The shipping strategies of internet retailers: Evidence from internet book retailing

Managing the shipment of goods to consumers is one of the central aspects of retail competition on the internet. In this article, we analyze internet retailers’ shipping strategies using data from the internet book retailing industry. We find that, controlling for a variety of observable firm characteristics, firms with lower product prices offer lower shipping fees and higher quality shipping in terms of average delivery time, compared to firms with higher product prices. These patterns cannot be readily reconciled with a large class of models of competition under perfect consumer information. Theories based on imperfect consumer information can explain the findings better.

Incentives for sales agents after the advent of the internet

E-commerce has siphoned sales away from bricks-and-mortar channels in many industries. Taking a principal-agent perspective, this article analyzes how the increasing volume of e-sales influences offline incentive schemes and firm profitability. According to the proposed model, moderate channel cannibalization can be a blessing in disguise if it decreases incentive intensity and lowers expected wage payments. Whether a larger volume of e-sales is blessing or curse depends (among other things) on the relative magnitude of cannibalization versus market enlargement and the degree to which the increase changes the composition of offline customers’ types with respect to service costs.

The effect of advertising on brand awareness and perceived quality: An empirical investigation using panel data

We use a panel data set that combines annual brand-level advertising expenditures for over three hundred brands with measures of brand awareness and perceived quality from a large-scale consumer survey to study the effect of advertising. Advertising is modeled as a dynamic investment in a brand’s stocks of awareness and perceived quality and we ask how such an investment changes brand awareness and quality perceptions. Our panel data allow us to control for unobserved heterogeneity across brands and to identify the effect of advertising from the time-series variation within brands. They also allow us to account for the endogeneity of advertising through recently developed dynamic panel data estimation techniques. We find that advertising has consistently a significant positive effect on brand awareness but no significant effect on perceived quality.

Reviewing the reviewers: The impact of individual film critics on box office performance

Critics and their opinions or critical reviews play a major role in many markets. Marketing research on how critics impact product performance has so far examined an aggregate critic effect. An obstacle in studies examining the relationship of aggregate critical opinion and product sales is the close association between the intrinsic quality of a product and the aggregate opinion regarding the product. Our analysis parses out these two effects, allowing us to distinguish individual critics who are simply good at identifying products with popular appeal from those who act as opinion leaders and engender early product sales. The role of critics is especially prominent in the film business, in which one finds multiple expert opinions about each movie and where critics’ endorsements are used in advertising. In the context of the motion picture industry, our research investigates the impact of individual film critics on the market performance of movies, where specific key critics and reviewers may serve as market gatekeepers, and where various critics may have different types of impacts on product performance.

The relationship between FSI advertising style and coupon redemption

We investigate the relationship between free-standing insert advertising style and coupon redemption. Results from two experiments indicate that the propensity to clip a coupon can be enhanced by matching ad tone (emotional vs rational) to the nature of a consumer’s primary motivation with respect to coupon usage. Moreover, this result appears to hold for consumers with both procoupon and anticoupon inclinations.

Innovation and productivity in SMEs: empirical evidence for Italy

Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation that incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the “Survey on Manufacturing Firms” conducted by Mediocredito-Capitalia covering the period 1995–2003. The model is estimated in steps, following the logic of firms’ decisions and outcomes. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size and R&D intensity, along with investment in equipment, enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm’s productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.

Third-Degree Price Discrimination in the Presence of Asymmetric Consumption Externalities

In this paper, we consider third-degree price discrimination in two markets in the presence of asymmetric consumption externalities; we establish that under plausible conditions, a firm reduces its price in the market with low price elasticity of demand. The firm can increase its profits by reducing the price for these consumers and enlarging the demand for other consumers, provided that positive consumption externalities exist. Moreover, we show that third-degree price discrimination enhances not only the firm’s profit but also total consumer surplus.

Employment effects of business dynamics: Mice, Gazelles and Elephants

Much of the theoretical work on industry dynamics focuses on the role of ‘noisy’ selection and incomplete information on firm entry and survival. We extend this research by looking at the impact of firm heterogeneity on employment effects for 320 U.S. Metropolitan Statistical Areas (MSA). We find that only start-ups with greater than 20 and less than 500 employees have persistent employment effects over time and only in large diversified metropolitan regions. Therefore, both the type of entry (Gazelles) and the characteristics of the region are important for employment growth.

Google: The World’s First Information Utility?

In only ten years, Google has achieved remarkable success from online search-based advertising. Its search engine is dominant, and its IT infrastructure is the most powerful computing system in the world running on over one million computers and serving more than one billion users globally. Google makes money by using its search engine to deliver online advertising alongside responses to user searches for information, goods, maps, directions, and a host of other services. Its capabilities make it likely to become the world’s first information utility – a concept similar to electric utilities that provide services to many corporations and individuals alike. Constant innovation is the key to Google’s success and offers lessons for other companies: hire talented people, have them work in small teams, and give them freedom to excel, but use a rigorous data-based approach to evaluating results and making course adjustments.

(Noisy) communication

Communication is central to many settings in marketing and economics. A focal attribute of communication is miscommunication. We model this key characteristic as a noise in the messages communicated, so that the sender of a message is uncertain about its perception by the receiver, and then identify the strategic consequences of miscommunication. We study a model where competing senders (of different types) can invest in improving the precision of the informative but noisy message they send to a receiver, and find that there exists a separating equilibrium where senders’ types are completely revealed. Thus, although communication is noisy it delivers perfect results in equilibrium. This result stems from the fact that a sender’s willingness to invest in improving the precision of their messages can itself serve as a signal. Interestingly, the content of the messages is ignored by the receiver in such a signaling equilibrium, but plays a central role by shaping her beliefs off the equilibrium path (and thus, enables separation between the types). This result also illustrates the uniqueness of the signaling model presented here. Unlike other signaling models, the suggested model does not require that the costs and benefits of the senders will be correlated with their types to achieve separation. The model’s results have implications for various marketing communication tools such as advertising and sales forces.

Empathetic responses to advertising: Testing a network of antecedents and consequences

It has been proposed conceptually that viewers respond to certain advertisements via Empathetic Responses; that is, by feeling with depicted characters. Such deep viewer engagement is especially valued in today’s media environment and is central to dramatic advertising strategies. Nevertheless, Empathetic Responses remain relatively understudied. We situate Empathetic Responses within a model comprising high-level personality domains (within the “Big Five”), lower-level personality facets (multidimensional Trait Empathy), and Perceived Ad Vividness, all as antecedents, as well as consequent Ad-Evoked Feelings. Our findings clarify the composition and function of Empathetic Responses, adding to both basic and applied understandings.

The effects of entrepreneurial orientation, market orientation, and marketing subunit influence on firm performance

The study investigates how an organization’s entrepreneurial orientation moderates the interplay between market orientation and marketing subunit influence on firm performance. The hypothesized model predicts that the positive interaction between market orientation and marketing subunit influence has a weaker effect on firm performance under conditions of high entrepreneurial orientation. The regression and supplementary analyses provide support for most predictions and, most importantly, for a negative three-way interaction effect: At higher levels of entrepreneurial orientation, the positive moderating effect of marketing subunit influence on the market orientation–business performance relationship is reduced. The authors discuss the managerial and theoretical implications of their findings and provide a number of directions for further research.

Consumer boycotts: The impact of the Iraq war on French wine sales in the U.S.

The French opposition to the war in Iraq in early 2003 prompted calls for a boycott of French wine in the US. We measure the magnitude of consumers’ participation in the boycott, and look at basic evidence of who participates. Conservative estimates indicate that the boycott resulted in 26% lower weekly sales at its peak, and 13% lower sales over the 6 months period that we estimate the boycott lasted. Although theory suggests consumers would not participate in boycotts due to a free-rider problem, these findings indicate that businesses should be concerned that consumers may boycott their products. We also find that neither political preferences nor media attention are important determinants of boycott participation.

Technical Progress and Labour Demand in Swedish Manufacturing Firms

Controlling firms’ sales in the labour demand model, this paper investigates effects of trade and R&D via technical progress on labour demand in a dynamic framework, based on a panel of Swedish manufacturing firms for 1990s. The main results of this study indicate that employment elasticities with respect to different characteristics of firms (wages, total sales, exports and R&D efforts) and industrial import penetration could vary across respective skilled sectors. There is some indication to that import penetration from fourteen ‘old members’ of European Union could induce capital-saving technical progress and result in the rise in demand for labour for firms in medium-low skilled sector, whilst those from the ten ‘new members’ of European Union could induce x-efficiency and labour-saving technical progress for firms in low-skilled sector. Furthermore, the effects of R&D intensity on demand for labour are positive and significant for firms in medium-high-skilled and high-skilled sectors.

Technological advances in digital cameras: Welfare analysis on easy-to-use characteristics

This paper examines the characteristics attributed to the success of digital cameras by studying both the demand and the supply sides of the digital-camera market. A discrete choice model is employed to investigate consumer preferences over digital camera characteristics during the period 1996–1998. The empirical findings reveal that Sony’s ‘Easy-to-Use’ storage system contributes significantly to Sony’s demand advantage and profitability. Also, the welfare analysis demonstrates that ‘Easy-to-Use’ attributes significantly contribute to social welfare improvement.

Effect of credit guarantee policy on survival and performance of SMEs in Republic of Korea

This study evaluates the effect of credit guarantee on SMEs at the firm level. To estimate the effect of credit guarantee, we analyze relations between credit guarantee, the survival of guaranteed firms, and their productive performance. The result indicates that credit guarantee frequency enabled guaranteed firms to achieve good performances in general. On the contrary, the effect of guarantee amounts is ambiguous in that there is difference between the contemporary effect and the lagged effect. Therefore, we conclude that credit guarantee satisfied partially its goal to alleviate SMEs’ difficulty in acquiring finance and to stabilize employment.

Spatial competition with endogenous location choices: An application to discount retailing

This paper examines the importance of geographical differentiation in store location decisions of firms in the retail discount industry. Using a novel data set that includes the store locations and accompanying market conditions for all stores belonging to the Wal-Mart, Kmart, and Target chains, we study the factors that influence the entry and location decisions of these firms. The model involves an incomplete information game between the three players where each firm has private information about its own profitability. A key feature of our modeling approach is that it permits asymmetries across firms in the impact of exogenous market characteristics and competitive interaction effects. Variations in the exogenous firm specific characteristics, such as the distances from the market to firms’ headquarters and the nearest distribution centers, serve as exclusion restrictions and provide the source for model identification. Parameter estimates of the payoff functions are used to predict the equilibrium market structure under a variety of market conditions that provide insights into the competitive landscape of the industry. Results show that all firms exert a strong negative impact on competitors when they are in close proximity, but the effect decreases with distance to rivals suggesting strong returns to spatial differentiation in this industry. Target stores fare well under competition except when these competitors are in close proximity. Wal-Mart’s supercenter format is found to be the most formidable player as it substantially impacts competitors even at a large distance. We also find significant asymmetries across players in their response to market conditions and competition interactions.

Gender differences in business performance: evidence from the Characteristics of Business Owners survey

This paper compares the technical efficiency of small and medium-sized enterprises (SMEs) with that of large firms and studies the factors influencing technical efficiency for Taiwan’s electronics industry. Unlike conventional studies, we use two alternative approaches to control for the influence of size effect. One is the two-stage switching regression to correct for endogenous size effect on technical efficiency and, the other is, a metafrontier production function for firms in different groups. The main results are as follows. First, the average technical efficiency for large firms is higher than that of SMEs, without considering the size effect, and lower when considering the endogenous choice on firm size. This study cannot, therefore, conclude that there is a negative size–technical efficiency relationship. It however, sheds light on the importance of size effect on the size–technical efficiency nexus. Second, the estimates on the determinants of technical efficiency show that being a subcontractor has a statistically significant positive influence on SMEs’ technical efficiency, but the effect decreases with firm size.

Spiritual Climate of Business Organizations and Its Impact on Customers’ Experience

This study examines the notion of ‹spirituality’ as a dimension of human self, and its relevance and role in management. Major thesis of this research is that spirituality of employees is reflected in work climate. This may in turn affect the employees’ service to the customers. In the first part of the study a Spiritual Climate Inventory is developed and validated with the data from manufacturing and service sector employees. In the later part, hypothesis of positive impact of spiritual climate on customers’ experience of employees’ service is examined and found to be substantiated empirically.

Competitive reasons for the Name-Your-Own-Price channel

This paper shows that the Name-Your-Own-Price (NYOP) business model can help soften competition. When consumers differ in their frictional costs (i.e., the shopping hassle) they experience when bidding at an NYOP retailer, the NYOP format can be a mechanism for differentiating a retailer from a posted-price rival. Beyond providing a motivation for using an NYOP mechanism, competition also has important implications for the optimal structure of the NYOP format. For example, this paper shows that prohibiting rebidding may benefit an NYOP firm by reducing price rivalry.