Firms compete for reputational status in institutional fields. Managers attempt to influence other stakeholders' assessments by signaling firms' salient advantages. Stakeholders gauge firms' relati...

What's in a Name? Reputation Building and Corporate Strategy

A Historical Comparison of Resource-Based Theory and Five Schools of Thought Within Industrial Organization Economics: Do We Have a New Theory of the Firm?

This essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics. Most previous cross-section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets. As we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly, structural cross-section analysis has fallen out of fashion. In contrast to most of the cross-section literature, the analysis reported here is fundamentally descriptive; it does not attempt directly to estimate or to test hypotheses about structural parameters. I hope to show by example that one can perform illuminating analysis of cross-section data without a host of controversial maintained hypotheses. Cross-section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries, even if they cannot easily support full-blown structural estimation.' One can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation, depending on one's feeling about the long-run potential of that research approach. This study also departs from much of the cross-section literature by being fundamentally concerned with the importance of various effects, not just with coefficient signs and t-statistics. In particular, this essay provides estimates of the relative importance of firm, market, and market share differences in the determination of business unit (divisional) profitability in U.S. manufacturing. Using 1975 data from the Line of Business Program of the U.S. Federal Trade Commission (FTC), I find support neither for the existence of firm effects nor for the importance of market share effects. Moreover, while industry effects apparently exist and are important, they appear to be negatively correlated with seller concentration in these data. Section I relates firm, market, and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis. The remainder of the essay treats the data and

Do Markets Differ Much

The authors review more than 250 journal articles and books to establish what is and should be known about how advertising affects the consumer—how it works. They first deduce a taxonomy of models,...

How Advertising Works: What Do We Really Know?

Previous studies that attempt to relate environmental to financial performance have often led to conflicting results due to small samples and subjective environmental performance criteria. We report on a study that relates the market value of firms in the S&P 500 to objective measures of their environmental performance. After controlling for variables traditionally thought to explain firm-level financial performance, we find that bad environmental performance is negatively correlated with the intangible asset value of firms. The average ‘intangible liability’ for firms in our sample is $380 million—approximately 9% of the replacement value of tangible assets. We conclude that legally emitted toxic chemicals have a significant effect on the intangible asset value of publicly traded companies. A 10% reduction in emissions of toxic chemicals results in a $34 million increase in market value. The magnitude of these effects varies across industries, with larger losses accruing to the traditionally polluting in...

Does the Market Value Environmental Performance

Advertising Market Structure and Performance

The current debate over the economics of advertising has long focused on two questions. The first concerns the impact of advertising on the relative positions of large and small firms in an industry and thereby on the state of competition. The second examines the role of advertising on consumer purchasing decisions over broad consumption categories. Comanor and Wilson use the modern tools of economic theory and statistics to build and test their hypotheses, and contribute important analytical and empirical evidence on the key issues.The authors find that consumer decisions are affected substantially by the volume of advertising. Indeed, advertising is a weightier factor than relative prices. Their conclusions surely contribute to the nervousness long felt by economists over the use of consumer preferences to evaluate the welfare implications of resource allocation.

Advertising and Market Power

The publication of Lester G. Telser's 1964 paper [52] was the starting point for much of the recent literature on advertising and competition. The major finding of that paper was that "there is little empirical support for an inverse association between advertising and competition, despite some plausible theorizing to the contrary" This review does not deal with the question of whether advertising is excessive, nor with the related issues of the welfare economics of advertising or product differentiation. Rather, it focuses on those papers which examine the impact of advertising on barriers to entry and on the extent of price competition. Advertising expenditures are designed to influence consumer demand for the firm's products. They may affect both direct and cross-elasticities of demand. Those who argue that advertising may limit competition maintain that the relevant demand curves[1] are more inelastic and that cross-elasticities are lower as a result, while those who dispute this contention suggest that advertising has no such influence or even that it leads to more elastic demands and higher cross-elasticities. Much controversy has therefore turned on the direction of the effects of advertising on demand elasticities. [Авторский текст]

The effect of advertising on competition: a survey

Three-Pass Least Squares: A Method for Estimating Models with a Lagged Dependent Variable

IN recent years the behavior of productivity has received increasing theoretical and empirical attention. Two basic approaches have been developed. The first focuses upon the long-run trend in output per man-hour and examines the sources of that trend. The second focuses upon the short-run or cyclical behavior of productivity. The purpose of this paper is to explain the characteristic behavior of output per man-hour over the business cycle and to identify changes in the cyclical response mechanism. An explanation of cyclical changes in productivity is essential for an analysis of unit labor costs, and is therefore a necessary ingredient in an explanation of the price level and its movements. It is also a necessary precondition to understanding the longer-run trends; cyclical fluctuations in output per man-hour are large, and the trends based on capital and technology cannot be seen until the short-run variations have been removed.

Thomas A. Wilson

Papers

Advertising Market Structure and Performance

Advertising and Market Power

The effect of advertising on competition: a survey

Three-Pass Least Squares: A Method for Estimating Models with a Lagged Dependent Variable

Short-Run Productivity Behavior in U.S. Manufacturing