Ex ante or ex post competition policy? A progress report

When intervening in markets, say to block a merger, competition authorities are constrained by the limited information they have about the social desirability of the available alternatives. Compared to ex ante control, ex post control is based on the more accurate information that becomes available in the intervening period, but entails temporary losses to social welfare and reversal costs incurred to unscramble the eggs. Through a toy model, we identify situations in which the competition authority finds it optimal to commit to forego the option of ex post review in order to avoid chilling ex ante socially beneficial mergers. On the other hand, the case for ex post review is strengthened if post-merger market conducts can signal the merged firm's private information about the consequences of the merger.     

Does competition raise productivity through improving management quality?

A classic question in industrial organization is whether competition raises productivity and if so, through what mechanism? I discuss recent empirical evidence from both large-scale databases and specific industries which suggests that tougher competition does indeed raise productivity and one of the main mechanisms is through improving management practices. To establish this, I report on new research seeking to quantify management. I relate this to theoretical perspectives on the economics of competition and management, arguing that management should be seen at least in part as a transferable technology. A range of recent econometric studies suggests that (i) competition increases management quality and (ii) improved management quality boosts productivity.     

Is there a U-shaped relation between competition and investment?

We consider a two-stage game with cost-reducing investments followed by a linear differentiated Cournot duopoly. With competition inversely parameterized by the extent of product differentiation, investment in the subgame perfect equilibrium is typically minimal for intermediate levels of competition. Laboratory experiments partly confirm the U-shape in a reduced one-stage version of the game. In the two-stage version, there is no evidence for positive effects of moving from intermediate to intense competition.     

Has Europe missed the endgame of telecommunications policy?

The European Electronic Communications Code (EECC) is a major milestone in the EU's telecommunications policy. But is it such a step forward and are the technical and market developments such that the EECC is the endgame? An endgame would mean that sustainable competition is reached in all telecommunications markets. The current paper argues that the EECC's new policy goal of investment in very high capacity connectivity could actually lead to policies that end in sustainable infrastructure competition. The EECC's policies, however, are not courageous enough to reach this goal. This lack of courage also characterizes the EU's gatekeeper policies on call terminations and net neutrality. In both these areas an endgame with sustainable competition is possible.     

Does product market competition foster corporate social responsibility? Evidence from trade liberalization

This study examines whether product market competition affects corporate social responsibility (CSR). To obtain exogenous variation in product market competition, I exploit a quasi‐natural experiment provided by large import tariff reductions that occurred between 1992 and 2005 in the U.S. manufacturing sector. Using a difference‐in‐differences methodology, I find that domestic companies respond to tariff reductions by increasing their engagement in CSR. This finding supports the view of “CSR as a competitive strategy” that allows companies to differentiate themselves from their foreign rivals. Overall, my results highlight that trade liberalization is an important factor that shapes CSR practices. Copyright © 2014 John Wiley & Sons, Ltd.     

Do non‐competition agreements lead firms to pursue risky R&D projects?

This study investigates the impact of non‐competition agreements on the type of R&D activity undertaken by companies. Non‐competition agreements, by reducing outbound mobility and knowledge leakages to competitors, make high‐risk R&D projects relatively more valuable than low‐risk ones. Thus, they induce companies to choose riskier R&D projects, such that corporate inventions are more likely to lie in the tails of the inventions' value distribution (as breakthroughs or failures) and be in novel technological areas. This study uses data about U.S. patent applications from 1990 to 2000 and considers longitudinal variation in the enforcement of non‐compete clauses. The results indicate that in states with stricter enforcement, companies undertake riskier R&D paths than in states that do not enforce non‐compete agreements as strictly. Copyright © 2013 John Wiley & Sons, Ltd.     

Fish: Friend or foe? Food policy and subpopulation warnings for consumers

Fish is a healthy food that provides valuable nutrients for heart health and cognitive development. However, for some subpopulations, consuming fish containing higher levels of methylmercury may pose a health risk. This research seeks to identify the impact of including a seafood warning disclosure in the advertisement of a can of tuna fish on consumers’ purchasing behaviors. An experimental survey is employed to examine the resulting impact for two segments of the population – those considered at risk for methylmercury overexposure and all others. Findings indicate the use of warning disclosures increases respondents’ negative product perceptions without significantly altering positive product perceptions. Attention to the warning is short-lived and does not significantly impact perceived healthful levels of consumption. Modeling purchase behavior using a random utility choice framework indicates that the inclusion of a warning in an advertisement of a can of tuna fish has no adverse affect on purchase behaviors for the population not at-risk and may, in certain cases, serve to decrease tuna purchase likelihood for “at-risk” respondents. Communicating advisory statements on healthy products, such as fish, creates a public health challenge; message pre-testing is imperative.     

Attaining food security in Central Asia—emerging issues and challenges for policy research

Developing long-term strategies for improving food security, alleviating poverty and encouraging sound use of natural resources is fundamental for sustained economic growth in Central Asia. However, the process of policy and institutional reforms has been complex and slow. This paper, based on several rounds of client consultation, attempts to synthesize emerging issues and challenges that confront food and agricultural sectors in Central Asia. It argues that developing institutions that will foster a policy dialogue on long-term issues related to food, agriculture and the environment within and among the Central Asian countries is fundamental to identify development strategies for the next 10 to 15 years. This will require setting priorities for future food, agriculture, and natural resource policy research and analysis that will help in generating and sharing information on the policy challenges and solutions useful for Central Asia in its quest to reduce malnutrition, eradicate poverty and protect the natural resource base.     

Liberalisation policy,industry structure and productivity changes in Korea’s telecommunications industry

The paper examines the efficiency implications of the liberalisation policy in Korea’s telecommunications industry. The paper develops a contextual understanding of the Korean evolutionary path and discusses various transitional difficulties and additional complications posed by business conglomerates that Korea confronted. Examining factors affecting efficiency, the paper shows how the government commitment to the liberalisation schedule imposed a credible competitive threat to the incumbent carriers and enhanced dynamic efficiency of the industry.     

Organic farming policy development in the EU: What can multi-stakeholder processes contribute?

This paper discusses if and how multi-stakeholder involvement can make a worthwhile contribution to the development of agricultural policy in the enlarged EU, using the example of organic farming. A methodological approach to policy design and learning developed and implemented during the design phase for national implementations strategies of the Rural Development Plans in 11 European countries is introduced. Examples of results obtained by this methodology are presented. Conclusions for the design of future bottom-up policy development processes are drawn.     

Adoption and policy implications of Japan’s new corporate governance practices after the reform

In this paper we explain the process and policy implications of Japanese firms’ adoption of recently reformed corporate governance practices. We use a selective adaptation framework in doing so. We present some qualitative predictions about the possible outcome of their adoption process. One advantage of our approach is that we can describe various aspects of the evolutionary process of Japan’s corporate governance reform as a system in a consistent manner, rather than as independent pieces. Our predictions provide policy implications and are empirically testable. Japan’s post-bubble corporate governance reform has been extensive and involves the enactment and revisions of many relevant laws and affected institutions. Japan’s aim has been to install US-like practices (the de facto global standard), with these practices replacing the now tarnished bank-centered practices, and to facilitate Japanese industry in regaining global competitiveness. However, we show that Japanese businesses’ adoption of US practices has been selective and efficiency and other policy implications of such behavior are potentially dysfunctional.     

Information–communications technologies (ICT) and transport: does knowledge underpin policy?

Cities around the world attempt to imitate the Silicon Valley model by adopting public policies aimed at attracting new high-tech industries and Research and Development activities. The adoption of Information and Communications Technologies (ICT) as elements in a public policy is based on the expectations of policy-makers regarding the potential to harness technology to ameliorate key urban problems such as a deteriorating environment, congestion or lack of communications between citizens and institutions. More specifically, policy-makers are exposed to knowledge about ICT, which is supplied by a variety of sources like scientists, popular media and their own experience. This paper argues that two gaps typify the flow of knowledge consumed by urban decision-makers: the knowledge gap, namely the uncertainty about the actual impacts of ICT on urban issues, and the communication gap which relates to the biases and noise emanating from the process of communicating knowledge between different actors on potential ICT impacts. The communications gap can, to a large extent, be explained by language and cultural differences between scientists and policy-makers. To illustrate and emphasise the gaps and their role in the ICT policy-making process, in this paper a comparison is made with the more familiar case of transportation policy making.     

Strategizing by the government: Can industrial policy create firm‐level competitive advantage?

Despite the prevalence of governmental action devised to foster firms and industries, the link between industrial policy (IP) and competitive advantage has received scant attention in strategic management. I propose a model where such a link is mediated by the accumulation and churning of local resources and capabilities. I also introduce the concept of support‐adjusted sustainable competitive advantage (SASCA), which occurs if a firm's observed performance is superior to the expected performance of competitors had they received the same array of policies. I argue that achieving SASCA through IP is a difficult endeavor and requires the interplay of three conditions: insertion in global production networks, geographical specificity, and governmental capability. Thus, the model expands the potential determinants of competitive advantage into the context of governmental intervention. Copyright © 2013 John Wiley & Sons, Ltd.     

Income diversification,poverty traps and policy shocks in Côte d’Ivoire and Kenya

This paper presents evidence on the effects of two different sorts of policy shocks on observed income diversification patterns in rural Africa. In Côte d’Ivoire, households with poor endowments were less able to respond to attractive emerging on-farm and non-farm opportunities. Due to entry barriers to superior livelihood strategies, the benefits of exchange rate reform accrued disproportionately to households that were richer prior to devaluation. By contrast, food-for-work transfers to households in Kenya significantly reduced liquidity constraints, enabling project participants to pursue more lucrative livelihood strategies in non-farm activities and higher-return agricultural production patterns. Jointly, these two shocks underscore the importance of liquidity, market access and skill constraints to skilled non-farm income sources to dynamic poverty traps in rural Africa.     

Pre‐commercial procurement: a demand or supply policy instrument in relation to innovation?

In 2006, the European Commission introduced the concept of ‘pre‐commercial procurement’ (PCP) as an instrument to promote innovation and to mitigate grand challenges. One of the main motives for the support of PCP schemes was to use public needs as a driver for innovation. This concept was also introduced as a response to the need to reinforce the innovation capabilities of the European Union while improving the quality and efficiency of public services. But what is meant by PCP? Is it a demand‐ or a supply‐side instrument in relation to innovation? This is the research question addressed in this paper, the goal being motivated by the lack of academic discussion in this direction. The paper is based on three cases, one from the Netherlands, one from the United Kingdom and one from Australia. These cases provide evidence that PCP is a matter of research and development (R&D) funding of a targeted kind, geared toward very specific goals and in a focused way. This leads the authors to conclude that PCP is a supply‐side policy instrument in relation to innovation. In this sense, they would like to raise a flag for going back to the origins of the PCP program and calling it a ‘precompetitive R&D program’, rather than labeling it as an innovation procurement instrument.     

Changing EU agricultural policy discourses? The discourse analysis of Commissioner’s speeches 2000–2007

This paper is a combination of political economy and critical discourse analysis of public texts about the common agricultural policy (CAP) by concerned agents and the EU’s agricultural Commissioner in the period of November, 2004 until October, 2007. The analysis reveals how concerned agents articulated three competing discourses (neomercantilism, multifunctionality, and neoliberalism). It also shows that elements of the discourse of neoliberalism in the Commissioner’s speeches, despite her use of different discourses for different audiences, are becoming more and more important in order to facilitate further reforms and liberalisation of the CAP.     

Affect or information? Labeling policy and consumer valuation of rBST free and organic characteristics of milk

Using a labeling policy framework, we answer the question of whether attitude has an impact on consumers’ valuation of rBST-free and organic characteristics of milk. We utilize 2 years of consumer survey data and a hedonic model to estimate marginal effects of attitude on consumer valuation of rBST-free and organic milk. Findings indicate that in 2001 milk value was impacted by attitude, regardless of whether attitude was measured using an opinion based or behavioral construct. In 2004 the contribution of attitude to value was insignificant. Implications for labeling policy are discussed.     

Risk assessment in the international food safety policy arena. Can the multilateral institutions encourage unbiased outcomes?

Two institutions provide multilateral venues for countries to discuss food safety measures at the international level: the Codex Alimentarius Commission (Codex) and the World Trade Organization. Both institutions encourage their Members to base food safety standards on scientific evidence.     

Was there policy “reform”? Evolution of EU domestic support for processed fruits and vegetables

Policy “reform” in agricultural markets is often associated with less government regulation and expenditures, or a shift towards more efficient interventions. The European Union (EU) adopted major policy changes for processed fruits and vegetables in 2001 and again in 2008, and we employ a simulation model to examine the effects of the three policy regimes in place before and after each of the changes. Our analysis incorporates the heterogeneity of processing firms in the EU and considers how they responded to the different policy regimes. Simulation results indicate that the EU subsidies increased EU tomato production by 3.8% for the regime that began in 2008 and 9.1% for the regime that began in 2001 compared to no subsidies. The policy regime that was in place from 2001 through 2007 led to the greatest distortions in global processing tomato markets, in part because it directed more of the benefits to EU growers and less to EU processors and consumers. Thus changes in 2001 “reformed” policy by redistributing gains within the EU, while changes in 2008 “reformed” policy by reducing distortions in global markets.