Scale and scope economies and the efficient vertical and horizontal configuration of the water industry:a survey of the literature

This paper surveys the literature on scale and scope economies in the water and sewerage industry. The magnitude of scale and scope economies determines the cost efficient configuration of any industry. In the case of a regulated sector, reliable estimates of these economies are relevant to inform reform proposals that promote vertical (un)bundling and mergers. The empirical evidence allows some general conclusions. First, there is considerable evidence for the existence of vertical scope economies between upstream water production and distribution. Second, there is only mixed evidence on the existence of (dis)economies of scope between water and sewerage activities. Third, economies of scale exist up to certain output level, and diseconomies of scale arise if the company increases its size beyond this level. However, the optimal scale of utilities also appears to vary considerably between countries. Finally, we briefly consider the implications of our findings for water pricing and point to several directions for necessary future empirical research on the measurement of these economies, and explaining their cross country variation.

Market orientation in the service sector of the transition economies of central Europe

The Narver and Slater market orientation scale is tested in the context of service firms in the transition economies of central Europe and found to be both valid and reliable. The survey examined levels of market orientation in 205 business to business services companies and 141 consumer services companies in Hungary, Poland and Slovenia. As predicted by the predominantly western marketing literature, those service firms with higher levels of market orientation; were more often found in turbulent, rapidly changing markets; were more likely to pursue longer term market building goals rather than short term efficiency objectives; more likely to pursue differentiated positioning through offering superior levels of service compared to competitors; and also performed better on both financial and market based criteria. A number of different business approaches, however, are evident in the transition economies suggesting that other business orientations may co-exist with a market orientation creating a richer and more complex set of organizational drivers.

Privatisation and sustainable competitive advantage in the emerging economies of Central Europe

Extant research on the impact of privatization in the Central Europe (CE) region has focused on improvements in efficiency and the nature of cost-based advantages. This study argues that the development of a vibrant privatized sector requires attention to the broader resource configurations of domestic enterprises. Empirical research was conducted on a large sample of firms in Poland, Hungary and Slovenia. Foreign investment was found to significantly impact on resource accumulation with implications for the development of strategic capabilities and competitive advantage. Foreign direct investment is an effective vehicle for the transfer of financial resources, reputation and new brands but not organizational capabilities. In terms of practice, this study demonstrates the important role of outside investment in the development of a firm's resource base (Frydman et al. 1999). Companies can gain a competitive advantage in their domestic markets through gaining access to the resources of foreign investors.

A comparison of integrated biomass to electricity systems

This thesis presents a comparison of integrated biomass to electricity systems on the basis of their efficiency, capital cost and electricity production cost. Four systems are evaluated: combustion to raise steam for a steam cycle; atmospheric gasification to produce fuel gas for a dual fuel diesel engine; pressurised gasification to produce fuel gas for a gas turbine combined cycle; and fast pyrolysis to produce pyrolysis liquid for a dual fuel diesel engine. The feedstock in all cases is wood in chipped form. This is the first time that all three thermochemical conversion technologies have been compared in a single, consistent evaluation.The systems have been modelled from the transportation of the wood chips through pretreatment, thermochemical conversion and electricity generation. Equipment requirements during pretreatment are comprehensively modelled and include reception, storage, drying and communication. The de-coupling of the fast pyrolysis system is examined, where the fast pyrolysis and engine stages are carried out at separate locations. Relationships are also included to allow learning effects to be studied. The modelling is achieved through the use of multiple spreadsheets where each spreadsheet models part of the system in isolation and the spreadsheets are combined to give the cost and performance of a whole system.The use of the models has shown that on current costs the combustion system remains the most cost-effective generating route, despite its low efficiency. The novel systems only produce lower cost electricity if learning effects are included, implying that some sort of subsidy will be required during the early development of the gasification and fast pyrolysis systems to make them competitive with the established combustion approach. The use of decoupling in fast pyrolysis systems is a useful way of reducing system costs if electricity is required at several sites because• a single pyrolysis site can be used to supply all the generators, offering economies of scale at the conversion step. Overall, costs are much higher than conventional electricity generating costs for fossil fuels, due mainly to the small scales used. Biomass to electricity opportunities remain restricted to niche markets where electricity prices are high or feed costs are very low. It is highly recommended that further work examines possibilities for combined beat and power which is suitable for small scale systems and could increase revenues that could reduce electricity prices.

Cost economies, efficiency and productivity growth in the Chinese banking industry:evidence from a quarterly panel dataset

This article examines cost economies, productivity growth and cost efficiency of the Chinese banks using a unique panel dataset that identifies banks' four outputs and four input prices over the period of 1995-2001. By assessing the appropriateness of model specification, and making use of alternative methodologies in evaluating the performance of banks, we find that the joint-stock commercial banks outperform state-owned commercial banks in productivity growth and cost efficiency. Under the variable cost assumption, Chinese banks display economies of scale, with state-owned commercial banks enjoying cost advantages over the joint-stock commercial banks. Consequently, our results highlight the ownership advantage of these two types of banks and generally support the ongoing banking reform and transformation that is currently taking place in China.

Measuring economies of horizontal and vertical integration in the US electric power industry:how costly is unbundling?

This research employs econometric analysis on a cross section of American electricity companies in order to study the cost implications associated with unbundling the operations of integrated companies into vertically and/or horizontally separated companies. Focusing on the representative sample average firm, we find that complete horizontal and vertical disintegration resulting in the creation of separate nuclear, conventional, and hydro electric generation companies as well as a separate firm distributing power to final consumers, results in a statistically significant 13.5 percent increase in costs. Maintaining a horizontally integrated generator producing nuclear, conventional, and hydro electric generation while imposing vertical separation by creating a stand alone distribution company, results in a lower but still substantial and statistically significant cost penalty amounting to an 8.1 % increase in costs relative to a fully integrated structure. As these results imply that a vertically separated but horizontally integrated generation firm would need to reduce the costs of generation by 11% just to recoup the cost increases associated with vertical separation, even the costs associated with just vertical unbundling are quite substantial. Our paper is also the first academic paper we are aware of that systematically considers the impact of generation mix on vertical, horizontal, and overall scope economies. As a result, we are able to demonstrate that the estimated cost of unbundling in the electricity sector is substantially influenced by generation mix. Thus, for example, we find evidence of strong vertical integration economies between nuclear and conventional generation, but little evidence for vertical integration benefits between hydro generation and the distribution of power. In contrast, we find strong evidence suggesting the presence of substantial horizontal integration economies associated with the joint production of hydro generation with nuclear and/or conventional fossil fuel generation. These results are significant because they indicate that the cost of unbundling the electricity sector will differ substantially in different systems, meaning that a blanket regulatory policy with regard to the appropriateness of vertical and horizontal unbundling is likely to be inappropriate.

Innovation, networking and globalisation:the role of regional innovation systems in the global innovation process

In the global economy, innovation is one of the most important competitive assets for companies willing to compete in international markets. As competition moves from standardised products to customised ones, depending on each specific market needs, economies of scale are not anymore the only winning strategy. Innovation requires firms to establish processes to acquire and absorb new knowledge, leading to the recent theory of Open Innovation. Knowledge sharing and acquisition happens when firms are embedded in networks with other firms, university, institutions and many other economic actors. Several typologies of innovation and firm networks have been identified, with various geographical spans. One of the first being modelled was the Industrial Cluster (or in Italian Distretto Industriale) which was for long considered the benchmark for innovation and economic development. Other kind of networks have been modelled since the late 1970s; Regional Innovation Systems represent one of the latest and more diffuse model of innovation networks, specifically introduced to combine local networks and the global economy. This model was qualitatively exploited since its introduction, but, together with National Innovation Systems, is among the most inspiring for policy makers and is often cited by them, not always properly. The aim of this research is to setup an econometric model describing Regional Innovation Systems, becoming one the first attempts to test and enhance this theory with a quantitative approach. A dataset of 104 secondary and primary data from European regions was built in order to run a multiple linear regression, testing if Regional Innovation Systems are really correlated to regional innovation and regional innovation in cooperation with foreign partners. Furthermore, an exploratory multiple linear regression was performed to verify which variables, among those describing a Regional Innovation Systems, are the most significant for innovating, alone or with foreign partners. Furthermore, the effectiveness of present innovation policies has been tested based on the findings of the econometric model. The developed model confirmed the role of Regional Innovation Systems for creating innovation even in cooperation with international partners: this represents one of the firsts quantitative confirmation of a theory previously based on qualitative models only. Furthermore the results of this model confirmed a minor influence of National Innovation Systems: comparing the analysis of existing innovation policies, both at regional and national level, to our findings, emerged the need for potential a pivotal change in the direction currently followed by policy makers. Last, while confirming the role of the presence a learning environment in a region and the catalyst role of regional administration, this research offers a potential new perspective for the whole private sector in creating a Regional Innovation System.

A simulation analysis of spoke-terminals operating in LTL Hub-and-Spoke freight distribution systems

DUE TO COPYRIGHT RESTRICTIONS ONLY AVAILABLE FOR CONSULTATION AT ASTON UNIVERSITY LIBRARY AND INFORMATION SERVICES WITH PRIOR ARRANGEMENT The research presented in this thesis is concerned with Discrete-Event Simulation (DES) modelling as a method to facilitate logistical policy development within the UK Less-than-Truckload (LTL) freight distribution sector which has been typified by “Pallet Networks” operating on a hub-and-spoke philosophy. Current literature relating to LTL hub-and-spoke and cross-dock freight distribution systems traditionally examines a variety of network and hub design configurations. Each is consistent with classical notions of creating process efficiency, improving productivity, reducing costs and generally creating economies of scale through notions of bulk optimisation. Whilst there is a growing abundance of papers discussing both the network design and hub operational components mentioned above, there is a shortcoming in the overall analysis when it comes to discussing the “spoke-terminal” of hub-and-spoke freight distribution systems and their capabilities for handling the diverse and discrete customer profiles of freight that multi-user LTL hub-and-spoke networks typically handle over the “last-mile” of the delivery, in particular, a mix of retail and non-retail customers. A simulation study is undertaken to investigate the impact on operational performance when the current combined spoke-terminal delivery tours are separated by ‘profile-type’ (i.e. retail or nonretail). The results indicate that a potential improvement in delivery performance can be made by separating retail and non-retail delivery runs at the spoke-terminal and that dedicated retail and non-retail delivery tours could be adopted in order to improve customer delivery requirements and adapt hub-deployed policies. The study also leverages key operator experiences to highlight the main practical implementation challenges when integrating the observed simulation results into the real-world. The study concludes that DES be harnessed as an enabling device to develop a ‘guide policy’. This policy needs to be flexible and should be applied in stages, taking into account the growing retail-exposure.

Fast pyrolysis of biomass for energy and fuels

Bioenergy is now accepted as having the potential to provide the major part of the projected renewable energy provisions of the future as biofuels in the form of gas, liquid or solid fuels or electricity and heat. There are three main routes to providing these biofuels — thermal conversion, biological conversion and physical conversion — all of which employ a range of chemical reactor configurations and process designs. This paper focuses on fast pyrolysis from which the liquid, often referred to as bio-oil, can be used on-site or stored or transported to centralised and/or remote user facilities for utilisation for example as a fuel, or further processing to biofuels and/or chemicals. This offers the potential for system optimisation, much greater economies of scale and exploitation of the concepts of biorefineries. The technology of fast pyrolysis is described, particularly the reactors that have been developed to provide the necessary conditions to optimise performance. The primary liquid product is characterised, as well as the secondary products of electricity and/or heat, liquid fuels and a considerable number of chemicals. The main technical and non-technical barriers to the market deployment of the various technologies are identified and briefly discussed.

Structured packing in air distillation

An economic analysis has been performed to establish when it is advantageous to use structured packing in air separation plant. A model of a low pressure cycle was developed to calculate the power saved when packing is used, and cost models were developed for the columns and cold box. The rate of return was calculated on the extra investment required for a packed plant based on the annual power saving. Structured packing was found to be economic only in larger plants, where economies of scale mean that the increased capital cost becomes less significant compared with the power saved. It was also found that different sized plants favour different packings. The analysis identified that the packing variable with the biggest impact on the economic balance was the efficiency and that increasing the efficiency of current packings could enhance their balance in air distillation. A new packing was therefore developed to have a higher efficiency than conventional ones. The vapour phase resistance was targeted for reduction, since most packing models predict this to be dominant. The final shape was chosen as the easiest and most economic to make. It has converging and diverging channels and was manufactured in two specific areas and with two block heights by Tianjin University Packing Factory. A 0.3 m diameter distillation column test rig was designed, built and commissioned with the standard Sulzer Mellapak 500YW. It was then used to test the new packing alongside some standard ones. Because the packings had different specific areas, correlations of published results were developed to allow a true comparison to be made. The test results show that, unexpectedly, the packings with 0.1 m high blocks have an efficiency about 8% greater than the standard 0.2 m blocks. The new shape as implemented in the 350Y packing shows an additional 7% greater efficiency, so it is 15% better than a standard packing with the same area. It has a better efficiency than the Mellapak 500YW and the higher capacity associated with its lower area. The new 500Y did not show a significant advantage.

Empirical analysis of human capital development and economic growth in Europe

Recent discussion of the knowledge-based economy draws increasingly attention to the role that the creation and management of knowledge plays in economic development. Development of human capital, the principal mechanism for knowledge creation and management, becomes a central issue for policy-makers and practitioners at the regional, as well as national, level. Facing competition both within and across nations, regional policy-makers view human capital development as a key to strengthening the positions of their economies in the global market. Against this background, the aim of this study is to go some way towards answering the question of whether, and how, investment in education and vocational training at regional level provides these territorial units with comparative advantages. The study reviews literature in economics and economic geography on economic growth (Chapter 2). In growth model literature, human capital has gained increased recognition as a key production factor along with physical capital and labour. Although leaving technical progress as an exogenous factor, neoclassical Solow-Swan models have improved their estimates through the inclusion of human capital. In contrast, endogenous growth models place investment in research at centre stage in accounting for technical progress. As a result, they often focus upon research workers, who embody high-order human capital, as a key variable in their framework. An issue of discussion is how human capital facilitates economic growth: is it the level of its stock or its accumulation that influences the rate of growth? In addition, these economic models are criticised in economic geography literature for their failure to consider spatial aspects of economic development, and particularly for their lack of attention to tacit knowledge and urban environments that facilitate the exchange of such knowledge. Our empirical analysis of European regions (Chapter 3) shows that investment by individuals in human capital formation has distinct patterns. Those regions with a higher level of investment in tertiary education tend to have a larger concentration of information and communication technology (ICT) sectors (including provision of ICT services and manufacture of ICT devices and equipment) and research functions. Not surprisingly, regions with major metropolitan areas where higher education institutions are located show a high enrolment rate for tertiary education, suggesting a possible link to the demand from high-order corporate functions located there. Furthermore, the rate of human capital development (at the level of vocational type of upper secondary education) appears to have significant association with the level of entrepreneurship in emerging industries such as ICT-related services and ICT manufacturing, whereas such association is not found with traditional manufacturing industries. In general, a high level of investment by individuals in tertiary education is found in those regions that accommodate high-tech industries and high-order corporate functions such as research and development (R&D). These functions are supported through the urban infrastructure and public science base, facilitating exchange of tacit knowledge. They also enjoy a low unemployment rate. However, the existing stock of human and physical capital in those regions with a high level of urban infrastructure does not lead to a high rate of economic growth. Our empirical analysis demonstrates that the rate of economic growth is determined by the accumulation of human and physical capital, not by level of their existing stocks. We found no significant effects of scale that would favour those regions with a larger stock of human capital. The primary policy implication of our study is that, in order to facilitate economic growth, education and training need to supply human capital at a faster pace than simply replenishing it as it disappears from the labour market. Given the significant impact of high-order human capital (such as business R&D staff in our case study) as well as the increasingly fast pace of technological change that makes human capital obsolete, a concerted effort needs to be made to facilitate its continuous development.