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Article
Publication date: 25 July 2019

Franco Manuel Sancho-Esper and Francisco José Mas-Ruiz

The purpose of this paper is to analyse the role of switching costs (SwCs) on established firm cost behaviour towards a competitive entry in the Spanish domestic airline market…

Abstract

Purpose

The purpose of this paper is to analyse the role of switching costs (SwCs) on established firm cost behaviour towards a competitive entry in the Spanish domestic airline market, taking into account the entrant profile and airport capacity restrictions.

Design/methodology/approach

The dynamic model is based on information of 193 Spanish domestic routes in which incumbents react to entrants (quarterly data during 10 years, 620 reactions are analysed). The balanced panel used is constructed by setting up a multiple-source database based on accounting and industrial engineering procedures.

Findings

Results show that both entrant profile and regulatory constraints conditions incumbent cost reaction (CR) to entry at the route-level. Regression models show that the relationship between SwCs and incumbent reaction is moderated by the entrant profile and the regulatory conditions of the market.

Practical implications

This study reveals the importance of policy measures aimed at reducing firm market power and increasing consumer protection in the airline industry, in which SwCs are artificially created at the company’s discretion and where operating costs at the route-level need to be evaluated together with the various service elements.

Originality/value

This study complements current literature related to incumbent CR to entry in the airline industry since it analyses the specific reaction performed by a carrier at the route-level. Moreover, it analyses the whole set of routes in the Spanish domestic market rather than a selection of it. It also explicitly includes three alternative measures of SwCs that can influence such incumbent reaction.

Objetivo

Esta investigación analiza el papel de los costes de cambio en el comportamiento en costes de las empresas establecidas ante las entradas competitivas en el mercado aéreo nacional español, teniendo en cuenta el perfil de los entrantes y las restricciones de capacidad de los aeropuertos.

Diseño/Metodología/Enfoque

El modelo dinámico propuesto se basa en la información de 193 rutas nacionales españolas en las que los implicados reaccionan ante los nuevos entrantes (datos trimestrales durante 10 años, se analizan 620 reacciones). El panel equilibrado utilizado se construye configurando una base de datos de múltiples fuentes basada en procedimientos de contabilidad de costes e ingeniería industrial.

Resultados (Hallazgos)

Los resultados muestran que tanto el perfil del entrante como las restricciones a la entrada condicionan la reacción en costes del implicado ante la entrada a nivel de ruta. Los resultados de las regresiones muestran que la relación entre los costes de cambio y la reacción del implicado está moderada tanto por el perfil del entrante como por las condiciones regulatorias del mercado.

Implicaciones prácticas

Este estudio revela la importancia de las medidas de política destinadas a reducir el poder de mercado de las empresa y a aumentar la protección del consumidor en el sector de las aerolíneas, en las que los costes de cambio se crean artificialmente a discreción de la compañía y donde los costes operativos a nivel de ruta deben evaluarse juntos con diversos elementos de servicio.

Originalidad/Valor

Este estudio complementa la literatura actual relacionada con la reacción del implicado ante la entrada en el sector de las aerolíneas, ya que analiza la reacción específica realizada por las compañías a nivel de ruta. Además, analiza de forma exhaustiva el conjunto de rutas en el mercado nacional español en lugar de una muestra de ellas. También, incluye explícitamente tres medidas alternativas de costes de cambio que pueden influir en dicha reacción predominante.

Article
Publication date: 8 June 2015

John Kuada

– The purpose of this paper is to provide a classificatory framework for mapping out entrepreneurs and small businesses with growth potentials in Africa.

Abstract

Purpose

The purpose of this paper is to provide a classificatory framework for mapping out entrepreneurs and small businesses with growth potentials in Africa.

Design/methodology/approach

The study undertakes a review of the existing development economics and entrepreneurship literature to determine the need for the framework and how to proceed in developing it.

Findings

The literature review informs that although enterprise-led growth provides a greater promise for absolute poverty reduction, policymakers lack guidelines on how to identify those with highest potentials for job creation and tax revenue generation. Furthermore, African entrepreneurs can purposefully be classified in terms of their motives and degree of innovation. The classification produces a 2×2 matrix that maps out the growth capabilities of businesses found in a given country or community.

Research limitations/implications

The framework provides researchers and policymakers with descriptive categories that can guide their strategies and decisions.

Originality/value

Introducing innovation-imitation dimension into the classificatory framework extends and improves previous typologies of small enterprises available in the literature.

Details

African Journal of Economic and Management Studies, vol. 6 no. 2
Type: Research Article
ISSN: 2040-0705

Keywords

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