Implications For Entry Research Articles

The firm size-leverage relationship and its implications for entry and business concentration

Larger firms (by sales or employment) have higher leverage. This pattern is explained using a model in which firms produce multiple varieties, acquire new varieties from their inventors, and borrow against the future cash flow of the firm with the option to default. A variety can die with a constant probability, implying that firms with more varieties (bigger firms) have a lower variance of sales growth and, in equilibrium, higher leverage. In this setup, a drop in the risk-free rate increases the value of an acquisition more for bigger firms because of their higher leverage: they can (and do) borrow a larger fraction of their future cash flow. The drop causes existing firms to buy more of the new varieties arriving into the economy, resulting in a lower startup rate and greater concentration of sales.

Entry, exit, and the potential for resource redeployment

Research summary: Combining the concept of resource relatedness with the economic notion of sunk costs, we assess how the potential for resource redeployment affects market entry and exit by multi‐business firms. If the performance of a new business falls below expectations, a diversified firm may be able to redeploy its resources back into related businesses. In effect, relatedness reduces the sunk costs associated with a new business, which facilitates exit. This, in turn, has implications for entry: By decreasing the cost of failure, the potential for redeployment justifies the undertaking of riskier entries and greater experimentation. These dynamic benefits of relatedness are distinct from standard notions of “synergy.” To show support for this idea, we provide a mathematical model, descriptive data, and company examples.Managerial summary: The ability to redeploy resources inside the firm reduces the cost of entry “mistakes.” If a new business turns out to have poor profitability, the ability to redeploy more of its resources back into the firm's other businesses allows recycling of investment and can speed up the retreat. This reduces not only the cost of exit, but also the cost of entry. Managers should therefore be more willing to experiment and take risks in developing businesses that are more related to the firm's existing businesses, whereas if redeployment is likely to be difficult, managers should be cautious about entering. New businesses should be chosen in ways that facilitate redeployment, and managers should consider the implications of redeployment when setting the performance thresholds that justify entry and exit. Copyright © 2016 John Wiley & Sons, Ltd.

Unsuccessful patent application and cooperative R&D

We show that uncertainty in patent approvals may induce the firms to do cooperative R&D. With an exogenous probability of success in patent application, we show that, if all firms apply for patents under non-cooperative R&D, the firms prefer cooperative R&D than non-cooperative R&D for moderate (high) probabilities of success in patent applications, if the cost of patenting is small (large). We also show the implications of entry of non-innovating firms and endogenous probability of success in patent applications.

Intra-industry differences in vertical integration, heterogeneous costs and pricing: the case of web hosting

In many differentiated product industries, both traditional and “new economy” activities, vertically integrated firms also supply inputs to apparent rivals in the downstream business. This generates heterogeneity between low- and high-sunk cost suppliers with implications for entry and competitive conduct. The web hosting market is typical with primary suppliers operating alongside resellers who rent server space from them. We explore the impact of competition in US hosting using a unique dataset covering 15,000 packages offered by 3,500 firms. The results suggest price is sensitive to competitor clustering in quality space; an outcome consistent with easy entry for resellers with ultra-low fixed costs.

Advertising and Entry: The Case of Physician Services

This paper examines the entry implications of physician advertising. Evidence suggests that advertising inhibits entry into this market. Nevertheless. experienced physicians (incumbents), to whom advertising would offer the greatest financial benefit, in fact advertise less--a paradox that may be explained by nonfinancial concerns, such as unwillingness to break well-internalized professional norms against advertising. Physician advertising has risen sharply in recent years, and it appears that this trend will continue. If incumbents increasingly resort to advertising, there could be a substantial redistribution of income from less-well-established physicians to better-established ones.

A Theory of Entrepreneurship and Its Application to the Study of Business Transfers

We formalize a view of entrepreneurship in the spirit of Theodore W. Schultz. In this view, entrepreneurs are those individuals who respond to the opportunities for creating new products (and the like) that arise because of technological progress, for example. The theory has implications for entry and exit, specialization of labor, and business transfers. These business transfers correspond to, among other things, individuals changing jobs an sales of firms. Transfers are seen as a mechanism facilitating division of labor. We also discuss evidence on business transfers that occur through sales of firms.

Preoperative Nursing Assessment: A Research Study

This study identified characteristics of preoperative nursing assessments performed on ambulatory and morning admission patients by nurses at two facilities. Two tools used to identify these characteristics were developed by the investigators using the OR nursing criteria list adapted from the Rush-Medicus Process Monitoring Criteria Master List, and the "Competency statements in perioperative nursing." Results were compared between hospitals, between observed and self-reported activities, and between assessments made by perioperative nurses with differing demographic attributes. Significant results were found in nine items comparing the number of observed versus self-reported activities, and in two items comparing diploma nurses with baccalaureate nurses. The study has implications for entry into practice, for nursing activities in relation to prospective payment, and for relating conceptual models to nursing assessments. It strongly suggests the need for future research in the quality and characteristics of preoperative nursing assessment and documentation. Emphasis on providing the humanistic component of nursing care will help offset the dehumanizing elements of new methods of providing health care that are a result of the changing economic climate. After all, the ultimate focus of nursing care in general--and perioperative nursing in particular--is the patient, not the economic system. The determination of existing nursing assessment activities by this study provides baseline data for evaluating future changes in nursing care.

Initiation of the process of adult role entry

Among the most significant events marking the transition to adulthood are role changes involving the assumption of adult responsibilities. These include entry into the adult roles of worker, spouse, and parent. Because entry into one adult role tends to have implications for entry into other adult roles, the ages at which these role changes occur are related. It is therefore instructive to view the process of adult role entry as a process that is initiated when the first of several role changes occurs. The purpose of this paper is to examine initiation of the process of adult role entry. Data from a fifteen-year followup study of high school students originally surveyed in 1957–58 and resurveyed in 1973–74 are analyzed to determine which of several role changes initiated the process of adult role entry and the age at which the process was initiated for cohorts born during the early 1940s. A model predicting the age at initiation of the process is estimated, and the parameters of that model are compared with the parameters of comparable models predicting educational attainment and the timing of exit from the student role.