advertising and prices as signals of quality in a regime of price rivalry abstract this paper addresses the issue of whether firms use price or advertising to signal quality and whether advertising has pro or anti competitive effects we show that when there is price rivalry advertising may be necessary to signal quality in contrast to single firm models signaling through price alone prevails for sufficient inter brand quality differentials joint price advertising signals prevail when the quality differential is small finally advertising in the form of variable rather than fixed costs is shown to increase the feasibility of signaling quality

new blood as an elixir of youth effects of human capital tenure on the explorative capability of aging firms the relationship between firm age and innovation has been an enduring topic of interest we contribute to this research by studying how the effect of firm age on the quality of explorative and exploitative innovations is affected by the firm specific and industry tenure of the talent resources employees that the firm utilizes we start with the baseline predictions that firm age is related to the development of better exploitative innovations and worse explorative innovations however the tenure of employees intervenes in these relationships by way of bringing in new knowledge mental models and beliefs we predict that longer firm specific and industry tenure of employees enhances the positive effect of firm age on the quality of exploitative innovations while amplifying the negative effect of firm age on the quality of explorative innovations in addition for both the baseline and the moderating effect we also formulate a prediction comparing the quality of explorative innovations with those of

a comparison of four methods to evaluate the effect of a utility residential air conditioner load control program on peak electricity use abstract we analyzed the peak load reductions due to a residential direct load control program for air conditioners in southern ontario in 2008 in this program participant thermostats were increased by 2 c for four hours on five event days we used hourly whole house data for 195 participant households and 268 non participant households and four different methods of analysis ranging from simple spreadsheet based comparisons of average loads on event days to complex time series regression average peak load reductions were 0 2 0 9 kwh h per household or 10 35 however there were large differences between event days and across event hours and in results for the same event day hour with different analysis methods there was also a wide range of load reductions between individual households and only a minority of households contributed to any given event policy makers should be aware of how the choice of an analysis method may affect decisions regarding which demand side management programs to support and how they might be incentivized we recommend greater use of time series methods although it might take time to become comfortable with their complexity further investigation of what type of households contribute most to aggregate load reductions would also help policy makers better target programs

residential energy demand and the interaction of price and temperature british experimental evidence the responsiveness of heating energy demand to pricing is shown to be dependent on temperature and vice versa this is investigated empirically using residential electricity demand data obtained under conditions of price variation from a british time of use pricing experiment results confirm that consumer responses to higher electricity prices are conditional on temperature levels particularly during the daytime and for households with high overall levels of electricity consumption and previous experience of time of use tariffs

measuring climatic impacts on energy consumption a review of the empirical literature abstract this paper reviews the literature on the relationship between climate and the energy sector in particular we primarily discuss empirical papers published in peer reviewed economics journals focusing on how climate affects energy expenditures and consumption climate will affect energy consumption by changing how consumers respond to short run weather shocks the intensive margin as well as how people will adapt in the long run the extensive margin along the intensive margin further research that uses household and firm level panel data of energy consumption may help identify how energy consumers around the world respond to weather shocks research on technology adoption e g air conditioners will further our understanding of the extensive margin adjustments and their costs we also note that most of the literature focuses on the residential sector similar studies are urgently needed for the industrial and commercial sectors

cooperation and entry induction as an extension of technological rivalry abstract this paper investigates how the structure of cooperation in an industry influences the dynamics of entry by start up firms competition over technological dominance induces the entry of start up firms into new subfields as incumbent firms seek to expand the consumer base using their technology by cooperating incumbent firms succeed to varying degrees in establishing their technologies as a dominant standard by building central positions in a cooperative network start ups tend to enter however if there is reasonable certainty that a dominant technology has been established we find strong support for the relationship between network centrality as a measure of technological dominance of a standard and the entry of start up firms into the semiconductor industry

cost externalities and corporate diversification abstract this paper examines the optimal time of entry by established firms that strategically exploit cost externalities resulting from experience transfer from their core product line to the entered market established firms may delay entry even under conditions when newborn firms would enter early the paper can also explain other entry scenarios including early diversification at an initial loss into markets that newborn firms would never enter the shape of the experience curve in the entered market strongly affects these differences in scenarios

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

understanding corporate coherence theory and evidence abstract multiproduct firms are perceived to be coherent in their scope yet there is no strong theoretical foundations to explain coherence in modern industrial organization theory this paper shows that as u s manufacturing firms grow more diverse they maintain a constant level of coherence between neighboring activities this finding runs counter to the idea that firms with many activities are generally more incoherent a framework is then presented which appeals to the nature of enterprise learning path dependencies and the nature of the selection environment to explain the ubiquity of coherent diversifiers

sources of superior performance market share versus industry effects in the u s brewing industry using financial measures of performance we investigate the sources of value creation in the u s brewing industry between 1969 and 1979 we find that market share gains in this industry at this time are not correlated with changes in value and that the performance of individual leading firms is highly correlated our interpretation is that the success of market share building strategies depends critically on specific industry conditions specifically in the absence of fundamental shifts in the relative resource positions of individual firms share gains may come at too high a price in addition the research shows that intra industry correlations in returns may result from excessive competition rather than collusion

applying and advancing internalization theory the multinational enterprise in the twenty first century internalization theory has provided a resilient analytical framework that explicitly or implicitly underlines much of international business scholarship internalization theory is not a monolithic body of knowledge instead it has devolved into several streams each of which focuses on the interests of particular epistemic communities while also acting as a more generic organizing framework for those more broadly interested in its application to real world challenges following a review of the various streams we trace the frontiers of current research of the broader internalization framework and identify emerging themes raised by the papers in the special issue these include transaction cost considerations in the bundling and recombination of assets across diverse contexts the growing relevance of quasi internalization the theoretical challenges of bounded rationality for internalization theory and the increasing disconnect between ownership control and responsibility these developments point to new research frontiers for scholars looking to apply or advance internalization theory

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

impact of information technology capital on firm scope and performance the role of asset characteristics this research draws on transaction cost and resource based theory to examine how information technology it capital moderates the relationship between different types of assets and firm scope both vertical integration and diversification the analysis suggests that it capital enables firms with narrowly valuable assets to be less vertically integrated and less diversified and enables firms with broadly valuable assets to be more vertically integrated and more diversified the moderating influence of it capital on the relationship between different types of assets and firms vertical and product market scope is consistent with transaction cost as well as resource based traditions abstract from author

product quality product price and share dynamics in the german compact car market the present paper examines one of the central elements of evolutionary thinking the replicator dynamics mechanism using data on product characteristics of automobiles sold on the german domestic market over the period 2001 2006 we construct a fitness variable for each car model applying non parametric efficiency measurement techniques better known as data envelopment analysis dea the basic question we intend to answer is whether cars providing a higher quality price ratio for consumers tend to increase their market share compared to variants with lower quality price ratio for consumers the relationship between a car models fitness and its market performance is empirically tested in a regression framework the results show that the principle of growth of the fitter is working as suggested by evolutionary theory in particular we find that car models with considerably lower fitness than the market average lose whereas models with above average fitness gain additional market shares

heating homes understanding the impact of prices abstract studies show that energy prices have an impact on household energy consumption however these studies pay little attention to interpreting the findings and therefore little is known about how and why households respond to energy prices this paper provide an example of an interpretation of the impact of energy prices on consumption from a social practice theoretical perspective this paper investigates the impact of district heating price level on energy used for space heating and hot water by danish households living in single family detached houses the results show a moderately negative effect of the price level on consumption which is stronger in newer presumably more energy efficient houses and for higher income households however the effect varies across years which suggests that the price responsiveness is more a matter of changing everyday practices short term response than being able to afford energy improvements long term response in a practice theoretical perspective the results indicate that price differences have an impact on everyday practices where for example the aspect of energy in everyday practices is perceived as more valuable to practitioners in expensive areas compared to cheaper areas and that the meaning of price in practices is influenced by the social and material contexts

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

the influence of technology and demand factors on firm size and industrial structure in the dram market 1973 1988 abstract the focus of this research is on the impact of the diffusion of innovations in integrated circuit technology on the market structure of that industry and the implications of firm strategy for both further innovation and market structure change the study examines the effects of sustained product innovation over a fifteen year period in the dram segment of the integrated circuit industry assessments are made on first mover advantages shape of the diffusion curve and resource needs in a market characterized by an increasingly complex technology comparisons are made along the dimensions of number of firms in the market continuity of the firms and market concentration

i m not a high quality firm but i play one on tv this article investigates the role of noise in a multidimensional signalling game a monopolist that offers a high or low quality product can signal its quality to consumers through its selection of price and advertising it is shown that when the advertising channel is noisy there is no separating equilibrium where the monopolist will simultaneously employ both signalling mechanisms advertising will take place only when price is uncorrelated to quality furthermore the noise complicates the process of consumer inference this enables a low quality firm to take advantage of consumer ignorance by partially mimicking the strategy of the high quality firm

linking corporate strategy to capital structure diversification strategy type and source of financing this study examines the relationship between corporate strategy and capital structure specifically the diversfication and financing strategies of a firm the results show that equity financing is preferred for related diversification and unrelated diversification is associated with debt financing additionally firms diversifying through acquisitions are more likely to use public sources of financing and those emphasizing internal development of new businesses depend primarily on private sources of financing using simultaneous equation estimation we found a reciprocal relationship between a firm s financial strategy and its corporate diversification strategy mode and nature of diversification are also reciprocally interrelated 1998 john wiley sons ltd

firm size and r d intensity a re examination using data from the federal trade commission s line of business program and survey measures of technological opportunity and appropriability conditions this paper finds that overall firm size has a very small statistically insignificant effect on business unit r d intensity when either fixed industry effects or measured industry characteristics are taken into account business unit size has no effect on the r d intensity of business units that perform r d but it affects the probability of conducting r d business unit and firm size jointly explain less than one per cent of the variance in r d industry effects explain nearly half the variance two sets of well known hypotheses are associated with the later work of joseph schumpeter the first concerns the effects of market concentration on research and development investment and on innovative performance the second bears on the effects of firm size on r d and innovation in a recent paper levin cohen and mowery 1985 we re examined the first set of hypotheses simple regressions at the line of business level replicated the established findings that both r d intensity and innovative performance first increase and then decrease as industrial concentration rises the effect of concentration however was sharply attenuated when we controlled for interindustry differences in technological opportunity and in the appropriability of returns from new technology our results suggested that it is probably unwarranted to conclude that market concentration favors r d investment and innovation in this paper we investigate the schumpeterian hypothesis that large size is conducive to r d investment this relationship has been studied at least as intensively as the link between concentration and r d but our approach is novel in two respects first using data collected by the federal trade

do esg controversies matter for firm value evidence from international data the aim of this paper is to investigate the relationship between environmental social and governance esg controversies and firm market value we use a unique dataset of more than 4000 firms from 58 countries during 2002 2011 primary analysis surprisingly shows that esg controversies are associated with greater firm value however when interacted with the corporate social performance csp score esg controversies are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive building on this evidence we attempt to explore the channels through which csp may enhance market value conducting sample split analysis indicates that higher csp score has an impact on market value only for high attention firms those firms which are larger perform better located in countries with greater press freedom more searched on the internet more followed by analysts and have an improved corporate social reputation thus our findings provide new insights on the role of firm visibility through which firms can profit from their csp

persuasion or information the economics of prescription drug advertising the economic and welfare effects of advertising have been extensively studied over the last half century however these efforts have not led to a consensus either as to the effects or the value of advertising economists continue to reach polar conclusions that appear to be derived mainly from preconceptions of the social desirability of advertising on the one hand is research that emphasizes promotion s ability to create artificial product differentiation and thereby produce informational confusion 1 this line of research stresses the empirical association of extensive advertising with high concentration and high accounting profits evidence judged to support increased market power and entry barrier effects 2 a contrary body of research emphasizes the value of advertising in providing information and hence in promoting competition 3 the empirical findings most consistent with this view are that prices paid by consumers in selected markets are lower with advertising than without it 4

price sensitivity of residential energy consumption in norway abstract the main aim of this paper is to test the stability of the results of a model which focus on the relationship between the choice of heating equipment and the residential energy consumption the results for the income and energy price variables are of special interest stability in the time dimension is tested by applying the model on micro data for each of the years 1993 1995 the parameter estimates are stable within a 95 confidence interval however the estimated impact of the energy price variable on energy consumption was considerably weaker in 1994 than in 1993 and 1995 the results for two different income groups in the pooled data set are also subject to stability testing the energy price sensitivity in residential energy consumption is found to be higher for high income households than for low income households

the wacc fallacy the real effects of using a unique discount rate in this paper we test whether firms properly adjust for risk in their capital budgeting decisions if managers use a single discount rate within firms we expect that conglomerates underinvest overinvest in relatively safe risky divisions we measure division relative risk as the difference between the division s asset beta and a firm wide beta we establish a robust and significant positive relationship between division level investment and division relative risk next we measure the value loss due to this behavior in the context of acquisitions when the bidder s beta is lower than that of the target announcement returns are significantly lower

innovation and industry evolution the theoretical literature on innovation has been concerned with a single innovation produced by a number of identical agents by contrast we consider a market in which one firm is the current incumbent while the remaining firms are challengers moreover we consider a sequence of innovations so that success does not imply that the successful firm reaps monopoly profits forever after but only until the next better innovation is developed we begin with a fully optimizing behavioral model and derive the equivalent of the schumpeterian process of creative destruction that is a firm enjoys temporary monopoly power but is soon overthrown by a more inventive challenger the essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process the fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers goods the new methods of production or transportation the new markets the new forms of industrial organization that capitalist enterprise creates schumpeter 1942 pp 82 83

the firm as a dedicated hierarchy a theory of the origins and growth of firms in the formative stages of their businesses entrepreneurs have to provide incentives for employees to protect rather than steal the source of organizational rents we study how the entrepreneur s response to this problem determines the organization s internal structure growth and its eventual size large steep hierarchies will predominate in physical capital intensive industries and will have seniority based promotion policies by contrast e at hierarchies will prevail in human capital intensive industries and will have up or out promotion systems furthermore e at hierarchies will have more distinctive technologies or cultures than steep hierarchies the model points to some essential differences between organized hierarchies and markets at the root of most enterprises generating economic surplus is an entrepreneur with a unique critical resource such as an idea good customer relationships a new tool or superior management technique a fundamental problem of entrepreneurship is how to enlist the cooperation of the many agents necessary for production without ceding to them too much of the surplus generated by the enterprise the risk of being expropriated however is always inherent in production in particular the entrepreneur has to give her employees whom we call managers close proximity or access to the critical resource for them to learn to produce effectively for example a manager has to understand the idea be in contact with the key customers and suppliers or even learn the entrepreneur s unique managerial techniques in order to work effectively but access also gives the manager the opportunity to expropriate this critical resource and compete against the entrepreneur managers may steal the idea walk away with clients or mimic the entrepreneur s management style and start up a rival concern the greater the access a manager has the more he can appropriate and the more effectively he can compete this paper explores the role of organizational design in

the propensity to patent abstract this paper analyzes the relationship between 1974 rd among the exceptions the tendency was toward diminishing returns variables measuring overseas sales federal r d support diversification scope of invention use and invention type had only modest explanatory power there was no significant evidence of disproportionate patent accumulation in the more highly concentrated industries

product line expansion and resource cannibalization abstract diversification research argues that new products are more successful when they leverage a firm s intangible resources which may support multiple activities without engendering rivalry for their use however numerous complementary resources may also be needed to exploit a firm s intangibles if these resources are in limited supply or if it takes time to acquire and assimilate additional resource capacity then new products may impose costs on existing products by cannibalizing the services of firm resources our analysis of product introductions within the pharmaceutical industry provides evidence of resource cannibalization and suggests that product market experience helps offset some of these costs

organizational constraints to adaptation intrafirm asymmetry in the locus of coordination we assemble a panel data set of firms in the u s defense industry between 1996 and 2006 to examine the drivers of heterogeneous incumbent firm adaptation following the industry wide demand shock of september 11 2001 this shock entailed not only an increase in aggregate demand but more importantly a shift in the relative attractiveness of individual product areas resulting in the need for firms to reshuffle their product portfolios in response to changing demand conditions the exogenous nature of the shock allows us to empirically identify the effect of preshock interdependence structures on postshock adaptation outcomes we find that the locus of coordination inside a firm can explain differential postshock adaptation performance because interdependencies spanning organizational boundaries are more difficult to manage than those contained within such boundaries coordination across product areas creates greater adaptation challenges compared with coordination within product areas we further inves

market networks and corporate behavior data on market relations between a large population of corporations and investment banks are used to study the organization market interforce the pattern of direct market ties between a firm and its banks forms of interfaces range from a long term exclusive tie the relationship interface to many short lived episodic ties the transaction interface with hybrid forms between the two poles contrary to widespread belief the article finds that strong relationships still exist transactions interfaces are rare most firms use hybrid interfaces a firm s interface is conceptualized as the intentional result of its efforts to reduce dependence and exploit power advantages observed interfaces are shown to be related systematically to various power dependence concepts including resource intensity number of transactions and dollar amounts raised criticality the availability of resource alternatives power asymmetry between a firm and its main bank organization size standardization of exchange and

is it a car or a truck managerial beliefs the choice of product architecture and the emergence of the minivan market segment new markets segments are a common setting for studies in technology strategy these studies generally assume that new segments already exist or have formed following the introduction of a product innovation by an entering firm thus theory on the role of established firms in the emergence of new market segments is underdeveloped this study informs current research by explaining the product innovation decisions of established firms during the emergence of a new market segment the results of a case study on the development and commercialization of the minivan at chrysler ford and general motors between 1970 and 1985 indicate that existing theories based on managerial cognition firm capabilities economic incentives and organizational structure are insufficient to explain the decisions this article develops theory based on the interrelationship of these four mechanisms

do firms learn to create value the case of alliances we investigate whether firms learn to manage interfirm alliances as experience accumulates we use contract specific experience measures in a data set of over 2000 joint ventures and licensing agreements and value creation measures derived from the abnormal stock returns surrounding alliance announcements learning effects are identified from the effects of unobserved heterogeneity in alliance capabilities we find evidence of large learning effects in managing joint ventures but no such evidence for licensing contracts the effects of learning on value creation are strongest for research joint ventures and weakest for marketing joint ventures these results are consistent with the view that learning effects are more important in situations characterized by greater contractual ambiguity copyright 2000 john wiley sons ltd

is advertising a signal of product quality evidence from the compact disc player market 1983 1992 abstract we study panel data on advertising and pricing in the compact disc player market during 1983 1992 controlling for product features firm heterogeneity and aggregate effects i advertising increases after the player is introduced but at a decreasing rate and ii price falls from the outset and at an accelerating pace these patterns are inconsistent with both the perfect learning in papers by kihlstrom and riordan j polit econ 92 1984 427 and milgrom and roberts j polit econ 94 1986 796 and the imperfect learning in horstmann and macdonald j econ manag strat 3 1994 561 versions of paper by nelson j polit econ 82 1974 729 model of advertising extensions having persistent consumer uncertainty and learning can explain these profiles

strategic pricing of new pharmaceuticals this paper provides empirical evidence on the leading factors affecting the prices of new pharmaceuticals both at introduction and after 4 6 and 8 years most important is the extent of therapeutic advance embodied in a new product for drugs which represent important therapeutic gains launch prices can be two or three times those of existing drugs used for the same purposes while drugs that largely duplicate the actions of currently available products are typically priced at comparable levels in addition the number of branded substitutes has a substantial negative effect on launch prices which reflects the importance of competitive pressures duplicate products thereby play an important economic role in pharmaceutical markets

regionalization of r d activities dis economies of interdependence and inventive performance abstract this paper examines the impact of the extent of the regionalization of mnes r d activities on their inventive performance by joining the regionalization theory with the recombinant view of invention we challenge the implicit assumption that all foreign knowledge seeking activities will necessarily offer new knowledge to the firm we introduce the dis economies of interdependence defined as the dis advantages that the firm derives due to the interdependence among countries within a region as a new theoretical mechanism explaining the benefits and costs of regionalization our analysis of global pharmaceutical firms shows that an inverted u shaped relationship exists between the number of regions in which a firm has r d activities and its inventive performance our results also indicate that a firm s recombinant capability moderates the inverted u shaped relationship in such a way that when a firm s recombinant capability is high it reaches its turning point in a larger number of regions and the inverted u shaped relationship is flatter these results underscore that recombinant capability significantly influences the firm s ability to derive benefits and reduce costs from the regionalization of its r d activities our findings suggest that it is through the consideration of the dis economies of interdependence that offers the essential reasoning needed to unwind the inferred assumption that all foreign knowledge seeking activities will offer access to new knowledge

the costs of related diversification the impact of the core business on the productivity of related segments i develop the thesis that in related diversified firms the core business in my analysis the largest business may provide benefits such as scope economies to a related segment but it may also exert power and constrain the segment to act in its interests in various internal and external transactions this enables the core business to shift productivity gains toward itself from the segment which could lead to various inefficiencies within the related diversified firm using input output flow data and a multilevel model with the segment as the unit of analysis i first show that a segment s productivity is lower compared with a single business firm when it shares backward and forward complementarity i e when it shares transactions with common suppliers and customers with the core business correspondingly i show that as a mirror image the core business s productivity is enhanced when the business shares backward and forward complementarity with segments and when segments are backward integrated with it i e when the core business provides outputs to segments these shifts in productivity and the attendant inefficiencies do not seem to be destroying the entire value from related diversification overall the findings support the argument that the power and influence exerted by the core business and concomitantly the subsidization of the core business by related segments is an important source of costs borne by segments in a related diversified firm

know how and asset complementarity and dynamic capability accumulation the case of r d dynamic capabilities enable firms to create new products and processes and respond to changing market conditions this empirical investigation of dynamic r d capabilities deals with the role of complementary know how and other assets in the context of changing conditions in the u s petroleum industry during the 1970s and early 1980s the analysis suggests that in response to rising oil prices firms with larger amounts of complementary technological knowledge and physical assets also undertook larger amounts of r d on coal conversion a synthetic fuels process 1997 by john wiley sons ltd

welfare gains from quality certification of infant foods results from a market experiment in mali in low income countries malnutrition is often most severe among infants of six to twenty four months they need higher density foods than the family diet but density is a credence attribute we hypothesize that the premium now paid for heavily advertised brands reflects demand for quality assurance which could be provided at lower cost to competing firms through third party certification we use a new market experiment to find that mothers average willingness to pay for certification is about 1 75 kg or four times its cost so that total economic surplus gains from introducing certification to mali would be on the order of 1 million annually

the neoclassical model of consumer demand with identically priced commodities an application to time of use electricity pricing hick s theorem permits aggregation of commodities when their relative prices are fixed but contrary to a widely expressed view it does not require that they be aggregated even where commodities have identical prices all of their income elasticities and many of their price elasticities can be identified through econometric estimation our empirical illustration uses the generalized leontief indirect utility function with data from the wisconsin residential electricity pricing experiment we model the demand for six commodities although there are only two unique prices

dominance by birthright entry of prior radio producers and competitive ramifications in the u s television receiver industry the u s television receiver industry evolved to be an oligopoly dominated by firms that produced radios prior to tvs data on the experience of all u s radio manufacturers and on the length of survival and rate of innovation of all u s tv entrants are collected to analyze how radio experience influenced entry firm performance and the evolution of market structure in the tv industry consistent with a model of the evolution of an oligopolistic industry more experienced radio firms were more likely to enter tv manufacturing had higher innovation rates and in turn had greater market shares and longer survival suggesting that firm capabilities and the evolution of the tv industry s market structure were critically shaped by firms experience prior to entry copyright 2000 john wiley sons ltd

tobin s q and the importance of focus in firm performance using tobin s q as a measure of performance we seek to estimate the relative importance of industry focus and share effects in determining firm performance our methods are analogous to those of richard schmalensee and like him we find that industry effects account for the majority of the explained variance however we also find that firm effects exist in the form of focus effects that is narrowly diversified firms do better than widely diversified firms we interpret this finding as consistent with profit maximization by firms with different factor endowments

information structures of product markets buyers demand continuing information flows to guide their choices among competing product brands they select portfolios of information types some supplied by sellers of the branded goods some not this paper investigates the determinants of businesses outlays on information media advertising sales force other sales promotion they include buyers overall demands for information buyers access to sources not controlled by the seller the relative efficiency of seller supplied information and competitive conditions in the product market the hypotheses about effects on sellers total information outlays are strongly supported some evidence appears on determinants of the mixture of information types they provide

the moderating role of the complementary nature of technological resources in the diversification performance relationship this article analyzes the moderating role of complementary technological resources in the diversification performance relationship our contention is that entry into a new market poses challenges to complementary resources that are already being exploited and that diversification thus comes at a substantial cost to the diversifying firm using a sample of the world s largest manufacturers we find that the effect of diversification on productivity is positive for firms with an initially low level of overall technological complementarity firms that specialize and have existing complementarities are negatively affected by diversification because the process of unbundling and rebundling technological resources is disruptive to productive firms

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

electricity consumption in g7 countries a panel cointegration analysis of residential demand elasticities this article applies recently developed panel unit root and panel cointegration techniques to estimate the long run and short run income and price elasticities for residential demand for electricity in g7 countries the panel results indicate that in the long run residential demand for electricity is price elastic and income inelastic the study concludes that from an environmental perspective there is potential to use pricing policies in the g7 countries to curtail residential electricity demand and thus curb carbon emissions in the long run

advertising and quality in the u s market for automobiles using data consisting of domestic and foreign automobiles over the period 1985 1990 the hypothesis that advertising serves as a signal of higher quality is empirically tested this is accomplished by examining how advertising levels vary with a quality measure that is not observable at the time of purchase but becomes available subsequent to a model s release above average quality results in expenditures that are 15 higher than average quality outlays lending further support to the signalling hypothesis the positive advertising quality relationship holds strongest when a model significantly improves in quality relative to the previous year s model

q and the tax bias theory abstract a growing body of literature analyzes the variation in q the ratio of financial market value to asset current replacement cost and makes inferences about attributes such as monopoly power profitability managerial performance etc these studies ignore potential biases embedded in q that result from non neutral tax policies this study examines the association between q and tax biases and establishes that differences in accumulated depreciation tax shields explain significant variation in q the implication that q should be adjusted for tax biases before use in empirical research is examined further adjusting q for tax biases at least with the factors herein leads only to minor changes in econometric analyses

application specific r d capabilities and the advantage of incumbents evidence from the anticancer drug market this paper examines the proposition that during competence destroying technological changes incumbents are incompetent in researching in house a radically new technology they only retain market leadership if their undestroyed proprietary complementary assets compensate for their research incompetence in contrast to prior research i propose that there is not one but two sets of capabilities necessary to execute research and development r d sets that differ in their market specificity a technology specific set i e technological platforms that are non market specific and an application specific set i e knowledge of the application that is therefore market specific although all markets require both sets of capabilities to execute r d prior research has analyzed cases where the application was not as complex and therefore application specific capabilities did not represent strategic factors because at the start of a technological discontinuity application specific capabilities are undestroyed and have accrued only to incumbents when complex enough these capabilities can represent a source of competitive advantage for these firms even in the face of competition from diversifying entrants reusing previously acquired technological platforms i find evidence consistent with my proposition based on data on outcomes from drug discovery as estimated through clinical endpoints in phase i trials for firms competing in the anticancer drug market one of the most complex markets within pharmaceuticals as the market transitions into the biotechnology revolution the proposition in this paper implies that although technological platforms can help firms move across markets application specific r d capabilities can help firms retain leadership within a market across technological discontinuities

choosing an appropriate alliance governance mode the role of institutional cultural and geographical distance in international research development r d collaborations we identify a variety of r d alliance modes in a knowledge intensive industry e g pharmaceuticals and classify them into four ordered categories which go beyond the traditional binary equity vs non equity alliance classification this enriches our understanding of alliance governance structures and broadens the application of alliance modes in what is today a more complicated international r d collaboration setting we then explore national industry and firm factors that determine the selection of an appropriate r d alliance governance mode using a sample of 237 international alliance deals the likelihood of using a more integrated alliance governance mode decreases as the difference or distance between nations of the partner firms increases in terms of human capital and cultural distance on the other hand a greater geographic and institutional difference is positively associated with the selection of more integrated alliance governance modes furthermore firms in the research stage are more likely to use a more integrated governance mode as opposed to firms in the development stage these findings advance research on alliance governance structure they reveal the factors affecting the r d alliance governance mode choice

capturing knowledge within and across firm boundaries evidence from clinical development how do firm boundaries influence employees acquisition of information using detailed project level data and qualitative evidence i document that pharmaceutical firms are more likely to outsource the coordination of data intensive clinical trials while they are more likely to assign knowledge intensive trials to internal teams managers do not choose between market and hierarchy but between the hierarchy of the firm in which subjective performance evaluations are combined with flat explicit incentives and the hierarchy of its subcontractor whose virtue stems precisely from the ability to provide high powered incentives on a narrow set

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

environmental regulation of households an empirical review of economic and psychological factors abstract the literature on sustainable consumption and environmental regulation of household behavior is dominated by conceptual and normative approaches as a result many suggestions lack a firm empirical basis to overcome this deficiency econometric studies in three areas of environmentally relevant activities of households are reviewed residential use of energy generation of solid waste and recycling and residential use of water next to price and income elasticities attention is devoted to individual socio economic features and psychological factors such as attitudes knowledge perceptions and values potential psychological determinants and related insights are further examined by discussing a range of representative and illustrative statistical psychological studies of environmental behavior one important general finding is that there are very few empirical studies that systematically combine socio economic and psychological determinants a range of insights for environmental policy is derived and research recommendations are offered

a capability based view of competitive heterogeneity the question of how firms differ is paramount to strategy scholars this question has motivated empirical research on the factors influencing performance differences among close competitors it also has motivated work on factors that increase or decrease the mean performance of firms in an industry theories about resources and capabilities tend to dominate discussions of heterogeneity in performance and superior performance yet the strategy field lacks a cumulative body of empirical work showing how firms differ this article derives conclusions and questions from empirical work on capabilities we then discuss work that complements but lies beyond the boundaries of traditional capabilities research we conclude by suggesting approaches to and areas of future work

the validity of profits structure studies with particular reference to the ftc s line of business data the simple proposition that consumerdamaging collusion is more likely to occur when there are fewer competitors has given rise not only to legal restrictions of economic activity thought to restrict output but also to an enormous amount of empirical work attempting to relate market concentration to the exercise of monopoly power most such studies measured market structure by an index of concentration for example four firm concentration or herfindahl and performance by accounting profit for example net profit divided by assets or price cost margins sales less direct costs divided by sales from the positive statistically significant correlations often found between greater concentration and profit with other factors presumably accounted for some researchers conclude that increases in concentration are anticompetitive and that concentration therefore is bad the concentration profits studies have been criticized essentially on two grounds one is that the positive relationship is not indicative of collusive behavior in particular oliver williamson 1968 john mcgee 1971 harold demsetz 1973 1974 and sam peltzman 1977 point out that higher profits could result from efficiencies experienced by large firms which resulted both in greater market shares and high levels of concentration analytical arguments show that higher profits logically follow as much from lower costs that are associated with higher levels of concentration as from collusion determined higher prices some empirical evidence that supports this belief is presented by demsetz peltzman and bradley gale and ben branch 1982 however their findings have been contested on the grounds that the data used are biased or inadequate or that the researchers have not demonstrated that the observed higher profits greater concentration relationship was caused by lower costs 2 the second criticism is that available data provide an inadequate basis for such conclusions the concentration numbers are based usually on industries defined by the commerce department s standard industrial classifications sic the sic definitions tend to be supply production rather than demand determined include nonhomogeneous products and exclude sales of similar products that are included in different sic groups or are imported the profit data are taken from accounting reports that provide poor measures of economic values weiss 1974 describes many of these problems however he does not believe that these shortcomings invalidate the studies as weiss 1979 concludes

asset stock accumulation and the sustainability of competitive advantage reply authors reply to comments regarding their paper dierickx i k cool 1989 asset stock accumulation and the sustainability of competitive advantage management sci

intergenerational hybrids spillbacks spillforwards and adapting to technology discontinuities during technological discontinuities incumbents frequently develop hybrids of competing technical generations although some prior work implies that such intergenerational hybrids may be the result of organizational dysfunction we propose that in some cases hybrids may be sophisticated learning tools that shape organizational adaptation to a technological discontinuity in this paper we suggest two mechanisms through which intergenerational hybrids may affect organizational adaptation spillbacks and spillforwards in an empirical test among the population of automobile carburetor manufacturers during a technological discontinuity we observe that organizations developing intergenerational hybrids capture spillback benefits knowledge spillovers from an emerging technology generation to the current generation furthermore we find that these same organizations also capture spillforwards spillover benefits from developing higher performing intergenerational hybrids that improve their product performance in the future technology generation these results suggest that intergenerational hybrids may be stepping stones for organizations to learn about and adapt to technology discontinuities

patterns of innovation and organizational demography in emerging sustainable fields an analysis of the chemical sector this paper examines the patterns of environmental innovation in the chemical sector and focuses in particular on detecting whether the rise of sustainable chemistry technologies sct has stimulated the emergence of new organizations this question is important to assess the extent to which sct are sustaining the technological advantage of industry incumbents or are creating opportunities for new firms aspiring to develop radically new environmental innovations we found that sct still represent a relatively low proportion of chemical technologies and that they have not stimulated in a significant way the emergence of new firms however the importance of new firms has grown in the last 20 years and their technologies seem to have a higher potential of radicalness than incumbents technologies this indicates that although incumbents advantage remains strong a small group of young firms has started to weaken such advantage moreover the important role played by research organizations in generating sct may signal that technological opportunities are expanding and that some governments in particular the us government are committed to develop sct these results suggest that if supported by effective policies technological ferment in the field which at the present appears still limited has a potential of growth

determinants of venture capital firms preferences regarding the industry diversity and geographic scope of their investments abstract competition is intensifying in the venture capital industry in the u s the number of venture capital firms vcfs tripled from 1980 to 1989 supplier power in the form of institutional investors such as pension funds continues to grow foreign venture capital has grown to the extent that commitments to foreign vcfs exceeded domestic commitments in both 1988 and 1989 further alternative sources of financing for entrepreneurs such as individual investors angels corporations and strategic alliances are increasingly viable options vcfs face pressure to seek lower risk investments improve rates of return and provide value to new venture development surprisingly few scholarly studies have begun to investigate the strategies vcfs are aiming to implement in order to deal with this increasing pressure building on the premise that decisions regarding product market scope are a key component of firm strategy hofer and schendel 1978 this study examined 169 domestic vcfs in order to identify factors that might explain variations in preferences regarding the industry diversity and geographic scope of their investments the sample drawn from california massachusetts and texas represented about 27 of all u s based vcfs in 1987 the year in which the data were gathered in terms of the total size of investment portfolio the average for these 169 vcfs was 69 8 million which is statistically indistinguishable from the u s average of 65 million results indicate that 1 vcfs specializing in early stage ventures prefer less industry diversity and narrower geographic scope relative to other vcfs 2 corporate vcfs i e those owned by non financial corporations prefer less industry diversity but broader geographic scope relative to non corporate vcfs 3 larger vcfs prefer greater industry diversity and broader geographic scope than do smaller vcfs and 4 provision of small business investment companies sbic financing by the vcf has no impact on preferences regarding industry diversity but is associated with a preference for narrower geographic scope one implication of these results is that vcfs in the u s are not homogeneous as regards the intended product market scope of their portfolios this in turn holds implications not only for vcfs but also for their suppliers limited partners buyers entrepreneurs and policy makers vcfs can no longer rely on haphazard investment schemes they need to attract investors by virtue of the benefits offered by their portfolio strategy and they need to attract superior investments via offering valueadded services and know how potential investors in venture capital will want to examine for example the impact on risk and return of investing smaller amounts in several vcfs at one extreme versus making one large investment in a very diversified vcf at the other extreme the results of this and other studies suggest that outcomes timing magnitude and riskiness of returns of choosing such alternatives will vary widely and will depend in great part on the strategies of the vcfs involved it will not be possible for investors to make wise choices without a full examination of their own objectives and of the profiles of vcfs entrepreneurs with the most attractive ventures have alternative sources of financing to consider and should weigh the benefits of being financed and supported by various vcfs as part of the vcfs portfolios knowing a vcf s preferences regarding product market scope improves their chances of approaching and selecting the right fit and for those entrepreneurs with a narrower set of options such knowledge may make the difference between receiving and not receiving financing in a timely manner finally policy makers may be able to make use of knowledge of the forces that influence the investment strategies of vcfs presently concerns for policy makers may include the gap in seed capital increased foreign presence in the u s market and the export of promising innovative technology via alliances with foreign firms all of these factors are influenced by the strategies pursued by vcfs as they jockey for position in the increasingly competitive venture capital market

warranties as signals under consumer moral hazard this article examines the use of prices and warranties as signals of product quality to consumers who choose how to maintain their purchases the seller s incentives are strongly affected by the interaction of quality and maintenance in determining product reliability two different assumptions about this interaction are made a separating equilibrium in which high quality is signalled with a low warranty and low price is shown to be possible in both cases

time of use electricity pricing evidence from a british experiment seemingly unrelated regression sure analysis is applied to data from a british time of use tou pricing experiment it is shown that consumption changes are statistically significant and important but vary by consumption strata the results have implications for demand system analysis of tou data

a structural decomposition analysis of technological opportunity corporate survival and leadership this article considers corporate technological leadership and survival in the face of changing technological opportunities over the period 1930 1990 for firms selected from three broad industrial groups by using us patent data in a novel application of structural decomposition analysis it considers the extent to which selected firms positions of technological leadership benefited from a favorable change in the structure of their technological environment relative to changes caused through firm level choices copyright 2007 oxford university press

unraveling the process of creative destruction complementary assets and incumbent survival in the typesetter industry when radical technological change transforms an industry established firms sometimes fail drastically and are displaced by new entrants yet other times survive and prosper drawing upon an unusually rich data set that covers the technological and competitive history of the typesetter industry from 1886 to 1990 this paper uses a combination of quantitative and qualitative analysis to unravel this process of creative destruction it argues that the ultimate commercial performance of incumbents vs new entrants is driven by the balance and interaction of three factors investment technical capabilities and appropriability through specialized complementary assets in this industry specialized complementary assets played a crucial role in buffering incumbents from the effects of competence destruction and an analysis that examined investment or technical capabilities in isolation would have led to misleading results this work thus highlights the importance of considering multiple perspectives when examining the competitive implications of technological change 1997 by john wiley sons ltd

testing viability of cross subsidy using time variant price elasticities of industrial demand for electricity indian experience abstract indian electric tariffs are characterized by very high rates for industrial and commercial classes to permit subsidized electric consumption by residential and agricultural customers we investigate the viability of this policy using monthly data for 1997 2003 on electric consumption by a few large industrial customers under the aegis of a small distribution company in the state of uttar pradesh for a given price cost ratio it can be shown that if the cross subsidizing class electricity demand is sufficiently elastic increasing the class rates fail to recover incremental cross subsidy necessary to support additional revenues for subsidized classes this suboptimality is tested by individually estimating time variant price elasticities of demand for these industrial customers using box cox and linear regressions we find that at least for some of these customers cross subsidy was suboptimal prior to as late as october 2001 when rates were changed following reforms

global cities and multinational enterprise location strategy we combine the concept of location derived by economic geographers with theories of the multinational enterprise mne and the liability of foreignness developed by international business scholars to examine the factors that propel mnes toward or away from global cities we argue that three distinctive characteristics of global cities global interconnectedness cosmopolitanism and abundance of advanced producer services help mnes overcome the costs of doing business abroad and we identify the contingencies under which these characteristics combine with firm attributes to exert their strongest influence consistent with these arguments our analysis of a large sample of mne location decisions using a multilevel multinomial model suggests not only that mnes have a strong propensity to locate within global cities but also that these choices are associated with a nuanced interplay of firm and subsidiary level factors including investment motives proprietary capabilities and business strategy our study provides important insights for international business scholars by shedding new light on mne location choices and also contributes to our understanding of economic geography by examining the heterogeneous strategies and capabilities of mnes the primary agents of economic globalization that shape the nature of global cities

survival of businesses using collaborative relationships to commercialize complex goods authors with many theoretical and managerial perspectives argue that businesses commercializing technologically complex goods benefit when they collaborate closely with other businesses collaboration is viewed as a means for businesses to overcome competency limitations and to achieve the close configuration of components required for complex goods we predict that collaborative relationships often assist businesses to produce complex goods but that the relationships might also cause problems for the collaborating businesses we find that firms using development oriented and marketing oriented collaborative relationships in the hospital software systems industry are less likely to shut down than businesses that follow independent approaches when the environment changes gradually but businesses using collaborative relationships are sometimes susceptible to being acquired by other firms following a sudden environmental shock businesses with collaborative relationships for activities central to the shock became more likely to shut down while businesses with collaborative relationships for activities outside the focus of the shock became more likely to survive the study critically evaluates and tests the widely stated but little tested argument that interfirm collaboration is usually beneficial the results address the issue of whether organizational choices affect comparative business performance

diversification ricardian rents and tobin s q according to prevailing theory firms diversify in response to excess capacity of factors that are subject to market failure by probing into the heterogeneity of these factors we develop the corollary that firms that elect to diversify most widely should expect the lowest average rents an empirical test with tobin s q as the measure of rents is consistent with this theory

self selection in the residential electricity time of use pricing experiments in none of the existing studies that attempt to pool the results of the five best residential electricity tou pricing experiments is the problem of selection bias addressed three of the five experiments used samples of volunteers and it is well known that this can bias results if the ultimate inference to be made applies to the population of non volunteers i e the situation of mandatory tou pricing in this paper we adapt some well used methodology for correcting for self selection to the five experiments in question and estimate the extent to which its presence biases estimates of the elasticity of substitution between peak and off peak electricity consumption we find for example that the bias is upwards of 24 per cent in the los angeles experiment resulting in a substantial overstatement of the response of customers to mandatory tou prices while we stop short of integrating our methodology into a full blown pooling framework users of the epri sponsored retou program should nevertheless be cautioned to the potential biases inherent in forecasts of tou response derived from it since no account for the selfselection phenomenon and its consequences was taken in its development

keeping it fresh strategic product redesigns and welfare abstract product redesigns happen across virtually all types of products yet there is little evidence on the market and welfare effects of redesigns we develop a model of redesign decisions in a dynamic oligopoly model and use it to analyze redesign activity in the u s automobile market we find automobile model redesigns are frequent despite an estimated average cost around 1 billion our estimates also suggest that redesigns lead to large increases in profits and welfare due to the strong preferences consumers have for redesigns we show that welfare would be improved if redesign competition were reduced allowing redesign activity to be more responsive to the planned obsolescence channel the net effect of these changes would reduce total redesigns by roughly 10 increasing total welfare by roughly 3 the high valuation that consumers put on newly designed models drives frequent redesigns and gives automobile manufacturers fairly substantial market power with a 2 to 1 ratio of firm profits to consumer surplus

the underemphasized role of established firms as the sources of major innovations we argue that established firms including industry incumbents and diversifying entrants play vital all underemphasized roles as the sources of major innovations in many industries the study presents empirical evidence showing that established firms are often sources of major innovations in the telecommunications and medical sectors we conduct an exploratory investigation of how variation in the types of technical and market change influence whether industry incumbents diversifying entrants or nets companies are the sources of major innovations copyright 1996 by oxford university press

asset specificity and a firm s borrowing ability an empirical analysis of manufacturing firms abstract this paper investigates the importance of asset specificity in explaining differences in firms ability to borrow money with empirical research we investigated whether there is a relationship between asset specificity and the debt ratio of a slovene manufacturing firm the basic idea of the research was to link the sources of finance that define property rights and the attributes of the assets that are the objects of finance a firm s capital structure can be viewed as a description of the allocation of risk and control among investors

intangible resources as a key factor in the internationalisation of spanish firms abstract in this paper we analyse the effect of the availability of intangible resources measured by way of tobin s q on the probability of spanish firms increasing their international diversification we find that this impact is positive and statistically significant we also discover that firms with a higher endowment of intangible resources increase their presence in their current markets concentration and that those with a multinational status also expand to new markets scope