|
on Economics of Strategic Management |
|
Issue of 2008‒04‒12
thirteen papers chosen by Joao Jose de Matos Ferreira University of the Beira Interior |
| By: | Pereira de Carvalho, Flavia (UNU-MERIT); Goldstein, Andrea (OECD Development Centre) |
| Abstract: | This chapter analyses foreign direct investments (henceforth FDI) in the oil industry from two large emerging economies, Brazil and China, with the purpose to understand the role of Governments and technology in the internationalisation strategies of those firms. The chapter shows that the Brazilian oil company, Petrobras, internationalised in the 1970s in order to secure oil resources, and throughout time developed technological capabilities that explain its current success and worldwide expansion. Chinese firms have risen later and are making their outward moves in order to catch up technologically with the world's leading firms. |
| Keywords: | multinational corporations, emerging economies, oil companies, technology, technological exploitation, competitive advantages. |
| JEL: | F23 O25 O38 O57 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2008021&r=cse |
| By: | Marin, Dalia; Verdier, Thierry |
| Abstract: | Corporate organization varies within a country and across countries with country size. The paper starts by establishing some facts about corporate organization based on unique data of 660 Austrian and German corporations. The larger country (Germany) has larger firms with flatter and more decentralized corporate hierarchies compared to the smaller country (Austria). Firms in the larger country change their organization less fast than firms in the smaller country. Over time firms have been introducing less hierarchical organizations by delegating power to lower levels of the corporation. We develop a theory, which explains these facts and which links these features to the trade environment that countries and firms face. We introduce firms with internal hierarchies in a Krugman(1980) cum Melitz and Ottaviano (2007) model of trade. We show that international trade and the toughness of competition in international markets induce a power struggle in firms, which eventually leads to decentralized corporate hierarchies. We offer empirical evidence, which is consistent with the models predictions. |
| Keywords: | corporate organization in similar countries; empirical test of the theory of the firm; endogenous congruence in the firm; international trade with endogenous firm organizations |
| JEL: | D23 F12 F14 L22 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6734&r=cse |
| By: | INUI Tomohiko; KAWAKAMI Atsushi; MIYAGAWA Tsutomu |
| Abstract: | Going all the way back to Schumpeter (1934), economists have long discussed whether market competition stimulates innovation. To reconcile conflicting earlier empirical evidence, Aghion and Griffith (2005) developed a model showing that competition can have both a positive and a negative effect on innovation, depending on the degree of competition in the market. Following Aghion and Griffith's work, this paper empirically examines the effect of market competition - measured either by the Herfindahl Index or the Lerner Index - on productivity growth and R&D intensity using micro data for Japan's manufacturing sector. We found evidence of an inverted U-shaped relationship between competition and innovation when we use the Herfindahl Index as a measure of competition in the market. Especially for the period since 2000, the data lend strong support for the hypothesis of an inverted U-shaped curve. In addition, we examined the effect of new entrants on the innovative activity of incumbents. The results of our estimation using a regulation index as our measure of entry barriers suggest that the effect on incumbents' TFP growth depends on their technology level. When incumbents' technology level is close to the technology frontier in their industry, competition from new entrants induces these firms to make efforts to increase their productivity in order to escape from competition. On the other hand, such competition discourages innovation in firms far from the industrial technology frontier. |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:08012&r=cse |
| By: | Hans Degryse; Mark Van Achter; Gunther Wuyts |
| Abstract: | We present a dynamic microstructure model where a dealer market (DM) and a crossing network (CN) interact. We consider sequentially arriving agents having different valuations for an asset. Agents maximize their profits by either trading at a DM or by submitting an order for (possibly) uncertain execution at a CN. We develop the analysis for three different informational settings: transparency, “complete” opaqueness of all order flow, and “partial” opaqueness (with observable DM trades). We find that a CN and a DM cater for different types of traders. Investors with a high eagerness to trade are more likely to prefer a DM. The introduction of a CN increases overall order flow by attracting traders who would not otherwise submit orders (“order creation”). It also diverts trades from the DM. The transparency and “partial” opaqueness settings generate systematic patterns in order flow. With transparency, the probability of observing a CN order at the same side of the market is smaller after such an order than if it was not. Buy (sell) orders at a CN are also less likely to attract subsequent sell (buy) orders at the DM. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0415&r=cse |
| By: | Costa, Ionara (UNU-MERIT); Doranova, Asel (UNU-MERIT); Eenhoorn, Geert-Jan (World Wide Recycling) |
| Abstract: | This paper analyses the participation of firms without GHG emission liabilities as technology providers in CDM and JI projects, the flexibility mechanisms of the Kyoto Protocol. It argues that the motivations for those firms to engaging in CDM and JI projects is based on market stimuli beyond those related to the emission market itself. Instead, their motivations are largely associated with search for new markets where their technological resources and expertise can be exploited. The analysis is based on three firms from the Dutch waste management industry. These cases suggest that the Kyoto's mechanisms compensate to some extent the weakness of the underdeveloped waste management sector in developing and transition economies. |
| Keywords: | Waste Management Industry, Kyoto Protocol, International Expansion, Firm-specific advantages |
| JEL: | L19 L22 L59 L98 Q28 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2008020&r=cse |
| By: | Bartel, Ann P; Lach, Saul; Sicherman, Nachum |
| Abstract: | This paper presents a dynamic model that analyzes how firms’ expectations with regards to technological change influence the demand for outsourcing. We show that outsourcing becomes more beneficial to the firm when technology is changing rapidly. As the pace of innovations in production technology increases, the firm has less time to amortize the sunk costs associated with purchasing the new technologies. This makes producing in-house with the latest technologies relatively more expensive than outsourcing. The model therefore provides an explanation for the recent increases in outsourcing that have taken place in an environment of increased expectations for technological change. We test the predictions of the model using a panel dataset on Spanish firms for the period 1990 through 2002. The empirical results support the main prediction of the model, namely, that all other things equal, the demand for outsourcing increases with the probability of technological change. |
| Keywords: | outsourcing; technological change |
| JEL: | J21 L11 L24 O33 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6731&r=cse |
| By: | Stijn Claessens; Neeltje van Horen |
| Abstract: | Familiarity with working in a specific institutional environment compared to its competitors can provide a firm with a competitive advantage, making it invest in specific host countries. We examine whether this notion of institutional competitive advantage drives banks to seek out specific markets. Using detailed, bilateral data of bank ownership for a large number of countries over 1995-2006 and using a first-difference model, we find that institutional competitive advantage importantly drives banks' location decisions. Results are robust to different samples and model specifications, various econometric techniques and alternative measures of institutional quality. This finding has some policy implications, including on the increased cross-border banking among developing countries. |
| Keywords: | foreign direct investment; international banking; institutions |
| JEL: | D4 E50 G21 L10 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:172&r=cse |
| By: | Acharya, Viral V; Volpin, Paolo |
| Abstract: | We argue that the choice of corporate governance by a firm affects and is affected by the choice of governance by other firms. Firms with weaker governance give higher payoffs to their management to incentivize them. This forces firms with good governance to also pay their management more than they would otherwise, due to competition in the managerial labour market. This externality reduces the value to firms of investing in corporate governance and produces weaker overall governance in the economy. The effect is stronger the greater the competition for managers and the stronger the managerial bargaining power. While standards can help raise governance towards efficient levels, market-based mechanisms such as (i) the acquisition of large equity stakes by raiders and (ii) the need to raise external capital by firms can help too, and we characterize conditions under which this happens. |
| Keywords: | corporate governance; executive compensation; externality; governance standards; ownership structure; regulation |
| JEL: | G34 J63 K22 K42 L14 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6627&r=cse |
| By: | Reuben, E.; Suetens, S. (Tilburg University, Center for Economic Research) |
| Abstract: | We use a novel experimental design to examine the role of reputational concerns in explaining conditional cooperation in social dilemmas. By using the strategy method in a repeated sequential prisoners? dilemma in which the probabilistic end is known, we can distinguish between strategically and non-strategically motivated cooperation. Second movers who are strong reciprocators ought to conditionally cooperate with first movers irrespective of whether the game continues or not. In contrast, strategically motivated second movers conditionally cooperate only if the game continues and they otherwise defect. Experimental results, with two different subject pools, indicate reputation building is used around 30% of the time, which accounts for between 50% and 75% of all realized cooperative actions. The percentage of strong reciprocators varied between 6% to 23%. |
| Keywords: | cooperation;reputation building;strong reciprocity;repeated prisoners? dilemma |
| JEL: | C91 D01 D74 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200833&r=cse |
| By: | Filip Abraham |
| Abstract: | In the last decade, regional issues have gradually moved into the centre-stage of the debate on economic integration and international trade in Europe. The fading influence of the nation-state goes together with a transfer of sovereignty to the European level combined with a renewed interest in the region as a relevant economic unit. Regional authorities are welcoming this evolution as a new opportunity for greater regional autonomy. They are developing political and economic ties with other regions but are at the same time promoting the strategic interests of their own region. This twofold strategy draws a hesitant response from European Union (EU) regulators. They applaud the fact that economic integration strengthens regional complementarities and co-operation. But the increased regional competition raises the prospect of a greater use of policies that distort competition in an integrated economic area. Moreover, EU regional policies that seek convergence between high and low income regions would suffer from a systematic policy of the stronger regions to expand their influence at the expense of the weaker regions. From a theoretical point of view, those issues raise several questions that are addressed in this paper. What are the driving forces for regional complementarities and regional competition? How does economic integration affect regional competition ? What can "strategic" regional policy do to promote narrowly defined regional interests ? And how do EU-wide policies prevent distortions in regional competition? This paper addresses those theoretical questions based on the literature in international trade, regional agglomeration and multinational companies. Section 1 starts with a look at theories that predict regional convergence as the outcome of the regional integration process. Section 2 assesses recent theoretical contributions that focus on regional agglomeration and explore the regional consequences of multinational companies. In a third section, the scope for EU policies that prevent destructive regional competition is discussed. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces9907&r=cse |
| By: | M. van leuvensteijn; C. Kok Sørensen; J.A. Bikker; A.A.R.J.M. van Rixtel |
| Abstract: | This paper analyses the impact of loan market competition on the interest rates applied by euro area banks to loans and deposits during the 1994-2004 period, using a novel measure of competition called the Boone indicator. We find evidence that stronger competition implies significantly lower spreads between bank and market interest rates for most loan market products, in line with expectations. Using an error correction model (ECM) approach to measure the effect of competition on the pass-through of market rates to bank interest rates, we likewise find that banks tend to price their loans more in accordance with the market in countries where competitive pressures are stronger. Further, where loanmarket competition is stronger, we observe larger bank spreads (implying lower bank interest rates) on current account and time deposits. This would suggest that the competitive pressure is heavier in the loan market than in the deposit markets, so that banks under competition compensate for their reduction in loan market income by lowering their deposit rates. We observe also that bank interest rates in more competitive markets respond more strongly to changes in market interest rates. These findings have important monetary policy implications, as they suggest that measures to enhance competition in the European banking sector will tend to render the monetary policy transmission mechanism more effective. |
| Keywords: | Monetary transmission; banks; retail rates; competition; panel data; |
| JEL: | D4 E50 G21 L10 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:171&r=cse |
| By: | Michiel van Leuvensteijn; Christoffer Kok Sørensen; Jacob A. Bikker; Adrian A.R.J.M. van Rixtel |
| Abstract: | This paper analyses the impact of loan market competition on the interest rates applied by euro area banks to loans and deposits during the 1994-2004 period, using a novel measure of competition called the Boone indicator. We find evidence that stronger competition implies significantly lower spreads between bank and market interest rates for most loan market products, in line with expectations. Using an error correction model (ECM) approach to measure the effect of competition on the pass-through of market rates to bank interest rates, we likewise find that banks tend to price their loans more in accordance with the market in countries where competitive pressures are stronger. Further, where loan market competition is stronger, we observe larger bank spreads (implying lower bank interest rates) on current account and time deposits. This would suggest that the competitive pressure is heavier in the loan market than in the deposit markets, so that banks under competition compensate for their reduction in loan market income by lowering their deposit rates. We observe also that bank interest rates in more competitive markets respond more strongly to changes in market interest rates. These findings have important monetary policy implications, as they suggest that measures to enhance competition in the European banking sector will tend to render the monetary policy transmission mechanism more effective. |
| Keywords: | Monetary transmission; banks; retail rates; competition; panel data |
| JEL: | D4 E50 G21 L10 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:103&r=cse |
| By: | Moser, Christoph; Urban, Dieter M; Weder di Mauro, Beatrice |
| Abstract: | This study investigates the impact of international competitiveness on net employment, job creation, job destruction, and gross job flows for a representative sample of German establishments from 1993 to 2005. We find a statistically significant but economically small effect of real exchange rate shocks on employment, comparable to the one found in studies for the United States. However, contrary to the United States, the employment adjustment (among surviving firms) operates mainly through the job creation rather than the job destruction rate. Job destruction occurs essentially through discrete events such as restructuring, outsourcing and bankruptcy. We suggest that these findings are consistent with a highly regulated labour market, in which smooth adjustment is costly and possibly delayed. |
| Keywords: | attrition estimator; gross worker flows; international competitiveness; inverse probability weighted GMM; real exchange rate |
| JEL: | F16 F40 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6745&r=cse |