Integrating the resource-based view and transaction cost economics in immigrant business performance

This paper presents a new integrated framework that integrates the resource-based view and transaction cost economics to explain the phenomenon of immigrant entrepreneurship. We extend the existing literature on immigrant entrepreneurship by identifying different types of ethnic network resources and demonstrating how these resources interact with transaction costs in the context of Chinese immigrants. Thus, our study contributes to the literature by providing a theoretical framework which identifies mechanisms immigrant entrepreneurs use to strategically deploy resources to minimize costs and maximize performance outcomes.     

Selling cross-border in online markets: The impact of the ban on geoblocking strategies

We develop a model of strategic geoblocking, where two competing multi-channel retailers, located in different countries, can decide to block access to their online store from foreign consumers. We characterize the equilibrium when firms decide unilaterally whether to introduce geoblocking restrictions. We show that geoblocking allows firms to soften competition, but at the cost of lower demand. A ban on geoblocking leads to lower prices, both offline and online. However, when firms can invest in increasing online demand, the ban may have adverse effects on investment and social welfare. We extend our analysis to account for price discrimination and investigate the role of shipping costs.     

Price Discrimination with Demarketing

We study how demarketing interacts with pricing decisions to explain why and when it can be employed as the seller's optimal strategy. In our model, a monopolistic seller offers different price‐quality bundles of the product. A consumer's preference is private information. With demarketing, consumers must make a costly effort to purchase and/or utilize the product, whereas with marketing, the seller instead makes the effort so that the consumer's purchasing decision is independent of the cost of effort. Our result suggests that, for small or large effort costs, it is optimal for the seller to engage in marketing. For intermediate effort costs, however, demarketing can be optimal. With demarketing, the seller induces only the consumers with high valuation to make transaction effort. By doing so, the seller can price discriminate more effectively, thus extracting more surplus. We extend our analysis to the case where the seller can offer special deals through exclusive sales channels along with demarketing. Then, demarketing can be optimal even for large costs of effort.     

Search and price dispersion in online grocery markets

Consumers often purchase multiple products at a time from retailers, creating multi-product incentives for search. In this paper we consider how product variety affects consumer search intensity and the dispersion of prices in multi-product retail markets. We employ online grocery pricing data from four large retailers in the UK to estimate search costs and equilibrium price dispersion for food products under circumstances where: (i) consumers search for single products; and (ii) consumers search for multiple products at once. We compare estimates in each case between a model in which utility increases with product variety and a model in which utility is not a function of variety. Relative to our preferred specification with variety effects in utility, we find estimates of both search cost and search frequency to be biased upwards in single product settings when variety effects are ignored; however, we find estimates of search costs are biased upwards while search frequency is biased downwards in multi-product settings when variety effects in utility are ignored.     

User Cost and the Demand for Housing Attributes

A number of studies have related changes in the demand for housing to changes in user cost. All have treated housing as a composite good rather than as a bundle of characteristics. We consider the effect of changing user cost on the demand for the component characteristics of owner-occupied housing, and, given information about the supply of the characteristics, we predict implicit price responses. An empirical test of our model indicates that reductions in user cost result in higher real prices for the non-replicable attributes of housing, examples being location and access to fixed amenities. In contrast, the price of attributes that are perfectly elastic in supply are not affected by changes in user costs. We conclude that the effects of changing user cost are not uniform across housing types and locations, thus generating the appearance of housing submarkets.     

A Review of: “UNCERTAINTY AND ITS EFFECT ON CAPITAL INVESTMENT ANALYSIS,” by Martin B. Solomon,Jr. Management Science,Volume 12, No. 8, April 1966

In this paper we extend Thompson's [17] work using time series models within the discounted cash flow framework to estimate the cost of equity capita] for a firm. In particular we do the following: First, we prove the existence and uniqueness of a solution for the cost of equity capital. Secondly, we verify that the cost of equity function is continuously differentiable and derive the formula for its reliability. Formulas for both the cost and its reliability are in terms of infinite sums or infinite dimension matrices. Thirdly, we derive estimators of the cost of equity capital and its reliability which are in terms of finite sums and easy to calculate. We show that these estimated converge to the cost of equity capital and its reliability. Finally, our procedure for estimation applies to a wide variety of time series models that may be used to forecast dividends.     

Search Costs and Investment in Quality

In this paper we analyze how lower search costs affect firms' incentives to invest in quality. We identify two conflicting effects. On the one hand, lower search costs increase incentives to invest in quality by eroding the market share of low quality firms and increasing the market share of high quality firms. On the other hand, by intensifying price competition, lower search costs adversely affect high quality firms more than low quality firms. The net effect of a change in the search cost on quality is shown to depend on the initial quality distribution. There is a critical value such that, if the proportion of high quality firms is initially below this value, lower search costs increase this proportion, whereas if the initial quality is above this value, lower search cost decreases the proportion of high quality firms. We show that our results are consistent with a ‘superstar effect.’     

ENDOGENOUS COSTS AND PRICE‐COST MARGINS: AN APPLICATION TO THE EUROPEAN AIRLINE INDUSTRY*

This paper allows for endogenous costs in the estimation of price cost margins. In particular, we estimate price‐cost margins when firms bargain over wages. We extent the standard two‐equation set‐up (demand and first‐order condition in the product market) to include a third equation, which is derived from bargaining over wages. In this way, price‐cost margins are determined by wages and vice versa. We implement the model using data for eight European airlines from 1976–1994, and show that the treatment of endogenous costs has important implications for the measurement of price‐cost margins and the assessment of market power. Our main result is that observed prices in Europe are virtually identical to monopoly prices, even though observed margins are consistent with Nash behavior. Apparently, costs had been inflated to the point that the European consumers were faced with a de facto monopoly prices.     

Market failures and the additionality effects of public support to private R&D: Theory and empirical implications

We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D cost and a cost of external finance. We derive the optimal support rule. At the intensive (extensive) margin the costs of external funding reduce (increase) the optimal subsidy rate. We also establish necessary and sufficient conditions for the existence of additionality. It turns out that additionality at the intensive margin is less likely with higher spillovers. Our results suggest that the relationship between additionality and welfare may not be straightforward.     

ENTRY AND COMPETITION IN LOCAL HOSPITAL MARKETS*

We extend the entry model developed by Bresnahan and Reiss to make use of quantity information, and apply it to data on the U.S. hospital industry. The Bresnahan and Reiss model infers changes in the toughness of competition from entry threshold ratios. Entry threshold ratios, however, identify the product of changes in the toughness of competition and changes in fixed costs. By using quantity data, we are able to identify separately changes in the toughness of competition from changes in fixed costs. This model is generally applicable to industries where there are good data on market structure and quantity, but not on prices, as for example in the quinquennial U.S. Economic Census. In the hospital markets we examine, entry leads to a quick convergence to competitive conduct. Entry reduces variable profits and increases quantity. Most of the effects of entry come from having a second and a third firm enter the market.     

On risk and cost in global sourcing

The benefits of global sourcing as part of a firm’s purchasing strategy have been widely discussed in the academic literature, yet so there are few models that provide a comprehensive risk and cost assessment to guide managerial decision-making. In particular, few models capture the dynamic nature of many cost drivers, such as transportation and energy cost, labour cost inflation, or carbon offset costs, in their calculations. In this paper, we define three basic cost elements in global sourcing: static, dynamic and hidden cost, and use this framework to assess the costs and risks inherent in global sourcing scenarios from three different points of view: conceptually, analytically and empirically. We highlight the key learning points from each perspective and propose a total cost model of how to make informed global sourcing decisions, which we test by applying it to three exploratory case studies of global sourcing arrangements.     

Channel coordination with the newsvendor model using asymmetric information

In this paper, after surveying short-term two-echelon supply channel coordination methods, we present an extended version of the newsvendor model in which the supplier has to fulfil all demand of the customer, even if this calls for an additional setup of production. Given uncertain demand forecast, the solution is an optimal production quantity that minimises the expected total cost including setup, inventory holding and obsolete inventory costs. Then, the model is studied in a decentralised setting where the customer has private information about the demand forecast, while the supplier knows the various cost factors. We suggest such a coordination protocol and payment scheme that provides both partners the right incentive for minimising the total cost: the customer is interested in sharing her unbiased demand forecast and uncertainty, while the supplier's rational decision concurs with the overall optimum. Hence, local decisions based on asymmetric information coordinate the channel in the global sense. The results are also demonstrated by taking some real-life test cases from an industrial study that motivated our work.     

考虑营销成本的库存与运输联合优化三阶段决策模型研究

一般来说,个体最优和整体最优是不一致的,二者之间存在着偏差,这一偏差就是分散优化带来的效率损失。库存与运输联合优化（ITIO）将物流系统中的库存控制和运输管理融合到一个大问题中,去寻求这一联合问题而非单个问题的最优解决方案,可以最优化整个配送系统的运营成本。本文在考虑营销成本条件下,建立ITIO三阶段决策模型,并求解分析模型性质。研究表明：ITIO零售价和营销成本与需求的营销成本弹性、零售商订购成本、供应商生产启动成本、供应商生产成本、运输固定成本和运输可变成本正相关;与需求函数的价格弹性和订货批量负相关;当订购数量相同时,零售商单独优化的营销成本大于ITIO联合优化的营销成本。     

Understanding liability of foreignness in an Asian business context: A study of the Korean asset management industry

This study provides an in-depth understanding of the liability of foreignness (LOF) in an Asian business context. Based on previous literature, we distinguish the two distinct cost components that comprise LOF: The cost of foreignness and the cost of multinationality. Whereas the former refers to the costs incurred by foreign firms when they develop location-specific advantages in a host country environment, the latter refers to the costs associated with an MNC’s multinational operation, more specifically, transferring firm-specific advantages from the home country (or elsewhere) and adapting them to a particular host country context. Based on this distinction, we investigate whether and how persistently each of these costs exists in an Asian business environment. Our data on the Korean asset management industry support the presence of both costs, resulting in lower performance increase of foreign firms relative to local ones from utilizing location- and firm-specific advantages, respectively. Furthermore, in our study setting, compared to the cost of foreignness, the cost of multinationality persists longer in the market, suggesting that the latter is more difficult and takes a longer time for MNCs to mitigate than the former. Our results provide important insights into detailed aspects of strategic challenges confronted by MNCs in the Asian business context from which they can derive effective strategic responses.     

Inventory control in a two-echelon dual-channel supply chain with setup of production and delivery

This paper considers a two-echelon dual-channel supply chain model with setup of production and delivery and develops a new inventory control policy for the supply chain. Previously, a two-echelon supply chain model without setup of production and delivery is considered and a one-for-one inventory control policy is applied to the supply chain. In the inventory control policy, production is stopped when the warehouse inventory reaches the upper limit and is started again immediately after the inventory drops below the limit. Moreover, delivery to the retailer is stopped when the store inventory reaches the upper limit and is started again immediately after the inventory drops below the limit. The total cost that consists of inventory holding costs and lost sales cost is considered, and setup costs are not considered in the total cost. Once setup costs are introduced, the one-for-one inventory control policy is no longer appropriate. Then, this paper develops a new control policy for the two-echelon dual-channel supply chain with setup of production and delivery. As performance measure, the total cost that consists of inventory holding costs, lost sales cost, and production and delivery setup costs is considered, and the total cost calculated on the basis of Markov analysis demonstrates the effectiveness of the proposed control policy.     

Dynamic lot sizing problem with continuous-time Markovian production cost

This paper develops a polynomial algorithm for obtaining dynamic economic lot sizes in a single product multiperiod production system with the objective of minimizing total production and inventory costs over T periods. It is assumed that production costs are linear, inventory costs are concave, setup costs are zero and backlogging is not permitted in all periods. Moreover, the unit production cost is a stochastic variable, which is evolved according to a continuous-time Markov process over the planning horizon. The model is formulated as a stochastic dynamic programming (DP) optimization with the state variable being unit production cost. Then, it is solved using the backward dynamic programming approach. To justify the application of the proposed model, two practical cases are presented.     

The costs of increased localization for a multiple-product food supply chain: Dairy in the United States

There is increased interest in greater localization of food supply chains but little evidence about the effects of localization on supply-chain costs. Assessing these effects is complex in multiple-product, multi-process supply chains such as the dairy industry. In this study, we develop a spatially-disaggregated transshipment model for the US dairy sector that minimizes total supply-chain costs, including assembly, processing, interplant transportation and final product distribution. We employ the cost-minimizing solution as benchmark to compare alternative scenarios of increased supply chain localization. Our results indicate: (1) short-run limits to increased localization, (2) modest impacts on overall supply-chain costs, and (3) large cost re-allocations across supply chain segments, regions and products. We find that increased localization reduces assembly costs while increase processing and distribution costs. Cost increases are larger in regions with smaller raw milk supplies and during the season when less raw milk is produced. Minimizing distances traveled by all dairy products results in tradeoffs across products in terms of cost and distance traveled. The relationship between increased localization and costs appears to be nonlinear.     

An EOQ lot sizing model with random supplier capacity

This paper presents a general formulation of the inventory lot sizing model with random supplier capacity under the EOQ framework. For a general capacity distribution, we show that the expected cost per unit of time is a unimodal function and pseudo-convex in the ordering quantity. Moreover, we derive some simple data-dependent bounds for both optimal lot size and expected cost per unit of time. In order to illustrate the general model, three types of distributions for the random capacity are analyzed as special cases. These are the uniform, exponential, and truncated normal distributions. For each of these distributions, we find that the maximum cost penalty of using the EOQ lot size instead of the optimal one is almost negligible (not greater than 0.52%, 1.81%, and 0.91% for the uniform, exponential, and truncated normal distributions, respectively). In addition, we extend the general model to allow for the presence of defective units in the quantity received from the supplier. It is shown that this extra randomness does not affect the optimal ordering policy for the original model.     

Distinguishing costs of cooperation and control in alliances

Firms simultaneously face the need to cooperate with and control an alliance partner. To complement the transaction cost perspective's emphasis on the need to control and limit opportunistic behavior, we examine the sources and impact of the cooperation costs incurred in order to work with a partner. We propose that these costs increase with greater joint task complexity and interpartner diversity, and perceptions of equitable behavior affect the perceptions of these costs. Hypotheses derived from the framework are tested in a sample of 231 contractual alliances between architects and general contractors in the Hong Kong construction industry. We find that both cooperation costs and transaction costs affect the level of time and effort a manager expends on an alliance, supporting our fundamental proposition that the costs of cooperation and control are conceptually and empirically distinct. We argue that cooperation costs should be incorporated into studies that compare the choice of alternative partners and alliance structures, as well as among the broader categories of market, hierarchy, and hybrid governance forms. Copyright © 2005 John Wiley & Sons, Ltd.     

THE ROLE OF COST IN DETERMINING WHEN FIRMS OFFER BUNDLES*

We model competitive bundling and tying, allowing for marginal cost savings from bundling, fixed costs of product offerings, and variation in customer preferences. Pure bundling can arise either because few people demand only one component or because, with high fixed costs, a single product efficiently satisfies customers with diverse tastes. We conclude by analyzing empirically the bundling of pain relievers with decongestants. The discount for the bundled product is large. We argue that our model provides a simpler, more compelling explanation for the size of the discount than the demand‐centered approach to bundling by a monopolist.