building competitive advantage innovation and corporate governance in european construction this paper explores the relationship between corporate governance and innovation this is examined through detailed interviews with the largest contractors in five european countries the ability to undertake research and development in production technologies by contractors differs widely across different countries this may be explained by the extent to which strategic control is in the hands of those who have the incentives and abilities to allocate resources to uncertain and irreversible investments in innovation this is influenced by particular features of firm ownership organisational and management structure internal mechanisms to diffuse knowledge and links to external sources of knowledge

network externalities technological progress and the competition of market contracts abstract network externalities are used to describe the fact that many modern products become more valuable the more users adopt products of the same technology where network externalities and technological progress exist the various kinds of inefficiencies discussed in the recent literature can be explained by different types of contracts the main categories analysed are simple market contracts update contracts and service contracts it is shown that these types of contract emerge endogenously from the incentive structure of profit maximizing firms competition between these contracts may substantially reduce inefficient allocations caused by network externalities

tipping and concentration in markets with indirect network effects this paper develops a framework for measuring tipping the increase in a firm s market share dominance caused by indirect network effects our measure compares the expected concentration in a market to the hypothetical expected concentration that would arise in the absence of indirect network effects in practice this measure requires a model that can predict the counterfactual market concentration under different parameter values capturing the strength of indirect network effects we build such a model for the case of dynamic standards competition in a market characterized by the classic hardware software paradigm to demonstrate its applicability we calibrate it using demand estimates and other data from the 32 64 bit generation of video game consoles a canonical example of standards competition with indirect network effects in our example we find that indirect network effects can lead to a strong economically significant increase in market concentration we also find important roles for beliefs on both the demand side as consumers tend to pick the product they expect to win the standards war and on the supply side as firms engage in penetration pricing to invest in growing their networks

in search of insights into the generation of techno economic trends micro and macro constituencies in the microprocessor industry abstract in the field of technology policy few challenges are more intriguing than understanding the nature of technical and market trends this paper deals with this problem by using the sociotechnical constituencies approach in order to integrate the treatment of micro macro issues from product to industry the case study is that of the microprocessor industry where at present a risc reduced instruction set computer technology is emerging in a field where a powerful and far from exhausted cisc complex instruction set computer technology tends to occupy almost every segment of the market the analysis reveals how emerging product constituencies do implement pro active trend creating strategies in order to establish themselves as industrial trends and by so doing they simultaneously re define the existing content of the macro industrial level the study also reveals the important role of the nature and maturity of microprocessor technology in conditioning the constituency building strategies implemented by different players microprocessor technology is specifically characterised as an architectural codified knowledge component with indirect network externalities and weak appropriability regime finally the paper also highlights the potential risks of both fragmentation and complete proprietary control of technology in technological processes involving strongly competitive situations

meta paradigm change and the theory of the firm many seemingly unrelated debates on the theory of the firm are in fact part of a single deeper transformation of the social sciences as the foundational assumptions of 20th century social science have slowly been shown by science to be false new sub paradigms have emerged which cumulatively drop i theoretical assumptions about markets to explain firms ii epistemological assumptions about knowledge to explain diversity and iii metaphysical assumptions about causality to explain technical change debates occur across each of these levels

β convergence and the cyclical dynamics of uk regional house prices the potential convergence of regional house prices in the uk is examined in contrast to the existing literature which focuses upon stochastic convergence the present paper considers alternative f

the spatial and temporal diffusion of house prices in the uk abstract this paper provides a method for the analysis of the spatial and temporal diffusion of shocks in a dynamic system we use changes in real house prices within the uk economy at the level of regions to illustrate its use adjustment to shocks involves both a region specific and a spatial effect shocks to a dominant region london are propagated contemporaneously and spatially to other regions they in turn impact on other regions with a delay we allow for lagged effects to echo back to the dominant region london in turn is influenced by international developments through its link to new york and other financial centers it is shown that new york house prices have a direct effect on london house prices we analyse the effect of shocks using generalised spatio temporal impulse responses these highlight the diffusion of shocks both over time as with the conventional impulse responses and over space

a large scale mapping of territorial development dynamics in latin america summary this paper summarizes a study of changes in per capita income monetary poverty and income distribution in 9 045 subnational administrative units of nine latin american countries between the mid 1990s and mid 2000s the results largely support spatial convergence of mean household incomes although the estimates indicate it has been slow territorial inequality is found to be persistent and reduces the pro poor effect of local income growth although national context specific the estimates also indicate that territorial development dynamics are influenced by the structural features of the territories in view of the evidence territorial development policies in latin america seem well warranted

differing house price linkages across uk regions a multi dimensional recursive ripple model the aim of this study is to determine the nature of the relationship between house prices of different types of housing across the uk regions we use an autoregressive distributed lag bounds testing approach to determine the long run relationships between house prices as well as an error correction model to estimate the short run dynamics between house prices the data include house prices across the regions of great britain and for new old and modern houses the results suggest that house price shocks ripple across regions although the nature of the relationship varies across housing types we further simulate the impact of house price shocks and reveal a complex structure whereby a house price shock in region a impacts upon prices in other regions which in turn feedback into region a in a recursive ripple

ripple effects in south african house prices this paper analyses the ripple effect of house prices in large medium and small sized houses of five major metropolitan areas of south africa namely cape town durban unicity greater johannesburg port elizabeth uitenhage and pretoria based on available quarterly data covering the period of 1966 q1 to 2010 q1 following the extant literature the issue is contextualised as a unit root problem with one expecting the ratios of metropolitan house price to national house price to exhibit stationarity to an underlying trend value if there is diffusion in house prices using bayesian and non linear unit root tests besides the standard linear tests of stationarity with and without structural break overwhelming support is found for the existence of robust ripple effects also factor analysis conducted suggested that ripple effects originate in cape town for the large housing segment and in durban for the medium and small sized houses

forms of trust and conditions for their stability of the three principal approaches to trust we decided to investigate in greater detail the one in which trust is regarded as a belief that the individuals involved hold about a relationship trust was defined as a delegatory relationship based on anticipation of the delegatee s behaviour we reached four main conclusions first the solution to the problem posed by the indeterminacy of trust lies in the differentiation and hierarchisation of the various forms of trust contractual organisational and tacit on the basis of their degree of irreversibility and stability second contractual trust is unstable because it comes up against the problem of guarantees of individual intentions this leads to the third conclusion rational evaluation by individuals cannot by itself establish trust which is based on collective beliefs practices and rules fourth we identified two conditions for the stability of trust the creation of irreversibilities through adherence to a rule and the creation of a confidence interval within which different interpretations of contradictory individual strategies are tolerated thus the viability of the various forms of trust depends on the ability of institutions and organisations to create rules that are likely when applied to produce an interval in which tolerance of mutual intentions is the norm these analyses of trust hence highlight the role of time and period of time in the notion of trust

a percolation based model explaining delayed takeoff in new product diffusion a model of new product diffusion is proposed in which a site percolation dynamics represents socially driven diffusion of knowledge about the product s characteristics in a population of consumers a consumer buys the new product if her valuation of it formed after her witnessing the product in use among her friends or neighbors is not below the price of the product announced in a given period our model attributes the empirical finding of a delayed takeoff of a new product to a drift of the percolation dynamics from a nonpercolating regime to a percolating regime this drift is caused by learning effects lowering the price of the product or by network effects increasing its individual valuations by consumers both with an increasing number of buyers

the convergence of regional house prices in the uk the ripple effect hypothesis implies a long run convergence of regional uk house prices however despite many authors believing in the existence of such an underlying constancy statistical evidence has yet to be presented supporting this implication in this paper an alternative approach is proposed to analyse regional house price ratios in contrast to the findings of previous studies application of this new procedure results in the detection of widespread convergence of house prices in a number of regions of the uk the results suggest that the failure of previous analyses to uncover convergence is due to an underlying asymmetry in the adjustment process being ignored interestingly the form of asymmetry detected varies between regions while regions in the south east experience faster convergence following downswings in prices other regions exhibit more rapid convergence following increases in prices

hedonic price indexes for spreadsheets and an empirical test for network externalities in this article i first estimate hedonic price equations for computer spreadsheet programs and then use the analysis to empirically test whether network externalities exist in this industry the study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the lotus platform and for spreadsheets that offer links to external databases and a similar premium for spreadsheets that offer local area network externalities finally the quality adjusted real price of computer spreadsheets declined by approximately 15 per year from 1986 to 1991

second order sustainability conditions for the development of sustainable innovations in a dynamic environment abstract in particular radical innovations can be important means to achieving improved sustainability due to the existence of path dependency and lock in however the transition from one technological trajectory to another more sustainable one is often impeded by significant barriers fortunately these barriers are by their nature subject to substantial changes in time so it makes sense to carefully distinguish between periods of stability showing high barriers in which the given trajectory can hardly be left and periods of instability characterized by low barriers where a new trajectory can be reached more easily the latter distinction matters since sustainable innovations often rely on governmental regulation and the economic burden arising from this regulation will be much lower in periods of instability moreover due to the complexity and dynamics of change in their respective environments innovations are generally associated with fundamental uncertainty such that it becomes impossible to predict the degree of sustainability yielded by specific innovations in the longer run under these circumstances it is essential to facilitate the change between trajectories and to allow for the possibility to select between a variety of alternative trajectories within a process of trial and error sustainability as viewed from this evolutionary perspective is therefore better understood as the general capability to adapt that is to readily change from less to more sustainable technological trajectories since the latter kind of sustainability determines the conditions under which the former kind i e sustainability related to a specific technology can be achieved the two kinds are respectively called second order and first order sustainability finally a series of determinants and corresponding indicators from the techno economic political and socio cultural sphere is identified which after proper measurement and weighting allow for making an assessment whether and when the incumbent industry is sufficiently destabilized and the political system rendered sufficiently favorable to the new more sustainable technology such that a transition to the preferred trajectory is possible without too much effort

wind power policy in complex adaptive markets abstract this paper aims to advance research into the effectiveness of policies for encouraging technological transition in the energy sector in general and wind power in particular it contends that the ineffectiveness of wind power development policy in most nations stems from a linear approach to policy design that is unsuited to complex adaptive markets the paper argues that in complex adaptive markets policies are required that foster competition on a level playing field insights are extracted from complexity theory to advance four principles for effective wind power policy in such markets these principles include establishing policy initiatives to encourage technological diversity establish clear and progressive short to medium term targets enhance environmental monitoring systems and establish a malleable policy regime that directly resolves emergent challenges while simultaneously sustaining market momentum to ensure long term targets are met in order to demonstrate the applied relevance of these principles the paper applies these concepts to a historical analysis of denmark s wind power development policies

predicting u s business cycle regimes this article examines the use of logistic classification methods for the identification and prediction of postwar u s business cycle expansion and contraction regimes as defined by the national bureau of economic research nber reference turning point dates we present a coherent theoretical framework for this task using measures of discriminatory information the analysis encompasses model selection parameter estimation and classification decision rules we examine the performance of logistic procedures in reproducing the nber regime classifications and in predicting one and three months ahead using leading indicator variables our models are shown to provide substantially more accurate business cycle regime predictions than markov switching specifications

dynamic competition with network externalities why history matters we consider dynamic competition among platforms in a market with network exter nalities a platform that dominated the market in the previous period becomes focal in the current period in that agents play the equilibrium in which they adopt the focal platform whenever such equilibrium exists yet when faced with higher quality competition can a low quality platform remain focal in the finite horizon case the unique equilibrium is efficient for patient platforms with an infinite time horizon however there are multiple equilibria where either the lowor high quality platform dominates if qualities are stochastic the platform with a better average quality wins with a higher probability even when its realized quality is lower and this probability increases as platforms become more patient hence social welfare may decline as platforms become more forward looking

privatization in eastern europe irreversibility and critical mass effects abstract this paper proposes a model to shed light on two important policy features of privatization in central and eastern europe the idea of a necessary critical mass of privatization on one hand and the great difficulties encountered in the actual privatization process on the other the model incorporates a positive externality related to the size of the private sector multiple equilibria may arise for political and economic reasons policies of free distribution are analysed with the model they may eliminate the danger of policy reversals due to excess unemployment but may at the same time increase the relative cost of restructuring leading in some cases to pareto inferior outcomes

waves in consumption with interdependence among consumers this paper presents a model to analyze the development of consumption patterns when there are social interactions among consumers in particular a consumer in this model recognizes three reference groups a peer group of similar consumers with whom the consumer wishes to share consumption activities a distinction group from which the consumer wishes to distinguish him or herself and an aspiration group to which the consumer does not belong but wishes that he she did and with whom the consumer would like to share consumption activities the interplay of aspiration and distinction can lead to waves in consumption these can happen when for example the avant garde consumption of up market pioneers is copied by other types of consumer as the latter aspire to emulate the former the former in turn seek to distinguish themselves from these unwelcome companions by varying their consumption in consequence a particular consumption activity may start up market an then gradually proceed down the social spectrum more complex patterns with continuing cycles in consumption can also be found the paper argues that this model is not only applicable to the consumption behaviour of an elite or would be elite but is relevant in a wide range of consumption settings

a disaggregated analysis of asymmetrical behaviour in the uk housing market potential asymmetrical adjustment in uk house prices is considered the present analysis extends previous research in a number of crucial ways first a seminal examination of asymmetry in regionally disaggregated uk house prices is undertaken secondly data are examined which are further disaggregated according to the age or vintage of the housing stock however the major development concerns the application of a non parametric testing approach to detect cyclical asymmetry in contrast to previously employed tests in the economics literature the triples test employed possesses high power and is not sensitive to outliers it is found that extensive asymmetry is present in uk house prices with cyclical peaks typically being greater in magnitude than corresponding troughs the implications of these findings for the comparison and construction of economic theories of the housing market the specification of econometric models and the construction and implementation of economic policy are noted

offshoring and outsourcing potentials evidence from german micro level data this paper provides two indicators that measure i offshoring potentials cross country geographical relocation and ii outsourcing potentials organisational relocation separately at the level of jobs occupations tasks and industries we use four waves of the bibb baua labour force survey in germany and apply principal component analysis based on a large set of potential determinants of offshoring and outsourcing derived from the literature our results show significant variation across these levels in the determinants of both dimensions we provide a comprehensive empirical classification of the determinants of how easily jobs can be offshored and outsourced this can serve as a basis for further research to investigate the economic effects of job offshoreability

competing technologies the learning curve and rational expectations abstract the problem of choice between several variants of a technology subject to dynamic learning economies is examined in a rational expectations model with overlapping adopters it is shown that even with rational expectations the long term market outcome depends sensitively on the pattern of early chance events and that only one variant of the technology will come to dominate the market in the long run this variant need not be the one which is socially optimal or most promising technically

wright meets markowitz how standard portfolio theory changes when assets are technologies following experience curves abstract we consider how to optimally allocate investments in a portfolio of competing technologies using the standard mean variance framework of portfolio theory we assume that technologies follow the empirically observed relationship known as wright s law also called a learning curve or experience curve which postulates that costs drop as cumulative production increases this introduces a positive feedback between cost and investment that complicates the portfolio problem leading to multiple local optima and causing a trade off between concentrating investments in one project to spur rapid progress vs diversifying over many projects to hedge against failure we study the two technology case and characterize the optimal diversification in terms of progress rates variability initial costs initial experience risk aversion discount rate and total demand the efficient frontier framework is used to visualize technology portfolios and show how feedback results in nonlinear distortions of the feasible set for the two period case in which learning and uncertainty interact with discounting we compare different scenarios and find that the discount rate plays a critical role

technological clusters with a knowledge based principle evidence from a delphi investigation in the french case of the life sciences abstract recent works in the theory of technical change show the effect of irreversibility and lock in on the diffusion and creation of innovation processes which are able to stop the development of a generic technology therefore industrial policies play a major role in selecting and supporting the innovative process the purpose of this paper is to prove the possibility to derive a typology of future innovations in terms of generic technology from a delphi type technology survey thus it is possible to get a better understanding of the industrial dynamics and to design an interesting tool for industrial policies or for firm strategies as far as they aim at developing stable technological trajectories this is applied to the french case of the life sciences the paper suggests interesting explanatory trajectories in order to fight against diseases such as cancer alzheimer or schizophrenia

when do markets tip a cognitive hierarchy approach the market structure of platform competition is critically important to managers and policy makers network effects in these markets predict concentrated industry structures whereas competitive effects and differentiation suggest the opposite standard theory offers little guidance full rationality models have multiple equilibria with wildly varying market concentration we relax full rationality in favor of a boundedly rational cognitive hierarchy model even small departures from full rationality allow sharp predictions there is a unique equilibrium in every case when participants single home and platforms are vertically differentiated a single dominant platform emerges multihoming can give rise to a strong weak market structure one platform is accessed by all and the other is used as a backup by some agents horizontal differentiation in contrast leads to fragmentation differentiation rather than competitive effects mainly determines market structure

gifts as economic signals and social symbols gift giving has often puzzled economists especially because efficient gifts like cash or giving exactly what a person asks for seem crass or inappropriate it is shown in a formal game theoretic model that gifts serve as signals of a person s intentions about future investment in a relationship and inefficient gifts can be better signals other explanations for the inefficiency of gift giving are advanced and some stylized facts about gift giving practices are described many of which are consistent with the signaling view of gifts

light emitting diodes and the lighting revolution the emergence of a solid state lighting industry emergence of new industries from evolving technologies is critical to the global economy yet has been relatively understudied due to the paucity of available data this study draws lessons on industry emergence by analyzing how a solid state lighting ssl industry grew out of light emitting diode led technologies that evolved for half a century with participation by tens of thousands of researchers in universities national laboratories and firms using data on publications patents and firms combined with business history we trace the evolution of ssl through a succession of market niches at times a few researchers with unorthodox research approaches made breakthroughs that greatly advanced particular technology trajectories and pushed led research in unexpected directions a succession of led market niches advanced the technology and provided profits to incentivize continuing research while reducing cost and improving efficacy of leds innovating firms developed a thicket of patents and captured substantial profit but were embroiled in extensive litigation that was ultimately resolved through cross licensing a major new generation of lighting products is now disrupting the traditional lighting industry although the leading incumbent lighting firms all invested early and heavily in ssl the industry s future leadership is uncertain

network externality an uncommon tragedy economists have defined network externality and have examined putative inframarginal market failures associated with it this paper distinguishes between network effects and network externalities where the latter are market failures the authors argue that while network effects are important network externalities are theoretically fragile and empirically undocumented some network externalities are merely pecuniary network ownership or transactions among network participants can internalize some network effects the type of market failure that has been associated with these externalities is a transition problem that has little to do with externality

a new perspective on the ripple effect in the uk housing market comovement cyclical subsamples and alternative indices an alternative perspective is provided on the existence of a ripple effect in the uk housing market in contrast to previous studies the analysis involves consideration of information on the changes in house prices to which the hypothesis of house price diffusion posited by the ripple effect relates rather than their levels in an examination of changes in house prices in london relative to other regions of the uk directional forecasting methods are employed to establish the extent of the relationship between geographical proximity and comovement across the three month window provided by quarterly data consequently the analysis provides a direct examination of the ripple effect which refers to changes in prices rather than the convergence of levels which has become a feature of the empirical literature the literature is extended further by both the application of dating techniques to perform the analysis across cycles and phases of cycles recovery and recessionary periods in the uk housing market

platform selection in the lab abstract emerging literature explores experimental platform selection games these games converge rapidly on the superior platform under a wide range of conditions we replicate the remarkable results of hossain and morgan 2009 in which such a game tips almost perfectly to the superior platform next we show that platform coordination fails when seemingly innocent increases in out of equilibrium payoffs are introduced the inflated payoffs keep the best reply structure unchanged and do not influence players security levels our design allows control for the explanatory force of risk dominance we find that equilibrium selection theory is unable to account for coordination failure while observed behavior is consistent with non rational learning furthermore and contrary to the literature we find that efficiency suffers when an inferior platform is granted initial monopoly

tortoises and hares choice among technologies of unknown merit recent work in the area of competing technologies and increasing returns has largely been concerned with the effectiveness of the market in delivering optimal outcomes the existence of inefficient market outcomes suggests that there might be a place for intervention in the technology choice process this paper develops a model of sequential choice in which the choice process is subject to centralized control the model is used to show that intervention can increase the expected present value of the technology adoption process it remains however that one technology and not necessarily the best will come to dominate the market copyright 1991 by royal economic society

housing credit constraints and macro stability the secondary mortgage market and reduced cyclicality of residential investment author s peek joe wilcox james a abstract as secondary mortgage markets developed and grew over the past two decades fluctuations in residential investment and in mortgage balances were much smaller than they had been prior to the 1980s we hypothesize that by reducing the volatility of the total supply of funds to mortgage markets larger secondary mortgage markets smm dampened the responses of residential investment to income and to interest rates and thereby contributed importantly to the great moderation in volatility of the u s economy our empirical results provide some evidence that the smm did continually reduce the volatility of residential investment over the past two decades by tempering its sensitivities to income and to interest rates

innovation processes in large technical systems market liberalization as a driver for radical change abstract electricity supply is a large technical system which exhibits strong path dependencies and high barriers for radical innovations recent market liberalization however has initiated a fundamental restructuring the paper analyzes how liberalization has altered innovation processes in the field of electricity supply we examine three radical innovations under monopoly conditions and contrast the findings with the results from a survey on the innovation behavior of electric utilities in liberalized markets we argue that the selection environment for innovations has changed in various respects in our sample new options open to innovation activities have emerged at the level of the firm and utility strategies turn out to be more heterogeneous this may be interpreted as an increase in the variety of search processes which may lead to a mid term decrease of path dependencies

seasonality and cointegration of regional house prices in the uk the data generation process underlying regional house prices in the uk is investigated using new statistical tests it is found that causal flows tend to be northwards the south east rather than greater london acts as an exogenous price determinator of the other regions in the south the midland regions have a great influence on prices in the north and flows through the east midlands are characterised by bi directional causality these results are largely independent of assumptions made about the data generation process and tests of these assumptions have low power in any case there are also similarities between this causality and migration patterns particularly in the south of england

spatial dynamics of the housing market an interurban perspective a major unproven hypothesis in housing economics is that regional ripple effects are caused by household migration between regions this paper examines household migration and price ripples at the level of local housing markets driven partly by the fact that such migration linkages are likely to be more pronounced between local rather than regional housing markets following a review of regional housing market studies several hypotheses linking the existence of lead lag relationships and cointegration with the scale of migratory linkages between local housing market areas lhmas are proposed using private housing transactions data for strathclyde a sub region of scotland the paper identifies two clusters of lhmas that differ in terms of their migratory linkages with glasgow the hypothesised leading housing market of the sub region tests for lead lag relationships and cointegration confirm the link between migration and house price changes

the dynamo and the computer an historical perspective on the modern productivity paradox the dynamo and the computer an historical perspective on the modern productivity paradox author s paul a david source the american economic review vol 80 no 2 papers and proceedings of the hundred and second annual meeting of the american economic association may 1990 pp 355 361 published by american economic association stable url http www jstor org stable 2006600 accessed 08 12 2010 01 40

persistence of power elites and institutions we construct a model to study the implications of changes in political insti tutions for economic institutions a change in political institutions alters the distribution of de jure political power but creates incentives for investments in de facto political power to partially or even fully offset change in de jure power the model can imply a pattern of captured democracy whereby a democratic regime may survive but choose economic institutions favoring an elite the model provides conditions under which economic or policy outcomes will be invariant to changes in political institutions and economic institutions them selves will persist over time jel d02 d72 the domination of an organized minority over the unor ganized majority is inevitable the power of any minority is irresistible as against each single individual in the majority who stands alone before the totality of the organized minor ity at the same time the minority is organized for the very reason that it is a minority

institutional reform and technological practice the case of electricity this article proposes a framework for categorizing possible interrelations between technological and institutional change and applies this framework to the case of the restructuring of the electricity sector it is argued that there is a need for coherence between institutions and technological practice so as to safeguard the satisfactory functioning of electricity infrastructure the identification of possible incoherences between institutions and technological practice allows for a better understanding of the potential drivers for change and the evolutionary processes of which they may be part this article attempts to elaborate the nature of this co evolution in somewhat more detail using specific levels of analysis that are exemplified in a four level model in the case of the restructuring of the electricity sector the institutional framework has changed from a public utility oriented towards a market oriented system however the technological practice remained unchanged a system oriented approach that relies on centralized planning control and operation this discrepancy between institutions and technological practice leads to significant frictions in the functioning of the electricity sector but it also offers opportunities for innovation in order to make liberalization a success it might be necessary to stimulate certain technical developments i e distributed generation and intelligent networks

biodiversity conservation in a dynamic world may lead to inefficiencies due to lock in effects and path dependence abstract although biodiversity is generally diminishing in some areas its conservation is expanding however the exact path of this expansion is uncertain this can lead to problems of path dependence and lock in effects path dependence describes situations where history strongly influences present decisions and lock in effects refer to situations where an earlier decision provides strong incentives to follow a particular path even if more efficient alternatives are available later on we develop a conceptual ecological economic model to investigate which ecological and economic parameters favour the appearance of efficiency losses in biodiversity conservation due to path dependence and lock in effects in a dynamic two period two region model generally we find that efficiency losses occur if there are signals that guide the first period budget into a region that later turns out to be suboptimal if both time periods had been considered right from the beginning to illustrate the conservation relevance of our findings we present potential efficiency losses through path dependence in the hypothetical case of applying offsets to conserving the endangered maculinea teleius butterfly near the city of landau in germany

employment job turnover and trade in producer services uk firm level evidence abstract we provide the first firm level evidence of the impact of the trade in producer services offshoring on the labour market using a new data set from the uk that measures trade in services at the firm level we find no evidence that importing intermediate services is associated with job losses or greater worker turnover using regression to control for observable differences between firms that import service inputs and those that do not we show that firms that start importing intermediate services experience faster employment growth than equivalent firms that do not this seems likely to be the result of positive demand shocks which cause a simultaneous increase in employment output and use of imported service inputs

learning by doing and the emergence of monopoly abstract the implications of learning by doing on the structure of an industry are studied through an example where firms are assumed to be non identical it is shown that under certain circumstances the industry may experience growing concentration leading eventually to monopoly a comparison between the effects of learning by doing in a socially managed industry and in a cournot duopoly is made

the adoption of voluntary environmental management programs in mexico first movers as institutional entrepreneurs this article analyzes the adoption of voluntary environmental management programs by firms operating in mexico mexican firms can obtain national certification clean industry and or international certification iso 14001 based on institutional entrepreneurship theory we posit that the role played by first movers as institutional entrepreneurs is crucial if these programs are to become established with sufficient strength and appeal this understanding is especially important in an environment where more than one program can be adopted we tested several hypotheses on the behaviors of 1328 facilities operating in mexico half of which 664 had certified environmental management programs of the 664 certified facilities 217 were classified as early adopters three variables predicted the likelihood of a facility being an early adopter 1 connected to international market 2 in the maquila sector and 3 linked to an industry association that offers free resources

property rights and the role of the state evidence from the horn of africa this study applies extant theories of property rights change to three land tenure systems in imperial ethiopia two of the areas underwent changes in property rights after experiencing changes in the value of land one did not a data set of litigation over land rights is used in conjunction with case studies to understand the mechanisms motivating or impeding property rights change amendments to the role of the state are suggested and two conclusions are reached 1 that movement towards greater specificity of land rights did not always occur and 2 the changes in property rights that occurred were imposed from above rather than occurring endogenously where property rights changes did not occur they appear to have been blocked by the state which was more concerned with political survival than with revenue maximisation

managerial prescriptions under the resource based view of strategy the example of motivational techniques working from the perspective of the resource based view of strategy this paper addresses whether academics consultants and other sources of general managerial prescriptions can affect firms long run rent streams the answer is affirmative to demonstrate this i discuss the use of motivational techniques as a well understood and common managerial choice that may affect a firm s chance of generating rents this paper interprets extant empirical research on goal setting and discusses the conceptualization of temporal rent patterns i build upon an empirical finding in goal setting research to compare the temporal patterns of rents for managerial choices embedded in path dependent vs path independent processes 1998 john wiley sons ltd

is demand pulled innovation equally important in different groups of firms previous empirical literature has tested the demand pull hypothesis and found that innovation may be driven by output using a balanced panel of 216 italian manufacturing firms 1995 2000 and checking for the path dependent nature of r d we find a role of sales in inducing r d however the demand pull effect plays a varying role for different sub samples of firms exporting firms liquidity constrained firms not subsidised firms and those not heading a group seem to be sensitive to sales in deciding r d these results have been obtained using a least squares dummy variable corrected estimator a recent panel data technique suitable for small samples

offshoring political myths and economic reality overseas outsourcing commonly known as offshoring is an aspect of globalisation that has attracted significant political and media attention in this lecture david smith discusses the phenomenon and examines the costs and benefits both to the companies and countries from which activities are being outsourced and to the host economy he concludes from a review of the evidence that there are indeed significant benefits and that they mainly accrue to the outsourcing country in the form of lower inflation faster growth in real incomes and an improved product ivity performance the shift to higher value added activities so why is there so much political sensitivity about offshoring one is that unlike in the case of manufacturing the jobs being offshored are commonly seen as those in which advanced economies retain comparative advantage another is that the new higher value added jobs that will be created are in areas and activities that barely exist at present the biggest problem he concludes is that while the victims of offshoring can be easily identified and have a political constituency the gains are spread more thinly across the economy this is the challenge for economists and pro free trade politicians

economic performance through time prize lecture to the memory of alfred nobel december 9 1993 this abstract was borrowed from another version of this item

adaptation as information restriction the hot stove effect individuals and social systems are often portrayed as risk averse and resistant to change such propensities are characteristically attributed to individual organizational and cultural traits such as risk aversion uncertainty avoidance discounting and an unwillingness to change this paper explores an alternative interpretation of such phenomena we show how the reproduction of successful actions inherent in adaptive processes such as learning and competitive selection and reproduction results in a bias against alternatives that initially may appear to be worse than they actually are in particular learning and selection are biased against both risky and novel alternatives because the biases are products of the tendency to reproduce success that is inherent in the sequential sampling of adaptation they are reduced whenever the reproduction of success is attenuated in particular when adaptation is slowed made imprecise or recalled less reliably the propensity to engage in risky and new activities is increased these protections against the error of rejecting potentially good alternatives on inadequate experiential evidence are costly however they increase the likelihood of persisting with alternatives that are poor in the long run as well as in the short run

the end of economic growth a contracting threshold hypothesis this paper argues that gdp growth in both developed and developing countries has associated costs that can outweigh the benefits and thus reduce sustainable well being this conclusion is based upon the findings of empirical applications of the genuine progress indicator gpi to a range of countries in the asia pacific region the studies conducted on seven asia pacific countries indicate that in the case of five of the seven nations more recent gdp growth has reduced the sustainable well being experienced by the average citizen residing within them moreover the threshold point at which the costs of gdp growth outweigh the benefits appears to be contracting i e occurring at a much lower per capita level of gdp this paper therefore introduces a new contracting threshold hypothesis as the economies of the asia pacific region and the world collectively expand in a globalised economic environment there is a contraction over time in the threshold level of per capita gdp as a consequence the threshold point confronting growth late comers i e developing countries occurs at a much lower level of sustainable welfare than what wealthy nations currently enjoy the consequences of this for developing countries are clearly significant and require a new approach to economic development

is there long run convergence among regional house prices in the uk this paper investigates the long run convergence of regional house prices in the uk existing studies have failed to reach a consensus on whether or not regional house prices exhibit long run convergence with each other the application is proposed of a new test involving unit root testing of the first principal component based on regional national house price differentials using mix adjusted quarterly data for 1973 2006 it is found that the first principal component is stationary this suggests that all uk regional house prices are driven by a single common stochastic trend further analysis suggests that those regions that are more distant from london exhibit the highest degrees of persistence with respect to deviations in house price differentials

statistical properties of uk house prices an analysis of disaggregated vintages the statistical properties of uk house prices are considered at a disaggregated level where disaggregation occurs according to the age or vintage of the housing given the frequency of transactions in the housing market and the sophistication of the estate agent system it might be expected that the series would share long run relationships and be subject to common short run shocks it is found via conventional techniques that both the long run and short run relationships are less pronounced than might be expected however by extending recent research concerning the testing of common features commonality in the short run cycles of the house price series is uncovered albeit with a partial lag despite this the cycles are shown to differ in terms of their asymmetric behaviour

the valuation of complex derivatives by major investment firms empirical evidence this article examines the auction of a portfolio of collateralized mortgage obligations cmos to major broker dealers and institutional investors the unique data set allows us to analyze a number of important empirical questions related to the valuation of cmos by the bidders and the elasticity of demand for the securities the results reveal that the valuations differ substantially implying a significant elasticity of demand this article is designed to shed light on two related questions first it extends the work of bagwell 1991 1992 brown and ryngaert 1990 and bradley desai and kim 1988 among others on shareholder heterogeneity and the elasticity of the demand for financial assets to date the empirical research on investor heterogeneity has focused on common stock this article supplements previous work by examining an auction of another class of securities complex collateralized mortgage obligations cmos to major securities dealers and institutional investors second it provides perspective on fixed income valuation models in the spirit of cox ingersoll and ross 1985 and black derman and toy 1990 virtually all of these models even those that specify relatively complex interest rate processes assume homogeneous beliefs this implies that within the constraints imposed by estimation error sophisticated investors should place equal values on fixed income securities bagwell observes that investors can be heterogeneous along several dimensions first heterogeneity can be induced by tax rules to the extent that different investors are taxed in different ways their demand for securities will be affected second transaction costs can cause heterogeneity by driving a wedge between buyers sellers and owners of a security third investors can differ in their assessments of the value of a security either because they possess different information or because they analyze that information in different ways fourth investors can face different nontradeable risks and thus can have different assessments of the value of a security depending on how it interacts with these risks finally it has been suggested by lee shleifer and thaler 1991 among others that investors may differ for idio

theorizing path dependence a review of positive feedback mechanisms in technology markets regional clusters and organizations the concept of path dependence has often been criticized as vague and only narrowly applicable although we can find some very refined definitions of the concept we also find a wide range of empirical phenomena being described as path dependent we argue that more detailed accounts of the positive feedback mechanisms that form paths can take path dependence beyond this state of being overdetermined but under specified reviewing three well described cases of path dependent dynamics in technology markets regional clustering and organizations we define a core set of positive feedback mechanisms that constitute path dependence at different analysis levels and clarify the relationship between positive feedback and increasing returns we show that path dependent processes that is processes driven by positive feedback that veer toward rigidity or lock in can be but do not have to be found under many labels including structural inertia coevolution or institutional persistence we conclude that a precise definition of path dependence does not need to be at odds with the concept s widespread use in understanding organizational and industrial development processes copyright 2013 the author 2012 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

technological change in economic models of environmental policy a survey this paper provides an overview of the treatment of technological change in economic models of environmental policy numerous economic modeling studies have confirmed the sensitivity of mid and long run climate change mitigation cost and benefit projections to assumptions about technology costs in general technical progress is considered to be a noneconomic exogenous variable in global climate change modeling however there is overwhelming evidence that technological change is not an exogenous variable but to an important degree endogenous induced by needs and pressures hence some environmenteconomy models treat technological change as endogenous responding to socio economic variables three main elements in models of technological innovation are i corporate investment in research and development ii spillovers from r d and iii technology learning especially learning by doing the incorporation of induced technological change in different types of environmental economic models tends to reduce the costs of environmental policy accelerates abatement and may lead to positive spillover and negative leakage

capitalism as an engine of progress economists from marx to schumpeter have touted capitalism as an engine of technical progress but what kind of an engine is it what are its key components how does it work

inefficient standard adoption inertia and momentum revisited i introduction since the establishment of the theory of network effects economists have been concerned with the question of whether a market with network effects will tend to settle on the socially optimal standard it has been postulated that markets may exhibit excess inertia once a technological standard is in place a new superior standard may not displace it because of installed base effects alternatively markets may exhibit excess momentum consumers may adopt a new standard too quickly ignoring the stranding effect they are having on previous users similar issues arise in the adoption of language and social norms the literature has investigated various conditions under which one of these inefficiencies arises such inefficiencies are of particular concern for open technologies such as the qwerty and dvorak keyboards 1 the situation is somewhat different when individual firms own standards in that case a simple argument seems to indicate that there is no possibility that an inefficient standard will persist if a new standard is superior in any objective sense there are gains to be made from switching to it once the standard has been adopted the firm can appropriate these gains therefore the firm has incentive to lower the initial price enough to induce adoption of the standard the preceding argument is made in liebowitz and margolis 1999 and repeated in spulber 2002 spulber expresses a general skepticism about the likelihood of inefficiencies when property rights are defined and markets exist critics might claim that previous models that imply inefficient standard adoption are unrealistic in some way and that if such models were modified slightly the inefficiency would disappear i reconsider the issue of inefficient standard adoption using a parsimonious yet compelling model assuming only that there are successive generations of finitely lived consumers that preferences are heterogeneous and that there are network effects among users adoption decisions can be inefficient this is true even if consumers can coordinate efficiently within a generation and a firm can act as a coordinating device across generations the model presented here generates some of the same results found in other papers collectively but in a more general setting and with more robust results if there is an established standard and a superior alternative emerges no single generation of consumers will be willing to switch to the new standard if the switching cost the loss of network benefit from breaking with past users is too high it may be that the benefits to future generations of consumers are large enough that from a social standpoint it would be efficient for one generation to adopt the new standard even if it is privately optimal for that generation to retain the old standard on the other hand the current generation considers only its own switching cost and not the cost it imposes on the previous generation leading to potential overadoption of new technology even for proprietary standards it is not clear that the incentive of the firm to induce adoption matches the social incentive in particular if consumer preferences are heterogeneous the firm will not be able to price in such a way to extract all of the additional surplus gained from the new standard on the other hand the firm will be able to appropriate some of the surplus generated by the network effect itself which is present for any standard and thus does not affect the social incentive to change standards it is not possible to address this issue with a two period model as in some of the previous literature see for example choi 1994 choi and thum 1998 katz and shapiro 1986 if a new technology is introduced in the second period but then the game ends the welfare of future generations of consumers is neglected 2 this article also differs from previous infinite horizon models of technology adoption

induced adoption and externalities in the regional diffusion of information technology antonelli c 1990 induced adoption and externalities in the regional diffusion of information technology reg studies 24 31 40 information technology can be considered as a set of complex radical innovations which continues to evolve and has a major impact both within the plant and the office in such a context its regional diffusion is likely to be determined by relevant externalities together with the effects of a wage induced process of localized technological change and adoption data on the territorial distribution of fax machines and modems show that the levels of diffusion of information technology in italy is highly uneven favouring central regions endowed with higher levels of fixed and human capital and consequently income the econometric analysis confirms that diffusion levels of both fax and modems across provinces are significantly associated with the level of wages as is to be expected from the induced adoption hypothesis and from the existence of external factors such as the presence

regional house prices and the ripple effect in malaysia this paper applies univariate and panel lagrange multiplier lm unit root tests with one and two structural breaks to the ratio of the regional to national house price to examine the ripple effect for five different housing price indices aggregate housing detached housing semi detached housing terrace housing and high rise housing across 14 regional locations in malaysia segmentation is restricted to a small group of states across most housing types for which there is no long run relationship with the malaysian average when all housing types are taken together evidence of a ripple effect is generally found from the most developed states to the less developed states of malaysia while overall rates of conversion to the long run equilibrium are consistent with a low level of persistence there is some evidence of regional clusters based on similar speeds of adjustment in different parts of the country

demand dynamics with socially evolving preferences in this work we first identify a few stylized facts concerning microconsumption acts second building on them we develop a simple model of boundedly rational consumers who endogenously evolve their preferences via both innovation and social imitation third we explore some statistical properties of the demand patterns generated by the model which despite its simplicity are surprisingly in line with the empirical evidence these results we suggest bring encouraging support to microfoundations of demand theory based on cognitive and behavioral foundations more in tune with the psychological and sociological evidence based on heterogeneous agents who are much less rational and much more social than in standard theory and who collectively discover along the way what they like within a growing universe of available commodities

power steering the canadian automotive industry the 1965 canada usa auto pact and political exchange abstract in the 1965 canada usa auto pact the automotive companies were required to maintain specified levels of assembly activity in canada this restriction and subsequent events such as the correlation of a shift in employment to canada and the widening of pay disparities between american and canadian workers the concentration of research in the united states despite canadian fiscal incentives and the differences in the rescue packages offered to chrysler by the two governments cannot be explained by conventional economic theory the paper demonstrates that they can be explained as mutually advantageous accommodations to different evaluations of political outputs reflecting endowments and domestic economic interests

technology choice and timing with positive network effects abstract when two competing and incompatible products coexist in a market potential users face a choice between the two products and the alternative of deferring the decision this paper examines the choice between the two substitutes where each one is subject to a positive network effect that is a user of one of the products experiences an increase in the value for each additional person using the same product we examine this buy or wait problem either for an individual or a manager making the investment on behalf of a firm by formulating and analyzing a decision theoretic model to model the stochastic evolution of market share we build on the generalized polya urn of arthur et al arthur w b ermoliev y m kaniovski y m 1987 path dependent processes and the emergence of macro structure european journal of operational research 30 3 294 303 allowing for composition of the market to affect not just the relative market shares but also the absolute growth rate of the market we show that the optimal strategy is defined by a pair of market penetration thresholds that depend on the market composition looking at the effect of the network effects on the optimal strategy we find that more pronounced network effects can either raise or lower the penetration thresholds

sectoral systems of innovation and production the concept sectoral system of innovation and production provides a multidimensional integrated and dynamic view of sectors it is proposed that a sectoral system is a set of products and the set of agents carrying out market and non market interactions for the creation production and sale of those products a sectoral systems has a specific knowledge base technologies inputs and demand agents are individuals and organizations at various levels of aggregation they interact through processes of communication exchange co operation competition and command and these interactions are shaped by institutions a sectoral system undergoes change and transformation through the co evolution of its various elements 2002 elsevier science b v all rights reserved

social capital and the linkages of high tech companies to the military defense system is there a signaling mechanism this study investigates linkages of new israeli high tech companies to the military and defense system we examine the impact of social capital signaling and learning spillovers on resource acquisition in terms of investments and the financial performance of companies with and without linkages social capital signaling and learning spillovers are examined as they impact individual and organizational resource acquisition and performance of 200 new israeli high tech companies the study contributes to the existing literature of entrepreneurship by suggesting the relevance of knowledge spillovers signaling theory and social capital to the context of the interface between defense and civilian spheres

the two faces of market support how deployment policies affect technological exploration and exploitation in the solar photovoltaic industry the recent years have seen a strong rise in policies aiming to increase the diffusion of clean energy technologies while there is general agreement that such deployment policies have been very effective in bringing technologies to the market it is less understood how these policies affect technological innovation to shed more light on this important question we conducted comparative case studies with a global sample of 9 firms producing solar photovoltaic pv modules complemented by in depth interviews with 16 leading pv industry experts we propose that on the one hand policy induced market growth serves as an important catalyst for innovative activity as it raises the absolute level of firm investments in technological exploration on the other hand however deployment policies create an incentive for firms pursuing more mature technologies to shift their balance between exploitation and exploration toward exploitation firms focusing on less mature technologies cannot tap the potentials of exploitative learning to the same extent as those with more mature technologies therefore stimulating strong market growth may raise the barrier to market entry for less mature technologies we conclude that when designing deployment policies great care should be taken to avoid adverse effects on technological diversity and a premature lock in into more established technologies

the economics of convention c onventions regulate much of economic and social life yet they have received surprisingly little attention from economists by a convention we mean a pattern of behavior that is customary expected and self enforcing everyone conforms everyone expects others to conform and everyone has good reason to conform because conforming is in each person s best interest when everyone else plans to conform lewis 1969 familiar examples include following rules of the road adhering to conventional codes of dress and using words with their conventional meanings conventions with direct economic implications include species of money and credit industrial and technological standards accounting rules and forms of economic contracts indeed it would scarcely be an exaggeration to say that almost all economic and social institutions are governed to some extent by convention the main feature of a convention is that out of a host of conceivable choices only one is actually used this fact also explains why conventions are needed they resolve problems of indeterminacy in interactions that have multiple equilibria indeed from a formal point of view we may define a convention as an equilibrium that everyone expects in interactions that have more than one equilibrium the economic significance of conventions is that they reduce transaction costs imagine the inconvenience if whenever two vehicles approached one another the important exceptions are sugden 1986 and ullman margalit 1977 the interested reader might also refer to the symposium on social norms that appeared in the fall 1989 issue of this journal with articles by sugden 1989 and elster 1989

testing for convergence between uk regional house prices drake l 1995 testing for convergence between uk regional house prices reg studies 29 357 366 this paper uses the kalman filter time varying parameter estimation technique to test for convergence between uk regional house prices this issue is significant given the historical disparities in regional house price inflation rates and the unprecedented downturn in both uk and most regional house prices in the late 1980s and early 1990s the evidence suggests that there are clear regional differences in the pattern of uk house price movements in particular house prices in the north and scotland show evidence of greater divergence from prices in the rest of the south east region than do the southern and midlands regions drake l 1995 une analyse pour determiner la convergence des prix du marche immobilier regionaux au royaume uni reg studies 29 357 366 cet article se sert de la technique dite kalman filter afin de determiner la convergence des prix du marche immobilier regionaux au royaume uni c

bad eggs learning by doing and the choice of technology we model long run economic development through technology adoption under scientific uncertainty about environmental effects there are four possible long run equilibria in a socially planned economy high growth adopt rapidly but abandon damaging technologies once revealed ddt cfcs cautious brake the introduction of new technologies to avoid mistakes genetically modified organisms no growth halt technological progress to preserve secondary knowledge and collapse adopt rapidly without ever abandoning damaging technologies in the base parameterization a short sighted social planner chooses the cautious strategy a far sighted planner chooses the high growth strategy unless damages are irreversible in which case the cautious strategy again dominates regulatory options in the market economy are investigated pollution taxes do not affect the firm s level of precaution if they can only be applied after the adopting firm has reaped the benefits however they do encourage the abandonment of damaging technologies liability rules do affect precaution but may lead to excessive caution or even a no growth trap

path dependence and the korean keyboard abstract this paper recounts the evolution of the korean keyboard as a case in which the disadvantages of the inherited standard turn into a nonissue with the advancement of auxiliary technologies the persistence of an inherited standard when a superior alternative is available is usually regarded as market failure however if the transition costs to the new standard are such that the net gains from the transition are insufficient the situation is unfortunate but not market failure the situation may change over time if the net gain from the alternative standard increases or transition costs to new alternative decrease or both the situation turns into one in which entrepreneurs can profit by making the transition where appropriate an institutional reform may lower transition costs substantially this paper suggests an additional possibility of technological changes that make the transition unnecessary in the case of the korean keyboard changes in auxiliary technologies have rendered the disadvantages of the inherited standard innocuous the case provides a cautionary tale against the temptation to drastically alter a seemingly hopelessly inferior inherited standard the lesson of the korean keyboard applies to japanese and chinese keyboards with even greater force

obtaining strategic advantage from being imitated when can encouraging clones pay an important business strategy research theme concerns finding ways to minimize competition faced by the firm this paper however focuses on a different set of situations the model developed suggests that an innovator s best strategy may be to encourage clones of its product when a network externality is present key factors to consider in assessing whether encouraging cloning is the innovator s best strategy are 1 the benefit to be derived in terms of added user base contributed by the clone sales traded off against 2 the unit sales that will be lost to the clones these factors in turn depend upon the strength of the network effect and the degree to which the innovator s product quality is perceived by consumers to be superior to the clone s the model further suggests that both the innovator and clone earn their highest payoffs when the clone takes the lead in price setting i e when the clone establishes its own price by considering for each price it might set how the innovator will react to that price and the innovator as price follower responds to the price the clone chooses the paper demonstrates that the clone leader innovator follower situation represents the unique nash equilibrium in price setting strategies a central implication is that when operating in a network externality environment instead of a problem to be avoided clones may be valuable assets to an innovating firm building up the user base for the innovator s technology by bringing lower valuing consumers into the market which in turn makes the innovator s product more attractive to high and medium valuing purchasers thus when the above described conditions hold being cloned can be more profitable for an innovating firm than dominating the market alone

regional worlds from related variety in regional diversification to strategic coupling in global production networks this annual lecture paper bridges two influential but parallel literature strands on evolutionary economic geography eeg and global production networks gpn it argues that both strands are prem

optimal patenting and licensing of financial innovations recent court decisions starting with the state street decision in 1998 allow business methods to be patentable and now give financial institutions the option to seek patent protection for financial innovations this new patentability paradigm and the heterogeneity of characteristics associated with financial innovations pose an immediate decision problem for senior management what to patent we present a parsimonious decision framework that answers this question we show that for innovations with certain characteristics it is optimal not to patent even if the option of patenting and licensing is available our model emphasizes the role of embedded real options that arise from certain types of financial innovations the model provides an explanation of observed patenting behavior of financial institutions and the success of a wide class of innovations including swaps credit derivatives and pricing algorithms

technical change growth and trade new departures in institutional economics this article analyses the main theoretical and policy issues emerging from the literature on the evolutionary institutional economics of technical change the four distinguishing characteristics of which are that technology is often proprietary in nature only a part of knowledge is codifiable in handbooks blueprints patents and so on there are fundamental variations in the above two points across different technological fields and the evolution of knowledge is highly path dependent