Product Market Characteristics Research Articles

Leveraging Social Interaction Among Customers: Referral Reward Versus Collective Buying

Over the past decade, the developed and emerging markets have witnessed an exponential growth in online selling strategies that leverage social interaction among customers and enable sellers to offer discounts or rewards on the basis of the size of the buyer pool. This article classifies these diverse strategies into two categories—referral reward (e.g., Uber) and collective buying (e.g., GroupGets)—with associated subtypes. The authors employ an analytical model in which the seller faces customers with heterogeneity in their knowledge and/or intrinsic valuation of a product. Informed customers may inform and increase their less-informed peers’ valuation of the product. The study's richer behavioral model and consideration of a broader strategy space, relative to the existing analytical models, provide new insights into when and how specific strategies are optimal. Referral reward and collective buying encourage information sharing with less-informed potential customers and are typically superior to the individual selling strategy (under which the seller does not incentivize information sharing among customers), except when information sharing is significantly difficult. The authors conduct model refinements and robustness checks and identify clear qualitative managerial implications that can aid strategic decisions under different product-market characteristics. The authors conclude by suggesting future research opportunities to build on this article and add new theoretical insights and managerial guidance.

Search, product market competition and CEO pay

We develop a market equilibrium model to show how search frictions in the CEO market, agency conflicts and product market characteristics interact to affect CEO market tightness, firm size and CEO incentive pay. The theory generates novel implications that link firms' product markets with CEO markets. Different determinants of competition—the entry cost, product substitutability, and market size—have contrasting effects on CEO market tightness, CEO pay and firm size. We also derive new predictions for the impact of product market risk on firm size and CEO incentive compensation. We show empirical support for several cross-sectional hypotheses derived from the theory for how CEO pay, CEO incentives, firm size and market tightness vary with product market characteristics.

Online Business-to-Business Markets for Industrial Product Reuse: Evidence from an Operational Policy Change

Problem definition: We examine the importance of expert services in online materials and waste exchanges (OMWEs), which are online business-to-business markets for coordinating transactions of industrial surplus, by-products, and waste. Academic/practical relevance: OMWEs face unique challenges because of their product mix and market characteristics. Many OMWEs have traditionally relied on a combination of routine services (online aggregation, filtered search, etc.) and expert services (selective and spatial matching, contract facilitation, etc.). Although OMWEs employ varying levels of expert services, the ultimate value of expert services in promoting transactions is not fully understood. From a managerial perspective, our study provides insights into the importance of balancing routine and expert services, offering guidance on when expert services offer the most benefits. From an academic perspective, we expand on the type of product and market attributes that should be considered in tailoring OMWE designs. Methodology: We use transactional data from a unique OMWE setting (MNExchange.org), which consists of approximately 3,500 product listings from 700+ supplier firms, collected during 2001–2007. We use various econometric techniques (survival analysis, regression discontinuity, etc.) to examine the changes in performance, including transaction rates and time to market, attributable to an operational policy change that occurred in 2004. We further conduct a detailed examination of mechanisms, alternative explanations, and counterfactual analysis. Results: The results show that eliminating expert services in OMWEs can adversely affect transaction outcomes in OMWEs. In particular, the results show that OMWEs should consider their product mix and market characteristics when making decisions about the appropriate use of expert services. Managerial implications: The study provides insights for improving the potential of online reuse marketplaces in the circular economy. From a broader perspective, the paper contributes to the debate on the role of technology in sustainable development and technology substitution for human tasks.

Product Market Competition, Executive Compensation, and CEO Family Ties

This paper analyzes the interaction between product market competition and family ties on the structure of CEO pay, in a panel of publicly listed family firms. To account for the multi-dimensional nature of competition we use a variety of measures. We find that in industries where import penetration is high, products are differentiated or domestic concentration is high, family CEOs’ variable pay is lower than is professional CEOs’ variable pay; but the former is more closely related to firm performance. This result remains strong when we account for the equity component of compensation and for endogeneity concerns and when we test the hypothesis of family CEOs’ “pay for luck”. Our findings suggest that: (1) competition is likely to substitute incentive pay in homogeneous product markets and to complement them in differentiated industries and in markets that are open to international trade; and (2) product market characteristics are more important than are family ties in shaping managerial compensation.

Model Konseptual Customer Order Decoupling Point pada Agroindustri Udang

Shrimp agro-industry is one of the food processing industries, which converts raw shrimp into high-value shrimp processed products. The production system used in shrimp agroindustry to respond market demand is a hybrid make to stock (MTS) and make to order (MTO). The decision to determine which products will be stored as supply sources and which products are made to fulfill orders is a critical decision that must be made on the MTS-MTO hybrid system. The concept of customer order decoupling point (CODP) is used to identify material flow points that connect a product with different consumers. This study aims to present a conceptual model in the MTS-MTO hibrid system based on customer order decoupling point (CODP) which is adjusted to product characteristics, production characteristics and market characteristics in the shrimp agroindustry. The results of the study are presented in a business process model template that describes the order of decisions for storing products or making products to fulfill orders and conceptual models in the form of diagrams named the CODP conceptual model on shrimp agroindustry.

IMPACT OF INNOVATIONS ON THE PRODUCT MARKET COMPETITIVE DEVELOPMENT


 
 
 Competitive product markets are characterized by aiming at complete consumers’ needs satisfaction, flexible market price making, freedom of economic activity and entrepreneurship, free entry and exit from a market, fair trading and business practices etc. The highest values for the companies functioning at the competitive markets are consumers and consumer needs. Accordingly, all the decisions related to the companies’ activity are being taken not based on the entrepreneurs’ ambitions, but from the perspective of the consumer as the agent of future income and profits. One of the essential characteristics of the markets competitive development is ability of the market players to optimize costs, minimize prices, and improve product quality for the maximum consumer satisfaction. Innovations are one of the means for providing competitive development path. However, the essence of innovations is not only introducing something new, some quality changes of the entrepreneurship activity. This economic category may manifest itself as a barrier for entry into product markets, and may cause emerging of innovative monopolies that eventually influence competitive development. Presented article is dedicated to the outcomes of innovative activity on the marketplace. Interconnections between the competitive environment and innovativeness are being investigated, and as the result, innovativeness is proven a method of overcoming competitive pressure, achieving competitive advantages at the market. It is determined that innovativeness depends on the companies’ size, as the financial capacity for innovations and availability of the labour potential concentrated in the innovative area are higher within big companies. As well the need for innovativeness as the mean for attaining competitive advantages depends both on the industry type and the product market characteristics, where a company is functioning, as there are no needs for competitive advantages at monopolistic markets. Innovations may also appear in natural monopolies as the result of introducing some regulatory policies. Also the causality between companies’ pursuance of uniqueness, the level of national competitiveness – and the innovations is being investigated, as well as the time lag between introduction of innovations and gaining some competitive advantages at the market. Understanding mutual influences of innovations and product markets competitive development is the clue for taking proper decisions by regulatory bodies with respect to markets development. Appearance of innovative monopolies aggravate the demand for regulatory bodies control over product markets development with the purpose of preventing excessive use of the market power by innovative monopolies.
 
 

Product Market Characteristics and the Choice between IPOs and Acquisitions

Using unique U.S. Census data sets, we analyze how entrepreneurial firms’ product market characteristics affect their choice between going public, being acquired, or remaining private. Size, total factor productivity (TFP), sales growth, capital expenditure, market share, access to private funding, and human capital intensiveness significantly increase a private firm’s likelihood of an initial public offering (IPO) relative to an acquisition. Firms in industries with less information asymmetry and higher stock liquidity are more likely to choose an IPO over an acquisition. While TFP peaks around either form of exit, the rate of increase in TFP prior to acquisitions and the subsequent decrease is smaller than that around IPOs.

“The Mediating Role of Marketing Strategy in the Effect of Antecedents on Export Performance : in the case of of Oil Seeds, Pulses and Coffee Exporting Companies in Ethiopia.”

This study examined the impact of specific firm, product, industry, and export market characteristics, as well as export marketing strategy (product adaptation, price competitiveness, promotion adaptation and support to foreign distributor) on the export performance On Export Performance of Selected Export Companies in Ethiopia. Data were gathered from 100 marketing strategists via a structured surveyfrom firms engaged in exporting four product categories (coffee, livestock products (leather, live animals and meat), oil seeds and pulses) which has been operating since 1986. The results indicatedthat the four explanatoryvariables have a direct positive and significant effect on overall export performance. Export strategy (product adaptation, price competitiveness and promotion adaptation) also played a significant mediating role on export performance. However, support for distributers strategy has played a positiveand an insignificant role in explaining the export performance. Overall the study finding implied that marketing-mix strategyhas a mediating effect on the relationship. The findings can be generalized only for those sectors studied and provide export managers withuseful insights.

Heterogeneous Merger Impacts on Competitive Outcomes

Mergers realize heterogeneous competitive effects on profits, production, and prices. To date, it is unclear whether differential merger outcomes are caused mostly by firms' technology or product market attributes. Furthermore, empirical merger studies conventionally assume that, conditional on regressors, the impact of mergers on outcomes is the same for every firm. We allow the merger responses to vary across firms, even after controlling for regressors, and apply a random-coefficient or heterogeneous treatment effect model (in the context of Angrist and Krueger (1999), Heckman, Urzua, and Vytlacil (2006), and Cerulli (2012)). Based on a comprehensive dataset on the static random access memory industry, we find that firms' postmerger output further increases (and postmerger price further declines) if merging firms are more efficient, operate in more elastic product markets, are more innovative, and acquire knowledge in technological areas that are relatively unexplored to themselves. A further interesting insight is that product market characteristics cause stronger postmerger outcome heterogeneities than do technology market characteristics. We also find that the postmerger effects accounting for heterogeneities differ greatly from those that consider homogeneous postmerger outcome effects. Our estimation results provide evidence that ignoring heterogeneous outcome effects can result in heterogeneity bias, just as ignoring premerger heterogeneities can lead to selectivity bias.

CEO talent, CEO compensation, and product market competition

We develop a structural industry equilibrium model to show how competitive chief executive officer (CEO)-firm matching and product markets jointly determine firm value and CEO pay. We analytically derive testable implications for the effects of product market characteristics on firm size, CEO pay, and CEO impact on firm value. CEO talent matters more in more competitive markets with greater product substitutabilities. Our CEO impact estimates are much higher than those obtained by previous structural approaches that abstract away from CEO market segmentation. The estimates differ across industries primarily due to variation in product market competition, rather than variation in the CEO talent distribution.

Heterogeneous Merger Impacts on Competitive Outcomes

Mergers realize heterogeneous competitive effects on profits, production, and prices. To date, it is unclear whether differential merger outcomes are caused mostly by firms’ technology or product market attributes. Furthermore, empirical merger studies conventionally assume that, conditional on regressors, the impact of mergers on outcomes is the same for every firm. We allow the merger responses to vary across firms, even after controlling for regressors, and apply a random-coefficient or heterogeneous treatment effect model (in the context of Angrist and Krueger (1999), Heckman, Urzua, and Vytlacil (2006), and Cerulli (2012)). Based on a comprehensive dataset on the static random access memory industry, we find that firms’ postmerger output further increases (and postmerger price further declines) if merging firms are more efficient, operate in more elastic product markets, are more innovative, and acquire knowledge in technological areas that are relatively unexplored to themselves. A further interesting insight is that product market characteristics cause stronger postmerger outcome heterogeneities than do technology market characteristics. We also find that the postmerger effects accounting for heterogeneities differ greatly from those that consider homogeneous postmerger outcome effects. Our estimation results provide evidence that ignoring heterogeneous outcome effects can result in heterogeneity bias, just as ignoring premerger heterogeneities can lead to selectivity bias.

CEO Talent, CEO Compensation and Product Market Competition

We develop a structural industry equilibrium model to show how competitive CEO-firm matching and product markets jointly determine firm value and CEO pay. We analytically derive testable implications for the effects of product market characteristics on firm size, CEO pay, and CEO impact on firm value. CEO talent matters more in more competitive markets with greater product substitutabilities. Our CEO impact estimates are much higher than those obtained by previous structural approaches that abstract away from CEO market segmentation. The estimates differ across industries primarily due to variation in product market competition, rather than variation in the CEO talent distribution.

Cultural Industries: Product–Market Characteristics, Management Challenges and Industry Dynamics

During the last decade, cultural industries have grown in economic importance, and research interest in them has increased. Despite prolific research, there is a lack of a comprehensive view on the subject. The purpose of the present paper is to offer a reconceptualization of cultural industries by tracing their boundaries, their features and the dynamics that follow from these features. This is achieved through a review of 314 cultural industries studies, whereby a classification system of three main and six sub‐categories is constructed. On the basis of the review, a framework for future research is presented. Most importantly, future research should examine selection criteria and selection performance, and explore the relationships between tastes, sales, diversity and quality. In this way, researchers might be able to create some order in the extreme uncertainty that cultural industries managers face.

Determinants of Store Brand Share

Private labels or store brands have witnessed considerable growth in the last few decades, especially in grocery products. However, market shares of store brand vary considerably across categories, markets, and countries. A natural question of interest to academics and practitioners is what factors influence store brand market shares. Drawing on a utility framework, we develop 21 consumer, manufacturer, retailer, and product-market characteristics that can influence store brand share. We test the empirical generalizability of the effect of these determinants through a meta-analysis of data from 54 individual and aggregate market studies. Twenty of the 21 determinants show significant, empirically generalizable effects. We discuss the key findings, their implications, and directions for future empirical research.

Understanding varieties of flexibility and security in multinationals: Product markets, institutional variation and local bargaining

Most studies of flexicurity have focused on formal institutions within distinctive national labour market systems. However, the level and types of flexibility and security in a national labour market are to an important extent influenced by company-level processes, relationships and policies; thus a micro-perspective should be integrated into the study of flexibility and security. This article advances understanding of the influences of decentralized rule-making and its links with the macro level by drawing on case study research in four multinational companies, each with subsidiaries in Germany, Belgium, Italy and the UK. It reveals major differences in terms of flexibility and security between companies operating in the same country, and major similarities between the subsidiaries of the same multinational. Product market characteristics affect local autonomy to define human resource policies; national institutions and local circumstances then affect the capabilities of trade unions and works councils to negotiate local flexibility-security trade-offs.

The Influence of Software Process Maturity and Customer Error Reporting on Software Release and Pricing

Software producers are making greater use of customer error reporting to discover defects and improve the quality of their products. We study how software development differences among producers (e.g., varying levels of process maturity) and software class and functionality differences (e.g., operating system versus productivity software) affect how these producers coordinate software release timing and pricing to optimally harness error reporting contributions from users. In settings where prices are fixed, we characterize the optimal release time and demonstrate why in some cases it can actually be preferable to delay release when customer error reporting rates increase. The manner in which a firm's optimal release time responds to increases in software functionality critically hinges on whether the added functionality enhances or dilutes user error reporting; in both cases, the effect of added functionality on release timing can go in either direction, depending on both firm and product market characteristics. For example, when processing costs are relatively large compared with goodwill costs, firms with lower process maturity will release earlier when per-module error reporting contributions become diluted and release later when these contributions become enhanced. We also examine how a firm adapts price with changes in error reporting levels and software functionality, and finally, we provide implications of how beta testing influences release timing. This paper was accepted by Lorin Hitt, information systems.

Product Market Competition, Managerial Compensation, and Firm Size in Market Equilibrium

We develop a tractable equilibrium model of competing firms in an industry to show how the distribution of firm qualities, moral hazard, and product market characteristics interact to affect firm size, managerial compensation, and market structure. Different determinants of product market competition have contrasting effects on firm size and managerial compensation. Although both firm size and managerial compensation increase with the entry cost, they increase with the elasticity of substitution if and only if firm size exceeds a high threshold but decrease if it is below a low threshold. Aggregate shocks to the firm productivity distribution affect incentives in our equilibrium framework. We show statistically and economically significant empirical support for several hypotheses derived from the theory that relates product market characteristics to managerial compensation, firm size, and the number of firms in the industry. Different determinants of competition indeed have contrasting effects, as predicted by the theory. This paper was accepted by Brad Barber, finance.

Employers Gone Rogue: Explaining Industry Variation in Violations of Workplace Laws

Drawing on an innovative, representative survey of workers in Chicago, Los Angeles, and New York City, the authors analyze minimum wage, overtime, and other workplace violations in the low-wage labor market. They document significant interindustry variation in both the mix and the prevalence of violations, and they show that while differences in workforce composition are important in explaining that variation, differences in job and employer characteristics play the stronger role. The authors suggest that industry noncompliance rates are shaped by both product market and institutional characteristics, which together interact with labor supply and the current weak penalty and enforcement regime in the United States. They close with a research agenda for this still-young field, framing noncompliance as an emerging strategy in the reorganization of work and production at the bottom of the U.S. labor market.

Management Insights

Management Insights

When Do Firms Divest Foreign Operations?

Extant literature on divestment has repeatedly found that firms are likely to divest their poorly performing operations. In this paper, I consider how product market relatedness and geographic market differences in growth, policy stability, and exchange rate volatility can moderate the negative relationship between performance and divestment. Results from a comprehensive panel of U.S. multinational corporations (MNCs) reveal that conventional arguments about poor performance hold for both related and unrelated firm operations in countries characterized by low growth, policy stability, and exchange rate stability. However, the results also show that there are significant differences across the divestment decisions of firms for their related and unrelated foreign operations in countries characterized by high growth, policy instability, and exchange rate volatility. Although poor performance has been called the most significant predictor of divestment, this paper considers how interactions across multilevel factors influence the divestment decisions of firms and reveals how U.S. MNCs respond to both product and geographic market characteristics when making divestment decisions for their foreign operations.