The Effect of Standardized Information on Firm Survival and Marketing Strategies

We argue that standardized information disclosure information using a common format and uniform metrics creates asymmetric opportunities for firms, which affects their strategies and survival. We test our predictions using a longitudinal, quasi-experimental field study, involving the Nutrition Labeling and Education Act of 1990 NLEA, and we focus on firm market share within a category as a key asymmetry. Findings indicate that, in general, the NLEA had no effect on firm responses. However, when accounting for firm differences, we observe that the NLEA led to 1 an increase in small-share firm exits and 2 a greater increase in distribution for large-share firms. No concurrent increase in price by large-share firms following the NLEA was observed. We conclude by discussing the implications of these effects for firm strategy, the design of public policy, and theories regarding the impact of information on markets.

[1]  K. Srinivasan,et al.  Broader product line: a necessity to achieve success? , 1990 .

[2]  Sanford J. Grossman.  The Informational Role of Warranties and Private Disclosure about Product Quality , 1981, The Journal of Law and Economics.

[3]  R. Leone.  Real costs of regulation , 1977 .

[4]  W. L. Wilkie.  Affirmative Disclosure at the FTC: Strategic Dimensions , 1986 .

[5]  W. W. Muir,et al.  Regression Diagnostics: Identifying Influential Data and Sources of Collinearity , 1980 .

[6]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[7]  P. Bloom,et al.  How Comparative Product Information Affects Consumers and Competition: the Effects of the Business Week and U.S. News A World Report Ratings , 1998 .

[8]  L. Delbeke.  Quasi-experimentation - design and analysis issues for field settings - cook,td, campbell,dt , 1980 .

[9]  P. Rajan Varadarajan,et al.  An Analysis of the Market Share-Profitability Relationship , 1993 .

[10]  Kevin Lane Keller.  Conceptualizing, Measuring, and Managing Customer-Based Brand Equity , 1993 .

[11]  Kusum L. Ailawadi,et al.  Market Response to a Major Policy Change in the Marketing Mix: Learning from Procter & Gamble's Value Pricing Strategy , 2001 .

[12]  Gary J. Russell,et al.  Nutrition Information in the Supermarket , 1986 .

[13]  R. Vietor.  Businessmen and the Political Economy: The Railroad Rate Controversy of 1905 , 1977 .

[14]  John G. Lynch,et al.  Wine Online: Search Costs Affect Competition on Price, Quality, and Distribution , 2000 .

[15]  R. Jacobson,et al.  Market Share and Customers’ Perceptions of Quality: When Can Firms Grow Their Way to Higher versus Lower Quality? , 1999 .

[16]  Peter S. Fader,et al.  A Cross-Category Analysis of Category Structure and Promotional Activity for Grocery Products , 1990 .

[17]  G. J. Tellis,et al.  The impact of corporate size and strategy on competitive pricing , 1989 .

[18]  Srinivas K. Reddy,et al.  Effects of a Television and Radio Advertising Ban: A Study of the Cigarette Industry , 1986 .

[19]  William S. Comanor,et al.  The Effect of Advertising on Competition: A Survey , 1979 .

[20]  Bernard J. Jaworski,et al.  Market orientation: Antecedents and consequences , 1993 .

[21]  Richard Staelin,et al.  A Framework for Evaluating Consumer Information Regulation , 1981 .

[22]  George Hendrikse,et al.  The Theory of Industrial Organization , 1989 .

[23]  S. Oster.  THE STRATEGIC USE OF REGULATORY INVESTMENT BY INDUSTRY SUB-GROUPS , 1982 .

[24]  Alan Schwartz,et al.  Product Quality and Imperfect Information , 1985 .

[25]  Alan D. Mathios,et al.  The Impact of Mandatory Disclosure Laws on Product Choices: An Analysis of the Salad Dressing Market* , 2000, The Journal of Law and Economics.

[26]  William Boulding,et al.  Sustainable Pioneering Advantage? Profit Implications of Market Entry Order , 2003 .

[27]  Debanjan Mitra,et al.  Deconstructing the Pioneer's Advantage: Examining Vintage Effects and Consumer Valuations of Quality and Variety , 2002, Manag. Sci..

[28]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[29]  D. Campbell,et al.  EXPERIMENTAL AND QUASI-EXPERIMENT Al DESIGNS FOR RESEARCH , 2012 .

[30]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[31]  Joseph P. Cannon,et al.  Slotting Allowances and Fees: Schools of thought and the Views of Practicing Managers , 2000 .

[32]  R. D. Buzzell,et al.  The PIMS Principles: Linking Strategy to Performance , 1987 .

[33]  L. G. Thomas,et al.  Direct and Indirect Effects of Regulation: A New Look at OSHA's Impact , 1985, The Journal of Law and Economics.

[34]  Christine Moorman,et al.  Market-Level Effects of Information: Competitive Responses and Consumer Dynamics , 1998 .

[35]  Richard Schmalensee,et al.  Handbook of Industrial Organization , 1989 .

[36]  J. E. Russo,et al.  The Value of Unit Price Information , 1977 .

[37]  J. Farley,et al.  How Advertising Affects Sales: Meta-Analysis of Econometric Results , 1984 .

[38]  Jack High,et al.  Strategic Uses of Public Policy , 1988 .

[39]  Dominique M. Hanssens,et al.  Modeling Marketing Interactions with Application to Salesforce Effectiveness , 1987 .

[40]  J. R. Moore,et al.  The theory of the growth of the firm twenty-five years after , 1960 .

[41]  John G. Lynch.  Presidential Address Reviewing , 1998 .

[42]  J. Calfee,et al.  The Industry Effects of Information and Regulation in the Cigarette Market: 1950–1965 , 1996 .

[43]  L. G. Thomas.  Advertising in Consumer Goods Industries: Durability, Economies of Scale, and Heterogeneity , 1989, The Journal of Law and Economics.

[44]  G. Jarrell,et al.  Studying Firm-Specific Effects of Regulation with Stock Market Data: An Application to Oil Price Regulation , 1986 .

[45]  Christine Moorman,et al.  The Contingency Value of Complementary Capabilities in Product Development , 1999 .

[46]  S. Salop,et al.  Information and Monopolistic Competition , 1976 .

[47]  T. Cook,et al.  Quasi-experimentation: Design & analysis issues for field settings , 1979 .

[48]  George A. Akerlof,et al.  The Market for “Lemons”: Quality Uncertainty and the Market Mechanism , 1970 .

[49]  L. G. Thomas.  Regulation and Firm Size: FDA Impacts on Innovation , 1990 .

[50]  Paul N. Bloom.  Studying Consumer Responses to the Changing Information Environment in Health Care: a Research Agenda , 1997 .

[51]  J. Stiglitz.  Imperfect information in the product market , 1989 .

[52]  Bart J. Bronnenberg,et al.  The Emergence of Market Structure in New Repeat-Purchase Categories: The Interplay of Market Share and Retailer Distribution , 2000 .

[53]  Sunil Gupta,et al.  Commercial Use of UPC Scanner Data: Industry and Academic Perspectives , 1999 .

[54]  C. Hjorth-Andersen,et al.  The Concept of Quality and the Efficiency of Markets for Consumer Products , 1984 .

[55]  S. Oster,et al.  Modern Competitive Analysis , 1989 .

[56]  John G. Lynch,et al.  Toward a Reconciliation of Market Power and Information Theories of Advertising Effects on Price Elasticity , 1995 .

[57]  K. Arrow.  Economic Welfare and the Allocation of Resources for Invention , 1962 .

[58]  Thomas P. Lyon.  The political economy of regulation , 2007 .

[59]  P. Ippolito,et al.  Information and advertising: the case of fat consumption in the United States. , 1995, The American economic review.

[60]  Carlisle E. Moody,et al.  Quality, Price, Advertising, and Published Quality Ratings , 1983 .

[61]  Wagner A. Kamakura,et al.  Measuring Market Efficiency and Welfare Loss , 1988 .

[62]  Will Mitchell,et al.  Precarious collaboration: Business survival after partners shut down or form new partnerships , 2007 .

[63]  John C. Narver,et al.  The Effect of a Market Orientation on Business Profitability , 1990 .

[64]  Amna Kirmani,et al.  Money Talks: Perceived Advertising Expense and Expected Product Quality , 1989 .

[65]  B. Pashigian,et al.  The Effect of Environmental Regulation on Optimal Plant Size and Factor Shares , 1984, The Journal of Law and Economics.

[66]  Catherine A. Cole,et al.  Consumers' Search and Use of Nutrition Information: The Challenge and Promise of the Nutrition Labeling and Education Act , 2002 .

[67]  Carl F. Mela,et al.  Managing Advertising and Promotion for Long-Run Profitability , 1999 .