We propose a conceptual framework—with the resource-based view (RBV) of the firm as its theoretical underpinning—to explain interfirm differences in firms' profitability in high-technology markets in terms of differences in their functional capabilities. Specifically, we suggest that marketing, R&D, and operations capabilities, along with interactions among these capabilities, are important determinants of relative financial performance within the industry. This paper contributes to the RBV literature by proposing the input-output perspective to conceptualize the notion of capabilities. Specifically, this approach entails modeling a firm's functional activities—viz., marketing, R&D and operations—as transformation functions that relate the productive factors/resources to its functional objectives, if the firm were to deploy these resources most efficiently. Any underattainment of the functional objective, then, is attributable to functional inefficiency, or equivalently, to a lower functional capability of the firm. The input-output conceptualization of a firm's capabilities is then estimated using the stochastic frontier estimation (SFE) methodology. SFE provides the appropriate econometric technique to empirically estimate the efficient frontier and hence the level of efficiency achieved by the various firms. Our study contributes to a number of literatures, both methodologically and substantively. First, it contributes both conceptually and methodologically to the RBV literature. Conceptually, our study suggests that firm capabilities can be viewed in an input–output framework. Methodologically, the study suggests the use of stochastic frontier estimation to operationalize and estimate firm capabilities. This methodology is, to the best of our knowledge, the first to allow the researcher/manager to capabilities from archival data. Substantively, our study contributes to the literature on market orientation by suggesting that a stronger market orientation of a firm should be reflected in a higher marketing capability. It also adds to the literature on “design for manufacturability” by explicating the complementarity among the various functional capabilities and offering empirical evidence on their relative importance in influencing a firm's performance. Finally, our study builds on prior literature that has highlighted the importance of marketing–R&D coordination as important determinants of new product development and success. We highlight below some of our main findings. • A strong base of innovative technologies enhances a firm's sales by favorably influencing consumers' expectations about the externality benefits associated with its product. This suggests that a past track record of consistent innovation is a credible signal to current and potential customers of the firm's continued excellence in a technologically evolving market. Given the importance of influencing customers, managers need to tailor their marketing activities around the need to inform customers of the technological excellence of their firm...
This paper attempts to operationalize and measure firm-specific capabilities using an extant conceptualization in the resource-based view (RBV) literature. Capabilities are conceived as the efficiency with which a firm employs a given set of resources (inputs) at its disposal to achieve certain objectives (outputs). We expand on extant theoretical literature on relative capabilities, by delineating the conditions that have to be met for relative capabilities to be measured non-tautologically. We then proceed to suggest an estimation methodology, stochastic frontier estimation (SFE), that allows us to infer
We offer an econometric framework that models consumer's consideration set formation as an outcome of her costly information search behavior. Because frequently purchased products are characterized by frequent price promotions of varying depths of discounts, a consumer faces significant uncertainty about the prices of the brands. The consumers engage in a fixed-sample search strategy that results in their discovering the posted prices of a subset of the available brands. This subset is referred to as the consumer's “consideration set.” The proposed model is estimated using the scanner data set for liquid detergents. Our key empirical results are: (i) consumers zincur significant search costs to discover the posted prices of the brands; (ii) whereas in-store displays and feature ads do not influence consumers' quality perceptions of the brands, they significantly reduce search costs for observing the prices of the brands; (iii) per capita income of consumer's household significantly increases her search costs; and (iv) the consumers' price sensitivity is seriously underestimated if we were to assume that consumers get to know all the posted prices at zero cost. The proposed model is also estimated for the ketchup category to enable us to do cross-category comparisons of consumers' price search behaviorprice uncertainty, consumer search, consideration set, quality uncertainty, consumer learning, bayesian updating, structural model, econometric estimation
The rapid rate of knowledge obsolescence in many high-technology markets makes it imperative for firms to renew their technological bases constantly. Given its critical importance, excellence in renewal of technological base would serve as a . Drawing on past literature, we identify this dynamic capability associated with acquiring and utilizing external technological know-how with the notion of (AC). We ask the following questions: (a) What would cause some firms to have a higher AC than others? and, (b) What is the impact of AC on a firm's profitability? We build a conceptual framework suggesting that marketing, R&D, and operations capabilities have a significant positive impact on a firm's AC. We test our framework on a data set of firms in high-technology markets. Using an econometric technique called stochastic frontier estimation, we the AC of firms from an observation of the know-how they actually absorb. We find that firm-specific capabilities significantly impact AC. Also, we find that AC has a significant impact on profitability and that this impact is moderated by the pace of technological change: the greater the pace of change, the greater the impact.absorptive capacity, dynamic capabilities, high-technology markets, resource-based view, marketing capability, organizational learning, knowledge acquisition
Our work represents one of the first attempts to assess the impact of IT (information technology) on both process output and quality. We examine the optical character recognition and barcode sorting technologies in the mail sorting process at the United States Postal Service. Our analysis is at the application level, and thus does not involve the aggregation of IT impact over multiple processes. We use data from 46 mail processing centers over 3 years to study the IT impact. We also use a set of factors in our model to account for differences in input characteristics. Our results show that mail sorting output significantly increases with higher use of IT. In addition, IT improves quality which in turn enhances output. We also find that input characteristics exert considerable influence in determining the output and quality of the mail sorting operation. For example, while absenteeism tends to decrease output and quality due to its disruptive consequences, a higher fraction of barcoded mail seems to enhance both performance measures.information technology, business value, productivity, quality, business process evaluation
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