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The long term evolution of vertically-related industries

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Author Info
Andrea Bonaccorsi
Paola Giuri

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Abstract

The paper develops the argument that the long-term structural evolution of an industry depends on the evolution of a vertically-related, downstream industry. We analyse two pairs of vertically-related industries, the jet and turboprop aircraft and engine industries, since the first introduction of the jet and turboprop technologies to 1998. The paper shows that the evolutionary dynamics of the downstream industry, in terms of number of firms and products, entry, exit and concentration, is transmitted to the upstream industry via the structure of the network of vertical exchange relations. We identify two network configurations, partitioned and hierarchical, and show that they are responsible for sharply different transmission effects. An econometric analysis is carried out to demonstrate this difference in the turboprop and jet markets.

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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2000/01.

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Date of creation: 04 Dec 2000
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Handle: RePEc:ssa:lemwps:2000/01

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Related research
Keywords: vertically-related industries; network; industrial concentration; entry; exit.;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
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  1. Orsenigo, L. & Pammolli, F. & Riccaboni, Massimo, 2001. "Technological change and network dynamics: Lessons from the pharmaceutical industry," Research Policy, Elsevier, vol. 30(3), pages 485-508, March. [Downloadable!] (restricted)
  2. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326. [Downloadable!]
  4. Andrea Bonaccorsi & Paola Giuri, 1999. "Non shakeout patterns of industry evolution. The case of turboprop engine industry," LEM Papers Series 1999/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  5. Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring. [Downloadable!] (restricted)
  6. Holmstrom, Bengt & Roberts, John, 1998. "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 73-94, Fall. [Downloadable!] (restricted)
  7. Kirk Monteverde & David J. Teece, 1982. "Supplier Switching Costs and Vertical Integration in the Automobile Industry," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 206-213, Spring. [Downloadable!] (restricted)
  8. Joseph Farrell & Hunter K. Monroe & Garth Saloner, 1998. "The Vertical Organization of Industry: Systems Competition versus Component Competition," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 7(2), pages 143-182, 06. [Downloadable!] (restricted)
  9. Bresnahan, Timothy F & Greenstein, Shane, 1999. "Technological Competition and the Structure of the Computer Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 47(1), pages 1-40, March. [Downloadable!] (restricted)
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  10. Klepper, Steven, 1997. "Industry Life Cycles," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 145-81.
  11. Michael H. Riordan & David E.M. Sappington, 1989. "Second Sourcing," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 41-58, Spring. [Downloadable!] (restricted)
  12. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  13. Andrea Bonaccorsi & Paola Giuri, 1999. "Increasing returns and network structure in the evolutionary dynamics of industries," LEM Papers Series 1999/12, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  14. Joel S. Demski & David E.M. Sappington & Pablo T. Spiller, 1987. "Managing Supplier Switching," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 77-97, Spring. [Downloadable!] (restricted)
  15. Lustgarten, Steven H, 1975. "The Impact of Buyer Concentration in Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 125-32, May. [Downloadable!] (restricted)
  16. Riordan, Michael H, 1998. "Anticompetitive Vertical Integration by a Dominant Firm," American Economic Review, American Economic Association, vol. 88(5), pages 1232-48, December. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andrea Bonaccorsi & Paola Giuri & Francesca Pierotti, 2001. "Discontinuities, convergence and survival of inefficient trajectories in technical progress," LEM Papers Series 2001/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  2. Marie-Laure Allain & Saïd Souam, 2004. "Concentration horizontale et relations verticales," Working Papers hal-00242914_v1, HAL. [Downloadable!]
    Other versions:
  3. Andrea Bonaccorsi & Paola Giuri, 2001. "Learning, technological competition and network structure in the aero-engine industry," LEM Papers Series 2001/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  4. David A. Hennessy & John Miranowski & Bruce A. Babcock, 2003. "Genetic Information in Agricultural Productivity and Product Development," Center for Agricultural and Rural Development (CARD) Publications 03-wp329, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
    Other versions:
  5. Riccardo Cappellin & Eugenio Corti & Massimiliano Bianca, 2006. "Strategy for Innovation and Knowledge Creation in the Aeronautical Industrial Cluster in Campania Region," ERSA conference papers ersa06p643, European Regional Science Association. [Downloadable!]
  6. Andrea Bonaccorsi & R. Cambini & Paola Giuri & R. Riccardi, 2001. "Non ergodic properties of the dynamics of industry concentration," LEM Papers Series 2001/12, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  7. Noriaki Matsushima & Tomomichi Mizuno, 2009. "Input specificity and product differentiation," ISER Discussion Paper 0745, Institute of Social and Economic Research, Osaka University. [Downloadable!]
  8. Andrea Bonaccorsi & Paola Giuri, 1999. "Network Structure and Industrial Dynamics. The long-term evolution of the aircraft-engine industry," LEM Papers Series 1999/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
    Other versions:
  9. Jackie Krafft, 2004. "Shakeout in industrial dynamics: new developments, new puzzles," Post-Print hal-00211802_v1, HAL. [Downloadable!]
  10. José Pedro Pontes, 2006. "Networks and Firm Location," Working Papers 2006/09, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
    Other versions:
  11. Andrea Bonaccorsi & Paola Giuri, 2000. "Industry Life Cycle and the Evolution of an Industry Network," LEM Papers Series 2000/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
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