Complementarity, coordination and compatibility: The role of fixed costs in the economics of systems

We analyze industry equilibrium and incentive to compatibility when goods produced by different producers generate utility only when consumed as component parts of a system. We assume the presence of two systems, each composed of some basic component and a set of differentiated complementary products. The combination of complementarity between the two components of the system and of fixed costs in the production of the complementary product results in a form of network effect. We focus on the role played by the size of the fixed costs in the production of the complementary products in determining the size of this system effect and, by this means, the structure and types of equilibria that may be observed: monopolistic or duopolistic, symmetric or asymmetric. We also highlight the consequence of the same fixed costs for the private and social incentives to render the systems compatible.     

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.     

Impact of telecommuting on mass transit congestion: the Tokyo case

Telecommuting, a dispersed style of commuting enabled by developments in info-communication technology, is becoming increasingly popular among Japanese white-collar employees. According to our estimates, 9–14 million employees will telecommute by 2010, which will result in a 6.9–10.9% reduction in congestion in Tokyo, Japan. Associated cost savings are equivalent to 7.9–26.4% of annual spending on public transportation. Due to the considerable size of these positive external effects, some degree of policy support will be necessary to achieve a socially optimal level of penetration by telecommuting.     

Geographical distance and the role and management of subsidiaries: The case of subsidiaries down-under

Based on a international mail survey covering 169 subsidiaries of MNCs headquartered in the USA, Japan, the UK, Germany, France and the Netherlands, we investigate the impact of geographical distance on the role that subsidiaries play in the MNC network and the way they are managed. To this end, we compare Australian and New Zealand subsidiaries – which provide a significant example of geographically isolation – compared to subsidiaries located in other countries. Referring to the typology constructed by Gupta & Govindarajan (1991), we show that Australian and New Zealand subsidiaries are more likely than subsidiaries in other countries to be Local Innovators rather than Global Innovators. In addition, both intra-company flows and the type of control mechanisms applied by HQ reflect the geographical isolation of Australian and New Zealand subsidiaries. The overall level of capabilities of Australian and New Zealand subsidiaries is equal to that of other subsidiaries, although lower relative capabilities in R{&}D and production seem to be associated with lower levels of local R{&}D and production. We discuss the implications of these findings and provide recommendations for management and competitiveness issues in Australia and New Zealand.     

Firm and destination-specific export costs: The case of the Swedish food sector

This paper focuses on sunk export costs in the Swedish food and beverage sector. Its purpose is threefold. First, it investigates whether the estimation of the importance of sunk costs is sensitive to persistence bilateral (firm-destination) effects such as specific market knowledge compared to firm-specific effects such as managerial skills or product quality. Second, it analyses the effects of firm and market characteristics on firms’ export decisions. Third, it tests whether the importance of sunk costs varies with destination as well as firm characteristics. The main results are: (1) that firm-destination effects are more important than general, unobserved firm characteristics, (2) that more productive and larger firms are more likely to export and that firms’ expectations from exporting increase with market size and exchange rate stability, and (3) that the importance of sunk export costs varies with firm and market characteristics.     

Mode of entry and ex-post performance

In this study I develop and empirically test hypotheses delineating how a set of industry- and firm-level factors are differentially associated with postentry performance of de novo and acquisitive entrants. First, I conceptualize structural entry barriers as sunk costs or irrecoverable investments that entrants must make in the entered industry to be competitive vis-à-vis incumbents. I then argue that de novo and acquisitive entrants differ in three important ways: (1) incremental vs. up-front sunk cost investments in overcoming impediments to entry; (2) increasing productive capacity vs. changing ownership in the entered industry; and (3) low vs. high costs of integration when realizing synergies with parent firms. I use the Trinet, FTC-ALB, and Compustat data bases to construct a sample comprising de novo and acquisitive entries made during the period 1980–82. Next, I evaluate postentry survival and growth between 1982 and 1986. Overall, empirical tests provided partial support for the hypotheses, and the explained variance in my models ranged from 17 percent to 37 percent. © 1998 John Wiley & Sons, Ltd.     

Valorisation of a local asset: The case of olive oil on Lesvos Island,Greece

Agri-food products are more and more considered and treated as valuable local assets. The valorisation of such local assets is an issue of great importance, especially in disadvantaged areas. In this paper, the case of the olive oil of Lesvos Island in Greece is presented. We seek to analyse the supply chain and examine the benefits that are distributed to its various actors by comparing three different olive oil products: PGI, organic and conventional olive oil with the use of two dimensions: size of production and success of the producers. The data come from quantitative and qualitative research to different actors across the supply chain and from published and unpublished local and national sources. The findings indicate that olive farmers are “cut-off” from the benefits of the products to a great extent. Small bottlers are the ones that receive the most benefits, as they can ignore big retailers. Overall, the absence of consensus and common management between the different actors, along with a complex and very competitive international market create uneven impacts.     

Stock market surveillance and market performance: The case of Taiwan

In this paper we investigate the effect of warning announcements on the price behaviour of stocks. We also study the effects of various corrective treatments (trading halts, call trading and 100% payment/delivery with order) on the performance of stocks in the Taiwan stock market. It is found that warning announcements serve to improve the performance of stocks, except in the case of consecutive warnings. Generally speaking, the corrective measures taken after the consecutive warnings are able to reduce the volatility, the abnormal returns and the excess liquidity of the stocks.The authors are Professors from the National Sun Yat-sen University, and the Securities and Exchange Commission respectively.     

The performance implications of resource and pay dispersion: The case of Major League Baseball

Research summary: Building on research in strategic management that has found that high levels of pay dispersion are detrimental to firm performance; we examine the potential dependence of those findings on similar dispersion in the latent potential of those resources to contribute to performance. We find that congruence between resource value dispersion and pay dispersion is positively related to organizational performance. Additionally, we find that this congruence moderates the effects of both organizational resources and organizational pay levels on organizational performance. These findings contribute to a growing line of research that explores the implications of key human resource value and pay combinations for organizational performance. Managerial summary: While differences in income between key employees (i.e., dispersed pay) can instill feelings of inequity and be detrimental to organizational performance, such differences may also increase the odds of attracting star talent and help performance. In the context of Major League Baseball (MLB), we find that performance improves when dispersions in pay are congruent with the dispersion in the contributions that team members make to their organizations. We also find that the positive effects on performance of higher total pay and of level of organizational talent are enhanced by congruent pay and contribution dispersions. These findings suggest organizations may benefit from consistent dispersions in pay and talent and that important contributions by key organizational members need to be visible when organizations have dispersed pay structures. Copyright © 2016 John Wiley & Sons, Ltd.     

Group heterogeneity and cooperation on the geographical indication regulation: The case of the “Prosciutto di Parma” Consortium

This paper explores the impact of individual group members’ heterogeneous characteristics, resources and strategies on their level of cooperation on defining the future regulation of Geographical Indications (GIs). By following a “grounded theory” approach, this study combines qualitative evidence from an in-depth study on the “Prosciutto di Parma” Protected Designation of Origin (PDO) Consortium with quantitative evidence based on data collected from 94 Consortium members and analysed through path modelling. Results confirm that (1) “Prosciutto di Parma” Consortium members have highly and increasingly heterogeneous characteristics, assets and strategies and that (2) higher heterogeneity negatively affects members’ agreement on the future level of restrictiveness of “Prosciutto di Parma” PDO as GI and therefore the effectiveness of the collective action. Overall, these findings give light to another internal barrier that may threaten producers’ opportunity of profiting from the use of established and highly recognized GIs. Managerial and policy implications for both “Prosciutto di Parma” Consortium members and other groups governing established and highly recognized GIs are drawn.     

Innovation, imitation, and new product performance: The case of China

This paper compares the effects of innovation and imitation strategies on new product performance and examines their contingency across different market conditions in China. The empirical results from a cross-industry survey show that, compared with an imitation strategy, an innovation strategy leads to better new product performance. Furthermore, the benefits of an innovation strategy over an imitation strategy become stronger as market demand is increasingly uncertain, technology changes rapidly, and competition intensifies. The author compares the findings with the predictions put forward in previous Western-based literature and discusses the implications of the findings in light of China's unique market characteristics.     

Market structure and performance in intellectual property: The case of copyright collectives

Copyright collectives are associations to whom authors transfer copyrights for purposes of exploitation. These collectives grant licenses for the use of works in their repertory, they negotiate and collect royalties which they distribute to their members and they take legal actions against those who infringe the copyrights to which they hold title. This paper investigates the consequences of the formation of collectives on the number of copyrighted works produced and circulation of these works in the framework of a model of joint production. Welfare issues are also addressed.     

Vertical differentiation via multi-tier geographical indications and the consumer perception of quality: The case of Chianti wines

We derive and estimate a model of demand for Geographical Indications allowing for subjective and heterogeneous quality perceptions, and study vertical differentiation based on multi-tier quality labels within the context of the strategy adopted by the Chianti Consortium. Quality perceptions and wine choices are elicited in an online experiment where the number of quality tiers is augmented incrementally in a between-subject design. The empirical model includes subjective quality perceptions as an (endogenous) explanatory variable, and unexplained heterogeneity in WTP for quality as a random parameter. We find that quality perceptions are endogenous to the labeling regime, and adding a high-quality label (Chianti Classico Gran Selezione) decreases the perceived quality of all other Chianti wines, but not the competitor wines. However, the market shared lost to perception restructuring is small compared to the benefits of increased vertical differentiation.     

Technological capabilities and firm performance: The case of small manufacturing firms in Japan

The purpose of this study is to investigate the relationship between technological capabilities and firm performance. We divide technological capabilities into two types—refinement capability, which involves the improvement of the existing asset portfolio, and reconfiguration capability, which involves the restructuring of the asset portfolio through the integration of new assets. The results of an analysis of a sample of 302 small and medium-sized manufacturing firms in Japan suggest that refinement capability relates more positively to operational efficiency than does reconfiguration capability, and that reconfiguration capability relates more positively to strategic performance than does refinement capability. The results also suggest that firms with superior refinement capability tend to possess superior reconfiguration capability. Our findings show that both external and internal factors, such as technological volatility, inter-firm collaboration, and firm age and size, are significantly associated with the level of refinement and reconfiguration capabilities possessed by a firm.

Managerial ties,firm resources,and performance of cluster firms

Previous research has documented the relationship among managerial ties, firm resources, and performance in emerging economies such as China. While managerial ties may be embedded in a particular location, some of these ties may be non-location-bound. Therefore, for firms located within one geographically concentrated cluster, how do managerial ties and firm resources affect performance? Using data from 163 firms in two Chinese clusters, we demonstrate that managerial ties and firm resources—independently and in combination—help firms improve market performance. Results support the view that both network-centered strategies (utilizing managerial ties) and market-centered strategies (leveraging firm resources) are critical determinants of firm performance.     

Impact of standards adoption on healthcare transaction performance: The case of HIPAA

The Health Insurance Portability and Accountability Act (HIPAA) is a standard for the healthcare industry mandating, in part, use of the EDI X12 protocol set for data exchanges among industry members. The motivation underlying this change was the view that lack of a standard format for healthcare data created significant inefficiencies, resulting in increased costs within the industry. With regulators’ supposition that the standard would improve data exchange performance, we set out to determine the actual performance implications of HIPAA.Using data on transactions occurring over 106 months from 1998 to 2004, we study the impact of the HIPAA standardization requirement on transaction performance in the form of transaction delivery time and transaction quality measured as percentage errors. Performance is expected to deteriorate immediately following HIPAA compliance, due to system disruption, before a longer-term trend toward improved performance. Transaction performance immediately following HIPAA compliance shows deterioration in transaction delivery time, as expected, but a surprising improvement in transaction quality. The longer-term trends associated with HIPAA compliance for both transaction quality and transaction delivery time show that both are trending toward improvement. However, when we compare performance three, six, and 12 months before and after HIPAA compliance, we find that neither delivery time nor quality has improved. The implications for practice and theory are discussed.     

Reducing the level of switching costs in mobile communications: The case of Mobile Number Portability

Switching costs are one of the most important economic forces that affect market competition in mobile communications. Both theoretical and empirical studies have shown that switching costs reduce market competition leading to higher prices, lower product and service quality, and lower customer welfare. Given their negative consequences, national regulatory authorities have designed policies aimed at reducing switching costs and fostering competition. One of the most important of these, in the mobile communications industry, is mobile number portability (MNP). The aim of this paper is to investigate the effect of MNP on switching costs in mobile phone services. First, a hierarchical Bayes model is proposed to measure switching costs at the customer level and to investigate the impact of MNP on them. Second, this study examines the drivers of MNP adoption by customers using a binary logit specification. The results reveal that this regulatory policy has significantly reduced the cost of switching and that MNP adoption partially depends on customer-related variables.     

Why members stay in or leave an R&D consortium: performance and conditions of membership as determinants of continuity

This paper jointly examines performance and conditions surrounding membership as determinants of the decision to stay or leave an R&D consortium. Hypotheses were developed for performance and, by drawing from power dependence and transaction cost theories, for conditions surrounding membership. Analysis of survey questionnaire data from 184 member organizations of U.S.-based R&D consortia indicates that performance and the conditions of knowledge-related involvement, network ties, learning, and alternatives are related to the decision to stay in or leave. These results provide limited support for power dependence but are more consistent with transaction cost theory. Subsequent analyses revealed an interaction between performance and membership conditions, suggesting performance leads to the conditions of membership, and that the continuity decision for a poorly performing consortium differs from that for one performing well. © 1997 John Wiley & Sons, Ltd.