nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒02‒02
25 papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Very Simple Markov-Perfect Industry Dynamics By Abbring, J.H.; Campbell, J.R.; Tilly, J.; Yang, N.
  2. Asymmetric Entry Equilibrium in a Symmetric Trading Oligopoly Model By T.Huw Edwards
  3. Capacity Mechanisms and Effects on Market Structure By Elberg, Christina; Kranz, Sebastian
  4. Self-Serving Behavior in Price-Quality Competition By Halbheer, Daniel; Bertini, Marco; Koenigsberg, Oded
  5. Price Discrimination in Input Markets: Quantity Discounts and Private Information By Müller, Daniel; Herweg, Fabian
  6. Licensing with Free Entry By Muthers, Johannes; Inceoglu, Firat; Doganoglu, Toker
  7. Market Share Dynamics in a Duopoly Model with Word-of-Mouth Communication By Kovac, Eugen; Eugen, Kovac; Robert, Schmidt
  8. Price Guarantees, Consumer Search, and Hassle Costs By Schwalbe, Ulrich; Baake, Pio
  9. Entry by Takeover: Auctions vs. Negotiations By Marco Pagnozzi; Antonio Rosato
  10. Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors By Bec, Frédérique; Bessec, Marie
  11. Optimal procurement and outsourcing of production in small industries By Rosar, Frank
  12. Company Law and Firm Entry By Prantl, Susanne; Böhme, Ulrike
  13. Cartel Formation with Endogenous Capacity and Demand Uncertainty By Paha, Johannes
  14. How Mergers A ffect Innovation: Theory and Evidence By Stiebale, Joel; Haucap, Justus
  15. Competition policy and cartel size By Bos A.M.; Harrington Jr. J.E.
  16. The Effects of Remedies on Merger Activity in Oligopoly By Wey, Christian; Dertwinkel-Kalt, Markus
  17. Price Discontinuities in an online used Car Market By Englmaier, Florian; Schmöller, Arno; Stowasser, Till
  18. Ex Post Merger Evaluation in the UK Book Retail Market By Duso, Tomaso; Argentesi, Elena; Aguzzoni, Luca; Ciari, Lorenzo; Tognoni, Massimo
  19. Price Regulation and Parallel Imports of Pharmaceuticals. By Brekke, Kurt R.; Holmås, Tor Helge; Straume, Odd Rune
  20. Management Practices, Relational Contracts, and the Decline of General Motors By Susan Helper; Rebecca Henderson
  21. Welfare Effects of Public Service Broadcasting in a Free-to-Air TV Market By Sieg, Gernot; Rothbauer, Jula
  22. Demand Forces of Technical Change Evidence from the Chinese Manufacturing Industry By Beerli, Andreas; Weiss, Franziska; Zilibotti, Fabrizio; Zweimüller, Josef
  23. Financing Patterns of Innovative SMEs and the Perception of Innovation Barriers in Germany By Heike Belitz; Anna Lejpras
  24. Firm R&D, Innovation, and Productivity in German Industry By Vuong, Van Anh; Peters, Bettina; Roberts, Mark J.; Fryges, Helmut
  25. High Hopes and Limited Successes: Experimenting with Industrial Polices in the Leather Industry in Ethiopia By Girum Abebe; Florian Schaefer

  1. By: Abbring, J.H.; Campbell, J.R.; Tilly, J.; Yang, N. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This paper develops an econometric model of industry dynamics for concentrated markets that can be estimated very quickly from market-level data on demand shifters and the number of producers. We show that the model has an essentially unique symmetric Markov-perfect equilibrium that can be calculated from the xed points of low-dimensional contraction mappings. We characterize the model's identi cation and extend Rust's (1987) nested xed point estimator to account for the observable implications of mixed strategies on survival. We illustrate the model's application with ten years of County Business Patterns data from Motion Picture Theaters in 573 Micropolitan Statistical Areas.
    Keywords: demand uncertainty;dynamic oligopoly;rm entry and exit;Markov-perfect equilibrium;nested xed point estimator;sunk costs;toughness of competition
    JEL: L13 C25 C73
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:2014008&r=ind
  2. By: T.Huw Edwards (School of Business and Economics, Loughborough University)
    Abstract: While there are now considerable literatures on both oligopolistic and mo- nopolistically competitive market structures in trade, asymmetry is rarely exam- ined except where it reects some underlying heterogeneity. Following Melitz, 2003, economists have come to see dierences in rms' entry decisions are now typically seen as evidence of rm heterogeneity and xed entry costs. In addi- tion, there is supporting evidence that rms which engage in trade are seen as larger and more ecient (Bernard and Jensen, 1995; Baldwin and Gu, 2003) than their non-trading rivals. While there is considerable evidence that rm asymmetry can be a causal factor of dierent trading behaviour, there is nevertheless scope for caution. After all, where does the heterogeneity stem from? If there are scale economies at the rm level - why should not greater size and eciency therefore be seen as potentially consequential to the market entry decision, rather than the reverse? Evidence of greater size or eciency prior to starting exporting (Lileeva and Treer, 2010) is not, of itself, sucient to discount this possibility, given that what matters is the intent of a rm to become an exporter (which may long predate actual market entry). In this short note we show that the market entry decision of rms, partic- ularly in industries intensive in research and development (R&D) activity, is absolutely characteristic of the sort of problem where initially symmetric games may have asymmetric (and sometimes, if we restrict ourselves to pure strategy games, only asymmetric) equilibria. In this regard, one should consider past papers on discontinuous games by Dasgupta and Maskin (1986) and Amir et al (2010). Also Fey (2011).
    Keywords: Trade, oligopoly, market entry
    JEL: F12 L13
    Date: 2014–01
    URL: http://d.repec.org/n?u=RePEc:lbo:lbowps:2014_03&r=ind
  3. By: Elberg, Christina; Kranz, Sebastian
    Abstract: Liberalized electricity markets are characterized by a fluctuating price-inelastic demand, non-storable electricity and often show substantial market shares held by one or few incumbent firms. These characteristics have led to a controversial discussion concerning the need for and the design of capacity mechanisms, which combine some form of capacity payments with price caps in the spot market. The purpose of this study is to understand the effects of different capacity mechanisms on the market structure. We consider a model with a dominant firm and a competitive fringe and investigate the impact of price caps and capacity payments on investment incentives and market shares of both parties. While lower price caps reduce the potential for the exercise of market power in static models, we find that in the dynamic model with endogenous investments lower price caps increase market concentration and the frequency of capacity withholding, as well as, the dominant firm's profits. --
    JEL: L11 L51 L94
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79811&r=ind
  4. By: Halbheer, Daniel; Bertini, Marco; Koenigsberg, Oded
    Abstract: Managers like to think well of themselves, and of the firms that employ them. However, positive illusions can bias a manager's evaluation of market outcomes, self-servingly crediting success on the superior quality of one's own product but blaming failure on the aggressive price of a competitor's offering. These distorted attributions stem from the idea that product quality better serves the manager's motivation for self-enhancement and self-presentation than price: product quality is seemingly more central to the firm, less susceptible to external market forces, and more stable over time. We position our theory in the psychology of attribution, define self-serving behavior and provide experimental and survey evidence of this phenomenon, and develop a model of price-quality competition that incorporates the empirical findings. In particular, we first study the natural benchmark equilibrium provided by unbiased decision makers. We then introduce self-serving behavior in the presence of myopic principals, or of forward-looking principals who anticipate the limitations of managers and set first-period decisions accordingly. --
    JEL: L21 M21 M31
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79842&r=ind
  5. By: Müller, Daniel; Herweg, Fabian
    Abstract: We consider a monopolistic supplier's optimal choice of wholesale tariffs when downstream firms are privately informed about their retail costs. Under discriminatory pricing, downstream firms that differ in their ex ante distribution of retail costs are offered different tariffs. Under uniform pricing, the same wholesale tariff is offered to all downstream firms. In contrast to the extant literature on price discrimination with nonlinear wholesale tariffs, we find that banning discriminatory wholesale contracts often improves welfare. This also holds if the manufacturer is not an unconstrained monopolist. Moreover, uniform pricing increases downstream investments in cost reduction in the long run. --
    JEL: D43 L11 L42
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79978&r=ind
  6. By: Muthers, Johannes; Inceoglu, Firat; Doganoglu, Toker
    Abstract: The literature on the licensing of an innovation has mainly focused on some speci c contract types. We show within the framework of a fairly general model that removing these contractual limitations will lead to extreme market outcomes. Speci cally, we nd that when the patentee can employ observable contracts that can condition on market entry, it can achieve the monopoly outcome. Furthermore, when the patentee can only use unconditional quantity forcing contracts, it captures the entire market, albeit not at monopoly price, via a single licensee. Our results point out to the signi cance, and perhaps the particularity, of observable, nonrenegotiable contracts. --
    JEL: D45 K11 L11
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79757&r=ind
  7. By: Kovac, Eugen; Eugen, Kovac; Robert, Schmidt
    Abstract: We analyze dynamic price competition in a homogeneous goods duopoly, where consumers exchange information via word-of-mouth communication. A fraction of consumers, who do not learn any new information, remain locked-in at their previous supplier in each period. We analyze Markov perfect equilibria in which firms use mixed pricing strategies. Market share dynamics are driven by the endogenous price dispersion. Depending on the parameters, we obtain different 'classes' of dynamics. When firms are impatient, there is a tendency towards equal market shares. When firms are patient, there are extended intervals of market dominance, interrupted by sudden changes in the leadership position. --
    JEL: C73 D83 L11
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79994&r=ind
  8. By: Schwalbe, Ulrich; Baake, Pio
    Abstract: The paper deals with the competitive effects of price guarantees in a spatial duopoly where consumers can search for lower prices but have to incur hassle costs if they want to claim a price guarantee. It is shown that symmetric equilibria with and without price guarantees exist but price guarantees will have no effect on prices if search costs are low, hassle costs are high and the number of uninformed consumers is small. However, when both firms use price guarantees, there also exist payoff-dominant equilibria where both firms use mixed pricing strategies in the form of "high-low" pricing schemes, provided that the search costs are sufficiently high. --
    JEL: D43 L13 C72
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:80023&r=ind
  9. By: Marco Pagnozzi (Università di Napoli Federico II and CSEF); Antonio Rosato (University of Technology Sydney)
    Abstract: We compare two mechanisms through which a potential entrant can take over an incumbent in a market with asymmetric firms: auctions (where other incumbents can bid for the target) and bilateral negotiations between the entrant and the target. The entrant’s choice of target depends on the mechanism, and it may not maximize ex-post profit or consumer welfare. In an auction, the entrant pays a higher price to take over a target with higher synergies, because they impose stronger negative externalities on incumbents and increase their willingness to pay for preventing entry. This provides a new rationale for takeover premia. Auctions increase the price obtained by the target, but reduce welfare compared to negotiation because they may discourage the entrant from acquiring a target with higher synergies.
    Keywords: Takeover; Mergers; Auctions with Externalities
    JEL: D44 G34 L13
    Date: 2014–01–27
    URL: http://d.repec.org/n?u=RePEc:sef:csefwp:353&r=ind
  10. By: Bec, Frédérique; Bessec, Marie
    Abstract: This paper explores the existence of a bounce-back effect in inventory investment using the European Commission opinion survey on stocks of finished products in manufacturing and retail trade sectors for France, Germany and a European aggregate, from 1985q1 to 2011q4. Our empirical findings support the existence of a high recovery episode for inventory investment, during the quarters immediately following the recessions: it occurs later and lasts longer in manufacturing than in retail trade sector. Since a third phase of rapid recovery has not been found in final sales data so far, the rebound in inventories could in turn explain the GDP growth bounce-back pointed out in previous empirical studies. This calls for a careful modeling of the inventory investment behavior in any sensible theoretical explanation of aggregate business cycles.
    Keywords: Threshold auto-regression; bounce-back effects; business cycles; inventory investment;
    JEL: C22 E32
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:dau:papers:123456789/11777&r=ind
  11. By: Rosar, Frank
    Abstract: I study the interaction between optimal procurement and outsourcing of production in small industries. First, two sellers decide about outsourcing. By outsourcing, a seller loses information about the costs of producing to his supplier. Then the buyer designs the procurement mechanism and sellers who outsourced production subcontract with their respective suppliers. The focal equilibrium might exhibit bilateral outsourcing although outsourcing is modeled to have no direct positive effects. When a seller is able to extract his supplier s rent ex ante, the focal equilibrium exhibits bilateral outsourcing for any distribution of production costs satisfying a regularity condition. --
    JEL: D44 D82 L23
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79812&r=ind
  12. By: Prantl, Susanne; Böhme, Ulrike
    Abstract: In this paper, we study the impact of the entry costs imposed by the German Limited Liability Company Law on firm entry. The law implies an expensive and complex incorporation process. As entrepreneurs choose between legal forms when entering the market, either a legal form with limited liability or without it, we suggest an empirical approach for identifying entry cost effects that takes this decision into account by exploiting the natural experiment in entry regulation following from German reunification. The empirical findings show, in particular, that entry costs based on the German Limited Liability Company Law cause an increase in entry size for limited liability firms. In addition, we report that the entry rate for limited liability firms, as well as the sustained entry rate, is lowered. --
    JEL: K22 L25 L26
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:80486&r=ind
  13. By: Paha, Johannes
    Abstract: This article provides a framework for the analysis of cartel formation. It models the strategic interaction among firms who invest into production capacity, sell a near-homogeneous good, and are subject to unexpected demand shocks with persistence. The firms either compete or collude in prices. The model shows that a reduction of demand may promote collusion despite lowering collusive profits. This is the case when capacities are durable and a perceptible decline in demand creates excess capacities that make competition more intense. One finds unstable cartels especially for low discount rates as these lead the firms to choose asymmetric capacities. --
    JEL: D43 L11 L41
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79726&r=ind
  14. By: Stiebale, Joel; Haucap, Justus
    Abstract: This papers analyses how horizontal mergers affect innovation activities of the merged entity and its non-merging competitors. We develop an oligopoly model with heterogeneous firms to derive empirically testable implications. Our model predicts that a merger is more likely to be profitable in an innovation intensive industry. For a high degree of firm heterogeneity a merger reduces innovation in both the merged entity and in non-merging competitors in an industry with high R\&D intensity. Using data on horizontal mergers among pharmaceutical firms in Europe, we find that our econometric results are consistent with many predictions of the theoretical model. Our main result is that after a merger patenting and R\&D of the merged entity and its non-merging rivals declines substantially. The results are robust towards alternative specifications and using an instrumental variable strategy. --
    JEL: D22 D43 O31
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79831&r=ind
  15. By: Bos A.M.; Harrington Jr. J.E. (GSBE)
    Abstract: This paper examines endogenous cartel formation in the presence of a competition authority. Competition policy makes the most inclusive stable cartels less inclusive. In particular, small firms that might have been cartel members in the absence of a competition authority are no longer members. Regarding the least inclusive stable cartels, competition policy can either increase or decrease their inclusiveness. Highly inelastic market demand is sufficient for the presence of a competition authority to cause the least inclusive stable cartels to increase in size.
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:unm:umagsb:2013027&r=ind
  16. By: Wey, Christian; Dertwinkel-Kalt, Markus
    Abstract: We analyze the effects of structural remedies on merger activity in a Cournot oligopoly when the antitrust agency applies a consumer surplus standard. Remedies increase the scope for profitable and acceptable mergers, while divestitures to an entrant firm are most effective in this regard. Remedial divestitures are most attractive from a social welfare point of view, when the merging parties can extract the entire gains associated with the asset sale. We also show that the merging parties have strong incentives to search for the most efficient buyer and we identify instances so that a remedy rule induces strictly price-decreasing mergers. Finally, under incomplete information an effcient merger type is to be doomed to "overshoot" with its divestiture proposal in a pooling equilibrium which is also possible under separation. --
    JEL: L13 L41 K21
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79888&r=ind
  17. By: Englmaier, Florian; Schmöller, Arno; Stowasser, Till
    Abstract: We examine empirically whether individuals evaluating used cars efficiently aggregate all relevant information on its constituent characteristics. Based on detailed field data on more than 80,000 used car offers in a large online marketplace, we provide evidence for biased information processing. While the precise date of first registration, i.e., its "age", is publicly and prominently stated for each car, we identify an amplified value adjustment for otherwise identical cars at year-count changes. These discontinuities indicate that individuals over-react to the figure displayed in the latter, while underrating the finer information on a car's age as conveyed through the month of first registration. Moreover, we are able to replicate the findings from Lacetera et al (2009) and find discontinuous drops in prices at 10,000km odometer thresholds. While the latter finding, as suggested by Lacetera et al (2009), is consistent with a left-digit bias in the processing of numerical information, the first finding cannot be explained by this. Our findings underline that information-processing heuristics matter also in markets with large stakes and easily observed information --
    JEL: D03 D12 D83
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79982&r=ind
  18. By: Duso, Tomaso; Argentesi, Elena; Aguzzoni, Luca; Ciari, Lorenzo; Tognoni, Massimo
    Abstract: This paper empirically evaluates the effects of a merger between the two largest book retail chains in the UK. We build an original dataset of book titles with data on the prices at the store level and at the national level. We then apply difference-in-differences techniques to assess the impact of the merger. A key feature of the books market is that titles become obsolete very quickly. Therefore, we compare different titles before and after the merger in an hedonic approach. Since retail mergers may have either local or national effects (or both) according to the level at which retail chains set prices, we undertake an ex post assessment of the impact of the merger at both aggregation levels. At the local level, we compare the changes in the average price charged before and after the merger in the shops located in overlap areas (i.e. areas where both chains were present before the merger) and in non-overlap areas (i.e. areas where only one chain was present before the merger). Our results do not show any significant difference between non-overlap and overlap areas where the merger could have been expected to generate the strongest effect. To investigate the effects of the merger at the national level, we employ two distinct control groups, namely the competitors and the top-selling titles. In both cases we find that the merger did not result in an increase in prices at the national level. --
    JEL: K21 L44 D22
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:80025&r=ind
  19. By: Brekke, Kurt R. (Dept. of Economics, Norwegian School of Economics and Business Administration); Holmås, Tor Helge (Uni Rokkan Centre); Straume, Odd Rune (University of Minho)
    Abstract: This paper studies the effects of price regulation and parallel imports in the on-patent pharmaceutical market. First, we develop a theory model in which a pharmacy negotiates producer prices with a brand-name firm and then sets retail prices. We show that the effects of price regulation crucially depend on whether the producer faces competition from parallel imports. While parallel imports improve the bargaining position of the pharmacy, price regulation counteracts this effect and may even be profitable for the producer. Second, we use a unique dataset with information on sales and prices at both producer and retail level for 165 substances over four years (2004-7). Exploiting exogenous variation in the regulated price caps, we show that stricter price regulation reduces competition from parallel imports. While the effect is clearly negative on producer profits for substances without parallel imports, the e¤ect is not significant for substances with parallel imports. Finally, we show that stricter price regulation reduces total expenditures, but the e¤ect is much stronger for substances with parallel import. Thus, our results suggest that price regulation may promote both static and dynamic efficiency in the presence of parallel imports.
    Keywords: Pharmaceutical market; Price regulation; Parallel imports.
    JEL: I11 I18 L13 L51 L65
    Date: 2014–01–10
    URL: http://d.repec.org/n?u=RePEc:hhs:nhheco:2014_001&r=ind
  20. By: Susan Helper; Rebecca Henderson
    Abstract: General Motors was once regarded as one of the best managed and most successful firms in the world, but between 1980 and 2009 its share of the US market fell from 62.6 to 19.8 percent, and in 2009 the firm went bankrupt. In this paper we argue that the conventional explanation for this decline – namely high legacy labor and health care costs – is seriously incomplete, and that GM’s share collapsed for many of the same reasons that many of the other highly successful American firms of the 50s, 60s and 70s were forced from the market, including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did. We focus particularly on the problems GM encountered in developing the relational contracts essential to modern design and manufacturing. We discuss a number of possible causes for these difficulties: including GM’s historical practice of treating both its suppliers and its blue collar workforce as homogeneous, interchangeable entities, and its view that expertise could be partitioned so that there was minimal overlap of knowledge amongst functions or levels in the organizational hierarchy and decisions could be made using well-defined financial criteria. We suggest that this dynamic may have important implications for our understanding of the role of management in the modern, knowledge based firm, and for the potential revival of manufacturing in the United States.
    JEL: J24 L2 L21 L23
    Date: 2014–01
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:19867&r=ind
  21. By: Sieg, Gernot; Rothbauer, Jula
    Abstract: A welfare-maximizing Public Service Broadcaster (PSB) broadcasts both information-type and show-type content if (i) the information consumption of TV viewers generates external benefits for society by improving the ability of voters to control politicians and (ii) the marginal external benefits of information consumption diminish as the information possessed by voters increases. We analyze a two-sided free-to-air TV market with two differentiated private channels and a commercial-free PSB. Welfare depends on the efficiency of the PSB, the external benefits of voter information, and lost rents from the advertising market. Welfare can be higher without a PSB. --
    JEL: L82 D72 L32
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79800&r=ind
  22. By: Beerli, Andreas; Weiss, Franziska; Zilibotti, Fabrizio; Zweimüller, Josef
    Abstract: This paper investigates the effect of market size on innovation activities across different durable good industries in the Chinese manufacturing sector. We use a potential market size measure driven only by changes in the Chinese income distribution which is exogenous to changes in prices and qualities of durable goods to instrument for actual future market size. Results indicate that an increase in market size by one percentage point leads to an increase of 4.4% in R&D inputs, an increase in labour productivity by 6.5% and an increase in the likelihood of a successful product innovation by about 1.1 percentage points. These findings are robust controlling for export behaviour of firms and supply side drivers of R&D. --
    JEL: L16 O31 O33
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79980&r=ind
  23. By: Heike Belitz; Anna Lejpras
    Abstract: We analyze the role of public support in the financing pattern of R&D in German SMEs and their assessment of financing conditions in the context of other framework conditions for innovation. In Germany, there is a diversity of overall well-funded technology-neutral and technology-specific programs providing grants to R&D and innovation projects. Different types of SMEs access public funding for R&D and innovation activities to varying degrees. Using an extensive sample of 2,700 German SMEs that participated in public R&D promotion programs during the 2005-2010 period, we identify four groups of companies with different patterns of public and private sources of R&D finance, such as own capital, grants, private and subsidized loans. The firms in our sample are generally positive about public financing of R&D in Germany in 2010. Despite the different funding patterns, we find only slight variations in this assessment across the four groups of subsidized SMEs. Nevertheless, medium-sized R&D companies (often with external equity investment) that have to finance the market introduction of innovations without a track record, appear to suffer from deficiencies in the provision of loans. Further, the companies perceive obstacles to innovation primarily in the non-financial sphere, namely the supply of skilled personnel, market regulation and competition conditions. Therefore, future work on innovation policies for SMEs should put greater emphasis on the non-financial external framework conditions for firm R&D and innovative activities.
    Keywords: R&D promotion, financing of R&D, small and medium sized enterprises, barriers to innovation
    JEL: O14 O25 O38 L20
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1353&r=ind
  24. By: Vuong, Van Anh; Peters, Bettina; Roberts, Mark J.; Fryges, Helmut
    Abstract: This paper investigates empirically rm investment behavior in research and development (R&D). Firms make investments in R&D in order to produce innovations. These innovations in turn improve the rm s future productivity level, pro tability and incentives to invest in R&D. Using German rm-level data from the manufacturing sector, we estimate a dynamic, structural model of the rm s choice to invest in R&D and quantify the bene t and cost of engaging in R&D. We nd that among rms that engage in R&D, process and product innovations create a signi cant improvement in their productivity. The cost for performing R&D differs across rms based on their size and R&D history. We compute the bene ts of R&D investment to the rm and nd that by taking the dynamic nature of the investment into account the real return to R&D is several times higher than the one time gain in rm productivity. --
    JEL: L60 O31 O32
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc13:79760&r=ind
  25. By: Girum Abebe (Ethiopian Development Research Institute); Florian Schaefer (Department of Development Studies, SOAS (University of London))
    Abstract: In the presence of standardized production technology and the possibility of potentially unlimited market rendered by international trade, there is clear comparative advantages to be realized in experimenting with industrial polices in the leather industry in Ethiopia. This paper reviews wide arrays of policy interventions in the industry and, more modestly, attempts to link these interventions with the performance observed in the industry. We find that industrial policies in the leather sector have been largely effective driving strong growth. This growth, however, has not been in par with its potentials. Market problems along the supply-chain, liquidity constraint, limited processing and marketing capacity, inefficient regulations and enforcement capacity and coordination problem have culminated into below- potential levels of production and, hence, export earnings. We believe that, impressive results to date notwithstanding, important improvements still need to be made in terms of policy responsiveness and in ensuring growth is broad-based across relevant value chains. While building market institutions to bring down transactions costs will improve the effectiveness of industrial polices in the sector, policy makers should ensure that existing regulations are transparent, enforceable and do not impose undue burden on investments in the industry. Continuous channels of communication and information exchanges between the private sector and the regulatory organ would accelerate the understanding of constraints and their apt solutions.
    Keywords: Industrial Policy, Leather, capacity, value chain, markets
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:etd:wpaper:011&r=ind

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