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Business Strategy and Firm Reorganization under Changing Market Conditions

  • Vivek Ghosal

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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-06/cesifo1_wp2673.pdf
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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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  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. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 339-376, February.
  3. Ghosal, Vivek, 2002. "Potential foreign competition in US manufacturing," International Journal of Industrial Organization, Elsevier, vol. 20(10), pages 1461-1489, December.
  4. 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.
  5. 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.
  6. 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.
  7. Martin Pesendorfer, 1998. "Horizontal Mergers in the Paper Industry," NBER Working Papers 6751, National Bureau of Economic Research, Inc.
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