Complementarities between organisational strategies and innovation

The purpose of this paper is to determine whether organizational strategies in various manufacturing industries are complementary with innovation. In particular, our interest is to discover which organizational strategies are complementary with major innovations (world-first and Canada-first). Knowledge of complementarity should pave the way for creating sustainable competitive advantage because the use of a complex strategy may be difficult to imitate. In other words, competitive advantage increases as the complexity of the strategy increases (i.e. because the number of strategy combinations follows a power law), which acts as a barrier to potential imitators (Rivkin, J.W. (2000) Imitation of Complex Strategies. Management Science, 46(6), 824–844.).

Because of the static nature of our results (productivity and profit are for 1997), their interpretation can only be tentative. Thus, our research is really a first step along the road to understanding the (potential) importance of complementarities among firm strategies. Caveats aside, managers may want to compare their own firm’s emphasis on particular strategies against what is empirically determined to be complementary with innovation and high-performance within their industry. The frequency of complementary pairs that involve innovation range from 40 to 50% depending on whether we are talking about profit, productivity, or strategies. This result is important—as it means that innovation outcomes are statistically significant for both increased productivity and increased profit. Furthermore, innovation was found to be complementary with many organizational strategies. The complementary strategies across industries were quite different, but this was expected to occur.     

Understanding the divergence of manufacturing enterprisesʼ profitability in China

ABSTRACT

The transition of the Chinese economy is placing increasing pressure on manufacturing enterprises to become more profitable. In this article, we first calculate and analyze the profitability of Chinese manufacturing enterprises based on data from the 2015 Chinese Enterprises–Employees Survey (CEES 2015), and find that there is an obvious profitability divergence tendency of manufacturing enterprises. We then analyze the different actions and strategies that may cause the profitability divergence and find that aggressive strategies in innovation, diversification, market development, and conservative strategies in production expansion tend to result in a good profitability, while the opposite strategies in each action lead a poor profitability. The different adoption of strategies in diverse actions may the possible causes of profitability divergence.

Abbreviations: CEES: China Employer-Employee Survey, PGR: Profit growth rate, SME: Small and medium-sized enterprise     

Robustness against indirect invasions

Games that have no evolutionarily stable strategy may very well have neutrally stable ones. (Neutrally stable strategies are also known as weakly evolutionarily stable strategies.) Such neutrally, but not evolutionarily stable strategies can however still be relatively stable or unstable, depending on whether or not the neutral mutants it allows for - which by definition do not have a selective advantage themselves - can open doors for other mutants that do have a selective advantage. This paper defines robustness against indirect invasions in order to be able to discern between those two very different situations. Being robust against indirect invasions turns out to be equivalent to being an element of a minimal ES set, where this minimal ES set is the set that consists of this strategy and its (indirect) neutral mutants. This is useful, because we know that ES sets are asymptotically stable in the replicator dynamics.     

Low-cost innovation and technology-driven innovation in China’s machinery industry

ABSTRACT

The political concept of indigenous innovation in China sets out a guiding principle for the country’s major transformation towards becoming an innovation nation. However, firms’ innovation strategies and capabilities in middle-income countries are usually heterogeneous, making a uniform response to this concept at the company level highly unlikely. The paper’s empirical contribution is based on analysing survey data on technologically advanced machinery firms in China. It uses a multinomial model approach to establish which drivers of innovation go hand-in-hand with the different innovation strategies. This paper identifies different innovation strategies and forms of innovation that co-emerge as part of this transformation, leading to four firm groups: low-cost producers, technology-oriented producers, user-oriented innovators and technology-oriented innovators. It thus contributes to a more differentiated view of the effects of China’s innovation-focused transformation. We find that R&D investments, governmental R&D support and scientific collaborations are key factors to distinguish between the above-mentioned groups.     

Managing the transition to sustainable supply chain management practices: Evidence from Dutch leader firms in Sub-Saharan Africa

Abstract

Governance literature identifies so-called ‘leader firms’ as the directors of global value chains. But in what direction are they leading? Some leader firms actively try to make a transition towards sustainable supply chain practices, but how can this be assessed? Supply chain management literature provides fragmented insights into the antecedents of transition processes. They adopt a largely ‘top-down’, ‘inside-out’ perspective rather than (also) take a ‘bottom-up’ and ‘outside-in’ perspective in which the consequences for the business models of supplying firms at the bottom of the supply chain are rarely taken into account. This contribution develops a more integrated eclectic approach on sustainable supply business models. We conceptualise antecedents of change along consecutive stages of management that combines different supplier ‘upgrading’ approaches with different ways in which leader firms integrate suppliers in their purchasing strategies. We apply this model to the strategies of 10 leading Dutch companies active in Africa, but with different supply chain positions.     

The politics of progressive income taxation with incentive effects

This paper studies majority voting over quadratic taxation and investigates under which conditions marginal progressivity emerges as a voting outcome. In our model with endogenous income, there is no majority (Condorcet) winning tax schedule. We then investigate less demanding political equilibrium concepts in order to see under which conditions the set of equilibria is composed only of progressive tax functions. We follow three strategies: (i) reduction of the policy space to the tax functions that are ideal for some voter; (ii) elimination of weakly dominated strategies and the use of mixed strategies in a standard Downsian two-party competition game; (iii) assumption that political parties interact repeatedly and care about the size of their majority. Although each approach captures a different aspect of political behavior, they point to the same (simulation-based) conclusion that progressivity is more likely to emerge for most distributions of abilities and that it is actually the only possible voting outcome if the distribution is sufficiently concentrated at the middle.     

Does player specialization predict player actions? Evidence from penalty kicks at FIFA World Cup and UEFA Euro Cup

Penalty kicks are analysed in the literature as ‘real life experiments’ for assessing the use of rational mixed strategies by professional players. However, each penalty kick cannot be considered a repetition of the same event because of the varying background conditions, in particular the heterogeneous ability of different players. Consequently, aggregate statistics over data sets composed of a large number of penalty kicks mediate the behaviour of the players in different games, and the properties of optimal mixed strategies cannot be tested directly because of aggregation bias. In this article, we model the heterogeneous ability of players. We then test the hypothesis that differently talented players randomize over different actions. To achieve this aim, we study a data set that collects penalties kicked during shoot-out series in the last editions of FIFA World Cup and UEFA Euro Cup (1994–2012) where kickers are categorized as specialists and non-specialists. The results support our theoretical predictions.     

Evaluating the effects of area closure for recreational fishing in a coral reef ecosystem: The benefits of an integrated economic and biophysical modeling

This paper presents an integrated agent-based model of recreational fishing behavior within a reef ecosystem as a platform for the evaluation of recreational fishing management strategies. Angler behavior is described using econometrically estimated site choice models, with site choice among anglers driven by site attributes and angler characteristics. The biophysical model represents the marine reef environment as a system with different trophic levels identifying algal and coral growth as well as two types of fish (piscivores and herbivores). Ecosystem dynamics are driven by interactions within the trophic levels and interaction between fish populations and fishing activities.The model is used to simulate recreational fishing activities and their interactions with the environment. Recreational fishing sites from the Ningaloo Marine Park, an iconic coral reef system in Western Australia, are used as a case study. A set of management strategies, including “business-as-usual” and different site closure durations, are assessed for two different levels of fishing pressures. The results show that not only the effectiveness but also the distribution of management impacts across space and over time can be very different from what one would expect without the benefit of integrated modeling.     

Technological capabilities accumulation and internationalization strategies of Mexican biotech firms: a multi case study from agro-food & pharma industries

ABSTRACT

In this paper our aim is to analyze the relationship between technological capabilities accumulation of Mexican biotech firms and their different types of internationalization strategies. Because of the determining effect of firms’ capital investment level, we analyzed three groups of firms: start-ups, small and medium-sized firms (SMEs) and multinational firms (MNEs). We made use of a wide range of information: The First Survey of Biotechnology Development Firms in Mexico, the systematization of 20 case studies, interviews with key persons in the industry and public sources. We confirmed the two hypotheses outlined: (i) TCA process does not follow a linear path in Mexican biotech firms and (ii) firms with lower capital investment levels exhibit a lower level of TCA and less complex internationalization strategies; while firms with higher capital investment levels are associated with higher TCA levels and more complex internationalization strategies. Biotechnology requires high levels of capital investment and these to a large extent determine the development and technological capabilities accumulation. Therefore, we suggest that a capitalization program is much needed to foster Mexican biotech firms’ TCA processes and develop internationalization strategies.     

Social Security Strategies and Redistributive Effects in European Social Transfer Systems

This paper evaluates the linkage between social security strategies and redistributive effects in EU social transfer systems. It is argued that the various European systems produce different patterns of redistribution that may be explained by the adoption of different mixes of social security strategies. In support of this argument, several ideal-typical strategies are characterized and a classification of European social transfer systems is introduced. Subsequently, the redistributive effects of the systems are assessed and the relationship to their class assignment is investigated. We conclude that the redistributive effects differ markedly between systems of different classes, indicating that redistributive patterns are heavily influenced by the adopted strategy mix.     

Learning from Role Models in Rwanda: Incoherent Emulation in the Construction of a Neoliberal Developmental State

In the twenty-first century, developing country policymakers are offered different market-led role models and varied interpretations of ‘developmental state role models’. Despite this confusion, African countries pursue emulative strategies for different purposes – whether they may be for economic transformation (in line with developmental state strategies), market-led reforms or simply to signal the implementation of ‘best practices’ to please donors. Rwanda has been lauded for the country’s economic recovery since the 1994 genocide, with international financial institutions and heterodox scholars both praising different facets of its development strategy. This paper argues that Rwanda is an example of a country that has simultaneously pursued emulative strategies for different purposes – often even within the same sector. Two studies of emulation are explored: the emulation of Singapore’s Economic Development Board through the establishment of Rwanda’s own Rwanda Development Board (RDB) and the evolution of Rwanda’s financial sector with reference to the use of contending market-led and developmental state models. The paper argues that in Rwanda, incoherent emulation for different purposes has resulted in contradictory tensions within its development strategy and the construction of a neoliberal developmental state.     

Manufacturer's pricing strategy in a two-level supply chain with competing retailers and advertising cost dependent demand

The paper studies a two-echelon supply chain comprising one manufacturer and two competing retailers with advertising cost dependent demand. The manufacturer acts as the Stackelberg leader who specifies wholesale price for each retailer. The two retailers compete with each other in advertising and they have different sales costs. The manufacturer uses one of the following two pricing strategies: (i) setting the same wholesale price for both the retailers irrespective of the difference in their sales costs; (ii) setting different wholesale prices for the retailers depending on their sales costs. Two models are developed. In the first model, the manufacturer shares a fraction of each retailer's advertising cost while in the second model, the manufacturer does not share any retailer's advertising expenses. In both the models, we derive the retailers' and manufacturer's optimal strategies. A numerical example is given to illustrate the theoretical results developed in each model. Computational results show that it is always beneficial for the manufacturer to adopt different wholesale pricing strategy for the retailers.     

Join hands or walk alone? Evidence on lobbying for trade policy in India

Using primary evidence for 146 Indian manufacturing firms, I examine single and dual lobbying strategies for trade policy influence, and the factors driving firm's choice of these strategies. Firms can adopt a single strategy, by lobbying collectively as a group (Join Hands), or lobbying individually as a firm (Walk Alone). Firms can also adopt a dual strategy, that is, a combination of collective and individual lobbying. The choice of strategy is affected by sector concentration and by tradeoffs between lobbying intensity for sector‐wide and firm‐specific outcomes. The following findings are new for India: First, majority of Indian firms (more than 64% in the sample) use a dual strategy, suggesting the importance to better understand what drives dual strategies. Second, the likelihood of adopting a dual lobbying is higher in sectors that are characterized by low concentration (dispersion is higher), indicating a strong competition effect over free‐riding. Third, relative to the single strategy of collective lobbying, Indian manufacturing firms are likely to join hands while walking alone when targeting firm‐specific outcomes, but prefer to walk alone (single strategy of individual lobbying) when there are tradeoffs between different outcomes, to react quickly. Finally, the availability of resources and firm's perceived effectiveness of its lobbying are significant drivers for the strategy choice.     

Driving forces for research and development strategies: an empirical analysis based on firm-level panel data

This paper investigates empirically different ways to organize research and development (R&D) within Swiss firms. Based on a longitudinal data set comprising three cross-sections (1999, 2002, and 2005) of the Swiss Innovation Survey, four different types of R&D strategies could have been separated; firms combine in-house R&D with R&D co-operations (coop) or in-house R&D with external R&D (buy), or they conduct in-house R&D, external R&D, and R&D co-operations (mixed), or they exclusively rely on in-house R&D (make). It is the aim of this paper to understand what drive firms to go for different strategies. Based on econometric estimations controlling for correlations between the dependent variables and endogeneity among the independent variables, it was found that concepts related to the absorptive capacity, incoming spillovers, and appropriability, the importance of different knowledge sources, the competitive environment, costs, and skill aspects as well as technological uncertainty are essential factors to determine a firm's decision to choose a specific way to organize R&D.     

Measuring efficiency when competitive prices aggregate differences in product quality and risk

In perfectly competitive markets with homogenous goods, prices aggregate inputs and outputs into a money metric that allows production plans and, hence, firms to be ranked by their profitability. Standard techniques of efficiency measurement use this metric to estimate cost and profit frontiers that identify “best-practice” production, conditioned on these exogenous prices. However, when prices vary due to differences among firms in the quality of outputs and inputs and in how asymmetric informational problems are resolved, both quality and the production of information can be decision variables of the firm, and prices will have endogenous components linked to production decisions. For example, in banking, prices of financial inputs and outputs are linked to credit quality and, hence, to risk and, thus, aggregate both inputs and outputs and their risk characteristics as well as reflect how informational asymmetries in credit markets are ameliorated. This paper argues that these cases pose two serious problems for the standard techniques of efficiency measurement: (1) they underestimate inefficiency because, in conditioning on prices, they fail to account for the effects of suboptimal pricing strategies on profitability; and (2) in ignoring how production plans and pricing strategies affect market-priced risk, the standard techniques neglect the effects of different pricing strategies on the discount rate, on expected profit and, hence, on market value. Two alternative techniques that do not condition their frontiers on prices and that account for risk are described to show how they measure the efficiency of different pricing strategies as well as production plans. These two alternative models for measuring efficiency are employed to study how differences in pricing strategies affect the efficiency and market value of highest-level bank holding companies in the United States in 1994.     

Salience and horizontal differentiation

I study a horizontal differentiation model in which one of two attributes of a product, product fit and price, is more salient for a consumer than the other and different consumers can find a different attribute salient. The attribute that is more salient is determined by relative differences between the two products and is determined endogenously as a result of firms' pricing strategies. High (low) marginal costs soften (toughen) price competition between firms. Pass-through rates are greater than 1 for some parameter values. Both industry- and firm-level cost increases may be beneficial for firms.     

Investment horizons,cash flow news,and the profitability of momentum and reversal strategies in the Chinese stock market

This study investigates the profitability of momentum and reversal strategies of different investment horizons in the Chinese stock market. The findings indicate that momentum strategies are profitable for investment horizons less than one week. For longer investment horizons, reversal strategies are profitable. This result is very different from the US market, where profitable momentum strategies yield to much longer investment horizons. We show that this is because investors in Chinese stock market generally overreact to the company cash flow news while investors in US market underreact to cash flow news.     

Exploring larger biotech research firm strategies: Projections from a comparison of small and larger firms

This is an exploratory study of larger biotech firms using insights from a head-to-head comparison of 49 small and 17 large U.S. biotech firms using archival data. We found small and large biotech firms to be significantly different from each other on R&D intensity and funding strategies. The findings are used to project and hypothesize about larger biotech firm growth strategies.Whereas R&D expenses in the small firms exceed total income by a wide margin, larger firms are able to cover most, if not all, of their R&D expenses. Thus, the larger firms are relatively more financially viable. Results also show that the larger firms derive a greater proportion of their revenues from collaborative research agreements (CRAs), which has key implications for revenue growth in these firms.Based on the findings we project R&D expenses and collaborative research revenues for biotech firms as they grow in size.     

Technical change and employment under imperfect competition with perfect and imperfect information

We consider the implications of process innovation for the aggregate level of employment of assuming that not all firms adopt new technologies simultaneously and that non-innovators adopt (temporarily)disequilibrium strategies (due to imperfect information about the introduction of the new technology). Two alternative scenarios are explored. In one, consumers' demands arise from symmetric homothetic preferences, and in the other from asymmetric (Hotelling-type) preferences. We find that there may be a reduction in employment in the transition to the new equilibrium under both types of preferences even if there is no decrease (or an increase) in the new (long-run) equilibrium level of employment. The conditions under which this will occur are however different for the alternative preference structures. Further, the latter are shown to have different implications for theequilibrium effects of process innovation.     

R&D Strategy in International Mixed Duopoly with Research Spillovers

This paper examines the international mixed duopoly behaviour with research spillovers. Using a two‐stage game with Research and Development (R&D) and output, we investigate the effects of imperfectly appropriable R&D on optimal R&D strategies of a domestic public firm and a foreign private firm across different market interactions: (i) international R&D competition, (ii) only the foreign firm conducts R&D, (iii) only the domestic public firm conducts R&D, (iv) no firm conducts R&D, and (v) research joint venture. The results show that firms' research performances are determined by the degree of spillovers and the optimal R&D strategies involve R&D competition. Spillovers are shown to be socially beneficial and their absence can prove to be a strategic deterrent, with the public firm monopolising the market. Some of these findings contrast with the traditional models of oligopoly (with or without R&D) and mixed oligopoly (without R&D).