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Firm size, rivalry and the extent of the market in endogenous technological change

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  • Peretto, Pietro F.

Abstract

Evidence shows that firms build their market position by accumulating knowledge protected by secrecy, patents and other appropriation devices. I explore the implications of this fact in a model economy where oligopolistic firms establish in-house R&D programs. In symmetric equilibrium, the number of firms determines concentration and firm size. These determine the scale and the efficiency of R&D operations and the rate of innovation. The number of firms, moreover, is endogenous and determined jointly with the rate of growth by the zero-profit condition. This property yields new results. For example, the scale effect of population size may be negative. The market allocation of resources is not Pareto optimal. I discuss the nature of this distortion.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 43 (1999)
Issue (Month): 9 (October)
Pages: 1747-1773

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Handle: RePEc:eee:eecrev:v:43:y:1999:i:9:p:1747-1773

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  1. Novshek, William & Sonnenschein, Hugo, 1987. "General Equilibrium with Free Entry: A Synthetic Approach to the Theory of Perfect Competition," Journal of Economic Literature, American Economic Association, vol. 25(3), pages 1281-1306, September.
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  4. Backus, David K. & Kehoe, Patrick J. & Kehoe, Timothy J., 1992. "In search of scale effects in trade and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 377-409, December.
  5. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
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  7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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  9. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
  10. Alvin K. Klevorick & Richard C. Levin & Richard R. Nelson & Sidney G. Winter, 1993. "On the Sources and Significance of Interindustry Differences in Technological Opportunities," Cowles Foundation Discussion Papers 1052, Cowles Foundation for Research in Economics, Yale University.
  11. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
  12. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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Cited by:
  1. André Grimaud & Frederic Tournemaine, 2007. "Why can an environmental policy tax promote growth through the channel of education?," Working Papers 22635, Institut National de la Recherche Agronomique, France.
  2. Minniti, Antonio, 2011. "Knowledge appropriability, firm size, and growth," Journal of Macroeconomics, Elsevier, vol. 33(3), pages 438-454, September.
  3. Ana Balcão Reis & Daniel Traca, 2008. "Spillovers and the competitive pressure of long run innovation," ULB Institutional Repository 2013/14146, ULB -- Universite Libre de Bruxelles.
  4. Silvia Giacomelli & Carlo Menon, 2013. "Firm size and judicial efficiency: evidence from the neighbour's court," Temi di discussione (Economic working papers) 898, Bank of Italy, Economic Research and International Relations Area.
  5. Jürgen Antony & Torben Klarl & Alfred Maußner, 2010. "Firm Heterogeneity, Credit Constraints, and Endogenous Growth," DEGIT Conference Papers c015_045, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. Patrizio Pagano & Fabiano Schivardi, 2003. "Firm Size Distribution and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 255-274, 06.
  7. Murat F. Iyigun & X. Maggie Chen, 2004. "Strategic R&D Delays Generate Market Power," Econometric Society 2004 North American Summer Meetings 213, Econometric Society.
  8. Thanh Le, 2008. "A dual economy model of endogenous growth with R&D and market structure," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 349-366, August.
  9. Huang, Chien-Yu & Ji, Lei, 2013. "Knowledge-intensive business services and economic growth with endogenous market structure," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 95-106.
  10. Peretto, P. & Smulders, J.A., 1998. "Specialization, Knowledge Dilution, and Scale Effects in an IO-Based Growth Model," Discussion Paper 1998-02, Tilburg University, Center for Economic Research.
  11. Silvia Giacomelli & Carlo Menon, 2012. "Firm Size and Judicial Efficiency in Italy: Evidence from the Neighbour's Tribunal," SERC Discussion Papers 0108, Spatial Economics Research Centre, LSE.
  12. Y. Malevergne & A. Saichev & D. Sornette, 2010. "Zipf's law and maximum sustainable growth," Papers 1012.0199, arXiv.org.
  13. Ying Fan & Menghui Li & Zengru Di, 2004. "Increasing Returns to Scale, Dynamics of Industrial Structure and Size Distribution of Firms," Papers cond-mat/0407383, arXiv.org.
  14. repec:ebl:ecbull:v:12:y:2002:i:6:p:1-9 is not listed on IDEAS

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