Alliance Paradox: An Empirical Study Of Alliance Portfolio Effects On Customer Service Quality In The U.S. Airline Industry

This dissertation studies the potential paradoxical effects of alliance participation. Over the past two decades, alliance participation has become a popular firm strategy to obtain benefits that are difficult for a firm to obtain on its own. Yet, as firms increasingly participate in alliances, boundedly rational managers may not effectively manage all aspects of alliances to achieve intended alliance outcomes. Paradoxically, alliance participation may cause harm to the participating firms. To unveil an alliance paradox, this dissertation first examined the relationships between alliance portfolio attributes (i.e., alliance portfolio size, multilateral alliances, alliance partner country diversity, and alliance type) and customer service quality in the U.S. airline industry. Further, I examined whether alliance experience moderates the relationships between alliance portfolio attributes and customer service quality. Altogether, five hypotheses were tested. This dissertation relied exclusively on the longitudinal quarterly data of nine U.S. major airlines over a 20-year period between 1988 and 2007 that include Alaska Airlines, American Airlines, America West, Continental, Delta, Northwest, Southwest, United Airlines, and U.S. Airways. Data pertaining to alliance variables were collected from the Securities Data Company (SDC) database. Quarterly service quality data pertaining to customer complaint, mishandled baggage, on-time arrival, and involuntary denied boarding were collected from the Air Travel Consumer Report published by the U.S. Department of Transportation (DOT). To detect the temporal effects of alliance portfolio attributes on service quality, a three-month lag was created between the alliances data and the service quality data. The results show that although the relationship between alliance portfolio attributes and service quality seems to be more complex than initially proposed, the overall finding confirms the existence of an alliance paradox in that increases in alliance portfolio size, partner country diversity and channel-dominated alliances (versus backward competitor-dominated alliances) are associated with decreases in certain key dimensions of service quality. This dissertation seeks to make several important contributions. First, by exploring the alliance paradox, this dissertation attempts to demonstrate that despite the anticipated alliance benefits such as cost reduction or revenue enhancement, managers need to be aware of the cost of alliance participation with respect to customer service quality, which has paramount impact on firm performance. Second, this dissertation also contributes to services marketing literature by investigating alliance portfolio attributes as antecedents of service quality. Third, this dissertation investigates whether firm-level alliance experience moderates the relationship between alliance portfolio attributes and service quality

INVESTORS REACTIONS TO COMPETITIVE ACTIONS AMONG RIVALS: A STEP TOWARD STRATEGIC ASSET PRICING THEORY

This dissertation describes the development and empirical testing of strategic asset pricing theory (STRAPT). This explains the processes by which investors form ideas and judgments about a given firm‘s competitive strategy, and their ultimate belief about the impact these strategies will have on the firm‘s future stock price. My model explicitly accounts for information investors associate with dimensions of a firm‘s pattern of competitive actions, how investors process and interpret this information, and how they form opinions about the relationship between competitive strategy and future value of the firm‘s equity shares. Thus, by accounting for observed competitive behavior, my model stands in stark contrast to asset pricing theory – which asserts that financial markets are efficient and all investors rational – and instead sides with Hirshleifer (2001) who contends some investors form biases, and that the next stage of asset pricing theory is to look at how investors form opinions about stocks. Drawing from some unique theoretical areas: information perception/salience, information processing, social judgment, and decision making, my dissertation develops a conceptual model of this process by which long-buyers and short-sellers view and react to patterns of competitive actions carried out among rivals. My findings about how long-buyers regard between-firm ―differences‖ in the pattern of competitive actions the firm carries out over time, or strategic heterogeneity, are generally supportive of Miller and Chen (1996), who posited that distinctive processes such as heterogeneous strategies may decrease the ―legitimacy‖ of the firm. They exhibit a negative relationship with stock returns. Due to a different decision-making process, short-sellers come to different conclusions. Strategic heterogeneity exhibits a U-shaped relationship with short interest. My findings pertaining to how long-buyers value the number of strategic moves carried out by a firm generally support Young, Smith, and Grimm (1996) and Ferrier (2001). Specifically, I demonstrate that these investors value exposure to a firm, and this translates into positive stock market returns. Short-sellers, on the other hand, see the value of a large number of strategic actions only to an extent. Through their systematic analysis, they subscribe to the Porter (1980) and Shamsie (1990) viewpoint that more is not always better. This results in a U-shaped relationship with short interest

The strategic management of projects to enhance value for money for BAA plc. Volumes 1 - 2.

The airport business is undergoing a shift from that of a traditionally operational nature, to a more commercial, profit driven business orientation. Airport infrastructure is experiencing a face lift in order to meet the requirements for customer satisfaction resulting from this shift in culture. In this regard airport operators must seek improvements in the way in which their development projects are planned, designed and delivered. An inherent link between corporate, business and project value, highlighted within this thesis, has led to the requirement for project management systems that maximise value and therefore facilitate the corporate strategy of the organisation.. This thesis develops a model to strategically manage projects to enhance value for money for BAA plc. It is concluded that the project management process is divided into two primary phases: the strategic and tactical, the former receiving minimum attention in UK construction project management. By combining the strategic management of a portfolio of projects with the tactical management of individual projects a link is forged between corporate and customer value and project value. The thesis concludes by presenting the Strategic Project Management framework for use by BAA project managers. The decision making framework facilitates the definition of project objectives and manages the project process to realise optimum value to the client / customer groups. By defining sub processes within the overall project process, the framework binds the interfaces such that information and communication flows freely and completely through the project.BAA pl

Strategy Tripod Perspective on the Determinants of Airline Efficiency in A Global Context: An Application of DEA and Tobit Analysis

The airline industry is vital to contemporary civilization since it is a key player in the globalization process: linking regions, fostering global commerce, promoting tourism and aiding economic and social progress. However, there has been little study on the link between the operational environment and airline efficiency. Investigating the amalgamation of institutions, organisations and strategic decisions is critical to understanding how airlines operate efficiently. This research aims to employ the strategy tripod perspective to investigate the efficiency of a global airline sample using a non-parametric linear programming method (data envelopment analysis [DEA]). Using a Tobit regression, the bootstrapped DEA efficiency change scores are further regressed to determine the drivers of efficiency. The strategy tripod is employed to assess the impact of institutions, industry and resources on airline efficiency. Institutions are measured by global indices of destination attractiveness; industry, including competition, jet fuel and business model; and finally, resources, such as the number of full-time employees, alliances, ownership and connectivity. The first part of the study uses panel data from 35 major airlines, collected from their annual reports for the period 2011 to 2018, and country attractiveness indices from global indicators. The second part of the research involves a qualitative data collection approach and semi-structured interviews with experts in the field to evaluate the impact of COVID-19 on the first part’s significant findings. The main findings reveal that airlines operate at a highly competitive level regardless of their competition intensity or origin. Furthermore, the unpredictability of the environment complicates airline operations. The efficiency drivers of an airline are partially determined by its type of business model, its degree of cooperation and how fuel cost is managed. Trade openness has a negative influence on airline efficiency. COVID-19 has toppled the airline industry, forcing airlines to reconsider their business model and continuously increase cooperation. Human resources, sustainability and alternative fuel sources are critical to airline survival. Finally, this study provides some evidence for the practicality of the strategy tripod and hints at the need for a broader approach in the study of international strategies

European Hub Airports – Assessment of Constraints for Market Power in the Local Catchment and on the Transfer Market

Airports have long been considered as an industry in which firms are able to exert significant market power. Nowadays, there is controversial discussion whether airports face a degree of competition which is sufficient to constrain potentially abusive behaviour resulting from this market power. The level of competition encountered by European airports has hence been evaluated by analysing the switching potential of both airlines and passengers between different airports, for example. The research within this thesis contributes to the field of airport competition by analysing the degree of potential competition 36 European hub airports face on their origin-destination market in their local catchments as well as on the transfer market within the period from 2000 to 2016. For this purpose, a two-step approach is applied for each market, with first analysing the degree of market concentration, using the Herfindahl Hirschman Index as a measure, for each destination offered at the hub airports and the respective development over time. In the second step, the effect of market concentration on the seat capacities at the hub airports is estimated. This analysis shows that the majority of European hub airports has a dominant position on both the origin-destination and transfer market. However, it can be observed that the level of market concentration has been decreasing over time, thus implying a higher overlap between destinations offered at hub airports and their competitive counterparts. Passengers thus have more alternatives available when travelling between two points, this increasing switching ability therefore imposes potential constraints on airport market power. In the second step of the analysis, the above approach is complemented by empirically estimating the impact of an increase in market concentration, and additional factors such as the presence of low cost carriers at competing airports, on the seat capacities offered on a particular destination. Using panel data for the considered time period, the statistically significant results show that an increase in market concentration leads to a decrease in the amount of seats as well the flight frequencies offered to a destination. These findings are coherent for both the origin-destination and transfer market. Considering the decrease in market concentration across the majority of European hub airports, it can in turn be inferred that more seats and frequencies are supplied on the respective routes, resulting in an increase in consumer welfare. This approach and the respective findings in this thesis serve as further guidance to policy makers deciding on the extent of economic regulation feasible for individual hub airports in Europe. From an airport and airline standpoint these results can, of course, also be applied to gain insight as to which airports are their main competitors, and which routes face a high overlap with other airports and airlines, thus designing their network structure accordingly

The development of trust at multiple levels in strategic alliances

Most of prior multilevel studies on trust in inter-organizational relationships place much emphasis on specifying the level of analysis at which trust occurs (i.e. individual, group, or organization level) while overlooking the level of management, which refers to the hierarchical echelons within an organization. In addition, more often than not, the inter-organizational context where trust develops is not specified. Integrating both levels-of-analysis and levels-of-management perspectives, the dissertation investigates the distinctive trust dynamics at two hierarchical echolons, to understand the cross-level interaction between these echelons which leads to the establishment of shared trust in the partner organization and the formation of organization-level trust, and to contemplate the factors that might lead to within-organization trust heterogeneity. The focus on the management level also enables to discern contingencies associated with the trust development process in horizontal alliances as opposed to vertical alliances. Adopting the case stud method, the alliance between KLM and Northwest Airlines is investigated to illustrate key concepts in the developed theoretical framework and to buld a stronger case for future large-scale empirical studies.:CHAPTER 1: INTRODUCTION 1.1. Motivation for the dissertation 1.2. Objectives of the dissertation 1.3. Key contributions of the dissertation 1.4. Structure of the dissertation CHAPTER 2: THEORETICAL BACKGROUND 2.1 The concept of trust in strategic alliances 2.1.1 Definition of trust 2.1.2 Levels of trust 2.1.3 Trust development in strategic alliances 2.2 Boundary spanning roles in strategic alliances 2.2.1 Nature of boundary spanning roles in strategic alliances 2.2.2 Hierarchical perspective on boundary spanning roles CHAPTER 3: THEORETICAL FRAMING 3.1 Theoretical model of trust development in strategic alliances 3.1.1 Initiation stage 3.1.2 Negotiation stage 3.1.3 Formation stage 3.1.4 Implementation stage 3.2 Boundary condition of trust development 3.2.1 Interpersonal-level characteristics 3.2.2 Firm-level characteristics 3.2.3 Alliance-level characteristics 3.3 Discussion 3.3.1 Integration of level of analysis and level of management 3.3.2 Within-organization trust homogeneity vs. heterogeneity 3.3.3 Context of analysis: vertical alliances vs. horizontal alliances CHAPTER 4: ILLUSTRATIVE CASE STUDY 4.1 Objective of the empirical study 4.2 Rationale for case study methodology 4.3 Research Design 4.3.1 Data collection 4.3.2 Data analysis 4.3.3 Validity and reliability of the study 4.4 Results 4.4.1 Alliance background 4.4.2 Impact of corporate-level trust on operating-level trust 4.4.3 Influence of operating-level trust on corporate-level trust CHAPTER 5: IMPLICATIONS, LIMITATIONS AND CONCLUSION 5.1 Implications of the dissertation 5.2 Limitations of the dissertation 5.3 Conclusion REFERENCES APPENDI

Antitrust

This is a survey of the economic principles that underlie antitrust law and how those principles relate to competition policy. We address four core subject areas: market power, collusion, mergers between competitors, and monopolization. In each area, we select the most relevant portions of current economic knowledge and use that knowledge to critically assess central features of antitrust policy. Our objective is to foster the improvement of legal regimes and also to identify topics where further analytical and empirical exploration would be useful.