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on Industrial Competition |
| By: | Philippe Askenazy; Christophe Cahny; Delphine Irac |
| Abstract: | This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-32&r=com |
| By: | Marinucci, Marco |
| Abstract: | This paper faces two questions concerning Joint Ventures (JV) agreements. First, we study how the partners contribution affect the creation and the profit sharing of a JV when partners' effort is not observable. Then, we see whether such agreements are easier to enforce when the decision on JV profit sharing among partners is either delegated to the independent JV management (Management Sharing) or jointly taken by partners (Coordinated Sharing). We find that the firm whose effort has a higher impact on the JV's profits should have a larger profit shares. Moreover, a Management sharing ensures, at least in some cases, a wider range of self-enforceable JV agreements. |
| Keywords: | joint ventures; strategic alliances; ownership structure; asymmetries. |
| JEL: | L14 L13 D43 L22 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8985&r=com |
| By: | Blecker, Thorsten; Abdelkafi, Nizar; Raasch, Christina |
| Abstract: | This paper extends the principles of open source software development to a non-industry-specific level by introducing the Open Source Innovation (OSI) model. OSI exhibits main differences to other related models and concepts such as the private-collective model, commons-based peer production, R&D networks and is therefore an innovation model in its own right. In order for OSI projects to be successful, numerous factors need to be fulfilled. We make the distinction between four categories of factors: economic, technical, legal, and social. In each category, we differentiate between enabling and sustaining factors. The enabling factors must be met at the beginning of the project, whereas the sustaining factors must be satisfied as the project progresses. |
| Keywords: | OSI; open source innovation; R&D |
| JEL: | O32 L17 O3 O31 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8964&r=com |
| By: | Jan Eeckhout (Department of Economics, University of Pennsylvania); Philipp Kircher (Department of Economics, University of Pennsylvania) |
| Abstract: | We investigate under which conditions price competition in a market with matching frictions leads to sorting of buyers and sellers. Positive assortative matching obtains only if there is a high enough degree of complementarity between buyer and seller types. The relevant condition is root-supermodularity; i.e., the square root of the match value function is supermodular. It is a necessary and sufficient condition for positive assortative matching under any distribution of buyer and seller types, and does not depend on the details of the underlying matching function that describes the search process. The condition is weaker than log-supermodularity, a condition required for positive assortative matching in markets with random search. This highlights the role competition plays in matching heterogeneous agents. Negative assortative matching obtains whenever the match value function is weakly submodular. |
| Keywords: | Competitive Search Equilibrium. Directed Search. Two-Sided Matching. Decentralized Price Competition. Root-Supermodularity. |
| JEL: | J64 C78 D83 |
| Date: | 2008–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:08-020&r=com |
| By: | Armstrong, Mark; Vickers, John |
| Abstract: | We present a model in which a principal delegates the choice of project to an agent with different preferences. The principal determines the set of projects from which the agent may choose. The principal can verify the characteristics of the project chosen by the agent, but does not know which other projects are available to the agent. Two frameworks are considered: (i) a static setting in which the collection of available projects is exogenous to the agent but uncertain, and (ii) a dynamic setting in which the agent searches for projects. |
| Keywords: | Delegation; principal-agent; rules; search; merger policy |
| JEL: | D86 D83 L4 |
| Date: | 2008–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8963&r=com |
| By: | Sumon Kumar Bhaumik; Ekta Selarka |
| Abstract: | performance. On the one hand, concentration of ownership that, in turn, concentrates management control in the hands of a strategic investor, eliminates agency problems associated with dispersed ownership. On the other hand, it may lead to entrenchment of upper management which may be inconsistent with the objective of profit (or value) maximisation. This paper examines the impact of M&A on profitability of firms in India, where the corporate landscape is dominated by family-owned and group-affiliated businesses, such that alignment of management and ownership coexists with management entrenchment, and draws conclusions about the impact of concentrated ownership and entrenchment of ownermanagers on firm performance. Our results indicate that, during the 1995-2002 period, M&A in India led to deterioration in firm performance. We also find that neither the investors in the equity market nor the debt holders can be relied upon to discipline errant (and entrenched) management. In other words, on balance, negative effects of entrenchment of ownermanagers trumps the positive effects of reduction in owner-vs.-manager agency problems. Our findings are consistent with bulk of the existing literature on family-owned and group affiliated firms in India. |
| Keywords: | mergers and acquisitions, corporate governance, manager entrenchment, firm performance, India |
| JEL: | G34 |
| Date: | 2008–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2008-907&r=com |
| By: | Juan Piñeiro Chousa,; Krishna Chaitanya,; Artur Tamazian |
| Abstract: | Is there any interrelationship between firm level FDI in the form of cross border Mergers & Acquisitions and capital markets growth and quality? We addressed this question using panel data of cross border M&A for nine emerging economies. Our study period goes from 1987 to 2006. We find that the stock market variables, viz., capitalization and value addition encourage the number of deals and value of cross border Mergers & Acquisitions. However, the association with regulatory and financial reforms is much stronger and robust. |
| Keywords: | Financial Markets, Cross border M&A & Emerging Economies. |
| JEL: | E44 O53 O54 O55 |
| Date: | 2008–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2008-911&r=com |
| By: | Ram C. Acharya; Wolfgang Keller |
| Abstract: | In the wake of falling trade costs, two central consequences in the importing economy are, first, that stronger competition through increased imports can lead to market share reallocations among domestic firms with different productivity levels (selection). Second, the increase in imports might improve domestic technologies through learning externalities (spillovers). Each of these channels may have a major impact on aggregate productivity. This paper presents comparative evidence from a sample of OECD countries. We find that the average long run effect of an increase in imports on domestic productivity is close to zero. If the scope for technological learning is limited, the selection effect dominates and imports lead to lower productivity. If, however, imports are relatively technology-intensive, imports also generate learning that can on net raise domestic productivity. Moreover, there is somewhat less selection when the typical domestic firm is large. The results support models in which trade triggers both substantial selection and technological learning. |
| JEL: | F1 F2 O3 O33 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14079&r=com |
| By: | Karl Aiginger (WIFO) |
| Abstract: | This paper investigates the impact of the toughness of competition on the macroeconomic performance of countries. The relation between competition and innovation has been investigated intensely in industrial economics. It started with Schumpeter's hypotheses that monopoly profits were necessary for innovation, leading then to U-curve relationships where innovation was the highest for medium-range of competition, but lower for very tough competition as well as for a very lax competitive regime. Empirical studies on the growth differences between countries increasingly stress – apart from the usual suspects like investment, R&D, human capital – the role of institutions. They include indicators on regulation, government size, corruption and rule of law, but usually not the degree of competition. Conventional growth theory did not model the impact of competition, but assumed perfect competition. In New Growth Theory, economic growth depends on purposeful and maximising innovation activities, where market structure plays an important role. But this did not result in the inclusion of competition variables into empirical growth equations. We have attempted to bridge this gap a bit by relating 13 indicators on the toughness of competition to macroeconomic performance. We then added these competition indicators to an equation relating macro performance to the standard explanatory variables for economic growth (like investment and R&D). The results indicate that competition plus innovation is a good recipe at the macro level, too, probably with similar tensions and non-linearity as at the company level. |
| Keywords: | Competition Macroeconomic Performance Innovation |
| Date: | 2008–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2008:i:318&r=com |
| By: | Olivier Debande (European Investment Bank, Luxembourg); Jean-Luc De Meulemeester (Université Libre de Bruxelles and SKOPE, University of Oxford) |
| Abstract: | In this paper, we analyze a bidimensional quality competition between two higher education sectors characterised by different preferences (academic vs. vocational) as well as cost structures, and its impact on curriculum’s provision (type and quality), both in decentralised and social welfare maximisation settings. The students are heterogenous in terms of their valuation of quality and their intellectual type. We try to illustrate in this abstract setting some stylized facts as academic drift of vocational institutions as well as addressing more normative issue as the relative merits of binary or unitary models of higher education |
| Keywords: | Higher education, competition, vertical and horizontal differentiation |
| JEL: | I21 L13 N30 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:08-12rs&r=com |
| By: | Speklé, Roland F.; Teije G. Smittenaar,Teije G. (Nyenrode Business Universiteit) |
| Abstract: | We examine the comparative effectiveness of three alternative licensing systems in professional football. The three systems’ main concern is with the promulgation of responsible financial behaviour among football clubs. To that effect, all three systems rely on entry control and ex ante budget approval rights. However, the three structures also differ, especially with regard to the way in which they seek to impose ex post budgetary discipline. We analyse these differences, using Transaction Cost Economics as our basic frame of reference. Both theoretically and empirically, we demonstrate that the effectiveness of the licensing arrangements depends on the credibility of the punitive measures available to the governing body. We also find evidence to suggest that social ties may partly substitute for formal deterrence and enforcement. |
| Keywords: | Licensing, Governance structure effectiveness, Credible threats, Transaction Cost Economics |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:nijrep:2008-05&r=com |
| By: | Théophile T. Azomahou (UNU-MERIT, Maastricht University, The Netherlands); Raouf Boucekkine (UCLouvain, Belgium; and University of Glasgow, UK); Phu Nguyen-Van (THEMA-CNRS, Université de Cergy-Pontoise, France) |
| Abstract: | We develop a general equilibrium vintage capital model with embodied energy-saving technological progress and an explicit energy market to study the impact of investment subsidies on investment and output. Energy and capital are assumed to be complementary in the production process. New machines are less energy consuming and scrapping is endogenous. It is shown that the impact of investment subsidies heavily depends on the structure of the energy market, the mechanism explaining this outcome relying on the tight relationship between the lifetime of capital goods and energy prices via the scrapping conditions inherent to vintage models. In particular, under a free entry structure for the energy sector, investment subsidies boost investment, while the opposite result emerges under natural monopoly if increasing returns in the energy sector are not strong enough. |
| Keywords: | Energy-saving technological progress; vintage capital; energy market; natural monopoly; investment subsidies |
| JEL: | E22 O40 Q40 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dpc:wpaper:1508&r=com |
| By: | Ramon Marimon; Vincenzo Quadrini |
| Abstract: | We develop a dynamic general equilibrium model with two-sided limited commitment to study how barriers to competition, such as restrictions to business start-up, affect the incentive to accumulate human capital. We show that a lack of contract enforceability amplifies the effect of barriers to competition on human capital accumulation. High barriers reduce the incentive to accumulate human capital by lowering the outside value of ‘skilled workers’, while low barriers can result in over-accumulation of human capital. This over-accumulation can be socially optimal if there are positive knowledge spillovers. A calibration exercise shows that this mechanism can account for significant cross-country income inequality. |
| Keywords: | Limited commitment, limited enforcement, human capital accumulation, income inequality, innovation, barriers to competition. |
| JEL: | D99 E20 J24 O15 O34 O43 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/21&r=com |