Non-Discriminatory Pricing,Partial Backward Ownership,and Entry Deterrence

This article demonstrates that entry deterrence can occur when downstream incumbents hold non-controlling ownership shares of a supplier that does not price-discriminate. Such backward ownership implies a rebate on the input price for the incumbents and a competitive disadvantage for downstream entrants. An industry can use non-controlling ownership to change the pricing of a supplier in a way that appears to be accommodating but in fact deters entry. The supplier benefits from an obligation or a commitment to supply the customers under equal terms, as this induces profitable sales of ownership stakes to incumbent downstream firms.     

Is advertising an underappreciated driver of sales growth in B2B markets? Theoretical perspectives and empirical evidence

While firms in consumer markets spend hundreds of billions of dollars on advertising each year, firms in business markets are comparably hesitant to adopt advertising as a means to drive business and generate sales growth. Instead, a widespread belief is that sales success in business markets results from a quality focus and sales force support. Challenging these beliefs, this study proposes that B2B advertising can have effects that are meaningful and unmatched by effects resulting from a quality focus and sales force spending. Furthermore, we hypothesize that B2B advertising can help unlock dormant potentials in the established success drivers. We test the proposed effects empirically, drawing on more than 12,000 observations of the advertising expenses, quality focus, sales force spending, and sales growth of more than 2000 U.S.-based B2B firms between 1990 and 2015. This research provides novel insights for researchers and managers concerning the benefits of B2B advertising spending and the interplay between different success drivers in generating sales growth in business markets.     

Tell me a story: The role of narrative transportation and the C-suite in B2B advertising

This research investigates stories about buyer-seller experiences in B2B advertising. In two studies, the authors explore the impact of stories and narrative transportation in advertising on decision makers’ attitudinal responses. In Study 1, findings from a Fortune 100 company’s buyer panel indicate that stories told using narrative advertising were positively related to the decision maker’s trust in the supplier, ability to form personal connections with the supplier and the tendency to advocate for the supplier. Moreover, the organizational status of the decision maker (C-suite versus non-C-suite executives) was examined. Results demonstrate that the effect of these relationships were stronger for C-level decision makers than non-C-level decision makers. In Study 2, depth interviews were conducted with C-level decision makers. Findings reinforce results from Study 1 and provide additional insight into C-level decision makers’ perspectives on stories and narrative transportation. Implications for how stories about buyer-seller relationships can benefit organizational decision making are discussed.     

产品设计作为竞争策略的PRO 供应链生产决策研究

对于大多数无力自建WEEE 回收体系的生产企业选择加入PRO 是明智的选择。本文基于行业PRO 运作模式，构建了由两制造商和回收商联盟组成的供应链模型，将与市场增长挂钩的产品设计作为其中一制造商的竞争策略，研究了产品设计和回收双责任要求下供应链各主体的生产决策问题。研究发现：（1）当产品设计成本较低和市场增量较高时，以产品设计作为竞争策略的在位制造商可以淘汰竞争制造商；（2）当产品设计成本低于市场增量时，在位制造商的生产决策优于竞争制造商。一定条件下，竞争制造商存在“搭便车”行为；（3）产品设计降低了处理成本，但损害了回收商经济效益，回收商抵制过度产品设计，并通过转移价格实现供应链主体的利润配置。当经济驱动下回收商自愿回收时，更高的政府回收率会导致整个供应链经济效益变好；（4）存在一个三方共赢局面使三者经济效益都更优，存在一个双赢局面使回收商和在位制造商更优。     

The competitive effects of resale versus facility-based entry: evidence from the long-distance market

This paper examines the ability of entry by either resellers or facilities-based carriers to discipline the pricing behavior of a vertically integrated incumbent supplier. Theoretical considerations suggest that, once a sufficient amount of entry has occurred at both vertical stages—transmission and retail functions—additional entry at either stage can push final output toward the competitive level. Under these conditions, entry at either stage may serve as a gross complement or substitute for entry at the other stage. Data from the interLATA telecommunications market are used to test the relevant hypotheses. Our findings are not expected to be directly applicable to the local exchange and electricity markets as those markets are currently constituted. When these industries begin to exhibit structural characteristics that resemble the long-distance market, however, our findings should become relevant there as well.     

Naked exclusion by a dominant input supplier: Exclusive contracting and loyalty discounts

Recent literature has shown that an incumbent can use exclusive contracts to maintain supra-competitive prices when buyers of the good are also competitors. Most of the models require the incumbent to completely prevent a more efficient potential entrant from entering, and assume that the entrant is exogenously prevented from making exclusive offers. Such models cannot explain how exclusive arrangements can lower welfare when they do not completely foreclose a small rival, when the rival can make exclusive offers, nor can they identify rudimentary relationships such as how a dominant supplier's size affects his incentive and ability to exclude and lower welfare. I extend the intuition of the literature by formally modeling competition between a dominant input supplier and a small rival selling to competing downstream firms. I show that a dominant supplier can pay downstream firms for exclusivity, allowing him to maintain supra-competitive input prices, even when a small rival that is more efficient at serving some portion of the market can make exclusive offers. I also show that exclusives need not completely exclude the small rival to cause competitive harm. The payment the dominant supplier makes for exclusivity equals the incremental rents that the rival's input could generate if exactly one downstream firm sold final goods using it.     

Downstream mergers in vertically related markets with capacity constraints

Motivated by a recent merger proposal in the French outdoor advertising market, we develop a model in which firms are initially endowed with some advertising capacities and compete on two fronts. First, firms compete to acquire additional advertising capacities on an upstream market; a first stage modeled as a second-price auction with externalities. Second, those firms, privately informed on their own costs, use their capacities on the downstream market to supply advertisers whose demand is random; a second stage modeled by means of mechanism design techniques. We study the linkages between the equilibrium outcomes on both markets. When a firm is endowed with more initial capacity, through the acquisition of a competitor for instance, whether it becomes more or less eager to acquire extra capacity on the upstream market depends a priori on fine details of the downstream market. Under reasonable choices of functional forms, we demonstrate that a downstream merger does not create any bias in the upstream market towards the already dominant firm.     

TWO‐SIDED MARKETS WITH PECUNIARY AND PARTICIPATION EXTERNALITIES*

The existing literature on two‐sided markets addresses participation externalities, but it has neglected pecuniary externalities between platforms. In this paper we build a model that incorporates both externalities. In our set‐up, differentiated platforms compete in advertising levels and offer consumers a service free of charge that is financed through advertising. We show that advertising can exhibit the properties of a strategic substitute or complement. Surprisingly, we find that platform profits can increase with market entry and that there are cases in which the level of advertising rises with entry. We also consider endogenous entry and provide a welfare analysis.     

Buyer attentiveness in buyer-supplier relationships

How do a manufacturing firm's (supplier) relationship marketing activities lead to more profitable business-to-business (B2B) customers? This research proposes that a supplier's relationship activities develop a buyer's attentiveness toward the supplier, which, in turn, leads to profitable buyer purchasing behaviors. Findings from 119 buyer organizations support this contention, and, additionally, buyer attentiveness was found to have a stronger positive influence on favorable buyer behavior than does either buyer dependence or relationship length. This study contributes to our understanding of long-term buyer-supplier relationships in B2B markets.     

“Green” supply chain management: The role of trust and top management in B2B and B2C markets

“Green” supply chain management (GSCM) has often been associated with highly visible companies (Bowen, 2000) and firms within consumer-focused industries (Buysse & Verbeke, 2003; Hall, 2000; Roht-Arriaza, 1996). As such, GSCM has partly been led by development of consumer awareness of environmental issues (Beamon, 1999; Zhu et al., 2005). This suggest that firms operating in business-to-consumer (B2C) markets have strong incentives to implement GSCM, due to both institutional and stakeholder pressure. However, this leaves the role of GSCM in business-to-business (B2B) sectors relatively unexplored and to-date little is known about: 1) the relative engagement with GSCM among firms in business-to-consumer and business-to-business sectors; 2) the conditions that are necessary for successful implementation of “green” practices in B2B supply chains. This study addresses these issues within the context of 340 buyer–supplier relationships in the United Kingdom, using an innovative research methodology that captures firms' engagement with GSCM practices and minimizes social desirability and common source biases. Our results show that GSCM is relatively limited among firms in B2B markets compared to firms in B2C markets. At the same time, we show that developing trust with supply chain partners, while also having top management support, is a crucial driver of engagement with GSCM among firms in B2B sector but less important among firms in B2C sector. These findings provide considerable insights to managers and marketers of B2B supply chains that seek to respond to a growing interest of environmental performance of supply chain.     

Managing Supplier Involvement in New Product Development: A Multiple‐Case Study*

Existing studies of supplier involvement in new product development have mainly focused on project‐related short‐term processes and success factors. This study validates and extends an existing exploratory framework, which comprises both long‐term strategic processes and short‐term operational processes that are related to supplier involvement. The empirical validation is based on a multiple‐case study of supplier collaborations at a manufacturer in the copier and printer industry. The analysis of eight cases of supplier involvement reveals that the results of supplier–manufacturer collaborations and the associated issues and problems can best be explained by the patterns in the extent to which the manufacturer manages supplier involvement in the short term and the long term. The results of this study reveal that the initial framework is helpful in understanding why certain collaborations are not effectively managed yet conclude that the existing analytical distinction among four different management areas does not sufficiently reflect empirical reality. This leads to the reconceptualization and further detailing of the framework. Instead of four managerial areas, this study proposes to distinguish between the strategic management arena and the operational management arena. The strategic management arena contains processes that together provide long‐term, strategic direction and operational support for project teams adopting supplier involvement. These processes also contribute to building up a supplier base that can meet current and future technology and capability needs. The operational management arena contains processes that are aimed at planning, managing, and evaluating the actual collaborations in a specific development project. The results of this study suggest that success of involving suppliers in product development is reflected by the firm's ability to capture both short‐ and long‐term benefits. If companies spend most of their time on operational management in development projects, they will fail to use the leverage effect of planning and preparing such involvement through strategic management activities. Also, they will not be sufficiently able to capture possible long‐term technology and learning benefits that may spin off from individual projects. Long‐term collaboration benefits can only be captured if a company can build long‐term relationships with key suppliers, with which it builds learning routines and ensures that the capability sets of both parties are aligned and remain useful for future joint projects.     

Advertising,industry innovation,and entry deterrence

With the advent of the Internet and social media platforms, advertising has become cheaper and more effective in reaching consumers. This paper studies the effect of better informative advertising on innovation and industry growth. This paper finds that improvements in informative advertising can lead to costly entry deterrence. Because advertising and innovation are complementary, better advertising raises the threats of entry. When innovation spillover is present in an industry, an incumbent firm has incentives to strategically lower its own innovation to deter entry. As a result, better advertising in innovation-intensive industries can have negative consequences on industry growth and consumer welfare. This paper also investigate the role of innovation spillover on entry deterrence.     

Exclusionary pricing in two-sided markets

This paper studies the incentives to engage in exclusionary pricing in the context of two-sided markets. Platforms are horizontally differentiated, and seek to attract users of two groups who single-home and enjoy indirect network externalities from the size of the opposite user group active on the same platform. The entrant incurs a fixed cost of entry, and the incumbent can commit to its prices before the entry decision is taken. The incumbent has thus the option to either accommodate entry, or to exclude entry and enjoy monopolistic profits, albeit under the constraint that its price must be low enough to not leave any room for an entrant to cover its fixed cost of entry. We find that, in the spirit of the literature on limit pricing, under certain circumstances even platforms find it profitable to exclude entrants if the fixed entry cost lies above a certain threshold. By studying the properties of the threshold, we show that the stronger the network externality, the lower the thresholds for which incumbent platforms find it profitable to exclude. We also find that entry deterrence is more likely to harm consumers the weaker are network externalities, and the more differentiated are the two platforms.     

The effects of an articulated customer value proposition (CVP) on promotional expense,brand investment and firm performance in B2B markets: A text based analysis

Using text-based analysis, we search for evidence of articulated customer value propositions (CVP), in annual reports of US B2B firms, and then demonstrate that B2B firms that explicitly emphasize a CVP invest more in their brands, have higher future sales and sales per customer. We also find that CVP has a negative effect on the size of their customer base, perhaps because firms who care about a CVP appear to attract more long-term, loyal customers. Firms that pay more attention to CVP also tend to spend less on advertising and promotion. Future performance, particularly among small to mid-size firms, is positively affected when these firms emphasize CVP, and this also holds especially in less competitive markets. Our findings are based on a large dataset of around 12,000 firm year observations for a 14-year period from 2004 to 2017.     

Is exclusionary pricing anticompetitive in two-sided markets?

This paper studies the competitive effects of exclusionary pricing in two-sided markets. While formally showing that below-cost pricing on one market side can allow an incumbent firm to exclude a potential rival which does not have a customer base yet, the proposed model does not necessarily imply that below-cost pricing in such markets should be taken as anti-competitive conduct. Instead, I find that in sufficiently asymmetric two-sided markets, exclusion is always beneficial and if anything, there is too little of it in the sense that there are cases in which there is inefficient entry. Further, prohibiting below marginal cost pricing may destroy some socially efficient exclusion and worsen the problem of excessive (or inefficient) entry.     

Spectrum Licensing,Policy Instruments and Market Entry

Competition policy attempts to address the potential for market failure by encouraging competition in service markets. Often, in wireless communication service markets, national regulatory authorities seek to encourage entry via the spectrum assignment process. Instruments used include the assignment mode (auction or beauty contest), setting aside licenses and providing bidding (price and quantity) credits for potential entrants, and making more licenses (spectrum blocks) available than there are incumbent firms (excess licenses). The empirical analysis assesses the effectiveness of these policy instruments on encouraging entry. The econometric results show that the probability of entry is enhanced by using auction assignments and excess licenses. Furthermore, quantity, but not price, concessions encourage entry.     

Uniform Pricing as a Barrier to Entry

This paper considers an entry game in which an incumbent firm operates in a number of markets and a potential entrant can enter multiple or all of the markets. While price discrimination has usually been thought of as a barrier to entry, in our model it is not and instead, charging a uniform price across the markets can discourage entry. Partial entry occurs when the two firms' products are highly substitutable. In this case, uniform pricing raises the profits of both the incumbent and the entrant but reduces consumer and total welfare relative to price discrimination.     

Pricing response to entry and agglomeration effects

In contrast to the traditional approach that typically views entry solely as a threat, we argue that our understanding of this important phenomenon will remain incomplete until we consider the possibility that entry may also provide opportunity for incumbent firms. Drawing from agglomeration theory, which describes the benefit from colocating with competitors, we explicitly examine the combined impact of the competitive and agglomeration effects of entry using a unique dataset of Texas hotels. We find that incumbent establishments price higher when facing entrants whose agglomeration benefits are more likely to outweigh their competitive effects. This association is stronger for incumbents that have greater experience with entry. Our results bring a new perspective to the entry response literature helping clarify inconsistent empirical results. Further, we apply agglomeration theory to a new question, incumbent behavior, and demonstrate that experience appears to play an important role in recognizing situations that generate agglomeration externalities. Copyright © 2009 John Wiley & Sons, Ltd.     

Optimal pricing and advertising strategy for introducing a new business product with threat of competitive entry

The problem of optimal joint pricing and advertising decision making for a new product facing potential competitive entry has received inadequate attention. We propose a model that attempts to find the optimal price-advertising frontier in the face of potential competitive entry that maximizes total discounted profits for pre- and post-entry periods. We find that a firm would charge the price that equates price elasticity to marginal revenue product of advertising (as predicted by [Dorfman, R. and Steiner, P.O. (1954), Optimal Advertising and Optimal Quality, American Economic Review, 44(5), 826-836.]) only when the potential effects of pricing and advertising on its market share are not considered. Under optimal conditions, aware that market share is subject to erosion, the firm charges a somewhat lower price than the profit maximizing price, and sets an advertisement expense that is somewhat higher than the profit-maximizing advertising level as predicted by Cournot's monopolistic setting. We illustrate the applicability of our model using business product examples taken from several industries including operating systems, software, pharmaceutical, and telephone switching. Directions for future research with implications for B2B managers (for example, the possible effects of preannouncement to forestall competitive entry) are discussed.