Economies of Scope and Density in the Market for Real Estate Brokerage Services

Using a multiproduct translog cost function, this paper examines the case for economies of scope and density in the market for residential real estate brokerage services. Earlier research that treated output as a homogeneous commodity reported modest economies of scale for this industry. The results of this study suggest that the composition of output is an important source of these scale economies, rather than simply the size of the firm. The economies of scope which we find imply that a balanced mix of listing and sales is the least costly type of operation, a result borne out by the product mix found in our sample. The results also show product-specific diseconomies of scale, suggesting that specialization in either listing or sales may be sub-optimal under the current institutional arrangements present in the market. Finally, market density appears to be, at best, only a nominal source of savings for real estate brokerage firms.     

The economic dynamics of work

Only by developing management systems based on appropriate standards can a business successfully learn how to improve the technology of work. As a result, a new economics of work is created where the evolution of large organizations makes economic sense. But economies of scale no longer require rigid mass production of a limited product line. Flexibility can be introduced to produce product diversity without losing the efficiencies of standardization. Thus manufacturing can operate more flexibly like a service by learning to apply industrial robots and other smart machines. Service businesses can also learn how to manage more systematically by designing standard menus of operations.     

中国商业银行规模经济与范围经济的实证分析

本文通过对中国商业银行1996年到2001年的经营情况进行实证分析，估算出各家银行的规模经济系数和范围经济系数，发现大部分商业银行规模不经济而范围经济，规模不经济的程度与银行资产规模呈正相关关系，股份制商业银行的范围经济系数高于国有商业银行的范围经济系数，范围经济与银行资产规模没有必然的联系。在此基础上，本文提出了相应的政策主张。     

Determinants of Hazard Confronting New Entry: Does Financial Structure Matter?

This paper attempts to identify the determinants ofhazard confronting 219 new manufacturing firmsestablished in 1982–84 and followed up to1992 using a Cox regression model. Three sets ofvariables are combined in the analysis: firm, sectorand cohort specific. Financial, firm specificcharacteristics such as larger initial financialcapital size, conservative borrowing, heavier fixedasset commitment and lower diversification in terms ofholding other firms' assets are estimated to reducefirm hazard. Higher sectoral entry and lower sunk costsectoral requirements by increasing marketcontestability increase risk of failure together withcyclical variations.     

Inter‐temporal economies of scope,organizational modularity,and the dynamics of diversification

The question of whether corporations add value beyond that created by individual businesses has engendered much debate in recent years. Some of this debate has focused on the pros and cons of related vs. unrelated diversification. A standard explanation of the benefits of related diversification has to do with the ability to obtain intra‐temporal economies of scope from contemporaneous sharing of resources by related businesses within the firm. In contrast, this paper deals with inter‐temporal economies of scope that firms achieve by redeploying resources and capabilities between related businesses over time, as firms exit some markets while entering others. The transfer of resources due to market exit distinguishes our treatment of inter‐temporal economies of scope from standard intra‐temporal economies of scope. In addition, these inter‐temporal economies can benefit from a decentralized and modular organizational structure. This ability to obtain inter‐temporal economies of scope via organizational modularity and recombination suggests that corporations do not necessarily need a high degree of coordination between business units in order to benefit from a strategy of related diversification. Copyright © 2004 John Wiley & Sons, Ltd.     

A Sensitivity Analysis of IRR Leasing Models

In this article we argue that advances made in automation, communication, and manufacturing portend a dramatic reversal of the “bigger is better” approach to cost reductions prevalent in many basic infrastructure industries; for example, transportation, electric power generation, and raw material processing. We show that the traditional reductions in capital costs achieved by scaling up in size are generally matched by learning effects in the mass production process when scaling up in numbers instead. In addition, using the U.S. electricity generation sector as a case study, we argue that the primary operating cost advantage of large unit scale is reduced labor, which can be eliminated by employing low-cost automation technologies. Finally, we argue that locational, operational, and financial flexibilities that accompany smaller unit scale can reduce investment and operating costs even further. All of these factors combined imply that with current technology, economies of numbers may well dominate economies of unit scale. Yet realizing the full potential of small unit scale will require technologists and business leaders to develop a new ability to “think small.”     

The trade-off between production and transportation costs in determining optimal plant size

An important element of manufacturing strategy is to decide on the shipping radius and the size of a geographically focused plant. This decision involves a trade-off between exploiting economies of scale in production by building a large plant and decreasing transportation costs by building a small plant. The paper presents a model for analysing this trade-off. It is shown that scale economies in transportation facilitate the exploitation of production economies of scale. For an optimal sized plant, the ratio of transportation to production costs does not depend on the absolute cost levels in production and transportation, but only the economies of scale present in production and in transportation.     

Development of Trust: A Study of Interfirm Relationships in Vietnam

The radical political and economic reforms sweeping through former socialist countries during the last decade have opened rich opportunities for privately owned businesses to emerge and develop. Since the market institutions and infrastructures in these countries are largely underdeveloped, private firms in transition economies rely extensively on interfirm partnerships. This raises the question of how—in the absence of institutions that legitimate markets, contracts, and private property—managers of new business ventures develop new relationships. This paper addresses this issue through analysis of multiple subcontracting relationships formed at a private garment company in Vietnam. This analysis suggests that firms in transition economies develop interfirm trust in ways that are quite different from their counterparts in more highly developed economies.     

R&D,Firm Size and Innovation Outputs: Are Japanese Firms Efficient in Product Development?

Although Japanese firms in various industries enjoyed outstanding success during the 1980s, the recent economic news has been less favorable. Like their American counterparts, Japanese managers have faced difficult decisions regarding plant closures, layoffs, and moving production facilities overseas. Many Japanese business leaders attribute the innovation successes of the 1980s, at least in part, to economies of scale resulting from increases infirm size. If this assertion holds true, the current economic climate in Japan seems certain to result in diminished economies of scale for innovative activities. Ryuhei Wakasugi and Fumihiko Koyata test this assertion in a statistical study of the innovation efficiency of Japanese electrical machinery firms. In other words, their study explores whether the hypothesized economies of scale apply to the innovation inputs and outputs of these firms. They examine the manner in which R&D expenditures, patent applications, and product developments relate to the size of Japanese electrical machinery firms during the late 1980s and early 1990s—a period marked by high levels of innovative activity among these firms. For the Japanese electrical firms in this study, innovation inputs that is, R&D expenditures—increase in greater proportion than firm size. In other words, the larger firms in this study pursued their innovation efforts more aggressively than did the smaller firms in the study. In terms of R&D expenditures, however, the study does not reveal any resulting economies of scale for either patent applications or product developments. Similarly, analysis of the data in this study does not identify any economics of scale for product developments as a result of increases in firm size. In fact, the only economies of scale identified in the study involve firm size and the number of patent applications. In general terms, the statistical evidence in this study does not support the hypothesis that an increase in firm size improves the efficiency of innovation activity. To put this another way, the study does not provide evidence to support the hypothesis of economies of scale in product development.     

Deregulation without apology: A truncated survivor analysis of long-run efficiency gains in the U.S. trucking industry

Deregulation of the U.S. trucking industry is found to have promoted long-run technical efficiency among less-than-truckload carriers of general commodity freight. It did so by exposing all carriers to competition which caused the very largest group, hauling more than five billion ton-miles annually, to lose output share to smaller carrier groups. Their inability to survive in-full implies that efficiency gains were achieved by reducing the extent of operation under decreasing returns to scale. This conclusion conflicts with other recent findings that deregulation promoted long-run efficiency by creating new ways for all carriers, even the very largest, to achieve economies of scale. The discrepancy in conclusions is significant in that previous findings of continuous scale economies, post-deregulation, leave open the possibility of rising industry concentration with all due repercussions on consumer welfare. A more encouraging outlook emerges from the present survivor analysis which finds the minimum efficient size to be below one billion ton-miles annually. This finding strongly supports a prediction of vigorous competition in the future, at least for this one segment of the trucking industry.This study was funded by a Faculty Summer Research Grant from Villanova University. The author acknowledges and appreciates the Office of Research and Sponsored Projects at Villanova for its support.     

The propensity to exit and innovation

In offering an answer to the question, “Who exits and why?”, I introduce a model relating the decision to remain in, or exit from an industry, to conditions of demand and the underlying technology. In particular, I argue that two elements of technology are important — the role of scale economies in an industry and the extent to which the underlying technological information conditions can be characterized by either an entrepreneurial or a routinized regime. Based on the evidence from over 300 U.S. manufacturing industries, I conclude that the process of firm selection and industry evolution tends to conform either to the model of the revolving door, where the bulk of exiting businesses are new entrants, or else the metaphor of the forest, where incumbent establishments tend to be displaced by new entrants.     

Does Microelectronics Reduce Economies of Scale? A Case Study in the Turkish Chemical Industry

This paper delves into the question of how new technologies affect economies of scale at the empirical level. As theoretical studies are inconclusive, we introduce a case study in the Turkish chemical industry to observe the dynamics of the relationship between technology and economies of scale. By observing the changes in the sources of economies of scale, output and unit costs in our case study firms, we showed that while economies of product scale stayed stable, both economies of plant and firm scales increased in the chemical industry.     

Explaining Location Patterns of Suburban Offices

Suburban office markets exhibit a pattern of variegated clustering that is little explained by the conventional theories of urban form based on agglomeration effects and the cost of distance. To explain the pattern, this paper introduces industry economies of scale for "Class A" offices. Empirical tests for industry economies of scale are reported, based on data from the office market of Houston, Texas. The models presented, under conditions typical of North American cities in recent decades, imply the patterns of variegated clustering that are observed. They suggest a sequence of clusters, increasing in size and distance from the central business district. Further, they imply the potential for mass movement by tenants from older clusters to new.     

The power of the vegetable patch: How home-grown food helps large rural households achieve economies of scale & escape poverty

This paper explores how the household’s capacity to grow food impacts their ability to achieve economies of scale in food consumption and how this impacts the geographic distribution of poverty across rural and urban areas. An accurate understanding of consumption economies of scale is vital for comparing poverty levels across households of varying size. Using Sri Lankan data on home-grown food consumption, we empirically confirm that such economies of scale exist and that large households tend to consume relatively more home-grown food than smaller households. The magnitude of these scale economies are found to be larger than those in market purchased food, but smaller than those found in housing expenditure. Consuming more home-grown food is also found to be positively correlated with per-capita calories consumed. Taking these effects into account in poverty estimates leads to a 15 per cent decline in the number of household who fall below the poverty line in rural regions.     

Product Development for the BoP: Insights on Concept and Prototype Development from University‐Based Student Projects in India

In recent years, market‐based approaches have been proposed for the base of the pyramid (BoP). However, the literature offers little theoretical or practical guidelines for innovative product development for what are radically new market contexts for most businesses in advanced economies. Considering that product development is a fundamental activity in a market economy, and that much BoP consumer welfare potentially arises from innovative and affordable goods and services that can solve critical life needs, this is a substantial gap in knowledge. This paper attempts to address this gap by using an analysis of 13 year‐long university projects on BoP‐focused concept and prototype development conducted between 2006 and 2010. An inventory of research propositions is developed that identifies factors necessary for effective product development for BoP markets. Implications for new product development research and practice are discussed.     

Asset divestiture following horizontal acquisitions: a dynamic view

Business acquisition, resource redeployment, and asset divestiture are elements of a dynamic process in which firms change their businesses by recombining internal and external resources. Analyzing 253 horizontal acquisitions, we show that post‐acquisition resource redeployment leads to asset divestiture from the business that receives the redeployed resources, but not from the business that contributes the new resources. Consistent with scale economies rationales, we find that strategic similarity also leads to greater asset divestiture from the target firms. Many theoretical perspectives are skeptical about the positive rationale for acquisitions and many of these believe that asset divestiture is evidence of acquisition failure. Our arguments and analysis help refine the accepted wisdom. In particular, the pattern of resource redeployment and asset divestiture in our analysis suggests that acquisitions provide a means of reconfiguring the structure of resources within firms and that asset divestiture is a logical consequence of this reconfiguration process. Copyright © 2001 John Wiley & Sons, Ltd.     

Real Estate and Economies of Scale: The Case of REITs

Building on past research in the economies-of-scale debate, we test for scale economies in real estate investment trusts (REITs) by examining growth prospects, revenue and expense measures, profitability ratios, systematic risk and capital costs. Overall, we find that large REITs are increasing growth prospects while succeeding at lowering costs, leading to a direct relationship between firm profitability and firm size. Additionally, we find an inverse relationship between equity betas and firm size, and for all cost of capital measures we find significant scale economies. Further evidence from the stochastic frontier analysis suggests efficiency opportunities appear possible through continued growth and consolidation in REITs.     

Optimal Size in the Waste Collection Sector

The purpose of this study is to analyze the cost structure of a sample of Italian wastecollection firms in order to assess economies of scale and density and, therefore, definethe optimal size of the firms. A total and a variable translog cost function were estimated using panel data for a sample of 30 firms operating at the provincial level over the period 1991–1995.The empirical evidence suggests that franchised monopoly, rather than side-by-sidecompetition, is the most efficient form of production organization in the waste collection industry. Further, the majority of firms are not operating at optimal scale.     

A Model for the Development of Small High-Technology Businesses Based on Case Studies from an Incubator

Alf Scherer and D. W. McDonald examine several emerging companies that are currently being assisted by an incubator for small, technology-based businesses. The case studies illustrate how the short- and long-term responses to new technical and market opportunities need to be clearly separated and prioritized. A common failing observed is the underestimation of the time and resources required to successfully commercialize the first product before moving on to the development of second-generation products. A multistep process model of business and product development was found to be a useful tool in diagnosing the status of the start-up companies, as well as identifying future decision points and alternative courses of action.     

企业规模、规模经济与产业集群

企业规模问题一直存在着截然相反的观点和主张,造成冲突的原因在于“企业规模”是一个各取所需的含混的概念。具有经济学意义的企业规模应该从两个相互正交的维度上———企业的横向规模和纵向规模———来度量。规模经济来自于横向规模的扩张,而纵向规模的扩张可能会带来规模不经济。产业集群是观察企业横向、纵向规模一个好的样本。区分企业规模的不同性质,将会使与规模经济相关的理论研究出现明晰的路径。