Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery
    17 Sep 2009Working Paper Summaries

    Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery

    by David M. Cutler, Robert S. Huckman and Jonathan T. Kolstad
    Many professions rely on highly and variably skilled individuals. If a new firm is looking to enter a specific market, in addition to setting up a physical facility the company needs to hire or contract with specialized labor. In the short term, the supply of these specialists is relatively inelastic. From the point of view of economics, there remains a well-known potential for free entry to be inefficient when firms make entry decisions without internalizing the costs associated with the business they "steal" from incumbent firms. In 1996 Pennsylvania eliminated its certificate-of-need (CON) policy that had restricted entry by hospitals into expensive clinical programs, such as coronary artery bypass graft (CABG) programs—leading to an increase from 43 to 63 in the number of hospitals providing this service. HBS professor Robert Huckman and coauthors examine the welfare implications of entry in the market for cardiac surgery. Key concepts include:
    • Following the introduction of new CABG programs in Pennsylvania, volume shifted from incumbent programs to entrants and from lower- to higher-quality surgeons, thereby improving the overall quality of surgical outcomes.
    • The repeal of CON in Pennsylvania improved the market for cardiac surgery by directing more volume to better doctors and increasing access to treatment.
    • The benefit of reduced mortality from the increased use of high-quality surgeons roughly offset the fixed costs associated with free entry.
    LinkedIn
    Email

    Author Abstract

    Prior studies suggest that, with elastically supplied inputs, free entry may lead to an inefficiently high number of firms in equilibrium. Under input scarcity, however, the welfare loss from free entry is reduced. Further, free entry may increase use of high-quality inputs, as oligopolistic firms underuse these inputs when entry is constrained. We assess these predictions by examining how the 1996 repeal of certificate-of-need (CON) legislation in Pennsylvania affected the market for cardiac surgery in the state. We show that entry led to a redistribution of surgeries to higher-quality surgeons and that this entry was approximately welfare neutral. 43 pages.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: August 2009
    • HBS Working Paper Number: 10-011
    • Faculty Unit(s): Technology and Operations Management
      Trending
        • 14 Mar 2023
        • In Practice

        What Does the Failure of Silicon Valley Bank Say About the State of Finance?

        • 16 Mar 2023
        • Research & Ideas

        Why Business Travel Still Matters in a Zoom World

        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

        • 13 Mar 2023
        • Op-Ed

        How Leaders Should Leave

    Robert S. Huckman
    Robert S. Huckman
    Albert J. Weatherhead III Professor of Business Administration
    Howard Cox Healthcare Initiative Faculty Chair
    Unit Head, Technology and Operations Management
    Contact
    Send an email
    → More Articles
    Find Related Articles
    • Government and Politics
    • Health
    • Economics
    • Health

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College