endogenous market structures in international trade natura facit saltum abstract almost all of the large literature on international trade with imperfect competition assumes exogenous market structures the purpose of this paper is to develop a simple model that generates alternative market structures as nash equilibria for different parameterizations of the basic model equilibrium market structure is a function of the underlying technology familiar configurations such as a duopoly competing in exports or a single multinational producing in both markets arise as special cases small tax policy changes can produce large welfare effects as the equilibrium market structure shifts implying discontinuous jumps in prices quantities and profits

specialized supplier networks as a source of competitive advantage evidence from the auto industry this study examines the relationship between interfirm asset specificity and performance in the auto industry more specifically i examine the extent to which differences in supplier automaker asset specialization may explain performance differences between japanese automakers nissan and toyota and u s automakers chrysler ford general motors the findings indicate a positive relationship between supplier automaker specialization and performance in particular the data suggest a positive relationship between interfirm human asset cospecialization and both quality and new model cycle time moreover site specialization is found to be positively associated with lower inventory costs the findings suggest that in the auto industry a tightly integrated production network characterized by proximity and a high level of human cospecialization will outperform a loosely integrated production network characterized by low levels of interfirm specialization

foreign entry cultural barriers and learning this paper examines the longevity of foreign entries hypotheses are developed on the mode start ups vs acquisitions and ownership structure wholly owned vs joint ventures in relation to cultural distance the hypotheses are tested within a framework of organizational learning using data on 225 entries that 13 dutch firms carried out from 1966 onwards results show that the presence of cultural barriers punctuates an organization s learning cultural distance is a prominent factor in foreign entry whenever this involves another firm requiring the firm to engage in double layered acculturation we also identify locational paths of learning the longevity of acquisitions is positively influenced by prior entries of the firm in the same country similarly the longevity of foreign entries in which the firm has a majority stake improves whenever the expanding firm engaged in prior entries in the same country and in other countries in the same cultural block

voluntary import expansions with non stationary demand in this paper the effect of voluntary imports expansions vies on welfare in a dynamic game is analysed it is found that 1 there exists a markov perfect nash equilibrium mpne and a unique stable steady state 2 with habit formation in consumption the welfare and output for each firm are higher than that without habit formation and 3 vies can increase an importing country s welfare with raised con sumption and lowered price therefore vies can be voluntary to an importing country

long run competition in capacity short run competition in price and the cournot model in this article we investigate the nature of equilibrium in markets in which firms choose the scale of operation before they make pricing decisions we analyze a duopoly model in which firms choose their capacities before engaging in bertrand like price competition we demonstrate that the cournot outcome is unlikely to emerge in such markets and that the equilibrium tends to be more competitive than the cournot model would predict in addition our results indicate a tendency toward asymmetric firm sizes and price dispersion that results from the mixed strategies firms use in equilibrium

voluntary export restraints and expectations an analysis of export quotas in oligopolistic markets the frequency of export quotas imposed as voluntary export restraints has been increasing this tends to create the expectation that similar export quotas will be imposed in the future even if free trade is allowed now the author analyzes the effect of such an expectation he demonstrates that if a quota is expected to be imposed on foreign exporting firms it intensifies the exporting firms competition in the prequota period this offsets the protection which the export quota as a voluntary export restraint will provide for domestic import competing firms in the future quota period copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

competitive dynamics and economic learning an extended resource based view in this paper a conceptual framework for the analysis of economic learning is developed economic learning by analogy with organizational learning results in the development of economic competences or capabilities shared between firms which rest on a foundation of economic resources from which value is generated and economic routines through which resources are utilized it is the mobility of resources and their exchange and production dynamics along evolutionary pathways which underpins the plausibility of a notion of economic learning the paper elaborates this framework as a resource based view rbv of the economy as a whole as an extension of the rbv of the firm such a framework captures the dynamics of exchange and circulation of technologies know how and intangible assets as well as of tangible assets and capital goods it is concerned with investment behavior by entrepreneurs rather than with the behavior of producers and consumers in goods and services markets within this resource economy framework it is possible to generate an account of the resource dynamics that underpin production of goods and services including resource propagation diffusion imitation replication and recombination these processes encompass evolutionary pressures experienced through resource variation selection and retention entrepreneurial initiatives take the form of resource recombinations while resource innovation captures the creation of new economic resources such as technological standards such a perspective brings into focus the resource specialization and configurations that drive real economies within firms and between firms that translates into enhanced or diminished performance of the economy as a whole copyright 2003 oxford university press

franchising liquidity constraints and entry the short and long run incentives to franchise are considered while monitoring problems due to geographic dispersion ensure that franchising is an efficient organizational form in the long run entry costs suggest that franchising is an efficient solution to the formidable problems posed by entry in the short run this explains the intensive use of franchising in the early growth stages followed by a greater proportion of company owned outlets as the system matures

explaining interfirm cooperation and performance toward a reconciliation of predictions from the resource based view and organizational economics interfirm cooperation and its performance implications are examined in the context of two widely cited theoretical approaches to organizations broadly speaking the resource based view suggests that firms seek to capitalize on and increase their capabilities and endowments whereas organizational economics asserts that firms focus on minimizing the costs of organizing although these perspectives agree on managers likely actions in many areas their predictions diverge when interfirm cooperation is considered we take a step toward reconciling these differences by positing that firms place resource based concerns in front of considerations from organizational economics when deciding whether or not to engage in interfirm cooperation we examined this prediction using data from 94 publicly held restaurant chains the results support our integrated view but also suggest that giving primacy to resource concerns detracts from the performance of some firms we derive several implications of these findings in an effort to guide subsequent inquiry copyright 1999 john wiley sons ltd

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

excess capacity and collusion in this paper the authors analyze a restricted class of equilibria in the dynamic model of j p benoit and v krishna 1987 in which firms choose their scale of operation before engaging in a repeated game of price competition benoit and krishna established that all firms carry excess capacity in all collusive equilibria as the authors are interested in the relationship between excess capacity and collusion in price they examine equilibria in which firms tacitly collude in price but not in investment decisions copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

an analysis of import expansion policies an analysis of import expansion policies 1 introduction policy makers appear to display unlimited ingenuity in devising new and ever more complex measures to influence international trade no sooner did the profession come to understand the economics of trade restricting devices such as tariffs quotas and voluntary export restraints vers the discirminatory nature of vers has been recently noted and analyzed in dinopoulos and kreinin 1988 1989 then a new policy instrument was introduced christened by bhagwati 1987 as voluntary import expansion vie in several recent instances the united states insisted that japan voluntarily expand its import of certain products such as semiconductors or beef from the united states while the ver restricts the volume of trade below free market equilibrium the vie would expand the volume of trade beyond the equilibrium level but both policies depart from free trade equilibrium and both are discriminatory in nature a ver that limits japanese auto exports to the u s favors european suppliers who are excluded from the restriction their thems of trade improve and or their volume of export expands a vie that forces the japanese to import a minimum amount of semiconductors from the united states excludes european suppliers a similar vie on beef imports would discriminate against australian and argentinian suppliers it constitutes a form of export protectionism bhagwati and irwin 1987 how might a government administer a vie in the case of semiconductor imports by japan the possibilities are a subsidy by the japanese government on imports from the u s or an instruction to the large chip using companies in japan to purchase more american chips 1 alternatively the japanese government may buy u s chips for its own use or it may favor american suppliers in awarding contracts in the fall of 1987 certain japanese steel companies agreed under miti pressure to expand purchases of american coal even though it costs a7 per ton more than australian coal and in january 1988 1 an instance of a vie in the construction sector came to light japan had been under american pressure to permit u s construction companies to bid on large japanese public works projects like the kansai airport near osaka and the tokyo bay bridge such projects can amount to 70 billion in the next decade in response the japanese government proposed to permit joint foreign japanese companies to bid on these projects and give american companies preferential treatment in forming such partnership this paper analyzes the economic effects of a vie and whenever appropriate compares it to an export subsidy whereas the export subsidy is an instrument used by the exporting country the vie is a policy instrument employed by the importing country section ii presents a comparison between the two instruments within a two country general equilibrium framework when the offer curves are elastic section iii addresses the question of the optimum vie and compares it to the optimum tariff section iv analyzes the case when the offer curve of the vie administering country is enelastic another key distinction between a vie and an export subsidy is that the former is discriminatory between different trading partners while the latter is not section iv incorporates this feature by recasting the analysis in a three country general equilibrium framework section v states the conclusions of the paper ii view versus export subsidy a two country analysis with elastic offer curves in coventional trade geometry an export subsidy assumed as usual to be financed by a lump sum tax is shown by an outward shift namely an increase of the offer curve of the subsidizing country by contrast a graphical representation of a vie is more complex and is displayed in figure 1

information asymmetry and international strategic alliances abstract this paper examines how information asymmetry affects cross border strategic alliance formation by us firms over the period 2000 2008 we construct a measure information costs based on both geographical distance and the proportion of worldwide gdp the partner s home country represents consistent with our expectations we find an inverse association between information costs and cross border strategic alliances when considering the proportion of alliances formed with publicly quoted overseas partners we find this is unaffected by the level of information costs but rather the level of stock market development tax rate and general economic conditions information costs are however significantly negatively related to alliances with overseas private organizations our results offer clear support for the on going importance of information asymmetry in corporate decision making

make buy or ally a transaction cost theory meta analysis since the publication of williamson s markets and hierarchies many empirical articles have investigated the tenets of transaction cost theory using meta analytic techniques we quantitatively syn

divestiture market valuation and strategy an empirical study of 78 divestitures examines the relationship between type of divestiture and financial market valuation it was found that divestitures linked to corporate or business level stra

making new franchise systems work this paper argues that new franchise systems are more likely to survive if they are structured to economize on agency costs after controlling for industry effects and firm age and size this paper shows empirical support for six of nine hypotheses about the linkage between mechanisms for economizing on agency costs and the survival of new franchise systems 1998 by john wiley sons ltd

voluntary import expansions and voluntary export restraints in an oligopoly model with capacity constraints in a three country generalization of the kreps scheinkman 1983 duopoly model with price competition and capacity constraints the author analyzes the effects of discriminatory voluntary import expansions and voluntary export restraints on equilibrium capacity and pricing decisions voluntary export restraints are shown to be bad for the exporting country contradicting recent results in the literature by r harris 1985 and k krishna 1989 voluntary import expansions are shown to decrease competition cases are analyzed where voluntary import expansions may actually lead to import contraction or to increases in efficiency in the home country

a resource based theory of the firm knowledge versus opportunism this paper develops a resource based knowledge based theory of the firm its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity we focus on the polar cases of organization within a firm as compared to market contracting there will be a difference in the knowledge that is brought to bear and hence in joint productivity under the two options thus as compared to opportunism based transaction cost theory we advance a separate yet complementary answer to the question why do firms exist our aim is to develop an empirically relevant and complementary theory of why firms are formed a theory based on irreducible knowledge differences between individuals rather than the threat of purposeful cheating or withholding of information we assume limited cognitive abilities on the part of individuals bounded rationality and assume that opportunistic behavior will not occur the latter allows us to determine whether resource based

efficiency inducing taxation for polluting oligopolists abstract we show that there exists a time independent tax rule that guides polluting oligopolists to achieve the socially optimum production path the optimal tax is dependent on the current pollution stock and it may be negative when the pollution stock is low a surprising result is that the optimal tax rule may give firms a subsidy for an initial time interval even though under laissez faire their output always exceeds the socially optimal output this subsidy however induces firms to produce less than they would under laissez faire

the choice of organizational form the case of franchising abstract we examine companies that franchise some units and centrally operate own others the agency problems confronting these two organizational forms are analyzed testable hypotheses are developed the empirical results support the notion that owning versus franchising reflects a trade off among agency related problems the cost of monitoring store managers appears to be especially important in the own franchise decision the level of repeat business and initial investment requirements per unit also appear to be important

r d cooperation and product market competition abstract i derive equilibria that is self enforcing agreements for firms that cooperate in improving their product and compete in marketing it i am particularly interested in the interaction between rd ii product improvement is a function of the effort by each firm iii firms cannot observe each other s effort iv firms market the product by simultaneously setting prices the analysis reveals some surprising results i find that in some cases although monopoly prices can be sustained in equilibrium optimal equilibria call for firms to set lower than monopoly prices in the short run thus providing the right incentives for investment in r d under a different set of assumptions i find that it is optimal to reduce r d effort below the efficient level as a means to sustain short run collusion in prices even though efficient r d effort could be achieved in equilibrium

profitability of export restraint this paper analyzes the effect of quotas or voluntary export restraints upon each producer s profits in the case of an oligopoly with one foreign producer in this oligopoly all producers including the foreign producer can get greater profits under some protective quotas than under no restraints furthermore the optimal export restraint for the foreign producer with a low marginal cost is smaller than his optimal export under no restraints accordingly export restraints may be sought by the foreign producer as a strategic behavior to increase profits

cross border mergers and strategic alliances this paper develops a model with distribution costs to study firm cooperation in forming strategic alliances and mergers under different types of foreign market entry modes that is export or foreign direct investment fdi under both export and fdi we find that cross border alliances mergers dominate domestic alliances mergers and cross border alliances and mergers are preferred to independence if and only if distribution cost is high under export cross border alliances are chosen in equilibrium if distribution cost is high under fdi and with high distribution cost cross border alliances mergers are chosen in equilibrium if plant setup cost is low high

capabilities transaction costs and firm boundaries although the literature on firm boundaries has been greatly influenced by transaction cost economics strategy scholars often emphasize the importance of capabilities considerations in these decisions this has led to a debate that we suggest has generated more heat than light we argue that the two sets of considerations are in fact so intertwined dynamically that treating them as independent competitive explanations is fundamentally misleading we offer a theoretical synthesis of transaction cost and capabilities approaches to firm boundaries that seeks to overcome each approach s limitations and provides a unified and logically consistent understanding of boundary decisions

strategic alliances as stackelberg cartels concept and equilibrium alliance structure abstract this paper analyzes incentives of oligopolistic firms to form strategic alliances and the effects of the endogenously derived alliance structure on product market competition a three stage game is considered in the first stage firms decide about forming strategic alliances in the second stage each alliance designs a strategic contract and in the third stage alliance members and outsiders compete in the product market it is shown how contractual terms about transfer prices and profit sharing in a production joint venture for an intermediate product may serve as an appropriate commitment device profits of alliance members and outsiders under different alliance structures are then determined based on this profit structure the alliance formation process is analyzed in a linear cournot oligopoly with at most five firms only one alliance forms and industry output is reduced with more than five firms an alliance structure with at least two alliances results if an equilibrium of the alliance formation game exists and in this case competition is enhanced

towards an economic theory of the multiproduct firm this paper outlines a theory of the multiproduct firm important building blocks include excess capacity and its creation market imperfections and the peculiarities of organizational knowledge including its fungible and taut character a framework is adopted in which profit seeking firms are seen to diversify in order to avoid the high transactions costs associated with using various markets to trade the services of various specialized assets neoclassical explanations of the multiproduct firm are shown to be seriously deficient

import now an analysis of market share voluntary import expansions vies abstract proponents claim that voluntary import expansions vies increase foreign access to a domestic market while increasing competition and reducing prices using a bertrand model i show that a vie produces exactly the opposite results a vie that increases the market share of imports above the prevailing level results in higher prices in the domestic market this result holds even when the domestic market is assumed to be protected by a tariff type barrier prior to the imposition of a vie a vie and an equivalent import subsidy are shown to have opposite effects on prices