nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2009‒06‒17
four papers chosen by
Rui Baptista
Technical University of Lisbon

  1. Entry, Exit and Investment-Specific Technical Change, Second Version By Roberto M. Samaniego
  2. The Lifecycle of the Financial Sector and Other Speculative Industries By Bruno Biais; Paul Woolley; Jean-Charles Rochet
  3. Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine Industry By Ryan L. Lampe; Petra Moser
  4. Understanding the formative stage of Technological Innovation System development. The case of natural gas as an automotive fuel By Roald A.A. Suurs; Marko P. Hekkert; Sander Kieboom; Ruud E.H.M. Smits

  1. By: Roberto M. Samaniego (Department of Economics, George Washington University)
    Abstract: Using European data, this paper finds that (1) industry entry and exit rates are positively related to industry rates of investment-specific technical change (ISTC); (2) the sensitivity of industry entry and exit rates to cross-country differences in entry costs depends on industry rates of ISTC. The paper constructs a general equilibrium model in which the rate of ISTC varies across industries and new investment-specific technologies can be introduced by entrants or by incumbents. In the calibrated model, equilibrium behavior is consistent with stylized facts (1) and (2), provided the cost of technology adoption is increasing in the rate of ISTC.
    Keywords: Entry, exit, turnover, investment-specific technical change, entry costs, vintage capital, embodied technical change, lumpy investment
    JEL: D92 L26 O33 O41
    Date: 2008–04–02
  2. By: Bruno Biais; Paul Woolley; Jean-Charles Rochet
    Abstract: Speculative industries exploit novel technologies subject to two risks. First, there is uncertainty about the fundamental value of the innovation: is it strong or fragile? Second, it is difficult to monitor managers, which creates moral hazard. Because of moral hazard, managers earn agency rents in equilibrium. As time goes by and profits are observed, beliefs about the industry are rationally updated. If the industry is strong, confidence builds up. Initially this spurs growth. But increasingly confident managers end up requesting very large rents, which curb the growth of the speculative sector. If rents become too high, investors may give up on incentives, and risk and failure rates rise. Furthermore, if the innovation is fragile, eventually there is a crisis, and the industry shrinks. Our model thus captures important stylized facts of the financial innovation wave which took place at the beginning of this century.
    Date: 2009–05
  3. By: Ryan L. Lampe; Petra Moser
    Abstract: Members of a patent pool agree to use a set of patents as if they were jointly owned by all members and license them as a package to other firms. Regulators favor pools as a means to encourage innovation: Pools are expected to reduce litigation risks for their members and lower license fees and transactions costs for other firms. This paper uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856-1877) to perform the first empirical test of the effects of a patent pool on innovation. Contrary to theoretical predictions, the sewing machine pool appears to have discouraged patenting and innovation, in particular for the members of the pool. Data on stitches per minute, as an objectively quantifiable measure of innovation, confirm these findings. Innovation for both members and outside firms slowed as soon as the pool had been established and resumed only after it had dissolved.
    JEL: D02 K0 K21 L2 L24 L4 N11 N4 N7 O3 O31 O32 O34 O38
    Date: 2009–06
  4. By: Roald A.A. Suurs; Marko P. Hekkert; Sander Kieboom; Ruud E.H.M. Smits
    Abstract: This study contributes to insights into mechanisms that influence the successes and failures of emerging energy technologies. It is assumed that for an emerging technology to fruitfully develop, it should be fostered by a Technological Innovation System (TIS), which is the network of actors, institutions and technologies in which it is embedded. For an emerging technology a TIS has yet to be built up. The research focuses on the dynamics of this build-up process by mapping the development of seven key activities: so-called system functions. The main contribution revolves around the notion of cumulative causation, or the phenomenon that the build-up of a TIS may accelerate due to system functions reinforcing each other over time. As an empirical basis, an analysis is provided of the historical development of the TIS around automotive natural gas technology in the Netherlands (1970-2007). The results show that this TIS undergoes a gradual build-up in the 1970s, followed by a breakdown in the 1980s and, again, a build-up from 2000-2007. It is shown that, underlying these trends, there are different forms of cumulative causation, here called motors of innovation. The study provides strategic insights for practitioners that aspire to support such motors of innovation.
    Keywords: functions of technological innovation systems; cumulative causation; automotive natural gas.
    Date: 2009–06

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