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Entrepreneurial Ability and Market Selection in an Infant Industry: Evidence from the Japanese Cotton Spinning Industry

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  • Atsushi Ohyama

    (University of Chicago)

  • Serguey Braguinsky

    (SUNY Buffalo)

  • Kevin M. Murphy

    (University of Chicago)

Abstract

In this paper we develop a new insight into the process of learning in an infant industry, in a setting where entrepreneurs are differentiated by talent. The learning rate depends on the quality of ideas, not on the scale of the industry, and a competitive open economy regime may furnish a better environment for innovation-led industrial growth even in the presence of industry-wide increasing returns to scale. Competitive market selection of ablest entrepreneurs forms a crucial condition for successful industrialization. The model is tested against the evidence of the industrial revolution in Japan, which presents a unique historic experiment in which an internationally competitive textile industry was eventually set up without government protection after earlier experiments with subsidized firms had failed. (Copyright: Elsevier)

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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 7 (2004)
Issue (Month): 2 (April)
Pages: 354-381

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Handle: RePEc:red:issued:v:7:y:2004:i:2:p:354-381

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  1. Boyan Jovanovic, 2006. "Asymmetric Cycles," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 145-162.
  2. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 503-30, May.
  3. Rajshree Agarwal & Michael Gort, 2002. "Firm and Product Life Cycles and Firm Survival," American Economic Review, American Economic Association, vol. 92(2), pages 184-190, May.
  4. Saxonhouse, Gary, 1974. "A Tale of Japanese Technological Diffusion in the Meiji Period," The Journal of Economic History, Cambridge University Press, vol. 34(01), pages 149-165, March.
  5. Baldwin, Robert E, 1969. "The Case against Infant-Industry Tariff Protection," Journal of Political Economy, University of Chicago Press, vol. 77(3), pages 295-305, May/June.
  6. Rebecca Achee Thornton & Peter Thompson, 2001. "Learning from Experience and Learning from Others: An Exploration of Learning and Spillovers in Wartime Shipbuilding," American Economic Review, American Economic Association, vol. 91(5), pages 1350-1368, December.
  7. Kiminori Matsuyama, 1987. "Perfect Equilibria in a Trade Liberalization Game," Discussion Papers 738, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, December.
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Cited by:
  1. Saure, Philip, 2007. "Revisiting the infant industry argument," Journal of Development Economics, Elsevier, vol. 84(1), pages 104-117, September.
  2. Serguey Braguinsky & Atsushi Ohyama & Tetsuji Okazaki & Chad Syverson, 2014. "Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry," NBER Working Papers 19901, National Bureau of Economic Research, Inc.
  3. Braguinsky, Serguey & Rose, David C., 2009. "Competition, cooperation, and the neighboring farmer effect," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 361-376, October.

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