EXPRESS: Learning to Set Prices

The authors empirically examine how firms learn to set prices in a new market. The 2012 privatization of off-premise liquor sales in Washington State created a unique opportunity to observe retailers learn to set prices from the point at which their learning process began. Tracking this market as it evolved through time, the authors find that firms indeed learn to set more profitable prices, that these prices increasingly reflect demand fundamentals, and they ultimately converge to levels consistent with (static) profit maximization. The paper further demonstrates that initial pricing mistakes are largest for products whose demand conditions differ the most from those of previously privatized markets, that retailers with previous experience in the category are initially better-informed, and that learning is faster for products with more precise sales information. These findings indicate that firm behavior converges to rational models of firm conduct, but also reveal that such convergence takes time to unfold and play out differently for different firms. These patterns suggest important roles for both firm learning and heterogeneous firm capabilities.

In Search of Optimal Distinctiveness: Balancing Conformity and Differentiation via Organizational Learning

ABSTRACT Firms in a nascent industry need to search across various technological trajectories and market opportunities with limited prior knowledge. While inter-firm learning (e.g., imitation) helps the focal firm adapt in the process of conformity, intra-firm learning (e.g., independent experimentation) helps a firm stand out from rivals in the process of differentiation, both of which can gain competitive advantages. This study investigates how the conformity-differentiation balance can be achieved from the cross-level learning perspective. Adopting a mixed-method design, we first conduct a case study on the Chinese photovoltaic industry. The case suggests that firms are inclined to conform in upstream and bottleneck technological domains but differentiate in the downstream market applications. We then extend the case findings through a computational simulation based on March's learning model. When experimentation and imitation are possible, the balance between conformity and differentiation can be reframed as the classical balance between exploitation and exploration across the firm and industry levels: while experimentation is often exploitative at the firm level but exploratory at the industry level, imitation is often exploratory at the firm level but exploitative at the industry level. The study makes a new attempt to bridge the optimal distinctiveness literature with the organizational learning literature.

The effect of industry association on firm innovation in Chinese private ventures

Purpose The purpose of this paper is to examine the relationship between industry association membership and firm innovation in Chinese private ventures. A secondary objective is to investigate potential moderating effects of firm learning practices and founder characteristics on the above relationship, and to draw out implications for policymakers and practitioners. Design/methodology/approach The paper utilizes data from a sample of 567 Chinese entrepreneurial firms operating in 9 designated emerging industries. Hierarchical regression models were employed to analyze the effect of industry association membership on firm innovation, and the potential moderating effects. A 2SLS procedure was adopted to control for potential endogeneity issue. Supplemental analyses were conducted to ensure the robustness of the findings. Findings The paper provides empirical insights about how industry association membership, along with firm learning practice and founder leadership, affect firm innovation in Chinese private ventures in emerging industries. It suggests that industry association membership positively affects firm innovation. Further, there is a three-way interaction effect of industry association membership, learning practice and founder power on innovation. Research limitations/implications Due to the design of the data set, there are some limitations. First, the study only considered whether a firm belongs to an industry association, but not the nature of such membership (length, firm status in the association, etc.). Second, the cross-sectional design may limit the power of the study to make casual implications about the tested relationships. Practical implications The paper provides important practical implications for policymakers and entrepreneurs in China. In general, the results suggest that private ventures pursuing innovation in emerging industries can benefit from industry associations, and entrepreneurs shall actively engage in firm-level and personal-level learning. For policymakers, the study suggests that to foster innovation in an emerging industry, special attention shall be paid to building necessary institutional support to develop and to strengthen the role of industry association in the industry. Originality/value This paper fulfills an important gap in the literature in that it is one of the first, which investigates the role of the industry association in firm innovation, especially in a non-western context. This paper provides new insights into the role of industry association and firm innovation in an under-researched developing economy context.

Analysing intermediary organisations and their influence on upgrading in emerging agricultural clusters

This paper analyses intermediary organisations in developing economy agricultural clusters. The paper critically engages with a growing narrative in studies of intermediaries that have stressed the ownership structure of intermediaries as a key driver for enabling knowledge transfer, inter-firm learning and upgrading of small producers in clusters. Two case studies of Latin American clusters are presented and discussed. The study suggests that in addition to ownership structure, cluster governance and the embeddedness of intermediaries in clusters are critical factors that need to be taken into account in understanding the influence of intermediaries in the upgrading of small producers in clusters.