Santarelli Entrepreneurship, Growth, and Innovation

The Dynamics of Firms and Industries
1. Auflage 2006
ISBN: 978-0-387-32314-5
Verlag: Springer US
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, Band 12, 285 Seiten, eBook

Reihe: International Studies in Entrepreneurship

Entrepreneurship, Growth and Innovation provides comprehensive insight into the economics of entrepreneurship, claiming that this recently established discipline should establish a framework of analysis that integrates the understanding of the determinants and the effects of both entrepreneurship and innovation without neglecting the functioning of the inducement mechanisms. For this purpose, the book combines theoretical prescriptions and international empirical evidence. Contributions by some of the best known scholars in the field of the economics of entrepreneurship and innovation investigate whether the interrelationships between the forces that affect firm and industry dynamics and ultimately determine economic growth are subject to change across countries and over time. The analysis of different national cases puts forward that the relationship between entrepreneurship and growth via innovation is shaped by the context of country-specific institutions and industries, thereby providing hints for industrial and innovation policy.

Zielgruppe

Research

Autoren/Hrsg.

Santarelli, Enrico

Inhaltsverzeichnis

A Market Model of Perfect Competition Under Uncertainty: Heterogeneous Firms and Technologies.- Industry Dynamics á La Stackelberg with Stochastic Capital Accumulation.- Gibrat’s Law: An Overview of the Empirical Literature.- Entrepreneurship in the Old and New Europe.- New Firm Formation and the Region: Empirical Results from the United States.- R&D Intensity and the Relationship between Firm Size and Growth in Germany.- Gibrat’s Law in a Medium-Technology Industry: Empirical Evidence for Italy.- Entrepreneurship, Innovation, and the Evolution of Industrial Districts.- Innovation Premium and the Survival of Entrepreneurial Firms in the Netherlands.- Foreign Presence, Technical Efficiency and Firm Survival in Greece: A Simultaneous Equation Model with Latent Variables Approach.- Entrepreneurship, Industrial Restructuring and Unemployment in Portugal.- Transferring the Risk of Failure. Entrepreneurship and Firm Dynamics in Turkish Manufacturing.- What is the Best Policy for Innovative Entrepreneurship?.

Leseproben

Chapter 2 INDUSTRY DYNAMICS A LA STACKELBERG WITH STOCHASTIC CAPITAL ACCUMULATION (P. 23)

Luca Lambertini

University of Bologna
1. INTRODUCTION
Firms' entry and growth in an industry have attracted a great deal of attention within both industrial and applied economics for several decades. Ever since Gibrat's seminal contribution (Gibrat, 1931), the established wisdom has maintained that expected firm growth rates are independent of firm size, a property known as Gibrat's Law. Both theoretical and empirical research have been extensively carried out along this line.' So far, the existing literature provides heterogeneous answers to the question as the way we shall expect market dynamics to unravel, given some degree of initial asymmetry among firms .

Two relevant contributions by Lucas and Prescott (1971) and Lucas (1978) investigate entry and exit decisions in long-run competitive equilibrium models where prices, outputs and investments are driven by stochastic processes. In a pioneering paper, Jovanovic (1982) proposes a theory of noisy selection where f m s enter over time and learn about their productive efficiency as they operate in the market. Those that are relatively more efficient grow and survive, while those who relatively less efficient decline and ultimately exit the industry. Hopenhayn (1992) analyzes the case of individual productivity shocks and their effects on entry, exit and market dynamics in the long-run.

He finds that the steady state equilibrium implies a size distribution of f m s by age cohorts, and proves that the size distribution is stochastically increasing in the age of the cohorts. Jovanovic's model is extended by Ericson and Pakes (1995) who consider two models of firm behaviour, allowing for heterogeneity among firms, idiosyncratic (or firm- specific) sources of uncertainty, and discrete outcomes (exit andlor entry). Broadly speaking, an overview of this literature leads one to think that 'older firms are bigger than younger firms'. An important question to this regard is the following: is moving first a prerequisite (i.e., a necessary condition) for a firm to become larger than its rivals, or is it a sufficient condition?

Here I propose a dynamic oligopoly model under uncertainty generalising some of the aspects treated in Lambertini (2005). Firms enter simultaneously and then compete hierarchically A la Stackelberg, at each instant over an infinite horizon. They accumulate capacity through costly investment, as in Solow's (1956) and Swan's (1956) growth model. At every instant, first the investment levels are chosen, then shocks realize and finally productive capacities are determined as a function of the shocks. Due to the formal properties of the model, the game possesses a unique and time consistent open-loop equilibrium.

The main results are as follows. The relative performance of firms depends on several factors, including the relative size of shocks as well as the relative number of leaders and followers. In particular, if investment costs are negligible, or the variance of the shock affecting the leaders is low, or again firms are subject to a common shock, then the expected profits of the representative leader exceed those of the representative follower.