This paper examines the theorical rationale for a new form of organisation appearing in the car industry. This form is characterised by horizontal as well as vertical communication, incentives based on ability rather than on productivity, and a cooperation of the divisions of large corporations. I show in a duopoly model that such horizontal information flows are optimal when the production technology is flexible, that is when there are large factor complementarities. This organisational form enabled Japanese producers to maintain a competitive advantage in terms of time-to-market and rate of product renewal. Therefore, innovation is not only technological, but also organisational.
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Paper provided by European University Institute in its series Economics Working Papers with number
eco97/07.
Length: 30 pages Date of creation: 1997 Date of revision: Handle: RePEc:eui:euiwps:eco97/07
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Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection L00 - Industrial Organization - - General - - - General