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on Technology and Industrial Dynamics |
| By: | Willi Semmler; Mika Kato (Department of Economics Howard University) |
| Abstract: | Recent literature in Industrial Organization has shown that the threat of entry limits the price setting power of dominant firms and stimulates the incumbents to increase innovations ---both leading to welfare improvements. On the other hand dominant firms as incumbents strive to build up entry preventing capital. In such an environment of heterogeneous firms, we study the dynamics of competition as suggested in an earlier paper by Brock (1983). When dominant firms face a threat of the competitive fringe’s entry in the industry they, therefore, will have an incentive to prevent it. Investing into barriers to entry capital through engaging in production activities with increasing returns and high adjustment cost of investment as well as through advertising, lobbying and patents the dominant firm can create thresholds above which fringe firms cannot induce price competition and stimulate innovations. The dominant firms thus face two types of investment: Entry-deterring investment and investment in physical capital for production activities. Depending on how the competitive fringe responds to the first type of investment, complex dynamics, multiple steady states and thresholds, separating different domains of attraction, may emerge. Since the effectiveness of entry-deterring investment depends in part on regulatory rules set and enforced by antitrust institutions, we show how an antitrust and competition policy can be designed that may prevent the build up of entry preventing capital strengthening incentives for price competition and innovations |
| Keywords: | entry-deterring investment |
| JEL: | L1 L4 |
| Date: | 2005–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:sce:scecf5:194&r=tid |
| By: | Mariana Mazzucato (Economics Open University); Massimiliano Tancioni |
| Abstract: | The paper studies whether “idiosyncratic riskâ€, i.e. the degree to which firm and industry specific returns are more volatile than aggregate market returns, is higher in innovative industries which are characterized by more risk and uncertainty. Volatility is studied both at the industry level (for 34 different industries from 1974-2003) and at the firm level (for 5 industries with different levels of innovativeness: biotech, pharmaceuticals, computers, textile, agriculture). Findings are mixed. A relationship between innovation and volatility emerges most strongly with firm level data, when firm dimension is accounted for, and when time varying volatility is explicitly studied via GARCH analysis. The latter highlights the distinctive behavior of returns during the course of the industry life-cycle. |
| Keywords: | idiosyncratic risk, volatility, innovation, industry life cycle |
| JEL: | G12 L11 |
| Date: | 2005–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:sce:scecf5:81&r=tid |
| By: | Yi Deng |
| Abstract: | This paper aims at quantifying the economic value of knowledge spillovers by exploring information contained in patent citations. I estimate a market valuation equation for semiconductor firms during the 1980s and early 1990s, and find an average value in the amount of $0.6 to 1.2 million "R&D-equivalent" dollars for the knowledge flows as embodied in one patent citation. For an average semiconductor firm, such an estimate implies that the total value of knowledge spillovers the firm received during the sample period could be as high as half of its actual total R&D expenditures in the same period. This provides a direct measure of the economic value of the social returns or externalities of relevant technological innovations. I also find that self citations are more valuable than external citations, indicating a significant amount of tacit knowledge or know-how spillovers that occur within the firm |
| Keywords: | Technological Innovations, Knowledge Spillover, R&D, Patent, Patent Citations, Tobin's Q |
| JEL: | O31 O33 O38 |
| Date: | 2005–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:sce:scecf5:374&r=tid |
| By: | Peter Møllgaard (Copenhagen Business School); Jo Lorentzen (Human Sciences Research Council, Cape Town, South Africa) |
| Abstract: | We briefly review the rationale behind technological alliances and provide a snapshot of their role in global competition, especially insofar as it is based around intellectual capital. They nicely illustrate the increased importance of horizontal agreements and thus establish the relevance of the topic. We move on to discuss the organisation of industries in a dynamic context and draw out consequences for competition policy. We conclude with an outlook on the underlying tensions between technology alliances, competition policy, and industrial policy. |
| Keywords: | competition policy; innovation; alliances; industrial policy |
| JEL: | L4 L5 O31 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuieci:2005-12&r=tid |
| By: | Luigi Benfratello (Università di Torino); Fabio Schiantarelli (Boston College); Alessandro Sembenelli (Università di Torino) |
| Abstract: | This paper contains a detailed empirical investigation of the effect of local banking development on firms' innovative activities, using a rich data set on innovation at the firm level for a large number of Italian firms over the 90's. There is evidence that banking development affects the probability of process innovation, particularly for small firms and for firms in high(er) tech sectors and in sectors more dependent upon external finance. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D. |
| Keywords: | Banks, Financial Development, Innovation, R&D, Investment |
| JEL: | D24 G21 G38 |
| Date: | 2005–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:631&r=tid |
| By: | Maria Jesus Nieto; Lluis Santamaría |
| Abstract: | In the current competitive scenario, firms are driven to introduce products with a higher degree of novelty. Consequently, there is a growing need to understand the critical success factors behind radical innovation. Specifically, this work empirically and theoretically analyses the role of different types of collaborative networks in achieving product innovation and, more precisely, the degree of novelty. Using a longitudinal data of Spanish manufacturing firms, our results show that the continuity on the co-operative strategy, the type of partner and the diversity of collaborative networks are critical factors in achieving a higher degree of novelty in product innovation. |
| URL: | http://d.repec.org/n?u=RePEc:cte:wbrepe:wb056516&r=tid |
| By: | Rainer Andergassen (Economics Università di Bologna); Franco Nardini |
| Abstract: | This paper attempts to generalise some results obtained in previous work showing the conditions under which paradigm setters emerge. We distinguish two different but definitely complementary and overlapping ways through which searching and learning occur. The first exploits the spillover potential that lies in a firm's network and thanks to which gathering innovation-useful information is actually possible. The second rests with the autonomous capacity that a firm possesses in order to carry out in-house innovative search. While these two searching processes not only coexist but are also reciprocally sustaining, we find it expedient to separate them by integrating a knowledge diffusion mechanism that propagates technological capabilities with an independent stochastic process capturing innovation arrivals due to internal R.&D. A network's evolution depends on how firms assess their performance in terms of innovation-enabling spillovers. In a bounded rationality framework, firms normally explore a limited part of the firms' space and require a protocol to target their information gathering efforts. The paper addresses this issue by designing a routinised behaviour according to which firms periodically reshape the neighbourhood that they observe to glean information by reassessing other firms' contributions to their own capability. The way the specific neighbour-choosing routine is accordingly organised determines in a significant way firms' average innovative capability. This feature is modelled by changing the span of network observation from a very broad setting, the whole economy, to a very narrow one, namely the most proximate neighbourhood membership. The economy is further portrayed as a collection of cognitively heterogeneous agents possessing firm specific knowledge and, thus, firm specific innovative capability. We also find it expedient to classify this assumed population according to their capability to capture broadcast information. This procedure implies viewing the economy as an ensemble of areas of cognitive exchange within which knowledge spillovers flow with equal ease. This approach to modelling interaction bears an important implication: the choice of new neighbours poses the problem of a trade-off between easily obtainable information, yet carrying low innovation empowering content, and hard to acquire, because cognitively distant, information but possibly conveying high capability contributions. To keep the model mathematically tractable, we formalise the features stated above by means of a linear system in which technological capabilities are made to depend on a matrix of interaction with evolving neighbours as well as on a vector of in-house generated knowledge. The model is then simulated to determine the emergent properties of neighbourhood formation and stability together with average capability |
| Keywords: | Paradigm setters, Netwoks, Technical Change, Bounded Rationality |
| JEL: | L14 O33 |
| Date: | 2005–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:sce:scecf5:322&r=tid |
| By: | Baeyens, K.; Vanacker, T.; Manigart, M. |
| Abstract: | The paper analyses venture capitalists’ selection process in biotechnology ventures. Biotech ventures operate in an extremely risky environment making this an interesting research setting. The majority of venture capitalists exclude certain biotech sectors ex-ante because of regulatory uncertainty, the long development process to a market ready product and the difficulty to understand the technology. The more thorough due diligence process focusses on financial, market and technology criteria. Management team capabilities are more important for later stage investors, whereas early stage investors expect to have an impact on the future recruiting of professional managers. Despite the higher risk of biotech investments, we find no evidence that VCs require higher hurdle rates or more complete contracts for these investments, compared to investments in other technology-based companies. The most important reason for not reaching an investment agreement is disagreement over valuation, due to large differences in risk perception between entrepeneurs and venture capitalists and the lack of a standard valuation tool for biotech projects. |
| Keywords: | venture capital; selection process; biotechnology |
| Date: | 2005–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:vlg:vlgwps:2005-17&r=tid |
| By: | Andy Cosh; Xiaolan Fu; Alan Hughes |
| Abstract: | This paper explores the impact of management characteristics and patterns of collaboration on a firmÕs innovation performance in transforming innovation resources into commercially successful outputs. These questions are investigated using a recent firm level survey database for 465 innovative British small and medium enterprises (SMEs) over the years 1998-2001. Both Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) are employed to benchmark a firmÕs innovative efficiency against best practice. Quality and the variety of innovations are taken into account by combining Principal Component Analysis (PCA) with DEA. We find evidence suggesting that the innovative efficiency of SMEs is significantly affected by their management characteristics and collaboration behaviour. Collaboration, organisational flexibility, formality in management systems and incentive schemes are found to contribute significantly to a firmÕs innovative efficiency. Managerial share-ownership also shows some positive effect. The importance of these effects, however, varies across different sectors. WE find that innovative efficiency in high-tech SMEs is significantly enhanced by collaboration, formal management structure and training; and that in medium- and low-tech SMEs is significantly associated with managerial ownership, incentive schemes and organisational flexibility. |
| Keywords: | management characteristics, collaboration, innovative efficiency |
| JEL: | D24 O30 O32 L20 M11 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp311&r=tid |
| By: | Silvia Gorenstein (UNSUR); Raul Dichiara (UNSUR); Gustavo Burachik (UNSUR); Andrea Castellano (UNSUR); Federico Castellano (UNSUR) |
| Abstract: | We study post entry performance of manufactuirng firms in 3 municipalities of Buenos Aires province, borned between 1990 and 1999. The aim of the paper is to identify main factors explaining firm growth. The focus is directed to endogenous determinants of firm performance, individual or local as well, taking into account the growing interest those elements are receiving in recent literature about local development. The results show that firm tradability grade is the key variable explaining performance. This factor is strongly influenced by entrepreneur´s profile but also by macroeconomic context. |
| Keywords: | local development, new firms, firm performance, tradability |
| JEL: | L |
| Date: | 2005–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpio:0511009&r=tid |
| By: | Mair, Johanna (IESE Business School); Schoen, Oliver (IESE Business School) |
| Abstract: | Although social entrepreneurial organizations have begun to receive more scholarly attention, we still know relatively little about how they are able to create both social and economic value. This paper presents a comparative case analysis of three social entrepreneurial organizations, based in Bangladesh, Egypt and Spain, whose success has been widely recognized. Analysis of these organizations' business models reveals common patterns: in their use of strategic resources, in their value networks, and in their customer interface. The findings suggest that successful social entrepreneurial organizations pro-actively create their own value network of companies that share their social vision; develop resource strategies as an integral part of the business model; and integrate the target group into the social value network. Propositions are advanced regarding the business models of successful social entrepreneurial organizations. |
| Keywords: | social entrepreneurship; business model; developing countries; |
| Date: | 2005–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0610&r=tid |