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What drives new firms into an industry? An integrative model of entry

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Author Info
Natália Barbosa () (NIMA, Universidade do Minho)

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Abstract

The paper focuses on the theoretical and empirical formulation of an entry model that integrates strategic considerations and firms' heterogeneity. Entry decisions are derived from a profit function, and, subsequently, the number of entrants is defined as the sum of firms that have effectively decided to enter a given industry. As the aggregation of individual entry decisions yields a discrete outcome, the econometric methodology is based on panel count data models, rendering a novel departure from previous works. The results suggest that both incumbents' behaviour towards entry and firm-specific characteristics provide additional and interesting insights in understanding entry.

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File URL: http://nima.eeg.uminho.pt/publications/161.pdf
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Publisher Info
Paper provided by Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho in its series Working Papers with number 23.

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Length: 28 pages
Date of creation: Oct 2003
Date of revision:
Handle: RePEc:nim:nimawp:23/2003

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Postal: Universidade do Minho, Escola de Economia e Gestão Gualtar, 4710-057 Braga,Portugal
Phone: +351 253604100 (ext 5530)
Fax: +351 253676375
Web page: http://nima.eeg.uminho.pt/

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Postal: Universidade do Minho, Escola de Economia e Gestão Gualtar, 4710-057 Braga,Portugal
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Web: http://nima.eeg.uminho.pt/

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Related research
Keywords: entry; firms' heterogeneity; manufacturing; panel count data models;

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Bresnahan, Timothy F & Reiss, Peter C, 1990. "Entry in Monopoly Markets," Review of Economic Studies, Blackwell Publishing, vol. 57(4), pages 531-53, October. [Downloadable!] (restricted)
  2. Ghemawat, Pankaj, 1987. "Investment in lumpy capacity," Journal of Economic Behavior & Organization, Elsevier, vol. 8(2), pages 265-277, June. [Downloadable!] (restricted)
  3. Bonanno, Giacomo, 1988. "Entry deterrence with uncertain entry and uncertain observability of commitment," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 351-362. [Downloadable!] (restricted)
  4. Audretsch, David B., 1995. "Innovation, growth and survival," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 441-457, December. [Downloadable!] (restricted)
  5. Timothy F. Bresnahan & Peter C. Reiss, 1987. "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1987-3), pages 833-882. [Downloadable!]
  6. Fotopoulos, Georgios & Spence, Nigel, 1999. "Net entry behaviour in Greek manufacturing: consumer, intermediate and capital goods industries," International Journal of Industrial Organization, Elsevier, vol. 17(8), pages 1219-1230, November. [Downloadable!] (restricted)
  7. Sorgard, L., 1995. "Judo Economics Reconsidered: Capacity Limitation, Entry and Collusion," Papers 18/95, Norwegian School of Economics and Business Administration-.
    Other versions:
  8. Schwartz, Marius, 1986. "The Nature and Scope of Contestability Theory," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 37-57, Suppl. No. [Downloadable!] (restricted)
  9. B. Curtis Eaton & Roger Ware, 1987. "A Theory of Market Structure with Sequential Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 1-16, Spring. [Downloadable!] (restricted)
  10. Winkelmann, Rainer & Zimmermann, Klaus F, 1995. " Recent Developments in Count Data Modelling: Theory and Application," Journal of Economic Surveys, Blackwell Publishing, vol. 9(1), pages 1-24, March.
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  12. Smiley, Robert, 1988. "Empirical evidence on strategic entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 6(2), pages 167-180. [Downloadable!] (restricted)
  13. Pakes, A. & Ericson, R., 1990. "Empirical Implications Of Alternative Models Of Firm Dynamics," Papers 594, Yale - Economic Growth Center.
    Other versions:
  14. Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 315-325, Autumn. [Downloadable!] (restricted)
  15. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March. [Downloadable!] (restricted)
    Other versions:
  16. Agarwal, Rajshree & Gort, Michael, 1996. "The Evolution of Markets and Entry, Exit and Survival of Firms," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 489-98, August. [Downloadable!] (restricted)
  17. Ghemawat, Pankaj, 1984. "Capacity Expansion in the Titanium Dioxide Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 33(2), pages 145-63, December. [Downloadable!] (restricted)
  18. Singh, Satwinder & Utton, Michael & Waterson, Michael, 1998. "Strategic behaviour of incumbent firms in the UK," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 229-251, March. [Downloadable!] (restricted)
  19. Rosenbaum, David I & Lamort, Fabian, 1992. "Entry, Barriers, Exit, and Sunk Costs: An Analysis," Applied Economics, Taylor and Francis Journals, vol. 24(3), pages 297-304, March.
  20. Schmalensee, Richard, 1985. "Do Markets Differ Much?," American Economic Review, American Economic Association, vol. 75(3), pages 341-51, June. [Downloadable!] (restricted)
    Other versions:
  21. Richard Schmalensee, 1978. "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 305-327, Autumn. [Downloadable!] (restricted)
  22. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
  23. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter. [Downloadable!] (restricted)
    Other versions:
  24. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  25. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March. [Downloadable!] (restricted)
  26. Thomas, Louis A., 1999. "Incumbent firms' response to entry: Price, advertising, and new product introduction," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 527-555, May. [Downloadable!] (restricted)
  27. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier. [Downloadable!] (restricted)
    Other versions:
  28. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
    Other versions:
  29. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July. [Downloadable!] (restricted)
  30. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December. [Downloadable!] (restricted)
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