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on Industrial Competition |
| By: | Chen, Yongmin; Zhang, Tianle |
| Abstract: | Firms simultaneously set prices in a homogeneous-product market where uninformed consumers search for price information. Some uninformed consumers are local searchers who visit only one seller, possibly due to high search costs or bounded rationality; whereas others search sequentially with an optimal reservation price. Equilibrium prices may follow a mixture distribution, with clusters of high and low prices separated by a zero-density gap. The presence of local searchers raises prices for high-value products but can lower prices for low-value products. A reduction in search cost sometimes leads to higher equilibrium prices. |
| Keywords: | price dispersion; search; search cost; bounded rationality |
| JEL: | D83 D43 |
| Date: | 2009–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16490&r=com |
| By: | Paul Hallwood (University of Connecticut) |
| Abstract: | Teams combine tacit and separable knowledge so complicating the pricing of knowledge and mitigating against knowledge transfer between firms. The efficient markets hypothesis suggests that entities possessing insider information should be ablest at accurately pricing any given complementary set of knowledge. Thus, even though some knowledge in a given complementary set is separable from a team, the easily transferable pieces are still most likely to be used within the originating firm. The boundaries of a firm may therefore expand even when knowledge is not tacit and transaction costs in markets for ideas are otherwise low. |
| Keywords: | asymmetric information, evolutionary theory of the firm, governance, holdup, insider information, path dependency, rent appropriation, tacit information, transaction costs. |
| JEL: | D23 F23 L80 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2009-21&r=com |
| By: | Massimo Riccaboni; Fabio Pammolli; Sergey V. Buldyrev; Linda Ponta; H. Eugene Stanley |
| Abstract: | The relationship between the size and the variance of firm growth rates is known to follow an approximate power-law behavior σ(S) similar to S^-β(S) where S is the firm size and β(S) almost equal to 0.2 is an exponent weakly dependent on S. Here we show how a model of proportional growth which treats firms as classes composed of various number of units of variable size, can explain this size-variance dependence. In general, the model predicts that β(S) must exhibit a crossover from β(0) = 0 to β(∞) = 1/2. For a realistic set of parameters, β(S) is approximately constant and can vary in the range from 0.14 to 0.2 depending on the average number of units in the firm. We test the model with a unique industry specific database in which firm sales are given in terms of the sum of the sales of all their products. We find that the model is consistent with the empirically observed size-variance relationship. |
| Keywords: | patent disclosure; innovation; r&d competition |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:trt:rockwp:052&r=com |
| By: | Giuseppe De Feo (Department of Economics, University of Strathclyde); Carlo Capuano (Department of Economics, University of Naples Federico II, Complesso Universitario di Monte S.Angelo) |
| Abstract: | The aim of this paper is to investigate the welfare eect of a change in the public firms objective function in oligopoly when the government takes into account the distortionary effect of rising funds by taxation (shadow cost of public funds). We analyze the impact of a shift from welfare- to proft-maximizing behaviour of the public firm on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games using the game with observable delay proposed by Hamilton and Slutsky (1990). Differently from previous work that assumed the timing of competition, we show that, absent efficiency gains, instructing the public firm to play as a private one never increases welfare. Moreover, even when large eciency gains result from the shift in public firm's objective, an inecient public rm that maximizes welfare may be preferred. |
| Keywords: | Mixed oligopoly; Nash equilibria; Endogenous Timing; Distortionary taxes |
| JEL: | L1 L13 L32 L33 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:0916&r=com |
| By: | Bennett, John |
| Abstract: | We analyse potential dynamic benefits for a firm from having the option of adopting informal status. Informality may be a stepping stone, without which formality might never be achieved. This result obtains for a broad range of realistic parameter values, suggesting a potential dynamic case for government support of informal firms. Informality may alternatively play a converse role as a consolation prize, a firm only entering an industry (formally) because it recognizes that if profitability is disappointing, it can switch to informality. However, this result obtains for a range of parameter values so narrow to be of no practical significance. |
| Keywords: | informality; entrepreneurship |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:rp2009-19&r=com |
| By: | Anna J. Wieczorek; Marko P. Hekkert; Ruud E.H.M. Smits |
| Abstract: | In this paper we review major theoretical (neoclassical economics, evolutionary, systemic and knowledge-based) insights about innovation and we analyse their implications for the characteristics of contemporary innovation policy and instruments. We show that the perspectives complement each other but altogether reveal the need to redefine the current general philosophy as well as the modes of operationalisation of contemporary innovation policy. We argue that systemic instruments ensuring proper organisation of innovation systems give a promise of increased rates and desired (more sustainable) direction of innovation. |
| Keywords: | systemic instruments, innovation policy, innovation theory, policy mix, innovation system, sustainability |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:uis:wpaper:0912&r=com |
| By: | Gries, Thomas; Naude, Wim |
| Abstract: | The success of new start-up firms often depends on timing. It is valuable for the potential entrepreneur to wait for the right moment before starting a new firm. In this paper we provide a theoretical model to determine the optimal time for starting a new firm. We integrate insights from the real option theory with the theory on entrepreneurial market entry. An important and novel feature of our model is that it allows the start-up timing decisions of novice and serial entrepreneurs to be distinguished. |
| Keywords: | entrepreneurship, serial entrepreneurship, start-ups, real options, stochastic optimal control |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:rp2009-39&r=com |
| By: | Pellegrino, Gabriele (Università Cattolica del Sacro Cuore); Piva, Mariacristina (Università Cattolica del Sacro Cuore); Vivarelli, Marco (Università Cattolica del Sacro Cuore) |
| Abstract: | This paper discusses the determinants of product innovation in young innovative companies (YICs) by looking at in-house and external R&D and at the acquisition of external technology in embodied and disembodied components. These input-output relationships are tested on a sample of innovative Italian firms. A sample-selection approach is applied. Results show that in-house R&D is linked to the propensity to introduce product innovation both in mature firms and YICs; however, innovation intensity in the YICs is mainly dependent on embodied technical change from external sources, while − in contrast with the incumbent firms − in-house R&D does not play a significant role. |
| Keywords: | R&D, product innovation, embodied technical change, CIS 3, sample selection |
| JEL: | O31 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4301&r=com |
| By: | Goedhuys, Micheline; Sleuwaegen, Leo |
| Abstract: | This paper studies the growth performance of a large set of entrepreneurial firms in ten manufacturing sectors of eleven Sub-Saharan African countries. The focus of the paper is on identifying those entrepreneurs. attributes and firm characteristics that tend to generate a significant number of high-growth firms in these countries. To this end, we use a quantile regression, which provides a more complete estimation of the growth distribution of firms conditional on different attributes. The results indicate that especially firms that engage in product innovation, have their own transport means and are connected to the internet through their own website are characterized by higher growth rates and display a more skewed distribution to the right, hosting a higher number of high-growth firms. The effect of the last two variables, which relate to distance-bridging modes of infrastructure, points to the self-reinforcing growth effects. |
| Keywords: | quantile regression, high-growth firms, firm growth, Africa |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:rp2009-11&r=com |
| By: | Laura Magazzini; Fabio Pammolli; Massimo Riccaboni; Maria Alessandra Rossi |
| Abstract: | The prominent role played by patents within the pharmaceutical domain is unquestionable. In this paper we take an unusual perspective and focus on a relatively neglected implication of patents: the effect of patent-induced information disclosure (of both successes and failures) on the dynamics of R&D and market competition. The study builds upon the combination of two large datasets, linking the information about patents to firm level data on R&D projects and their outcome. Two case studies in the fields of anti-inflammatory compounds and cancer research complement our analysis. We show the important role played by patent disclosure in shaping firms technological trajectories through the possibility of reciprocal monitoring in a context of parallel research efforts, and suggest the importance of enhancing the diffusion of information concerning failures, not only to avoid wasteful duplication of innovative efforts, but also as a tool for the identification of promising research trajectories. This paper is the result of the "R&D competition" research project carried out jointly with Adrian Towse and Martina Garau of the Office of Health Economics, London, UK. A preliminary draft of the paper has been presented to the DRUID Summer Conference 2006 (Copenhagen), and to the 11th ISS Conference (Sophia-Antipolis). |
| JEL: | D23 D83 O34 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:trt:rockwp:053&r=com |
| By: | Byung-Wook Kwon |
| Abstract: | The focus of this paper is to provide an overview of developments in broadband power line technologies and related policy issues. The electric power grid is a hostile environment for high-speed data transmission, but after years of development, the technology to deliver high-speed data over the existing electric power delivery network has emerged, somewhat tentatively, in the marketplace. This technology, referred to as Broadband over Power Lines (BPL), uses medium- and low-voltage power lines to provide broadband Internet access to residential users and businesses and is considered by some as a third access technology offering potential competition to xDSL telecommunication lines and cable modems. Recent trends, however, indicate that the focus of BPL technology is shifting from providing broadband connectivity to smart meter usage allowing households to reduce energy costs and allow energy companies to better manage their networks by developing a “smart grid”. |
| Date: | 2009–06–04 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaab:157-en&r=com |
| By: | Agoraki, Maria-Eleni; Delis, Manthos D; Pasiouras, Fotios |
| Abstract: | This study investigates whether regulations have an independent effect on bank risk-taking or whether their effect is channeled through the market power possessed by banks. Given a well-established set of theoretical priors, the regulations considered are capital requirements, restrictions on bank activities and official supervisory power. We use data from the Central and Eastern European banking sectors over the period 1998-2005. The empirical results suggest that banks with market power tend to take on lower credit risk and have a lower probability of default. Capital requirements reduce risk in general, but for banks with market power this effect significantly weakens. Higher activity restrictions in combination with more market power reduce both credit risk and the risk of default, while official supervisory power has only a direct impact on bank risk. |
| Keywords: | Banking sector reform; regulations; competition; risk-taking; CEE banks |
| JEL: | G38 G32 G21 |
| Date: | 2009–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16495&r=com |
| By: | Delis, Manthos D; Pagoulatos, George |
| Abstract: | Abstract Following their EU15 counterparts, the banking systems of Central and Eastern European (CEE) countries underwent extensive reform since the 1990s. In this paper we estimate the degree of bank market power during the periods of financial reform in each European country, and subsequently we analyze the political and institutional sources of bank competition distinguishing between the EU15 and CEE subgroups. A linear pattern in the relationship between bank competition and institutional strength is demonstrated for the EU15 group of countries, while for the CEEs this pattern is non-linear. Therefore, we suggest that relatively underdeveloped banking systems, in less advanced politico-institutional milieus, overall fail to benefit from reforms in their early stages. As a policy implication the results imply that a certain level of institutional maturity, combined with openness to foreign investors, is a precondition for reforms aiming at enhancing competition and efficiency of banking markets. |
| Keywords: | Bank competition; Financial reforms; Institutional development; European Union; Central and Eastern European countries |
| JEL: | C10 P51 P34 G21 |
| Date: | 2009–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16494&r=com |
| By: | Rafael Di Tella; Juan Dubra |
| Abstract: | We propose a model where voters experience an emotional cost when they observe a firm that has displayed insufficient concern for other people's welfare (altruism) in the process of making high profits. Even with few truly altruistic firms, an equilibrium may emerge where all firms pretend to be kind and refrain from charging "abusive" prices to their customers. Our main result is that, as competition decreases, the set of parameters for which such pooling equilibria exist beomes smaller and firms are more likely to anger consumers. Regulation can increase welfare, for example, through fines (even if there are no changes in prices). We illustrate these gains in a monopoly setting, where regulation affects welfare through 3 channels (i) a reduction in monopoly price leads to the production of units that cost less than their value to consumers (standard channel); (ii) regulation calms down existing consumers because a reduction in the profits of an "unkind" firm increases total welfare by reducing consumer anger (anger channel); and (iii) individuals who were out of the market when they were excessively angry in the unregulated market, decide to purchase once the firm is regulated, reducing the standard distortions described in the first channel (mixed channel). |
| JEL: | D64 L4 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15201&r=com |