Consumer welfare and GM food labeling: A simulation using an adjusted Kumaraswamy distribution

Genetically modified (GM) food products and their labeling have become a major policy issue with impassioned public debates. We explore the impact of different labeling regimes on consumer attitudes towards GM products and consumer welfare. Our experimental results illustrate that these consumer attitudes do not follow the Uniform distribution as has often been assumed in the literature but instead fit an adjusted Kumaraswamy distribution. If a Uniform distribution is assumed, the advantage of mandatory labeling would be exaggerated. Using an adjusted Kumaraswamy distribution our simulation results demonstrate that voluntary labeling is superior to mandatory labeling with the higher separation cost, while mandatory labeling is not necessarily better with lower separation cost. Therefore, the governments of China and other countries with similar consumer characteristics should consider voluntary labeling for GM food while encouraging innovations that reduce the price of GM food as well as controlling the opportunistic behavior of its producers so as to enhance the advantage of voluntary labeling.     

Strategic planning as a complex and enabling managerial tool

Research summary : The role of the strategic planning process in the ongoing generation of innovative knowledge is vital to the survival and growth of a firm, especially when technologies and market conditions are rapidly changing. We analyze data from a survey of firms in high‐technology industries to determine whether it is possible to break the commonly experienced trade‐off between strategic planning's positive influence on firm profitability and its negative influence on firm innovation. We draw on Adler and Borys's (1996) conceptualization of bureaucratic process types to identify several firm characteristics that have the potential to affect whether employees perceive strategic planning as enabling to their creative endeavors. We find that contingent effects between strategic planning and the identified firm characteristics exist that can break the trade‐off. Managerial summary : A tension exits in the literature about whether strategic planning hurts or helps innovative activity. Our analysis of data from 227 business units in high‐technology industries indicates that strategic planning is a complex process that can be perceived by employees as enabling or coercive. Our results confirm that strategic planning negatively affects innovative activity but positively affects profitability for average firms. We find, however, controllable firm characteristics—risk‐taking and knowledge‐based reward systems—affect the trade‐off. Given the higher levels of risk‐taking and knowledge‐based reward systems, firms can use strategic planning to achieve both high returns on investment and a high level of innovative activity. Copyright © 2015 John Wiley & Sons, Ltd.     

The influence of market structure on technological performance in the food-manufacturing industries

This paper tests the effect of firm and market structure variables on the rate of R&D investment by food processing firms. While the estimated relationship is consistent with the hypotheses of Schumpeter and Galbraith at small firm sizes and small-to-moderale concentration levels, above these critical values expected firm R&D increases at a decreasing rate with firm size and decreases with market concentration. The second part of this paper examines the origins of process patents closely related to six food industries. On average U.S. firms outside the industry, foreign firms, and individuals were each assigned more food-industry patents than were U.S. food processing firm. These findings place the public policy interpretation of observed relationships between market power and firm technological performance into a broader perspective. Even if a reduction in market concentrationn reduced R&D originating within a food industry, this decrease might bede minimus relative to technological changes, originating outside the industry.     

A preliminary comparison of the retail level effects of genetically modified food labelling policies in Canada and France

Most developed countries have adopted labelling policies for genetically modified (GM) food. In April 2004, Canada implemented a voluntary labelling policy for GM and non-GM food, while France adopted the European Union’s new extended mandatory labelling of GM food. I present the result of a qualitative survey of GM and non-GM food labels in supermarkets in Canada and France, five months after the introduction of the new policies. I find that there are almost no GM labelled products in France and non-GM labelled products in Canada. Each policy tends to crowd out the targeted label attribute. However, Canadian consumers can choose between GM and non-GM organic products, whereas there are only non-GM products in French supermarkets. Recent political developments in Quebec suggest that the labelling landscape may change in Canada, either with an increase in the number of non-GM products at the retail level or a transition towards a mandatory labelling policy like in France.     

Product standards and developing country agricultural exports: The case of the European Union

This paper shows that voluntary product standards in EU food and agriculture markets can have significant trade effects. In particular for all countries and for goods that are raw or lightly processed, EU standards can often be trade-inhibiting. However, internationally harmonized EU standards—those that are equivalent to ISO norms—have much weaker trade effects, and in some cases are even trade-promoting. EU standards may have hurt developed countries more than developing countries, but this result is dependent on the sector. At a policy level, the results highlight the importance of dealing with the trade effects of voluntary standards in major markets, not just mandatory public standards.     

Money secrets: How does trade secret legal protection affect firm market value? Evidence from the uniform trade secret act

Research summary : We investigate the impact of trade secret legal protection on firm market value in the context of acquisitions. On one hand, market value may increase because trade secret assets become better protected from rivals. On the other hand, market value may decrease because trade secret protection reduces information about the target and its competitors available to potential buyers, increasing uncertainty about its value. Buyers will discount their offers in expectation of being compensated for riskier deals. Using a sample of private equity investments in the United States, we find that trade secret protection has a positive effect in industries with high mobility of knowledge workers, but a negative effect in industries with (1) high resource–value uncertainty and (2) high poor‐investment risk. Managerial summary : We argue that an increase in trade secret legal protection might not unequivocally benefit firm owners when selling their business. A stronger trade secret protection increases the market value of firms in industries with high workers' mobility, but it decreases the market value of firms in industries with uncertain resource value and/or high risk of poor‐acquisition investments. Based on the contingent effect of trade secret protection, companies may want to adjust their strategic decisions, including where to locate or relocate, based in part on whether they will derive benefits or suffer losses when trade secrets are better protected. Finally, our study should help policymakers understand more fully the economic impact of government policies associated with trade secrets. Copyright © 2016 John Wiley & Sons, Ltd.     

Private incentives for adopting food safety and quality assurance

The competitiveness of food companies in national and international markets depends upon their ability to adopt production processes which meet food safety and quality requirements. Food safety and quality assurance affect the cost of carrying out transactions, and therein lies the private incentive for adopting voluntary quality assurance systems. While quality assurance systems have the potential to reduce transaction costs by serving as the seller's guarantee of safety or quality, they may also serve as trade barriers.     

Rent‐Sharing under Different Bargaining Regimes: Evidence from Linked Employer–Employee Data

Using Belgian linked employer–employee data, we examine how collective bargaining arrangements affect the relationship between firms' profitability and individual wages via rent‐sharing. In industries where agreements are usually renegotiated at firm‐level (‘decentralized industries’) wages and firm‐level profits are positively correlated regardless of the type of collective wage agreement by which the workers are covered (industry or firm). On the other hand, where firm‐level wage renegotiation is less common (‘centralized industries’), wages are only significantly related to firms' profitability for workers covered by a firm‐level collective agreement. Thus, industry‐wide contracts that are not complemented by a firm‐level collective agreement suppress the impact of firm profits on workers' wages in centralized industries.     

Discrimination in Dynamic Procurement Design with Learning-by-doing

We study the long-run impact of procurement discrimination on market structure and future competition in industries where learning-by-doing makes incumbent firms more efficient over time. We consider a sequential procurement design problem in which local and global firms compete for public good provision. Both firms benefit from learning-by-doing if they provide the public good in the previous period, but global firms only may be able to transfer learning-by-doing from different markets. We show that the optimal procurement has to be biased in favor of the local firm even when all firms are symmetric with respect to their initial cost distribution.     

Acquisitions of private vs. public firms: Private information,target selection,and acquirer returns

The acquisition of privately held firms is a prevalent phenomenon that has received little attention in mergers and acquisitions research. In this study, we examine three questions: (1) What drives the acquirer's choice between public and private targets? (2) Do acquisitions of private targets elicit a more positive stock market reaction than acquisitions of public targets, which, on average, destroy value for acquirers' shareholders? (3) Do acquirers gain when their selection of a public or private target fits the theory? In this paper, we argue that the lack of information on private targets limits the breadth of the acquirer's search and increases its risk of not evaluating properly the assets of private targets. At the same time, less information on private targets creates more value‐creating opportunities for exploiting private information, whereas the market of corporate control for public targets already serves as an information‐processing and asset valuation mechanism for all potential bidders. Using an event study and survey data, we find that: (1) acquirers favor private targets in familiar industries and turn to public targets to enter new business domains or industries with a high level of intangible assets; (2) acquirers of private targets perform better than acquirers of public targets on merger announcement, after controlling for endogeneity bias; (3) acquirers of private firms perform better than if they had acquired a public firm, and acquirers of public firms perform better than if they had acquired a private firm. These results support the expectation that acquirer returns from their target choice (private/public) are not universal but depend on the acquirer's type of search and on the merging firms' attributes. Copyright © 2007 John Wiley & Sons, Ltd.     

Whom are you promoting? Positive voluntary public disclosures and executive turnover

Research summary: This paper uses signaling theory to bring together two complementary research streams that have largely ignored each other: strategic human resource management and media relations management. We argue that when publicly traded firms voluntarily and publicly disclose positive information about their value creation and appropriation activities, they also send positive signals to managerial labor markets regarding executives' capabilities. Accordingly, we hypothesize a positive association between public disclosures and voluntary executive turnover. An analysis of pharmaceutical and communications equipment firms from 1990 to 2004 supports this prediction, underscoring the need to understand better the effects of voluntary public disclosures on a firm's ability to protect its human capital. More generally, our results highlight the importance of considering the impact of a single signal on multiple receivers. Managerial summary: Given the organizational benefits of positive media coverage, the considerable effort that firms put into managing their image in the media is not surprising. We argue and show, however, that when a firm enhances its public image it also improves its executives' positions in the managerial labor market and, by so doing, increases their likelihood of voluntarily leaving the firm. In particular, we find that corporate press releases, an important mechanism for managing information released in the public domain to signal a firm's competitive advantages, may result in unintentional loss of senior management talent. This trade‐off suggests that firms should increase coordination between their strategy, human resources, and corporate communications/investor relations departments to ensure that they collectively weigh the benefits and costs of publicly disclosing value‐relevant information. Copyright © 2015 John Wiley & Sons, Ltd.     

Implementing COOL: Comparative welfare effects of different labeling schemes

Country-of-origin labeling (COOL) is being implemented in different forms and degrees in the United States and other countries across the world. The first implementation of mandatory country of origin labeling (MCOOL) in the United States was for seafood in 2005. This is an example of partial MCOOL because it exempts the foodservice sector and excludes processed seafood from labeling. Using a conceptual framework, we analyze the welfare impacts of partial MCOOL when compared to no, voluntary, and total mandatory COOL, taking into account imperfect competition in the downstream markets, information asymmetry, and diversion of low-quality product to the unlabeled market. The model is general enough to apply to any incomplete regulation for which the perceived low-quality product is required to be labeled, such as the labeling of genetically modified food in the European Union. Our results show that when consumers have a strong enough preference for domestic relative to imported product, regulators can overestimate the gain in consumer welfare from partial mandatory labeling if they ignore the diversion of lower quality imports to the unlabeled sector. We show that if the preference for domestic product is large enough, total MCOOL benefits the home market the most overall, including domestic consumers and producers, but not the imperfectly competitive downstream agents. However, if total MCOOL is too costly to implement, partial MCOOL is the second-best solution, but only if consumers falsely believe the unlabeled product to be of higher quality than it truly is. Our results suggest more research is needed to determine the extent to which consumers value the information provided by MCOOL and to enable regulators to consider the welfare impact of diversion in evaluating incomplete mandatory labeling regulations.     

Food risk communication: Some of the problems and issues faced by communicators on the Island of Ireland (IOI)

In this paper we consider the findings of a number of interlinked pieces of research, both qualitative and quantitative, that have investigated aspects of food risk communication on the island of Ireland. These findings are set in the context of international risk communication research. The findings are examined using the three basic elements of a simple communications framework: the message sender; the channel through which the message is communicated and the receiver of the message. The barriers to effective communication are examined and special reference is made to the barriers affecting the communication of domestic food safety risk. Barriers identified include personal, infrastructural and message related factors, such as lack of interest, lack of appropriate facilities and conflicting messages. Based on an evaluation of the views of the scientific community and the public, we make suggestions on how future food safety communications could be tackled to better address the identified barriers. Both suggested long and short term policies are considered in the context of a heterogeneous public and scientific community. Short term suggestions provide an opportunity to address the challenges faced by those who are currently exposing themselves to a high level of domestic food safety risk. The long term suggestions reflect on the underlying barriers impacting on public domestic food safety practices.     

A NEW PERSPECTIVE ON INDUSTRY R&D AND MARKET STRUCTURE*

This paper aims to shed some new insights on the long‐debated and both extensively and intensively explored relationship between market concentration and industry R&D intensity. In order to do so, this study develops, from a classic Dorfman‐Steiner [1954] model of firm R&D, a model of industry R&D, where consumer preference over quality and price, R&D technology, and the joint distribution of firm‐specific technological competence and market share jointly determine the level of industry R&D intensity. The joint distribution term, which reflects both the underlying distribution of firms‐specific technological competence and the strength of its link with market share, suggests that the concentration‐R&D relationship differs depending on the strength of the link or simply the appropriability of R&D in terms of market share: A positive relationship is predicted for low‐appropriability industries, where market concentration supplements low R&D appropriability, while a negative or an inverted U‐shaped relationship for high‐appropriability industries. An empirical analysis of data, disaggregated at the five‐digit SIC level, on R&D and market concentration of Korean manufacturing industries provides supportive evidence for the predictions.     

The clock is ticking! Executive temporal depth,industry velocity,and competitive aggressiveness

We examine how the interplay between executive temporal depth (time horizons that executives consider when contemplating past and future events) and industry velocity (the rate at which new opportunities emerge and disappear in an industry) shapes competitive aggressiveness (a firm's propensity to challenge rivals directly and intensely in order to maintain or improve its market position) and firm performance. Based on panel data (from 1995 to 2000) from 258 firms in 23 industries, we found that executive temporal depth exhibited different patterns of relationships with competitive aggressiveness in low‐ and high‐velocity industries. Moreover, competitive aggressiveness had a positive main effect on firm performance, but this effect was stronger in high‐velocity industries than in low‐velocity industries. Copyright © 2015 John Wiley & Sons, Ltd.     

COMPATIBILITY INCENTIVES OF A LARGE NETWORK FACING MULTIPLE RIVALS*

Under network effects, we analyze when a firm with the largest market share of installed‐base customers prefers incompatibility with smaller rivals that are themselves compatible. With incompatibility, consumers realize that intra‐network competition makes the rivals' network more aggressive than a single‐firm network in adding customers. Consequently, under incompatibility the unique equilibrium can entail tipping away from the largest firm whatever its market share. The largest firm is more likely to prefer incompatibility as its share rises (above fifty per cent is necessary) or the potential to add consumers falls; the number of rivals and strength of network effects have ambiguous implications.     

Vertical integration and innovation

Innovation is a driving force for most industries, where it moreover affects many stages of the vertical chain. We study the impact of vertical integration on innovation in an industry where firms need to undertake risky R&D investments at both production and distribution stages. Vertical integration brings better coordination within the integrated firm, which boosts its investment incentive at both upstream and downstream levels. However, it is only mutually beneficial for firms to integrate when both upstream and downstream innovations are important. When innovation is irrelevant at one level, firms favor instead vertical separation. The analysis provides insights for the wave of mergers and R&D outsourcing observed in the pharmaceutical industry and other vertically related industries.     

Threat of falling high status and corporate bribery: Evidence from the revealed accounting records of two South Korean presidents

Research Summary: Social status and its dynamics may be an important predictor of which firms will engage in large‐scale bribery. Prior theory is incomplete, however, and prior studies have lacked comprehensive and reliable data on firm‐level bribery decisions. We offer a new theoretical prediction and a novel data set on high‐level corruption in South Korea, where the accounting records of two presidents in the 1987–1992 era were exposed to after‐the‐fact legal and public scrutiny. We find that, controlling for a range of alternative explanations, the threat of falling high status—that is, the combination of longstanding high social status with current‐period mediocre economic performance relative to that of industry peers—is a statistically and economically meaningful predictor of increases in the amount of large‐scale corporate bribery. Managerial Summary: What leads companies to engage in large‐scale bribery of senior politicians? Our concept of “threat of falling high status” refers to a circumstance where companies that have historically enjoyed high status through their owner families’ elite marriage networks experience mediocre economic performance relative to their peers. We show that this threat of falling high status is a notable determinant of large‐scale corporate bribery of senior politicians, using court data on corporate bribery of two South Korean presidents during 1987–1992. The implication of our study is twofold. Companies can strengthen internal control systems to avoid any large‐scale illegal activities at a higher level. Law enforcement agencies can also implement targeted monitoring programs to preempt illegal activities among companies facing the threat of falling high status.     

Will they buy it? The potential for marketing organic vegetables in the food vending sector to strengthen vegetable safety: A choice experiment study in three West African cities

Considering the hazardous use of synthetic pesticides in vegetable production in urban West Africa, this research investigated the marketing potential of organic vegetables in the food vending sector of Cotonou (Benin), Accra (Ghana) and Ouagadougou (Burkina Faso). Certified organic production and marketing was examined as a potential strategy to improve chemical food safety. A stratified random sampling strategy was applied to study the preferences of food vendors (n = 180) and consumers (n = 360); vegetable use, risk perception, choice preferences and willingness-to-pay (WTP) for organic certification were specifically analyzed. The results showed that awareness of chemical contamination risks was generally low. Appearance of a product was central to vendor choice; consumers attributed similar utility to taste and organic certification. Consumer WTP was calculated to be a premium of 1.04 USD (per plate) if the food served contained only certified organic vegetables. In restaurants, this would mean an average premium of 19% for a meal. If certified organic vegetable production is to make a positive impact on food safety in urban West Africa, we suggest concentrating marketing efforts on the educated “elite” who frequent restaurants. However, considering that restaurant owners exhibited a lower preference for organic certification than lower class food vendors, the marketing situation is difficult. We therefore conclude that demand from the food vending sector alone will not institutionalize domestic certification mechanisms; this underlines the need for public commitment to facilitating such change.     

The consequences of voluntary traceability system for supply chain relationships. An application of transaction cost economics

This paper analyses the effects of voluntary traceability on vertical relationships within food supply chains using a transaction cost perspective. The analysis makes reference to the Italian situation where the national standard organization has introduced a private standard for traceability that provides a higher degree of information associated with the individual product than the European mandatory traceability system. A survey was conducted by questionnaire to assess changes in transaction characteristics, costs and governance after the introduction of voluntary traceability. The sample represents all Italian firms applying this standard. Factorial and cluster analyses were applied to find the different reorganizations of transactions. The results highlight an increase in asset specificity and a decrease in the uncertainty level throughout the supply chains. The introduction of voluntary traceability shows increased vertical coordination for firms that previously used oral agreements and variation in transactions conditions for firms using contracts. Instead vertically integrated firms do not reveal any variation in the governance of transactions as they are already internally safeguarded.