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Gaining the competitive edge using internal and external spillovers: a dynamic analysis

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  • Bischi, G. -I.
  • Dawid, H.
  • Kopel, M.

Abstract

This paper studies the evolution of two clusters of firms competing on a common market. Firms exit and enter a cluster based on the perceived chances for profits inside and outside the cluster. Information about profits are diffused by direct communication between firms. Internal and external spillover effects reduce the overall costs of firms in the clusters depending on the number of firms in the own and the competing cluster. A discrete time deterministic dynamical system describing the evolution of cluster sizes is derived. An analysis of the long run attractors of the system and their basins of attraction is used to compare the effects of advantages of a cluster with respect to the size of internal and external spillover effects, respectively. Furthermore, the implications of slow and fast exit and entry behavior of firms for the long run survival and the size of the clusters are studied.
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  • Bischi, G. -I. & Dawid, H. & Kopel, M., 2003. "Gaining the competitive edge using internal and external spillovers: a dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11-12), pages 2171-2193, September.
    • Handle: RePEc:eee:dyncon:v:27:y:2003:i:11-12:p:2171-2193
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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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