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Divisionalization and Entry Deterrence
Marius Schwartz,Earl A. Thompson +1 more
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In this article, the authors assume that firms can create new independent divisions more cheaply than potential entrants, who must incur the additional overhead costs of new entry, leading perfectly informed incumbents to preempt all rational entry into their industries.Abstract:
This paper assumes that incumbent firms can create new independent divisions more cheaply than potential entrants, who must incur the additional overhead costs of new entry. The main theoretical result is that such divisionalization ability leads perfectly informed incumbents to preempt all rational entry into their industries. In contrast, existing models of entry deterrence imply that informed incumbents, even those with steadily decreasing average costs, will often allow rational entry. Our result may explain why successful, large-scale entry by firms with no informational advantage is extremely rare. The use of divisions to preempt entry may also explain why large firms in high-profit oligopolies often divisionalize, allowing their divisions to compete freely despite the negative pecuniary externality that each division imposes on others.read more
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Concept of the Corporation
TL;DR: Concept of the Corporation as mentioned in this paper was the first study of the constitution, structure, and internal dynamics of a major business enterprise, focusing on a two-year analysis of the company during the closing years of World War II.
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Licensing the market for technology
TL;DR: In this article, the authors extend the literature on patent licensing by relaxing the assumption of a monopolist technology holder and show that the number of licenses per patent holder decreases with the degree of product differentiation.
Journal ArticleDOI
Barriers to Entry and Market Entry Decisions in Consumer and Industrial Goods Markets
Fahri Karakaya,Michael J. Stahl +1 more
TL;DR: In this paper, the authors test six market entry barriers in consumer and industrial markets: cost advantages of incumbents, product differentiation, capital requirements, customer switching costs, and product switching costs.
Journal ArticleDOI
Choosing the competition and patent licensing
TL;DR: In this article, the authors examine licensing as a means of choosing the competitors which a patentee-monopolist will face in the period after the patent expires and find that choosing the competition was an important motivation of the licensor's behavior.
Posted Content
Divisionalization, Franchising, and Divestiture Incentives in Oligopoly
TL;DR: In this article, a two-stage game is used to model firms' strategic incentives to divide production among autonomous competing units through divisionalization, franchising, or divestiture.
References
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Industrial market structure and economic performance
TL;DR: In this article, the authors have reviewed theoretical, empirical, and policy developments of the past decade and provided new insights into strategic behaviour from game theory, and integrated them with the related theoretical materials.
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Strategy and Structure: Chapters in the History of the Industrial Enterprise
TL;DR: Chandrasekaran et al. as mentioned in this paper studied the changing strategies and administrative structures of U.S. industrial companies after World War II and found that strategic growth resulted from an awareness of the needs and opportunities created by exogenous change to employ existing or expanding resources more profitably.
Book
Barriers to new competition
TL;DR: In this paper, a series of hypotheses as to the conditions of entry, and the probable degree to which they serve as barriers to new competition are presented, and a bold attempt is made to measure the height of these barriers in 20 manufacturing industries.