/pdf/the-theory-of-industrial-organization-19bejph0ej.pdf

The Theory of Industrial Organization

The resource-based view of the firm: Ten years after 1991

For the last 30 years a growing number of scholars and practitioners have been experimenting with concepts and models that facilitate our understanding of the complexities of today’s business challenges. Among these, “stakeholder theory” or “stakeholder thinking” has emerged as a new narrative to understand and remedy three interconnected business problems—the problem of understanding how value is created and traded, the problem of connecting ethics and capitalism, and the problem of helping managers think about management such that the first two problems are addressed. In this article, we review the major uses and adaptations of stakeholder theory across a broad array of disciplines such as business ethics, corporate strategy, finance, accounting, management, and marketing. We also evaluate and suggest future directions in which research on stakeholder theory can continue to provide useful insights into the practice of sustainable and ethical value creation.

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Stakeholder Theory: The State of the Art

Understanding customer experience and the customer journey over time is critical for firms. Customers now interact with firms through myriad touch points in multiple channels and media, and customer experiences are more social in nature. These changes require firms to integrate multiple business functions, and even external partners, in creating and delivering positive customer experiences. In this article, the authors aim to develop a stronger understanding of customer experience and the customer journey in this era of increasingly complex customer behavior. To achieve this goal, they examine existing definitions and conceptualizations of customer experience as a construct and provide a historical perspective of the roots of customer experience within marketing. Next, they attempt to bring together what is currently known about customer experience, customer journeys, and customer experience management. Finally, they identify critical areas for future research on this important topic.

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Understanding Customer Experience Throughout the Customer Journey

The authors examine the implications of electronic shopping for consumers, retailers, and manufacturers. They assume that near-term technological developments will offer consumers unparalleled opportunities to locate and compare product offerings. They examine these advantages as a function of typical consumer goals and the types of products and services being sought and offer conclusions regarding consumer incentives and disincentives to purchase through interactive home shopping vis-à-vis traditional retail formats. The authors discuss implications for industry structure as they pertain to competition among retailers, competition among manufacturers, and retailer-manufacturer relationships.

Interactive home shopping: Consumer, retailer, and manufacturer incentives to participate in

What if rent from a competitive advantage is appropriated so it cannot be observed in performance measures? The resourcebased view was not formulated to examine who will get the rent. Yet, this essay argues that the factors leading to a resource based advantage also predict who will appropriate rent. Knowledge-based assets are promising because firm-specificity, social complexity, and causal ambiguity make them hard to imit ate. However, the roles of internal stakeholders may grant them a great deal of bargaining power especially relative to investors. This essay integrates the resource-based view with the bargaining power literature by defining the firm as a nexus of contracts. This new lens can help to explain when rent will be generated and, simultaneously, who will appropriate it. In doing so, it provides a more robust theory of firm performance than the resource-based view alone. It is also suggested that this lens might be useful for examining other theories of firm performance.

https://www.jstor.org/stable/pdfplus/2640307.pdf

When Competitive Advantage Doesn't Lead to Performance: the Resource-Based View and Stakeholder Bargaining Power

The profitability of remanufacturing systems for different cost, technology, and logistics structures has been extensively investigated in the literature. We provide an alternative and somewhat complementary approach that considers demand-related issues, such as the existence of green segments, original equipment manufacturer competition, and product life-cycle effects. The profitability of a remanufacturing system strongly depends on these issues as well as on their interactions. For a monopolist, we show that there exist thresholds on the remanufacturing cost savings, the green segment size, market growth rate, and consumer valuations for the remanufactured products, above which remanufacturing is profitable. More important, we show that under competition remanufacturing can become an effective marketing strategy, which allows the manufacturer to defend its market share via price discrimination.

https://flora.insead.edu/fichiersti_wp/inseadwp2005/2005-63.pdf

Remanufacturing as a Marketing Strategy

This article discusses the diffusion process in an online social network given the individual connections between members. The authors model the adoption decision of individuals as a binary choice affected by three factors: (1) the local network structure formed by already adopted neighbors, (2) the average characteristics of adopted neighbors (influencers), and (3) the characteristics of the potential adopters. Focusing on the first factor, the authors find two marked effects. First, an individual who is connected to many adopters has a greater adoption probability (degree effect). Second, the density of connections in a group of already adopted consumers has a strong positive effect on the adoption of individuals connected to this group (clustering effect). The article also records significant effects for influencer and adopter characteristics. For adopters, specifically, the authors find that position in the entire network and some demographic variables are good predictors of adoption. Similar...

Network Effects and Personal Influences: The Diffusion of an Online Social Network:

This article analyzes how Knowledge Management (KM) is likely to affect competition in the management consulting industry. KM represents a fundamental and qualitative change in this industry9s basic production technology. Because management consultants acquire information directly from their customers, for these firms, KM technology exhibits increasing returns to scale. As such, although KM clearly represents an opportunity for some consultants to build a sustainable competitive advantage, it is likely to lead to a shake-out. Based on the industry9s early experience with KM systems, this article describes a number of possible future outcomes as well as strategies that consultants can follow.

Knowledge management and competition in the consulting industry

Conventional wisdom seems to claim that, by lowering the cost of distribution and by making search easier for consumer, the introduction of the Internet is likely to intensify price competition. This paper intends to challenge this view by asking: When and how is the Internet likely to decrease the level of price competition between firms? To answer this question, we develop an analytic model with the following characteristics. On the demand side, consumers need to gather information on two types of product attributes: digital attributes which can be communicated on the Web at very low cost and nondigital attributes for which physical inspection of the product is necessary. Consumers choose between two brands but are familiar with the nondigital attributes of only the brand purchased on the last purchase occasion. On the supply side, firms use traditional stores and the Internet to inform consumers about their products' attributes and to sell their products. In this setup, we show that the impact of the Internet on competition will be radically different depending on the relative importance of parameters describing the relevant shopping and distribution context. Specifically, we find that the introduction of the Internet might lead to monopoly pricing when 1 the proportion of Internet users is high enough, 2 when nondigital attributes are relevant but not overwhelming, 3 when consumers have a more favorable prior about the brand they currently own, and 4 when the purchase situation can be characterized by "destination shopping". More surprising, we also show that in such cases, the use of the Internet not only leads to higher prices but can also discourage consumers from engaging in search. As such, an important message of the paper is that under some conditions the Internet might represent an opportunity for firms to leverage their brand loyalty and increase their profits.

The intuition behind our results is the following. The Internet allows consumers to evaluate digital attributes easily, i.e., without visiting the stores. However, nondigital attributes can only be evaluated through physical presence. As such, for goods where both types of attributes are important, the introduction of the Net changes the effective cost of search for consumers. Without the Internet the cost of search is the cost of visiting more than one store. With the introduction of the Net however, nonsearching consumers do not have to undertake the shopping trip at all because they can order products on the Net. Thus, in the presence of the Internet the cost of search is related to the cost of undertaking the entire shopping trip. In the case of destination shopping i.e. when the fixed cost of undertaking the shopping trip is higher than the cost of visiting an additional store, the presence of the Internet creates higher effective search costs for consumers. Given this shift of paradigm in search costs due to the Internet, consumers may not take the risk of searching for products with better nondigital attributes, but instead, remain with the product they are familiar with. This results in increased consumer loyalty, which induces firms to increase their prices.

Our results have important managerial implications. First, they provide guidelines for firms on when i.e. for which product categories they should consider expanding their distribution network to the Internet. In this respect, an important additional insight of the paper is that the Internet can lower price competition and lead to reduced consumer search even if it is more expensive than the traditional distribution channel. This can easily be the case if distribution through the Internet represents additional costs such as the costs associated with shipping and handling and return policies. Second, the paper also provides guidelines on how to plan the firm's Internet strategy. Interestingly, the results suggest that with the general availability of the Internet the role of stores might actually become more important. While we do not explicitly model a dynamic market, our findings together with Klemperer's 1987 results suggest that stores might have a key role in consumer acquisition, while the Internet can help leverage the acquired customer base through demand fulfillment. This might imply that for certain product categories, firms should actually allocate additional resources to improve their in-store environment when considering the Internet as a complementary distribution channel.

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Miklos Sarvary

Papers

When Competitive Advantage Doesn't Lead to Performance: the Resource-Based View and Stakeholder Bargaining Power

Remanufacturing as a Marketing Strategy

Network Effects and Personal Influences: The Diffusion of an Online Social Network:

Knowledge management and competition in the consulting industry

When and How is the Internet Likely to Decrease Price Competition