Contagion Entrepreneurship: Institutional Support,Strategic Incoherence,and the Social Costs of Over‐Entry

Existing literature on the legitimizing role of institutions tilts toward a “more is better” perspective, proffering the notion that the liabilities of smallness and newness can be mitigated through institutional policies that foster acceptance, trust, and confidence. Although this may seem reasonable, even desirable, institutional munificence can trigger massive over‐entry, potentially causing unintended consequences and unwanted social costs. Using a data set of nearly six million transaction‐level decisions involving all 612 companies and 56,240 permitted projects from a complete industry history, I find that unforeseen costs arise when small, early‐stage firms substitute the legitimizing effects of institutional support for strategic coherence. The findings are surprising and significant. While institutional support for new markets does in fact generate a surge in firm formations, the ill effects of munificence are evidenced by indiscriminate, contagion‐style market entry by unfit firms that perform poorly, fail quickly, and leave a long trail of regulatory violations in their collective wake. The study offers opportunities for scholars, practitioners, and policymakers to reassess the core assumptions related to the benefits and costs of institutional support for new industries, firms, and entrepreneurs.     

Growth and Renewal in the United States: Retooling America's Economic Engine*

New research by the McKinsey Global Institute (MGI) examines the growth challenge facing the United States and explores how U.S. business and government can contribute to the economy's renewal by reinvigorating their drive toward higher productivity. As baby boomers retire and the female participation rate plateaus, the U.S. economy will receive significantly less lift from increases in the labor force and will have to rely increasingly on productivity gains to fuel growth. The report finds that the United States needs a 34% acceleration in productivity growth if it is to match the GDP growth rates of the past 20 years—and that this is possible. Three‐quarters of the necessary productivity growth acceleration can come from the efforts of private‐sector companies operating within the current regulatory and business environment. Even the best‐performing companies and sectors still have headroom to boost productivity by emulating the best practice of others and tapping into new innovations, and coming up with new innovations of their own. The remaining one‐quarter—and more—can come from government and business working together to address barriers that now limit growth. MGI lays out a seven‐point agenda for action to spur productivity.     

Property and Industrial Organization in Communist and Capitalist Nations

Endogenous growth theorists argue that certain equity-enhancing social institutions enhance growth. Despite the centrality of inequality in these approaches, there is no sense in which economic actors exercise power or collective action to create and maintain social norms and rules that are personally advantageous but socially costly. This despite the work of neoclassical economists on rent-seeking, which posits that efforts to claim unearned revenues can pose significant costs for growth. The question of the impact of gender equity on economic growth is an instructive context for understanding these contradictions. Even though gender practices are inherently about the exercise of power, that they have become a feature of the neoclassical growth literature alights on obvious tensions in the neoclassical institutionalist paradigm. By incorporating insights from both the rent-seeking and feminist economics literatures, we will present analternative explanation of why gender hierarchies persist despite their obvious economic costs.     

Exploiting volatility movements in the Sydney futures exchange's bank bill contract

An appropriate stochastic model was fitted to one year of data on the implied volatility of options on 90 day bank accepted bill futures contracts traded in the Sydney Futures Exchange. The model used was ARIMA augmented with day of the week variables, an option time to maturity variable, and recent values of historic volatility. The high ex-post predictive accuracy of the model was then employed as the central element of a strategy of buy low/sell high volatility.We employed two trading schemes with suitably constructed Delta neutral portfolios comprising bill futures and call and put options on those futures over a period of six months, to test whether speculative trading profit could be earned. The existence of trading profits before transaction costs validated the potential of the buy low/sell high volatility strategies to generate speculative profits. The absence of any such trading profits after transaction costs however, showed that the market pricing of these securities is such that the dependencies within implied volatility cannot be profitably exploited.This result may be interpreted as evidence supporting an hypothesis of a semi-strong form of market efficiency.     

A process model of the effects of price promotions on brand image

This article introduces a model to explain the process by which consumer satisfaction or dissatisfaction with price promotions can influence brand image. Specifically, the model explores conditions under which consumers experience satisfaction or dissatisfaction with price promotions, predicts ways that consumers might engage in various levels of attributional processing about price promotion satisfaction or dissatisfaction, and examines how consumer attributions of price promotion satisfaction or dissatisfaction influence brand image. Managerial implications and directions for future research are also offered. © 1994 John Wiley & Sons, Inc.     

Changing pattern of acquisition behaviour in takeovers and the consequences for acquisition processes

Since 1985 the U.K. and American corporate markets have been seeing, for the fourth time this century, boom conditions in the acquisition and merging of companies. Most predictions suggest this pattern will continue into the 1990s. Yet the failure of acquired companies remains at 50 per cent. In an attempt to understand this failure rate Kitching's seminal work (1967, 1973) is used as a starting point. His hypothesized relationships for success or failure are tested against a recent U.K. study of 40 cases, and found to be insufficient to explain success or failure. A paradigm of contextual and process variables is proposed as a fuller explanation of the phenomenon. Finally, different contexts and different behavioural processes are suggested as more substantial explanations of outcomes.     

The theoretical foundations of nonprofit competition: a resource-advantage theory approach

Competition in the nonprofit sector has dramatically intensified in the past two decades because of (1) the increased number of nonprofit organizations (NPOs), (2) the decline and diffusion of governmental support, and (3) the entry of for-profit companies into markets that traditionally have been the domain of nonprofits. In an attempt to enhance the understanding of nonprofit competition, the authors apply resource-advantage (R-A) theory, a dynamic theory of competition adapted from the for-profit business literature, to commercial nonprofits and explain how commercial nonprofits can leverage their various resources to successfully compete and deliver social value. Contributing to the understanding of nonprofit competition and the challenge that NPOs face in balancing mission and money, this paper provides a foundation for a theory of nonprofit competition that can guide future research in the area and help NPO managers as they maneuver in today’s increasingly competitive environment.     

The strategic imperative and sustainable competitive advantage: Public policy implications of resource-advantage theory

Strategy theorists share (1) the view that the strategic imperative of a firm should be sustained, superior financial performance and (2) the belief that this goal can be achieved through a sustainable competitive advantage in the marketplace. Neoclassical perfect competition and traditional industrial organization economics, however, imply that the sustained performance goal advocated by strategy theorists is anticompetitive and its achievement presumptively detrimental to social welfare. This article addresses the strategy-is-anticompetitive thesis with the goal of grounding strategy in a theory of competition— resource-advantage theory—that does not imply that the strategic imperative and its achievement are presumptively anticompetitive and antisocial. As such, this article initiates a discussion of the public policy implications of resource-advantage theory. Shelby D. Hunt is the J. B. Hoskins and P. W. Horn Professor of Marketing at Texas Tech University, Lubbock, Texas. A past editor of theJournal of Marketing (1985–1987) and author ofModern Marketing Theory: Critical Issues in the Philosophy of Marketing Science (South-Western, 1991), he has numerous articles on competitive theory, macromarketing, ethics, channels of distribution, philosophy of science, and marketing theory. Three of hisJournal of Marketing articles, “The Nature and Scope of Marketing” (1976), “General Theories and Fundamental Explananda of Marketing” (1983), and “The Comparative Advantage Theory of Competition” (1995), have won the Harold H. Maynard Award for the “best article on marketing theory.” He received the 1986 Paul D. Converse Award from the American Marketing Association for his contributions to theory and science in marketing. He received the 1987 Outstanding Marketing Educator Award from the Academy of Marketing Science and the 1992 American Marketing Association/Richard D. Irwin Distinguished Marketing Educator Award.     

The Entrepreneurship Industry: Influences of the Goods and Services Marketed to Entrepreneurs

This paper constitutes the first comprehensive attempt to define and assess entrepreneurship as an industry, and it is the only study to date to empirically evaluate the extent to which the entrepreneurship industry (EI) is associated with entrepreneurial actions and outcomes. EI is defined as the goods and services explicitly intended for opportunity discovery and development by current and prospective entrepreneurs, an industry with $13 billion in annual revenue. In order to assess EI's influence, we employ a matched set comparison of EI consumers and nonconsumers, which reveals that high levels of EI consumption are associated with an increase in entrepreneurial activity but a decrease in performance and survival prospects. The findings address material gaps in existing frameworks by adding EI to the entrepreneurial contexts that exert a potent influence on the identification, development, and exploitation of opportunities.