Distance to Customers,Absorptive Capacity,and Innovation in High‐Tech Firms: The Dark Face of Geographical Proximity

This paper investigates the impact of both geographical and relational proximity on the innovative performance of the firm. We address the role of one firm characteristic—its absorptive capacity—as a specific contingency affecting the relationship between different proximities and innovation. Using data from 158 high‐tech firms located in the Tiburtina Valley in Italy, we studied the relationship between these firms and their key customers. Our findings support the need to downplay the role of geographical proximity in promoting innovation. Our results also show that relational proximity to key customers has a complementary relationship with absorptive capacity, which positively moderates its influence on innovative performance.     

Barriers to technological adoption in Spain and Portugal

Since 1945, both Spain and Portugal have experienced significant market transformations. These countries were both led by dictators for many years until the mid 1970s when each moved toward more democratic governments and more open markets. As a result, each experienced significant changes in output with Spain’s becoming a model for proper market based transformations. Although Portugal’s transformation has been less impressive it experienced improvements too. This paper uses a Parente and Prescott (J Polit Econ 102(2), 298–321, 1994; 2000) type model to investigate the recent transformations in each of these countries and quantify the extent to which barriers to technological adoption may have played for these two development experiences. Our results indicate that from 1945 to 2003 these barriers have fallen considerably but remain high, and are somewhat higher in Portugal than in Spain.     

INEQUALITY AND HAPPINESS

In recent years there has been an accumulation of empirical evidence suggesting that individuals dislike inequality. The literature has built upon estimating the degree of this dislike as well as its causes. The use of self‐reported measures of satisfaction or well‐being as a proxy for utility has been one of the empirical strategies used to this end. In this survey, we review the papers that estimate or examine the relationship between inequality and self‐reported happiness to conclude that inequality correlates negatively with happiness in Western societies. Some of the surveyed papers identify particular sources of heterogeneity on preferences over inequality. The evidence for non‐Western societies is more mixed and less reliable. Notwithstanding that, trust in the institutions seems to play an important role in shaping the relationship between income inequality and subjective well‐being. We conclude with suggestions for further research.     

Loving Outside the Neighborhood: The Conflicting Effects of External Linkages on Incremental Innovation in Clusters

The present study assesses the explanatory capacity of three levels of factors, namely, internal to the company, and internal and external to the cluster, in predicting firms' incremental innovative performance in cluster contexts. The empirical research conducted here focuses on a sample of 92 companies from the Spanish textile industrial cluster in Valencia. Findings reveal that the significant role played by firms' interorganizational ties as a moderating factor between absorptive capacity and their incremental innovative performance. Additionally, results reflect the differentiated roles developed by intra‐ and extra‐cluster linkages in these interaction processes.     

ENERGY EFFICIENCY: ECONOMICS AND POLICY

Abstract Energy efficiency and conservation are major factors in the reduction of the environmental impact of the energy sector, particularly with regard to climate change. Energy efficiency also contributes to reducing external dependence and vulnerabilities in the energy domain. In this paper, we discuss the factors that influence energy efficiency and conservation decisions, and the most appropriate policies for their promotion. Although not all public policies seem justified, we argue that specific policies for promoting energy conservation may be required, preferably based on economic instruments or on the provision of information to consumers.     

Price competition under universal service obligations

In industries like telecom, postal services or energy provision, universal service obligations (uniform price and universal coverage) are often imposed on one market participant. Universal service obligations are likely to alter firms' strategic behavior in such competitive markets. In the present paper, we show that, depending on the entrant's market coverage and the degree of product differentiation, the Nash equilibrium in prices involves either pure or mixed strategies. We show that the pure strategy market sharing equilibrium, as identified by Valletti, Hoernig, and Barros (2002), defines a lower bound on the level of equilibrium prices.     

Your loyalty program is betraying you

Even as loyalty programs are launched left and right, many are being scuttled. How can that be? These days, everyone knows that an old customer retained is worth more than a new customer won. What is so hard about making a simple loyalty program work? Quite a lot, the authors say. The biggest challenges include clarifying business goals, engineering the reward structure, and creating incentives powerful enough to change buying behavior but not so generous that they erode margins. Additionally, companies have to sort out the puzzles of consumer psychology, which can result, for example, in two rewards of equal economic value inspiring very different levels of purchasing. In their research, the authors have discovered patterns in what the successful loyalty programs get right and in how the others fail. Together, their findings constitute a tool kit for designing something rare indeed: a program that won't do you wrong. To begin with, it's important to know exactly what a loyalty program can do. It can keep customers from defecting, induce them to consolidate certain purchases with one seller (in other words, win a greater share of wallet), prompt customers to make additional purchases, yield insight into their behavior and preferences, and turn a profit. A program can meet these objectives in several ways--for instance, by offering rewards (points, say, or frequent-flier miles) divisible enough to provide many redemption opportunities but not so divisible that they fail to lock in customers. Companies striving to generate customer loyalty should avoid five common mistakes: Don't create a new commodity, which can result in price wars and other tit-for-tat competitive moves; don't cater to the disloyal by making rewards easy for just anyone to reap; don't reward purchasing volume over profitability; don't give away the store; and, finally, don't promise what can't be delivered.     

A new instrumental method for dealing with endogenous selection

This paper develops a new method for dealing with endogenous selection. The usual instrumental strategy based on the independence between the outcome and the instrument is likely to fail when selection is directly driven by the dependent variable. Instead, we suggest to rely on the independence between the instrument and the selection variable, conditional on the outcome. This approach may be particularly suitable for nonignorable nonresponse, binary models with missing covariates or Roy models with an unobserved sector. The nonparametric identification of the joint distribution of the variables is obtained under a completeness assumption, which has been used recently in several nonparametric instrumental problems. Even if the conditional independence between the instrument and the selection variable fails to hold, the approach provides sharp bounds on parameters of interest under weaker monotonicity conditions. Apart from identification, nonparametric and parametric estimations are also considered. Finally, the method is applied to estimate the effect of grade retention in French primary schools.     

Airline consolidation and the distribution of traffic between primary and secondary hubs

Several airline consolidation events have recently been completed both in Europe and in the United States. The model we develop considers two airlines operating hub-and-spoke networks, using different hubs to connect the same spoke airports. We assume the airlines to be vertically differentiated, which allows us to distinguish between primary and secondary hubs. We conclude that this differentiation in air services becomes more accentuated after consolidation, with an increased number of flights being channeled through the primary hub. However, congestion can act as a brake on the concentration of flight frequency in the primary hub following consolidation. Our empirical application involves an analysis of Delta's network following its merger with Northwest. We find evidence consistent with an increase in the importance of Delta's primary hubs at the expense of its secondary airports. We also find some evidence suggesting that the carrier chooses to divert traffic away from those hub airports that were more prone to delays prior to the merger, in particular New York's JFK airport.     

Household internal and external electricity contract switching in EU countries

Using a representative sample of more than 13,000 households from eight countries in the European Union (EU), this article empirically studies the factors related to household electricity contract switching by distinguishing between internal switchers (households that switched contracts but stayed with the same supplier) from external switchers (households that switched to a new supplier). The econometric analysis includes individual preferences, household structural factors and socio-demographic characteristics, as well as electricity market characteristics. The study explicitly explores the role of risk and time preferences on switching behaviours, with risk and time preferences elicited through incentivized experiments as well as self-assessment scales. The main results suggest that internal and external switching are not related to the same factors, that risk and time preferences affect switching behaviours, and that renters are less likely to switch than homeowners; further, electricity market characteristics are found to affect household electricity contract switching.