a history friendly model of the successive changes in industrial leadership and the catch up by latecomers abstract successive changes in industrial leadership between both firms and countries described here as catch up cycles have been common in several sectors this article develops a history friendly model to explore the role played by technological conditions in the emergence of such leadership changes the model is inspired by two cases where the emergence of disruptively novel technology played an important role mobile phones and semiconductors in the baseline setting the model is able to generate the benchmark case of three cycles with two leadership changes in particular the simulation analysis reveals that a the more disruptive the new technology and the lower the incumbents capabilities the greater the shake up of market shares between incumbents and latecomers b leadership change is more likely to occur when it coincides with certain responses by the actors to the technological disruption such as a high lock in behaviour on the part of incumbents and c a technology driven change of industrial leadership is more likely to occur in the presence of increasing returns to technological investments the counterfactual experiments show that different catch up dynamics can emerge depending on the magnitude of technological disruption the degree of lock ins the shape of technological landscape and incumbents initial capabilities in particular four other types of catch up cycle are generated the aborted cycle persistent leadership return of the old leadership and coexistence in leadership between latecomers and incumbents each of these cycles is identified with a specific historical case of catch up

technological regimes schumpeterian patterns of innovation and firm level productivity growth the paper investigates the relationships between technological regimes and firm level productivity performance and it explores how such a relationship differs in different schumpeterian patterns of innovation the analysis makes use of a rich dataset containing data on innovation and other economic characteristics of a large representative sample of norwegian firms in manufacturing and service industries for the period 1998 2004 first we decompose tfp growth into technical progress and efficiency changes by means of data envelopment analysis we then estimate an empirical model that relates these two productivity components to the characteristics of technological regimes and a set of other firm specific factors the results indicate that 1 tfp growth has mainly been achieved through technical progress while technical efficiency has on average decreased 2 the characteristics of technological regimes are important determinants of firm level productivity growth but their impacts on technical progress are different from the effects on efficiency change 3 the estimated model works differently in the two schumpeterian regimes technical progress has been more dynamic in schumpeter mark ii industries while efficiency change has been more important in schumpeter mark i markets

catch up cycles and changes in industrial leadership windows of opportunity and responses of firms and countries in the evolution of sectoral systems this study proposes a framework that aims to explain why successive changes in industry leadership called also the catch up cycle occur over time in a sector in catch up cycles latecomer firms and countries emerge as international leaders whereas incumbents lose their previous positions new leaders are then dethroned by newcomers to identify factors at the base of catch up cycles this article adopts a sectoral system framework and identifies windows of opportunity that may emerge during the long run evolution of an industry this study proposes three windows related to the specific dimensions of a sectoral system one dimension is related to changes in knowledge and technology the second dimension pertains to changes in demand and the third includes changes in institutions and public policy the combination of the opening of a window technological demand or institutional policy and the responses of firms and other components of the sectoral system of the latecomer and incumbent countries determines changes in industrial leadership and catch up sectors differ according to the type of windows that may open and the responses of firms and other components of systems empirical evidence of catch up cycles is presented from six sectors namely mobile phones cameras semiconductors steel mid sized jets and wines

further evidence on the asymmetric behavior of economic time series over the business cycle evidence has recently been presented by salih neftci to support the hypothesis that recessions in economic activity tend to be steeper and more short lived than recoveries in economic activity that evidence however was confined to the behavior of the unemployment rate in the united states in this paper it is shown that when neftci s methods are applied to analyze the behavior of real gross national product investment and productivity in the united states or when they are used to analyze industrial production abroad the asymmetry hypothesis seems to be less compelling

successive changes in leadership in the worldwide mobile phone industry the role of windows of opportunity and firms competitive action abstract we take a historical perspective to gain insight into the determinants of changes in industrial leadership in the global mobile phone industry from the beginning of the 1980s to 2012 the theoretical foundation of our analysis is a the concept of windows of opportunity proposed by industry evolution studies i e changes in the technological regulatory and consumer demand environment offering latecomers the opportunity to overtake leading rivals and b the concept of action aggressiveness proposed by the competitive dynamics literature i e the extent to which a firm forcefully takes a large number and a wide variety of actions to outperform its competitors we show that the potential for leadership changes is greater for firms that are able to undertake aggressive competitive actions at the time when significant windows of opportunity are open in particular we analyze the determinants of two leadership changes 1 in the second half of the 1990s when the us giant motorola lost its number one position dethroned by its finnish competitor nokia and 2 in the first half of the 2010s when samsung of south korea caught up with nokia

productivity growth of newly industrializing economies in heterogeneous capital goods markets the case of the korean machinery and equipment industry although many previous studies have investigated the economic growth of east asian countries from the perspective of productivity growth they have adopted a limited focus only on the national level or on the aggregated level and have overlooked the heterogeneity at the disaggregated level furthermore only a few studies have examined the sources of the remarkable growth and trade performance of the korean machinery and equipment industry despite its importance for sustainable growth of national economy therefore we investigated the total factor productivity growth tfpg of the korean machinery and equipment industry and its 12 sub sectors from 1970 to 2012 using the stochastic frontier production approach as a result we found that the industry has achieved labour input driven tfpg largely due to technical progress this is contrary to the previous result that east asia has expanded the production frontier by capital accumulation in contrast in some sub sectors scale effect and allocation effici

preconditions windows of opportunity and innovation strategies successive leadership changes in the regional jet industry abstract we analyse the drivers of two successive leadership changes in the regional or mid sized jet market a particularly dynamic segment of the commercial aircraft industry in the first instance bombardier a canadian newcomer assumed leadership over the incumbents bae and fokker in 1995 in 2005 the brazilian firm embraer became the market leader in terms of number of regional jet deliveries our theoretical framework considers discontinuities in the building blocks of sectoral innovation systems as windows of opportunity for which challenger firms can devise strategic responses allowing them to assume market leadership it also considers preconditions as necessary capabilities limiting the number of potential challenger companies the analysis of leadership change shows that more efficient engines and technological improvements in subsystems changing oil prices business cycles liberalization of air transport services scope clauses and government interventions provided technological demand and regulatory windows of opportunity launching new aircraft families an architectural innovation targeting the 50 and the 100 120 seat niche markets gave first bombardier s crj family and later embraer s e jet family the leadership the fate of failed challengers and incumbents point to the importance of incumbent traps technological and financial capabilities the timing of windows of opportunity speedy strategic response a proper evaluation of future demand and sheer luck as long lead times and sunk costs entrap incumbents and other inadequately responding companies

managing technological development lessons from the newly industrializing countries this survey looks at the technological development of the newly industrializing countries to draw some important lessons for firms and governments in other developing countries first inventing products and processes is not at the center of the technological development needed for successful industrialization it is at the fringe what is at the center is acquiring the capabilities needed for efficient production and investment second some countries have overemphasized the drive for technological self sufficiency and paid a high price in poor productivity what makes the best economic sense is to combine foreign and local technological elements and to do this in a way that progressively develops local capabilities in areas where they can be more efficient third the acquisition of technological capability does not come merely from experience though experience is important fourth the economic environment through its influence on the technological efforts of firms is very important in determining the productivity of a country s resources

both institutions and policies matter but differently for different income groups of countries determinants of long run economic growth revisited summary this paper revisits the recent debate on the determinants of long run economic growth with the simple idea that different factors matter at different country groups classified by income levels this paper improves on the methodology by conducting not only cross section estimations but also fixed effects panel and system gmm estimations the results suggest that new policy variables such as technology and tertiary education as well as institutions matter as the determinants of long run economic growth in addition this paper finds that while secondary education and institution turn out to be important for lower income countries an emphasis on technology and higher education appears to be effective in generating growth for the upper middle and high income countries but not for the lower middle and low income countries

plant closings and exit behaviour in declining industries the plant closing and exit strategies of firms operating in a declining industry are examined a dynamic game theoretic model is utilized the perfectness criterion is used to restrict the set of nash equilibria there are two key equilibrium results first when firms have the same number of plants high cost plants close before lower cost plants second a larger firm i e a firm operating more plants begins closing plants before a smaller firm as long as cost differences are not large copyright 1988 by the london school of economics and political science

within country product diversification and foreign subsidiary performance we examine the product diversification of a multinational firm within each of its host country markets based on a sample of 12 992 foreign subsidiaries of japanese multinational firms we find that higher levels of within country product diversity led to higher subsidiary performance where the institutional strength of the local market was weak and where a firm s corporate product diversity level was high our study highlights the importance of examining a multinational firm s strategy in its individual host country markets as influenced by the institutional characteristics of a host country market and the corporate level strategy of the multinational firm

cost differences and survival in declining industries a case for picking winners abstract in this paper we examine the relationship between firms cost structures and the order of exit from declining industries we distinguish between two fundamental causes of demand decline namely a shrinkage of the consumer base and a decrease in consumers willingness to pay we show that it is not necessarily best to be small and flexible the order of exit in a market driven outcome depends on the manner in which demand shrinks we find that from a welfare perspective the order of exit determined by market forces is not necessarily desirable however simple rules for picking winners based on current unit cost profitability or productive efficiency do not provide sound guidance for policy

entry deterrence in a finitely lived industry the ghemawat and nalebuff 1985 exit model is extended to include an entry stage demand is high at the time of entry but is expected to eventually decline it is shown that equilibrium entry decisions may be critically affected by the prospect of a future decline in demand even when the latter is scheduled to occur in the arbitrarily distant future or is expected to be of arbitrarily short duration in all cases a unique perfect equilibrium for the entry game exists this equilibrium exhibits counterintuitive features for example the incumbent s and sometimes even the industry s output may be larger if the incumbent is a monopoly than if faced with a potential entrant

dependability and organizational bankruptcy an application of agency and prospect theory this paper proposes and tests a new model of organizational bankruptcy based on agency and prospect theory the paper argues that debtors with unprestigious top managers low liquidity and high leverage signal that they will be undependable exchange partners the model proposes that survival is contingent on maintaining an acceptable minimum level of these financial and managerial assets if a firm falls below that threshold level it has a higher probability of bankruptcy because creditors withdraw their financial support from the debtor consistent with agency theory this implies that bankruptcy can be viewed as the legal resolution of severe shareholder creditor conflicts about the levels of financial and managerial assets that the debtor should maintain this new model proposes that maintaining a minimum level of these assets is a necessary but not sufficient condition for bankruptcy some undependable firms delay bankruptcy by using strategies that create the hope that they will become dependable in the future according to prospect theory these strategies work because creditors wish to avoid recognizing significant losses and thus take on more risk than they might otherwise assume

technological regimes and schumpeterian patterns of innovation this paper proposes that the specific pattern of innovative activities in an industry can be explained as the outcome of different technological learning regimes a technological regime is defined by the particular combination of technological opportunities appropriability of innovations cumulativeness of technical advances and properties of the knowledge base building upon the distinction between schumpeter mark i and schumpeter mark ii industries this paper provides empirical estimates of the relationships between indicators of the schumpeterian patterns of innovation concentration of innovative activities stability in the hierarchy of innovators and importance of new innovators and indicators of the variables defining technological regimes

top managerial prestige and organizational bankruptcy this paper extends earlier work on an alternative view of bankruptcy suggesting that bankruptcy occurs when creditors withdraw then support from a firm s top management team it further proposes that support for the top team depends upon the team s prestige five characteristics measuring the relative status of top teams were tested for their association with bankruptcy three of the characteristics focused on items commonly associated with membership in economic elites elite educational backgrounds board memberships and previous employment as officers in other corporations the fourth and fifth characteristics focused on membership in political and military elites the results indicated that political and board connections were negatively associated with bankruptcy in the year of failure even when financial factors and cooptive board linkages were controlled the results also showed that failing firms attempted to improve their managerial prestige three to four years before they failed they were how

an intertemporal model of industrial exit a finite horizon model of industrial exit is developed after an initial lag most exits are by young firms the duration of the lag is positively related to sunk entry costs but not due to the fallacy of sunk costs the conception of entry differs from previous research as a result not all entrants are identical and firm size affects the rate of learning on average larger new firms last longer entrepreneurs in declining firms act more lazily as the firm declines a number of empirical observations about declining firms are organized by the model

technological regimes catching up and leapfrogging findings from the korean industries abstract this paper examines the experiences of selected industries in korea to identify the stylized facts in the process of technological capability building and thereby to sort out the conditions for the catching up to occur to explain the process we have built a model of technological and market catching up a special attention has been given to the question of whether there has been a case of leapfrogging in any industry in korea and if so what are the conditions for its incidence in our framework we first measure the degree of catching up in terms of market shares in the world then we focus on catching up in technological capabilities in explaining the different record and prospects of korean industries in market catching up in the model technological capability is determined as a function of both technological effort and the existing knowledge base as determinants of technological effort we look at the technological regimes of the industries such as cumulativeness of technical advances fluidity predictability of technological trajectory and the properties of knowledge base using this model we explain the different technological evolution of the selected industries in korea including the d ram automobile mobile phone consumer electronics personal computer and machine tool industries we find three different patterns of catching ups path creating catching up cdma mobile phone path skipping catching up d ram and automobile and path following catching up consumer electronics personal computers and machine tools we interpret the first two case of catching up as leapfrogging unlike the argument by perez and soete perez c soete l 1988 catching up in technology entry barriers and windows of opportunity in dosi et al eds technical change and economic theory pinter publishers london we find that important r d projects except automobiles where only private r d was involved involved both private and public capacities and that entry was not driven by endogenous generation of knowledge and skills but by collaboration with foreign companies

innovation technological regimes and organizational selection in industry evolution a history friendly model of the dram industry the paper explores the complex relationship among innovation technological regimes and selection of the firms of different organizational forms in the evolution of an industry for this purpose this paper develops a history friendly model for the dynamic random access memory industry that replicates the history of the industry by simulation the shift of industry dominance by small specialized ss firms to large diversified ld firms is explained by the technological regimes of the industry characterized by low cumulativeness and strong impact of innovation on productivity increase the simulation analysis also found the following causal relationship underlying the evolution of the industry first the stronger innovation impact in terms of productivity jump tends to enlarge the productivity difference among the incumbent firms and increase the speed of productivity catch up by the ld firms second the possibility of entry and eventual dominance by the ld firms increase when the innovation productivity linkage is stronger and there is less cumulativeness in productivity determination copyright 2003 oxford university press

gradual catch up and enduring leadership in the global wine industry the wine industry is an extremely interesting sector from a catch up point of view because the latecomers in the international market have changed how wine is produced sold and consumed and in doing so they have challenged the positions of incumbents until the end of the 1980s the european countries and particularly france and italy dominated the international market for wine subsequently significant changes in the market namely decreases in consumption by traditional consuming countries the entry of new inexperienced consumers and the increasing importance of large distribution have threatened this supremacy initially the usa and australia and later emerging countries such as chile and south africa gained increasing market shares in both exported volumes and value at the expense of incumbents however some of these newcomers e g australia have shown slower growth opening opportunities for newer entrants such as argentina and new zealand at the same time some of the incumbents especially italy have innovated challenging the leadership of france in key markets such as the usa in this article we investigate the different catch up cycles in the global wine sector that occurred between the 1960s and 2010 through a detailed analysis of export volumes values and unit prices we address issues related to the increasing share in the global market of latecomer countries and the relative decline of the incumbents as well as possible changes in the market leadership within these two groups

catching up by hiring the case of huawei hiring experts in centers of state of the art technology is an important way in which a multinational enterprise mne can gain competitive advantage and yet use of this mechanism remains under researched this study uses the case of a chinese mne that recently achieved a leading position in the telecommunications market huawei technologies taking the perspective of huawei s offshore hires i find that greenfield investments contributed to overcoming liabilities of origin and outsidership in the global telecommunications industry nevertheless even now that huawei has caught up with industry incumbents its output capabilities remain dependent on the innovation capabilities of its offshore experts

bridging behavioral and economic theories of decline organizational inertia strategic competition and chronic failure this paper is another plea for bridging behavioral and economic approaches to the study of competition in markets and strategy making by firms the arguments focus on a specific case in point the behavioral theory of organizational decline and the economic modeling of immediate exit the arguments come in three steps first the literature on organizational decline is reviewed by organizing a framework that summarizes arguments from varying economic and organizational perspectives that have for the most part developed independently observations from empirical and theoretical studies are combined in order to investigate the causes conditions courses and consequences of organizational downturn second a theoretical argument is developed that explains voluntary exit and chronic failure by introducing a proxy of organizational inertia in a model of strategic cournot duopoly the key assumptions which have a behavioral flavour that seemingly contradicts orthodox economics are grounded in the theoretical and empirical literatures the results of the model support the claim that pure profit maximizing behavior may be at the expense of organizational survival d aveni 1990 p 135 third by formulating two hypotheses and presenting tentative evidence from the chemical industry the paper hopes to convincingly argue that such integrative models lead to empirical testing of interesting hypotheses a key finding here is that inefficient firms may outlast their efficient rivals cf d aveni 1989a

the fallacy of only the strong survive the effects of extrinsic motivation on the persistence decisions for under performing firms abstract under performing firms persist even though existing theoretical perspectives indicate that they should be selected out of the market building upon threshold theory gimeno j folta t cooper a woo c 1997 survival of the fittest entrepreneurial human capital and the persistence of underperforming firms administrative science quarterly 42 750 783 and using staw s staw b m 1981 the escalation of commitment to a course of action academy of management review 6 4 577 587 theoretical model of commitment to a course of action we explore and test the factors that lead entrepreneurs to persist with under performing firms we found environmental munificence personal investment personal options previous organizational success and perceived collective efficacy impact the decision to persist with an under performing firm in addition extrinsic motivation moderates those relationships this research adds to the growing literature on highly persistent under performing firms and complements and extends threshold theory

approaching the innovation frontier in korea the transition phase to leadership as leading east asian latecomer firms begin to compete on the basis of new product development and in house research and development r d they appear to confront a difficult strategic dilemma should they compete as r d and brand leaders on the international stage or should they continue with their tried and tested formula of low cost catch up competitiveness most studies of east asian firms focus on catch up innovation processes by contrast this paper focuses on the challenges facing latecomer firms in the transition phase from catch up to leadership status in order to assess the strategic dilemma argument and examine the nature of transition innovation based on in depth interviews with leading korean firms the paper contends that the strategic dilemma argument is a misleading oversimplification of the main innovation challenges facing most korean firms as they become more technologically advanced most of the major exporters or chaebol offer a portfolio of products some of which are technologically advanced and others less advanced corporate innovation strategies tend to be executed in relation to the needs of specific products or closely related product families rather than the firm in its entirety in addition many firms in many product areas have yet to reach the innovation frontier stage and even the leading chaebol continue to produce large volumes of products under sub contracting and licensing agreements firm strategies tend to embody a mix of leadership followership and latecomer positions according to the product portfolio of the company in question the study identifies various strategic options and difficulties facing korean firms during the transition process and points to promising future research on latecomer transition

organizational inertia and momentum a dynamic model of strategic change this study provides an empirical test of hannan and freeman s theory of structural inertia we examined the changes organizations undertook in response to a major environmental change in addition

exit with multiplant firms using an extension of ghemawat and nalebuff s 1985 model i analyze the outcome of industry decline when firms have multiplant operations the analysis reveals that no natural generalization of their strong empirical prediction that the larger of two single plant duopolists exits first holds in a multiplant setting the results also highlight a number of factors that affect the pattern of capacity removal during industry decline and lead to a discussion of the strategic implications of firms plant size choices in general the factors determining the pattern of capacity reduction can be quite complex and prediction in such settings often requires intimate knowledge of industry structure

dynamics of china s provincial level specialization in strategic emerging industries this paper examines the dynamics of technological specialization in strategic emerging industries seis within each of mainland china s 31 provinces and the likely effectiveness based on the experiences of taiwan and south korea of the provinces strategies for developing these industries grounded in economic decentralization theories the empirical method employed includes analyzing the scores on an sei specialization promotion index per each province alongside several analytics of invention patent data from each province in the seven seis newly designated by the central level government as of 2010 the data is quantitatively analyzed according to four groups of indicators based on the following specialization relevant concepts comparative advantages and technological capabilities economy size and income technological uncertainty and lifecycles and latecomer entry into complex technologies where knowledge is most cumulative the analysis finds that china s system of economic decentralization has partially worked to ensure provincial industrial policymaking is effective whereby a notable number of provinces are seemingly pursuing sei development strategies in terms of sei selection and promotion that may enable catch up however paradoxically at the same time the system appears to sometimes facilitate provincial sei development strategies that are quite risky or even likely ineffective

the made in effect and leapfrogging a model of leadership change for products with country of origin bias abstract change in industrial leadership is often explained in terms of technological and costs advantages however firms in emerging economies not only have to produce high quality cost competitive goods but also win the resistance of consumers in the world market who are often adverse to purchasing products from countries that yet have to build a reputation we argue that this country of origin bias significantly influences the chances of leadership change a model that aims at capturing the endogenous dynamics of demand building and leapfrogging is proposed we show that in sectors with high monopoly power acquiring a superior technology is not sufficient for a latecomer country to become leader unless a significant share of consumers is aware of the quality of its products an extension of the model to multiple sectors shows that a latecomer country remains specialized into low value undifferentiated goods even after overtaking the technology of the leading country

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

credible entry threats into contestable markets a symmetric multi market model of contestability the theory of contestable markets emphasizes potential competition yet it is reticent on the identity of potential entrants recent literature discusses the im possibility of hit and run entry for several types of entrants r d cairns and d mahabir 1988 argue that existing firms in related markets are most likely to be capable of hit and run entry but unlikely to be motivated this paper expands their arguments by sketching a multimarket framework and by discussing a model that captures most of the current debate the model marks a first step into revising contestability theory along the lines of this debate copyright 1992 by the london school of economics and political science

the economic consequences of unwed motherhood using twin births as a natural experiment social scientists have long concluded that premarital childbearing exacerbates problems of both poverty and family instability out of wedlock and adolescent childbearing may reduce a mothers educational attainment lower the probability of her eventual marriage increase her probability of welfare recipiency and decrease family income the authors use an exogenous fertility event the birth of twins to estimate the economic effects of unplanned births the approach compares the economic outcomes of women experiencing premarital twin first births to those experiencing premarital single first births in the attempt to identify the consequences of an unplanned birth upon womens future fertility and marital decisions education labor force participation labor earnings welfare receipt and poverty status 1970 and 1980 us census micro data are used to identify twin births to unmarried women analysis found large short term effects of unplanned births on labor force participation poverty and welfare recipiency among unwed mothers but not among married mothers furthermore most adverse economic effects of unplanned motherhood dissipate over time for whites but larger and more persistent negative effects weigh upon black unwed mothers

firm entry and exit in the canadian manufacturing sector 1970 1982 this paper measures the importance of entry and exit to the canadian manufacturing sector in the 1970s it focuses on the size of entrants as they move from a stage of infancy to adolescence the exit rates of births their length of life and the growth path of entrants are presented distinctions are made between greenfield and merger entry while entrants are small at birth the cumulative effect of successive cohorts of entrants in the 1970s adds up to a significant fraction of all firms and total sales by 1979

a theory of exit in duopoly we develop a duopoly model in which exit occurs because of the existence of fixed costs or opportunity costs each firm enters the market knowing its own cost but not that of its opponent as times goes on each firm becomes increasingly pessimistic about the cost of its remaining rival the time of exit is the only strategic variable so that our model is a war of attrition in contrast to the classic war of attrition however we assume that with positive probability each firm s costs may be low enough that staying in forever is a dominant strategy thus our model unlike the classic one has a unique equilibrium

schumpeterian patterns of innovation using patent data for four countries germany france united kingdom and italy for the period 1968 1986 the authors find that the patterns of innovative activities differ systematically across technological classes while remarkable similarities emerge across countries in the patterns of innovative activities for each technological class this result strongly suggests that technological imperatives and technology specific factors closely linked to technological regimes play a major role in determining the patterns of innovative activities across countries schumpeter proposed two major patterns of innovative activities the first one labelled by nelson and winter 1982 and kamien and schwartz 1982 as schumpeter mark i is proposed in the theory of economic development 1934 in this work schumpeter examined the typical european industrial structure of the late nineteenth century characterised by many small firms according to this view the pattern of innovative activity is characterised by technological ease of entry in an industry and by a major role played by new firms in innovative activities new entrepreneurs come in an industry with new ideas new products or new processes launch new enterprises which challenge established firms and thus continuously disrupt the current ways of production organisation and distribution and wipe out the quasi rents associated with previous innovations the second one labelled schumpeter mark ii is proposed in capitalism socialism and democracy 1942 in this work inspired by the features of the american industry of the first half of the twentieth century schumpeter discussed the relevance of the industrial r d laboratory for technological innovation and the key role of large firms according to this view the pattern of innovative activities is characterised by the prevalence of large established firms and by relevant barriers to entry for new innovators large firms have institutionalised the innovation process with the creation of r d laboratories filled with researchers technicians and engineers with their accumulated stock of knowledge in specific technological areas their advanced competence in large scale r d projects production and distribution and their relevant financial resources they create barriers to entry to new entrepreneurs and small firms

state led technological development a case of china s nanotechnology development summary we analyze nanotechnology patent applications filed in china from 1998 to 2008 and find that the extraordinary pace of nanotechnology development achieved over that period has been promoted primarily by the public sector rather than being driven by industry and market forces this finding implies that developing countries such as china with public research capacity and commitment to technological development can make rapid progress in basic research in emerging technologies but it remains uncertain whether and when local industry can benefit from public r d investment enough to enable active development of indigenous innovation

knowledge diffusion market segmentation and technological catch up the case of the telecommunication industry in china abstract this paper examines the growth of technological capability in the telecommunication industry in china we apply a modified version of lee and lim s lee k lim c 2001 the technological regimes catch up and leapfrogging findings from the korean industries research policy vol 30 model of technological learning and catching up using the three cases of the shanghai bell the cit led r d consortium and indigenous companies such as huawei we analyze how the catching up in the telecommunication industry occurred we find that the important factors in the catch up are the strategy of trading market for technology the knowledge diffusion from shanghai bell both to the r d consortium and to huawei and industrial promotion by the government as a condition for successful catch up the paper points out that the technological regime of the telephone switches is featured by a more predictable technological trajectory and a lower cumulativeness these conditions and strategies helped the chinese firms to achieve a stage skipping catch up namely by skipping the stage of analogue electronic switches to jump to digital electronic switches

foreign competition domestic knowledge base and innovation activities evidence from chinese high tech industries using panel data analysis for a sample of chinese high technology industries from 1998 to 2008 this study examines how industry characteristics affect industry innovation activities differing from existing studies our research considers the impact of foreign competition on innovation activities at industry level in a large emerging economy the results indicate that the intensity of competition from foreign invested enterprises fies and domestic skill intensity affect industry buy and make activities foreign competition is positively associated with the intensity of buy activity but negatively affects the intensity of make activity further the findings show that domestic skill intensity weakens the impact of foreign competitive pressure on innovation activities our empirical evidence has important policy implications

an institutionalized policy making mechanism china s return to techno industrial policy abstract technology and innovation policy in china shifted dramatically in 2003 returning to techno industrial policy that involves direct government interventions to shape specific industrial sectors this article precisely documents the shift and shows that it occurred through two successive waves of policy change this policy shift was formulated through a policy process that like others in china has become increasingly institutionalized the article introduces a general four phase model that describes the structured policy process in china in the case of innovation policy this structured policy process facilitated a shift to a substantially more interventionist policy

rise of latecomers and catch up cycles in the world steel industry abstract this study analyzes the sources of changes in industrial leadership and catch up by latecomers in the world steel industry since world war ii the shift of leadership from the united states to japan in 1980 and the subsequent rise of korea with posco s output surpassing that of nippon steel in 1998 is explained on the basis of a single theoretical framework we rely on the neo schumpeterian concepts of sectoral innovation systems and windows of opportunity for latecomers in catching up with leading countries these windows include changing generations of technologies business cycles and demand shifts and government regulations and other interventions japan realized a path creating catch up by taking advantage of the opportunity window associated with the emergence of new technologies entering as a state owned enterprise posco engaged in stage skipping catch up by utilizing the downturn as a window of opportunity to pay low prices for expanding its facilities and updating its technologies

why not greater catch up by chinese firms the impact of ipr corporate governance and technology intensity on late comer strategies abstract how can late comer firms lcfs in developing economies manage their development of technological capability and within it their ip strategically in order to become fully competitive internationally under what conditions external and internal are they likely to succeed this paper develops a theoretical framework for understanding lcfs technology strategy and predicting its outcome then applies it to the cases of three chinese firms in sectors at different levels of technology intensity this yields insights as to its limitations and further development these help explain mainland china s very limited catch up in high technology sectors and to a lesser extent in medium high technology we show how our findings can be reconciled with the much greater success of korean firms some 20 years earlier if the effect of corporate governance differences is recognised

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

differences between learning processes in small tigers and large dragons learning processes of two color tv ctv firms within china abstract the main purpose of this paper is to describe the firm level learning processes by indigenous firms in china identify the differences between learning processes in small tigers and large dragons such as china this paper first sketches the history of the china s color tv ctv industry in which learning processes take place to put the companies case studies into context then this paper examines closely the actual experience of two major chinese firms in their practice of technological learning finally this paper finds that the most significant difference between learning processes in chinese firms and these four other tigers firms is that firms from four other tigers usually rely almost exclusively on export markets but chinese firms are mostly local market focused a novel contribution of this paper is its analysis of the issue the two chinese firms have followed not an export growth path but an local market focused path which proved to be much less successful in countries such as india latin america africa and former soviet union the success of this process in china hinges on the five critical factors 1 a number of multinational firms are increasing their presence in china 2 there is vibrant competition among domestic firms 3 the huge domestic market is a key incentive for local firms to invest in technological learning 4 chinese central government takes a phased approach to liberalization of the domestic market 5 there have a number of risk taking entrepreneurs with strategic version who make investment decisions on learning these factors should not be easily available to other developing countries in this regard china s experience has limited application to other developing countries

explaining divergence in catching up in pharma between india and brazil using the nsi framework since the mid twentieth century the national objective of india and brazil has been to develop industrial capabilities in essential sectors such as pharmaceuticals at the outset they shared some common features a considerable period of lax intellectual property rights regimes a large internal market and a reasonably strong cadre of scientists and engineers however over sixty years india has had much more success in building indigenous capabilities in pharmaceuticals than brazil at least to date why in exploring the answer to this question we show that in both countries the design of state policy played a crucial role and the endogenous responses in the national system of innovation consisted of two parts on the one hand most of the time the predicted and desired outcome was partially realized and on the other hand there were invariably other unpredicted responses that emerged the latter unexpected elements which were specific to the two countries pushed them along distinctive trajectories

strategic change in the turnaround process theory and empirical evidence early corporate turnaround theorists argued that strategic reorientations are central to the recovery process at many declining firms however subsequent large sample empirical studies have reported that performance turnarounds for declining firms are primarily associated with cutback actions that increase efficiency thus creating a gap between theory and empirical findings we close this gap by presenting and empirically supporting a model proposing that the extent of strategic change initiated in a successful turnaround varies systematically with a declining firm s need and capacity to reorient its strategy based on our model we offer explanations for why past large sample researchers were not able to verify the role of strategic change in the turnaround process and we reassert the adaptive role that strategic reorientations have in the turnaround attempts of declining firms with weak strategic positions 1997 by john wiley sons ltd

uneven growth between interdependent economies an evolutionary view on technology gaps trade and growth preface part one theory and empirics of international growth rate differentials and technology gaps chapter 1 technology growth and welfare a historical perspective 1 1 the search for welfare and the role of technology 1 2 aim of the book 1 3 organisation of the rest of the book notes chapter 2 the literature on economic growth and technological change 2 1 a brief overview 2 2 the traditional literature on economic growth 2 3 new neoclassical growth models endogenous innovation 2 4 the role of technological change 2 5 explaining growth rate differentials notes chapter 3 an evolutionary theory of economic growth and technological change the basics 3 1 economic growth as an evolutionary process a macroeconomic interpretation 3 2 economic growth as an evolutionary process a microeconomic interpretation 3 3 towards an evolutionary theory notes chapter 4 technology and growth in an international perspective 1960 1990 an impressionistic approach 4 1 economic growth and structural change 4 2 technology 4 3 technology and growth catching up or falling behind a global issue 4 4 summary and conclusions appendix iv 1 postwar economic welfare and the selection of country samples appendix iv 2 the 3 digit isic sector classification revision 2 appendix iv 3 on measuring and graphing structural differences between countries appendix iv 4 some tests for the influence of multicollinearity on the regressions in section 4 2 notes part two technology spillovers between interdependent economies catching up or falling behind chapter 5 a model of catching up or falling behind 5 1 description of the model 5 2 solving the model 5 3 the outcomes of the model under varying parameter restrictions 5 4 conclusions of the model notes chapter 6 an empirical test of the model 6 1 testing procedure and data sources 6 2 result 6 3 interpreting the results 6 4 summary and some policy conclusions appendix vi l a description of the data appendix vi 2 the calculation of the n statistic notes part three technological change international trade and economic growth chapter 7 an evolutionary model of technological change specialisation and economic growth 7 1 a descriptive interpretation 7 2 the model 7 3 simulation results 7 4 summary and conclusions appendix vii 1 initial values of the simulation runs for the 3 country 2 sector case appendix vii 2 some mathematical details of the selection equation in discrete time notes chapter 8 an empirical view on the evolution of trade and technology 8 1 patents as indicators of innovation 8 2 summarising some known correlations 8 3 trade and technology a dynamic evolutionary framework 8 4 estimation of the replicator equation 8 5 some further tests on the robustness of the replicator estimates 8 6 explaining the results for the patent variables 8 7 summary and conclusions

inter industry differences in profitability the legacy of the structure efficiency debate revisited this study presents a simple model on the sources of inter industry variation in profitability and tests its empirical implications in order to shed new light on the long lasting debate over industry profitability the model identifies four key factors that jointly influence an industry s price cost margin i the intensity of strategic investment e g r d and advertising ii the skewness of the distribution of market share or market concentration iii the appropriability of strategic investment and iv the extent to which firms market shares are determined by the intensity of their strategic investment these factors are expected to be positively related to industry profitability and our empirical analysis provides supportive evidence the model also suggests that the conventional single dimensional hypotheses on profitability the market power or market structure hypothesis and the efficiency hypothesis are overly simplified more importantly existing empirical results allegedly supporting each of these hypotheses are spurious to the extent that the distribution of firm specific strategic competence reflects firm heterogeneity in efficiency and at the same time underlies the distribution of market share or market concentration copyright 2009 oxford university press

entry and exit on the competitive fringe microeconomic theories of industry evolution reserve key roles for the entry and exit of firms competitive models of industry supply often assume that individual firms have ushaped long run average cost curves in consequence an industry s output adjustment in movement from one long run equilibrium to another is entirely accomplished through the entry and exit of firms rather than through changes in long run equilibrium output of individual firms in empirical applications the speed of movement to new equilibrium levels of output and price measured by the time it takes for profits to return to competitive levels following a demand shock clearly depends upon the ease of entry and exit however the simplest competitive models have a clear theoretical weakness abundant evidence against u shaped long run average cost curves precludes a simple identification of entry with industry expansion and exit with industry contraction expansion of industry supply can be met either by incumbents or entrants and we have little empirical evidence of the division entry conditions are also a staple of oligopoly and monopoly models potential entry constrains the pricing options open to industry leaders and actual entry of new firms and new products erodes at varying rates the market power of incumbent firms if actual entry responds rapidly to profit opportunities then the persistent exercise of monopoly power will be rare however analyses of monopoly and oligopoly models typically approach entry indirectly by inferring that persistent profit differentials reflect high barriers to entry there are few direct tests of the effects of such barriers on actual entry despite their importance very few empirical studies of entry and exit exist severe data limitations restrict both the number of studies and the scope of extant analyses the research reported in this paper provides measures of entry and exit in 46 food manufacturing industries during the 1976 82 period measures of incidence the number of firms as well as extent the size of firms are provided the analysis also distinguishes between diversified firms and specialist producers entry and exit rates vary considerably across industries and the paper reports the results of statistical analyses that account for industry differences in entry and exit rates by specialist firms

public policies and the art of catching up matching the historical evidence with a multicountry agent based model in this paper we study the effects of industrial policies on international convergence using a multi country agent based model which builds upon dosi et al 2019b the model features a group of microfounded economies with evolving industries populated by heterogeneous firms that compete in international markets in each country technological change is driven by firms activities of search and innovation while aggregate demand formation and distribution follows keynesian dynamics interactions among countries take place via trade flows and international technological imitation we employ the model to assess the different strategies that laggard countries can adopt to catch up with leaders market friendly policies industrial policies targeting the development of firms capabilities and rd protectionist policies focusing on tariffs only we find that markets cannot do the magic in absence of government interventions laggards will continue to fall behind on the contrary industrial policies can successfully drive international convergence among leaders and laggards while protectionism alone is not necessary to support catching up and countries get stuck in a sort of middle income trap finally in a global trade war where developed economies impose retaliatory tariffs both laggards and leaders are worse off and world productivity growth slows down

linking the technological regime to the technological catch up analyzing korea and taiwan using the us patent data this article examines the relationship between the technological regime and the technological catch up using us patent data this study first extends the notion of technological regimes as more appropriate for the catching up context before it goes on to develop the quantitative expressions of technological regime variables then it investigates in which technological classes technological catch up tends either to occur or not to occur and what affects the speed of the catch up this study has found that catching up is more likely to happen in those technological classes with shorter technological cycle time and more initial stock of knowledge and that among those candidate classes the actual speed of catch up varies depending on appropriability and knowledge accessibility this implies that the factors that determine the occurrence of catch up and the speed of catch up are different comparing the level of technological capability of the advanced and catching up economies the article has found that catching up countries tend to achieve high levels in the technological sectors with shorter cycle time easier access to knowledge and higher appropriability whereas the advanced countries show the exactly opposite performances the study also confirms the organizational selection hypothesis such that the firms of different organizations and strategies show divergent degrees of fitness in the different environment or technological regime we find that the korean firms find themselves more fitted to technological regimes featured by low appropriability and high cumulativeness persistence whereas the taiwanese firms are more fitted to technological regimes featured by high appropriability and low cumulativeness persistence our findings are consistent with the following characterization of the firms in korea and taiwan the korean firms dominated by the so called chaebols especially in patent registrations are characterized as less flexible large diversified conglomerates and pursing more independent r d and learning strategies the taiwanese firms are characterized as more flexible network based specialized firms and pursuing more cooperative r d and learning strategies copyright 2006 oxford university press

a modified cournot model of the natural gas market in the european union mixed motives delegation in a politicized environment with gazprom gaining prominence as the major supplier of natural gas in the european union the european gas market becomes more politicized we assume that gazprom s interest as a state monopolist is not only to maximize profit but also to seek market power presumably because this contributes to the geopolitical power of russia at large we introduce a modeling tool so called strategic delegation games to analyze the implications of gazprom s operation in the eu by way of illustration we model the case where gazprom competes against two profit maximizing rivals algerian sonatrach and norwegian statoil we prove that if gazprom serves any of a comprehensive type of nonprofit objectives the outcome is beneficial for the eu s consumers as gazprom s behavior shifts volumes up and brings prices down

investment activity and the exit decision using level data from the u s steel industry this paper tests and finds support for the hypothesis that firms in a contracting industr y first disinvest from and then close their high cost plants an investment decision model is estimated using a panel data set composed of the major replacement investments made in forty three steel plants during the years 1960 81 the results indicate that the firms disinvested from those plants are least likely to remain profitable in an environment of strong competition from imports minimills and stagnating domestic demand copyright 1988 by mit press

local test bed market demand in the transition to leadership the case of the korean mobile handset industry this article proposes that a potentially significant dimension of technological catching up and the transition to leadership lies in the quality and dynamics of the local market rather than in the export market demand as traditionally stressed in catch up studies based on an exploratory analysis of the korean mobile handset industry over the period of the late 1980s to 2005 the paper shows that a transition to leadership in handsets was shaped and driven by domestic users local service suppliers mobile telecommunications operators favorable government policies and strong producer user links forged by manufacturers and operators traditionally local demand in latecomer economies has been considered too small and unsophisticated to stimulate innovation and to enable catching up however in this case local demand evolved and acted as an important test bed for new products services and technologies shaping the rate and direction of the technological development of both local suppliers and operators the conclusion argues that while direct implications for other developing countries cannot be drawn from a single case future research could identify whether under certain circumstances the role of local demand and test bed markets could have wider relevance for other advanced developing nations and other sectors approaching the technology frontier

on the turnover of business firms and business managers this paper develops a model of small business failure and sale that is motivated by recent evidence concerning how the failure and sale of small businesses vary with the age of the business and the tenure of the manager this evidence motivates two key features of the model a match between the manager and the business and characteristics of businesses that survive beyond the current match the parameters of the model are estimated and the properties of this parametric model are studied this analysis results in a simple characterization of the workings of the small business sector

children and their parents labor supply evidence from exogenous variation in family size although theoretical models of labor supply and the family are well developed there are few credible estimates of key empirical relationships in the work family nexus this study uses a new instrumental variable the sex composition of the first two births in families with at least two children to estimate the effect of additional children on parents labor supply in the united states instrumental variables estimates using the sex mix are substantial but smaller than the corresponding ordinary least squares ols estimates moreover unlike the ols estimates the female labor supply effects estimated using sex mix instruments appear to be absent among more educated women and women with high wage husbands we also find that married women who have a third child reduce their labor supply by as much as women in the full sample while there is no relationship between wives child bearing and husbands labor supply excerpt

entry exit and diffusion with learning by doing early entry has the advantage of higher revenues per unit of output early on late entry has the benefit of learning from the experience of earlier entrants and hence lower production costs the advantages are balanced off in a continuous time perfect foresight equilibrium competition generates s shaped diffusion and staggered entry and exit a monopolist will innovate less than a competitive industry but the innovation that he does do he will do sooner copyright 1989 by american economic association

innovation and recurring shifts in industrial leadership three phases of change and persistence in the camera industry abstract this study examines factors underlying three phases of change or persistence in industrial leadership in the sector of interchangeable lens cameras over the past century during this period there were two major phases of leadership change both associated with the emergence of innovations involving major discontinuities in the industry s core technologies first japan won market leadership from germany in the mid 1960s after commercializing the single lens reflex slr camera that replaced the previously dominant german rangefinder camera second in the late 2000s japanese latecomer firms and a korean firm developed mirrorless cameras which allowed them to capture the majority of market share from the incumbent japanese leaders we also examine the long period about 60 years between these two phases of change during which leading japanese firms were able to sustain their market leadership despite the digital revolution from the 1980s to 1990s this paper explores the factors influencing these contrasting experiences of change and persistence in industry leadership the analysis integrates several aspects of sectoral innovation systems i e windows of opportunity associated with technology demand and institution as well as the strategies of incumbents and latecomer firms the conclusions highlight the complex and diverse combinations and importance of the factors that help explain the patterns of shifts in leadership

the devolution of declining industries in declining industries capacity must be reduced in order to restore profitability who bears this burden where production is all or nothing there is a unique subgame perfect equilibrium the largest firms exit first ghemawat and nalebuff 1985 in this paper firms continuously adjust capacity again there is a unique subgame perfect equilibrium all else equal large firms reduce capacity first and continue to do so until they shrink to the size of their formerly smaller rivals intuitively bigger firms have lower marginal revenue and correspondingly greater incentives to reduce capacity this prediction is supported by empirical findings

do organizations have to change to learn examining the effects of technological change and learning from failures in the natural gas distribution industry failures contain valuable information however organizations vary at learning from them i ask whether failures prompt organizations to make technological investments and whether these investments help boost performance beyond improvements gained through direct organizational learning i test hypotheses on natural gas distributors to determine whether they enhance their performance by learning directly by recognizing failures as prompts to invest in safer technologies or through a combination results suggest that distributors learn directly though firms which also invest in related technologies are able to gain some additional benefits copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

the life cycle of a competitive industry firm numbers first rise then later fall as an industry evolves this nonmonotonicity is explained using a competitive model in which innovation opportunities fuel entry and relative failure to innovate prompts exit equilibrium time paths for price and quantity also share features of the data the model is estimated using data from the u s automobile tire industry a particularly dramatic example of the nonmonotonicity in firm numbers

when is the local average treatment close to the average evidence from fertility and labor supply the local average treatment effect late may differ from the average treatment effect ate when those influenced by the instrument are not representative of the overall population heterogeneity in treatment effects may imply that parameter estimates from 2sls are uninformative regarding the average treatment effect motivating a search for instruments that affect a larger share of the population in this paper i present and estimate a model of home production with heterogeneous costs and benefits to fertility the results indicate that a sex preference instrument in taiwan produces iv estimates closer to the estimated ate than in the united states where sex preference is weaker

decomposing uncertainty and its effects on imitation in firm exit decisions this study examines the effects of different uncertainty types on interorganizational imitation in firm exit decisions we draw on herding models to conceptualize exit decisions as being based on a firm s private information which the firm updates with information inferred from observing the actions of others we posit that different types of uncertainty differentially affect this observational learning process in particular we propose that certain uncertainty types attenuate rather than foster observational learning and subsequent imitation we test this theory using a 29 year panel data set on the exit of private venture capital firms our results indicate that observational learning does influence imitation in firm exit decisions and they also suggest that a common belief that uncertainty enhances imitation does not apply to all types of uncertainty specifically we find that uncertainty fosters imitation only when it is idiosyncratic to the firm uncertainties that are common to all firms in contrast actually reduce reliance on observational learning by decomposing uncertainty into different types and explicating their effects on imitation we demonstrate that this relationship is more nuanced than previously assumed and in addition highlight the role of deliberate information processing in imitation

entry and exit over the industry life cycle this article presents a theoretical model of the rivalry between two firms in a market that undergoes a life cycle of growth and eventual decline firms in this market have the option of exit and reentry in the equilibrium for the growth phase high entry costs can act like high exit costs thereby conveying a commitment advantage for some parameter configurations this advantage is sufficient to enable a high costfirm to preempt its lower cost rival during the decline phase the smaller duopolist is able to outlast its rival provided that the smaller firm s reentry costs are positive

moving forward balancing the financial and emotional costs of business failure why do owner managers delay business failure when it is financially costly to do so in this paper we acknowledge that delaying business failure can be financially costly to the owner manager and the more costly the delay the more difficult the recovery but we complement this financial perspective by introducing the notion of anticipatory grief as a mechanism for reducing the level of grief triggered by the failure event which reduces the emotional costs of business failure we propose that under some circumstances delaying business failure can help balance the financial and emotional costs of business failure to enhance an owner manager s overall recovery some persistence may be beneficial to recovery and promote subsequent entrepreneurial action

learning and catching up in different sectoral systems evidence from six industries this article claims that catching up is a learning process that requires a long time and often differs significantly across economic sectors in the factors leading to success or failure we support these claims by examining the major factors affecting catching up by several countries in six industries india and brazil for pharmaceuticals korea china and brazil for autos india ireland israel china brazil and other countries for software korea and india for telecommunication equipment korea taiwan china and malaysia for semiconductors and china brazil costa rica and nigeria for some agricultural crops the article uses the framework of sectoral systems and argues that there are significant differences across these sectors in the variables and mechanisms involved in catching up the article identifies the common factors affecting catching up and the main differences across sectoral systems it then discusses the interplay between national systems and sectoral systems copyright 2011 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

estimating average and local average treatment effects of education when compulsory schooling laws really matter the change to the minimum school leaving age in the united kingdom from 14 to 15 had a powerful and immediate effect that redirected almost half the population of 14 year olds in the mid twentieth century to stay in school for one more year the magnitude of this impact provides a rare opportunity to a estimate local average treatment effects late of high school that come close to population average treatment effects ate and b estimate returns to education using a regression discontinuity design instead of previous estimates that rely on difference in differences methodology or relatively weak instruments comparing late estimates for the united states and canada where very few students were affected by compulsory school laws to the united kingdom estimates provides a test as to whether instrumental variables iv returns to schooling often exceed ordinary least squares ols because gains are high only for small and peculiar groups among the more general population i find instead that the benefits from compulsory schooling are very large whether these laws have an impact on a majority or minority of those exposed

natural natural experiments in economics the recent literature exploiting natural events as natural experiment instruments is reviewed to assess to what extent it has advanced empirical knowledge a weakness of the studies that adopt this approach is that the necessary set of behavioral market and technological assumptions made by the authors in justifying their interpretations of the estimates is often absent the methodology and findings from twenty studies are summarized and simple economic models are used to elucidate the implicit assumptions made by the authors and to demonstrate the sensitivity of the interpretations of the findings to the relaxation of some of these assumptions