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Business Strategy and Firm Reorganization under Changing Market Conditions

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  • Vivek Ghosal

Abstract

This study is framed against the increasingly stringent environmental demands on the pulp and paper industry since the late-1980s to reduce water and air pollution, and the global economic slowdown of the early-1990s. The primary focus of this paper is an observation-based analysis conducted by visiting selected paper mills in Finland, the U.S., Germany and Sweden. I find interesting differences and similarities in the firms’ strategies in terms of how they responded to these changes in market conditions. Some of the observed differences lie in their focus on achieving (incremental) cost-efficiency gains from better management of the production processes, inventories, supply-chain, product distribution, and timing of modernization investments, including ICT. The second part of the paper presents evidence on firms’ productivity paths, and the heterogeneity in productivity among relatively similar firms. I also present selected evidence of these firms’ investments in specific areas and how they affected their productivity. The observation of important intra-industry differences across relatively similar firms lends credence to the insights provided by Denrell, Fang and Winter (2003) and Zott (2003), among others. The findings have implications for the study of organizational behavior and business strategies employed by firms to improve their performance and productivity under changing market conditions. We end with some comments on how to assess innovative activity in traditional industries such as pulp and paper.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2673.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2673

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Related research

Keywords: incremental innovation; ICT investments; modernization investments; competitive advantage; production management; supply-chain management;

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References

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  1. Jerker Denrell & Christina Fang & Sidney Winter, 2003. "The Economics of Strategic Opportunity," LEM Papers Series 2003/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. Ghosal, Vivek, 2002. "Potential foreign competition in US manufacturing," International Journal of Industrial Organization, Elsevier, vol. 20(10), pages 1461-1489, December.
  3. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
  4. Pesendorfer, Martin, 2003. " Horizontal Mergers in the Paper Industry," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 495-515, Autumn.
  5. Ghosal, Vivek & Nair-Reichert, Usha, 2009. "Investments in modernization, innovation and gains in productivity: Evidence from firms in the global paper industry," Research Policy, Elsevier, vol. 38(3), pages 536-547, April.
  6. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
  7. Ghosal, Vivek, 2007. "Small is Beautiful but Size Matters: The Asymmetric Impact of Uncertainty and Sunk Costs on Small and Large Businesses," MPRA Paper 5461, University Library of Munich, Germany.
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Cited by:
  1. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," Quantitative Macroeconomics Working Papers 20906, Hamburg University, Department of Economics.
  2. Ghosal, Vivek & Nair-Reichert, Usha, 2007. "Investments in Modernization, Innovation and Gains in Productivity: Evidence from Firms in the Global Paper Industry," MPRA Paper 5459, University Library of Munich, Germany.
  3. Natália Barbosa & Ana Paula Faria & Vasco Eiriz, 2013. "Industry - and firm-specific factors of innovation novelty," NIPE Working Papers 10/2013, NIPE - Universidade do Minho.

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