Search results

Digital business models are often designed for rapid growth, and some relatively young companies have indeed achieved global scale. However, despite the visibility and importance of this phenomenon, analysis of scale and scalability remains underdeveloped in management literature. When it is addressed, analysis of this phenomenon is often over-influenced by arguments about economies of scale in production and distribution. To redress this omission, this paper draws on economic, organization, and technology management literature to provide a detailed examination of the sources of scaling in digital businesses. We propose three mechanisms by which digital business models attempt to gain scale: engaging both non-paying users and paying customers; organizing customer engagement to allow self-customization; and orchestrating networked value chains, such as platforms or multi-sided business models. Scaling conditions are discussed, and propositions developed and illustrated with examples of big data entrepreneurial firms.

This chapter is a radical critique of the neoclassical growth theory, justifying ways out of mainstream economics. It has three parts. The first one analyzes growth theories from the Classical representation to the endogenous growth models. The second part demonstrates that the “new growth theory” is not a break with Solow's formalization. To prove it, we build an original Solowian endogenous growth model. Then, this neoclassical macrodynamic framework is technically, deeply critized in a third part. We show that both exogenous and endogenous neoclassical models prove to be incapable to explain growth in the long period. We concentrate on the ambiguities surrounding the hypothesis of single agent, as well as on the role of the state, in particular when it is considered as a “planner” by the neoclassicals. Endogenous growth models do not correspond to macrodynamization of the Walrasian general equilibrium, nor have solid microeconomic bases. We advocate in favor of rehabilitating state's intervention in social areas and of reactivating Marxist theoretical reflections regarding social planning and class analysis in the current time of structural crisis of the capitalist world system.

This chapter examines the main methodological issues involved in the comprehension of the cost structure of the airport industry and suggests considerations for future airport cost analyses. Such understanding has become a crucial concern for policy makers, regional planners, and managers in order to deal with optimal market design (e.g., regulation and market configuration) and airport strategies (e.g., pricing, investments, and alliances). An in-depth analysis of the economics of cost functions is presented, together with a description of the relevant multi-output cost economies measures (average incremental costs, scale and scope economies, and cost complementarities). We also discuss the assumptions underlying estimates of total versus variable cost functions and the importance of estimating a sufficiently flexible functional form. Moreover, we provide a critical survey of the international empirical literature on the cost structure of the airport industry, which highlights how econometric estimates strongly depend on the sample choice and the empirical model considered. Indeed, while econometric studies on international samples based on long-run cost function estimates show that long-run scale economies are never exhausted, single country studies mostly estimate variable cost functions and find lower values for scale economies at median sample points that tend to decrease with size. We discuss why we believe that studies based on the estimation of short-run variable cost functions offer more reliable results, given the reasonable assumption of airport overcapitalization in the short run. We conclude our work by noting that underlying policy issues related to planning and regulation, as well as to the optimal market structure of the airport sector, need to take into account the role played by vertical relationships between airports and airlines.

Researchers recommend a reorganization of the medical profession into larger groups with a multispecialty mix. We analyze whether there is evidence for the superiority of these models and if this organizational transformation is underway.

We summarize the evidence on scale and scope economies in physician group practice, and then review the trends in physician group size and specialty mix to conduct survivorship tests of the most efficient models.

The distribution of physician groups exhibits two interesting tails. In the lower tail, a large percentage of physicians continue to practice in small, physician-owned practices. In the upper tail, there is a small but rapidly growing percentage of large groups that have been organized primarily by non-physician owners.

While our analysis includes no original data, it does collate all known surveys of physician practice characteristics and group practice formation to provide a consistent picture of physician organization.

Our review suggests that scale and scope economies in physician practice are limited. This may explain why most physicians have retained their small practices.

Larger, multispecialty groups have been primarily organized by non-physician owners in vertically integrated arrangements. There is little evidence supporting the efficiencies of such models and some concern they may pose anticompetitive threats.

This is the first comprehensive review of the scale and scope economies of physician practice in nearly two decades. The research results do not appear to have changed much; nor has much changed in physician practice organization.

Mergers and acquisitions in the transportation sector are typically explained as attempts to capture economies of scale and scope through shared infrastructure and related cost-saving measures. In the airline industry, the past 15 years have seen an increasing number of international mergers and acquisitions that would have been blocked under prior regulatory regimes. This activity suggests that there are indeed gains from increasing airline size.

Such gains may be largely financial in nature. One benefit to a merged airline could be greater market power over particular routes and hubs after merger, as well as improved contract structure and bargaining power in operations, although greater de-regulation and more competition internationally makes these arguments less compelling. In many cases, gains may be unique to specific airlines or operational situations. Thus, the issue addressed in this chapter is whether, in general, increasing the size or scope of airline operations enables them to function more efficiently and whether this effect is sustained across all sizes of airline. More pointedly, the chapter examines whether there exist measurable efficiency gains that can help explain the variety of mergers and acquisitions in the industry.

This research estimates a multi-product flexible cost function of airport variable costs. Data for the analysis are a panel of 50 airports from 1996 to 2008. Output includes domestic and international departures, non-aeronautical operating revenues, and the number of transport workload units, where a workload unit is a passenger or the equivalent of a 220 pound packet of cargo. The quasi-fixed factor is the equivalent number of 10,000′ × 150′ runways at an airport. After correcting for first-order serial correlation, the analysis finds that airports operate under constant returns to runway utilization and multi-product decreasing returns to scale, production technology is consistent with product specific returns to capacity utilization and anti-complementarity across outputs, and general airport operations have input substitution possibilities with personnel and contractual repair/maintenance inputs. The study also finds 1.05% technology progress over the sample period, due to strong growth prior to 2001, with similar productivity growth rates for large and medium hubs.

One aspect of agglomeration economies is economies of scale. When automobile production centered in Detroit in the early part of the twentieth century, this allowed more efficient production methods, which lowered the per-unit cost of output. Arrow (2000) emphasizes the tension between increasing returns to scale and equilibrium models, and as Young (1928) noted, increasing returns to scale is at the foundation of economic progress. Kaldor (1972), building on Young's insights, noted that static neoclassical economic models did not do a good job of depicting the economic progress that results from increasing returns to scale in production. This insight goes at least as far back as Adam Smith (1776), however, who noted the increased productivity that comes with an increased division of labor. Smith's example of the pin factory, where individuals specializing in one small part of a larger manufacturing operation increase productivity by, perhaps, hundreds of times, shows the benefits of agglomeration economies. The division of labor is limited by the extent of the market, Smith argued, so enlarging the extent of the market allows for a greater division of labor, which increases productivity and generates prosperity. By concentrating automobile production in Detroit rather than having automobiles locally built, the extent of the market is increased from one locality to an entire nation, and in some cases an entire world. The resulting agglomeration economies increase productivity and produce prosperity.