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on Technology and Industrial Dynamics |
| By: | Giovanni Dosi; Alfonso Gambardella; Marco Grazzi; Luigi Orsenigo |
| Abstract: | In this work we discuss the impact of the new ICT techno-economic paradigm upon the vertical and horizontal boundaries of the firm and ask whether the change in the sources of competitive advantage has resulted in changes in the size distribution of firms and also in the degree of concentration of industries. Drawing both on firm-level and national statistical data we assess the evolution of the overall balances between the activities which are integrated within organizations and those which occur through market interactions. While the new paradigm entails ``revolutionary'' changes in the domain of technology, the modification in industrial structures has been somewhat more incremental. Certainly, the vertical and horizontal boundaries of firms have changed and together one is observing a turnover in the club of biggest world firms accounting also for a shift in the relative importance of industrial sectors. Nonetheless, we do not observe an abrupt fading of the Chandlerian multidivisional corporation in favour of smaller less-integrated firms. |
| Keywords: | New techno-economic paradigm; Organizational change; Vertical integration; Boundaries of the firm; Visible hand. |
| Date: | 2007–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2007/12&r=tid |
| By: | Jaap H. Abbring (Vrije Universiteit Amsterdam); Jeffrey R. Campbell (Federal Reserve Bank of Chicago, and NBER) |
| Abstract: | This paper considers the effects of raising the cost of entry for a potential competitor on infinite-horizon Markov-perfect duopoly dynamics with ongoing demand uncertainty. All entrants serving the model industry incur sunk costs, and exit avoids future fixed costs. We focus on the unique equilibrium with last-in first-out expectations: A firm never exits leaving behind an active younger rival. We prove that raising a second producer's sunk entry cost in an industry that supports at most two firms reduces the probability of having a duopoly but increases the probability that some firm will serve the industry. Numerical experiments indicate that a barrier to entry's quantitative relevance depends on demand shocks' serial correlation. If they are not very persistent, the direct entry-deterring effect of a barrier to a second firm's entry greatly reduces the average number of active firms. The indirect entry-encouraging effect does little to offset this. With highly persistent demand shocks, the direct effect is small and the barrier to entry has no substantial effect on the number of competitors. This confirms Carlton's (2004) assertion that the effects of a barrier depend crucially on industry dynamics that two-stage "short run/long run" models capture poorly. |
| Keywords: | LIFO; FIFO; Sunk costs; Markov-perfect equilibrium; Competition policy |
| JEL: | L13 L41 |
| Date: | 2007–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070037&r=tid |
| By: | ASAKAWA Kazuhiro |
| Abstract: | Japan's dominance in TFT-LCD production share has weakened over time, while Korea and Taiwan have taken over the leading positions. After reviewing conventional wisdom regarding the factors influencing the decline in Japan's production volume, we reframe the entire issue from the perspective of "metanational" learning. Success behind Korean and Taiwanese firms lies in the fact that they have adopted the metanational approach: learning knowledge from Japan and adopting the global best-supplier policy for equipment and materials, regardless of nationality (e.g. Samsung). We argue that the relevance of the metanational approach (as opposed to the domestic "black box" approach) is determined by the competitive advantage of home country/industry and company. While this approach is generally considered appropriate for firms that are trying to overcome their home country disadvantages, we argue that the metanational approach remains appropriate for firms which need to cope with eroding country and industry competitiveness, such as Japanese firms in the TFT-LCD industry. |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:07029&r=tid |
| By: | Paulson, Nicholas D.; Ginder, Roger |
| Abstract: | The biodiesel industry in the United States has realized significant growth over the past decade through large increases in annual production and production capacity and a transition from smaller batch plants to larger-scale continuous producers. The larger, continuous-flow plants provide operating cost advantages over the smaller batch plants through their ability to capture co-products and reuse certain components in the production process. This paper uses a simple capital budgeting model developed by the authors along with production data supplied by industry sources to estimate production costs, return-on-investment levels, and break-even conditions for two common plant sizes (30 and 60 million gallon annual capacities) over a range of biodiesel and feedstock price levels. The analysis shows that the larger plant realizes returns to scale in both labor and capital costs, enabling the larger plant to pay up to $0.015 more per pound for the feedstock to achieve equivalent return levels as the smaller plant under the same conditions. The paper contributes to the growing literature on the biodiesel industry by using the most current conversion rates for the production technology and current price levels to estimate biodiesel production costs and potential plant performance, providing a useful follow-up to previous studies. |
| Keywords: | biodiesel, biofuels, feedstock, production costs, return on investment. |
| Date: | 2007–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12813&r=tid |
| By: | Mohnen, Pierre (UNU-MERIT and University of Maastricht); Tiwari, Amaresh (University of Maastricht); Palm, Franz (University of Maastricht); Schim van der Loeff, Sybrand (University of Maastricht) |
| Abstract: | Using direct information on financial constraints from questionnaires, rather than the commonly used balance sheet information, this paper presents evidence that, controlling for traditional factors as size, market share, cooperative arrangement, and expected profitability, financial constraints affect a firm's decision of how much to invest in R&D activities. Apart from these constraints, other hampering factors as market uncertainty and institutional bottlenecks, regulations and organizational rigidities also affect R&D investment. A semiparametric estimator of sample selection is employed to control for potential endogeneity of the regressors. The paper also shows that old firms and firms that belong to a group are less financially constrained when it comes to undertaking R&D activities. For the estimation a semiparametric binary choice model is used. |
| Keywords: | Research and Development, Investment, Financial Risk |
| JEL: | O32 G11 G32 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2007011&r=tid |
| By: | Acharya, Viral V; Subramanian, Krishnamurthy |
| Abstract: | Do legal institutions governing financial contracts affect the nature of real investments in the economy? We develop a simple model and provide evidence that the answer to this question is yes. We consider a levered firm's choice of investment between innovative and conservative technologies, on the one hand, and of financing between debt and equity, on the other. Bankruptcy code plays a central role in these choices by determining whether the firm is continued or liquidated in case of financial distress. When the code is creditor-friendly, excessive liquidations cause the firm to shy away from innovation. In contrast, by promoting continuation upon failure, a debtor-friendly code induces greater innovation. This effect remains robust when the firm attempts to sustain innovation by reducing its debt under creditor-friendly codes. Employing patents as a proxy for innovation, we find support for the real as well as the financial implications of the model: (1) In countries with weaker creditor rights, technologically innovative industries create disproportionately more patents and generate disproportionately more citations to these patents relative to other industries; (2) This difference of difference result is further confirmed by within-country analysis that exploits time-series changes in creditor rights, suggesting a causal effect of bankruptcy codes on innovation; (3) When creditor rights are stronger, innovative industries employ relatively less leverage compared to other industries; and (4) In countries with weaker creditor rights, technologically innovative industries grow disproportionately faster compared to other industries. Finally, while overall financial development fosters innovation, stronger creditor rights weaken this effect, especially for highly innovative industries. |
| Keywords: | creditor rights; entrepreneurship; financial development; growth; law and finance; R&D; technological change |
| JEL: | G3 K2 O3 O4 O5 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6307&r=tid |
| By: | Andrea Conte (University of Turin and Max Planck Institute of Economics Jena); Marco Vivarelli (Catholic University of Milan, CSGR Warwick, Max Planck Institute of Economics Jena and IZA) |
| Abstract: | This paper discusses the occurrence of Skill-Enhancing Technology Import (SETI), namely the relationship between imports of embodied technology and widening skill-based employment differentials in a sample of low and middle income countries (LMICs). In doing so, this paper provides a direct measure of technology transfer at the sector level from high income countries (HICs), namely those economies which have already experienced the occurrence of skill-biased technological change, to LMICs. GMM techniques are applied to an original panel dataset comprising 28 manufacturing sectors for 23 countries over a decade. Econometric results provide robust evidence of the determinants of widening employment differentials in LMICs. In particular, capital-skill complementarity represents a source of relative skill-bias while SETI provides an absolute skill-bias effect on the employment trends of skilled and unskilled workers witnessed in these countries. |
| Keywords: | skill biased technological change, capital skill complementarity, GMM estimation, general industrial statistics, world trade analyzer |
| JEL: | F16 J23 J24 O33 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2797&r=tid |