Structural ambidexterity,transition processes,and integration trade‐offs: a longitudinal study of failed exploration

In order to overcome the exploration–exploitation paradox, structural ambidexterity literature suggests establishing differentiated units for exploitation and exploration with a carefully managed exploration–exploitation interface supporting cross‐fertilization without cross‐contamination. Recent research demonstrates the crucial role of integration mechanisms (i.e. how knowledge exchange between exploratory and exploitative units can be organized) and related transition modes (i.e. how exploratory innovations can ultimately be transferred back into the exploitative structures of core business) to deal with this challenge. However, a systematic account of the diverse tensions, risks, and trade‐offs associated with integration which may ultimately cause exploration failure is missing, so far. This paper presents a longitudinal process study uncovering the anatomy of an unsuccessful exploration of (green) technologies by a medium‐sized entrepreneurial firm. We investigated their transition processes to understand how the managers dynamically configured and reconfigured the exploration–exploitation interface over time. Our theoretical contribution lies in providing a framework of six integration trade‐offs (Exploratory‐complementary linking vs. contamination; Seeking legitimacy early on vs. frustration at discontinuation of innovation; Boundary spanning through job rotation vs. carrying over of old culture; Early vs. premature transfer; Reorganization vs. capability mutation; and Improved access to core business resources vs. resource starvation) linked to three phases in the transition process (before, at, and after transfer). We also highlight mechanism, pulling‐forward, and streamlining‐related failures linked to integration trade‐offs in resource‐constrained contexts. Our implication for R&D and top management is that the use of integration mechanisms for structural ambidexterity bears the risk of cross‐contamination between the exploitative and exploratory structures and are therefore inevitably linked to trade‐offs. To minimize negative side effects and prevent exploration failure, organizations have to consciously select, schedule, operationalize, and manage (re)integration mechanisms along the transition process. Our framework of integration trade‐offs systematically supports managers in their organizational design choices for integration mechanisms in the transition processes.     

Tight Average Revenue Regulation Can Be Worse Than No Regulation

Price regulation of a multi-market monopolist, with the cap based on average revenue, can cause welfare to be below the unregulated level. In a model with linear demands and constant but unequal marginal costs, a sufficient condition for this welfare effect is that the cap equals the average revenue that would be earned with marginal cost pricing. Relaxation of the price cap can lower all prices. Welfare with uniform pricing at the level of the price cap can be above or below the average revenue welfare level.     

PRICES,SPATIAL COMPETITION AND HETEROGENEOUS PRODUCERS: AN EMPIRICAL TEST*

Homogeneous‐producer models attribute lower prices in denser markets solely to lower optimal markups. I argue here that when producers have different production costs, competition‐driven selection on costs also reduces prices. This selection mechanism can be distinguished from the homogenous‐producer case because it implies that higher density leads not only to lower average prices, but to declines in upper‐bound prices and price dispersion as well. I find empirical support for this mechanism in the prices of ready‐mixed concrete plants. I also show these findings do not simply reflect lower factor prices in dense markets, but result instead because dense‐market producers are more efficient.     

House Prices and Rents: Microevidence from a Matched Data Set in Central London

I analyze a real estate agency's proprietary dataset containing tens of thousands of housing sale and rental transactions in Central London during the 2006–2012 period. I isolate 1,922 properties that were both sold and rented out within six months and measure their rent‐price ratios. I find that rent‐price ratios are lower for bigger and more central units. These stylized facts are consistent with the user cost formula and reflect differences in maintenance costs, vacancy rates, growth expectations and risk premia.     

The Conditions Promoting Compromise in the Workplace

A previous article developed a framework to understand workplace co‐operation. We now elaborate on the key structuring conditions (technology, product markets and institutional regulation) generating different patterns and illustrate from field research how these different workplace regimes develop. Conditions generating positive and sustainable outcomes for both capital and labour are feasible but rare; stronger ‘beneficial constraints’ are needed if they are to be made more frequent. This article provides an alternative to current interpretations of labour–management co‐operation in the industrial relations literature.     

The Cap Rate Spread: A New Metric for Commercial Underwriting

This study introduces the cap rate spread as a novel metric for underwriting commercial mortgages. Cap rate spread is the difference between the cap rate and the fixed coupon rate. The spread predicts performance risk in a sample of 24,951 commercial mortgage‐backed securities loans during 1993–2011. We demonstrate that the cap rate spread includes crucial information about performance risk. The results arise from the role of the cap rate spread in generating positive or negative leveraged returns to equity in situations where additional equity is required. Incorporating simplistic cap rate spread requirements in commercial underwriting is expected to reduce loan performance risk.     

Balancing Development Costs and Sales to Optimize the Development Time of Product Line Additions*

Development teams often use mental models to simplify development time decision making because a comprehensive empirical assessment of the trade‐offs across the metrics of development time, development costs, proficiency in market‐entry timing, and new product sales is simply not feasible. Surprisingly, these mental models have not been studied in prior research on the trade‐offs among the aforementioned metrics. These mental models are important to consider, however, because they define reality, specify what team members attend to, and guide their decision making. As such, these models influence how development teams make trade‐offs across the four metrics to try to optimize new product profitability. Teams with such an objective should manage to a development time that minimizes development costs and to a proficient market‐entry timing that maximizes new product sales. Yet many teams use mental models for development time decision making that focus either just on development costs or on proficiency in market‐entry timing. This survey‐based study uses data from 115 completed NPD projects, all product line additions from manufacturers in The Netherlands, to demonstrate that there is a cost to simplifying decision making. Making development time decisions without taking into account the contingency between development time and proficiency in market‐entry timing can be misleading, and using either a sales‐maximization or a cost‐minimization simplified decision‐making model may result in a cost penalty or a sales loss. The results from this study show that the development time that maximizes new product profitability is longer than the time that maximizes new product sales and is shorter than the development time that minimizes development costs. Furthermore, the results reveal that the cost penalty of sales maximization is smaller than the sales loss of development costs minimization. An important implication of the results is that, to determine the optimal development time, teams need to distinguish between cost and sales effects of development time reductions. To determine the relative impact of these effects this study also estimates the elasticities of development costs, new product sales, and new product profitability with regard to development time. Armed with this knowledge, development teams should be better equipped to make trade‐offs among the four metrics of development time, development costs, proficiency in market‐entry timing, and new product sales.     

Research on the cost forecast of China's photovoltaic industry

Global energy and environmental problems are increasing in severity. Countries worldwide are more concerned about and are paying greater attention to strengthening their energy‐saving and emissions‐reduction efforts, protecting the environment and promoting the development of new energy. Solar energy is becoming the mainstream of the global power industry because of its significant resources and low cost. This paper provides an overview of the current state‐of‐the‐art of photovoltaic electricity technology (‘photovoltaic’ or PV) in China and addresses its potential for future cost reductions. This paper analyses the relationship between current renewable energy costs and cumulative production, development and demonstration expenditures, and other institutional influences. The theoretical framework of a learning curve offers a complete methodology for examining the underlying capital cost trajectory when developing electricity cost estimates used in energy policy planning models. The cumulative production needed to achieve ‘break‐even’ (the point at which PV is competitive with conventional alternatives) is estimated for a range of learning curve parameter values. The social cost (pollution costs and value‐added tax considered) of PV is calculated, and the question of whether and how the ‘cost cap’ can be bridged is posed, the latter being the difference between what this cumulative production will cost and what it would cost if it could be produced at a currently competitive level. We also estimate how much PV could gain if the external costs (attributable to environmental and health damage) of energy were internalised, such as through an energy tax. We use the simulated results to provide suggestions for relevant PV industrial policymaking.     

An integrated production planning model for molds and end items

This study develops a mathematical modelling framework for simultaneously generating production plans for molds and the end items that are made with them. The inputs considered are the item demand (assumed constant over an infinite planning horizon), holding costs and shortage costs, together with the molds’ statistical lifetime distribution (in terms of number of uses) and costs pertaining to amortization, preventive replacements and corrective replacements.     

The joint effects of information and communication technology development and intercultural miscommunication on international trade: Evidence from China and its trading partners

It is expected that advancements in communication technology can promote international trade by reducing transaction costs, improving efficiency, and moderating information asymmetry. Moreover, intercultural miscommunication caused by cultural differences generates costs from communication breakdowns during international trade. Using bilateral trade data from China and its major trading partners, this study not only provides further empirical evidence to support these claims but also examines the joint effect of those two factors on international trade, which have not been addressed in the literature. This study reveals the mixed results of the joint effects of intercultural miscommunication and the three factors of communication technology (access, use, and skills). More specifically, individualistic behaviours and masculine attitudes contribute the most to the negative effect on the relationship between international trade and communication technology access and use. In contrast, communication technology skills interact with intercultural miscommunication in different ways.     

Benefits and costs of food safety regulation

This paper begins with a review of the concepts and methods that can be used to quantify the benefits and costs of food safety regulations. On the cost side, where research is only beginning to emerge, this paper also provides an analytical framework for measurement of the costs of statutory regulations in the form of design and performance standards. This paper also discusses the use and limitations of currently available benefit and cost information for quantitative regulatory impact assessment, using the assessment of the mandatory HACCP and pathogen reduction regulations in the United States as an example. The paper concludes with suggestions for future research on quantifying benefits and costs of food safety regulations.     

Multi-market collusion with territorial allocation

We develop a supergame model of collusion between price-setting oligopolists located in different markets separated by trade costs. The firms produce a homogeneous good and sustain collusion based on territorial allocation of markets. We first show, in a much more general framework than some earlier literature, that a reduction in trade costs can paradoxically increase the sustainability of collusion. Then we prove a new paradox in which the scope for collusion may be enhanced by an increase in the number of firms. The paper thus highlights several hitherto unknown theoretical implications of collusion under price competition.     

Productivity measurement and price cap regulation: Issues for local exchange carriers in the USA

The success of price cap regulation depends, in part, on proper specification of the price cap formula's productivity offset. The productivity offset should be based on the long-term trend rate of growth of industry total factor productivity (TFP) to emulate competitive pricing outcomes and provide the proper efficiency-enhancing incentives, and to remain relatively immune from the short-term fluctuations inherent in productivity measures. The measurement of TFP should utilize standard index number techniques to aggregate dissimilar measures of output, capital, labor and other relevant input costs.     

The economic implications of using HACCP as a food safety regulatory standard

This article discusses the nature and role of Hazard Analysis Critical Control Point (HACCP) as a food safety control system and, in particular, its role as an element of public food safety regulation. The notion of efficiency in food safety regulation is discussed and related to the nature of food safety controls. It is suggested that, if appropriately applied, HACCP is a more economically efficient approach to food safety regulation than command and control (CAC) interventions. The economic implications of HACCP are discussed with reference to estimates of the costs and benefits, in particular for the food industry. Finally, the use of HACCP as an international trade standard and the facilitation of trade in processed food products is considered.     

Environmental Regulation, Investment Timing, and Technology Choice

We test whether environmental regulation affects investment decisions, using Census data for individual paper mills. New mills in states with strict environmental regulations choose cleaner production technologies, with differences in air and water pollution regulation also influencing technology choice. Examining investment allocation across existing plants, we find that abatement and productive investment tend to be scheduled together. However, plants with high abatement investment over the entire period spend significantly less on productive capital. This seems to reflect both environmental investment 'crowding out' productive investment within a plant, and firms shifting investment towards plants facing less stringent abatement requirements.     

ADVANCES IN LOGISTICS AND THE GROWTH OF INTRA‐FIRM TRADE: THE CASE OF CANADIAN AFFILIATES OF U.S. MULTINATIONALS, 1984–1995*

Intra‐firm trade in intermediates between U.S. multinational parents (MNCs) and their Canadian manufacturing affiliates increased dramatically in the 1984–1995 period (i.e., it roughly doubled). Tariff and transport cost declines were far too small to explain this phenomenon. But we show that the advent of improved logistics management practices, including the ‘just‐in‐time’ (JIT) production system, can explain much of the growth of intra‐firm trade. JIT lowers the inventory carrying cost component of intra‐firm trade, and, by 1984, this was more important than tariff and transport costs in many industries. We combine regression analysis with numerous case studies to draw our conclusions.     

国际贸易中的交易成本：一个文献综述

传统贸易理论所讨论的形成比较优势的成本,主要为生产成本。但是,在现实国际贸易活动中,交易成本在塑造一国比较优势时也发挥着重要作用。通过回顾国际贸易中的交易成本及其与生产成本和贸易成本的关系、国际贸易中的交易成本的影响因素及其度量、引入交易成本分析的国际贸易变化之相关文献,指出：现有文献未严格区分＂贸易成本＂和＂交易成本＂,迄今为止新制度经济学中对交易成本的测度与贸易理论中基于引力模型的贸易成本测度还缺乏必要的沟通和融合。     

Losing sight of the forest for the trees? Productive capabilities and gains from trade as drivers of vertical scope

Focusing on proving or disproving transaction cost economics has led to a relative neglect of some key drivers of vertical scope, such as differences in productive capabilities (as opposed to capabilities of governance). We consider how productive capability differences can shape vertical scope through gains from trade. Using highly detailed data from the mortgage banking industry, we find productive capabilities to be a key determinant of the make‐vs.‐buy decision. Our analysis also suggests firms' attempts to leverage a comparative advantage can also lead to the use of mixed governance modes (both ‘make’ and ‘buy’ in a particular part of the value chain). We conclude that the distribution of productive capabilities along the value chain, catalyzed by transaction costs, ultimately drives vertical scope. Copyright © 2005 John Wiley & Sons, Ltd.     

Consumer inference and the regulation of consumer information

When consumers are uncertain about the importance of a product attribute, mandatory disclosures have two effects: directly communicating attributes, and an inferential effect that changes how much weight consumers put on product attributes. I model a signaling game between regulators and consumers in which regulators perfectly reveal their private information about the importance of an attribute through the intensive margin of regulation. The model has empirical predictions that distinguish it from traditional models of mandatory disclosure. I also examine inferential mistakes that can lead to over or under-regulation and consumer over or under-estimates of the importance of product attributes.     

Multifamily Housing Demand: 1980–2000

Using Annual Housing Survey data on multifamily structure occupancy by household type for 1975, together with number of household projections from the Department of Agriculture, a gross level of multifamily housing demand is projected. Allowance is made for a 2 percent replacement rate of the total stock as well as a 5 percent vacancy figure for new household demand. Assuming that: (1) there is no massive shift away from one-family ownership to multifamily units, and (2) the present level of conversions from one-family units to multiple occupancy continues to offset the trend of conversion from rental multifamily units to condominium status, then total future demand for multifamily rental units is well within current construction levels.

• We are presently building one and one-half times the demand of 416,000 units per year projected for 1975–80.

• The demand from 1980 to 1990 decreases to 367,000 new units annually.

• This is further reduced to 335,000 units annually for the period 1990–2000.

The major determinants of future demand will focus on the scrap-page rate of extant facilities and the regional shifts of population.
The future supply of multifamily structures depends on an abatement of construction costs and interest rates, and/or massive levels of Government subsidy.
There is evidence that operating cost rises are challenging the financial integrity of multifamily structures. This is manifested by the HUD and private market mortgage delinquency and foreclosure rates.
Policy focus for the future should emphasize the minimization of both construction and operating costs rather than augmented delivery rates.