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Firms’ operational costs, market entry and growth

Author

Listed:
  • Cardona Daniel

    (Departament d’Economia Aplicada, Universitat de les Illes Balears, Edifici Jovellanos, Campus UIB, 07122 Palma de Mallorca, Spain)

  • Sánchez-Losada Fernando

    (Departament de Teoria Econòmica and CREB, Universitat de Barcelona, Av. Diagonal 696, 08034 Barcelona, Spain)

Abstract

The industrial organizational literature identifies operational costs as being an important determinant of industry evolution over time; however, it also shows that they can be endogenous and time-dependent. In this paper, we analyze the effects of endogenous and time-dependent operational costs on economic activity and, hence, on economic growth. We show that the particular nature of these costs determines the way in which the overall number of firms grows, which ultimately determines the pattern of economic growth. Our analysis differs from other approaches in that (i) a new firm is associated with the creation of a new product in such a way that a planned expenditure of resources is required (e.g. R&D), and (ii) an accumulation law for the growth of the number of firms is assumed. Hence, we show that growth can occur endogenously in an economy without any specific growth generating sector.

Suggested Citation

  • Cardona Daniel & Sánchez-Losada Fernando, 2016. "Firms’ operational costs, market entry and growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(1), pages 211-229, January.
    • Handle: RePEc:bpj:bejmac:v:16:y:2016:i:1:p:211-229:n:4
    DOI: 10.1515/bejm-2014-0132
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    References listed on IDEAS

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