High Entry Costs Research Articles

How Do Innovations Affect Mergers and Acquisitions—Evidence from Finland?

We have analysed whether innovations in a firm's possession increase a firm's propensity to buy other firms and, on the other hand, whether this possession attracts other firms so that they buy the firm concerned. Our results suggest that in the heavily investing processing industries high entry costs and the incumbency of all the firms make more efficient firms—the possessors of innovations—acquire inefficient firms. On the other hand, in the non-processing industries innovators become, according to our findings, easily purchased by the other firms whose strength obviously lies in other areas than in innovative activity.

Catch-Up and Competitiveness in China: The Case of Large Firms in the Oil Industry. By Jin Zhang. [London and New York: RoutledgeCurzon, 2004. xx +230 pp. $114.95. ISBN 0-415-33321-0.

Jin Zhang's study of the oil industry examines the challenges China faces in its efforts to create indigenous firms capable of competing with the world's leading companies. The task of catching up with the international oil giants is daunting for China's oil firms not only because the global oil business is one with a high cost of entry in terms of experience (the top companies have been around the longest), but also because, as Zhang observes, they are chasing a moving target. The international oil industry of today is fundamentally different from that of the 1980s and early 1990s when the Chinese government embarked on its tortuous path to reform China's oil sector. The mergers that occurred between the world's major oil companies in the late 1990s created a smaller group of much larger companies at the apex of the international oil industry, greatly expanding the gap between these companies and China's aspiring giants. Furthermore, many state-owned firms have disappeared from the ranks of the world's leading oil companies, a development that runs counter to China's strategy of catapulting its “national champions” into this peer group.Zhang illustrates the magnitude of these challenges facing China's aspiring oil giants through her systematic comparison of BP and Shell with PetroChina and Sinopec, the partially-privatized subsidiaries of the state-owned China National Petroleum and Natural Gas Group Company (CNPC) and Sinopec Group respectively, on a number of key business and organizational criteria. At first glance, the lead these “super majors” have over the Chinese companies in terms of business capabilities such as financial performance, technological prowess and the quality of their reserve portfolios, is more striking than the advantage the super majors have in organizational capabilities such as structure and leadership. Indeed, the organizational structures of PetroChina and Sinopec resemble those of BP and Shell. Zhang notes, however, that beneath these superficial similarities lie two critical differences between the Chinese companies and the super majors, differences that arguably constitute the greatest obstacle to the Chinese oil companies “catching up” with the super majors.

Selective Enforcement of Copyright as an Optimal Monopolistic Behavior

We present a perfect Nash equilibrium in which the creator of a work, motivated by economic considerations, selectively enforces her own copyright. In fact, the creator may not only permit, but may strategically promote infringement of the copyright, thereby participating indirectly in predatory pricing, and so raising barriers to entry. Our model is highly applicable to the software industry, where relatively high entry costs and the relatively low cost of copyright infringement make this phenomenon likely. We further show the conditions under which exogenous intervention, through intensive enforcement of copyrights, increases social welfare. Finally, we explore some potential strategies for such legal intervention.

Value Enhancement in the Thai Tourism Industry-Implications of the Online Travel Business

Findings 1. Tourism contributes 6% of Thailand's GDP at 323.5 billion Baht - increasing at 6% per annum, in contrast to 3.4% for GDP (five-year compound averages); this topic demands close attention. 2. The value chain shows the travel intermediaries as a key extractor of revenues from end users and suppliers due to informational barriers. 3. Evolving from low-margin manufacturer to high-margin design and marketing provider is possible by developing domestic (online) travel intermediaries. 4. Travel intermediaries must progress from service of demand-supply matching and payment transferal, to demand enhancement, database analysis, and financial contract issuance for revenue and risk management. 5. The market structure of tourism is analogous to that of agriculture, railroads as well as airlines, characterized by high entry cost and low marginal cost with inadequate information flow between suppliers and consumers. This leads to destructive competition and/or intermediary exploitation, particularly when intermediaries have market power. 6. Dynamic pricing can be extended and managed by online intermediaries. 7. Contracts between intermediaries and hotel operators are comprised of pre-paid contracts and reserved allocations that may involve a fee analogous to an option premium; remaining capacity is sold on a free-sale basis analogous to commission sales. These contract prices exhibit characteristics of spot prices, forwards and options. 8. The agriculture industry resolved the price elasticity risk induced by market structure problems and separation of consumers from producers through the mechanism of forward and futures contracts. This approach offers great promise for the airline and hotel industries. 9. An analytical solution to the hotel operator's seasonal capacity allocation problem can be based on a linear/quadratic programming approach that determines the choice fixed or variable contracts and accommodates risk and seasonality. 10. An analytical solution to the intermediary's problem of assuring supply to meet predictable demand is based primarily of unconstrained maximization of expected revenues by choice of fixed or variable contracts. 11. Intermediaries can profit from economies of scale by developing and exploiting databases. This permits optimization of the agent's problem in contract choice as well as the hotel operator's problem, the latter solution being sold on a consulting basis to hotels lacking the capacity and expertise to analyze demand. 12. The key element in resolving contract choice is generating precise estimates of demand on a seasonal basis. Much of this is a combination of statistical analysis and personal experience and understanding of sub-markets. 13. An important ancillary aspect of the intermediary's operation is the design and marketing of alternative tourism experiences in order to balance seasonal disparities and increase domestic value-added capabilities. Specific recommendations 1. An intermediary should design and produce a scheduling tool, such as the example given, for the use of hotel operators in planning their capacity utilization. 2. An intermediary should select its own mix of supply contracts through a tool based on analysis of demand patterns and linked to revenue maximization, as indicated by the example given. The creation of futures markets with standard contracts in hotel rooms and air tickets would enhance the markets in both products and aid risk management.

Stepping In and Out of the International Market: Internationalisation of Technology-Oriented Firms in Germany and the UK

For small high-tech firms international orientation is regarded as crucial for growth and long-term survival. Even newly founded technology based firms (NTBFs) are often internationally active shortly after their inception (born globals). However, in order to create jobs and have a sustainable influence on (macro)economic development, continuous growth of NTBFs is needed and research must focus on the continuous role of internationalisation. Based on longitudinal data, this paper examines empirically the long-term internationalisation behaviour of German and British technology-oriented firms founded between 1987 and 1996. Applying logit models, I am able to identify firm-specific success factors that influence the probability of entry into and exit from the international market. The results show, for instance, that firms can overcome high entry costs by acquiring firm-specific assets. Similarly, firm-specific resources prevent high-tech companies from exiting the international market. The strategic role of investment in R&D is stressed in particular by the data.

Problems, Methods, and Theories in the Study of Politics, or What's Wrong with Political Science and What to Do About it

Our mandate is to engage in navel-gazing about the condition of political theory. I confess that I find myself uncomfortable with this charge because I think political theorists have become altogether too narcissistic over the past half-century. Increasingly, they have come to see themselves as engaged in a specialized activity distinct from the rest of political science-either a bounded subdiscipline within it or an alternative to it. Political theorists are scarcely unusual in this regard; advancing specialization has been a hallmark of most academic disciplines in recent decades. When warranted, it facilitates the accumulation of knowledge in ways that would not otherwise be achieved. In many physical, biomedical, and informational sciences, the benefits are visible in expanding bodies of knowledge that were scarcely conceivable a generation ago. Specialization has also proceeded apace in the human sciences, seen in the proliferation of dedicated journals, professional organizations and suborganizations, and esoteric discourses notable for their high entry costs to the uninitiated. Here tangible advances in knowledge are less easily identified, however. In political science, even when the new subfields fly interdisciplinary banners (as with the new political economy in much American and comparative politics, the turn to social theory in international relations, or to approaches from moral philosophy in theorizing about justice), those who have not paid the entry costs would be hard-pressed to

Asset Markets and Equilibrium Selection in Public Goods Games with Provision Points: An Experimental Study

This paper reports the experimental results of implicit pre-play communication on the equilibrium selection in threshold public goods game experiments. The existence of an asset market in which the right to participate in a public goods game with a provision point is auctioned off among a larger group in a first stage is found to enhance significantly the contribution to the provision of the public good in a subsequent second stage. Though, contributions declined on average in the repeated public goods game when subjects were endowed with the right to play, they increased when subjects purchased the right to play. Once reached the Pareto-dominant equilibrium in the second stage, the auction price at the first stage increased to its upper limit. Confronted with the high entry cost which induced the dissipation of all possible gains from the public goods game single subjects deviated from the equilibrium strategy. Yet, robustness of the full contribution equilibrium is proved since unilateral deviations from it did neither reduce the individual contributions to the provision of the public good in the subsequent periods nor sustained a lower entry price.

A Preach for a Breach: Promoting Copyright Infringements As An Optimal Monopolistic Behavior

We discuss and formally show a multi-period equilibrium in which, counter to preliminary intuition, a creator of a work, motivated by economic considerations, promotes breach of his own copyrights. In effect, by selectively enforcing copyrights, the creator is allegedly indirectly involved in predatory pricing, thereby, raising barriers to entry. We particularly refer to the software industry where the described phenomenon is likely due to the relatively high entry cost on the one hand, and the relatively low copyright infringement cost on the other hand. We further show the conditions under which an exogenous intervention by way of intensive enforcement of copyrights increases social wealth.

"Costless" regulation of monopolies with large entry cost: A game theoretic approach

A major issue within the realm of Antitrust policy is the regulation of existing monopolies. We describe a new potential indirect scheme for regulating a natural monopoly that arises from high entry cost. The approach involves minimal government intervention, and it is based on encouraging entry by offering to subsidize entry cost for potential competitors. We pose this issue as a four-stage non-cooperative game. Analysis of sub-game perfect Nash equilibria of the game reveals that the first best outcome is achieved as the unique equilibrium in which the monopolist prices at marginal cost and there is no entry. The regulation is “costless,” since no entry will occur and hence no subsidy will be paid.

ACCESS TO THE PAYMENTS SYSTEM FOR NON‐BANK PLAYERS

This paper is in six sections. The first outlines risks inherent in access to the payments system, while the second section discusses the four clearing streams within the payments system and the current state of access. The third section focuses on payments system reforms which have taken place to date, including access of non-bank DTIs and the adoption of real time gross settlement (RTGS). The fourth section outlines a system developed by smaller financial institutions to implement RTGS and overcome the high entry costs of participation, while the fifth section discusses further proposed reforms of the payments system, including access for non-DTIs. The final section concludes.

Occupational licensing and the transition from welfare to work

Occupational licensing laws erect barriers to entry into various labor markets, impeding the upward mobility of welfare recipients seeking to transition into employment. This paper, recognizing that labor market interventions have often been used precisely because of this effect, proceeds to examine various restrictions which directly affect low-skilled workers in the U.S. economy who now have stronger incentives to participate in labor markets in response to recent welfare policy reforms. Three distinct types of labor market restrictions are identified: (1) the licensing of professional, high-skilled occupations tends to crowd workers into lower-skilled occupations, lowering such wages and thus weakening work incentives among the welfare population; (2) quantity license restrictions (permits which set quotas limiting the overall number of suppliers in a market) suppress demand for low-skilled workers, and may substantially reduce work opportunities and, thus, incentives. Taxi license restrictions alone, for instance, may result in several hundreds of thousands of lost employment opportunities throughout the United States; and (3) quality license restrictions, where entrants face higher entry costs (typically through educational requirements above the requirements of the market), may paradoxically provide welfare recipients with enhanced opportunities for employment, particularly when coupled with job-training subsidies typically extended to welfare recipients. This we call a “de facto liberalization” of occupational licensure. While incumbent workers are certain to resist enhanced entry by welfare recipients into licensed occupations, vocational schools should aggressively support such entry, affording a possible realpolitik to the migration path envisioned. More interestingly, once entry has accelerated under de facto liberalization, occupational license rents will predictably decline, thus increasing the likelihood of explicit liberalization, and further opening labor markets to competitive entry.

Macromolecular architecture for the twenty first century‐new products from old monomers

AbstractDue to the high entry costs for new monomers, polymer products for the 21st century will mainly consist of the monomer mix we have now. The demand for new properties will therefore have to be satisfied by changes in macromolecular architecture. Examples which are discussed include: Block polymers (AB, ABA, (AB)n, ABC, tapered), star polymers (rigid, block, fexible), ladder polymers, graft or comb polymers (from macromonomers), hyperbranched polymers, hypercrosslinked polymers, sequential copolymers. and starburst dendrimers. In addition, control of chain stereo chemistry will increasingly come into play. Synthetic techniques for obtaining these architectural forms are discussed as well as, potential uses for these new products.

U.S. INSURERS' ENTRY INTO EUROPE'S SINGLE MARKET

The EC single market is one of the world's largest. It offers both opportunities and challenges to U.S. insurers wanting to expand their operations into that market. Some U.S. companies possess unique qualifications that give them a good competitive position vs. European companies. Greater financial capacity, extensive underwriting experience particularly in the area of environmental U.S. insurers have focused on their vast home market which is responsible for approximately 37 percent of global insurance premiums. pollution and product liability, unique products and services of special appeal to European consumers, and the ability to service integrated international insurance programs are just a few examples. However, certain barriers may stand in the way of U.S. insurers’ entry to Europe. High entry cost, regulatory constraints, keen domestic competition, the possibility of lower profit margins, and the likelihood of certain protectionist policies are examples of these barriers. U.S. insurers are also concerned about entering an unknown market with radically different cultural characteristics and considerable national differences still existing among its members which would require adapting their approaches to the peculiarities of each country's insurance market instead of being able to use their own ideas about methods of operation. Nonetheless, U.S. insurers should abandon their domestic orientation and conservative nature and seek to resolve those difficulties that hinder their path of entry to Europe. The EC market is too important to be ignored.

Demountable TAB-a new path for TAB technology

Despite its advantages, the proliferation of TAB technology in the high lead count single chip packaging world has been somewhat limited by factors such as high entry cost and complex board-level assembly methods. In the area of MCM's, the difficulty of rework/repair of TAB emerges as a serious limiter. The TAB package developed at Hewlett-Packard addresses these very issues by providing bumpless inner lead bonding and demountable outer lead connection (hence called Demountable TAB, or DTAB). In the present paper, a comprehensive compilation of the DTAB packaging scheme is presented. The package construction, assembly procedure, PC board design considerations, thermal performance, electrical characterization and reliability testing are presented in detail. >

Entry and Exit Over the Industry Life Cycle

This article presents a theoretical model of the rivalry between two firms in a market that undergoes a life cycle of growth and eventual decline. Firms in this market have the option of exit and reentry. In the equilibrium for the growth phase, high entry costs can act like high exit costs, thereby conveying a commitment advantage. For some parameter configurations, this advantage is sufficient to enable a high costfirm to preempt its lower cost rival. During the decline phase, the smaller duopolist is able to outlast its rival, provided that the smaller firm's reentry costs are positive.

THE ASSESSMENT: ECONOMIC POLICY FOR TRANSPORT

This paper considers the economic principles underlying contemporary British transport policy issues, and the contributions that recent theoretical and empirical work can make to assessing policy solutions. It discusses two alternative highly stylised approaches to transport policy: (1) transport services supplied by privately owned companies and financed by charges to users; (2) statutory, publicly owned transport monopolies. It considers the corresponding problems of market failure and regulatory failure. Types of market failures include circumstances where competitive solutions are either: (1) feasible but not achieved because of actions by companies; or (2) achieved but undesirable for various reasons; or (3) not feasible because the relevant sectors have natural monopolies and high entry costs. The authors conclude that both the stylised approaches that they analysed have serious drawbacks. The most important consequence of the nationalisation of UK transport in the late 1940s was significant inefficiency in production and pricing. The public transport deregulation of the 1980s resulted in significant product innovation and changes in the level and structure of prices. However, artificial restriction of competitive outcomes seems to be the most important source of regulatory failure.

Perspectives on the international commercial space infrastructure

Commercial space activities are emerging as a potentially important segment of the economy in the Western World. However, the high entry costs and the high technological risks are significant impediments to private sector investment in major commercial space segments, such as transportation, microgravity materials processing, and remote sensing. Governments throughout the Western World have developed or are establishing commercial space policies and the infrastructure to minimize the financial, technical, and institutional risks to private industry in commercial space ventures. At the same time, the private sector is also trying to do its share to support the overall space commercialization efforts. These initiatives for the microgravity segment are described and compared for the United States, Western Europe, and Japan.

OCR has a place in data processing

Automatic reading of machine-printed data has been available for several years, but now newer generations of optical character recognition equipment are capable of automatically reading and digitizing images of handprint, signatures, drawings, and even complete documents. OCR offers significant benefits and savings to large organizations who, even before they embark on the processing cycles, face high data entry costs. The article briefly describes the technology of OCR and outlines major application areas.