Economy vs History - What Does Actually Determine the Distribution of Shops' Locations in Cities?

This study examines in which cases economic forces or historical singularities prevail in the determination of the spatial distribution of retail shops. We develop a relatively general model of location choice in discrete space. The main force towards an agglomerated structure is the reduction of transaction costs for consumers if retailers are located closely, whilst competition and transport costs work towards a disperse structure. We assess the importance of the initial conditions by simulating the resulting distribution of shops for identical economic parameters but varying initial settings. If the equilibrium distributions are similar we conclude that economic forces have prevailed, while dissimilarity indicates that 'history' is more important. The (dis)similarity of distributions of shops is calculated by means of a metric measure.

Dependence and trust between suppliers and industrial customers

Suppliers have experienced unexpected consequences for their businesses due to changing situations for their important customers. Such events may also occur at short notice, at least when it comes to necessary and radical decisions. Often suppliers are not aware of the full extent of these events until it is too late for them to take countermeasures, i.e. develop appropriate strategies. With increasing turbulence in the marketplace, it is clear that firms need to be aware of relationship-oriented marketing strategies. To cope with change the supplier and its customer will need strategies based on jointly understood action. Action, both strategic and operational, is based on each party’s meanings concerning why they do business with one another (enactment). Dependence and trust between the parties are issues in their construction of meaning and will therefore underlie their enactment. The purpose of this paper is to investigate dependence and trust between suppliers and industrial customers, implications for action of dependence and trust, and, finally, draw conclusions about dependence and trust for business strategy. Dependence. A firm can be dependent on a specific other firm due to investments in specific assets geared to that firm. A literature survey identifies five types of specific assets: Personal relations, competence, integration of governance systems, dedicated volume of goods/services, and product/process specialization. Another reason for dependence is the structure of the market, which may lack alternative providers of similar products. Then it becomes difficult or impossible due to large switching costs to substitute one firm with another for the provision of good/services. Trust. A literature survey concerning trust leads to the conclusion that important aspects of trust probably vary between different environments and settings where trust is an issue. Since trust between suppliers and industrial customers is the issue in this study, the notion and implications of trust among strategic decision-makers in that empirical setting would be important. By using the trust literature together with an empirical investigation three types of trust for the study are discerned: Relationship-based, competence-based and moral based trust. Dependence and trust. There is a temporal interplay between trust and dependence. Trust is expectation concerning the future. Dependence differs from trust by being formed in the present time and may therefore become a means to avoid the problems in assessing the future. But when you choose to trust someone, as a consequence you become dependent. Interrelationship between dependence and trust is thus complex and intertwined. It varies with task, situation and persons involved. The order of events in time has an impact. Earlier actions by actors influence later ones. Trust develops stepwise in repeated encounters between the parties. The parties’ actions towards each other and the evolvement of action processes seem to be the key to understanding suppliers’ and customers’ dependence and trust. This interplay is in the paper illustrated with dependence and trust development in two dyads of supplier – industrial customer. In the cases we could discern that meaning construction with dependence and trust, interrelated with action, can lead to improved or deteriorated business relations between the parties. As in the cases patterns of virtuous circles or vicious circles may emerge. Expectations concerning the other party, i.e. trust, could thus change substantially, leading to different types of action than before. Conclusions concerning business strategy. Dependence and trust have different impacts on a firm’s strategy and consequently on strategic change. Dependence indicates preconditions for action and what action is precluded due to the characteristics of business between the parties in terms of specific assets and substitutability. In all, dependence sets limits for strategy, wide or narrow. Trust, on the other hand, can be a driving force shaping strategy, opening up possibilities in markets and products as well as governance systems linking parties. But lack of trust and deteriorating trust may also preclude business that could otherwise have been done. There needs to be trust backing up any viable strategy and strategic change. Furthermore, it is vital that the parties concerned convey in their communication what they consider to be meanings in their business. If they have dissimilar views on dependence, action may become disjointed and not understood by the other party. Likewise, openness concerning trust in one another is needed in order to display mutuality in trust or build mutual trust. On industry level trust in supplier relationships at firm level can be promoted by providing information exchange and arenas for that purpose to support potential business partners to embark upon trust development. Society, in its policy-making, can promote trust on firm level by clear-cut rules of the game, which – among other things – will reduce the risks that parties in an exchange will go to disjointed action due to different interpretations of what society requires from firms in business.supply chain; strategy; business relationship

After outsourcing – the outsourced unit: Dependence, capabilities and strategy

Outsourcing is in this study defined as the transfer of responsibility and activities, including relevant assets and resources, from a user to a legally separate party, that becomes a vendor to the user. An outsourcer transfers activities to an outsourced unit. The situation of the outsourced unit becomes problematic in its provision of goods or services to both the outsourcer and other buyers. Specifically, the outsourced unit after outsourcing has ample and tight bonds to the outsourcer and there is a need to strike a balance between dependence and independence towards the outsourcer. The investigated problem reported in this article is: How can the outsourced unit strategically handle its situation after the outsourcing? Issues at stake for the outsourced unit are: How to hand le dependence on the outsourcer. How to use and develop competitive advantages, capabilities and resources. How to develop and implement business strategy. Dependence can reside in asset specificity: Relationships with the outsourcer and business partners, need for the exchange partner’s competence, joint governance systems, the relative volume of goods/services provided and/or specialization of goods/services towards the exchange partner. The structure of the market may make it more or less possible to substitute one exchange partner for another. For sustainable competitive advantage, the possession of or access to strategic capabilities and resources is needed, which the outsourced unit accumulates and deploys. The firm must meet the demand with a supply based on its capabilities and resources. The outsourced unit obviously starts with resources collected and capabilities developed by the out sourcer. It is its management’s task to identify and muster the resources and strategic capabilities of the firm. Inherited capabilities and resources may thus need to be developed into capabilities that are important for the outsourcer’s new role and position. In two in-depth cases outsourced units are studied with focus on dependence on the outsourcer, the units’ guiding competitive advantages, their capabilities and resources. Two distinct strategies are identified. A strategy of conjunction with the outsourcer is to make use of competitive advantages, align capabilities and resources towards the outsourcer’s needs and to build on dependence by holding specific assets of interest for the outsourcer. A strategy of disjunction implies reducing dependence on the outsourcer by seeking new alliances and markets outside the outsourcer-outsourced relation. Disharmony with either of the strategies is discussed as a reason for strategic change.Outsourcing; business relations; strategy

Regional unemployment insurance, wage bargaining, and the size of unions

The extent to which workers are threatened by unemployment differs considerably e.g. across branches of industry, age education, and regions. Nonetheless, it is customary to levy obligatory contributions to unemployment insurance UI) regardless of a worker´s specific risk of becoming unemployed. Branches of industry or regions characterized by a relatively high rate of unemployment are favoured by this practice because workers and / or employers pay less than the actuarial fair insurance premium. This leads to a distorsion of the decisions regarding where or what kind of labour is being supplied. The purpose of this paper is to discuss the effects of placing the UI under the opligation to equilibrate its budget in each region respectively, as opposed to on the whole. In the former case, the conditions of UI reflect the risk of unemployment within each region. The results may nevertheless be applied to other characteristics systematically influencing the probability to enter employment. Labor markets in both regions do not clear because the wage rate, bargained between trade unions and employers (right-to-manage-approach), is binding. Unions maximize the expected utility of a representative worker. This expected utility is affected, among other things, by the UI contributions employed workers have to pay, and by the UI benefits unemployed workers receive. In this paper it is assumed that the UI adjusts contributions to equilibrate its budget. In this case, contributions themselves will depend on the rate of unemployment, and thus on the bargained wages. The extent to which the unions take the interplay between wages and contributions into account, crucially depends on the size of a union. For atomistic unions (decentralized bargaining), the effect of the bargained wage the unemployment rate is negligible. Because every union neglects it, the total size of this externality however is considerable. The larger a union is with respect to the total workforce, the more of the effect is internal. It is interesting to analyze the effect in the context of regionalized UI because the way UI is organized affects, how elastic UI contributions react on variations of unemployment. Another important aspect is the role of migration. Protagonists of the regionalization of UI often point to the allocative advantages it has. The line of reasoning is that workers migrate to regions which are less concerned by unemployment and which are thus characterized by lower UI contributions. The regionalization thereby serves as a substitute for higher differences of wages, which do not perfectly reflect the relative regional scarcity of labor. This point of view is rather superficial. If there is unemployment in both regions, there is no direct allocative gain in reallocating workers from one region to the other. On the other hand, migration affects the UI`s parameters. If wages react on these, the efficiency may be affected, too. It is not quite clear, however, if it is improved or worsened by the regionalization of UI. Also, workers from the poor region may be better off, because the reinforced emigration ameliorates the probability of becoming employed, and vice versa. Since the effects of regionalization of UI on the economic agents, as well as on efficiency, are subject to the complex interplay of wages, UI contributions, and migration, a formal model is an adequate mean to identify the effects. In this paper, an analytical framework is established to analyze the effects of a regionalization of UI. Since many effects are ambigous in general, the model is calibrated with reasonable parameter values. Our results confirm the importance of the degree of centralization of unions for the assessment of the regionalization of UI by workers and employers, and for the efficiency of the measure.

Benchmarking business practices in Swedish manufacturing firms

Regional benchmarking studies were conducted on business practices in manufacturing plants in three regions in Sweden. The studies were designed to determine their use of best practices and thus enable firms to identify areas in which they need to make improvements. The questionnaire contained around 200 questions to which 452 firms responded. In analysing the results, questions and responses were grouped into six categories. Two indices were developed. The studies classified firms scoring high as leaders, and firms scoring low as laggers. The studies showed inter alia that the gap in performance between leaders and laggers is particularly wide in Information & benchmarking and Innovation & technology. Conclusions are that improving benchmarking processes is a strategic step towards improving the firm’s business practices.Benchmarking; business relations; strategy

Structural Change and Regional Employment Dynamics

A casual look at regional unemployment rates reveals that there are vast differences, which appearently cannot be explained by different institutional settings. Our paper attempts to trace the these differences in the regions' labor market performance back to the regions' specialization in products that are more or less advanced in the product cycle. The model we develop shows how individual profit and utility maximization endogenously leads to decreasing employment in the presence of process innovation. Things get even worse if the considered region is less innovative than others. Our model suggests that the only way to escape from this vicious circle is to specialize on products that are at the beginning of their economic life.