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on Technology and Industrial Dynamics |
| By: | Peter Thompson (Department of Economics, Florida International University); Steven Klepper (Department of Social and Decision Sciences, Carnegie Mellon University) |
| Abstract: | Various theories have been advanced for why employees leave incumbent firms to found firms in the same industry, which we call spinoffs. We review the accumulating evidence about spinoffs in various high-tech industries, highlighting the central role often played by disagreements. Because existing theories have ignored them, we develop the foundations of a model of spinoff formation driven by disagreements. Doing so proves to be rather challenging, because disagreements are not possible among rational actors that talk to each other. We introduce a minimal degree of non-rationality, based on the concept of solipsism, and ask whether such a concept is capable of generating predictions consistent with the empirical literature. |
| Keywords: | Spinoffs, Technological change, learning, disagreements |
| JEL: | L2 O33 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0503&r=tid |
| By: | Peter Thompson (Department of Economics, Florida International University) |
| Abstract: | Several theories of firm performance can explain the well-known observation that survival is positively related to age. However, a more mundane explanation – selection bias driven by variations in firm quality – may also underlie the phenomenon. This paper employs a 90-year plant-level panel data set on the US iron and steel shipbuilding industry of the 19th and early 20th centuries to discriminate between the two explanations. The shipbuilding industry exhibits the usual joint dependency of survival on age and size, but this dependency is eliminated after controlling for heterogeneity by using pre-entry experience as a proxy for firm quality. The evidence points to a dominant role for selection bias in creating the age-dependency of survival. At the same time, pre-entry experience is found to have a large and extremely persistent effect on survival, and this finding is inconsistent with standard explanations for the role of pre-entry experience on firm performance. |
| Keywords: | shipbuilding, firm survival, age, selection, unobserved heterogeneity |
| JEL: | N16 L11 L25 |
| Date: | 2004–03 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0404&r=tid |
| By: | Troy Quast (University of Florida) |
| Abstract: | This paper examines the determinants of both the extent and the means of competitive entry in local telecommunications markets. Panel data are used to analyze the number of lines that competitive local exchange carriers (CLECs) lease from regional Bell operating companies (RBOCs) using two alternative arrangements: leasing only the wires that connect a customer’s premises to the phone network, or leasing all of the network elements that are needed to provide phone service. The estimates suggest that while the revenue potential of a market tends to have a large impact on the observed level of entry, the effect of the regulated rates at which the CLECs lease the elements is limited. The results suggest that entrants may factor regulatory uncertainty into their entry decisions, and that local conditions may materially affect the implementation of federal regulatory policy. |
| Keywords: | regulation, telecommunications, entry |
| JEL: | L |
| Date: | 2005–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpio:0508003&r=tid |
| By: | Panayotis Dessyllas (Said Business School, University of Oxford); Alan Hughes (Centre for Business Research, University of Cambridge) |
| Abstract: | In this paper we investigate the incidence of high technology acquisitions using a large international sample of acquisitions by public high technology firms. Controlling for firms’ financial characteristics, we examine the impact of the following innovation- related factors on the propensity to acquire: R&D-intensity as a proxy for R&D inputs; the citation-weighted patent-intensity as a proxy for R&D output; the stock of citation-weighted patents as a proxy for the accumulated stock of knowledge generated by past R&D efforts. The following conclusions can be drawn with respect to the characteristics of acquirers of non-public targets – mainly private firms and former subsidiaries. First, we find support for the view that the propensity to acquire new knowledge-related assets through acquisitions is driven by declining returns from the exploitation of a firm’s existing knowledge base. Second, we find evidence in favour of the make-or-buy theory that acquisitions are a substitute for in-house R&D activity. Third, our results are in accordance with the theoretical argument that a large stock of accumulated knowledge enhances a firm’s ability to absorb external knowledge through acquisitions. These results suggest that smaller acquisitions can be seen as part of an innovation strategy by acquiring firms with relatively low levels of internal R&D which seek to offset low R&D productivity by exploring a range of potential innovation trajectories in new and smaller business units. Interestingly, we find that these interpretations cannot be made for acquirers of the larger public companies. |
| Keywords: | Mergers and acquisitions, acquisition likelihood, R&D, patents |
| JEL: | G34 O30 L20 |
| Date: | 2005–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpio:0507008&r=tid |
| By: | Argentesi, Elena; Ivaldi, Marc |
| Abstract: | This paper first discusses how the market is delineated in some recent antitrust cases in the printed media industry. It evaluates the extent to which the main features of the industry are incorporated into the analysis and affect market definition. In addition we argue that an econometric analysis that does not incorporate these features can lead to biased estimates of elasticities. As demand substitution is a crucial element for defining market, bad estimates of elasticities could blur the boundaries of relevant markets. Second we propose a simple model that encompasses these features and in particular the two-sidedness of the market. Thirdly, we review some empirical papers that analyse the issue of demand estimation in printed media. Finally, we perform a statistical estimation on a dataset of magazines in order to provide a measure of the possible bias that could arise in the estimation of elasticities when one does not use a proper model. |
| Keywords: | market definition; printed media; two-sided markets |
| JEL: | K21 L40 L82 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5096&r=tid |
| By: | Elena Argentesi |
| Abstract: | This paper looks at a form of non-price competition that has taken place in the Italian newspaper market, whereby weekly supplements are sold with the newspaper at a higher price. I estimate the impact of this selling strategy using a logit and a nested logit model of demand on a panel of Italian newspapers. I show that supplements increase the readership both in the weekday of issue and in the average weekday. This suggests that supplements are a way to attract new readers for the newspaper. This promotional effect is due both to business stealing and to market expansion. |
| JEL: | L11 L82 C33 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2004/28&r=tid |
| By: | Vesa Kanniainen; Seppo Kari; Jouko Ylä-Liedenpohja |
| Abstract: | Early-stage uncertainty makes the initial cost of capital greater than the expansion-stage one. Tax effects on enterprise formation, entrepreneurial effort and quality, and on capital costs are derived. For an incorporated enterprise (i) the entrepreneur’s ability threshold rises with the tax rate of the corporate form, (ii) the initial cost of capital due to a dividend tax is above the old view double-tax one, (iii) the start-up investment is not affected by undervaluation, but the discouragement engendered by dividend taxation is compensated by realization-based capital gains tax, (iv) with undervaluation, the expansion-stage cost of capital corresponds to the Johansson-Samuelson tax which is lower than the new view suggests, (v) without undervaluation, the dividend tax boosts expansion investment. |
| Keywords: | taxation of start-up enterprises |
| JEL: | H25 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1476&r=tid |
| By: | Sachin Chaturvedi |
| Abstract: | The purpose of this paper is twofold. First, an inventory is made of biotechnology data collection in India. This will include an assessment of how the need for biotechnology related statistics is being addressed, mainly in terms of patent data, commercialisation of genetically modified organisms, R&D allocations for biotechnology and industry statistics. In general, limited efforts have been made by different Indian agencies to collect statistics on biotechnology. One of the reasons for this scarcity of statistics is a missing consensus in India on a definition of biotechnology. However, initiatives are underway to address this and to establish a measurement framework. A second objective of this document is to present a broad overview of the status of biotechnology in India, with a focus on the agricultural and the health sector. First the funding and research programmes of various institutions are discussed, followed by an overview of human resources development and training possibilities in the country. A third section discusses capital venture funding and the role of financial institutions, while the last two sections look at initiatives by state governments and the policy regulations in place. <P>Dynamique de la recherche et de l'industrie biotechnologiques en Inde Cet ouvrage répond à un double objectif. Il vise tout d’abord à faire le point sur la collecte des données relatives aux biotechnologies en Inde, notamment à travers une évaluation des solutions apportées aux besoins de statistiques dans les domaines suivants : brevets, commercialisation d’organismes génétiquement modifiés, crédits de R-D consacrés aux statistiques des biotechnologies et de l’industrie. Les différentes instances indiennes concernées ont en général relativement peu investi dans la collecte de statistiques, entre autres parce qu’il n’existe en Inde aucun consensus sur la définition des biotechnologies. Des initiatives ont toutefois été engagées dans le but d’y remédier et d’établir un cadre d’analyse. Cette publication a par ailleurs pour ambition de présenter un vaste panorama des biotechnologies en Inde, en privilégiant plus particulièrement les secteurs de l’agriculture et de la santé. Sont tout d’abord décrits les dispositifs de financement et les programmes de recherche de diverses institutions, puis est présenté un tour d’horizon des perspectives de développement des ressources humaines et de formation. Une troisième section est consacrée à l’analyse du financement du capital-risque et du rôle des institutions financières, tandis que les deux dernières sections passent en revue les actions engagées par les autorités publiques des Etats et les réglementations en place. |
| Date: | 2005–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaaa:2005/6-en&r=tid |
| By: | Pastine, Tuvana; Pastine, Ivan |
| Abstract: | This paper studies advertising in vertically differentiated product markets with positive consumption externalities. In markets with consumption externalities, the value of the product to the consumer depends on the purchasing decisions of other consumers. In such markets, we show that firms will engage in advertising competition in order to convince consumers of their popularity only as long as they produce goods of similar quality. The firm with the lower quality product will have a greater incentive to advertise. If it is not the brand to provide the greater consumption externality it will have very low market share due to its low intrinsic quality. Hence, in equilibrium, the lower quality product will often be more popular. This provides an additional explanation for the empirical observation that in some markets high quality is associated with lower levels of advertising. |
| Keywords: | advertising; consumption externalities; coordination; product quality |
| JEL: | L13 L15 M37 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5152&r=tid |
| By: | Kurt R. Brekke; Michael Kuhn |
| Abstract: | We study effects of direct-to-consumer advertising (DTCA) in the prescription drug market. There are two pharmaceutical firms providing horizontally differentiated (branded) drugs. Patients differ in their susceptibility to the drugs. If DTCA is allowed, this can be employed to induce (additional) patient visits. Physicians perfectly observe the patients' type (of illness), but rely on information to prescribe the correct drug. Drug information is conveyed by marketing (detailing), creating a captive and a selective segment of physicians. First, we show that detailing, DTCA and price (if not regulated) are complementary strategies for the firms. Thus, allowing DTCA induces more detailing and higher prices. Second, firms benefit from DTCA if detailing competition is not too fierce, which is true if investing in detailing is sufficiently costly. Otherwise, firms are better off with a ban on DTCA. Finally, DTCA tends to lower welfare if insurance is generous (low copayments) and/or price regulation is lenient. The desirability of DTCA also depends on whether or not the regulator is concerned with firms' profit. |
| Keywords: | marketing, pharmaceuticals, oligopoly |
| JEL: | I11 L13 L65 M37 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1493&r=tid |
| By: | Ilya Segal; Michael Whinston |
| Abstract: | We study the effects of antitrust policy in industries with continual innovation. A more protective antitrust policy may have conflicting effects on innovation incentives, raising the profits of new entrants, but lowering those of continuing incumbents. We show that the direction of the net effect can be determined by analyzing shifts in innovation benefit and supply holding the innovation rate fixed. We apply this framework to analyze several specific antitrust policies. We show that in some cases, holding the innovation rate fixed, as suggested by our comparative statics results, the tension does not arise and a more protective policy necessarily raises the rate of innovation. |
| JEL: | L40 O31 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11525&r=tid |
| By: | Petr Hanel (GREDI, Département d'économique, Université de Sherbrooke); Dirk Czarnitzki (Centre for European Economic Research (ZEW), Dept. of Industrial Economics and International Management); Julio Miguel Rosa (Statistics Canada) |
| Abstract: | This study examines the effect of R&D tax credits on innovation activities of Canadian manufacturing firms. Over the 1997-1999 period the Federal and Provincial R&D tax credit programs were used by more than one third of all manufacturing firms and by close to two thirds of firms in high-technology sectors. We investigate the average effect of R&D tax credits on a series of innovation indicators such as number of new products, sales with new products, originality of innovation etc. using a non-parametric matching approach. Compared to a hypothetical situation in the absence of R&D tax credits, recipients of tax credits show significantly better scores on most but not all performance indicators. We therefore conclude that tax credits increase the R&D engagement at the firm level and that the R&D activities induced by fiscal incentives lead to additional innovation output. |
| Keywords: | R&D, Innovation, Public Subsidies, Tax Credit, Policy Evaluation. |
| JEL: | C14 C25 H50 O38 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:05-01&r=tid |
| By: | Francois, Joseph; Wooton, Ian |
| Abstract: | We examine interaction between goods trade and market power in domestic trade and distribution sectors. Theory suggests a linkage between service-sector competition and goods trade, one supported by econometrics involving imports of 22 OECD countries vis-à-vis 69 exporters. This points to linkages between market access conditions for goods and the structure of the service sector. Competition in services affects the volume of goods trade. Additionally, because of interaction between tariffs and competition, the market structure of the domestic service sector becomes increasingly important as tariffs are reduced. Also, empirically service competition apparently matters most for exporters in smaller, poorer countries. |
| Keywords: | GATS; market access; services trade; strategic competition policy; trade and competition; trade liberalization |
| JEL: | F12 F13 F23 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5135&r=tid |