Economic Capacity Utilization and its Determinants: Theory and Evidence

This paper develops and estimates a model of economic capacity utilization and its determinants by allowing for the firm's full optimization behavior that considers endogenous output choice. The model consists of deriving the short-run output supply function and the capital demand function which generate optimal and capacity output. Optimal capacity utilization is determined as the ratio of optimal to capacity output and its determinants are identified. Evidence from U.S. manufacturing shows that capital expansion not accompanied by market growth and higher materials and capital prices has contributed to lower capacity utilization. Energy price increases have exerted a stimulating impact on capacity utilization. Conventional capacity utilization measures are found to be biased and fail to capture the influences of changes in economic conditions facing firms.     

Markets Linked by Rising Marginal Costs: Implications for Multimarket Contact,Recoupment, and Retaliatory Entry

This paper studies the effects on prices and welfare of multimarket contact when firms serve multiple markets from a single facility with rising marginal costs. Here a link is created between markets, even with independent demands: greater output in one market leads to a higher marginal cost and lower output in other markets; and multimarket contact can indeed lower welfare. Variations of the model can explain two other puzzling phenomena: “recoupment” – lower prices in one market “paid for” by higher prices in other markets; and “retaliatory entry” – the credible threat to enter a rival’s market if it enters yours.     

Resource allocation for open and hidden learning in learning alliances

A satisfying relationship between alliance members is important for the success of learning alliances, especially those in the Asia Pacific region. While learning alliances create conditions for firms to leverage each other’s knowledge, firms may be opportunistic and appropriate each other’s knowledge, and firms face a tradeoff because appropriation affects the relationship between alliance members. After reviewing previous studies on knowledge sharing in learning alliances, we differentiate firms’ learning into open and hidden learning, and argue that open learning contributes to competence trust, while hidden learning reduces goodwill trust, which consequently affects open learning. Learning uncertainty, introduced in this study, and learning benefits determine expected payoffs of open and hidden learning, which influence firms’ resource investment in them. This study also finds that behavior and output control are important moderators of the relationships between expected payoffs of open and hidden learning and the resources invested in them. Thus, this study advances our understanding of the tension between cooperation and competition and the learning dynamics in learning alliances. The solution to solving the knowledge sharing dilemma in learning alliances is to promote partners’ open learning and to restrain their hidden learning. Therefore, this study argues that, with open and hidden learning, implementing proper control measures and influencing partners’ learning benefits and uncertainties can settle this dilemma. Furthermore, this study classifies the relationships of learning alliances into four types and gives an explanation of why horizontal learning alliances are usually more competitive than vertical ones.     

The economics of international codesharing: an analysis of airline alliances

International airline alliances allow airlines to coordinate their operations in providing international service. This paper analyzes the effect of such alliances on traffic levels, fares, and welfare. In the model, the benefits of alliances arise because cooperative pricing of trips by the partners puts downward pressure on fares in the interline city-pair markets (these are markets where travel on both carriers is necessary). The loss of competition in the interhub market, which connects the hub cites of the partners, generates a countervailing effect, tending to raise the fare in that market. While the presence of economies of traffic density complicates these impacts by generating cost links across markets, simulation analysis shows that the above tendencies typically prevail. Welfare analysis shows that both consumer and total surplus typically rise following formation of an alliance despite the harm to interhub passengers, suggesting that the positive effects of alliances may outweigh any negative impacts.     

Market Power and/or Efficiency: A Structural Approach

This article separates oligopoly-power and cost-efficiency effects ofchanges in industrial concentration and assesses their impact on output prices in 32 food-processing industries. Empirical results indicate that although concentration inducescost efficiency in one-third of the industries, oligopoly-power effects either dominate cost efficiencyor reinforce inefficiency, resulting in higher output prices in most industries. The articlealso provides fresh econometric estimates of oligopoly power and economies of size for the industriesin question.     

Using call-back to demonstrate the discriminatory nature of the proportionate return rule

The paper shows that the impact of a call-back service on the financial position of the monopolists in the countries where call-back service is offered, will in many cases be positive. The explanation for this result is found by observing cost and revenue streams, and by taking note of the various elasticities and feedback effects when ever there is an increase in traffic. For carriers selling call-back minutes to service providers, it is the proportionate return rule that provides then with a major, and perhaps the main source of profit on the call-back minutes they sell. The rule provides for the transfer of incoming IDD minutes and the associated hugely profitable settlement credits, from the other competing carriers, to the carrier selling call-back minutes. In this regard, the rule is not even-handed. The higher the market share of the carrier selling call-back minutes, the less well they do under the rule, so much so that under some circumstances a carrier selling call-back minutes at an apparent profit, would actually suffer losses on those minutes.     

Measuring the Economic Effect of Global Warming on Viticulture Using Auction,Retail, and Wholesale Prices

In this paper we measure the effect of year-to-year changes in the weather on wine prices and winery revenue in the Mosel Valley in Germany in order to determine the effect that climate change is likely to have on the income of wine growers. A novel aspect of our analysis is that we compare the estimates based on auction, retail, and wholesale prices. Although auction prices are based on actual transactions, they provide a thick market only for high quality, expensive wines and may overestimate climate’s effect on farmer revenues. Wholesale prices, on the other hand, do provide broad coverage of all wines sold and probably come closest to representing the revenues of farmers. Overall, we estimate a 1°C increase in temperature would yield an increase in farmer revenue of about 30%.     

Do science and money go together? The case of the French biotech industry

Developing technological applications, entering exploitation alliances, and choosing between research‐ or service‐focused strategic orientations are decisions that high‐tech firms must manage concurrently. This article explores systematically the contrasting effects of these strategic determinants on rent generation and rent appropriation using the entire population of French biotech firms (1994–2002). Findings indicate that science and money do not unconditionally go together–the direct relationship between rent‐accruing resources (e.g., patents or articles) and rent appropriation varies depending on the type of resources and the strategic orientation. Moreover, the effects of strategic determinants differ for rent generation vs. rent appropriation: 1) technological application diversity undermines a firm's capacity to appropriate rents–in particular for research‐oriented firms; 2) exploitation alliances favor rent generation but hinder rent appropriation; 3) service‐oriented firms exhibit significantly better performance than research‐oriented firms. Such evidence challenges the emergence in the biotechnology industry of a ‘one‐best’ strategic trajectory, as represented by research‐intensive start‐ups funded by private money engaged in publishing and patenting races. Copyright © 2008 John Wiley & Sons, Ltd.     

R&D Cooperation,Partner Diversity,and Innovation Performance: An Empirical Analysis

Existing literature on research and development (R&D) alliances focuses on formation motives and performance impacts of these alliances but hardly on diversity of the partners' portfolio. Cooperation with a diverse set of partners leads to learning opportunities with regard to both cooperation and innovation skills and hence is expected to enhance the firm's innovation performance. This paper examines two research questions: (1) the impact of functional and geographical diversity of R&D partners on radical and incremental innovation performance of product innovating firms, and (2) the organizational determinants of partner diversity in R&D alliances. The empirical analysis is based on data from the Dutch Community Innovation Survey, R&D and Information and Communication Technology Surveys, and Production Statistics, which lead to a representative sample of 12,811 innovating firms in the period 1994–2006. Through random‐effects panel Tobit estimates, econometric models for both research questions are estimated. The results indicate that functional and geographical diversity act through different channels. Functional diversity leads to a variety of knowledge intake and synergetic effects necessary to develop and commercialize novel products. Geographical diversity results in successful adaption of existing products to different local requirements such as technical standards, market regulations, and customer preferences. The organizational determinants of both kinds of partner diversity are prior experience, patenting, and information technology infrastructure.     

Scientific foundation,patents, and new product introductions of biotechnology and pharmaceutical firms

Absorptive capacity (ACAP) has long been used in the research of technology firms as an indication of knowledge acquisition. This paper links knowledge input using new product introductions (NPI), to commercial output, addressing one of the key criticisms of research and development expenditures as a measure of an organization's effort. We propose that firms with a strong basic science foundation such as biology and chemistry seek to advance their scientific knowledge in addition to developing and selling innovative products. In contrast, corporations with a more applied focus forego fundamental scientific advancement and concentrate their actions on the development of innovative products. Results from a sample of 487 firms over a 10‐year period indicated that firms with an applied science foundation had greater numbers of NPIs, both breakthrough and innovative, suggesting that a solutions‐based approach had greater value in terms of innovative output. The pursuit of science may build knowledge, but a clear link between increased ACAP and innovative output was not found. Our results also suggest that basic science firms have a positive relationship with both breakthrough and incremental NPIs using merger and acquisition activities. Applied science firms found university alliances useful in generating NPIs.     

The development of capabilities in new firms

This research explores evidence of corporate capabilities for conducting acquisition and alliance deals in young firms. We hypothesize that investors conjecture about the future based on information about a firm's capabilities. Each successive deal carries intrinsic value, creates experience, generates feedback, and yields information about the firm's underlying capabilities. We evaluate whether stock prices impute expectations that firms will capably pursue particular programs of acquisitions and alliances. The analysis covers how investor responses change across successive deals on the theory that firms with a concentrated program of deals may develop capabilities more intensively than those with programs that involve both acquisitions and alliances. The dataset covers the population of firms that went through an initial public offering (IPO) in the United States between 1988 and 1999. It contains information on all of their post‐IPO acquisitions and alliances, and on how their stock prices changed in response to the announcement of each deal. The results suggest that within the first year after IPO, investors expect firms to execute particular streams of alliances and acquisitions that reflect their unique histories of demonstrated capabilities. We also find evidence that investors cannot fully anticipate deal programs. The findings support a capabilities‐based view of the firm and also show that accurate inference using event‐study methods may require digging deep into the early histories of firms. Copyright © 2009 John Wiley & Sons, Ltd.     

An Empirical Analysis of Global Airline Alliances: Cases in North Atlantic Markets

This paper empirically investigatesthe effects on air fares, passenger volume, andconsumer surplus of four major alliances in NorthAtlantic aviation markets. The four alliances areBritish Airways/USAir, Delta/Sabena/Swissair,KLM/Northwest, and Lufthansa/United Airlines. We findthat equilibrium passenger volume increased by some36,000 passengers annually and equilibrium air faresdecreased by an average of $41 on the routes servedby the allying carriers, and that consumers weregenerally better off due to the alliances.     

Do International Roaming Alliances Harm Consumers?

This paper develops a model of international roaming in which mobile network operators (MNO's) compete both on the wholesale market to sell roaming services to foreign operators and on the retail market for subscribers. To allow their subscribers to place or receive calls abroad, they have to buy roaming services provided by foreign MNO's. In the absence of international alliances, competition between foreign operators would drive wholesale unit prices down to marginal costs. However, international alliances are endogenously formed since they serve as a commitment device to soften competition on the retail market, leading to excessively high roaming per‐call prices.     

Partner-based opportunism,interface structure,and performance efficiency in upstream and downstream alliance activities contexts

Few alliance studies have theorized that opportunisms effect on performance efficiency is contingent on other factors. Our study posits that alliance partner size and no end-point serve as interface structure mechanisms that condition the efficiency outcomes of partner-based opportunism in alliances. We argue that the direct effect of partner-based opportunism, and the moderation effects of alliance partner size and no end-point, differ according to the alliance activities context (i.e., upstream vs. downstream). Our hypotheses were tested using a survey of 361 alliances. We observe that partner-based opportunism is indeed associated with performance inefficiencies. Further, while alliance partner size has a nonsignificant moderating effect, no end-point has a positive moderating effect, on the relationship between partner-based opportunism and efficiency; that is, the negative link becomes less negative for no end-point alliances. We find that the negative performance relevance of partner-based opportunism remains significant among upstream alliances, but drops to nonsignificance for downstream ones. We show that alliance partner size has a negative moderating effect on the link partner-based opportunism to performance efficiency among downstream, but not upstream, alliances. Lastly, we find that the positive moderating effect of no end-point is significant among upstream, but not downstream, alliances. Our results generate important implications for managers' efforts to design and govern alliances.     

Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions

State agencies in infant-formula procurement auctions receive lower bids when they are in buyer alliances than when they are unallied. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) uses an auction to procure infant formula. Manufacturers bid on the right to be an agency’s sole supplier by offering a rebate on formula sold through WIC. Agencies frequently join together in buyer alliances. An empirical estimation shows that bids are lower to alliances and that lower prices result because alliances are heterogeneous. Results suggest that when heterogeneity is not controlled, bids decline with alliance size, which has policy implications because Congress recently limited alliance size.     

The influence of desire for control on monitoring decisions and performance outcomes in strategic alliances

Strategic alliances are fraught with risks, such as the uncontrolled disclosure of core knowledge via opportunistic learning. The usefulness of monitoring in policing opportunism notwithstanding, a contrasting view is that monitoring mechanisms can themselves manifest the dark side of strategic alliances. The present study argues that a novel dark personality trait—the focal firm's desire for control—may influence key decisions pertaining to how to monitor strategic alliances, which in turn can negatively impact performance outcomes. Our conceptual model was developed and tested, based on a survey of 404 strategic alliances. The results demonstrate that a focal firm's desire for control is positively associated with process monitoring as well as output monitoring. The firm's use of process monitoring to oversee the counterpart drives its performance outcomes only if there is a low level of information exchange between the alliance partners; as such, information exchange norms substitute for process monitoring. By contrast, the focal firm's use of outcome monitoring is negatively linked to performance unless complemented by a high level of information exchange. Key implications for alliance management and future research are derived from the findings.     

第二产业生产服务与第二产业生产率——基于面板数据的实证研究

根据OECD发布的24个国家投入产出表,分别计算了1995年、2000年和2005年各国第二产业的劳动生产率,采用面板数据模型检验了第二产业生产服务对第二产业生产率,以及对第二产业就业和产出的影响。检验结果表明,当服务投入在第二产业总产出中所占比重不断提高时,第二产业劳动生产率将随之提高,并不会减少第二产业就业人数。因此,第二产业生产服务对第二产业产出有显著的促进作用。     

Entry,donor market size,and competitive conduct among nonprofit firms

This paper empirically characterizes competitive behavior among charitable nonprofits where prices and output are difficult to observe. Using a model tailored to donative nonprofits and an empirical methodology that exploits cross-sectional variation in market size and various measurable demographic and cost characteristics applicable for nonprofits, this paper estimates the threshold number of potential donors required for nonprofit economic viability in five major charitable sectors. We find that our sample markets generally reach competitive levels once five or more nonprofits in a given nonprofit sector are observed. The paper offers several possible interpretations of these findings and directions for future research.