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.     

X-Inefficiency,Competition and Market Information

Whether competition forces firms toward efficient behaviour is an open question. We consider a duopoly with firms run by managers and affected by adverse selection on costs. In contrast to recent literature, we point out that, to have a genuine effect on firm X-inefficiency, competition must change managerial incentives. By introducing the availability of some signal on the rivals' behaviour we show that, if costs are correlated, the contractual use of that signal can render private managerial information uninfluential. This result stresses the informational role of the market and suggests scope for future work.     

Dominant firms and their alleged decline

By way of a survey of recent literature on the theory of strategic competition, this paper focuses on the question of whether dominant firms decline; the traditional argument suggesting decline is found to be based on a rather unsatisfactory modelling of dominance, and more acceptable conceptualizations suggest that such privileged positions will persist.     

转轨经济下管理层权力影响高管-员工薪酬差距的研究

企业高管薪酬一直是学术界热议的话题之一,近几年学者把目光更多地放在了研究高管薪酬与普通员工薪酬差距的方面。产品市场竞争作为一种非标准的外部治理机制,正日益受到越来越多学者的关注。本文以2006-2010年我国上市公司为研究样本,对企业内高管与普通员工薪酬差距越来越大的现象进行实证研究。结果表明,在国有企业中,管理层权力对薪酬差距的影响大于非国有企业,而产品市场竞争程度在非国有企业中对薪酬差距扩大有较好的缓解作用。在产品市场竞争越激烈、管理层权力越高的国有企业,高管与普通员工薪酬的差距依然很大。     

Emotional Prosperity and the Stiglitz Commission

This article argues — in line with the proposals of the recent Stiglitz Commission on the Measurement of Economic Performance and Social Progress — that we should now be measuring a nation's emotional prosperity rather than its economic prosperity (i.e. we ought to focus on the level of mental well‐being, not on the number of pounds in people's bank accounts). The article reviews recent ideas in this field. It also describes seven recent studies that, worryingly, suggest that emotional prosperity may be declining through time. For labour‐market specialists, a key question for future research is how much this downward trend can be traced back to increased pressures in working life. That question currently remains open.     

Towards an Institution-Based View of Business Strategy

This article focuses on a key question: Why do strategies of firms from different countries differ? Drawing from recent research on business strategies in Asian organizations, this article outlines the emergence of an institution-based view of business strategy which sheds light on why firms differ, reviews four streams of research in a broad range of countries, and critiques and extends some of the current work by suggesting a number of future research directions.     

Creating value in business relationships: The role of sales

Understanding the creation of value in business relationships has been a long-standing goal of researchers and managers alike. By adopting a relational perspective, recent research on business relationships has made much progress in understanding value-creating processes. As the sales function is thought to be a pivotal part of the value-creating processes in business relationships, the evolving view on creating relationship value clearly has implications for our understanding of the role of sales in these processes. In contrast to its importance, the question of how the sales function contributes to creating value in business relationships has been largely neglected in extant literature. The objective of our paper is to answer this question by systematically linking the relational value creating process to the sales function's content. Interpreting value creation as interaction process, we identify four features of value-creating processes in business relationships suggested in recent research (i.e., jointness, balanced initiative, interacted value, and socio-cognitive construction) and, based on these, outline a framework that is used to define a set of tasks that are key to creating value in business relationships and hence become critical for sales in its hitherto neglected role as co-creator of relationship value. We illustrate the various tasks of this new role of sales with data from 43 interviews with sales managers and salespeople. Along with related normative recommendations in extant literature, the interviews provide support for the validity and relevance of our framework for understanding the role of sales in creating relationship value. This framework puts forward a much-needed first effort towards a theory of sales' role in creating relationship value and offers several opportunities for future research.     

RESALE PRICE MAINTENANCE AND INTERLOCKING RELATIONSHIPS*

Dampening of interbrand as well intrabrand competition is often advanced to justify per se illegality of RPM. We analyze this argument in a context where rival manufacturers distribute their products through the same competing retailers. We show that RPM indeed limits the exercise of competition at both levels and can generate industry‐wide monopoly pricing. The impact on prices depends on the extent of potential competition at either level as well as on the parties' influence in determining the terms of the contracts. Our analysis sheds a new light on ongoing legal developments and is supported by recent empirical studies.     

Competition between exchanges: A research agenda

This paper describes open research questions related to the competition and market structure of financial exchanges and argues that only a combination of industrial organization and finance can satisfactorily attack these questions. Two examples are discussed to illustrate how the combination of these two approaches can significantly enrich the analysis: the “network externality puzzle”, which refers to the question of why trading for the same security is often split across trading venues, and the impact of the multi-sided character of financial exchanges on pricing and profitability.     

The European Commission's approach to mergers involving software-based platforms: Towards a better understanding of platform power

The European Commission’s digital single market policies are increasingly concerned with the impact of so-called ‘platforms’ on competition in the internal market. Whereas the European Commission acknowledges the contributions of platform companies to innovation, it also sees actual and potential damages occurring from their powerful position. As such, the European Commission aims to strengthen the enforcement of its competition law rules in this area. The main research question is how the European Commission has been evaluating the competitive effects of platforms under merger control and whether its approach is adequate to address the manifold concerns related to platforms and competition. Based on a case study analysis, we conclude that the European Commission (1) recognises the platform circumstance, their essential intermediary role in the digital industry and the importance of maintaining fair competition; (2) its analysis has been slowly evolving becoming more granular; (3) platforms’ behaviour and not their size per se is most often the central concern; (4) the proposed Digital Services Act and Digital Markets Act packages tackle platform concerns identified in the European Commission’s ex-ante analysis, signalling that its analysis seems to have inspired their creation.     

Mergers and product quality: Evidence from the airline industry

Retrospective studies of horizontal mergers have focused on their price effects, leaving the important question of how mergers affect product quality largely unanswered. This paper empirically investigates this issue for two recent airline mergers. Consistent with the theory that mergers facilitate coordination but diminish competitive pressure for quality improvement, we find that each merger is associated with a quality decrease (increase) in markets where the merging firms had (had no) pre-merger competition with each other, and the quality change can have a U-shaped relationship with pre-merger competition intensity. Consumer gains/losses associated with quality changes, which we monetize, are substantial.     

The theory of access pricing and its linkage with investment incentives

The paper reviews how the question of access pricing has been fully investigated by the theoretical literature in a static context. On the other hand, there is no developed analysis of the linkage between access pricing and incentives to invest. This paper argues that some useful literature in related areas can be brought to bear on the issue of “races” to build infrastructures, on the relationship between infrastructure and service competition, and on two-way network competition.     

Capital subsidies,profit maximization,and acquisitions by partially privatized telecommunications carriers

A recent phenomenon in competition policy is the acquisition of a private firm by an enterprise that is either wholly owned by government or in the midst of privatization. Such an acquisition poses the question of how public ownership may alter the incentives of a firm to engage in anticompetitive conduct. It also prompts one to examine the process by which such altered incentives revert, as the level of government ownership declines, to the same incentives that face purely private firms. Using Deutsche Telekom's acquisition of VoiceStream Wireless as a case study, this article presents the economic questions relevant to evaluating the competitive consequences of acquisitions by partially privatized firms. It predicts gains or losses to various constituencies of producer groups. It then analyzes bond ratings and weighted-average costs of capital to determine whether such data are consistent with the hypothesis, advanced by parties opposed to such foreign investment, that partially privatized acquirers benefited from the government subsidization of their credit.     

Economics at the FTC: Data Intensive Mergers and Policy R&D

Economics at the Federal Trade Commission (FTC) supports both the competition and consumer protection missions of the agency. In this year’s essay we discuss a range of activities focusing on data-intensive antitrust cases in the hospital and consumer products industries. We also discuss our most recent work on gasoline pricing. Policy-focused research and competition advocacy takes center stage as we discuss some health care advocacy work in the administration of pharmaceutical insurance benefits and efforts to understand the real estate business more completely. Finally, we describe our efforts to quantify the extent of “identity theft”.     

Economics at the FTC: The Google-DoubleClick Merger,Resale Price Maintenance,Mortgage Disclosures,and Credit Scoring in Auto Insurance

Economics at the Federal Trade Commission (FTC) supports both the competition and consumer protection missions of the agency. In this year’s essay we discuss competition activity with a summary of our work on the Google-DoubleClick merger and recent activity on resale price maintenance, an area in which FTC economists had done significant prior research. On the consumer policy front, we discuss our study of ways to improve mortgage disclosures to facilitate consumer shopping and competition. Finally, we discuss our study of the effects of credit scoring on prices paid for auto insurance with a focus on the effects of scores on different racial and ethnic groups.     

Maximizing the adoption of fixed number portability within the EU: An empirical analysis

Number portability (NP) is considered by the European Commission as a key measure for promoting competition within the telecom sector especially regarding network access infrastructure. However, NP requires several modifications to the network architecture and to the business processes of each operator that, depending on network size, may result in a significant financial cost. This is true for fixed networks in particular. Given the requirement for such an investment, National Regulatory Authorities (NRAs) desire a clear picture on what to expect, in terms of progress in access competition, when introducing fixed NP in their respective markets. The paper approaches this question by correlating several fixed telephony market indices related to access competition to the degree of success of fixed NP. Relevant analysis based on European Union member states’ data indicates that fixed NP does not significantly contribute to local loop unbundling (LLU) adoption in markets where there are other access technologies available. In these markets, access competition via these other technologies and fixed NP initially achieve similar penetration rates. Consequently, when access competition exceeds a certain threshold and given a reasonable pricing regime then fixed NP is further boosted to include broadband connections based on several broadband technologies/methodologies such as LLU and cable as well as existing narrowband access technologies (e.g. narrowband cable connections). In markets where LLU is the only alternative for access then the rate of Fixed NP adoption is directly correlated with the success of LLU. Consequently, these conclusions are considered within a high-level stepwise approach for NP implementation, which is based on the experience acquired from the respective Greek national project.     

Walking the tight rope of coopetition: Impact of competition and cooperation intensities and balance on firm innovation performance

This study empirically investigates an important question in the coopetition literature: to what extent does coopetition impact a firm's innovation performance? With a focus on the intensity of competition and intensity of cooperation of a focal firm with its alliance partners, our theory proposes that a moderate level of competition with alliance partners is more beneficial than a very high or a very low level of competition. We further develop the concept of “balance” in coopetition and examine how the interplay of competition and cooperation and the balance between the two matter for innovation performance. Results from our empirical study using data from the semiconductor industry show that competition and cooperation intensities have non-monotonic positive relationship with firm's coopetition-based innovation performance. Further, balanced coopetition (i.e., when competition is moderately high and cooperation is high) has a positive effect on innovation performance. A key contribution of this paper is the conceptualization and empirical demonstration of the effects of various aspects of coopetition such as competition dominant, cooperation dominant, and balanced coopetition on innovation performance.     

Managing tensions in coopetition

Tensions are natural in coopetitive business relationships that simultaneously involve cooperation and competition. The purpose of this study is to investigate how tensions are managed in coopetitive business relationships and examine the potential outcomes of the management of such tensions. The study will focus on various kinds of coopetitive relationships and how the management of the different tensions produces specific outcomes. The empirical study is based on comparative case study research on coopetitive business networks that features two different kinds of cases. The findings of the study contribute to coopetition research by identifying several new perspectives on tensions. Different levels of cooperation and competition in a coopetitive relationship as well as other underlying issues cannot alone determine tensions, but aspects such as the management of tensions are crucial. Most tensions are managed by using styles of competition and avoidance and result in mixed outcomes, which implies both positive and negative perceptions.     

Critical events in time and space when cooperation turns into competition in business relationships

This study aims to improve our understanding of the processes of critical events in time and space that lead from cooperation to competition in dyadic business relationships. Within the business network approach there has recently been a call for research into both time and competition, and research combining both is novel. The study identifies and analyzes critical events in time, their connections with each other and the inner and outer space related to each event. The empirical study is based on four qualitative cases. The findings contribute to existing research by presenting several new perspectives on events and spaces, which improves our understanding of time and process in business networks. Business relationships may evolve from cooperation to competition through chronological events involving information sharing, sales-related and opportunistic activities. In space, these events mostly relate to the focal business relationships, the individual companies and third parties, such as customers.     

Do Edgeworth price cycles lead to higher or lower prices?

A recent literature seeks to understand the causes of the high-frequency, asymmetric retail price cycles observed in many retail gasoline markets. However, much less attention has been given to the effects of the cycles, in particular, whether the cycles lead to higher or lower prices and margins. The leading theory for the underlying cause of the price cycles, Edgeworth price cycles, is silent on the issue. The challenge in addressing this most important question has been the difficulty in isolating cycle effects from other confounding factors, especially market structure. In this article, I exploit a unique natural experiment to isolate the effect of cycles — a refinery fire that, in a matter of days, halted cycles that had previously persisted for decades. I find that Edgeworth price cycles lead to lower prices and lower margins. I conclude with implications for competition policy.