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on Technology and Industrial Dynamics |
| By: | Besanko, David; Doraszelski, Ulrich; Kryukov, Yaroslav; Satterthwaite, Mark |
| Abstract: | Learning-by-doing and organizational forgetting have been shown to be important in a variety of industrial settings. This paper provides a general model of dynamic competition that accounts for these economic fundamentals and shows how they shape industry structure and dynamics. Previously obtained results regarding the dominance properties of firms' pricing behaviour no longer hold in this more general setting. We show that organizational forgetting does not simply negate learning-by-doing. Rather, learning-by-doing and organizational forgetting are distinct economic forces. In particular, a model with both learning-by-doing and organizational forgetting can give rise to aggressive pricing behaviour, market dominance, and multiple equilibria, whereas a model with learning-by-doing alone cannot. |
| Keywords: | dynamic games; learning-by-doing; organizational forgetting |
| JEL: | C73 D43 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6160&r=tid |
| By: | Peter Thompson (Department of Economics, Florida International University); Mihaela Pintea (Department of Economics, Florida International University) |
| Abstract: | A number of plausible theories offer explanations for the propensity of many young industries to undergo a shakeout phase, during which the number of firms declines sharply in the face of continued rising output. However, none of the theories considers the role of labor market sorting. This paper presents a model in which individual abilities are complements in production, but frictions permit only gradual sorting among firms. The quality distribution of firms becomes wider over time, inducing exit of firms that have ended up with predominantly low-quality workers. The model does not ensure that a shakeout takes place, but when it does it will be characterized by rising output alongside a declining price, an increasing average wage, and a widening of the distributions across firms of employment, output, productivity and average wages. |
| Keywords: | Shakeouts, industry evolution, O-ring production functions. |
| JEL: | L1 J62 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0702&r=tid |
| By: | Fabio Canova; David Lopez-Salido; Claudio Michelacci |
| Abstract: | We analyze the labor market effects of neutral and investment-specific technology shocks along the intensive margin (hours worked) and the extensive margin (unemployment). We characterize the dynamic response of unemployment in terms of the job separation and the job finding rate. Labor market adjustments occur along the extensive margin in response to neutral shocks, along the intensive margin in response to investment specific shocks. The job separation rate accounts for a major portion of the impact response of unemployment. Neutral shocks prompt a contemporaneous increase in unemployment because of a sharp rise in the separation rate. This is prolonged by a persistent fall in the job finding rate. Investment specific shocks rise employment and hours worked. Neutral shocks explain a substantial portion of the volatility of unemployment and output; investment specific shocks mainly explain hours worked volatility. This suggests that neutral progress is consistent with Schumpeterian creative destruction, while investment-specific progress operates as in a neoclassical growth model. |
| Keywords: | Search frictions, technological progress, creative destruction |
| JEL: | E00 J60 O33 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1012&r=tid |
| By: | Fryges, Helmut |
| Abstract: | Determinants of a firm’s export-sales ratio (degree of internationalisation) are frequently discussed in the literature related to individual firms’ export activities. Stylised facts show a positive relationship between firm size and firm age on the one hand and the firm’s export-sales ratio on the other hand. However, anecdotic evidence and recent empirical results revealed that it is not size or age per se that leads to a high export-sales ratio. This paper analyses the export-sales ratio of a sample of young technology-oriented firms in Germany and the UK. The empirical results confirm that neither youth nor smallness are necessarily an obstacle to realising a high degree of internationalisation. However, this requires that the firms possess firm-specific assets in order to overcome barriers to entry into the foreign market. These firm-specific assets may be acquired via conducting own R&D activities, buying novel technology from other companies, or by employing internationally experienced managers. |
| Keywords: | High-technology industries, export-sales ratio, fractional logit model |
| JEL: | F23 L60 L86 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:5435&r=tid |
| By: | Andrea Caggese |
| Abstract: | In this paper I develop a general equilibrium model with risk averse entrepreneurial firms and with public firms. The model predicts that an increase in uncertainty reduces the propensity of entrepreneurial firms to innovate, while it does not affect the propensity of public firms to innovate. Furthermore, it predicts that the negative effect of uncertainty on innovation is stronger for the less diversified entrepreneurial firms, and is stronger in the absence of financing frictions in the economy. In the second part of the paper I test these predictions on a dataset of small and medium Italian manufacturing firms. |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1011&r=tid |
| By: | Iván Moreno Torres; Jaume Puig; Joan-Ramon Borrell-Arqué |
| Abstract: | The aim of this paper is to analyse empirically entry decisions by generic firms into markets with tough regulation. Generic drugs might be a key driver of competition and cost containment in pharmaceutical markets. The dynamics of reforms of patents and pricing across drug markets in Spain are useful to identify the impact of regulations on generic entry. Estimates from a count data model using a panel of 86 active ingredients during the 1999–2005 period show that the drivers of generic entry in markets with price regulations are similar to less regulated markets: generic firms entries are positively affected by the market size and time trend, and negatively affected by the number of incumbent laboratories and the number of substitutes active ingredients. We also find that contrary to what policy makers expected, the system of reference pricing restrains considerably the generic entry. Short run brand name drug price reductions are obtained by governments at the cost of long run benefits from fostering generic entry and post-patent competition into the markets. |
| Keywords: | Entry; Generic Drugs; Pharmaceutical industry; Reference pricing |
| JEL: | I11 L11 L65 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1014&r=tid |
| By: | Cabral, Luís M B; Ross, Thomas |
| Abstract: | The received wisdom is that sunk costs create a barrier to entry - if entry fails, then the entrant, unable to recover sunk costs, incurs greater losses. In a strategic context where an incumbent may prey on the entrant, sunk entry costs have a countervailing effect: they may effectively commit the entrant to stay in the market. By providing the entrant with commitment power, sunk investments may soften the reactions of incumbents. The net effect may imply that entry is more profitable when sunk costs are greater. |
| Keywords: | barriers to entry; sunk costs |
| JEL: | L13 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6162&r=tid |
| By: | Fidel Pérez Sebastián (Universidad de Alicante); Shiferaw Gurmu (Georgia State University) |
| Abstract: | Hausman, Hall and Griliches (1984) and Hall, Griliches and Hausman (1986) investigated whether there was a lag in the patent-R&D relationship for the U.S. manufacturing sector using 1970¿s data. They found that there was little evidence of anything but contemporaneous movement of patents and R&D. We reexamine this important issue employing new longitudinal patent data at the firm level for the U.S. manufacturing sector from 1982 to 1992. To address unique features of the data, we estimate various distributed lag and dynamic multiplicative panel count data models. The paper also develops a new class of count panel data models based on series expansion of the distribution of individual effects. The empirical analyses show that, although results are somewhat sensitive to different estimation methods, the contemporaneous relationship between patenting and R&D expenditures continues to be rather strong, accounting for over 60% of the total R&D elasticity. Regarding the lag structure of the patents-R&D relationship, we do find a significant lag in all empirical specifications. Moreover, the estimated lag effects are higher than have previously been found, suggesting that the contribution of R&D history to current patenting has increased from the 1970¿s to the 1980¿s. |
| Keywords: | Innovative activity, Patents and R&D, Individual effects, count panel data methods. |
| JEL: | C20 O30 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2007-03&r=tid |