nep-mic New Economics Papers
on Microeconomics
Issue of 2007‒10‒13
thirteen papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Founding Conditions and the Survival of New Firms By P.A. Geroski (deceased); José Mata; Pedro Portugal
  2. Vertical integration and product innovation By Arijit Mukherjee2; Piercarlo Zanchettin
  3. A note on competitive toughness:;why it should be identified neither with product;substitutability, nor (inversely) with concentration.;Toward a unified theory of oligopoly. By Davide DOTTORI; Saul DESIDERIO
  4. Firm Regulation and Profit-Sharing: A Real Option Approach By Michele Moretto; Paola Valbonesi
  5. R&D-EXPERIENCE AND INNOVATION SUCCESS By Pilar Beneito; Amparo Sanchis Llopis; María Engracia. Rochina Barrachina
  6. The impact of productive efficiency and quality of a regulated local public utility on final goods prices By Alessandro Petretto
  7. What Determines the Entrepreneurial Innovative Capability of Portuguese Industrial Firms? By Silva, Maria José; Leitão, João
  8. Mergers & Acquisitions and Innovation Performance in the Telecommunications Equipment Industry By Tseveen Gantumur; Andreas Stephan
  9. R&D, Competition and Growth with Human Capital Accumulation : A Comment By Bianco, Dominique
  10. Imperfect competition, technical progress and capital accumulation By Biancamaria D'Onofrio; Bertrand Wigniolle
  11. R&D Internationalization, R&D Collaboration and Public Knowledge Institutions in Small Economies: Evidence from Finland and the Netherlands By Cees van Beers; Elina Berghäll; Tom Poot
  12. Innovation Sources and Productivity: A Quantile Regression Analysis. By Agustí Segarra-Blasco
  13. The Effect of Information on the Bidding and Survival of Entrants in Procurement Auctions By De Silva, Dakshina; Kosmopoulou, Georgia; Lamarche, Carlos

  1. By: P.A. Geroski (deceased); José Mata; Pedro Portugal
    Abstract: We analyze the effects of founding conditions on the survival of new firms. We allow the effects of founding conditions to be transitory and estimate how long such effects last. Our findings indicate that founding effects are important determinants of exit rates. Moreover, in most cases, their effect on survival seems to persist without much of an attenuation for several years after the founding of the firm.
    Keywords: Survival of firms; founding effects
    JEL: L25
    Date: 2007
  2. By: Arijit Mukherjee2; Piercarlo Zanchettin
    Abstract: We study vertical integration and product innovation (in the form of horizontal product differentiation) as interdependent strategic choices of vertically related firms. We consider product innovation in the downstream market as a strategic decision of innovative firms facing a threat of vertical integration and market foreclosure by an upstream monopolist. Our main finding is that, although product differentiation allows to soften product market competition and to avoid market foreclosure, the downstream market may prefer less product differentiation to deter vertical integration. Therefore, less product innovation can be a possible social cost of a lenient antitrust policy.
    Keywords: Vertical Integration; product innovation; market foreclosure; duopoly
    JEL: D43 L13
    Date: 2007–10
  3. By: Davide DOTTORI (Universita' Politecnica delle Marche, Dipartimento di Economia); Saul DESIDERIO (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: Often the intensity of competition has been measured through proxies like the degree of product substitutability or as the inverse;of the degree of concentration in an industry. Both visions are based on the implicit assumption that few competitors imply a less though competition, but puzzles arise as several counter-examples exist. Other puzzling issues arise from the lack of a unified approach to oligopolistic equilibria (e.g. Cournot vs Bertrand competition). In this paper the unified approach of competitive toughness proposed by D'Aspremont et al.(2007), offering a generalization of the traditional oligopoly theory encompassing all the possible oligopolistic regimes between the Cournot and the competitive outcome, is discussed, also with respect to its implication for economic growth and macro studies.
    Date: 2007–10
  4. By: Michele Moretto (Università di Padova); Paola Valbonesi (Università di Padova)
    Abstract: To avoid the extremely high profit levels found in recent experience of public utilities’ regulation, some regulators have introduced a profit-sharing (PS) rule that revises prices to the benefit of consumers. However, in order to be successful, a PS rule should satisfy appropriate incentive conditions. In this paper, we study the incentive properties of a second best PS mechanism designed by the regulator to induce a regulated monopolist to divert its "excessive" profits to the customers. In a real option model where a regulated monopolist manages a long-term franchise contract and the regulator has the option to revoke the contract if there is serious welfare loss, we first endogenously derive the welfare maximising PS rule under the verifiability of profits. We then explore the dynamic efficiency of this PS rule under non-verifiability of profits and study the firm’s incentive to comply with it in an infinite-horizon game. Finally, we derive the price adjustment path which follows the adoption of a PS rule in a price cap regulation. We show that the riskiness of the distribution of the firm’s future profits and the regulator’s cost in revoking the franchise contract are key factors in determining the equilibrium properties of a dynamic PS rule.
    Date: 2007–10
  5. By: Pilar Beneito (Universitat de València); Amparo Sanchis Llopis (Universitat de València); María Engracia. Rochina Barrachina (Universitat de València)
    Abstract: This paper analyses the role of firms' R&D-experience in their innovative success using a representative sample of Spanish firms for the period 1990-2002. Using count data models and within an innovation production function approach, we investigate the influence of firms' R&D-experience in the achievement of innovative results. To estimate R&D-experience, partially unobserved, we estimate a duration model and use the obtained results and a non-parametric procedure to impute R&D-experience when unobserved. We obtain that R&D effectiveness increases along the R&D history of the firm. En este trabajo se analiza el papel de la experiencia en actividades de I+D sobre el éxito innovador de las empresas utilizando una muestra representativa de empresas españolas para el periodo 1990-2002. Mediante modelos de recuento (count-data models) y partiendo de la especificación de una función de producción de innovaciones, investigamos la influencia de la experiencia en I+D en la obtención de resultados innovadores. Para estimar la experiencia en I+D, que es parcialmente inobservable, estimamos un modelo de duración y utilizamos los resultados obtenidos en este modelo y un procedimiento no paramétrico para imputar la experiencia en I+D a aquellas empresas para las que no se observa. Nuestros resultados muestran que la efectividad de la inversión en I+D aumenta con el historial innovador de la empresa.
    Keywords: Innovación, acumulación del conocimiento, experiencia en I+D, modelos de duración, modelos de recuento innovation, accumulation of knowledge, R&D-experience, duration models, count data models.
    JEL: O30 O34 C23 C10
    Date: 2007–10
  6. By: Alessandro Petretto (Università degli Studi di Firenze, Dipartimento di Scienze Economiche)
    Abstract: In this note we reconstruct the process by a which the decisions of a regulated local public utility, in terms of productive efficiency and quality of the service provided, impact on prices of final consumption goods, supplied in a oligopolistic market operating in the same geographic area. We obtain some formula for these effects which can be quantified by estimating firms’ conditional input demand function of the public service and firms’ inverse demand function for the public good, non-rival, component of this.
    Keywords: regulation, x-efficiency, oligopoly
    JEL: L51 D11 D21
    Date: 2007
  7. By: Silva, Maria José; Leitão, João
    Abstract: In the context of globalisation, innovation is considered as a key factor for enhancing the competitiveness of firms. Nowadays, it is widely accepted that Portuguese firms face an increasing competitive environment, which is characterised by internationalization and globalization. In this sense, it becomes important to analyse the determinant factors of innovation capability of firms. This paper aims to identify and analyse the degree of importance of the determinant factors of innovation capability of Portuguese industrial firms. The data obtained through the 2rd Community Innovation Survey (CIS II) conducted by EUROSTAT, is used in a linear regression model. The entrepreneurial innovative capability, measured as product innovation, is considered as the variable answer, in the estimation process of a Logit function. The paper presents an innovative contribution since it uses a set of five determinant factors of innovation capability of industrial firms, at a product innovation level. Technological capacity, dimension of the firm, activity sector, market orientation and location of the firm, are considered as determinants factors of innovation capability of the firms. The results of the joint analysis provide the identification of stimulating factors and restraining factors of the entrepreneurial innovative capability of a selected sample of Portuguese industrial firms. Under a Schumpeterian approach, the paper ratifies that large enterprises are more prone to innovate than small enterprises. The dimension plays a role, in terms of the strategic conduct implemented by small firms, which are not so prone to innovate, due to its small dimension. Benchmarking the Portuguese case is particularly important, because small industrial enterprises face restraining conditions imposed by outsourcing contracts that are established between small producers and leading international buyers. This restrains, broadly, the entrepreneurial innovative capability of small industrial enterprises.
    Keywords: Innovation; Entrepreneurial Innovative Capability.
    JEL: O32 O31
    Date: 2007–10–08
  8. By: Tseveen Gantumur; Andreas Stephan
    Abstract: The telecommunications in the 1990s witnessed an enormous worldwide round of Mergers & Acquisitions (M&A). This paper examines the innovation determinants of M&A activity and the consequences of M&A transactions on the technological potential and the innovation performance. We examine the telecommunications equipment industry over the period 1988-2002 using a newly constructed data set with firm-level data describing M&A and innovation activity as well as financial characteristics. Based on a matching propensity score procedure, the study provides evidence that M&A realize significantly positive changes to the firm's post-merger innovation performance.
    Keywords: Mergers & Acquisitions, Innovation Performance, Telecommunications Equipment Industry
    JEL: L63 O30 L10
    Date: 2007
  9. By: Bianco, Dominique
    Abstract: This paper shows that the results of Bucci (2003) depend criti- cally on the assumption that there are no difference between the intermediate goods share in final output, the returns of specialization and the degree of market power of monopolistic competitors. In this paper, we disentangle the market power parameter from the intermediate goods share in final output and the returns to specialization. The main result of this paper is that the competition has no effect on growth contrary to Bucci (2003). This result is explained by the fact that economic growth rate depends on the parameters describing preference and the human capital accumulation technology but is completely independent of competition and R&D activity.
    Keywords: Endogenous growth; Horizontal di®erentiation; Technologi- cal change; Imperfect competition
    JEL: D43 O41 J26 O31 L16
    Date: 2007–10–09
  10. By: Biancamaria D'Onofrio (Dipartimento di Matematica - [Università degli studi di Roma I - La Sapienza]); Bertrand Wigniolle (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: This paper explores the consequences of imperfect competition on capital accumulation. The framework is an OLG growth model with altruistic agents. Two types of long run equilibria exist : egoistic or altruistic. We assume both competitive and non-competitive firms exist, the latter being endowed with more productive technology. They behave strategically on the labor market : they take into account the impact of their demand for labor on the equilibrium wage and on their profit. The effect of technical progress for a non-competitive firm depends on the initial productivity of the firm and on the type of steady state (egoistic or altruistic). An increase in the productivity of the most productive firm has a negative impact on capital accumulation in an egoistic steady state, and a positive one in an altruistic steady state. An increase in the productivity of the competitive sector can have various effects on capital accumulation. If the productivity levels of the non-competitive firms are close enough, capital accumulation increases in an egoistic steady state and decreases in an altruistic one. But, the impact of increasing productivity in the competitive sector can be reversed if the productivity of the less productive non-competitive firm is low enough.
    Keywords: Imperfect competition, capital accumulation, technical progress.
    Date: 2006–12
  11. By: Cees van Beers; Elina Berghäll; Tom Poot
    Abstract: This paper investigates innovating firms’ determinants of R&D collaboration with domestic universities and public knowledge institutes in Finland and the Netherlands. Three questions – relevant for innovation policies - constitute the central part of this paper. First, are innovating foreign firms less or more involved in R&D co-operation with domestic public knowledge institutions than innovating domestic firms? Second, do innovating firms that are open to their external knowledge environment have a higher probability to co-operate with public partners than firms that are not or less open? Third, are public knowledge institutions in Finland and the Netherlands attractive R&D partners to innovative firms? Based on data from Community Innovation Surveys we find that foreign firms in the Netherlands are less likely to co-operate with domestic public knowledge institutions than domestic firms, while in Finland no significant difference can be detected. With regard to the second question our findings show that openness of innovating firms is an important determinant of R&D collaboration in both countries. Finally, the empirical results show that knowledge of public partners is considered useful by innovating firms to transform own ideas into concrete innovations in Finland, but not in the Netherlands. However, the type of knowledge – fundamental or applied - is important for R&D collaboration with Dutch public partners, but not for co-operating with Finnish public partners. This raises the issue whether Finnish innovation policies with a strong focus on R&D co-operation provide incentives for domestic public partners to put more emphasis on applied research.
    Keywords: Multinational enterprises; innovation; R&D collaboration; public knowledge institutions; national innovation systems
    JEL: O32 O38
    Date: 2007
  12. By: Agustí Segarra-Blasco (Grup de Recerca en Indústria i Territori(GRIT), Departament d'Economia, Universitat Rovira i Virgili.)
    Abstract: This paper explores the effects of two main sources of innovation —intramural and external R&D— on the productivity level in a sample of 3,267 Catalan firms. The data set used is based on the official innovation survey of Catalonia which was a part of the Spanish sample of CIS4, covering the years 2002-2004. We compare empirical results by applying usual OLS and quantile regression techniques both in manufacturing and services industries. In quantile regression, results suggest different patterns at both innovation sources as we move across conditional quantiles. The elasticity of intramural R&D activities on productivity decreased when we move up the high productivity levels both in manufacturing and services sectors, while the effects of external R&D rise in high-technology industries but are more ambiguous in low-technology and services industries.
    Keywords: Innovation sources, R&D, Productivity, Quantile Regression
    JEL: O30 C10 O14
    Date: 2007–10
  13. By: De Silva, Dakshina; Kosmopoulou, Georgia; Lamarche, Carlos
    Abstract: In government procurement auctions of construction contracts, entrants are typically less informed and bid more aggressively than incumbent firms. This bidding behavior makes them more susceptible to losses a¤ecting their prospect of survival. In April of 2000, the Oklahoma Department of Transportation started releasing the internal cost estimates to complete highway construction projects. Using newly developed quantile regression approaches, this paper examines the impact of the policy change on aggressive entrants. First, we find that the information release eliminates the bidding differential between entrants and incumbents attributed to informational asymmetries. Second, we argue that the policy change a¤ects the prospects of survival of entrants in the market. We find that those who used to exit the market relatively soon are now staying 37 percent longer, while at the median level bidding duration increased by roughly 68 percent. The policy has the potential to encourage entry in government procurement auctions and thus increase competition.
    Keywords: Entry; Survival; Information Release; Procurement Auctions
    JEL: D44 H57
    Date: 2007–06–08

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