nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2006‒10‒07
eight papers chosen by
Roberto Fontana
Universita Bocconi

  1. Entry and Exit in International Markets: Evidence from Chilean Data By Roberto Alvarez; Ricardo Lopez
  2. The Growth Opportunities for SMEs? By Bentzen, Jan; Madsen, Erik Strøjer; Smith, Valdemar
  3. R&D IN THE PHARMACEUTICAL INDUSTRY: A WORLD OF SMALL INNOVATION By Beatriz Dominguez; Juan-José Ganuza; Gerard Llobet
  4. NETWORK SIZE AND NETWORK CAPTURE By Gerard Llobet; Michael Manove
  5. What do you mean by "mobile"? Multi-applicant inventors in the European Bio-Technology Industry By Francesco Laforgia; Francesco Lissoni
  6. Reinforcing the patent system? Patent fencing, knowledge diffusion and welfare By Murat YILDIZOGLU (E3i-IFReDE-GRES)
  7. Entrepreneurial Decision Making: Examining Preferences for Causal and Effectual Reasoning in the New Venture Creation Process By Politis, Diamanto; Gabrielsson, Jonas
  8. Selection and Comparative Advantage in Technology Adoption By Tavneet Suri

  1. By: Roberto Alvarez (Central Bank of Chile); Ricardo Lopez (Indiana University Bloomington)
    Abstract: Several studies examine the patterns and determinants of entry and exit in manufacturing industries. Not much work exists on entry and exit in international markets. This paper uses Chilean data to analyze the determinants of entry and exit in and out of export markets. We find that entry and exit rates differ across industries; vary over time; and are positively correlated. The econometric analysis shows that within-industry heterogeneity, measured by differences in productivity or other firm characteristics, has a significant effect on plant turnover in international markets. Our findings reveal that trade costs, factor intensities, and fluctuations in the real exchange rate play a minor role explaining entry and exit. This last result is consistent with hysteresis in international markets.
    Keywords: Treatment Entry, Exit, International Markets, Chile
    JEL: F14 D21 O54
    Date: 2006–09
  2. By: Bentzen, Jan (Department of Economics, Aarhus School of Business); Madsen, Erik Strøjer (Department of Economics, Aarhus School of Business); Smith, Valdemar (Department of Economics, Aarhus School of Business)
    Abstract: The extensive empirical literature on the validity of Gibrat’s law does not in general verify the law as it finds that firms’ growth rates are negatively correlated with both firm size and age. However, some studies find that Gibrat’s law holds for sub-samples of firms such as large firms or firms belonging to special industries. It has been pointed out that these results are due to the fact that the likelihood of firm survival for natural reasons is positively related to firm size and age. This study uses a relatively large and representative sample of Danish firms to evaluate the validity of Gibrat’s law for different kinds of firms over the period 1990 - 2003. In contrast to the majority of earlier studies our analysis corrects for the bias in the estimations by using variables related to the survival of small firms.
    Keywords: Market Structure; Firm Strategy; Market Performance;
    JEL: L10
    Date: 2006–09–27
  3. By: Beatriz Dominguez; Juan-José Ganuza; Gerard Llobet (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: It is commonly argued that in recent years pharmaceutical companies have directed their R&D towards small improvements of existing compounds instead of more risky drastic innovations. In this paper we show that the proliferation of these small innovations is likely to be linked to the lack of market sensitivity of a part of the demand to changes in prices. Compared to their social contribution, small innovations are relatively more profitable than large ones because they are targeted to the smaller but more inelastic part of the demand. We also study the effect of regulatory instruments such as price ceilings, copyments and reference prices and extend the analysis to competition in research.
    Keywords: Health-care, pharmaceuticals, innovation.
    JEL: I11 I18 O31
    Date: 2006–01
  4. By: Gerard Llobet; Michael Manove (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: Most types of networks, over time, spawn the creation of complementary stocks that enhance network value. Computer operating systems, for example, induce the development of the complementary stock of software applications that increase the value of the operating system. In this paper, we challenge the conventional wisdom that a large network, which induces the creation of large complementary stocks, serves as a barrier to entry that protects the incumbent from competition or network capture. We show that a larger network may either deter or attract entry depending on the relation between the network quality and the cost of an innovator's network product. The probability of entry also depends on the level of compatibility between the potential entrant's technology and existing complementary stocks, which in turn is influenced by the strength of the intellectual-property-rigths environment. Intellectual property rigths and the associated threat of entry may affect and incumbent's choice of network size in counterintuitive ways.
    JEL: L41 O34
    Date: 2006–04
  5. By: Francesco Laforgia; Francesco Lissoni
    Abstract: Many recent papers dealing with the issue of knowledge spillovers have relied on patent data to extract information on so-called mobile inventors that is inventors designated by patent applications filed by different companies. In this paper we follow in this tradition, but with the aim of setting straight a number of methodological issues. By making use of information on the identity and history of those applicants, we then propose a taxonomy of the phenomena behind multi-applicant inventorship, which distinguishes between job mobility, mobility as a result of M&As, a case which we suspect to be dominated by the markets for research and for technologies, and residuals cases. We then argue that different multi-applicant inventors’ categories have to do with different patterns of knowledge diffusion, which include both spillovers and markets for technology.
    Keywords: Patents; mobile inventors; multi-applicant inventorship; knowledge diffusion
    JEL: O31 O32
    Date: 2006
    Abstract: This article develops an evolutionary model of industry dynamics in order to carry out a richer theoretical analysis of the consequences of a stronger patent system. This model explicitly takes into account the potentially positive effects of the patents: Publication of patents participates to the building of a collective knowledge stock on which the innovations can rely, and dropped patents can provide a source of technological progress for firms that are lagging behind the leaders of the industry. These dimensions of the patent system are used to question the negative results of Vallée & Yildizoglu (2006). The main results of the new model show that these positive effects do not counterbalance the negative effects of a stronger patent system on social welfare and global technological progress, even if it is a source of better protection and higher profits for the firms.
    Keywords: Innovation, Technical progress, Patent system, Intellectual property rights (IPR), Technology policy, Technological regimes
    JEL: O3 O34 L52
    Date: 2006
  7. By: Politis, Diamanto (Department of Business Administration, School of Economics and Management, Lund University); Gabrielsson, Jonas (Department of Business Administration, School of Economics and Management, Lund University)
    Abstract: A growing body of studies emphasizes the discovery of opportunities and the decision to exploit them as the essence of entrepreneurial activity. Following this stream of research, we present a study that examines entrepreneurs’ preferences for causal and effectual reasoning in the new venture creation process. The dominating view is that entrepreneurial decision making to a large degree varies in response to the unique situational context. In contrast, we are in this paper particularly interested to what extent individual career experiences and career motives makes entrepreneurs in favour of one decision making logic over another. From this point of departure we develop hypotheses of the expected influence of career experience and career motives on entrepreneurs’ preferences for causal and effectual reasoning. Statistical analysis on a sample of 291 Swedish entrepreneurs give ample support for the argument that entrepreneurs’ career experience and career motives have a significant influence on entrepreneurial decision making. The finding suggests that future research into entrepreneurial decision making should include career experience and career motives as contingency variables. Furthermore, the article provides an attempt to operationalize entrepreneurs’ preference for causal and effectual modes of reasoning. To our knowledge no such operationalizations exists.
    Keywords: entrepreneurial decision making; career experience; career motives; effectuation
    Date: 2006–09–19
  8. By: Tavneet Suri (Sloan School, MIT)
    Abstract: This paper examines a well known empirical puzzle in the literature on technology adoption: despite the potential of technologies to increase returns dramatically, a significant fraction of households do not use these technologies. I study the use of hybrid maize and fertilizer in Kenya, where there are persistent cross-sectional differences in aggregate adoption rates with a large fraction of households switching in and out of adoption. By allowing for selection of farmers into technology use via comparative advantage differences, I examine whether the yield returns to adopting hybrid maize vary across farmers. If so, high average returns can coexist with low returns for the marginal farmer. My findings indicate the existence of two interesting subgroups in the population. A small group of farmers has potentially high returns from adopting the technologies. Yet, they do not adopt. This lack of adoption appears to stem from supply and infrastructure constraints, such as the distance to fertilizer distributors. In addition, a larger group of farmers faces very low returns to adopting hybrid maize, but chooses to adopt. This latter group might benefit substantially from the development of newer hybrid strains to increase yields. On the whole, the stagnation in hybrid adoption does not appear to be due to constraints or irrationalities.
    Keywords: Technology, Heterogeneity, Comparative Advantage
    JEL: C33 O12 Q12
    Date: 2006–09

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