While competition decreases rents for firms, the presence of competitors may create benefits. Competitors that agglomerate, that are physically proximate, may create externalities-production efficiencies or heightened demand that increases rents. When such externalities exist, then who gains from and who contributes to them? We examine how other competitors' traits affect performance in Texas's lodging industry. In rural markets, we find that chain hotels and larger hotels contribute to positive externalities. While expecting those hotels similar to the establishments creating these externalities to gain, we find the opposite. Independent hotels and smaller hotels gain the most. Interestingly, some establishments are harmed.
We analyze whether firms prefer collocating with incumbent firms when choosing among markets to enter, highlighting the role of resource-seeking as a motivation for collocation. We propose that entrants will locate near others possessing resources that can spill over, but will avoid locations where existing firms will exploit spillovers without contributing. To test these propositions, we analyze the location decisions of 570 new hotels in Texas between 1992 and 2000. We find that hotels are attracted to markets with branded upscale hotels. Further, we find that owners of upscale hotels avoid markets with hotels without similar resources.
Immigrant entrepreneurs often rely on their group's local social capital in their new home market to establish and maintain their businesses. In particular, immigrant entrepreneurs with few resources of their own receive help from those possessing more resources. Supporting these arguments using the empirical setting of Gujarati immigrant entrepreneurs in the lodging industry, we find that the likelihood of survival of an immigrant entrepreneur's hotel increases when surrounded by higher counts of branded hotels (representing high-resource establishments) owned by individuals from their ethnic group but is unaffected by unbranded motels (representing low-resource establishments) owned by members of their ethnic group or by branded hotels owned by individuals from other ethnic groups. These results isolate and reinforce the importance of social capital not only for immigrant entrepreneurs but also more generally for any entrepreneurs belonging to ethnic, professional, religious, or social groups.social capital, immigrant entrepreneurs, franchising, survival, hotels
Research Summary: In multivariate regression analyses of correlated variables, we sometimes observe pairs of estimated beta coefficients large in absolute magnitude and opposite in sign. T‐statistics are also large, suggesting meaningful findings. I found 64 recently published Strategic Management Journal articles with results exhibiting these characteristics. In this article, I demonstrate that such results may be Type 1 errors (false positives): If regressors are correlated via an unobservable common factor, estimated beta coefficients will misleadingly tend toward infinite magnitudes in opposite directions, even if the variables’ real effects are small and of the same sign. Diagnostics such as Variance Inflation Factors (VIF) will misleadingly validate Type 1 errors as legitimate results. After establishing general results via mathematical analysis and simulation, I provide guidelines for detection and mitigation. Managerial Summary: This article demonstrates mathematically how regression analyses with correlated independent variables may generate beta coefficients of opposite sign to the variables’ true effects. To assess the likelihood of this possibility, I propose that: if (a) absolute correlation of two independent variables is about ±0.3 or more (smaller correlations may be problematic for large data sets), (b) the two variables have beta coefficients of opposite sign, if correlated positively, and of the same sign, if correlated negatively, and (c) the bivariate correlation of one independent variable with the dependent variable is of the opposite sign from the beta coefficient, then the beta might be a false positive. To facilitate such analysis, authors should provide complete correlation tables, including dependent variables, interaction terms, and quadratic terms.
We use data on all the new restaurants opened in Texas between 1980 and 1995 by seven of the largest nationally franchised fast-food chains to examine empirically the extent of multi-unit ownership in franchised chains and the way in which franchisors allocate the ownership of units among franchisees. We find that individual franchisees are much more likely to be assigned the ownership of a particular new unit the closer their existing units are geographically to the new unit. Further, given distance, franchisees are more likely to be allocated a new franchised unit if they already own units whose markets are contiguous and demographically similar to that of the new unit. Finally, contrary to implications from some explanations for company ownership, we find that franchisors use similar criteria when they decide to retain units under company ownership as when they choose among franchisees.
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