Resource‐seeking agglomeration: a study of market entry in the lodging industry

We analyze whether firms prefer collocating with incumbent firms when choosing among markets to enter, highlighting the role of resource‐seeking as a motivation for collocation. We propose that entrants will locate near others possessing resources that can spill over, but will avoid locations where existing firms will exploit spillovers without contributing. To test these propositions, we analyze the location decisions of 570 new hotels in Texas between 1992 and 2000. We find that hotels are attracted to markets with branded upscale hotels. Further, we find that owners of upscale hotels avoid markets with hotels without similar resources. Copyright © 2004 John Wiley & Sons, Ltd.     

Can mergers increase output? Evidence from the lodging industry

We find that hotel mergers increase occupancy. In some specifications, price also rises. Because these effects occur only in markets with high capacity utilization and high uncertainty, we reject simple models of price or quantity competition in favor of models of “revenue management,” where firms price to fill available capacity in the face of uncertain demand.     

When do female-owned businesses out-survive male-owned businesses? A disaggregated approach by industry and geography

Studies have invoked several theoretical perspectives to explain differences between female-owned businesses and male-owned businesses. Yet, few have considered the possibility that differential outcomes between female-owned businesses and male-owned businesses vary from setting to setting, an insight that we derive by combining social constructionism with feminist theory. We articulate hypotheses regarding the outcome of business survival duration based on this insight. Then, using a dataset of one million Texan proprietorships, we test these hypotheses by estimating separate gender effects for many individual industries and geographic areas. We find that female-owned businesses consistently out-survive male-owned businesses in many industries and areas.     

Hamburger Prices and Spatial Econometrics

This paper applies spatial econometrics to hamburger price data to assess the degree of substitutability of products and locations of spatially dispersed franchised chains. First, while intrachain price variation exists, I find that hamburger prices at neighboring outlets of different chains are spatially uncorrelated. I conclude that their products are not close substitutes, which provides an explanation for why price promotions have not raised market share. I do find spatial price correlation, however, among proximate outlets of separate franchisees within the same chain. This finding implies that customers view proximate locations of a chain as substitutes.     

Multicollinearity: How common factors cause Type 1 errors in multivariate regression

Research Summary : In multivariate regression analyses of correlated variables, we sometimes observe pairs of estimated beta coefficients large in absolute magnitude and opposite in sign. T‐statistics are also large, suggesting meaningful findings. I found 64 recently published Strategic Management Journal articles with results exhibiting these characteristics. In this article, I demonstrate that such results may be Type 1 errors (false positives): If regressors are correlated via an unobservable common factor, estimated beta coefficients will misleadingly tend toward infinite magnitudes in opposite directions, even if the variables’ real effects are small and of the same sign. Diagnostics such as Variance Inflation Factors (VIF) will misleadingly validate Type 1 errors as legitimate results. After establishing general results via mathematical analysis and simulation, I provide guidelines for detection and mitigation. Managerial Summary : This article demonstrates mathematically how regression analyses with correlated independent variables may generate beta coefficients of opposite sign to the variables’ true effects. To assess the likelihood of this possibility, I propose that: if (a) absolute correlation of two independent variables is about ±0.3 or more (smaller correlations may be problematic for large data sets), (b) the two variables have beta coefficients of opposite sign, if correlated positively, and of the same sign, if correlated negatively, and (c) the bivariate correlation of one independent variable with the dependent variable is of the opposite sign from the beta coefficient, then the beta might be a false positive. To facilitate such analysis, authors should provide complete correlation tables, including dependent variables, interaction terms, and quadratic terms.     

Agglomeration effects and performance: a test of the Texas lodging industry

While competition decreases rents for firms, the presence of competitors may create benefits. Competitors that agglomerate, that are physically proximate, may create externalities—production efficiencies or heightened demand that increases rents. When such externalities exist, then who gains from and who contributes to them? We examine how other competitors' traits affect performance in Texas's lodging industry. In rural markets, we find that chain hotels and larger hotels contribute to positive externalities. While expecting those hotels similar to the establishments creating these externalities to gain, we find the opposite. Independent hotels and smaller hotels gain the most. Interestingly, some establishments are harmed. Copyright © 2001 John Wiley & Sons, Ltd.     

Overestimation and Venture Survival: An Empirical Analysis of Development Commitments in International Master Franchising Ventures

Many international master franchising contracts include "development commitments," clauses specifying a number of units that master franchisees must develop in exchange for exclusive rights to an assigned market, typically their entire home nation. I analyze 142 contracts with development commitments signed by US fast food franchisors and their master franchisees. Several empirical regularities emerge from the analysis: First, the development commitments are large and rarely completely fulfilled. Second, a robust negative relationship exists between survival and development commitment size. Further, ventures with larger commitments exhibit a lower level of investment still productive at the end of the development period. Various explanations for these regularities are considered.     

Relationships and Hybrid Contracts: An Analysis of Contract Choice in Information Technology

Selecting the type of contract is an important aspect of governinginterfirm transactions. The purpose of this article is to examinethe use of fixed-fee and time-and-materials (T&M, or cost-plus)contracts and a hybrid contract that consists of a T&M contractwith a cap. In addition to uncertainty and measurement factors,we also address a relatively unexplored aspect of contracting—howthe prior relationship between the firms influences the typeof contract the firms select. Using data on 394 contracts fromthe information technology (IT) services industry, we show thatT&M contracts are preferred when the cost of measuring qualityex post is high and when it is difficult to estimate costs exante. We also find site-specific measures of relationship leadto a preference for low-powered T&M contracts.