cost reduction competition and industry performance in many markets firms compete over time by expending resources with the purpose of reducing their costs sometimes the cost reducing investments operate directly on costs in many instances they take the form of developing new products that deliver what customers need more cheaply therefore product development can have the same ultimate effect as direct cost reduction in fact if one thinks of the product as the services it delivers to the customer in the way that lancaster pioneered then product development often is just cost reduction

optimal electricity market for wind power abstract this paper is about electricity market operation when looking from the wind power producers point of view the focus in on market time horizons how many hours there is between the closing and delivering the bids the case is for the nordic countries the nordpool electricity market and the danish wind power production real data from year 2001 was used to study the benefits of a more flexible market to wind power producer as a result of reduced regulating market costs from better hourly predictions to the market wind power producer would gain up to 8 more if the time between market bids and delivery was shortened from the day ahead elspot market hourly bids by noon for 12 36 h ahead an after sales market where surplus or deficit production could be traded 2 h before delivery could benefit the producer almost as much gaining 7

market structure and incentives to innovate the case of cournot oligopoly abstract in a classical paper arrow the rate and direction of inventive activity 1962 princeton university press pp 609 626 showed that the benefit of innovation to the single firm with r d capabilities is higher under perfect competition than under monopoly arrow in essence assumed bertrand price competition in this paper i examine cournot quantity competition and show that under weak conditions the benefit of a small process innovation decreases with the number of firms i also show that the elasticity of the slope of the inverse demand function plays a critical role in determining the effect of product market competition on the incentives to innovate

liberalisation and r d in network industries the case of the electricity industry abstract electricity sector liberalisation has coincided with a significant decline in r d spending this paper reviews the industrial organisation literature on r d and innovation to explore the likely causes of the decline in r d spending in the electricity sector meanwhile r d productivity and innovative outputs in utilities and equipment suppliers appear to have improved however a lasting decline in r d expenditure can have a negative long term effect on technological progress and innovation in the sector we conclude that the decline in r d could have been predicted from the literature we also discuss the need to reorient the post liberalisation technology policy

technical performance and firm size analysis of patents and publications of u s firms this study focuses on the scientific output of firms of different sizes in different industries in the u s both patents and papers and publications are used as measures of technical output data from two samples of firms one consisting of 225 large firms annual sales at least 250 million and minimum annual r d budget of 1 million and the other consisting of 248 small and medium sized firms annual sales between 10 to 200 million and annual r d budget at least 10 thousand have been presented here the study shows that determinants of r d expenditure are different in firms of different sizes for the large firms r d expenditure depends on net income as well as its size measured in terms of annual sales for small size firms r d expenditure is closely related with sales rather than the net income for large firms r d expenditure is related to both sales and income the latter being more important than the former the two output measures patents and papers are correlated but the correlation is not a very strong one for small firms patent and papers are correlated significantly with both r d expenditure as well as annual sales the firm s growth is not linked with patents on the contrary there is a negative relationship between patent and r d growth and patent and income growth in the case of small firms papers are not linked with growth variables for small firms finally this study confirms the hypothesis that small firms are more productive in innovation than the large firms small firms are more efficient than their larger competitors in terms of patents and papers per million dollars of r d expenditure

corporate led sustainable development and energy poverty alleviation at the bottom of the pyramid the case of the cleancook in nigeria summary corporations are increasingly viewed as key actors in poverty alleviation bottom of the pyramid bop advocates suggest that multinational corporations mncs can simultaneously alleviate poverty and make profits by selling scaled down products to the poor our paper investigates this claim using the case of the cleancook stove and fuel technology introduced in nigeria by an mnc working through a nonprofit organization and local business actors supply and demand side analyses show that the cleancook is least likely to reach the energy poor bop households originally targeted the evidence suggests that serving the bop requires greater differentiation than can be achieved with profit driven business models

price adjustment at the firm level a theoretical and empirical analysis the price setting behaviour of firms and the adjustment of prices with respect to changes in the economic environment is relevant for the short run analysis of the business cycle as well as for the analysis of the long run development of the market in this paper a theoretical model of the price adjustment of the firm is developed and estimated with a unique panel of firm level data from west german manufacturing the empirical results reveal that capacity constraints significantly affect the price setting the price and quantity adjustment also depends significantly on variables that are related to competition

business unit strategy and changes in the product r d budget this study of changes in product r d intensity in business units supplements past studies by including two major classes of independent variables which have not been examined previously the competitive strategy of the business and role of the business in the overall corporate portfolio multiple regression analysis is used on a sample drawn from the pims data base the results suggest that r d decisions in growth businesses are responsive to competition evolving strategies and intra firm resource flows in mature businesses a pattern of stability and r d equilibrium is evident even in the face of changes by competitors managerial implications are noted

innovation and the durable goods monopolist the optimality of frequent new version releases when an improvable durable good such as packaged software saturates the market the seller could be tempted to release new versions too frequently hurting her profit a novel contractual device which i term as a free new version rights warranty free nvr warranty can help the seller overcome this temptation in a two period game theoretic model involving a monopolist firm facing heterogeneous consumers i derive conditions under which a rational monopolist can act suboptimally she could face a commitment problem and offer the new version even if doing so lowers her overall profit profit is hurt because when consumers expect a new version a fewer consumers buy the initial version and b the monopolist is forced to charge a lower price for the initial version i show how the free nvr warranty which requires the monopolist to offer consumers the right to receive the new version for free for a limited period can solve her commitment problem this is a new surprising finding by bundling new version rights with the initial version the monopolist at first appears to be denying herself future revenue i derive conditions under which this apparently unprofitable action is optimal which is my main contribution when free nvr is offered consumer surplus decreases and social surplus increases this work extends prior literature on durable goods and the coase conjecture to innovative durable goods with network externalities the findings have important practical implications for firms selling new versions of innovative durable goods subject to network effects as well as for their consumers

market motives distinctive capabilities and domestic inertia a hybrid model of innovation generation the authors develop and test a model of innovation in which the generative process of innovation is fostered by a balance of three forces market motives distinctive capabilities and domestic ine

fuelwood policies for the 1990s abstract the paper provides a review of policy issues and options associated with the role of biomass as an energy resource it seeks to demonstrate how such policies can be set in the context of local circumstances the analysis focuses on the relationship of fuelwood problems to other development issues recognizing that these problems are primarily a consequence of the interaction of environmental and economic forces at a local level a series of fundamental policy reforms are an essential pre condition to finding local answers to fuelwood problems these policy reforms are the main focus of this paper

the impact of renewable energy forecast errors on imbalance volumes and electricity spot prices abstract this paper contributes to the general consideration of whether a policy of incentivising system operators to improve the quality and market availability of forecasts for renewable energy outputs would be beneficial using data from the german electricity market we investigate the effect of wind and solar energy forecasts errors on imbalance volumes and subsequent spot electricity prices we use ordinary least squares regression quantile regression and autoregressive moving averages to identify these relationships using variables that have a quarter hourly data granularity the results show that higher wind and solar forecast errors increase the absolute values of imbalance volumes and that these can pass through into higher spot prices we find that wind forecast errors in germany impact spot prices more than solar forecasting errors policy incentives to improve the accuracy and availability of renewable energy forecasts by the system operators should therefore be encouraged

innovation policy in an open economy a normative framework for strategic and tactical issues abstract in this paper we present a normative analysis of innovation policy grounded in traditional economic principles which responds to the schumpeterian critique of previous efforts in the neoclassical vein focusing directly on specific policy issues we pursue our analysis in two main directions investigating the role of government in developing an infrastructure for innovation and the optimal design of support schemes for r d projects the analysis suggests that while the structural and developmental issues stressed by the schumpeterian school are of fundamental importance identification of disparities between social and private gains the market failure approach provides an invaluable tool for understanding and formulating innovation policy focusing our attention on such factors as economics of scale the incidence of externalities and the supranormal profits offered by imperfectly competitive markets it provides a rational and realistic basis for anticipating where and how government intervention on behalf of industrial innovation is likely to be most effective we view our contribution as a step towards bridging the gap between the neoclassical mainstream of economic analysis and the practice of innovation policy

technological expectations and adoption of improved technology abstract attention is focused upon the adoption demand rather than the creation supply of new technology which improves from time to time based on the expected flow of technological progress over which the firm demander has no control it must decide either to adopt the current best available technology or to postpone adoption the distinguishing features of the model are that more than one technological innovation is anticipated and expectations about the likelihood of such innovations are revised as time passes since the last innovation our analysis shows that the firm will adopt the current best practice if its technological lag exceeds a certain threshold moreover as time passes without new technological advances it may become profitable to purchase a technology that has been available even though it was not profitable to do so in the past

r d market structure and profits a value based approach this paper considers a complex relation among r d market structure and a market value based measure of profits perhaps of greatest interest a positive effect of r d on profits emerges as does a negative r d concentration interaction effect both appear robust and support an intangible capital and rivalrous view of r d despite substantial interest in the question little direct evidence on research and development r d market structure and profits relations has appeared in the literature an important exception to this rule is grabowski and mueller hereafter g m 1978 who reported a strong effect of r d on adjusted profit rate data in addition to an equally strong negative r dmarket concentration interaction effect g m interpret their findings as support for an intangible capital and rivalrous view of r d alternatively they are also consistent with the hypothesis that firms in highly concentrated markets pursue r d less efficiently or take on riskier projects in any event g m s findings seem inconsistent with a view of r d as a barrier to entry see kamien and schwartz 1975 this study extends previous research in at least four respects first we adopt a market valued based measure of profits in order to avoid any bias inherent in accounting profit data due to an expense as incurred rather than capitalization and amortization treatment of r d advertising and similar expenditures second we evaluate simultaneous influences among profits r d advertising and concentration suggested but not tested previously third estimation results are derived using leamer s search technique which illustrates the sensitivity of estimates to alternate model specifications and fourth we consider an n 390 firm fortune 500 sample which is substantially larger than in previous studies including firms responsible for nearly 90 of private sector r d during 1977 estimation results should therefore be broadly indicative of the economic consequences of r d

research and development and the schumpeterian hypothesis alternate approach there have been numerous empirical studies investigating the relationship between firm size and inventive activity since schumpeter first argued that the large scale enterprise has come to be the most powerful engine of economic progress 24 106 the important policy issue is whether large firm size is associated with greater innovative output but measuring innovative output is very difficult consequently many empirical studies have focused on the relationship between firm size and some measure of innovative inputs and argue that inferences can be made concerning innovative output and firm size as long as the production of innovations is characterized by nondecreasing returns to scale 2 fisher and temin 4 contend that the empirical tests relating innovative inputs and firm size are inappropriate for even if the production of innovation is characterized by increasing returns to scale a positive and increasing relationship between r d employment and firm size is neither necessary nor sufficient for there to be an increasing and positive relationship between innovative output and firm size 3 the fisher and temin results are controversial in review articles on innovation and monopoly power markham 16 states he does not accept the conclusions of fisher and temin while kamien and schwartz 10 mention fisher and temin but discuss the empirical literature without further reference to their

unobservable industry characteristics and the innovation concentration advertising maze evidence from an econometric study using panel data for manufacturing industries in the frg 1979 1986 in discussing the nexus between innovations and market structure it is often argued that industry characteristics called opportunities might play an important role as determinants of innovation and that simultaneity rather than one way causality prevails we consider a three equation model for innovation advertising and concentration based on pooled cross section time series data for 26 german manufacturing industries we estimate single equation models with and without fixed industry and or time effects to control for unobservable industry or time effects respectively and simultaneous equation systems including fixed effects and controlling for extreme cases outliers or not furthermore we use two different measures for innovations i e the percentage of shipments due to new products and the percentage of firms which classified themselves as innovators our results can be summarized as follows 1 the firm size has no significant effect on innovation one can therefore not conclude from this data set that large firms are more innovative than small ones 2 unobservable industry effects do matter 3 the treatment of outliers does matter 4 simultaneity does matter 5 the way innovations are measured does matter 6 different stories could be told based on the results of the systems of interdependent equations estimated

a sequential model of r d investment over an unbounded time horizon a markov model of sequential r d investment where successful firms are assumed to have an advantage in related follow on r d is formulated and a solution approach is given under this assumption profit maximizing firms must consider the effect of r d investments on their future market position as well as the direct monetary returns from innovation under certain conditions free entry is shown to lead to excessive competition and overinvestment by the firms this market failure can be corrected through a three part policy of restricted patent lives subsidies to firms for consecutive successes and entry taxes in addition to these policy conclusions the modeling and solution approaches presented here provide a framework for further research efforts to incorporate market position into project selection and budget allocation models

intensity of competition and the choice between product and process innovation abstract two questions are examined within a model of vertical differentiation the first is whether cost reducing innovations are more likely to be observed in regimes of more intense bertrand or less intense cournot competition we find that there are cost reducing innovations that are pursued under cournot but not under bertrand competition the second is whether the regime of competition affects a firm s choice between product and process innovation we show that for the high quality firm whenever there is a difference between the choice made by a bertrand competitor and the choice made by a cournot competitor the former opts for product innovation while the latter prefers process innovation for the low quality firm the result is reversed

policy review section in this policy review section gerry stoker of the institute of local government studies presents a critical review of the role of urban development corporations udcs in comparing the experience of the udcs consideration is given to the varying nature of the land and property market in each udc area to the relationship with local authorities and other local bodies and the regeneration strategies pursued by the udcs this is followed by an assessment of the impact of the udcs in economic social and political terms in the second article john britton of the university of toronto examines the theoretical case for interventionist public policies to assist the innovation process in small and medium sized enterprises these arguments are supported by a review of the experience of various national support programmes introduced in the uk in particular the manufacturing advisory service introduced in 1978 and the design advisory service launched in 1982

competition and diversification in public and private higher education the development of mass higher education and growing competition between higher education institutions has given increasing visibility to the issue of diversification this article analyses the issue of programme diversification using a panel of 181 portuguese higher education institutions over the period 1995 to 2007 by comparing the behaviour of public and private institutions the results show that the legal status of institutions is the major determinant of programme diversification as private institutions are far more specialized than their public counterparts the study also evaluates the role of other institutional variables such as the institution s size age location institutional mission and research intensity to explain differences in the diversification behaviour of higher education institutions the results provide important insights as competition has been thought to improve the performance of higher education institutions

analysing future trends of renewable electricity in the eu in a low carbon context the aim of this paper is to analyse the situation and trends of electricity from renewable energy sources res e in the eu up to 2030 taking into account several drivers and barriers and different maturity levels for the renewable energy technologies the methodology is based on the results of simulation models providing insights on future outlooks complemented with an analysis of regulations and other drivers and barriers regarding the most mature renewable electricity technologies the main drivers will be public policies carbon prices and support schemes and the expected up ward trend in fossil fuel prices and the main barriers are related to grid access administrative procedures and the exhaustion of places with the best wind resource for those already commercial but expensive technologies the main driver is support schemes but not carbon prices allowing the exploitation of the large potential for investment cost reductions barriers are mostly related to their high investment costs finally for those technologies which are emerging and immature further technical improvements as a result of r d efforts will be needed and they cannot be expected to significantly penetrate the european electricity market until 2030

why firm size matters investigating the drivers of innovation and economic performance in new zealand using the business operations survey abstractthe performance of the new zealand nz economy is something of an enigma although ranked one of 144 countries for four important growth fundamentals nz is middle of the pack when it comes to economic growth productivity and process innovation using four iterations 2005 2007 2009 and 2011 of the business operations survey this research seeks to shed some new light on this conundrum by using a multivariate probit regression mvprobit approach applied to pooled samples in excess of 22 000 unit record observations of nz firms the results suggest that factors including firm size high perceived quality investment research and development rd while many external issues such as those related to geography market structure business environment have little influence at the firm level innovations in nz are highly dependent on the fi

the economics of invention incentives patents prizes and research contracts though public intervention in the market for research is virtually universal economists have paid surprisingly little attention to the choice of the form of research incentive in a given market structure many studies concentrate on patents but any assumption of their superiority over other incentives has been founded on intuition rather than on formal analysis in this paper i analyze the choice between three of the most common alternative means of public intervention in the research market namely patents prizes and direct contracting for research services i show why and under what conditions any one of the three may be preferred by a social welfare maximizing administrator in a competitive economy using a model that for the first time pays explicit attention to differences in the informational roles of each of these alternatives in the extensive literature on the economics of patents see arnold plant 1934 fritz machlup 1958 charles taylor and z a silberston 1973 morton kamien and nancy schwartz 1975 and f m scherer 1977 for valuable surveys formal analysis weighs the benefits of patents as a solution to the market failure associated with the inappropriability of knowledge against the welfare cost due to the restriction on the use of the knowledge generated and this tradeoff is optimized by patent life adjustment in william nordhaus 1969 scant analytical attention is paid to alternative incentive mechanisms an exception is ben yu 1981 who considers the role of prior contracting for inventions but as many writers for example dan usher 1964 yoram barzel 1968 joseph stiglitz 1969 carole kitti 1973 glenn loury 1979 partha dasgupta and stiglitz 1980a have pointed out in various contexts the incentive offered by an unlimited patent to competitive researchers may be excessive due to the common pool problem discussed further in section i below if the patent administrator and researchers share the same information as implicitly assumed in previous models then the patent life limitation can be adjusted to provide the optimal patent incentive given the common pool problem but in all such models patents would not be chosen in a fully optimized fiscal system researchers and the administrator are assumed to have identical information about the shadow price of potential inventions a patent is just a means of turning this shadow price into a monetary reward but monetary compensation can instead be offered directly to researchers by the state assuming that patent revenues incur a higher deadweight loss than an equivalent amount of public funds financed by less distortionary means for example a minimally efficient tax system appropriate prizes or government contracts are socially preferable to patents with optimal lives if the patent is ever to be the optimal incentive mechanism for research it must possess advantages not captured in existing models informal discussions of patents emphasize their informational role to include the latter as a justification for decentralized invention incentives i incorporate an ex ante imbalance of information about costs and benefits of research in the model presented in section ii but this alone is not quite enough it is further necessary to specify that the terms of the award must be fixed before department of economics economic growth center box 1987 yale station yale university new haven ct 06520 i thank with the usual caveat marguerite alejandro wright cindy arfken martin baily nuong brennan steven englander robert evenson richard levin richard nelson susan rose ackerman denis wright and two referees for assistance of various kinds

foreign ownership and technology adoption evidence from indian firms abstract firms in developing countries rely on foreign technology purchases to improve their technology we use a theoretical framework developed by katz and shapiro to examine the ongoing technology adoption behavior of foreign owned and domestic firms using firm level data on indian firms from 1989 to 1993 we test this theoretical model we find that foreign ownership firm size and market structure are among the variables that impact a firm s probability of adopting new technology we also find that the 1991 liberalization of technology transfer policies in india appears to have had a larger impact on foreign owned firms than domestic firms

toward a global agricultural research system a personal view abstract before the beginning of this century almost all increases in agricultural production occurred as a result or increases in area cultivated by the end of the century increased agricultural production will depend almost entirely on more intensive cultivation of areas already being ued for agricultural production over the next several decades agricultural research capacity must he established for each commodity of economic significance in each agroclimatic region of the world the new system of international agricultural research institutes must be supplemented by the strengthening of national research systems the development of national systems has however been characterized by cycles of growth and decay small country research systems face severe size diseconomies regional collaborative networks have not been very successful external supporl for development of national systems needs to give greater attention to enhancement of political and economic viability as well as scientific viability

the estimation of barone curves based on the iwai model abstract based on the evolutionary model of iwai the authors show that the supply curve of barone can be interpreted as an outcome of the dynamic process of schumpeterian competition by using empirically given distributions of profits the barone curve can be estimated significantly for different industries of the federal republic of germany in this respect the paper at hand not only provides a strong argument for the validity of the iwai model but also gives important insights into the individual forces of schumpeterian competition and their impact on the market structures in an economy

an evaluation of federal policy instruments to stimulate basic research in industry a model of the resource allocation behavior of a group of firms demonstrates that unaided industry allocation to basic inappropriable research is suboptimal furthermore provision of seed money is generally counterproductive while the provision of a matching subsidy is not very cost efficient in increasing the allocation innovative policy alternatives are proposed

industry concentration and allocation of resources to basic research while the mainstream of western economic thought believes in competitive markets the schumpeterian school considers concentrated industry to be the ideal vehicle for the advancement of industrial technology empirical evidence on the schumpeterian hypothesis that a concentrated industry allocates relatively more resources to its research and development rd joglekar p m hamburg 1987 industry resource allocation to basic research under normally distributed benefits decision sci winter 1 24 who showed that industries consisting of smaller numbers of firms allocate relatively greater amounts of resources to their basic research than industries consisting of larger numbers of firms extending joglekar and hamburg s models here we find that when two industries consist of the same number of firms in most cases a heterogeneous industry falls as short of its pareto optimal investment in basic research as its comparable homogeneous counterpart numerical examples suggest that in some cases concentrated heterogeneous industries may do worse policy implications of the results as well as directions for further research are discussed

technological progress and change in market concentration in the u s 1963 77 what effect does r d induced technological progress have on market structure do the concentration ratios the most used indices of market structure increase or decrease in an industry that is faced with a high level of technological opportunity and exploits it through a high rate of r d this paper focusses on a model by nelson and winter as a theoretical starting point to deal with this question in the nelson and winter model concentration increases as a result of dynamic competition in the technologically progressive industries but their model does not allow entry and the effect on concentration may be reversed if the possibility of entry is considered empirically this paper shows that concentration ratios in the high r d industries have decreased in the united states during 1963 77

a method for allocating renewable energy source subsidies among final energy consumers abstract in a new context of growing need for renewable energy sources res tariff design has become a critical component of energy system regulation a methodology for allocating the cost of res subsidies that ensures an optimal balance between compliance with the main regulatory principles of tariff design and each state s specific policy is of cardinal importance in the current context this paper presents and discusses a novel methodology to allocate the res subsidy costs which consists of distributing them among final energy consumers in proportion to their consumption regardless of the type of final energy consumed liquid fuels gas electricity or coal first the different designs of res subsidies are categorized and a review of a good number of the res burden sharing mechanisms implemented in the eu is presented then the proposed methodology is developed on the basis of the basic regulatory principles underlying the tariff design and the current regulatory context in force in the eu finally to illustrate its actual impact in a real case example the proposed methodology is applied to the spanish system in which the burden of extra costs incurred for res amounts to a very large proportion of the overall energy system costs

buyer market structure and r d effort a simultaneous equations model the theoretical and empirical investigations of the relationship between market structure and the firm s incentive to invent and innovate have concentrated on the effects of the structure of the supply side of the market this focus on the supply side originated in schumpeter s controversial hypothesis that current market power provided the necessary conditions and future market power provided the incentive for technical change schumpeter 1950 this hypothesis stimulated a vast number of theoretical refinements and empirical tests of relations between research and development activity r d and supply side characteristics such as concentration firm size and diversification this literature has been well summarized by kamien and schwartz 1975 and scherer 1980 the analysis of the effects of the buyer market structure on the selling industry conduct and performance has been limited both theoretically and empirically stigler 1964 modeled the effects of the size distribution of buyers on price competition in oligopoly telser 1964 devel oped a theory of advertising messages in which he suggested that advertising would increase when buyers were many and small lustgarten 1975 tested the effects of buyer market structure on price cost margins and advertising and found the relations suggested by stigler and telser invention and innovation are forms of competition which like price and advertising will be affected by both buyer market structure and seller market structure however unlike price and advertising competition there have not been explicit attempts to establish theoretical and empirical relations between buyer market structure and inventive and innovative activity the effects of buyer market structure on the selling industry s incentive to invent and innovate is relevant to interpreting the effects of seller market structure on this effort a number of previous studies of the effects of seller market structure on technical change have found that seller concentration may have a slight positive impact on inventive and innovative effort kamien and schwartz 1975 p 20 even this weak relation may be due to not controlling for buyer market structure if galbraith s 1952 countervailing power hypothesis is correct lustgarten 1975 p 128 concentration in the buyer and seller markets may be positively correlated if buyer market concentration is positively related to inventive and innovative effort in the selling industry the empirical estimate of the partial effect of seller concentration will be biased upward this paper investigates the effect of buyer market structure on r d effort section ii draws together the literature that is relevant to the issue of the relation between buyer market structure and seller inventive and innovative activity section iii develops a simultaneous equation model of r d activity where r d advertising and concentration are endogenous variables section iv uses data on scientific and engineering inputs to test this model section v summarizes these results

technology development mode a transaction cost conceptualization technology alliances have emerged in the past decade as a significant mode for the development of innovation the present research assesses the factors explaining whether firms will engage in such technology alliances or utilize the more traditional mode of internal r d the hypotheses stem from a transaction cost conceptualization results suggest that firms which pursue technology alliances are likely to have less commitment to product category specific assets to face higher technological uncertainty to be more capable at measuring innovation performance to have more successful technology alliance experiences and to compete in lower growth product categories 1998 john wiley sons ltd

schumpeterian dynamics an evolutionary model of innovation and imitation abstract this paper develops a simple evolutionary model of innovation and imitation it analyzes how dynamic interactions between equilibrating force of imitation and disequilibrating force of innovation mold the evolutionary pattern of an industry s state of technology and shows that in this schumpeterian world the industry will never approach a neoclassical equilibrium with perfect knowlwdge even in the long run the paper also examines the steady state efficiency distribution of firms that characterizes the industry s long run and obtains some comparative dynamics results

interdependences in the intrafirm diffusion of technological innovations confronting the rational and social accounts of diffusion this article investigates the intrafirm diffusion of technological innovations and the interdependences that exist among rival firms in this process previous research has offered two potential explanations for these interdependences social accounts in which they result from institutional pressures and rational accounts in which firms are interdependent as a result of how adoption by rivals affects expectations about the profitability of the technology the article offers two contributions first we propose a competitive interaction mechanism that is consistent with the fundamentals of rational accounts of diffusion second the empirical analysis shows the dominance of the proposed rational mechanism over social accounts of innovation diffusion in the generation of interdependences in the process of intrafirm diffusion

optimal diversity increasing returns versus recombinant innovation abstract choices regarding diversity play an important role in economics and innovation management but often remain implicit once made explicit the objectives of efficiency and diversity are usually posed as in conflict as efficiency relates positively and diversity negatively to various increasing returns to scale in markets such a perspective however neglects the benefits of diversity in terms of realizing system improvements through recombinant innovation or spillovers the latter implies a contribution of diversity to long term efficiency dominant economic approaches that address diversity such as option value and real options theories regard benefits of diversity as exogenous this paper proposes a simple model of variable endogenous diversity to analyse the optimal balance between increasing returns to scale and recombinant innovation it is discussed under which conditions one of four solutions is optimal complete specialization regardless of which option complete specialization in one specific option symmetric diversity perfect balance and asymmetric diversity the results give rise to a number of policy insights

beyond replicator dynamics innovation selection dynamics and optimal diversity we propose a new evolutionary approach to model technological change based on an extension of replicator dynamics with recombination and mutation it gives rise to interactive innovation selection dynamics the model allows studying the combined effects of selection and variety generation on evolutionary economic change the developed framework describes a population of boundedly rational entrepreneurs who decide each period on the allocation of investments in different production technologies they tend to invest in belowaverage cost technologies just as under replicator dynamics in addition they spend a constant fraction of investments captured by mutation and recombination rates on alternative technologies and research on recombinant innovation as opposed to most previous studies mutation and recombination are here conceptual variables with a concrete behavioral interpretation namely describing the decision rules heuristics of investors we compare the dynamics of shares of investments in various technologies for three cases with constant costs of capital with costs decreasing steadily and exogenously over time and with costs depending on the level of cumulative investments for each model version we examine under which conditions the coexistence of technological options is feasible and optimal in terms of minimising the average cost of investments authors abstract

on the reswitching and convergence properties of research development rivalry under an alternate assumption of the payoff function we analyze lee s dynamic game model of r d rivalry both similarities and differences in the equilibrium results of the model are obtained it is shown that both the reswitching property and the convergence property of r d rivalry are robust under the alternate assumption the reswitching property of r d rivalry states that after gaining a technological edge against a rival a decision maker stops doing r d and he will resume doing r d when his rival succeeds in narrowing the technological gap between the two rivals the convergence property of r d rivalry states that when the technology levels of two rivals differ by a wide margin the one with a lower technology level will be the only one doing r d to narrow the technological gap between the two rivals this formalizes the perception of r d managers that the r d decision of one firm should depend on the r d decision of its rivals for competitive reasons moreover when multiple nash equilibria exist

electricity transmission tariffs for large scale wind power consumption in western gansu province china abstract large scale wind power transmission presents the power system with several challenges the determination of the transmission tariff and the cost sharing issue are potential obstacles which may influence the development of wind power this paper analyses the incremental cost to the power system for long distance transmission of wind power considers the fixed and variable properties of the incremental cost and the risk of fluctuations in the cost and establishes a comprehensive risk based pricing model for long distance transmission of large scale wind power electricity gansu province in china has abundant wind resources so we use the jiuquan wind power integration and the 800 kv gansu zhuzhou direct current dc power transmission as examples to test the validity of the model the conclusions are as follows the allowances for access grid connection cost should be separately estimated for the large scale wind power base and long distance transmission and the long distance transmission pricing of large scale wind power should apply a two part electricity transmission pricing system in order to eliminate the volatility risk inherent in each simple allocation method and the fixed and variable characteristics of the transmission cost the transmission price must include compensation for depreciation operation and maintenance costs and also a reasonable return on investment in order to offer an effective incentive and guidance mechanism for enterprises business development

international technology transfer abstract this paper presents a formal analysis of the process of technological assimilation or catch up of a typical least developed country in the context of a three sector dynamic model the optimal time path of r d and current production is determined and the comparative static and dynamic properties of the model are examined

deregulation market competition and innovation of utilities evidence from japanese electric sector this paper explores the determinants of electric utility innovation and examines the impact of electric sector deregulation and market competition on it using a balanced panel database of nine japanese utilities from 1978 to 2014 both input r d expenditure and output patent application number and patent quality aspects of innovations are examined the empirical results indicate that deregulation and market competition decrease the former but increase the latter these results are followed by a discussion on why this scenario occurs the results also suggest that after deregulation utilities focus more on short term business oriented r d projects hence we call for governments to support long term public oriented and environmental research in the electric sector

finance innovation and industrial change abstract this paper investigates the impact financial structures upon industrial dynamics whenever the system is permanently characterized by unexploited opportunities for innovation highly bounded rationality and trial and error search processes in these circumstances it is argued specific financial set ups such as market based vs credit based mechanisms of allocation control and ownership transfer are likely to exert different influences on the rates and modes of industrial innovation relatedly one suggests some hypotheses on the links between financial systems and features of industrial evolution and some tentative taxonomies

spatial concentration location and competitiveness the case of switzerland maggi r and haeni p k 1986 spatial concentration location and competitiveness the case of switzerland ireg studies 20 141 149 this paper considers the relation between location and competitiveness of thirty nine swiss export industries using a factor endowment approach we found that spatial concentration in intermediate areas is important for performance and conclude that spatial proximity offers a significant comparative advantage for swiss industries further findings in the case of switzerland are that scale economies are unimportant and that high technical skill constitutes a comparative advantage while manual skill does not the chosen approach proves to be useful but additional information might be found by analysing companies rather than industries

external ownership and innovation in the united kingdom this paper examines the impact of ownership and a variety of other variables on the likelihood of innovation and the presence of an r d function within a national sample of uk defence related firms it is shown that foreign ownership has a negative indirect impact upon innovation mixed support is found for the schumpeterian approach to innovation involvement in export markets technological opportunity and r d collaboration are shown to have a positive impact on innovation

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

technological change and market structure an evolutionary approach this paper studies an inter temporal market context in which firms innovate imitate and compete in quantities and technological choices each period potential entrants enter if there are profitable opportunities incumbent firms exit when they go bankrupt the key aspect of the model is that technological change evolves along a directed graph this graph reflects both the direction of technological change and the magnitude of costs involved in switching technologies in this set up my main concern is to explore the implications of different technological structures on entry exit dynamics and on the evolution of market characteristics market concentration profitability variance etc

currents and sub currents in innovation flows explaining innovativeness using new product announcements the creation of new knowledge is a haphazard process not every sector in an economy is equally involved the effect of industry structure on innovativeness has been a focus of attention for a long time by both academics and policymakers in a much quoted article using unique data new product announcements acs and audretsch acs z j audretsch d b 1988 innovation in large and small firms an empirical analysis american economic review 78 4 678 690 identified several characteristics of industry structure and their effects on innovativeness by analyzing a new and more consciously compiled database we re examine their original claims our results largely support their findings industry concentration and degree of unionization for instance hamper innovation skilled labor promotes it our findings diverge in one significant respect from theirs we suggest that the large firms do not contribute more to an industry s innovativeness than small firms at the industry level we find strong support for the schumpeter mark i perspective of creative destruction by small firms rather than creative accumulation by large firms in addition we show that less dedicated innovators prove more susceptible to firm external industry factors than more committed innovators an unfavorable competitive environment decreases the likelihood that less successful innovators will announce new products c 2008 elsevier b v all rights reserved

an analysis of the composition of r d spending research and development encompasses a myriad of activities generally research is the primary search for technical or scientific advancement and development is the translation of such advancement into product of process innovations the national science foundation has fostered an even finer breakdown basic research applied research and development in practice however r d is more heterogeneous than these labels imply the research fields associated with basic research include areas in both the physical and biological sciences applied research and development projects relate to product groups as diverse as all the activities in the industrial sector nevertheless most previous empirical studies of the microeconomic aspects of r d have treated r d spending as a single homogeneous activity consequently a generally acceptable set of variables has developed for explaining inter firm levels of r d spending but virtually nothing is known about the determinants of the inter firm composition of r d

managerial efficiency and the schumpeterian link between size market structure and innovation revisited this research uses a unique survey on innovation conducted in belgian high tech industries to investigate a the effects of managerial efficiency on the firm s innovative activity and b the effects of controlling explicitly for managerial efficiency on the schumpeterian like relationship that firm size and market concentration are both conducive to innovation the key findings are managerial efficiency is an important determinant of the firm s innovation performance only when one controls for managerial variables considered as success factors for innovation the schumpeterian effect of the impact of the firm s market share emerges for a wide range of measures of performance which confirms rothwell s suggestion 18 that small firms have a advantage in the management of their innovation

firm behavior and the externalities of technological leadership abstract a simple two firm model in which technological knowledge lies in an existing product s attribute is analyzed accordingly the technologically leading firm the firm whose current product is more advanced produces a knowledge externality the technologically less advanced firm may take advantage of the externality by learning the technology and embarking on its own development plan if the follower instead just imitates the leader s product the externality is likely to have an adverse effect on the imitator reflecting the notion that a larger technological gap makes imitation more difficult comparative statistics experiments reveal among other things that greater initial technological gaps encourage technological progress if the follower imitates as a result the introduction of a patent system in this case would inhibit technological progress

evolutionary modelling of the macro economic impacts of catastrophic flood events this paper examines the possible contribution of evolutionary economics to macro economic modelling of flood impacts to provide guidance for future economic risk modelling most macro economic models start from a neoclassical economic perspective and focus on equilibrium outcomes either in a static or dynamic way and describe economic processes at a high level of aggregation as a consequence they typically fail to account for the complexity of social interactions and other behavioural responses of consumers and producers to disasters which may affect the macroeconomic impacts of floods employing evolutionary principles and methods such as agent based modelling may help to address some of the shortcomings of current macro economic models we explore and discuss the implications of applying consumer and producer heterogeneity bounded rationality network effects social and technological learning co evolution and adaptive policy making concepts into existing economic frameworks for the assessment of macro economic impacts of floods authors abstract

the geography of innovation in small and medium sized firms in west germany since the 1980s a more micro economic oriented view has settled the dispute between macro economic theories over the causes of regional development differentiated studies revealed an unequal spatial distribution of r d laboratories and innovating firms and furthermore it was discovered that the innovation behaviour of firms differs between types of regions however these studies still left several questions unanswered

analysis of the imbalance price scheme in the spanish electricity market a wind power test case this work investigates the interaction between wind power and electricity markets the paper is focused on balancing markets pricing policies the proposal of a new imbalance price scheme is included and conveniently evaluated this proposed scheme tries to minimise the use of ancillary services to compensate for deviations in searching for a more efficient market design the effectiveness of imbalance prices as market signals is also examined and policy recommendations regarding imbalance services are discussed two test cases are included that analyse the participation of a wind power producer in the spanish electricity market using a stochastic optimisation strategy for this purpose the uncertainty of the variables is considered i e wind power production and prediction intraday and imbalance prices test cases were run with real data for 10 months and realistic results are presented along with a hypothetical test case the regulation of the imbalance prices may not be adequate for the spanish electricity market because an error drop is not sufficiently encouraged therefore we suggest the application of a new imbalance price scheme which includes an additional constraint the conclusions of this paper can be assumed to be general policy recommendations

managerial incentives and investment in r d in large multiproduct firms incentives for division managers in large firms affect their risk orientation and thus their decisions to invest in r d this paper reviews theory and hypothesizes that division managers incentive compensation that is based on financial performance is negatively related to risk taking as measured by r d intensity results of a study of 184 major u s firms suggest that incentives based on short term annual division financial performance are negatively related to total firm r d intensity after controlling for industry r d intensity firm diversification size and group structure furthermore the results suggest that an emphasis on long term financial incentives may mitigate the negative relationship between these incentives and r d intensity but does not promote risk taking the results suggest the importance of emphasizing strategic controls evaluating division managers based on operational understanding of strategies proposed strategic criteria as opposed to the use of financial controls evalua

exploring renewable energy pricing with analytic network process comparing a developed and a developing economy abstract increasing use of renewable sources has a vital importance in mitigating increasing energy demand and global warming the limited reserves and negative environmental impacts associated with fossil fuel consumption make the renewable energy sources considerable alternatives in case environmental externalities are taken into consideration pricing models for renewable energy alternatives are commonly based on the same fundamentals as the fossil fuels but this approach neglects some of the characteristics that are unique to renewable energy alternatives in order to develop more accurate pricing models these unique variables which are mostly considered as market externalities need to be integrated in the current forms of pricing models the originality of this work is its ability to combine social technical environmental and economic aspects using analytic network process in order to provide a more holistic point of view on factors impacting renewable energy pricing through a comparison of two case studies united states u s and turkey are the two cases analyzed in this paper u s represents a developed economy whereas turkey represents a developing economy it is expected that the results of this work would be helpful for further research in understanding the dynamics behind pricing mechanism of the renewable sources in different environments for instance fundamental differences in relative importance of pricing factors between two case countries have been identified as different levels of enforcement through laws and regulations impact of geographic characteristics on site selection and job opportunities created through new investments

international comparisons of r d effort the case of the canadian pharmaceutical industry abstract the canadian federal government anxious to stimulate innovation announced recently a policy objective for the economy the attainment of industrial research expenditures reaching 1 5 percent of the gross national product the proposed substantial increase over the current level is rationalized by comparison with economy wide research intensities gerd gnp in other oecd countries this paper questions the economic validity and policy relevance of international aggregate comparisons it argues that inter country comparisons should take place at individual industry levels where technologies are similar and proposes a methodology for formulating rd this canadian industry presumably does not require governmental attention to its r d activities

market structure and innovation a survey economics we all recite deals with allocation of limited resources towards satisfaction of unlimited wants resources are typically identified as land labor and capital plus a technology that determines their transformation into consumer goods disparity between the available goods and services and the desired gives rise to scarcity and the question of what how and for whom to produce the focus then shifts to description and evaluation of alternative resource allocation mechanisms for making the choices the pareto criterion by which an allocation of resources is deemed efficient if any reallocation improving the position of some individual worsens the position of others is a commonly employed gauge of a mechanism s performance in the absence of externalities increasing returns to scale and uncertainty a perfectly competitive market system yields a pareto optimal allocation of resources this underlies the view that individual self interest is compatible with society s interest the further conclusion that pareto optimality may not be achieved via the market system in the presence of monopoly elements provides an economic rationale for antitrust laws the objective of a resource allocation mechanism appears to be according to the analysis described above to make the best of available resources the alternative objective of relaxing constraints through expanding the resource base or developing new technology seems to be beyond its scope thus until rather recently technical advance had been regarded in the mainstream of economic theory as unmotivated by the quest for profits and substantially unaffected by resource allocation instead as j schmookler observed technology had been viewed as a parameter like the weather affecting the outcome of resource allocations but itself unaffected by them 84 1965 evidence that technological progress has significantly contributed to growth in productivity together with a substantial increase in research and development activity largely financed by government and carried out by industry see f machlup 51 1962 may have spurred reconsideration of this view once technical advance is regarded as an economic variable it is natural to in

distribution of costs induced by the integration of res e power this article focuses on the distribution of costs induced by the integration of electricity generation from renewable energy sources res e the treatment to distribute these costs on different market actors is crucial for its development for this purpose individual actors of electricity markets and several cost categories are identified according to the defined cost structure possible treatments to distribute the individual cost categories on different relevant actors are described finally an evaluation of the cost distribution treatments based on an economic analysis is given economic efficiency recommends that clearly attributable shallow grid connection as well as deep grid costs are charged to the corresponding res e producer and that the res e producers are also charged the regulating power costs however deep grid integration costs should be updated to reflect evolving scarcities also regulating power costs should reflect actual scarcity and thus be symmetric and based on real time prices taking into account the overall system imbalance moreover the time span between the closure of the spot market and actual delivery should be chosen as short as possible to enable accurate res e production forecasts

the diffusion of new technology and the market for an innovation this article shows that the diffusion of a capital embodied process innovation results from a pattern of decreasing incremental benefits and adoption costs for later adoptions strategic behavior is inessential to this finding we develop a method for comparing diffusion rates for different market structures in the capital equipment market we consider cases with market power on the seller s side of the market and on the buyers side of the market a case with no market power and the welfare optimal case we find that a joint venture adopts an innovation more slowly than other market regimes to protect existing capital investments and that the adoption rate is slower than is socially optimal a monopoly supplier on the other hand adopts at a rate faster than is socially optimal this result is usually also the case when there is no market power finally we show that the monopoly supplier accelerates adoptions faster than in the case where there is no market power but retards later adoptions market power thus makes a difference in diffusion rates and on which side of the market that power lies makes a considerable difference

nigeria s household energy sector issues and supply demand frontiers abstract this paper deals with the energy situation in the household sector of the nigerian economy a review of the pattern of energy consumption in 1989 elucidates several critical characteristics of the sector the sector accounts for about 65 of total final energy consumption in the country in 1989 with fuelwood providing about 81 four cardinal issues to be addressed in the sector are highlighted the paper also presents the result of a useful energy demand forecast for the sector over the period 1989 2014 which shows that useful energy requirements will grow rapidly as a result of both economic and population growth this is then used in an approach of supply demand balancing to establish supply frontiers for final energy carriers under three scenarios finally the issues in the sector are examined against the background of the results of the analysis

strategic commitment with r d the case of bertrand competition abstract when there is multiplicatively separable demand and firms compete in the price dimension there is no room for strategic use of r d by firms under a different demand situation strategic use of r d by firms competing in the price dimension reduces r d spending reduces output increases price and increases profits of each firm

market structure innovation and optimal patent life m uch work has been directed at determining the relative efficiency of various market structures in the allocation of resources to invention while the conclusions are not entirely clear it seems certain that no single market structure results in a pareto efficient allocation of resources to research and development r d in the light of this certain secondbest procedures must be examined social controls may provide an attractive method of lessening the inefficiencies described above 2 while government research and development subsidies and award programs do exist the most prevalent form of social control is the patent system granting the inventor a monopoly on the use of the discovery for a specified period of time eliminates the free rider problem thus restoring the incentive to invent extension of the duration of protection will increase incentives for private resource allocation toward technical advance unfortunately extension of patent protection by definition brings with it the social inefficiencies recognized in a monopolistic market the

small firm entry in us manufacturing a cross section empirical analysis examining the entry behavior of small firms is provided in this paper while the authors find that certain traditional market structure characteristics and entry barriers have a strong impact on small firm entry behavior the reliance upon innovative strategy by small firms also explains a significant amount of the variation in the pattern of entry by small firms they conclude that small firm entry is at least partially determined by entry barriers industry specific characteristics facilitating retaliatory conduct by incumbent firms and the reliance upon innovative strategy by small firms copyright 1989 by the london school of economics and political science

schumpeterian dynamics part ii technological progress firm growth and economic selection abstract business firms strive for survival and growth they innovate in order to grow they imitate in order to survive the purpose of this paper the second in the series on schumpeterian dynamics is to construct a simple mathematical model which is capable of studying the evolution of an industry s state of technology as a dynamic outcome of the interactions among innovation imitation and capacity growth at the micro level of firms the doctrine of economic selection insists by means of the analogy to the biological theory of natural selection that only the most efficient firms will survive the long run competitive struggle for capacity growth indeed if neither innovation nor imitation is possible for the firm a firm or a group of firms which is lucky enough to start with the most efficient technology will outgrow all the other firms in the long run once however the possibility of technological imitation is allowed for the firms the industry will settle down to a static equilibrium of perfect technological knowledge not by the success of the most efficient firms in their striving for the higher growth rate but by the success of the less efficient in their effort to imitate the others the blind force of economic selection is thus outwitted by the human force of imitative activities finally when firms are allowed to innovate in their technology the selective force of market competition is no longer capable of weeding out the less fit even in the long run indeed it is shown in the present paper that the dynamic interplay of the processes of innovation imitation and growth will keep the industry s state of technology from settling down to the static equilibrium but reproduce in the long run a relative dispersion of efficiencies across firms in a statistically balanced form

does location matter for firms r d behaviour empirical evidence for danish firms in this paper we analyse whether regional location matters for danish firms r d performance in accordance with kleinknecht and poot s 1992 survey we test the urban hierarchy hypothesis stating that firms in urban agglomerations are more likely to perform r d than firms elsewhere using a micro dataset for danish firms obtained by merging danish r d statistics with account data the evidence of the influence of location on both the probability for undertaking r d and r d intensity is mixed but basically not in favour of any urban hierarchy in danish r d other non regional factors such as size of firm sectoral dummies classified according to pavitt s taxonomy and the dummy controlling for ict service industries are also estimated to have significant influence on firms r d behaviour furthermore the age of a firm only affects its r d intensity significantly cet article cherche a analyser si oui ou non la localisation regionale est importante pour le comportement des entreprises danoises quant

agency costs and innovation some empirical evidence abstract this paper examines the empirical relation between corporate ownership structure and innovation we test the hypothesis that diffusely held firms are less innovative than firms with either a high concentration of management ownership or a significant equity block held by an outside investor overall the evidence indicates that diffusely held firms are less innovative along the dimensions we examine patent activity growth by acquisition versus internal development and timing of long term investment spending these results are consistent with the conjecture that concentrated ownership and shareholder monitoring are effective at alleviating the high agency and contracting costs associated with innovation

schumpeterian competition in experimental markets abstract we report on a series of laboratory experiments that capture key elements of research and development r d rivalry the experimental environment has a small number of sellers who compete in terms of pricing and production decisions and in terms of cost reducing r d rewards for innovation depend on the profitability of product market competition the experiments capture a kind of dynamic schumpeterian competition there is a sharp contrast in experimental results between monopolies and four seller competitive markets aggregate r d is higher under competition than under monopoly and prices follow marginal cost reductions much more quickly under competition than under monopoly the paper examines market performance in the experiments and the sources of market performance problems

financial innovation in the uk this study employs a national survey of over 1100 british financial firms to ascertain the determinants of financial innovation and their sales success using the logit and the generalized tobit models we find that the likelihood of financial innovation rises with the size of financial firms employee education greater expenditure on research and development the availability of finance and the extent to which firms cooperate with each other perceptions of economic risk and innovation costs are also influential r d cooperation and human capital are the main variables driving the success of financial innovation measured by the percentage share of innovations sold firms in london the south have a significantly greater tendency to innovate though scotland also does well stock broking fund management and related activities are more innovative than firms in the financial intermediation and pension insurance sectors

the relationship between offshore sourcing and innovativeness of u s multinational firms an empirical investigation in increasingly complex global competition u s multinational firms have stepped up imports under items 806 30 and 807 00 of the tariff schedules of the united states as a part of offshore sourcing of components and finished products to serve the u s market