nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2009‒03‒22
five papers chosen by
Rui Baptista
Technical University of Lisbon

  1. The Entrepreneurial Adjustment Process in Disequilibrium: Entry and Exit when Markets Under and Over Shoot By Andrew Burke; Andre van Stel
  2. Patent Scope and Technology Choice By Färnstrand Damsgaard, Erika
  3. Strategic Information Disclosure and Competition for an Imperfectly Protected Innovation By Jos Jansen
  4. Globalization and Innovation in Emerging Markets By Yuriy Gorodnichenko; Jan Svejnar; Katherine Terrell
  5. When Things Get Tough Do the Tough Get Going? Founders’ Pre-entry Work Experience and High-tech Start-up Survival during an Industry Crisis By Luca Grilli

  1. By: Andrew Burke; Andre van Stel
    Abstract: The main contribution of entrepreneurship theory to economics is to provide an account of market performance in disequilibrium but little empirical research has examined firm entry and exit in this context. We redress this by modelling the interrelationship between firm entry and exit in disequilibrium. Introducing a new methodology we investigate whether this interrelationship differs between market ‘undershooting’ (the actual number of firms is below the equilibrium number) and ‘overshooting’ (vice versa). We find that equilibrium-restoring mechanisms are faster in over than in undershoots. The results imply that in undershoots a lack of competition between incumbent firms contributes to restoration of equilibrium (creating room for new-firm entry) while in overshoots competition induced by new firms (in particular strong displacement) helps restore equilibrium.
    Keywords: entry, exit, equilibrium, industrial organization, undershooting, overshooting
    JEL: B50 J01 L00 L1 L26
    Date: 2009–01
  2. By: Färnstrand Damsgaard, Erika (Research Institute of Industrial Economics (IFN))
    Abstract: This paper analyzes the effect of an increase in patent scope on R&D and innovation. It presents a model where patent scope affects an entrant firm's technology choice and thereby creates a trade-off between R&D investments and wasteful duplication of R&D. The model predicts that an increase in patent scope can increase the probability of innovation if the incumbent’s profit increase from innovation is large and the patented technology has a small advantage over the alternative technology. However, when the model is extended to Stackelberg competition or licensing, the benefit of a broad patent scope to a large extent disappears.
    Keywords: Innovation; Patents; Patent policy; Licensing
    JEL: K20 L51
    Date: 2009–03–03
  3. By: Jos Jansen (Max Planck Institute for Research on Collective Goods)
    Abstract: The imperfect appropriability of revenues from innovation affects the incentives of firms to invest, and to disclose information about their innovative productivity. It creates a free-rider effect in the competition for the innovation that countervails the familiar business-stealing effect. Moreover, it affects the disclosure incentives such that full disclosure emerges for extreme revenue spillovers (e.g., full protection and no protection of intellectual property), but either partial disclosure or full concealment emerges for intermediate spillovers. I analyze the implications of imperfect appropriability and strategic disclosure for the firms.profits and the probability of innovation.
    Keywords: R&D competition, innovation, spillovers, information disclosure, strategic substitutes, free-rider effect, externality
    JEL: D82 D83 L23 O31 O32
    Date: 2009–02
  4. By: Yuriy Gorodnichenko (University of Michigan); Jan Svejnar (University of Michigan); Katherine Terrell (University of Michigan)
    Abstract: Globalization brings opportunities and pressures for domestic firms in emerging markets to innovate and improve their competitive position. Using data on firms in 27 transition economies, we test for the effects of globalization through the impact of increased competition and foreign direct investment on domestic firms' efforts to raise their capability (innovate) by upgrading their technology or the quality of their product/service, taking into account firm heterogeneity. We find competition has a negative effect on innovation, especially for firms further from the frontier, and that the supply chain of multinational enterprises and international trade are important channels for domestic firm innovation. We do not find support for the inverted U effect of competition on innovation. There is weak evidence that firms in a more pro-business environment invest more in innovation and are more likely to display the inverted U relationship between competition and innovation.
    Keywords: emerging markets, globalization, innovation
    Date: 2008–04
  5. By: Luca Grilli
    Abstract: This article adds new insights into the relationship between founders’ human capital and the survival prospects of startup businesses. The impact of founders’ human capital on firm survival is controversial. On one hand, more experienced and skilled individuals are likely to create start-up businesses with a high chance of survival; on the other hand, their opportunity costs to run the firm may be high given the potential returns for investing their efforts in alternative employment opportunities. Analysing a sample of 179 Italian start-up companies created during 1995-early 2000 and operating in ICT services markets, this study provides evidence that, in intense industry crises (early 2000-2003), highly work experienced entrepreneurs may pursue an exit strategy and highlights the importance of distinguishing between different types of work experience and different exit routes. In particular, founding teams with highly specific work experience show higher probability of following the M&A route, while a higher level of generic work experience is more conducive to closure.
    Keywords: High-tech entrepreneurship; Start-up exit; Founders’ human capital; ICT
    JEL: L26 L86
    Date: 2009–01

This nep-tid issue is ©2009 by Rui Baptista. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.