Author Archive
First-Mover (Dis) Advantage
| Lasse Lien |
Whether you are interested in competitive advantage, entrepreneurship, innovation, regulation, or several other issues, the concept of first-mover (dis)advantage will probably be of considerable importance. The literature has, of course, supplied a number of important insights on what might account for both advantages and disadvantages from moving early. Nevertheless, browsing through this literature, I get a sneaking feeling that it tends to produce somewhat loosely structured lists of possible mechanisms. A possible avenue of attack for adding more structure to these insights might be to reduce the problem to the basic asymmetries between the first and later movers, and from there gradually introduce the effects of resource heterogeneity, asymmetric motivation, strategic interaction, etc. But what, then, might count as the basic asymmetries? (more…)
Shifting or Rotating Demand?
| Lasse Lien |
For O&M readers interested in competitive strategy, I would like to recommend a recent paper in AER by Johnson and Myatt: “On the Simple Economics of Advertising, Marketing, and Product Design” (vol 96, no. 3). The authors analyze a weirdly understudied topic in economics, namely rotations of the demand curve. This means that firms by their choice of advertsing, marketing and product design can influence the dispersion of customers valuations for a product. Take for instance product design. A universally attractive new feature will simply shift the demand curve outward, while a new feature that pleases some customers and displeases others will lead to an increased dispersion of customers valuation, that is, to a rotation of the demand curve. (more…)
Four Theories of Profit
| Lasse Lien |
The word equilibrium should perhaps be used sparingly here in this Austrian stronghold. Nevertheless, I shall dare to use it once or twice below. One of the biggest buzzes at the recent Academy of Management meeting in Atlanta was Richard Makadok’s paper, “Four Theories of Profit and Their Interaction.” Makadok’s main point was that we have four main classes of theories/mechanisms explaining positive profits in equilibrium, and that while we know a great deal about each theory individually, we do not know much about their interaction. I certainly agree that studying the interaction between such theories is worthwhile, and there is a lot to like about Makadok’s paper (which I BTW only have an older version of, therfore no link). What I am less sure about is what these basic theories should be, and how independent the four theories suggested by Makadok really are. (more…)
Is Judgment Measurable?
| Lasse Lien |
The hosts of this blog have offered an intriguing perspective on entrepreneurship, in which the entrepreneur is seen as an individual possessing judgment. Judgment is in short the ability to spot opportunities for profit under Knightian uncertainty (as opposed situations involving mere risk). Because there are prohibitive transaction costs associated with exploiting judgement via market contracting, the entrepreneur is left with little choice but to start his or her own firm to exploit this competence/skill/resource. This seems quite plausible, and I nodded enthusiastically as I read the paper. However, one problem kept — and keeps — bothering me (as a lowly empiricist); the problem of how to establish the existence of judgment empirically. (more…)
Organizations and Markets 
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