nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2005‒10‒08
eight papers chosen by
Roberto Fontana
Universita Bocconi

  1. A Gap for Me: Entrepreneurs and Entry By Volker Nocke
  3. Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs By Julie Holland Mortimer
  4. Inside the Black Box of ‘Industrial Atmosphere’: Knowledge and Information Networks in an Italian wine local system By Andrea Morrison
  5. Invention under uncertainty and the threat of ex post entry By David A. Miller
  6. Entry and Competition in Local Hospital Markets By Jean M. Abraham; Martin S. Gaynor; William B. Vogt
  7. Barriers To Entry By Dennis W. Carlton
  8. The Decline of the Independent Inventor: A Schumpterian Story? By Naomi R. Lamoreaux; Kenneth L. Sokoloff

  1. By: Volker Nocke (Department of Economics, University of Pennsylvania)
    Abstract: We present a theory of entrepreneurial entry and exit decisions. Knowing their own managerial talent, entrepreneurs decide which market to enter, where markets differ in size. We obtain a striking sorting result: each entrant in a large market is more efficient than any entrepreneur in a smaller market since competition is endogenously more intense in larger markets. This result continues to hold when entrepreneurs can export their output to other markets, thereby incurring a unit transport cost or tariff. The sorting and price competition effects imply that the number of entrants (and hence product variety) may actually be smaller in larger markets. In the stochastic dynamic extension of the model, we show that the churning rate of entrepreneurs is higher in larger markets.
    Keywords: entrepreneurship, entry, exit, firm turnover, industry dynamics
    JEL: L11 L13 M13
    Date: 2003–06–30
  2. By: Neus Palomeras (Universidad Carlos III de Madrid)
    Abstract: This paper analyzes pure-revenue technology licensing, where licensors solely seek the obtaining royalties. Since strategic concerns are left aside, the licensing decision is mainly driven by the features of the innovations. Our aim is to identify such characteristics. We use the NBER Patent Citations Database to explore different dimensions of the patented technologies present in, a marketplace likely to capture pure-revenue transactions. Our findings point out that these technologies differ from the mean technology in the licensor’s portfolio with respect to importance, innovativeness, scope, complementarity and fit into the firm’s core. Results increase our awareness on the drivers of technology licensing decisions.
    JEL: O32 L14
    Date: 2005–09
  3. By: Julie Holland Mortimer
    Abstract: This paper examines the welfare effects of intellectual property protection, accounting for firms' optimal responses to legal environments and technological innovation. I examine firms' use of indirect price discrimination in response to U.S. copyright law, which effectively prevents direct price discrimination. Using data covering VHS and DVD movie distribution, I explain studios' optimal pricing strategies under U.S. copyright law, and determine optimal pricing strategies under E.U. copyright law, which allows for direct price discrimination. I analyze these optimal pricing strategies for both the existing VHS technology and the new digital DVD technology. I find that studios' use of indirect price discrimination under US copyright law benefits consumers and harms retailers. Optimal pricing under E.U. copyright law also tends to benefit studios and consumers. I also reanalyze these issues assuming continued DVD adoption.
    JEL: L0 O3
    Date: 2005–10
  4. By: Andrea Morrison (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: A well-grounded empirical and theoretical literature shows that local production systems can benefit from external economies generated by a shared ‘industrial atmosphere’. Many scholars would agree that in contexts as industrial districts, clusters and local systems, economic actions are strongly embedded in social and institutional factors. Nevertheless, many scholars would instead debate about the nature, boundaries and processes underpinning ‘industrial atmosphere’. This paper aims at contributing to this field of studies by entering into the black box of the ‘industrial atmosphere’ reconstructing the informal contacts underpinning collective learning in a local production system. The study is based on empirical evidence collected at firm level in a an Italian wine local system and uses methods of network analysis
    Date: 2005–07
  5. By: David A. Miller (UCSD)
    Abstract: This paper proposes a theoretical framework for studying the invention of new products when demand is uncertain. In this framework, under general conditions, the threat of ex post entry by a competitor can deter invention ex ante. Asymmetric market power in the ex post market exacerbates the problem. The implications of these general results are examined in a series of examples that represent important markets in the computer industry. The first is a model that shows how an operating system monopolist, by its mere presence, can deter the invention of complements, to its own detriment as well as that of society. The implications of policies such as patent protection, price regulation, and mandatory divestiture are considered. Three additional examples consider the ability of a monopolist in one market to commit to bundling an unrelated product, a pair of horizontally differentiated firms that can add a new feature to their products, and a platform leader that can be challenged in its base market by the supplier of a complementary product.
    Keywords: Invention, innovation, demand uncertainty, ex post entry, bundling, Intel, Microsoft, Netscape
    JEL: L12 L13 O31
    Date: 2005–10–06
  6. By: Jean M. Abraham; Martin S. Gaynor; William B. Vogt
    Abstract: There has been considerable consolidation in the hospital industry in recent years. Over 900 deals occurred from 1994-2000, and many local markets, even in large urban areas, have been reduced to monopolies, duopolies, or triopolies. This surge in consolidation has led to concern about competition in local markets for hospital services. We examine the effect of market structure on competition in local hospital markets -- specifically, does the hardness of competition increase with the number of firms? We extend the entry model developed by Bresnahan and Reiss to make use of quantity information, and apply it to data on the U.S. hospital industry. In the hospital markets we examine, entry leads to a quick convergence to competitive conduct. Entry reduces variable profits and increases quantity. Most of the effects of entry come from having a second and a third firm enter the market. The fourth entrant has little estimated effect. The use of quantity information allows us to infer that entry is consumer-surplus-increasing.
    JEL: I1 L1 L8
    Date: 2005–10
  7. By: Dennis W. Carlton
    Abstract: This paper analyzes the concept of barriers to entry. It explains that the concept is a static one and explores the inadequacy of the concept in a world with sunk costs, adjustment costs and uncertainty. The static concept addresses the question of whether profits are excessive. The more interesting and relevant question is how fast entry or exit will erode profits or losses and how do the bounds that entry and exit place on price vary with uncertainty and sunk cost. Intuition based on the static concept of barrier to entry can be misleading in many industries.
    JEL: L1 L4
    Date: 2005–10
  8. By: Naomi R. Lamoreaux; Kenneth L. Sokoloff
    Abstract: Joseph Schumpeter argued in Capitalism, Socialism and Democracy that the rise of large firms’ investments in in-house R&D spelled the doom of the entrepreneurial innovator. We explore this idea by analyzing the career patterns of successive cohorts of highly productive inventors from the late nineteenth and early twentieth centuries. We find that over time highly productive inventors were increasingly likely to form long-term attachments with firms. In the Northeast, these attachments seem to have taken the form of employment positions within large firms, but in the Midwest inventors were more likely to become principals in firms bearing their names. Entrepreneurship, therefore, was by no means dead, but the increasing capital requirements—both financial and human—for effective invention and the need for inventors to establish a reputation before they could attract support made it more difficult for creative people to pursue careers as inventors. The relative numbers of highly productive inventors in the population correspondingly decreased, as did rates of patenting per capita.
    JEL: N O
    Date: 2005–10

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