nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2007‒08‒08
nine papers chosen by
Rui Baptista
Technical University of Lisbon

  1. Turbulence in High Growth and Declining Industries By Rui Baptista; Murat Karaoez
  2. Innovation Networks of High Tech SMES: Creation of Knowledge but no Creation of Value By Rob Winters; Erik Stam
  3. Spillovers, disclosure lags, and incentives to innovate. Do oligopolies over-invest in R&D? By Gianluca Femminis; Gianmaria Martini
  4. Firm Size and Openness: the Driving Forces of University-Industry Collaboration By Roberto Fontana; Aldo Geuna; Mireille Matt
  5. Going, Going, Gone. Innovation and Exit in Manufacturing Firms By Cefis, E.; Marsili, O.
  6. The Impact of Cost-Reducing R&D Spillovers on the Ergodic Distribution of Market Structures By Christopher A. Laincz; Ana Rodrigues
  7. Cournot competition among multiproduct firms:specialization through licensing By Luigi Filippini
  8. Governing the "New Economy": a 3-Phase Historical Model of Cumulative Gales of Creative Destruction of the United Kingdom Internet Service Providers' Market By Michèle Javary
  9. A Schumpeterian Renaissance? By Chris Freeman

  1. By: Rui Baptista (IN+, Instituto Superior Tecnico, Technical University of Lisbon; Max Planck Institute of Economics); Murat Karaoez (IN+, Instituto Superior Tecnico, Technical University of Lisbon; IIBF, Department of Economics, Sueleyman Demirel University, Isparta, Turkey)
    Abstract: We examine turbulence over the product life cycle using the lowest possible level of industry aggregation, allowing for the use of panel data to study the evolution of single product markets. We find that replacement of exiting firms by subsequent entry plays a primary role in generating turbulence in high growth markets, while displacement of incumbents by recent entrants is the main selection force in declining markets. As product life cycles progress, trial-and-error entry subsides, and turbulence decreases.
    Keywords: Entry, Exit, Selection, Product life cycle, Replacement, Displacement
    JEL: L11
    Date: 2007–07–31
  2. By: Rob Winters (Netherlands Ministry of the Interior and Kingdom Relations); Erik Stam (University of Cambridge, Utrecht University; Max Planck Institute of Economics)
    Abstract: This paper analyses the effects of innovation networks on product and process innovation and sales growth of high technology SMEs. Innovation net- works are positively related to both product and process innovation, i.e. knowledge creation. One exception is the negative effect of innovation networks with suppliers on product innovation. Older SMEs are more product innovative than young SMEs. The positive relation between firm size and (process) innovation, disappears when networks are introduced into the analyses. The general conclusion is that vertical innovation networks remove the effect of firm size on process innovation. In other words, high-tech SMEs can ‘borrow’ size if they co-operate with customers, but especially with suppliers for process innovation. So smallness is not necessarily a disadvantage for innovation, as long as firms cooperate with other organisations. Innovation and networks do not seem to effect value creation, measured as sales growth.
    Keywords: innovation, innovation networks, high tech SMEs, firm growth
    JEL: D21 D83 D85 L25 O31 O32
    Date: 2007–07–31
  3. By: Gianluca Femminis (DISCE, Università Cattolica); Gianmaria Martini (Università di Bergamo)
    Abstract: We develop a dynamic duopoly, where firms have to take into account a technological externality, that reduces over time their innovation costs, and an inter-firm spillover, that lowers only the second comer's R&D cost. This spillover exerts its effect after a disclosure lag. We identify three possible equilibria, which are classified, according to the timing of R&D investments, as early, intermediate, and late. The intermediate equilibrium is subgame perfect for a wide parameters range. When the innovation size is large, it implies that the duopolistic market equilibrium involves underinvestment. Hence, even in presence of a moderate degree of inter-firms spillover, the competitive equilibrium calls for public policies aimed at increasing the research activity. When we focus on minor innovations -- the case in which, according to the earlier literature, the market equilibrium underinvests -- our results imply that the policies aimed at stimulating R&D have to be less sizeable than suggested before, despite the presence of an inter-firm spillover.
    Keywords: knowledge spillover, dynamic oligopoly
    JEL: L13 L41 O33
    Date: 2007–06
  4. By: Roberto Fontana (CESPRI, Bocconi University); Aldo Geuna (SPRU, University of Sussex); Mireille Matt (BETA, University of Strasbourg)
    Abstract: A large number of works have studied university-industry relationships either from a qualitative point of view or relying on a case study of a single university. The aim of this paper is to provide some statistical evidence at the cross-country, cross-industry level to verify some of the hypotheses put forward in the qualitative literature. On the basis of the results of the KNOW survey carried out in seven EU countries in 2000, we examine two main issues. First, the contribution made by Public Research Organisations (PROs) to the innovative process of firms is analysed. Second, the existence and the extent of co-operative R&D projects between firms and PROs are examined. A two-equation econometric model evaluates the effect of firm-specific, sector-specific and country-specific factors (such as firm size, appropriation and signalling, searching of knowledge sources, government support) upon the propensity for and the extent of collaborations between PROs and firms. The analysis in this paper provides some preliminary evidence which allows a better understanding of the firm and industry characteristics that affect the contribution of PROs to firms' innovative activities and to their involvement in R&D collaborations with firms. The estimations produce some evidence to highlight how the size of the firm and its openness to the external environment have a significant and important effect on both the extent of and propensity of PRO-firm collaboration.
    Keywords: university-industry relationships, European Public Research Organisations, firm innovation
    JEL: I28 O31
    Date: 2007–06–05
  5. By: Cefis, E.; Marsili, O. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This paper examines the effect of innovation on the risk of exit of a firm, distinguishing between different modes of exits. Innovation represents a resource and a capability that helps a firm to build competitive advantage and remain in the market. At the same time, the resources and capabilities of innovative firms make them an attractive target for the acquisition process of other firms, thereby increasing the likelihood of the exiting the market. We explore these effects empirically by linking data on innovation and exits for a large sample of manufacturing firms in the Netherlands. The results show that the effect of innovation on a firm's risk of exit differs according to the mode of exit and, in addition, it is shaped by the nature of the innovation. While a firm can lower its risk of failure by innovating in either products or processes, the introduction of a new product in the absence of innovation in the production process increases the risk of exit as a result of merger and acquisition.
    Keywords: Mergers and acquisitions;Firm exit;Innovation;Competing risks model;
    Date: 2007–03–21
  6. By: Christopher A. Laincz (Drexel University); Ana Rodrigues (Autoridade da Concorrência)
    Abstract: We extend the literature on knowledge spillovers between firms by studying a dynamic duopoly model of R&D. Our analysis highlights the previously ignored welfare effects of spillovers through dynamic changes in industry concentration. In addition, we find that the impact of imperfect appropriability of R&D on concentration and welfare depends crucially on the manner in which spillovers are obtained. To date, the analysis of the impact of knowledge spillovers between firms has been largely restricted to static two-stage models (R&D decisions followed by product market decisions). These models generally predict suboptimal R&D expenditures and lower welfare. Such models are silent on the evolution of the market structure, and the resulting welfare implications, because they need to assume initial conditions (symmetry or asymmetry). We find that when spillovers require absorptive capacity investment in own R&D, larger spillovers lead to declines in concentration while rates of innovation increase and welfare rises. In contrast, when spillovers are costlessly obtained increases in the extent of spillovers rates of innovation fall leading to losses in welfare through both reduced consumer surplus and firm values, while the effect on concentration is ambiguous.
    Date: 2007–06
  7. By: Luigi Filippini (DISCE, Università Cattolica)
    Abstract: In a duopoly where each firm produces substitute goods, we show that under process innovation, specialization is the equilibrium attained with cross-licensing. Each firm produces only the good for which it has an advantage. Patent pool extension confirms the results.
    Keywords: cross-licensing, patent pool, specialization, process innovation
    JEL: D45 O31
    Date: 2006–12
  8. By: Michèle Javary (CENTRIM, University of Brighton)
    Abstract: This article documents the industrial dynamics and the innovation processes inherent in the fast emerging dial-up Internet access segment of the new telecommunication sector in the United Kingdom for the period between 1992 - 2002. It shows that evolving market structures and related products and service innovation in the wholesale and retail branches of the UK Internet Service Providers' market have to be understood in the context of: a) an entrepreneurial thrust that seizes the advantage of a glut of finance accumulated from the privatization of the utilities; b) the evolution of the relationship between the UK voice and data transfer markets after the privatization of British Telecommunications and the strategic development of its 'intelligent network'; c) the related network technologies and services available for deployment at the start of the implementation of the Internet as a mass infrastructure; d) BT's quasi-monopoly in call origination and finally e) the wider evolutionary industrial dynamics, i.e. a cumulative process of conjectures and feedback loops of market power, strategic management and transformation in corporate and institutional governance following the market's expansion and the transition from metered to unmetered dial up Internet access.
    Keywords: innovation and industrial dynamics, dial-up Internet, United Kingdom
    JEL: L96 O31
    Date: 2007–06–01
  9. By: Chris Freeman (SPRU, University of Sussex)
    Abstract: In the last few decades of the twentieth century, the attention paid to technical innovation in the economics and management literature and in social science generally has justified some such description as "a Schumpeterian renaissance". This article, in justifying the concept of such a renaissance, distinguishes in particular Schumpeter's work on the clustering of innovations and technological revolutions as a major contribution to contemporary theory. As always during his lifetime, the relevance of these ideas to his work on Business Cycles remains controversial but the debate on this topic has certainly enlivened the renaissance of neo-Schumpeterian economic theory and research.
    Keywords: innovation clusters, technological revolution, Schumpeter, business cycles
    JEL: E11 O30
    Date: 2007–06–05

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