|
on Industrial Organization |
| By: | Mertens, Matthias; Mottironi, Bernardo |
| Abstract: | Combining financial statements with firm-level product prices, we find that larger firms exhibit lower markups, although they are overcompensated by substantially higher wage markdowns. We explain our divergence from prior results by highlighting how labor market power affects markup estimates. |
| Keywords: | firm size; markdowns; market power; markups |
| JEL: | L11 L13 L25 J42 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128958 |
| By: | Weber, Jan David |
| Abstract: | Firms are not abstract, profit-seeking units as often assumed in neoclassical models, but historically situated, socially embedded, and organizationally adaptive entities. Firms evolve through continuous interaction with their environment, shaped by routines, bounded rationality, and the co-development of institutions and technologies. This comprehensive lens provides a richer understanding of firm behavior, accounting for the observed diversity across firms, the persistence of structural asymmetries, and the heterogeneous conditions under which firms grow, stagnate, or exit the market. These firm-level dynamics unfold within markets that are themselves evolving systems. Rather than tending toward a stable equilibrium, markets are shaped by feedback loops, path dependencies [path dependency], and innovation-driven competition. Entry and exit, firm growth, and shifts in market structure are not merely responses to price signals but outcomes of learning processes, strategic interactions, and institutional arrangements [Institutions]. As a result, market outcomes reflect complex adaptive dynamics rather than simple allocative efficiency. In this view, successful industrial policy is not limited to correcting market failures or achieving short-term efficiency gains. Rather, industrial policy is a dynamic and systemic process. This process contributes to long-term learning, structural transformation, and the strategic capacities of economies. Effective policies must therefore be reflexive, transparent, and collaborative, evolving alongside the systems they intend to shape. |
| Keywords: | Firm Size, Industrial Policy, Firm Activity |
| JEL: | D83 L11 O25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifsowp:325500 |
| By: | Martin, Ralf; Solorzano Mosquera, Jenniffer; Thomas, Catherine; Verhoeven, Dennis |
| Abstract: | We examine the relationship between firms' markups and the economic value of their innovation, including both the private value captured by the innovating firm and the knowledge spillovers that benefit other firms. Using a sample of over 14, 500 EU firms and 2, 400 US firms granted patents between 2005 and 2014, we find that innovation by high-markup firms is more valuable privately and also creates more external value. These associations are robust to controlling for the stock of past innovation and to estimating innovation value in various ways. |
| JEL: | D24 L11 O31 O33 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129003 |
| By: | Eric Budish; Maya M. Durvasula; Benjamin N. Roin; Heidi L. Williams |
| Abstract: | For large classes of potential inventions, intellectual property rights that are available on paper are either not possible or not profitable for firms to enforce in practice. In this paper, we show that these missing incentives yield quantitatively significant underinvestment in research and development. We develop a simple model that formalizes the conditions under which such missing markets for innovation arise. We identify an empirical setting—research into new uses for existing drugs—in which there is sharp variation in the enforceability of intellectual property rights on otherwise comparable inventions over time. We show that when intellectual property rights become unenforceable, research investment and commercialization nearly cease. In doing so, we test two claims central both to our model and the innovation literature more generally—that stronger intellectual property protection does, in fact, induce investment, and that heterogeneity in the availability of these rights distorts investment. The welfare consequences of inadequate incentives in our empirical context are large. Our estimates suggest that 200-800 new uses for existing drugs would have been developed under counterfactual policies. Measures of the value of these uses drawn from existing literature suggest that the social cost of this particular missing market is on the order of several trillion dollars. |
| JEL: | D47 I10 I18 K23 L65 O0 O3 O30 O34 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34222 |