Returns to Scale and Economies of Scale: Further Observations

Gelles, Gregory M.; Mitchell, Douglas W.

doi:10.2307/1183297

Cited by 13 publications

(11 citation statements)

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“…, Gaur and Kesavan , Rumyantsev and Netessine ). In a nutshell, our findings for retailer size/scale and the decreasing returns‐to‐scale ( γ + δ < 1) jointly verify the theoretical argument that large firms in a non‐perfectly competitive market could have scale inefficiency in production, while benefitting from economies of scale (Gelles and Mitchell ).…”

Section: Discussionsupporting

confidence: 79%

“…). In particular, firms having lower input prices can attain economies of scale even when they experience decreasing returns‐to‐scale (Cohn , Gelles and Mitchell ). Also, since our model imposes no prior assumptions on returns‐to‐scale, the estimated frontier function exhibits variable returns‐to‐scale (VRS).…”

Section: A Stochastic Production Function Modelmentioning

confidence: 99%

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Examining the Link between Retailer Inventory Leanness and Operational Efficiency: Moderating Roles of Firm Size and Demand Uncertainty

Chuang

Oliva

Heim

2019

Production and Operations Management

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R etail inventories have been consistently dropping, relative to sales, since the 1990s. Whether these lean inventory developments translate to better retailer operational performance is still an open question. We empirically examine associations between inventory leanness and operational efficiency for a sample of public US retailers from 2000 to 2013. Via a stochastic frontier analysis that accounts for retailer heterogeneity and time parameters, we find support for the hypothesis that operational efficiency has an inverted U-shape relationship with inventory leanness, suggesting an optimal inventory leanness level beyond which retailer operational efficiency degrades. This relationship, however, is heavily moderated by firm size and demand uncertainty. The former reflects a retailer's abilities to exploit economies of scale and scope, whereas the latter reflects the unpredictability in a firm's operating environment. Our evidence suggests that when increasing inventory leanness, small retailers exhibit efficiency degradation, whereas larger retailers are likely to exhibit efficiency improvement, with diminishing returns. We also find that under high demand uncertainty, being less lean is associated with higher operational efficiency, regardless of firm size. The findings show that depending on firm size and demand uncertainty, retail managers should take special care when pursuing inventory leanness. As part of post hoc robustness tests, we assess how different retail categories vary in their operational efficiency scores and conduct interviews with retail executives who further ground our econometric investigation and point to more nuanced moderators for future studies. We conclude by discussing the implications of our industry model estimation for managers and researchers.

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Section: Discussionsupporting

confidence: 79%

Section: A Stochastic Production Function Modelmentioning

confidence: 99%

Examining the Link between Retailer Inventory Leanness and Operational Efficiency: Moderating Roles of Firm Size and Demand Uncertainty

Chuang

Oliva

Heim

2019

Production and Operations Management

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“…Also, for full fish, the production cost N 220.15 k while the revenue per full fish was N 350.00 k. The results indicated that full fish farmers earned an average of N 129.85 k as net profit per full fish sold. The profitability ratio analysis which measures the ratio of revenue to expense and which gives room for comparison between two or more firms [24] revealed that fingerlings production was more profitable than production of both juveniles and full fish in the study area.…”

Section: Socio-economic Characteristicsmentioning

confidence: 99%

Profitability of Selected Ventures in Catfish Aquaculture in Ondo State, Nigeria

Oa¹,

Te²

2014

Fish Aquac J

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The need to provide information to prospective investors on the decision to invest led to this study on profitability analysis of selected ventures in catfish aquaculture in Ondo State, Nigeria. A multi-stage sampling technique was used to select 144 fish farmers rearing fingerlings, juveniles and table size (full) fish in the study area. The results of the analysis of socioeconomic characteristics showed that the mean age of the three groups of farmers was about 35.0 years, while about 88.0%was maleand about 83.0% was married.All the respondents had western education while about 88.0% of farmers had tertiary education. Fish farming was a secondary occupation for about 61.0% of farmers while the mean farming experience was 6.3 years. The result of Benefit-Cost Ratio (BCR) was 1.46 for fingerlings, 1.29 for juveniles and 1.26 for full fish. Profitability and efficiency ratio of 0.85 and 1.85, 0.71 and 1.71, and 0.55 and 1.55 were recorded for fingerlings, juveniles and full fish, respectively. Comparing these values indicated that fingerlings production is the most profitable catfish enterprise in the study area. It is recommended that governments at all levels explore the possibility of using the various ventures in catfish farming as a solution to the worrisome unemployment problem in Nigeria.

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“…Going back to the notions of scale and scope from an economics perspective, three different variations of returns are given (Basu 2008, Gelles andMitchell 1996), namely increasing, constant and declining returns to scale. In addition to this can be added the dimension of a linear relationship versus an exponential relationship.…”

Section: The Key Lies In Unlocking Exponentially Increasing Returns Tmentioning

confidence: 99%

The Concept of Business Model Scalability

Nielsen,

Lund

2015

SSRN Journal

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The power of business models lies in their ability to visualize and clarify how firms' may configure their value creation processes. Among the key aspects of business model thinking are a focus on what the customer values, how this value is best delivered to the customer and how strategic partners are leveraged in this value creation, delivery and realization exercise. Central to the mainstream understanding of business models is the value proposition towards the customer and the hypothesis generated is that if the firm delivers to the customer what he/she requires, then there is a good foundation for a long-term profitable business. However, the message conveyed in this article is that while providing a good value proposition may help the firm 'get by', the really successful businesses of today are those able to reach the sweet-spot of business model scalability. This article introduces and discusses the term scalability from a company-level perspective. It illustrates how managers should be using this term for the benefit of their business by focusing on business models capable of achieving exponentially increasing returns to scale.

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Returns to Scale and Economies of Scale: Further Observations

Cited by 13 publications

References 0 publications

Examining the Link between Retailer Inventory Leanness and Operational Efficiency: Moderating Roles of Firm Size and Demand Uncertainty

Examining the Link between Retailer Inventory Leanness and Operational Efficiency: Moderating Roles of Firm Size and Demand Uncertainty

Profitability of Selected Ventures in Catfish Aquaculture in Ondo State, Nigeria

The Concept of Business Model Scalability

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