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We examine the fit between a firm's product market strategy and its business model. We develop a formal model in order to analyze the contingent effects of product market strategy and business model choices on firm performance. We investigate a unique, manually collected dataset, and find that novelty-centered business models--coupled with product market strategies that emphasize differentiation, cost leadership, or early market entry--can enhance firm performance. Our data suggest that business model and product market strategy are complements, not substitutes.

Firms spend substantial resources on marketing and selling. Interpreting this as evidence of frictions in product markets, which require firms to spend resources on customer acquisition, this article develops a search theoretic model of firm dynamics in frictional product markets. Introducing search frictions generates long-term customer relationships, rendering the customer base a state variable for firms, which is sluggish to adjust. This affects: the level and volatility of firm investment, profits, value, sales and markups, the timing of firm responses to shocks, and the relationship between investment and Tobin's q. We document support for these predictions in firm-level data from Compustat, using cross-industry variation in selling expenses to quantify differences in the degree of friction across markets.

Research summary: Extending research on the effect of experience on acquisition outcomes, we examine how the differential in previous M&A experience between the target and the acquirer affects the value they, respectively, obtain when the acquirer takes over the target. Drawing on literature about organizational learning, negotiation, and information economics, we theorize that the party with greater experience will be able to obtain more value. Furthermore, we theorize that the effect of differential M&A experience on value obtained is contingent on the level of information asymmetry the acquirer faces with respect to the target, specifically as a function of the target's product-market scope and whether the deal is friendly. We test and find support for these predictions in a sample of 1,241 M&As over a 30-year period. Managerial summary: Corporate strategy is about a firm's scope and development decisions and outcomes, but corporate strategizing is incomplete unless managers anticipate the moves of other economic actors. We demonstrate the importance of these points when it comes to learning to make acquisitions. Using an innovative research design and theory that enables comparison between acquirer and target gains, we show that whatever their firm's acquisition history and capabilities, acquisitive managers should mind the negotiation and other pitfalls that arise when target firms possess ample acquisition experience of their own. We also demonstrate that the effect of experience advantage, whereby the more experienced party benefits, depends on the target firm's scope and whether the deal is friendly—two dimensions that acquirers can and should take into account.

We report on two studies (a single and a multi-industry) that empirically investigate a nomological network of relationships between strategic business unit product-market strategy (differentiation, cost-focus, and product-market scope), marketing capabilities (architectural and specialized capabilities, as well as their integration), and business unit performance (market effectiveness and subsequent one-year objective cash flow), along with a series of controls. Addressing important lacunae in the resource-based view our main research objective is to augment understanding of how critical firm-level marketing capabilities enable the realization of strategy, thus, further advancing both the resource-based view and more recent capabilities theorizing. Specifically, we test seven hypotheses and find strong evidence that both architectural and specialized marketing capabilities, and their integration, positively mediate the product-market strategy and derived business unit performance relationship. In contrast to many extant studies, both survey and objectively measured data are combined, and because the secondary data collected contains both resource-level (input) data and subsequent one-year financial data, a higher level of confidence may be attributable to our findings.

This paper explores the interplay between product market, strategic factor market, and resource development. More competition in the product market makes resource buyers bid higher for resources, as the value of trying to preempt the resources is higher. Holding other initial conditions constant, resources are developed more in industries with factor markets than in industries without. When buyers of resources cannot integrate more than one resource, developers choose to develop either at a low or high level, generating a type of heterogeneity that would not arise otherwise. Changes in the intensity of competition in the product market can have the opposite effect on resource development efforts depending on the presence or absence of factor markets.

We analyse the impact of product market competition on unemployment, and how this depends on labour market institutions. Theoretically, both firms with market power and unions with bargaining power are constrained in their behaviour by the elasticity of demand in the product market. We use differential changes in regulations across OECD countries over the 1980s and 1990s to identify the effects of competition. We find that increased competition reduces unemployment, more so in countries with labour market institutions that increase worker bargaining power. We also find that competition increases real wages but less so when bargaining power is high.

This study uses learning theory to show how knowledge domains affect product extension decisions and how these product decisions change as firms age. Faced with the choice of new product-markets, a firm might decide to introduce a similar product, by leveraging existing firm knowledge, or to experiment with a less familiar product, which requires new knowledge. Using data on new drug introductions in the US generic pharmaceutical industry, the analyses showed clear support for heterogeneous product-market entry patterns across knowledge domains as the firm ages. Across time, the form of learning shifts from exploration to exploitation.

Despite the extensive literature on the determinants of child labor, the evidence on the consequences of child labor on outcomes such as education, labor, and health is limited. We evaluate the causal effect of child labor participation among children in school on these outcomes using panel data from Vietnam and an instrumental variables strategy. Five years subsequent to the child labor experience we find significant negative impacts on education, and also find a higher probability of wage work for those young adults who worked as children while attending school. We find few significant effects on health.

This paper evaluates the relationship between public policy reforms and productivity, investment, employment and per capita income for OECD and non-OECD countries. More competition-friendly product market regulations are associated with improved economic outcomes: lower barriers to foreign trade and investment go in tandem with greater multi-factor productivity (MFP), and lower barriers to entry and less pervasive state control over the business sector with larger capital stock and increased employment rate. More flexible labour market regulations are found to go hand in hand with higher employment rates whereas no robust link between labour market regulations and MFP and capital deepening can be established. Thefindings also suggest that the quality of institutions is fundamental for economic outcomes. Finally, the paper shows that countries at different levels of economic development face different policy effects and that some policy reforms interact with each other by attenuating and amplifying each others economic impacts.

We examine how biased financial reports (managed earnings) affect product market competition and how product market competition affects incentives to bias financial reports in a model with fully rational firms. We find that Cournot competitors bias their reports to create the impression that their costs are lower than they actually are. This bias leads to lower total production and a higher product price, even though each firm fully understands its rival's incentives to bias its financial reports. The magnitude of the bias is larger when firms compete in more profitable product markets and smaller when the firm can extract more information about its rival's costs from its own. When the costs of misreporting are asymmetric, the lower-cost firm engages in more earnings management than its rival, produces more than it would in a fullinformation environment, and earns greater profits. Our analysis leads to new, testable relations among earnings management, reported and actual earnings, and industry structure.