nep-ino New Economics Papers
on Innovation
Issue of 2006‒01‒01
25 papers chosen by
Koen Frenken
Universiteit Utrecht

  1. Technology innovation and market turbulence: a dotcom example By Zhu Wang
  2. Sustaining High Growth through Innovation: Reforming the R&D and Education Systems in Korea By Yongchun Baek; Randall Jones
  3. Product cycles, innovation and exports: A study of Indian pharmaceuticals By Alka Chadha
  4. On the Economics of Innovation Projects: Product Experimentation in the Music Industry By Mark Lorenzen; Lars Frederiksen
  5. Trips and Patenting Activity: Evidence from the Indian Pharmaceutical Industry By Alka Chadha
  6. The effect of regional differences on the performance of software firms in the Netherlands By Ron A. Boschma; Anet B.R. Weterings
  7. Technological Revolutions and Stock Prices By Lubos Pastor; Pietro Veronesi
  8. Informational Complexity and the Flow of Knowledge across social boundaries By Olav Sorenson; Jan W. Rivkin; Lee Fleming
  9. Financing of Competing Projects with Venture Capital By Ekaterina Goldfain; Eugen Kovac
  10. Cash breeds Success: The Role of Financing Constraints in Patent Races By Enrique Schroth; Dezsö Szalay
  11. Agglomeration economies and entrepreneurship: testing for spatial externalities in the Dutch ICT industry By Frank G. van Oort; Erik Stam
  12. Variety and regional economic growth in the Netherlands By Koen Frenken; Frank G. van Oort; Thijs Verburg; Ron A. Boschma
  13. Economic policy from an evolutionary perspective: the case of Finland By Ron A. Boschma; Markku Sotarauta
  14. The evolution of the spatial digital divide: From internet adoption to internet use by french industrial firms By Danielle GALLIANO (LEREPS-GRES & INRA-ETIC ); Pascale ROUX (ADIS, Université Paris Sud )
  15. Patent Races, “Me-Too” Drugs, and Generics: A Developing-World Perspective By Alka Chadha; Åke Blomqvist
  16. The Future of Drug Development: The Economics of Pharmacogenomics By John A. Vernon; W. Keener Hughen
  17. Technology Timing and Pricing In the Presence of an Installed Base By QIU-HONG WANG; KAI-LUNG HUI
  18. The Influence of Managerial and Organizational Determinants of Horizontal Knowledge Exchange on Competence Building and Competence Leveraging By Mom, T.J.M.; Bosch, F.A.J. van den; Volberda, H.W.
  19. The Geography of Internet Adoption by Retailers By Jesse W.J. Weltevreden; Oedzge A.L.C. Atzema; Koen Frenken; Karlijn de Kruijf; Frank G. van Oort
  20. Les effets de la mondialisation sur l'organisation et la compétitivité des districts industriels By Ariel Mendez
  21. Bounded Rationality, Cognitive Maps, and Trial and Error Learning By Richard R. Nelson
  22. Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel By Annabelle Gawer; Rebecca Henderson
  23. Localized Learning and Social Capital: The Geography Effect in Technological and Institutional Dynamics By Mark Lorenzen
  24. Industrial restructuring and early industry pathways in the Asian 1st generation NICs: The Singapore garment industry By Leo van grunsven; Floor Smakman
  25. B2c e-commerce adoption in inner cities: An evolutionary perspective By Ron A. Boschma; Jesse W.J. Weltevreden

  1. By: Zhu Wang
    Abstract: This paper explains market turbulence, such as the recent dotcom boom/bust cycle, as equilibrium industry dynamics triggered by technology innovation. When a major technology innovation arrives, a wave of new firms enter the market implementing the innovation for profits. However, if the innovation complements existing technology, some new entrants will later be forced out as more and more incumbent firms succeed in adopting the innovation. It is shown that the diffusion of Internet technology among traditional brick-and-mortar firms is indeed the driving force behind the rise and fall of dotcoms as well as the sustained growth of e-commerce. Empirical evidence from retail and banking industries supports the theoretical findings.
    Date: 2005
  2. By: Yongchun Baek; Randall Jones
    Abstract: With inputs of labour and capital slowing, sustaining high growth rates in Korea will increasingly depend on total factor productivity gains, which are in turn driven to a large extent by innovation. While a number of Korean firms are at the world technology frontier in areas such as ICT, the diffusion of technology to lagging sectors is a priority to sustain growth. This paper recommends policies to improve the science and technology system by upgrading the R&D framework, in part through closer linkages between firms, universities and the government, and enhanced intellectual property right protection. Strengthened competition, particularly in the service sector, is needed to promote the diffusion of new technologies. Innovation also requires policies to ensure the supply of high-quality human capital through reforms of tertiary education. This requires a restructuring of the university system through increased competition and deregulation, as well as additional financial resources to improve quality. This Working Paper relates to the 2005 OECD Economic Survey of Korea ( <P>Maintenir une forte croissance grâce à l’innovation Les apports de main-d’oeuvre et de capital se ralentissant, le maintien de taux de croissance élevés en Corée dépendra de plus en plus des gains de productivité totale des facteurs, lesquels sont induits dans une large mesure par l’innovation. Tandis qu’un certain nombre d’entreprises coréennes se situent à la pointe de la technologie mondiale dans des domaines tels que les TIC, la diffusion de la technologie dans les secteurs retardataires est une priorité pour le maintien de la croissance. Ce papier préconise des politiques pour améliorer le système scientifique et technologique en modernisant le cadre de la R-D, notamment par une extension des liens entre les entreprises, les universités et l’État, mais aussi par un renforcement de la protection des droits de propriété intellectuelle. Une intensification de la concurrence, en particulier dans le secteur des services, est indispensable pour promouvoir la diffusion des nouvelles technologies. L’innovation requiert aussi des mesures visant à assurer une offre de capital humain de qualité par des réformes de l’enseignement supérieur. Cela exige une restructuration du système universitaire grâce au développement de la concurrence et de la déréglementation, ainsi qu’un accroissement des ressources financières pour améliorer la qualité. Ce Document de travail se rapporte à l'Étude économique de l'OCDE de la Corée, 2005 (
    Keywords: Korea, Corée, services, services, regulatory reforms, réforme réglementaire, innovation, innovation, product market competition, ICT, TIC, technological change, tertiary education, intellectual property rights, droit de propriété intellectuelle, patents, brevets
    JEL: I2 O31 O33 O34 O38 O39 O53
    Date: 2005–12–20
  3. By: Alka Chadha (Department of Economics, National University of Singapore)
    Abstract: This paper sheds light on the product cycle and neotechnology theories of trade in the context of generic pharmaceuticals. The paper studies the export performance of 177 Indian pharmaceutical firms for the post- liberalization period 1991-2004. The results indicate that technology proxied by foreign patent rights has a positive impact on exports. This suggests that developing countries with innovation skills for process innovations are capable of penetrating international markets in the later stages of the product cycle by using patents, which were the barriers to trade in the early stages of the product cycle. Thus, Indian pharmaceutical firms adept at reverse-engineering of brandname drugs have an opportunity to enter the global generic market for off-patent drugs.
    Keywords: Product cycle, Exports, Foreign patents, Pharmaceuticals
    JEL: L65 O34 F1
  4. By: Mark Lorenzen; Lars Frederiksen
    Abstract: The paper is conceptual, combining project and economic organization literatures in order to explain the organization and management of market-based projects. It dedicates particular focus to projects set up in order to facilitate product innovation through experimentation. It investigates the internal vs. market economies of scale and scope related to projects, as well as the issues of governance, planning and coordination related to reaping such economies. Incorporating transaction cost perspectives as well as considerations of labour markets, the paper explains the management of market-organized innovation projects by virtue of localized project ecologies and local labour markets of leaders and boundary spanners. It illustrates its arguments with a case study of the Recorded Music industry.
    Keywords: Project management; product innovation
    JEL: L23 O31 L82
    Date: 2005
  5. By: Alka Chadha (Department of Economics, National University of Singapore)
    Abstract: This paper studies the impact of the strict patent regime on the patenting activity of Indian pharmaceutical firms and finds that patenting activity of these firms has increased after the signing of TRIPs. The study is conducted for 65 pharmaceutical firms for the period 1991 to 2004 using different parametric and semiparametric count panel data models. Results across different count data models indicate a positive and significant impact of the introduction of stronger patents on patenting activity. Further, the results show a gestation lag of two years between R&D spending and patent applications.
    Keywords: Pharmaceuticals, Patents
    JEL: L65
  6. By: Ron A. Boschma; Anet B.R. Weterings
    Abstract: This paper aims to explore the effect of regional differences on the performance of software firms in the Netherlands. Inspired by evolutionary economics, we account for the impact of (1) co-location and sharing a local knowledge base; (2) pre-entry experience in the same or related industries; (3) being connected; and, (4) having organisational capabilities to cope with change. The outcomes of the regression analyses on data gathered among 265 software firms suggest that firms located in regions specialised in ICT have a higher innovative productivity. Spin-offs and firms with organisational capabilities also perform better, while network relationships do not affect the performance of software firms.
    Keywords: evolutionary economics, agglomeration economies, innovative productivity, software industry, spin-offs
    Date: 2005–01
  7. By: Lubos Pastor; Pietro Veronesi
    Abstract: During technological revolutions, stock prices of innovative firms tend to exhibit high volatility and bubble-like patterns, which are often attributed to investor irrationality. We develop a general equilibrium model that rationalizes the observed price patterns. The high volatility results from high uncertainty about the average productivity of a new technology. Investors learn about this productivity before deciding whether to adopt the technology on a large scale. For technologies that are ultimately adopted, the nature of uncertainty changes from idiosyncratic to systematic as the adoption becomes more likely; as a result, stock prices fall after an initial run-up. This “bubble” in stock prices is observable ex post but unpredictable ex ante, and it is most pronounced for technologies characterized by high uncertainty and fast adoption. We examine stock prices in the early days of American railroads, and find evidence consistent with a large-scale adoption of the railroad technology by the late 1850s.
    JEL: G1
    Date: 2005–12
  8. By: Olav Sorenson; Jan W. Rivkin; Lee Fleming
    Abstract: Scholars from a variety of backgrounds – economists, sociologists, strategists, and students of technology management – have sought a better understanding of why some knowledge disperses widely while other knowledge does not. In this quest, some researchers have focused on the characteristics of the knowledge itself (e.g., Polanyi, 1966; Reed and DeFillippi, 1990; Zander and Kogut, 1995) while others have emphasized the social networks that constrain and enable the flow of knowledge (e.g., Coleman et al., 1957; Davis and Greve, 1997). This chapter examines the interplay between these two factors. Specifically, we consider how the complexity of knowledge and the density of social relations jointly influence the movement of knowledge. Imagine a social network composed of patches of dense connections with sparse interstices between them. The dense patches might reflect firms, for instance, or geographic regions or technical communities. When does knowledge diffuse within these dense patches circumscribed by social boundaries but not beyond them? Synthesizing social network theory with a view of knowledge transfer as a search process, we argue that knowledge inequality across social boundaries should reach its peak when the underlying knowledge is of moderate complexity. To test this hypothesis, we analyze patent data and compare citation rates across three types of social boundaries: within versus outside the firm, geographically near to versus far from the inventor, and internal versus external to the technological class. In all three cases, the disparity in knowledge diffusion across these borders is greatest for knowledge of an intermediate level of complexity.
    Keywords: evolutionary economics, informational complexity, knowledge flow, social boundaries
    Date: 2005–09
  9. By: Ekaterina Goldfain; Eugen Kovac
    Abstract: We analyze innovation race in a moral hazard setting. We develop a model in which two competing entrepreneurs work independently on the same project. The entrepreneurs do not possess any wealth of their own and their research is financed by a venture capitalist. The project, if successful, generates a prize, which is to be shared between the winning entrepreneur and the venture capitalist. The venture capitalist cannot observe the allocation of funds he provides, which creates a moral hazard problem. We compare a competitive setting with a benchmark case where the venture capitalist finances only one entrepreneur. We show that the venture capitalist can increase the efficiency of research (hence, his own expected profit from investments) and alleviate the moral hazard problem if he finances both entrepreneurs. This conclusion is unambiguous, when the entrepreneurs are at the same (the last) stage of R&D. It holds for a reasonably large range of parameters, when the entrepreneurs are at different stages of R&D.
    Keywords: venture capital, moral hazard, optimal contract, innovation race
    JEL: G32 G34 O31
    Date: 2005–12
  10. By: Enrique Schroth; Dezsö Szalay
    Abstract: This paper studies the impact of cash constraints on equilibrium winning probabilities in a patent race between an incumbent and an entrant. We develop a model where cash-constrained firms finance their R&D expenditures with an investor who cannot verify their effort. In equilibrium, the incumbent faces better prospects of winning the race the less cash-constrained he is and the more cash-constrained the entrant is. We use NBER evidence from pharmaceutical patents awarded between 1975 and 1999 in the US, patent citations, and COMPUSTAT and fit probabilistic regressions of the predicted equilibrium winning probabilities on measures of the incumbent's and potential entrants' financial wealth. The empirical findings support our theoretical predictions.
    Keywords: patent race; incumbent; entrant; financial constraints; empirical estimation
    JEL: G24 G32 L13
    Date: 2005–05
  11. By: Frank G. van Oort; Erik Stam
    Abstract: Although there is growing evidence on the role of agglomeration economies in the formation and growth of firms, both the concepts of agglomeration economies and entrepreneurship tend to be ambiguously defined and measured in the literature. In this study, we aim to improve the conceptualisations and measures of agglomeration economies and entrepreneurship. Indicators of agglomeration economies are analysed in clearly defined urban regimes on three spatial scales in the Netherlands – national zoning, labour market connectedness, and urban size. This is done in order to uncover their effect on two entrepreneurial phases in the firm life cycle - new firm formation and the growth of incumbent firms in the relatively new ICT industry in the Netherlands. In comparison with new firm formation, the growth of incumbent firms is not so much related to spatial clustering of the ICT industry and other localized sources of knowledge economies associated with urban density. Instead, knowledge as an input for growth of incumbent firms is associated with more endogenous (firm internal) learning aspects, reflected by a significant correlate with R&D-investments. Also the effect of local ICT firm competition differs between the two types of firms: a positive effect on new firm formation, but a negative effect on incumbent firm growth. In general, agglomeration economies have stronger effects on the formation of ICT firms than on the growth of ICT firms.
    Keywords: agglomeration economics, spatial externalities, entrepreneurship, location, urban regimes, ICT industry
    JEL: D21 L25 L63 L86 M13 O18 R12 R30
    Date: 2005–03
  12. By: Koen Frenken; Frank G. van Oort; Thijs Verburg; Ron A. Boschma
    Abstract: In economic theory, one can distinguish between variety as a source of regional knowledge spillovers, called Jacobs externalities, and variety as a portfolio protecting a region from external shocks. We argue that Jacobs externalities are best measured by related variety (within sectors), while the portfolio argument is better captured by unrelated variety (between sectors). We introduce a methodology based on entropy measures to compute related variety and unrelated variety. Using data at the COROP level for the period 1996-2002, we find that Jacobs externalities enhance employment growth, while unrelated variety dampens unemployment growth. Productivity growth, by contrast, can be explained by traditional determinants including investments and R&D expenditures. Implications for regional policy in The Netherlands follow.
    Keywords: evolutionary economic geography, new economic geography, economic variety
    Date: 2004–12
  13. By: Ron A. Boschma; Markku Sotarauta
    Abstract: In the last decade, the Finnish economy has shown an unprecedented recovery, after being hit by a deep crisis in the early 1990s. The paper views and interprets this successful transformation process based on ICT from an evolutionary perspective. Although the rapid pace of the restructuring of the Finnish economy suggests a break with the past, this remarkable recovery was firmly rooted in its economic history. In addition, Finnish public policy played its role in turning Finland into a knowledge economy. Although a master plan for the Finnish economy was lacking, many policies worked out quite well together over an extended period. Building on education, research and technology policy initiatives taken in the 1970s and 1980s, the deep economic crisis in the early 1990s paved the way for new policy directions, with a focus on network-facilitating innovation policies.
    Keywords: evolutionary economics, economic geography, innovation policy, Finnish economy, Finnish policy, ICT cluster
    Date: 2005–08
  14. By: Danielle GALLIANO (LEREPS-GRES & INRA-ETIC ); Pascale ROUX (ADIS, Université Paris Sud )
    Abstract: In this paper, we concentrate on different aspects of the « spatial digital divide » and seek to answer three questions : Are there still spatial inequalities in the adoption of these technologies ? Is there a so-called “second level” geographical divide characterized by important differences in the intensity of Internet use between firms that have adopted these tools? Do the appropriation processes and logic of diffusion of ICT adopters vary according to the type of area in which they are located (urban vs. rural areas)? To answer these questions we have constructed an original model of technological diffusion (of the type developed by Battisti and Stoneman, 2005) that merges two types of models: those that concentrate on epidemic effects, and the so-called equilibrium models that model the decision to adopt new technologies as the result of an economic calculation by firms, which depends on their internal characteristics and those of their competitive, industrial and local environment. This model uses data drawn from a recent national survey (“ICT and e-commerce” 2002). One of the main results is that, for a given size and sector, although there no longer are spatial inequalities in terms of ICT adoption in France, there are still important inequalities in firms’ processes of ICT appropriation and use.
    Keywords: Internet, inter-firm and intra-firm diffusion, rank and epidemic effects, agglomeration effects, spatial inequalities
    JEL: L2 O3 O18
    Date: 2005
  15. By: Alka Chadha (Department of Economics, National University of Singapore); Åke Blomqvist (Department of Economics, National University of Singapore)
    Abstract: We build a model of pharmaceutical markets in the light of a patent race among competing firms. The incentive for R&D is the patent on either the breakthrough or the me-too drug. A feature of our model that has not been analyzed before is the prevalence of insurance in developed countries as opposed to developing countries, such that the true burden of financing R&D falls to a greater extent on the former than the latter. We suggest that generics drugs be allowed in low-income countries, particularly since most of them do not have a well-established and functioning pharmaceutical industry.
  16. By: John A. Vernon; W. Keener Hughen
    Abstract: This paper models how the evolving field of pharmacogenomics (PG), which is the science of using genomic markers to predict drug response, may impact drug development times, attrition rates, costs, and the future returns to research and development (R&D). While there still remains an abundance of uncertainty around how PG will impact the future landscape of pharmaceutical and biological R&D, we identify several likely outcomes. We conclude PG has the potential to significantly reduce both expected drug development costs (via higher probabilities of technical success, shorter clinical development times, and smaller clinical trials) and returns. The impact PG has on expected returns is partially mitigated by higher equilibrium prices, expedited product launches, and longer effective patent lives. Our conclusions are, of course, accompanied by numerous caveats.
    JEL: I10 I11 I12
    Date: 2005–12
  17. By: QIU-HONG WANG (National University of Singapore); KAI-LUNG HUI (National University of Singapore)
    Abstract: This study relaxes the conventional assumption in the literature of new product introduction that all consumers possess nothing at the beginning of the game. We generalize consumers’ utility function to a market in the presence of an installed base and characterize its specific properties pertaining to various market contexts with different consumer heterogeneity and technology improvement. In such a general setting, we investigate various feasible combinations of timing, pricing and product line strategies that the seller can employ in a two-period game for selling the new product to consumers with different purchase history and heterogeneous preference on product quality. Our subgame-perfect- equilibrium results suggest that other than the upgrade policy, the seller can maximize her profits via intertemporal price discrimination, or delayed introduction, or pooling pricing, depending on the characteristics of market structure and technology improvement. Without the concern about cost, social welfare directly depends on whether the seller can sustain her monopoly power facing the mutual cannibalization between the old and new products and the mutual arbitrage between the heterogeneous consumers.
    Keywords: New product introduction, intertemporal price discrimination, delayed product introduction, installed base, upgrade policy
    JEL: L
    Date: 2005–12–19
  18. By: Mom, T.J.M.; Bosch, F.A.J. van den; Volberda, H.W. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Both in theory as in practice insight is limited about how firms in dynamic environments could organize to manage concurrently both the strategic processes of competence building and competence leveraging. To contribute to this issue, a conceptual framework is developed which considers the ability to exchange knowledge across organization units as a prerequisite for firms to achieve both the goals of competence building and leveraging. The framework shows how several important managerial and organizational determinants, associated with cross-unit knowledge exchange, may stimulate competence-building processes and how they may stimulate competence-leveraging processes. The conceptual framework will be illustrated by two case studies in different contexts of Novartis, one of the leading European life-science companies. These two contexts of respectively ?organization-enabled? and ?web-enabled? knowledge exchange appear to be complementary. The conceptual framework and cases provide insight into (1) possibilities about how firms could organize to deal with the tension between competence building and leveraging processes, and (2) how managing the determinants of horizontal knowledge exchange can contribute to changing a firm?s actual mixture of competence building/leveraging processes into a more desired strategic mixture.
    Keywords: Competence Building;Competence Leveraging;Exploration & Exploitation;Horizontal Knowledge Flows;Novartis;
    Date: 2005–12–19
  19. By: Jesse W.J. Weltevreden; Oedzge A.L.C. Atzema; Koen Frenken; Karlijn de Kruijf; Frank G. van Oort
    Abstract: Up till now, the literature on Internet adoption by retailers paid little attention to spatial variables. Using data on 27,000 retail outlets in the Netherlands, we investigate the geographical diffusion of Internet adoption by Dutch retailers. More precise, we examine to what extent retail Internet adoption differs between shopping centers, cities, and regions, while controlling for product and organizational variables. Results of the linear and multinomial logistic regressions suggest that shops at city centers are more likely to adopt the Internet than shops located at shopping centers at the bottom of the retail hierarchy. Furthermore, shops in large cities have a higher probability to adopt the Internet than shops in small cities. On the regional level, the likelihood of Internet adoption is higher for shops in core regions than for retail outlets in the periphery. In conclusion, geography seems to matter for retail Internet adoption.
    Keywords: evolutionary economics, internet adoption, retailing
    Date: 2005–09
  20. By: Ariel Mendez (LEST - Laboratoire d'économie et de sociologie du travail - - CNRS : UMR6123 - Université de Provence - Aix-Marseille I;Université de la Méditerranée - Aix-Marseille II)
    Abstract: Cet article se propose de réfléchir, à partir d'un cas français, aux effets de la mondialisation sur l'organisation et la compétitivité des districts industriels. A la fin des années 80, les districts industriels et le modèle de la spécialisation flexible popularisé par Piore et Sabel ont été considérés comme une alternative au modèle de la grande entreprise intégrée. Mais, dans les années 90, les conditions de la concurrence internationale se sont durcies, et ce modèle a été mis à mal. Des zones géographiques florissantes quelques années plus tôt ont perdu des emplois, des activités ont été délocalisées. La concurrence internationale requiert aujourd'hui des caractéristiques que ne possèdent pas nécessairement les districts (niveau des volumes à produire, savoir codifié, standardisable, innovation radicale...). De plus, ces zones ont été investies par des entreprises extérieures qui y introduisent de nouvelles relations et qui n'hésitent pas à délocaliser la production, une fois captées les compétences qu'elles étaient venues chercher. Tout l'enjeu pour ces zones est de renouveler leurs compétences clés, de construire des ressources spécifiques intransférables qui résistent aussi bien à la concurrence des nouveaux pays producteurs qu'au « nomadisme » des entreprises multinationales. En prenant l'exemple de l'industrie aromatique et de la parfumerie de Grasse dans le sud est de la France, il s'agit ici de montrer que ce passage vers de nouveaux facteurs de compétitivité fait appel à de nouveaux modes de régulation ou de gouvernance de ces zones. Ces nouveaux modes de régulation suivent une double logique conjointe d'encastrement et de désencastrement. Désencastrement car l'évolution du district passe par une codification des savoirs, une formalisation des relations qui met à l'épreuve l'enracinement des relations économiques dans l'organisation sociale traditionnelle ; encastrement car de nouveaux acteurs se mobilisent pour maintenir l'activité, valoriser les compétences clés, en construire de nouvelles, souvent en capitalisant à partir des anciennes.
    Keywords: District industriel; Système productif localisé; Mondialisation; Compétitivité, Industrie aromatique et de la parfumerie; Grasse; France
    Date: 2005–12–19
  21. By: Richard R. Nelson
    Abstract: The term "bounded rationality" is meant to connote the reasoning capabilities of an actor who, on the one hand, has a goal to achieve and an at least partially formed theory as to how to achieve it, and on the other hand, that the theory is somewhat crude, likely will be revised in the course of the effort, and that success is far from assured. This article presents a theory of how trial and error learning interacts with theory modification in the course of problem solving under bounded rationality. The empirical focus is on efforts to advance a technology, especially medical practice, but the analysis is quite general. A central question explored is what makes progress in a field hard or easy.
    Keywords: Bounded Rationality, Search, Progress
    Date: 2005–12–21
  22. By: Annabelle Gawer; Rebecca Henderson
    Abstract: This paper draws on a detailed history of Intel's strategy with respect to the complementary markets for microprocessors to explore the usefulness of the current theoretical literature for explaining behavior. We find that as the literature predicts, Intel invests heavily in these markets, both through direct entry and through subsidy. We also find, again consistent with the literature, that the firm's entry decisions are shaped by the belief that it does not have either the capabilities or the resources to enter all possible markets, and thus that it believes it is critical to encourage widespread entry. As several authors have pointed out, this imperative places the firm in a difficult strategic position, since it needs to attempt to commit to potential entrants that it will not engage in an ex-post "squeeze", despite the fact that ex post it has very strong incentives to do so. We find that the fact that the complementary markets in which Intel competes are complex, dynamic and multilayered considerably sharpens this dilemma. We explore the ways in which Intel attempts to solve it, highlighting in particular the organizational structure and processes through which they attempt to commit to making money in the markets which they choose to enter while also committing not to making too much. Our results have implications for both our understanding of the dynamics of competition in complements and of the role of organizational structures and processes in shaping competition.
    JEL: L0
    Date: 2005–12
  23. By: Mark Lorenzen
    Abstract: Providing a concise working definition of social capital, this conceptual paper analyses why social capital is important for learning and economic development, why it has a regional dimension, and how it is created. It argues that with the rise of the Knowledge Economy, social capital is becoming valuable because it organizes markets, lowering business firms’ costs of coordinating and allowing them to flexibly connect and reconnect. Thus, it serves as a social framework for localized learning in both breadth and depth. The paper suggests that a range of social phenomena such as altruism, trust, participation, and inclusion, are created when a matrix of various social relations is combined with particular normative and cognitive social institutions that facilitate cooperation and reciprocity. Such a matrix of social relations, plus facilitating institutions, is what the paper defines as “social capital”. The paper further suggests that social capital is formed at the regional (rather than national or international) level, because it is at this level we find the densest matrices of social relations. The paper also offers a discussion of how regional policies may be suited for promoting social capital.
    Keywords: Social capital; knowledge economy; regional dimension
    JEL: D83 Z13
    Date: 2005
  24. By: Leo van grunsven; Floor Smakman
    Abstract: This article aims to contribute to an understanding of the industrial dynamics/evolution of mature export production complexes in the first generation Asian NICs, employing an evolutionary economic perspective. Over the past decade and longer the first generation Asian NICs, Singapore included, have been confronted with imperatives necessitating deep restructuring. We observe that industrial decline, associated with failed restructuring caused by lock-in, does not fit these countries, its industrial regions and early industries. Yet research has hardly begun to look at adjustment and address deeper evolution from tenets in the framework of evolutionary economics although such an approach is made not less but rather more relevant by continued resilience. We analyse the pathway(s) of one early industry, i.c. the apparel industry, in Singapore, through the 1980s and 1990s. The withering away in the Singapore context of an industry such as apparel is not inevitable. From a juxtaposition of the line of thinking in evolutionary economics emphasizing hindrance and decline due to path dependency and lock-ins with an alternative line emphasizing the possibility to adjust through renewal and the limited operation of lock-ins, we argue why the latter rather than the former has been the case.
    Keywords: evolutionary economics, industrial restruction, Asia, NICs
    Date: 2005–03
  25. By: Ron A. Boschma; Jesse W.J. Weltevreden
    Abstract: Internet makes it possible for consumers to shop without visiting a physical store. As online shopping is becoming more popular, this could have significant impact on in-store shopping. The extent to which consumers, producers and retailers make use of the Internet as a complementary channel or as a substitute for in-store shopping is fundamental for the way traditional retailing will be affected. It is only recently that geographers are becoming interested in the spatial consequences of this new form of commerce. From a traditional geographical perspective, one could expect that business-to-consumer (b2c) e-commerce could make physical shopping redundant, leading to a ‘death of distance’. There are, however, several factors that may limit this new form of commerce, such as logistical constraints (e.g., personal delivery of goods may be quite expensive), habits of people, and the need for social contact. The main goal of the paper is to draw some expectations concerning the relationship between b2c e-commerce and inner city retailing. Using new insights based on evolutionary economics, hypotheses will be developed concerning the impact of b2c e-commerce on consumers’ shopping behaviour, retailers’ store strategy, and the inner city retailing environment as a whole. We claim that habits may act as a constraint to change consumers’ shopping behaviour. In addition, routines can explain why retailers may be rather reluctant in exploiting this new channel of commerce, and why they are most likely to adopt rather conservative e-commerce strategies. We also explain how and why inner cities, as important retailing and consumption places, may affect the way actors deal with this new form of commerce. One may expect that especially in these localities, both stimulating and limiting factors of b2c e-commerce adoption are predominant, depending on the quality or the attractiveness of the inner cities, among other things.
    Keywords: evolutionary economics, e-commerce, urban economics
    Date: 2005–02

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