Issue 2

Volume 7 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Summer 1998

The Vertical Organization of Industry: Systems Competition versus Component Competition

Joseph Farrell, Hunter K. Monroe and Garth Saloner
We discuss two contrasting styles of vertical organization of complementary activities or components in an industry: systems competition versus component competition. When firms' competencies differ, systems competition is not a perfect substitute for component competition, even with Bertmnd behavior.

Statistical Causality and Strategic Behavior in Industrial Markets

Thomas W. Gilligan and Subrata Sarkar
This paper proposes a simple test of the leader-follower model of strategic behavior. This test relates the temporal notions of leadership central to such models to the empirical methods of statistical causality. This test is performed using data from the US softwood plywood industry of the last three decades.

Time Schedule and Program Profile: TV News in Norway and Denmark

Tore Nilssen and Lars Sørgard
Two TV channels compete on programming with respect to both time schedule (continuous choice) and program profile (discrete choice), with a directional constraint concerning time schedule (viewers cannot watch TV before they get home). We show how the relative importance of program profile and time schedule, as perceived by the viewers, determines the equilibrium outcome.

Influence Costs, Structural Inertia, and Organizational Change

Scott Schaefer
This paper builds an economic model of the relationship between influence activity and resistance to change in organizations. I show that influence activity can create harmful barriers to change and that the influence costs of change are positively related to the firm's prospects. The model rationalizes the widely held view that firms often must endure a survival-threatening crisis before meaningful change can be achieved.

Disciplinary Takeovers and Industry Effects

Rudolf Kerschbamer
This paper presents a disciplinary explanation for some seemingly paradoxical stylized facts from the takeover literature. Most notable among these are: (1) hostile takeovers are predicted better by industry-wide than by firm-specific performance failures; and (2) gains from a successful bid for a specific firm extend to other firms in the same industry.

Profitability under an Open versus a Closed System

Michael Kende
This paper explores the conditions under which a monopolist selling a system consisting of a main component and differentiated secondary components can increase profits by allowing competition in the aftermarket for the secondary components.