employed 57 4 percent of urban workers and possessed 52 2 percent of total investment in industrial fixed assets improving soe performance is crucial for social stability and sustained growth in china however over 40 percent of soe s are losing money in this paper we will argue that the root of the soe problem is the separation of ownership and control and that the oftencriticized soft budget constraints arise from various state imposed policy burdens which make the state accountable for the poor perfornance of soe s the key for a successful soe reform is to remove the policy burdens and to create a level playing field so that market competition can provide sufficient information for the managerial performance of the soe s and make the managers incentives compatible with those of the state io competition and the performance of large corporation in a market economy

the two faces of competition dynamic resourcefulness and the hypercompetitive shift competition in the american economy has fundamentally changed over the last few decades from static to dynamic this study labels this important change the hypercompetitive shift and documents it across 200 industries of the us manufacturing sector during i958 to 1991 for industries that undergo a hypercompetitive shift there is an increase in the cross firm variance in performance and a rotation in the value rivalry relationship from a negative association to an inverted u as a consequence of these competitive changes the strategic focus of firms shifts from careful exploitation of given highly durable strategic assets to the steady creation of many new rapidly depreciable ones the key driver of hypercompetitive shift is the dynamic resourcefulness of an industry or the ease with which new strategic assets can be created determinants of dynamic resourcefulness include the dynamism of related transactors notably consumers and suppliers the knowledge base of the industry and structural condi

will markets direct investments under the kyoto protocol lessons from the activities implemented jointly pilots under the kyoto protocol countries can meet treaty obligations by investing in projects that reduce or sequester greenhouse gases elsewhere prior to ratification treaty participants agreed to launch country based pilot projects referred to collectively as activities implemented jointly aij to test novel aspects of the project related provisions relying on a ten year history of projects we investigate the determinants of aij investment our findings suggest that review agency preferences related to national political objectives and possibly deeper cultural ties influenced project selection and limited the number of aij projects bilateral ties also appear to have affected investment decisions directly possibly because of related transaction costs the results suggest an investment process different from the assumptions that underlie well known estimates of cost savings related to the protocol s flexibility mechanisms we conclude that if approaches developed under the aij programs to approve projects are retained the scale of investment under kyoto s flexibility provisions and their cost savings will be less than what is generally anticipated and the pattern of investment less driven by abatement costs

does corporate strategy matter a revisionist view that corporate strategy does not matter has gained considerable influence in recent years this view largely stems from empirical results of early variance decomposition studies that found negligible corporate effects associated with profitability differences between businesses our analysis of the variance decomposition literature shows this view to be incorrect not only do the studies as a group show that factors at the corporate level of organizations contribute to profitability differences but also evidence suggests that factors specifically associated with corporate strategy contribute to corporate effects corporate strategy in fact does matter copyright 2001 john wiley sons ltd

activities implemented jointly another look at the facts abstract the first conference of the parties to the united nations framework convention on climate change in berlin established a pilot phase of so called activities implemented jointly aij this pilot phase started in 1995 and was to end in 1999 it was prolonged at the fourth conference of the parties in buenos aires 1998 for a yet undetermined period after 2000 this paper is an empirical study of aij experience in the first five years 1995 1999 based on 96 aij from the unfccc s web site as of april 30 1999 and a separate study on seven aij projects of japan the main results of this study are 1 aij investment shows a pattern of regional specificity with rather divergent regional investment portfolios in the united states japan and europe this pattern can be traced back to differences in the national aij programs of investors and hosts on the one hand and to specific ways of minimizing transaction cost on the other e g by attaching aij to established institutional links of development co operation or by trading in the neighbourhood and 2 aijs are overwhelmingly no regret measures with almost zero or negative cost transaction costs of reporting have been minimized by applying simple and straightforward methods of baseline determination the exception to this is the verification procedure where expensive external verification prevails

the intertemporal stability of the concentration margins relationship using a longitudinal data base we find that there has been a substantial narrowing of the spread between the price cost margins of concentrated and unconcentrated industries including measures of macroeconomic fluctuations into standard price cost margin regressions we find significant differences in cyclical behavior across market structure we also explore a possible explanation unionization for differences in cyclical behavior finally we investigate the degree to which our results are affected by the potential simultaneity of concentration advertising and the price cost margin

organizing emissions trading the barrier of domestic permit allocation abstract this paper uses a barrier model of politics to analyse the issue of permit allocation as a major political obstacle to organizing inter national greenhouse gas emissions trading it is argued that permit allocation constitutes a barrier because among other things various types of emitters have conflicting interests in trying to lobby for as much allocated permits as possible and because international differences in domestic permit allocation procedures are perceived to potentially distort inter firm competitiveness relations permit allocation is circumvented by applying intergovernmental or project based emissions trading the project approach is preferable in particular because it avoids the trading of hot air

concentration changes and large firm small firm efficiency differences evidence from us manufacturing industries 1990 concentration changes and large firm small firm efficiency differences evidence from us manufacturing industries applied economics vol 22 no 1 pp 131 142

emissions trading and transaction costs analyzing the flaws in the discussion abstract although emissions trading lowers the costs of climate change mitigation transaction costs e g to find a trading partner may reduce its cost effectiveness some economists claim that transaction costs for joint implementation ji and clean development mechanism cdm projects will be higher than for international emissions trading iet transfers arguing that projects require advance approval whereas permit transfers can be automatically registered and checked annually however this article demonstrates the incompleteness of their views by both analyzing empirical data and discussing the theoretical conditions under which transaction costs decrease for ji and cdm and increase for iet

hot air in kyoto cold air in the hague the failure of global climate negotiations abstract why did the climate negotiations in the hague fail our contribution is to argue that the conflict between the european union eu and the united states us stems mainly from disagreement on the cost issue we argue that the three main concerns promoted by the eu in the hague first a 50 national emission ceiling the supplementarity principle second the use of carbon sinks and third an international market control system these issues can be solved by removing all restrictions on free greenhouse gas ghg trade and by establishing the world trade organization as an international authority the us will face considerably higher costs than foreseen at the negotiations in kyoto and will have strong incentives to free ride our main hypothesis is that the eu proposal on supplementarity made the us turn to free riding thus to make the us stay in an international ghg emission trading scheme the eu must reconsider and acknowledge us claims for cheaper reduction options and the right to trade hot air this point is important if the us does not participate the increase in emissions will be much higher than the emission reduction following the eu supplementarity proposal

is tourism firm competitiveness driven by different internal or external specific factors new empirical evidence from spain abstract the quest to understand the multilevel antecedents of competitiveness has led to a separation of approaches on one side of the question are the environment theories that analyze the structural characteristics of the general and competitive environment on the other side are the resource based view and its extensions that highlight firm specific resources and capabilities as the main basis of firms competitiveness however in recent years the nature of competition and shifting economic conditions have given rise to new theoretical approaches that complement the assumptions underlying both environmental and firm theories specifically this study contributes by examining the regional environment effect the district effect and the strategic group effect through a study of 364 spanish tourism firms this research explores the relative importance of distinct external forces such as the general environment or country effect the regional effect the competitive environment or industry effect the district effect and internal factors such as the firm s tangible resources capabilities and strategy selection the results demonstrate that firms capabilities are more important than environment effects and tangible resources

domestic market power and foreign trade abstract this paper develops a conjectural variation model to include foreign trade and applies it to the swedish industry the main conclusions emerging from the empirical application are that the degree of implicit collusion is generally very low in sweden and further that while high seller concentration exerts a positive influence on this degree there is strong and counteracting competitive pressure from foreign trade a more general conclusion is that it is important to include foreign trade in analyses of market power in open economies

circumstance and choice the role of initial conditions and policies in transition economies the experience of countries in transition from a planned to a market oriented economy has varied greatly the clearest differences are between the east asian countries china and vietnam and the countries of central and eastern europe cee and the former soviet union fsu china and vietnam have contained inflation and benefited from continued high growth in gdp since the beginning of their reforms while all cee and fsu countries have experienced large declines in output and most have experienced hyperinflation but even in cee and the fsu differences are marked some countries have lost over half of their gdp and growth performance in a number of countries is still poor while others are growing strongly some are still suffering from high inflation while others have successfully reduced annual inflation what determines this divergence of outcomes across transition countries no study so far has analyzed the interaction of all factors including initial conditions political change and reforms in a unified framework including cee the fsu china and vietnam the authors examine these broader interactions but focus first on the role of initial conditions such as initial macroeconomic distortions and differences in economic structure and institutions which have been emphasized less in the literature they find that initial conditions and economic policy jointly determine the large differences in economic performance among the 28 transition economies in the sample initial conditions dominate in explaining inflation but economic liberalization is the most important factor determining differences in growth but reform policy choices are not exogenous they depend in turn on both initial conditions and political reform with political reform the most important determinant of the speed and comprehensiveness of economic liberalization other findings provide additional insight into these relationships results show that liberalization has a negative contemporaneous impact but a stronger positive effect on performance over time the results also show that macroeconomic and structural distortions are negatively related to both policy and performance regarding the former unfavorable initial conditions discourage policy reforms but do not diminish their effectiveness once they are implemented the authors find some evidence that the influence of initial conditions diminishes over time this is in part because many of the initial conditions are themselves modified in the course of transition monetary overhangs are dissipated through inflation industrial overhang is eroded as plants shut down and market memory returns through experience

china s transition and its implications for international business this paper focuses on institutional change as the central and most consequential contextual aspect of china s transition identification of key characteristics of china s emergent institutions leads to propositions on their relevance for international business practice china s transition also raises issues for theory development including the way that transition is modeled the need to draw upon multiple perspectives and the concomitants of a contextual approach

profit margins and the business cycle evidence from uk manufacturing firms this paper presents some empirical models of profitability using panel data covering 709 large u k companies ove r the 1970s and 1980s focusing specifically on the role of aggregate demand shocks in shaping firm level profitability in basic regressi ons and in quite complex econometric models the results suggest that firm level profit margins fell heavily during the deep manufacturing recession of the early 1980s and as such are consistent with model s predicting the procyclical nature of profit margins this result hol ds across different product groups producer goods consumer durables a nd nondurables though the timing of the impact of aggregate shocks appears to differ copyright 1993 by blackwell publishing ltd

markets vs management what drives profitability this study addresses the issue of the relative degree of variance in roa accounted for by industry corporate and sbu effects while controlling for the business cycle and the interaction between the business cycle and industry two key articles schmalensee 1985 and rumelt 1991 are discussed in detail research results on a recent data base compustat using variance components analysis varcomp are presented that not only confirm most of the rumelt 1991 findings but also suggest the existence of a corporate effect heretofore undetected

exploring the effect of cap and trade mechanism on firm s production planning and emission reduction strategy abstract cap and trade mechanism has a significant effect on firm s production and operation decisions and carbon emissions this study develops a mathematical model to examine the effect of cap and trade mechanism on firm s production planning and emission reduction strategy based on the model the firm s critical production planning decisions such as the optimal production quantity optimal allowance selling price and the maximum profit under the cap and trade mechanism are derived firstly then based on the cost benefit analysis the conditions under which the firm makes the optimal emission reduction strategy between buying carbon allowance from the carbon trading market and conducting low carbon processing are identified the result suggests that when the low carbon processing cost is greater than the potential opportunity benefit the firm is inclined to purchase carbon allowance from the carbon trading market and vice versa finally a numerical analysis is conducted to investigate the effects of relevant factors such as carbon quotas carbon emission rate low carbon processing cost and transaction cost on firm s production and operation decisions the results indicate that under the cap and trade mechanism the transaction cost has a positive effect on allowance selling price the firm s optimal production quantity and maximum profit is positively related to carbon quotas while negatively related to carbon emission rate and low carbon processing cost this research contributes to enrich related literature and knowledge with regard to carbon emissions reduction at the firm level and highlight the critical importance of cap and trade mechanism in reducing carbon emissions

u s canada trade liberalization and mnc production location using confidential firm level panel data from the bureau of economic analysis we examine how the bilateral trade flows of u s multinational corporations mncs and their canadian affiliates responded to u s canadian tariff reductions from 1983 to 1992 we find that canadian affiliate sales to the united states are negatively correlated with canadian tariffs but u s parent sales to canadian affiliates have little association with canadian tariffs these results contradict the notion that canadian tariff reductions would lead to a hollowing out of canadian manufacturing we also find substantial heterogeneity in mnc responses to tariff changes within narrowly defined manufacturing industries overall bilateral trade liberalization is trade creating as u s mncs integrated their north american production such that canadian affiliates increased sales to the united states and reduced domestic sales

successful in the long run a meta regression analysis of persistent firm profits we study the profit persistence literature by applying meta regression analysis mra to a set of 36 empirical papers which analyze the persistence of abnormal firm profits over time the analyzed literature provides evidence for a mediocre degree of persistence in abnormal profits an initial analysis of the distribution of reported profit persistence estimates reveals some degree of excess variation this points toward publication bias that favors significant results independent of their algebraic sign the mra however reveals that publication bias is particularly favoring results that indicate profit persistence and thus contradict the neoclassical model of perfect competition moreover the mra enables to control for heterogeneity driven by the study design we find that the analyzed country developing vs developed the applied econometric approach as well as the analyzed period of time are significant drivers of heterogeneity in reported persistence estimates

the profitability concentration relation market power or efficiency industrial economists have been studying the relationship between profitability and concentration using cross industry samples for many years now however as sometimes happens once it appeared that some consensus had been achieved with few exceptions market concentration and industry profitability are positively correlated peltzman i977 p 229 people began to question the interpretation of those results in particular demsetz e g i973 i974 and others suggested that rather than concentration market power leading to higher prices and profits the causal direction in fact ran from greater efficiency to both higher profits and incidentally to higher concentration our purpose here is to subject these conflicting hypotheses to cross industry empirical test using u k data in order to do this we first develop a model which is sufficiently general to allow for both alternative explanations of a positive concentration profitability correlation in the light of this model we then examine the implications for the within industry relation between market share and firm level profitability more specifically we explore demsetz s claim that the empirical form of this relationship should signal which of the alternative hypotheses is consistent with the between industry profitability concentration correlation our model suggests that in certain special circumstances this claim is partly justified in that it should be possible to assess the relative strengths of the market power and efficiency effects from the within industry relation more generally however factors such as product differentiation and scale economies may seriously impair the information content of the relation with at least a strong suspicion that the estimates will tend to exaggerate the evidence in favour of the efficiency hypothesis in the event our results tend to confirm that for most industries the within industry data offer little conclusive support for either hypothesis but for a not insignificant minority of industries the evidence suggests some support for the view that both efficiency and market power are at work simultaneously our model is detailed in section ii and estimated on u k data in section iii after which we offer a few comments in section iv first however we drovide a backcloth to the later analysis

the convergence of profits in the long run inter firm and inter industry comparisons this paper considers the extent to which the short run dynamic behavior and long run equilibrium levels of profitability differ among firms within the same industry movements in profits are modeled in terms of firm specific deviations from average industry profits and industry specific deviations from economy wide average returns applied to a sample of 217 large u k firms 1951 77 the results suggest that considerable heterogeneities exist within most industries that is most firms profitability experience differs considerably from those of their closest rivals copyright 1987 by blackwell publishing ltd

optimal production planning with emissions trading emissions trading is a market based mechanism for curbing emissions and it has been implemented in europe north america and several other parts of the world to study its impact on production planning we develop a dynamic production model where a manufacturer produces a single product to satisfy random market demands the manufacturer has access to both a green and a regular production technology of which the former is more costly but yields fewer emissions to comply with the emissions regulations the manufacturer can buy or sell the allowances in each period via forward contracts in an outside market with stochastic trading prices while needing to keep a nonnegative allowance account balance at the end of the planning horizon we first derive several important structural properties of the model and based upon them we characterize the optimal emissions trading and production policies that minimize the manufacturer s expected total discounted cost in particular the optimal emissions trading pol

the impact of managerial networking intensity and market based strategies on firm growth during institutional upheaval a study of small and medium sized enterprises in a transition economy varying institutional environments provide the foundation for a great deal of international business research yet relatively little empirical work has examined the determinants of small and medium sized enterprise sme growth during institutional upheaval although the importance of sme development for economic transition and growth is widely acknowledged our paper addresses this gap in the literature by examining how the competitive strategies of smes evolve during institutional transitions and assessing the implications for firm growth using data collected from 135 smes in 1993 and 200 smes in 2001 we find that managerial networking intensity i e developing and maintaining relationships that may be used for business purposes declines markedly over time whereas the importance of market based strategies increases managerial networking intensity is strongly associated with firm growth early in the institutional transition process but not later market based strategies are not associated with firm growth in either time period drawing on convergent insights from multiple theoretical perspectives we argue that changes in strategy are concurrently driven by socially constructed norms that legitimize new ways of competing and delegitimize old ones and by knowledge acquisition and learning which provide managers with a more diverse set of tools with which to exercise their strategic choices

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

the effects of social capital and organizational innovativeness in different institutional contexts this paper examines how social capital and organizational innovativeness influence business performance through their separate indirect or interactive effects and how these effects differ across the institutional contexts of a transition economy and a market economy in line with institutional theory our findings show that the effects of social capital are more extensive and probably more malignant in a transition economy than in a market economy furthermore different types of organizational innovativeness as corporate culture can be cultivated by different forms of social capital in different institutional contexts the implications for institutional theory and social capital theory and the managerial implications are discussed

new frontiers in international strategy this paper studies a new frontier in the understanding of international strategy is to explore it we propose the analogy of the ecology of firms and places as a way to emphasize that the real problem is the colocation of different places with different types of firms locations are in fact the distinctive content of international business strategy we deal with this problem with four different perspectives first differences across countries must be addressed with integrative frameworks able to represent the multidimensionality of semiglobalization or intermediate states between total localization and total integration second differences in the development of intermediary markets in a particular place influence firm positioning and industry structure in that place but their impact also crosses different places and it is endogenous to the ecology of places and firms in a systemic integrative way that makes simplifications extremely risky in the design of competitive strategy in an international context third places firms and strategies form a complex ecology that can be studied with a framework focused in understanding the geography strategy link that incorporates different levels of analysis new economic actors and a set of primitives finally firms around the ecology of places face the challenge of developing strategies and business models to serve the majority of humanity today excluded from world trade it is a fundamentally different way to think about the ecology of places and firms overall we present an intriguing new frontier with the capacity to impact both research and practice in the field of international strategy based in understanding the interplay among firms and places

in pursuit of monopoly power recent quantitative work in industrial economics this paper reviews empirical work in industrial organization devoted to the question of inferring the existence of monopoly power from data on observed market outcomes like profits and prices the discussion covers inter industry work long conventional in the area newer developments in intra industry analysis and case studies and concludes with some remarks on a small but growing body of work assessing market dynamics the wide range of studies reviewed all generally reveal that market power exists in many industries

the voyage of the beagle into innovation explorations on heterogeneity selection and sectors the aim of the paper is to assess heterogeneity of the innovation process using exploratory factor analysis on micro data from the third community innovation survey in 13 countries we identify four patterns that can be interpreted as research user external and production ingredients of innovation all too often it is assumed that how firm innovate can be represented by differences across sectors and or countries to put this proposition under scrutiny we partition variability of the factors scores into components identified by these higher levels sectors and countries matter to a certain extent but far more of the variance is given by heterogeneity among firms within both of them however groups of firms produced by cluster analysis account for much higher share of the variance which indicates that the most relevant stratification of the data cuts across the established sectoral and national boundaries we discuss implications of these findings for understanding of selection in evolutionary economics and for the literature on innovation systems

the market for sulfur dioxide emissions the 1990 clean air act amendments initiated the first large scale use of the tradable permit approach to pollution control the theoretical case for this approach rests on the assumption of an efficient market for emission rights the authors empirical analysis shows that the emission rights market created by the 1990 amendments had become reasonably efficient by mid 1994 they also show that the auctions specified in the amendments to jump start trading had become a small part of the overall market finally the authors demonstrate that the strategic bidding behavior discussed in the literature has had no effect on market prices copyright 1998 by american economic association

interfirm diversity organizational learning and longevity in global strategic alliances organizational theorists have correctly argued that the emergence and maintenance of robust cooperation between global strategic alliance partners is related to the diversity in the partners characteristics yet previous research has failed to systematically delineate the important dimensions of interfirm diversity and integrate the dimensions into a unified framework of analysis this paper develops a multilevel typology of interfirm diversity and focuses on organizational learning and adaptation as critical processes that dynamically moderate diversity s impact on alliance longevity and effectiveness

transaction costs and tradeable permits abstract tradeable permit systems are at the center of current interest and activity in market based reforms of environmental policy because these systems can offer significant advantages over conventional approaches to pollution control unfortunately claims made for their relative cost effectiveness have often been exaggerated transaction costs which may be significant in these markets reduce trading levels and increase abatement costs in some cases equilibrium permit allocations and hence aggregate control costs are sensitive to initial permit distributions providing an efficiency justification for politicians typical focus on initial allocations

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

market structure and price cost margins in a paper that has become a standard reference in the structure conductperformance approach to industrial economics cowling and waterson 1976 developed a theoretical rationale for expecting industry profitability to be positively correlated with the level of concentration their model based on a simple algebraic description of oligopoly behaviour has been interpreted as providing a justification for the common empirical practice of cross industry regression analysis of price cost margins in terms of concentration levels in the present paper we show that on further examination this model implies a joint determination of margins and concentration this provides some interesting comparative static results of relevance to inter industry differences in concentration levels equally however it leads to various cautionary insights concerning the meaning of price cost margin versus concentration regressions

the persistence of shocks to profitability in this study we use data for 1981 through 1994 on a large sample of u s companies to examine the persistence of incremental industry corporate parent and business specific effects on profitability our results indicate that the incremental effects of industry on profitability persist longer than the incremental effects of the corporate parent and of the specific business changes in industry structure have a more persistent impact on profitability than do changes in firm structure

joint implementation and cost effectiveness under the framework convention on climate change abstract the concept of joint implementation is the subject of ongoing negotiations under the framework convention on climate change proponents argue that allowing joint implementation of the objectives of the convention will increase the cost effectiveness with which those objectives are achieved opponents argue that allowing trade in carbon emission credits will reduce the incentive for domestic greenhouse gas emissions reductions and may undermine the commitments of the developed nations to take the lead in achieving climate stabilization this paper examines the argument for joint implementation from the standpoint of cost effectiveness it addresses the determination of incremental costs for abatement options and the assessment of cost effectiveness under complex systemic conditions using national greenhouse gas abatement costing studies from four different nations two developed nations on economy in transition and one developing nation the paper examines both the general claim for cost effectiveness of joint implementation and the implicit assumption that emissions reductions will be easier and cheaper in developing nations and economies in transition than they are in developed countries the results indicate firstly that benefits from joint implementation may be highly dependent on the level of associated transaction costs and secondly that greenhouse gas emission reductions may be considerably cheaper for some developed countries than they are for developing countries the paper stresses the need for well developed methodological guidelines under which both cost and cost effectiveness can be assessed and points to the dangers inherent in allowing ad hoc trading in emissions credits by a heterogenous community of private investors

management and ownership effects evidence from five countries despite the growing recognition in the corporate governance literature that the relationship between ownership concentration and profitability is context dependent this issue has not yet been subjected to direct empirical investigation using a single cross national sample this study empirically examines the ownership concentration performance relationship across the nations of canada france germany the united kingdom and the united states essentially we argue that the correlation if any between ownership concentration and firm profitability differs across countries in a systematic way determined by the national system of corporate governance results indicate that important and statistically significant differences do in fact exist across the countries studied 1998 john wiley sons ltd

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

a closer look at the effect of market growth on industries profits everybody talks about the relation of industries profit rates to their markets rates of growth but nobody does anything about it specifically researchers have confirmed the effect of the growth of nominal output on profits in many multivariate studies without specifying closely the hypothesis under test or the measure of demand growth appropriate to test it a profits growth relationship could stem from several mechanisms the lagged adaptation of capacity to unexpected changes in demand reactions of oligopolists to disturbances in their consensus etc these mechanisms how and where they work hold their own normative interest therefore knowing what behavior and what structure lying behind it accounts for the profits growth relationship should do more than improve the specifications of our studies of allocative efficiency it should also expand our knowledge of adaptive processes that are important and hard to observe directly in this paper we shall synthesize the available explanations of why changes in market demand should affect an industry s profits then present a statistical test of the relative significance of the competing explanations

impacts of alternative allowance allocation methods under a cap and trade program in power sector emission trading is considered to be a cost effective environmental economic instrument for pollution control however the policy design of an emission trading program has a decisive impact on its performance allowance allocation is one of the most important policy design issues in emission trading not only for equity but also for policy performance in this research an artificial market for sulfur dioxide so2 emission trading was constructed by applying an agent based model the performance of the jiangsu so2 emission trading market was examined under different allowance allocation methods and transaction costs the results showed that the market efficiency of emission trading would be affected by the allocation methods when the transaction costs are positive the auction allowance allocation method was more efficient and had the lowest total emission control costs than the other three allocation methods examined however the use of this method will require that power plants pay for all of their allowance and doing so will increase the production costs of power plants on the other hand output based allowance allocation is the second best method

the efficiency of firms what difference does competition make in cournot oligopoly the efficiency of a firm relative to others determines its market share this relationship gives an incentive to improve efficiency the incentives are greater in markets where firm behaviour is more competitive components of firm efficiency are identified by frontier production function techniques in 19 uk manufacturing sectors technical change average efficiency of each firm relative to the frontier and the efficiency of each firm relative to its own best practice in each period short run declines in market shares and profits induce the firm to improve efficiency relative to its best practice long run differences in efficiency are correlated with differences in gross investment

corporate and industry effects on business unit competitive position we partition the variances of market shares which we use as surrogates for competitive position of the business units of all public manufacturing companies available in the trinet data base into industry factors corporate parent specific factors and business unit specific factors our results differ somewhat from rumelt s 1991 which decomposed variances in profitability we find that corporate parent effects on market share are considerably greater than zero when lines of business are defined more narrowly when small business units are included and when firms are medium sized our results suggest that the relative importance of corporate industry and business unit effects depends on the types of criteria such as the level of industry aggregation whether small business units are included and firm size that are used to construct samples copyright 2000 john wiley sons ltd

risk and return on long lived tangible assets abstract assuming rational expectations a specialization of ross arbitrage pricing theory is used to obtain a simple securities market valuation formula when dividends follow linear stochastic processes the implications of this model for the use of accounting data to measure risk and for capital budgeting are explored a new measure of riskiness based on accounting data is derived and the use of risk adjusted discount rates is evaluated

technological change and market structure an evolutionary approach this paper studies an inter temporal market context in which firms innovate imitate and compete in quantities and technological choices each period potential entrants enter if there are profitable opportunities incumbent firms exit when they go bankrupt the key aspect of the model is that technological change evolves along a directed graph this graph reflects both the direction of technological change and the magnitude of costs involved in switching technologies in this set up my main concern is to explore the implications of different technological structures on entry exit dynamics and on the evolution of market characteristics market concentration profitability variance etc

the us market for so2 permits policy implications of the low price and trading volume abstract the price of so2 permits and the volume of trading under the us acid rain program have been lower than expected this can be explained by the creation and distribution of more permits than were initially authorized by the sale of permits by high cost abaters who are subject to more stringent local emission constraints or who have irreversibly invested in high cost abatement technologies and by the deregulation of the natural gas and railroad industries which in combination with incentives for cost cutting under the new market approach to so2 control has lowered marginal costs of abatement curves and made them more uniform across powerplants the low price of permits and low trading volume are evidence that market approaches to pollution control can be more cost effective than command and control regulations the effect of public policies and technological changes on the allowance market are usefully examined in the context of an ideal market in which the equilibrium price of allowances equals the marginal cost of abatement of individual powerplants using recent data from coggins and swinton 1996 we are able to explain the current price of permits with some accuracy

technical efficiency market share and profitability of manufacturing firms in cote d ivoire the technology trap this paper investigates the sources of inefficiency of firms in cote d ivoire and exam ines to what extent these effects translate into poor performance a large majority of firms is technically inefficient producing far below the maximum attainable output level major cost savings can also be realised through enlarging the scale of activities of firms efficiency gains and scale advantages translate into a better competitive position and via their impact on market share into higher profitability however severe growth barriers and imperfect markets keep firms from realising these gains and prevent firms from catching up in technology with respect to their larger older and often foreign owned competitors

is there a causal effect of concentration on persistent profitability differentials this article searches for a causal effect of industry concentration on estimates of persistent profitability differentials i offer solutions to identification problems that plague related analyses by applying an iv and a natural experiment this is the first study that explains estimates of persistent profit differentials using business segments data allowing to match micro and industry level data more consistently testing linear relations critical concentration levels and interactions with mobility barriers i find no evidence that concentration has any positive effect on long run profitability differences results rather tend to point to a statistically and economically significant negative causal effect

reply on comment to small firms and the merger mania research on performance differences between small and large firms is booming it emerges relatively separated from the mainstream industrial organization literature inspired by levy s comment on an earlier paper we try to bridge the gap between the two areas especially we screen non cooperative game theoretical models for predictions on performance differences most of them forecast higher profits for larger firms but there exist also some models which predict the opposite for very specific circumstances

multimarket contact economies of scope and firm performance we integrate the efficiency and competitive effects of product market scope choice into a comprehensive model of economic performance and empirically test the model in the context of the u s airli

consumer responses to sexual advertising the intersection of modernization evolution and international marketing drawing on insights from evolutionary psychology and sociology this research seeks to explain the gender differences and within sex variations in consumer responses to nudity in advertisements specifically we argue that the abundant resources that come with modernization emancipate women from the dependency on a long term relationship with a male partner for child bearing and rearing therefore women in modern societies are more likely to use fast reproductive strategies e g short term mating to enhance the chances of getting good genes from their mates for their offspring their physiological arousals activated by and attitudes toward male or female nudity in ads will change accordingly in contrast men s responses to nudity in ads are less affected by modernization we conducted an experiment in six chinese cities and obtained supportive evidence to illustrate these differences there was also evidence indicating that the socialization of high socio economic status may offset the force of evolution this study highlights the usefulness of an interdisciplinary approach in answering important questions in international business the findings are discussed with a focus on the integration of strategic pluralism theory life history theory parental investment theory and socialization theory

do traditional chinese cultural values nourish a market for pirated cds on one hand chinese consumers are well known for conspicuous consumption and the adoption of luxury products and named brands on the other hand they also have a bad reputation for buying counterfeit products their simultaneous preferences for two contrasting types of product present a paradox that has not been addressed in the literature this study attempts to present an explanation of this paradox by examining the effects of traditional chinese cultural values and consumer values on consumers deontological judgment of pirated cds and the amount of social benefits they perceive they gain from them we interviewed 300 hong kong chinese consumers and found that face consciousness increased materialism and risk aversion thereby producing a favorable deontological judgment of pirated cds face consciousness also has a direct effect on the amount of social benefits perceived in pirated cds both favorable deontological judgment and perceived social benefits contributed to a strong intention to buy pirated cds the results are discussed in a cultural perspective

sustained competitive advantage temporal dynamics and the incidence and persistence of superior economic performance competitive advantage is a key concept in strategic management research for a number of reasons not the least of which is that an avowed consequence of its attainment is held to be superior economic performance however few prior empirical studies have directly and systematically documented the incidence or prevalence of persistent superior economic performance the research reported here is based on empirical studies of a large number of industry samples for which longitudinal data were stratified by levels of performance using a new methodology and then analyzed in terms of their dynamics this new stratification technique was used in lieu of autoregressive methods employed in prior studies of performance persistence to allow for a true outlier analysis because persistent superior economic performance both has been argued theoretically and found empirically to be rare detailed results from a sample of 6 772 firms in 40 industries over 25 years are presented to illustrate the findings that 1 while some firms do exhibit superior economic performance 2 only a very small minority do so and 3 the phenomenon very rarely persists for long time frames these results while not providing direct support for a particular extant strategic management or economic theory concerning firm performance are most consonant with the resource based view of the firm and have implications for significant aspects of other received strategic management and economic theories

local governments as industrial firms an organizational analysis of china s transitional economy despite widespread skepticism about government ownership in transitional economies china s rapid industrial growth has been led by public enterprises kornai s theory of soft budbet constraints born of the failure of earlier hungarian reforms fosters such skepticism but it assumes as fixed organizational characteristics that in fact vary widely across government jurisdictions local governments with smaller industrial bases have clearer financial incentives and constraints fewer nonfinancial interests in enterprises and a greater capacity to monitor them in china s vast public sector the fastest growth in output and productivity has occurred where government ownership rights are clearest and most easily enforced which enables officials to manage public industry as a diversified market oriented firm

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

collusion versus differential efficiency testing alternative hypotheses the predictions of collusion and efficiency based static equilibrium explanations of interindustry profitability differences are formally developed and tested using appropriate econometric techniques with intraindustry data on seventy u s internal revenue service minor manufacturing industries in 1963 and 1972 none of the explanations has much explanatory power the 1963 data are consistent with collusion based models while the 1972 data are inconsistent with all non null hypotheses considered patterns of profitability are sharply different in the two years in complex ways apparently unrelated to cyclical forces or the phase ii price controls implications of these results are discussed copyright 1987 by blackwell publishing ltd

do unions capture monopoly profits this paper challenges the conclusion reached in recent studies that unions reduce profits exclusively in highly concentrated industries from their review of previous studies and their analysis of 1977 data on 367 fortune 500 firms the authors conclude that there is no convincing evidence that concentration produces monopoly profits for unions to capture moreover they find that the union wage effect is not greater in concentrated industries as suggested by the hypothesis that unions capture concentration related profits evidence is found suggesting that a firm s market share its expenditures on research and development and its protection from foreign competition provide more likely sources for union rents than does industry concentration several recent studies have found that unions reduce profits significantly and some have concluded that this profit reduction is restricted to highly concentrated industries both conclusions are important the finding that unions reduce profitability indicates that in general the cost increasing effects of unions outweigh any positive productivity effects they may bring to the workplace such a

a resource perspective of global dynamic capabilities global dynamic capabilities is used to integrate resource and market based views of the firm to enhance understanding of a firm s power in international business relationships regression is used to model resource and market based assets influencing power in international relationships with a sample of distributors from canada chile great britain and the philippines results indicate that asset specificity predictability and market knowledge gap influence a distributor s power implications are presented

the snowball effect abstract many economists think that dominant positions unprotected by strategic or operating advantages will tend to decay i demonstrate that that intuition is flawed by devising a model of noncooperative duopoly in which the initially larger competitor monopolizes all investment opportunities even though it is no more efficient than its smaller rival as part of an effort to push up output prices i also present an apparent example of this mechanism at work and discuss the implications for public policy

random walks and sustained competitive advantage strategy is concerned with sustained interfirm profitability differences observations of such sustained differences are often attributed to unobserved systematic a priori differences in firm characteristics this paper shows that sustained interfirm profitability differences may be very likely even if there are no a priori differences among firms as a result of the phenomenon of long leads in random walks even a random resource accumulation process is likely to produce persistent resource heterogeneity and sustained interfirm profitability differences a cournot model in which costs follow a random walk shows that such a process could produce evidence of substantial persistence of profitability the results suggest that persistent profitability does not necessarily provide strong evidence for systematic a priori differences among firms nevertheless since the phenomenon of long leads is highly unrepresentative of intuitive notions of random sequences such evidence may still be persuasive

firm size distribution and price cost margins in dutch manufacturing industrial economists surmise a relation be tween the size distribution of firms and performance usually attention is focused on the high end of the size distribution the widely used four firm seller concentration ratio c4 ignores what happens at the low end of the size distribution we investigate to what extent the level and the growth of small business presence influence price cost margins in dutch manufacturing we use a large data set of 66 industries for a thirteen year period this allows the investigation of both small business influences within a framework in which that of many other market structure variables is also studied evi dence is shown that price cost margins are influenced by large firm dominance growth in small business presence capital intensity business cycle international trade and buyer con centration