| By: |
Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology);
Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology);
Månsson, Kristofer (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology) |
| Abstract: |
Firm-level heterogeneity is substantial even in narrowly defined industries.
This paper focuses on formulating evolution dynamics which can account for the
observed heterogeneity and its maintenance. Based on examination of data on
Swedish firm’ supply pattern to different markets over time, we present a
parsimonious model that has the ambition to capture the picture of
heterogeneous firms, while accommodating the simultaneous exit and entry of
destination varieties in firms’ supply pattern. The model assumes both scale
economies of firms and path-dependence, where the latter is manifested in such
a way that the arrival rate of innovation ideas to an individual firm is a
function of each firm’s stock of varieties at every given point in time. The
path-dependence phenomenon is an “explosive” non-linearity, whereas
conservation mechanisms include development of demand and exit of established
varieties. The described path dependence explains the skewed distribution of
varieties across firms, but the question of what keeps the “equilibrium” away
from competitive exclusion where only few large firms remain. We make use of
simulations to depict and assess the innovation dynamics of the proposed model. |
| Keywords: |
innovation; path-dependence; firm-level; heterogeneity; evolution dynamics |
| JEL: |
C16 F14 L25 O33 |
| Date: |
2009–11–23 |
| URL: |
http://d.repec.org/n?u=RePEc:hhs:cesisp:0204&r=tid |