Search

We demonstrate how the incentives of firms that partially own their suppliers or customers to foreclose rivals depend on how the partial owner can extract profits from the target (tunneling). Compared to a fully vertically integrated firm, a partial owner may obtain only a share of the target’s profit but influence the target’s strategy significantly. We show that the incentives for customer and input foreclosure can be higher, equal, or even lower with partial ownership than with a vertical merger, depending on how the protection of minority shareholders and transfer price regulations affect the scope for profit extraction., CEPA Discussion Papers; 57

We show that team formation can serve as an implicit commitment device to overcome problems of self-control. In a situation where individuals have present-biased preferences, any effort that is costly today but rewarded at some later point in time is too low from the perspective of an individual’s long-run self. If agents interact repeatedly and can monitor each other, a relational contract involving teamwork can help to improve an agent’s performance. The mutual promise to work harder is credible because the team breaks up after an agent has not kept this promise – which leads to individual (under-) production in the future and reduces an agent’s future utility. This holds even though the standard free-rider problem is present and teamwork renders no technological benefits. Moreover, we show that even if teamwork does render technological benefits, the performance of a team of present-biased agents can actually be better than the performance of a team of time-consistent agents.

This article presents the results of an analysis of the patent trading flows of small and large firms and the determinants of these firm's patent sale and acquisition decisions. We also examine whether these transactions lead to an excessive concentration of patent rights. We show that small firms disproportionately sell and acquire more patents than large firms, and find no evidence that patent trading brings about a significant concentration of patent rights in the hands of large firms. We find that the match between new patented innovations and the original inventor's patent portfolio plays an important role in how successful firms are at generating value from their patents, and in the decision to sell a patent. And among the traded patents, we show that patent acquisitions respond to complementarities between the acquired patented innovation and the buyer's technological capabilities to adopt it. Our empirical analysis uses a new, comprehensive data set that matches information on patent trades and the identity of patent owners over a patent's lifetime.

This paper examines the optimal structure of hierarchies when workers differ in the range of tasks they can perform. A hierarchical system may reduce costs by allowing most tasks to be handled by unskilled workers. This may however increase delay for those tasks which must pass through several layers before reaching the appropriate level. The paper characterises an optimal hierarchy when such a trade-off exists. Organizations typically have a hierarchical structure. In recent years, economists have investigated a number of explanations for this, for example the need to monitor workers,' the desire to exploit parallel processing by having agents work simultaneously on a project,2 the need to coordinate decisions,3 and so on. This paper explores another explanation for the prevalence of hierarchies: the desire to economize on skilled workers. A firm typically has many problems flowing in that require decisions, many of which do not need the attention of senior management. By employing relatively unskilled workers to deal with tasks initially, one may therefore be able to employ relatively few senior managers. For example, in a shop most customer queries can be dealt with by low-paid assistants, with only the more important problems passed on to supervisors. The drawback of such a hierarchy is that it may delay some decisions by making them pass through more than one layer of control rather than being dealt with immediately. The paper aims to explore the implications of this trade-off between cost and delay for the structure of hierarchies. There are of course many aspects of hierarchies. This paper focuses on a particular one which has been previously neglected. In the model considered, workers differ in their ability to make decisions. Abler workers are capable of making (good) decisions in a wider range of tasks than less able ones. There is no horizontal specialization into different jobs and so the only motivation for employing less able workers is that they command lower wages. Tasks pass through the levels of the hierarchy until they can be dealt with. Software support fits this framework well. Typically, when one contacts a company because of a problem with a package, the enquiry is initially dealt with by low-level staff. If they cannot solve the problem, they hand it on to the next level, who in turn hand it on to the next level if they cannot solve it and so on until it is dealt with. A large number of levels may create considerable delay. Similarly in hospitals in the U.K., routine deliveries of babies are usually dealt with by mid-wives. A junior doctor will be brought in if there is a problem and he in turn will call

This paper contributes to the debate on the adequate regulatory treatment of non-bank financial intermediation (NBFI). It proposes an avenue for regulators to keep regulatory arbitrage under control and preserve sufficient space for efficient financial innovation at the same time. We argue for a normative approach to supervision that can overcome the proverbial race between hare and hedgehog in financial regulation and demonstrate how such an approach can be implemented in practice. We first show that regulators should primarily analyse the allocation of tail risk inherent in NBFI. Our paper proposes to apply regulatory burdens equivalent to prudential banking regulation if the respective transactional structures become only viable through indirect or direct access to (ad hoc) public backstops. Second, we use insights from the scholarship on regulatory networks as communities of interpretation to demonstrate how regulators can retrieve the information on transactional innovations and their risk-allocating characteristics that they need to make the pivotal determination. We suggest in particular how supervisors should structure their relationships with semi-public gatekeepers such as lawyers, auditors and consultants to keep abreast of the risk-allocating features of evolving transactional structures. Finally, this paper uses the example of credit funds as non-bank entities economically engaged in credit intermediation to illustrate the merits of the proposed normative framework and to highlight that multipolar regulatory dialogues are needed to shed light on the specific risk-allocating characteristics of recent contractual innovations.

We incorporate trade in tasks a la Grossman and Rossi-Hansberg (2008) into a small open economy version of the theory of firm organization of Marin and Verdier (2012) to examine how offshoring affects the way firms organize. We show that the offshoring of production tasks leads firms to reorganize with a more decentralized management, improving the competitiveness of the offshoring firms. We show further that the offshoring of managerial tasks relaxes the constraint on managers but toughens competition, and thus has an ambiguous impact on the level of decentralized management and CEO wages of the offshoring firms. In sufficiently open economies, however, managerial offshoring unambiguously leads to more decentralized management and to larger CEO wages. We test the predictions of the model based on original firm level data we designed and collected of 660 Austrian and German multinational firms with 2200 subsidiaries in Eastern Europe. We find that offshoring firms are 33.4% more decentralized than non-offshoring firms. We find further that the average fraction of managers offshored reduces the level of decentralized management by 3.1%, but increases the level of decentralized management by 4% in industries with a level of openness above the 25th percentile of the openness distribution. Lastly, we find that one additional offshored manager lowers CEO wages relative to workers by 4.9%.

The tax laws of most developed countries are debt biased since firms can deduct interest on debt but not on equity. This bias is known to distort investment decisions. However, less is known about how the debt tax shield affects the ownership of assets when bidders differ financial expertise and thus in optimal use of leverage. We show that the debt tax shield need not always distort ownership efficiency. Assets end up with the socially preferred owner when differences in financial and productive expertise between bidders are small and better financial expertise reduces expected bankruptcy costs.

The EU has been promoting unbundling of the transmission grid from other stages of the electricity supply chain with the aim of fostering competition in the upstream stage of electricity generation. At presence, ownership unbundling is the predominant form of unbundling in Europe. However, the benefits of increased competition from ownership unbundling of the transmission grid may come at the cost of lost vertical synergies between the formerly integrated stages of electricity supply. The policy debate generally neglects such potential costs of unbundling, yet concentrates on its benefits. Therefore European cross-country evidence may shed some light on this issue. This study helps fill this void by empirically estimating the magnitude of economies of vertical integration (EVI) between electricity generation and transmission based on a quadratic cost function. For this purpose we employ novel firm-level panel data of major European electricity utilities. Our results confirm the presence of substantial EVI, which put the policy measure of transmission ownership unbundling into question.

It is often suggested that incentive schemes under moral hazard can be gamed by an agent with superior knowledge of the environment, and that deliberate lack of transparency about the incentive scheme can reduce gaming. We formally investigate these arguments in a two-task moral hazard model in which the agent is privately informed about which task is less costly for him to work on. We examine two simple classes of incentive scheme that are “opaque” in that they make the agent uncertain ex ante about the values of the incentive coefficients in the linear payment rule. We show that, relative to deterministic menus of linear contracts, these opaque schemes induce more balanced efforts, but they also impose more risk on the agent per unit of aggregate effort induced. We identify settings in which optimally designed opaque schemes not only strictly dominate the best deterministic menu but also completely eliminate the efficiency losses from the agent’s better knowledge of the environment. Opaque schemes are more likely to be preferred to transparent ones when i) efforts on the tasks are highly complementary for the principal; ii) the agent’s privately known preference between the tasks is weak; iii) the agent’s risk aversion is significant; and iv) the errors in measuring performance on the tasks have large correlation or small variance. (JEL D86, D21, L22)

The use of contractual engineering to create channels of credit intermediation outside of the realm of banking regulation has been a recurring activity in Western financial systems over the last 50 years. After the financial crisis of 2007 and 2008, this phenomenon, at that time commonly referred to as ‘shadow banking’, evoked a large-scale regulatory backlash, including several specific regulatory constraints being placed on non-bank financial institutions (NBFI). This paper proposes a different avenue for regulators to keep regulatory arbitrage under control and preserve sufficient space for efficient financial innovation. Rather than engaging in the proverbial race between hare and hedgehog that is emerging with increasingly specific regulation of particular contractual arrangements, this paper argues for a normative approach to supervision. We outline this approach in detail by showing that regulators should primarily analyse the allocation of tail risk inherent in the respective contractual arrangements. Our paper proposes to assign regulatory burdens equivalent to prudential banking regulation, in case these arrangements become only viable through indirect or direct access to an (ad hoc) public backstop. In order to make the pivotal assessment, regulators will need information about recent contractual innovations and their risk-allocating characteristics. According to the scholarship on regulatory networks serving as communities of interpretation, we suggest in particular how regulators should structure their relationships with semi-public gatekeepers such as lawyers, auditors and consultants to keep abreast of the real-world implications of evolving transactional structures. This paper then uses the rise of credit funds as a non-bank entities economically engaged in credit intermediation to apply this normative framework, pointing to recent contractual innovations that call for more regulatory scrutiny in a multipolar regulatory dialogue.

We study how firms differ from their competitors using new time-varying measures of product differentiation based on text-based analysis of product descriptions from 50,673 firm 10-K statements filed yearly with the Securities and Exchange Commission. This year-by-year set of product differentiation measures allows us to generate a new set of industries and corresponding new measures of industry competition where firms can have their own distinct set of competitors. Our new sets of industry competitors better explain specific discussion of high competition by management, rivals identified by managers as peer firms and firm characteristics such as profitability and leverage than do existing classifications. We also find evidence that firm R&D and advertising are associated with subsequent differentiation from competitors, consistent with theories of endogenous product differentiation.

Relational contracts – informal agreements sustained by the value of future relationships – are integral parts of global production processes. This paper develops a repeated-game model of global sourcing in which final good producers decide whether to engage with their suppliers in relational contracting and whether to integrate a supplier into a firm's boundaries or deal with the latter at arm's-length. The model predicts that the relative prevalence of vertical integration increases in the long-term orientation of the headquarters' and suppliers' managers. It further suggests that the share of a foreign subsidiary owned by a final good producer increases in the headquarters' long-term orientation. Combining industry-level data from the U.S. Census Bureau's Related Party Trade database with measures for long-term orientation from Hofstede et al. (2010) and the World Management Survey, I find empirical evidence supportive of the positive link between the long-term orientation of cooperation parties and the relative prevalence of vertical integration. Using information on managerial composition of firms and ownership stakes from the Bureau van Dijk's Orbis database, I find that firms led by long-term oriented managers own higher shares of their foreign subsidiaries.

This essay analyses the relationship between corporate governance practices and Chief Executive Officer (CEO) wages from a sample of Portuguese listed companies over the period from 2002-2011. The relationship between CEO total compensation and shareholders return, firm characteristics, CEO characteristics, board of directors and shareholders characteristics is analysed. It is found that firm specific factors accounts for the majority of the variance in total CEO pay, while firm performance accounts for less than 5%. It is also found that the CEO characteristics, board of directors’ structures, and shareholders features are related with the CEO pay. The policy implications of these results are then derived.

Entrepreneurship is an important intangible asset of nations. The relatively recent progress in its measurement, mainly with the Global Entrepreneurship Development Index (GEDI), suggests that previous questions related to its determinants and mainly its relationship to corruption, namely the Corruption Perception Index (CPI) needs to be re-addressed. The objective of the present paper is to assess the links between GEDI and CPI using the most recent (2013-2014) published data on world countries included in the GEDI. The relationships are estimated overall countries included in the GEDI and over groups of countries. The attained results show consistently the positive effect of corruption reduction on GEDI and thus the positive relationship between an intangible good that is entrepreneurship and an intangible bad that is corruption. These results confirm that the recent available data are supportive of anti-corruption policies that are likely to favor the growth of entrepreneurial activities with promoting market development and ensuringthe growth of both tangible and intangible components of the wealth of nations. Key words: Entrepreneurship, corruption, determinants, anti-corruption policies.

The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks’ remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank’s top executives, and why direct intervention in trader compensation is called for. We present a model with both trader moral hazard and adverse selection on trader abilities. We demonstrate that as competition on the labour market for traders intensifies, banks optimally offer top traders contracts inducing them to take more risk, even if banks fully internalize the costs of negative outcomes. In this way, banks can reduce the surplus they have to offer to lower ability traders. In addition, we find that increasing banks’ capital requirements does not unambiguously lead to reduced risk-taking by their top traders.

Les réformes structurelles engagées en France ont une grande cohérence. Elles visent à développer un nouveau modèle économique et un nouveau modèle social basés sur le développement de l’entrepreneuriat et une individualisation des parcours professionnels censés favoriser l’innovation et la croissance en rupture radicale avec ce qui est parfois désigné comme l’ancien monde. L’analyse et l’expérience rappellent à une certaine réalité de l’entreprise et de la finance et conduisent à formuler un diagnostic moins optimiste faisant craindre une montée du dualisme au sein de la société allant à l’encontre du but recherché.

In this paper we develop a theory of patenting in which a firm preserves its reputation by only applying for a patent whenever a truly patentable idea has been generated. Firms have a short-run incentive to deviate and receive additional rents from unworthy pending patents, as well as potential rents from PTO mistakes in granting patents. We provide conditions for reputation to be preserved in equilibrium and analyze which market environments are favorable for such an equilibrium to exist. In particular, we analyze the merits of different patent systems.

This paper examines the factors that give rise to intermediaries in exporting and explores the implications for trade volumes. Export intermediaries such as wholesalers serve different markets and export different products than manufacturing exporters do. Wholesalers are more prevalent in markets with higher destination-specific fixed costs and focus on products that are less differentiated, have lower contract intensity, and have large sunk entry costs. Aggregate exports to destinations with high shares of indirect exports are less responsive to changes in the real exchange rate than are exports to markets served primarily by direct exporters.

This study focuses on investigating factors which influence successful espousal of Knowledge Management Systems (KMS) in India from a Micro, Small and Medium Enterprise’s (MSME’s) viewpoint. MSME sector in India contributes about 7.5% of India’s GDP accounting for about 38% of the manufacturing output and 40% of the exports of the country. The study reviews MSME sector in India, literature pertaining to emergent Knowledge Management Systems and proposes a conceptual model having qualities of Technology Acceptance Model, Theory of Reasoned Action and Social Cognitive Theory. The prelude findings of the study based on literature aids us in laying out factors influencing successful espousal of KMS in a developing country like India from a MSME’s viewpoint. Empirical inquiry of the developed model in future would have practical implication and will facilitate MSMEs (which are major contributors to improvement of the economy) in successful espousal of Knowledge Management Systems and garner the latent benefits.

I develop an intra-firm theory of group design and teamwork in the presence of peer effects. The purpose is to understand the interlinkages between intra-firm group formation and the extent of wage dispersion within the firm. Given a set of heterogeneous workers, the manager faces the challenge of allocating workers into endogenous groups (or teams) to maximize total profits. The optimal allocation features locational proximity between workers with similar productivity levels. I discuss the implications of this allocation on intra-firm wage outcomes. The main idea is that the wage paid to a single worker is determined by the productivity levels of the teammates as well as the worker's own productivity. This means that team composition is critical to understanding the within-firm productivity and wage differentials. I show that intra-firm wage dispersion is more pronounced when workers are more alike within each team and more different across the teams. I provide numerical exercises designed to illustrate how the model's predictions change as the key parameters are varied. One striking result is that a rise in the correlation between education and productivity (this can be interpreted as hiring workers with vocational education) leads to a decline in wage inequality within the firm. I also show that changes in the dispersion of worker efficiency lead to non-monotonic effects on within-firm wage inequality.

The purpose of this paper is the conceptualisation of the notion of enterprises’ structural power. It allows to draw the attention to the process of diversification of enterprises and building of complex and multidimensional ownership structures as possible sources of the increase in the companies’ power and the possibility of its use and abuse in order to limit the competition and perform better on the market. The concept of structural power is a part of the scientific discussion on the sources and possibilities of using enterprises’ market power, and fits into the current research on one of the fundamental problems of economic theory: how to protect competition internationally and, therefore, determine the limit when the natural and desirable behaviour of enterprises aimed at increasing their international competitiveness begins to distort competition and adversely affect economic development. The analysis shows that the potential influence on other market participants may arise not only from the firm’s position on the relevant market and other factors related to its specificity, but also from the various types of linkages between firms.

I empirically examine the impact of the 1948 Paramount antitrust case on ticket prices using a unique data set collected from Variety magazine issues between 1945 and 1955. With weekly movie theater information on prices, revenues and theater ownership for an unbalanced panel of 393 theaters located in 26 different metropolitan areas, I find evidence that vertically integrated theaters charged lower prices and sold more admission tickets than non-vertically integrated theaters. I also find that the rate at which prices increased in theaters were slower before vertical separation than it was after separation. These findings together with institutional and antitrust case aftermath detail are consistent with the prediction that vertical integration lowers prices through the elimination of double-marginalization. A back of the envelope calculation suggests that losses in consumer surplus due to the Supreme Court resolution suggesting theater vertical separation from major studios were sizable.

The purpose of this paper is to show how trust as an organizational value contributes to employee competence utilization in the case of innovation capability. Thus, it is the objective of this paper to analyze the positive impacts, but also potential limits of trust in business management. The research paper uses two different quantitative empirical studies drawn from German and Austrian mid-sized companies to empirically test this interrelation. As a result, the paper determines particular aspects of trust such as accountability, shared norms and the ability to take responsibility to be interrelated with the usage of employee competences and underlines a positive connection between product innovation performance and trust. However, the trust concept needs enriching elements to be balanced towards a feeling of mutual reliance and support creativity instead; inclusions of bridging social capital, elements of distrust and a pioneering spirit are to be mentioned here.

The Philippines pioneered the establishment of automotive assembly in South-east Asia in the 1950s. But Thailand, Indonesia and Malaysia lead the region since the 1990s. The foremost reasons for the decline are policy incoherence and unchecked inflows of smuggled cars, which are reflected in the erosion of the domestic automotive components supply base. Japanese assemblers are increasingly sourcing them from abroad through global production networks (GPNs), which have also made the Philippines a global producer of selected auto parts. Institutional support is necessary for the Philippines to take advantage of GPNs to catching up with the leading countries.

Differents modeles territoriaux d’innovation ont mis en perspective la facon dont les systemes regionaux se developpent a partir de dynamiques d’innovation et d’apprentissage propres a certains milieux locaux. Cet article reconsidere cette approche afin de tenir compte de la mobilite plus grande des ressources et comprendre comment l’innovation est constitutive d’un systeme de valuation socio-economique plus large. Proposant un debat theorique elargi et une lecture comprehensive du cas de l’industrie photovoltaique en Suisse occidentale, le concept de milieu innovateur est ici revisite afin de prendre en compte un interet economique, politique et social toujours plus marque pour les questions de developpement durable. Le terme de « milieu valuateur multi-local » est propose comme cadre de recherche exploratoire afin de nourrir de nouveaux debats theoriques et politiques en matiere d’innovation et de territoires.Codes JEL : O31, L22, L26

We examine the relationship between the organization of a multi-divisional firm and its ability to adapt production decisions to changes in the environment. We show that even if lower-level managers have superior information about local conditions, and incentive conflicts are negligible, a centralized organization can be better at adapting to local information than a decentralized one. As a result, and in contrast to what is commonly argued, an increase in product market competition that makes adaptation more important can favor centralization rather than decentralization. (JEL D21, D23, F23, L22)

Can formal contracts help resolving the holdup problem? We address this important question by studying the holdup problem in repeated transactions between a seller and a buyer in which the seller can make relation-specific investments in each period. In contrast to previous findings, we demonstrate that writing a simple fixed-price contract based on product delivery is of value even when relation-specific investment is purely cooperative. In particular, there is a range of parameter values in which a higher investment can be implemented only if a formal fixed-price contract is written and combined with an informal agreement on additional payments or termination of future trade, contingent upon investments. Furthermore, we show that under an additional natural assumption, focusing our attention on fixed-price contracts as a form of formal contracts is without loss of generality. The key driving force of our result is a possibility that the threat-point effect is negative, i.e., the relation-specific investment decreases the surplus under no trade. This possibility, although very plausible, has been largely ignored in previous theoretical/empirical analyses of the holdup problem.

Economists have long debated the relationships between market structure of banking sector and the profitability. General consensus asserts that more concentrated market is associated with higher profitability: banks with higher market share generally achieve higher profits. This empirical evidence can however hinge on two opposite explanations: in the first case banks increase their market share (via mergers and acquisitions) in order to exploit the resulting stronger market power and impose higher prices to their clients; the second explanation tells that more cost-efficient banks are able to lower the prices applied to their clients and therefore to gain new clients and finally enlarge their market share. In both cases there is a positive link between market share and profitability, but in the former what actually plays a crucial role is a non-competitive force (Relative Market Power Hypothesis, henceforth RMP), in the latter the relationship is driven by the greater efficiency of banks which enlarge their market share by reducing prices (X-Efficiency Hypothesis, ESX). We run a 4-years panel data analysis (2008-2011) in order to disentangle the above alternatives hypothesis (RMP versus ESX) for the Italian market. First we estimate the cost efficiency for a sample of more than 200 banks by applying the Stochastic Frontier Analysis (SFA). In the second step we regress bank spreads on efficiency scores and market structure variables in order to identify which process leads the price setting of Italian banks. Difference in the legal organization of bank (mutual, cooperative, and commercial banks) and type of business relationships established are controlled for.

This article examines the development of China's automotive industry. The evidence shows that integration in global production networks has stimulated upgrading of technological capabilities among automotive firms. However, the competitiveness and intra-industry analyses show mixed results. Although intra-industry trade in automotive products has improved since 2000, the trade competitiveness of completely built-up vehicles has largely remained in low value-added activities. Nevertheless, firm-level evidence shows that the industry has undergone considerable upgrading, albeit in low value-added activities. Trade integration and host-country institutional support have been the prime driving forces of technological upgrading in the automotive industry in China.

This article examines the transformation of clothing manufacturing in China with a focus on institutional support, technological upgrading and global production chains. Evidence shows that reforms and integration into global production chains have rapidly expanded China's exports but these have also driven the relocation abroad of Chinese clothing firms. Global integration has motivated clothing firms to upgrade through learning, adoption and innovation. Hence, despite improvements in technological capabilities the share of clothing value-added in manufacturing has gradually declined. Also, China has increasingly faced industrial structural change from clothing to the capital goods, real estate and high-tech sectors.

This article examines the relationship between host-site institutional support and regional trade linkages on firm-level technological capabilities in the semiconductor industry in Malaysia. An evolutionary perspective was used to measure technological capabilities using knowledge embodied in machinery, organization, processes and products. The results show that host-site institutional support, and regional trade linkages were correlated with technological upgrading. The relationship between host-site institutional support and technological upgrading was stronger than that between regional trade linkages and technological upgrading. The results show that host site institutional support is more important than regional integration in influencing firms’ capacity to upgrade their technological capabilities.

This article examines the relationships between host-site institutional support and firm-level technological upgrading, and between technological upgrading and domestic production linkages in the semiconductor industry in Singapore. An evolutionary perspective was used to measure technological capabilities using knowledge embodied in machinery, organization, processes and products. The results show that host-site institutional support is important for technological upgrading, and technological capabilities are positively correlated with domestic linkages. Also, domestic linkages rather than regional linkages were correlated with technological upgrading, which is a consequence of Singapore's sophisticated infrastructure compared to its neighbours in South-east Asia.

This article examines the relationship between institutional support and regional production linkages, and technological capabilities and firm performance in the garment industry in Laos. The evidence shows that garment firms in Laos have achieved considerable technological upgrading, and that firm performance and technological capabilities are determined by export-intensity. Firms’ technological capabilities are determined by the quality of host-site institutional support, while foreign firms have invested little to upgrade human capital in Laos. In addition, firms of all ownership structure have invested little in R&D in Laos.

This study analyses the influence of host-site institutional support, foreign ownership and regional production linkages on firm-level technological capabilities using data from automotive firms in Indonesia. The results show that host-site institutional support and foreign ownership are positively correlated with technological capabilities. In addition, regional linkages show a significant and positive link on technological capabilities. However, regional linkages and foreign ownership explain more strongly technological capabilities than host-site institutional support in automotive firms in Indonesia. This evidence suggests that the supporting high tech environment require further strengthening to stimulate higher technological capabilities in the automotive industry in Indonesia.

We study contractual arrangements that support an efficient use of time in a knowledge-intensive economy in which agents endogenously specialize in either production or consulting. The resulting market for advice is plagued by informational problems, since both the difficulty of the questions posed to consultants and the knowledge of those consultants are hard to assess. We show that spot contracting is not efficient because lemons (in this case, self-employed producers with intermediate knowledge) cannot be appropriately excluded from the market. However, an ex ante, firm-like contractual arrangement uniquely delivers the first best. This arrangement involves hierarchies in which consultants are full residual claimants of output and compensate producers via incentive contracts. This simple characterization of the optimal ex ante arrangement suggests a rationale for the organization of firms and the structure of compensation in knowledge-intensive sectors. Our findings correspond empirically to observed arrangements inside professional service firms and between venture capitalists and entrepreneurs.

Documentation P. Bartoli, UMR 1110 MOISA Marchés, Organisations, Institutions et Stratégies d'Acteurs, Montpellier (S WPM 2015-3); Our communication aims to present the key concepts and methodological tools mobilized by the analysis of global value chains. First, we present the evolution of CVG analysis positioning based on a historical development of this approach. Thus, Particular emphasis will be done on the definition of key concepts: dominant players, upgrading, governance modes, etc.(Gereffi and al., 2005). Then, using Palpacuer and Balas (2010) and Trienekens (2011) frameworks, we introduce some methodological tools associated with this type of analysis. This will allow us to identify the specific characteristics of the larger models of GTC as the determinants of governance modes and profiles of key players. Finally, we illustrate our analysis with examples of fresh tomatoes CGV in several Mediterranean countries (Champion, 2014; Tozanli, El Haddad, 2007) and poultry sector in Algeria (Kaci, Cheriet, 2013). These comparisons of the GCS in these countries allow a better coordination of inter-firm relationships based view analysis (Gereffi and al., 2005). They also allow us to identify the potential of these explanatory analysis tools and draw some application perspectives for the analysis on the food field in developing countries (Temple and al, 2009, Temple and al., 2011 and 2011; Rastoin, Ghersi, 2010).; L’objet de cette intervention est de présenter les concepts clés et les outils méthodologiques mobilisés par les analyses de Chaînes globales de valeur. Dans un premier temps, nous ferons un rappel du positionnement de la démarche CGV en nous basant sur une lecture historique du développement de ces analyses. Un accent particulier sera ainsi mis sur la définition des notions clés : acteurs dominants, upgrading, modes de gouvernances, etc. (Gereffi et al, 2005). Ensuite, en nous basant sur les travaux de Palpacuer et Balas (2010) et de Trienekens (2011), nous présenterons quelques outils méthodologiques liés à ce type d’analyse. Cela nous permettra de dégager les spécificités des grands modèles de CGV selon les déterminants des modes de gouvernance et les profils des acteurs clés. Enfin, nous illustrerons nos propos par des exemples d’analyse des CGV de tomates fraiches dans plusieurs pays méditerranéens (Champion, 2014 ; Tozanli, El Haddad, 2007), et de la filière avicole en Algérie (Kaci, Cheriet, 2013). Ces illustrations permettront de dégager quelques éléments de comparaison des CGV dans ces pays mais également de faire une lecture plus fine des relations de coordination inter-firmes (Gereffi et al, 2005). Elles nous permettraient également de rendre compte du potentiel explicatif de ces outils d’analyse et d’esquisser quelques perspectives d’application pour l’analyse portant sur le champ alimentaire dans les Pays en Voie de Développement (Temple et al, 2009 ; Temple et al, 2011 ; Rastoin, Ghersi, 2010).

In the paper the trade-offs among endogenous transaction costs caused by two-sided moral hazard, exogenous monitoring cost, and economies of specialization are specified in a Grossman, Hart and Moore (GHM) model to absorb Maskin and Tirole's recent critique and Holmstrom and Milgrom's criticism of the model of incomplete contract. The extended GHM model allowing incomplete contingent labor contract as well as complete contingent trade contract of goods is used to explore the implications of structure of ownership and residual rights for the equilibrium network size of division of labor and productivity.

We analyze how consumer preferences for one-stop shopping affect the (Nash) bargaining relationships between a retailer and its suppliers. One-stop shopping preferences create 'demand complementarities' among otherwise independent products which lead to two opposing effects on upstream merger incentives: first a standard double mark-up problem and second a bargaining effect. The former creates merger incentives while the later induces suppliers to bargain separately. When buyer power becomes large enough, then suppliers stay separated which raises final good prices. We also show that our result can be obtained when wholesale prices are determined in a non-cooperative game, under two-part tariffs and when products are substitutable.

Suppliers play a major role in firms' innovation processes. We analyse ownership and technology choices in vertical R&D collaborations. Under non-contractible R&D outcomes, trade-offs arise between R&D specifically designed towards a manufacturer (increasing investment productivity) and a general technology (hold-up reduction). Stronger downstream competition shifts optimal ownership towards the supplier and favours contracting over ownership rather than specific performance contracts. Downstream ownership is combined with the specific technology if the supplier's expertise is more pronounced or the specific technology is more productive. Contracts incorporating exit clauses increase the gains from collaborations.

The paper aims at investigating the possible trajectories of regional clusters (industrial districts or local systems) in order to depict feasible strategies to cope with globalization. First, same relevant stylized facts on the new structure of global market are presented in order to illustrate the new competitive framework the SME must face. Second, the concept of ‘complete productive process’ is introduced to characterize the special setting is necessary for the survival of the regional systems of SME. Said briefly, a local cluster needs to co-produce values, capabilities, institutions: its very identity. Since local systems are essentially ‘cognitive systems’, they need to go global not as single firm but as a system. To accomplish this difficult task they must resort to a collective and cooperative behaviour. The paper tries to fill this gap introducing the concept of ‘Collective Local Entrepreneurship’, a reference point, a device to whom anchor the strategic pragmatism necessary to regional clusters to cope with globalization. The renewal of the local ‘ecosystems’ within the international networks (at all different levels) appears to be a general objective. A strong public-private partnership emerges as a strategic commitment. In this perspective the paper tries to capture, as a conclusion, the potential dynamics of the four evolutionary trajectories, which the regional clusters are called upon to deal with.

This paper examines markets, firms, and the law as alternative institutional arrangements for organizing transactions that involve transaction-specific investments and uncertain performance. The analysis is the logical extension of Coase's seminal analysis of the market-firm boundary on one hand, and the market-law boundary on the other. It thus combines insights from the literature on industrial organization and law and economics. The result is a unified framework that reveals the relative advantages and disadvantages, within a fairly simple economic setting, of market exchange, court ordering (contracts), and internal governance (agency).

This paper empirically investigates the relation between vertical integration and video game performance in the US video game industry. For this purpose, we use a widely used data set from NPD on video game monthly sales from October 2000 to October 2007. We complement these data with handly collected information on video game developers for all games in the sample and the timing of all mergers and acquisitions during that period. By doing this, we are able to separate vertically integrated games from those that are just exclusive to a platform. First, we show that vertically integrated games produce higher revenues and sell more units at higher prices than independent games. Second, we explore the causal effect of vertical integration and find that, for the average integrated game, most of the difference in performance comes from better release and marketing strategies that soften competition and not from ex-ante differences in video game quality. We also find that exclusivity is associated with lower demand. Our estimates suggest that consumers value vertical integration features in their games between 4 and 34 dollars per game.

We extend the propertyrights framework to allow for a separation of the ownership rights of access and veto and for sequential investment. Parties investing first do so before contracting is feasible. It is possible, however, that parties investing second can share (at least some of) their investment costs. Along with this costsharing effect, the incentive to invest is affected by a strategic effect generated by sequential investment. Together these effects can overturn some of the predictions of the propertyrights literature. For example, the most inclusive ownership structure might not be optimal, even if all investments are complementary.

This study documents the changing organizational complexity of bank holding companies as gauged by the number and types of subsidiaries. Using comprehensive data on U.S. financial acquisitions over the past thirty years, the authors track the process of consolidation and diversification, finding that banks not only grew in size, but also incorporated subsidiaries that span the entire spectrum of business activities within the financial sector. Their analysis shows that bank holding companies added banks to their firms in the early 1990s, but gradually expanded into nonbank intermediation through acquisitions of already‐formed subsidiaries in the years following. They view this emergence as consistent with a move toward a model of finance oriented to securitization, and consider the implications of this new complexity for supervision and resolution.

Csehország, Magyarország, Lengyelország és Szlovákia az elmúlt évtizedekben beépült a multinacionális vállalatok globális hálózataiba, amelyek meghatározó szerepet töltenek be a világkereskedelemben. A globális értékláncok elmélete ma már jelentős helyet kap a nemzetközi közgazdaságtani szakirodalomban. E cikk ízelítőt ad a globális értékláncok vizsgálatának elméleti hátteréből, majd részletesen elemzi a négy kelet-közép-európai ország kereskedelmi kapcsolatait és azok szerkezeti változásait az ázsiai térségekkel. Ezekben a kereskedelmi folyamatokban megnyilvánulnak a visegrádi országok - globális értékláncokban elfoglalt helyük szerinti - különbségei is. Journal of Economic Literature (JEL) kód: F10, F23, L22., The Czech Republic, Hungary, Poland and Slovakia, four Visegrád" countries, have become integrated into the global networks of multinational companies that play a determining role in the world trade. An important place in international economic literature is held by the theory of global value chains. The article provides a taste of this theoretical background before analysing in detail the trade contacts of the Visegrád countries with Asia and their structural changes over the past decade. This trade reveals differences among them in their positions in global production chains.

Size and complexity are customarily viewed as contributing to the too-big-to-fail status of financial institutions. Yet there is no standard accepted metric for the complexity of a “typical” financial firm, much less for a large firm engaged in global finance. This article provides perspective on the issue of complexity by examining the number, types, and geographical spread of global financial institutions’ affiliates. The authors show that standard measures of institution size are strongly related to total counts of affiliates in an organization, but are more weakly aligned with other measures of complexity. Considerable heterogeneity exists across global financial organizations in measures of business and geographic complexity. Some business models and geographic tendencies have strong regional characteristics that are linked to the organization’s parentage. Since complexity is distinct from organizational size, the authors argue that its consequences and its policy relevance warrant much broader study.

The contemporary society was given a new feature, called virtual aspect, that gets involved into the daily life of people at a speed close to that of the sun. The Internet and nowadays technologies have become an absolutely perfect integrated part, offering better circumstances for development and a higher standard of life. All these areas have become basic in the international process of globalization and companies are looking to expand the possibilities of getting a higher income with lower costs. Internet opportunity called Wikinomics, gains momentum. The world evolves, people are becoming more interested and captivated by the idea of providing "something" to those companies. Crowdsourcing or outsourcing to online communities through social media and forums not only becomes the decisive factor in making important decisions in economic companies and in general, but it becomes a normal assimilation of the intellectual power of crowds in solving challenges of modern management in any field such as arts, culture, science, education, government and the economy, on the high current paths.

We use broad-based yet detailed data from the economy's goods-producing sectors to investigate firms' ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: roughly one-half of upstream establishments report no shipments to downstream establishments within the same firm. We propose an alternative explanation for vertical ownership, namely that it promotes efficient intrafirm transfers of intangible inputs. We show evidence consistent with this hypothesis, including the fact that, after a change of ownership, an acquired establishment begins to resemble the acquiring firm along multiple dimensions. (JEL G32, G34, L14, L22, L60, M11)

In order to analyze the optimal degree of privatizing an upstream public firm, this paper sets up a vertically related market that consists of an upstream mixed oligopoly with one public firm and m private firms and a downstream oligopoly with n private firms. The major findings of this paper are as follows: If the marginal production cost of input increases slowly (rapidly), then the optimal degree for privatizing a public upstream firm increases (decreases) with the number of downstream firms. If the marginal production cost of input increases moderately, then the optimal degree for privatizing the public upstream firm first increases and then decreases with the number of downstream firms. If the marginal production cost of input is constant, then the optimal degree for privatizing a public upstream firm always increases with the number of downstream firms.

Total Quality Management denotes a path by which - both in a stable and a transitional environment, in a professional and scientific way and by applying a variety of methods and techniques, through constant improvements and involvement of all employees - one could get to a model that enables a simultaneous achievement of the top quality level on one hand, and the top management level, on the other. Total Quality Management is a paradigm of business success in the entire world because its set up, inter alia, improves internal functions of an organisation, instils confidence in customers and triggers improvement chain reactions with suppliers and stakeholders. Quality is the foundation and client orientation is the base of the entire concept of total quality management. Placing customers at the centre is the main idea behind the entire quality concept around which everything is built. Improving the capacity of an organization to understand and meet the actual customer needs, both stated and implied, is the main objective of the total quality management. Teamwork and team leadership play a specific role in the total quality management, top managers have the key responsibilities, and activities of the medium and lower level managers together with all employees are of immeasurable significance. Managing the teamwork within the total quality management is not only a requirement for its set up, development and implementation, but also for its survival. Total Quality Management is a managerial philosophy and a mode of running a business in order to achieve success.