An analysis of B2B ingredient co-branding relationships

The proliferation of co-branding in consumer markets has been given considerable attention in the literature, yet attention to the practice in business-to-business markets has been limited, despite the growing attention to the role of relationships in the B2B arena. In an examination of co-branding in the industrial sector, this paper discusses the use of ingredient co-branding and uses an econometric modeling approach to offer a rationale for why it occurs. The analysis provides insight into why downstream manufacturers participate in a relationship that strengthens the supplier's position in the market. We find that under the threat to the supplier of entry from a competitor whose costs are unobservable, co-branding relationships will be entered into resulting in a reduced probability of entry. This co-branding arrangement benefits both the incumbent supplier and the downstream manufacturer. The incumbent supplier benefits from the reduced probability of competitor entry, and the downstream manufacturer is rewarded with a lower price. Further, we find that the cost of the co-branded product is lower, due to a mitigation of double marginalization in a vertically-integrated solution. We examine co-branding relationships with and without advertising support and find that co-branding relationships with advertising support tend to be superior.     

Optimal and Approximate Policies for Inventory Systems With Order Crossover

A common assumption in inventory analysis is that replenishment orders arrive in the same sequence in which they were placed. In practice, however, a variety of factors may cause orders to arrive out of sequence, a phenomenon known as order crossover. This article analyzes a periodic‐review inventory system for a single item with discrete variable demand and discrete variable and long lead‐times (relative to the review period). Under such a scenario, multiple orders are simultaneously outstanding, and orders may arrive in a different sequence than placed. If such order crossover occurs, traditional inventory analysis overstates expected shortages and standard inventory control policies are no longer optimal. This article discusses why orders may cross over in practice and investigates the implications of order crossover to inventory management policies. We investigate the cost performance of optimal policies under order crossover and also suggest approximate policies which are easier to compute and implement. Both the optimal and approximate policies take advantage of detailed real‐time information about the status of pending orders and goods in transit, and hence in a majority of cases perform better than commonly used policies which do not incorporate such information.     

Proposing and Testing an Intellectual Capital-Based View of the Firm

abstract    This study examines one specific aspect of the resource-based view, intellectual capital, and its three knowledge components – human, organizational, and social capital. We hypothesize that the impact of each component on financial performance is contingent upon the values of the other components, and that these leveraging effects are themselves contingent upon the industry conditions in which a business operates. Our hypotheses are supported using line-of-business survey and FDIC data (within-industry/within-geographic region) from two non-competing resource niches of the banking industry (personal and commercial banking).     

Shifting Demand: Online Music Piracy,Physical Music Sales,and Digital Music Sales

Traditionally, music has been sold to consumers by recording several individual songs/tracks in physical media such as CDs and cassettes. Sales of such physical music have been declining for the past several years. Many academic studies have attributed the decline of physical music sales to online music piracy, yet some other studies have not found evidence to support a negative relationship between online music piracy and physical music sales. Interestingly and importantly, we have observed that while many of the studies that found the negative relationship between online music piracy and physical music sales used data before 2003, other studies that do not find similar results have used post-2003 data. In fact, there was a significant structural change in the music market in 2003. Legal (iTunes-like) online channels for digital music that allow consumers to buy individual tracks became available during that year. This article complements the existing literature by analyzing the impact of online music piracy and physical music sales in the presence of iTunes-like legal channels for digital music using bivariate Granger testing. Our results show that the availability of legal channels for digital music has weakened the negative effect of online music piracy on physical music sales. Moreover, in the presence of legal channels for music distribution, digital music, not online music piracy, substitutes for physical music.     

Banking deregulation and innovation

We document empirical support for a key micro-level channel—innovation by young, private firms—through which financial sector deregulation affects economic growth. We find that intrastate banking deregulation, which increased the local market power of banks, decreased the level and risk of innovation by young, private firms. In contrast, interstate banking deregulation, which decreased the local market power of banks, increased the level and risk of innovation by young, private firms. These contrasting effects on innovation also translated into contrasting effects on economic growth. Our study suggests that the nature of financial sector deregulation crucially affects its potential benefits to the real economy.     

Are Central Bank Preferences Asymmetric? A Comment

A recent paper by Ruge-Murcia (2004) on asymmetric central bank objectives provides a new perspective on the policy roots of inflation in developed economies. More precisely, the paper demonstrates that if the distribution of the supply shocks is normal, then the reduced-form solution for inflation implies a positive (or negative) relation between average inflation and the variance of shocks. We argue that the evidence offered in support of this hypothesis suffers from lack of identification because Phillips curve nonlinearity combined with quadratic central bank preferences yield the same reduced-form solution for inflation. If so, estimating reduced form for inflation will not be able to discriminate between these models. Yet they have quite different implications for policy. Other, structural, evidence is needed.     

The Dispute Settlement Mechanism of the WTO: A Brief History and an Evaluation from Economic,Contractarian and Legal Perspectives

Any rule‐based system has to include a mechanism for the enforcement of its rules and a means for settlement of disputes about alleged violation of rules. The General Agreement on Tariffs and Trade (GATT), concluded in 1947, and its successor the World Trade Organisation (WTO) that subsumed it in 1995, embody rules governing the global trading system as specified in various agreements that their members have entered into over time. Naturally, both had a dispute settlement mechanism (DSM). It was a primarily political one in the GATT and was transformed into a largely legalistic one in the multilateral agreement that established the WTO. This paper reviews the history and evaluation of the two DSMs and examines their efficiency based on appropriate criteria. It views them from three alternative and overlapping perspectives: political‐diplomatic, legal‐economic and social. It concludes with a discussion of the unresolved problems in the operation of the WTO's DSM and the prospects of resolving them in the ongoing Doha Round of multilateral trade negotiations.     

Are share price levels informative? Evidence from the ownership, pricing, turnover and performance of IPO firms

We ask whether a firm's choice of IPO price is informative in the sense that it relates systematically to the firm's other choices and characteristics. We find that both institutional ownership and underwriter reputation increases monotonically with the chosen IPO price level. We also find that the relationship between IPO price and underpricing is U-shaped. In contrast, post-IPO turnover displays an inverted U-shaped relation to IPO price. Moreover, firms choosing a higher (lower) stock price level experience lower (higher) mortality rates. Our results are robust to controls for market liquidity and firm size, and for partial adjustment of IPO prices based on pre-market information.