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Innovation, Firm Size and Growth in a Centralized Organization

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  • Sharon Gifford

Abstract

The optimal innovation, firm size, and growth are derived for a centrally controlled firm in which only the entrepreneur evaluates and restores current projects or evaluates and adopts new projects. Current projects are subject to failure (due to entry) and possible obsolescence, while new projects may not be successful. The optimal allocation of attention implies bounds on firm size and that the rate of innovation depends not only on monopoly profits, firm size, and technological opportunity, but also on the probability of obsolescence. The effects of monopoly power and firm size on innovation also depend on the degree of obsolescence.

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  • Sharon Gifford, 1992. "Innovation, Firm Size and Growth in a Centralized Organization," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 284-298, Summer.
    • Handle: RePEc:rje:randje:v:23:y:1992:i:summer:p:284-298
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    Cited by:

    1. Hirshleifer, David & Lim, Seongyeon & Teoh, Siew Hong, 2004. "Disclosure to an Audience with Limited Attention," Working Paper Series 2004-21, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    2. Takii, Katsuya, 2009. "Limited attention, interaction and the gradual adjustment of a firm's decisions," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 345-362, February.
    3. George W. J. Hendrikse, 1998. "Screening, Competition and the Choice of the Cooperative as an Organisational Form," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 202-217, June.
    4. Sharon Gifford, 1994. "A Review of Milgrom and Roberts'sEconomics, Organization and Management," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(2), pages 407-436, June.
    5. Boyan Jovanovic, 1993. "The Diversification of Production," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1 Microec), pages 197-247.
    6. Levesque, Moren, 2004. "Mathematics, theory, and entrepreneurship," Journal of Business Venturing, Elsevier, vol. 19(5), pages 743-765, September.
    7. Fiet, James O., 2001. "The pedagogical side of entrepreneurship theory," Journal of Business Venturing, Elsevier, vol. 16(2), pages 101-117, March.
    8. Fiet, James O., 2001. "The theoretical side of teaching entrepreneurship," Journal of Business Venturing, Elsevier, vol. 16(1), pages 1-24, January.
    9. Pissarides, Francesca, 1999. "Is lack of funds the main obstacle to growth? ebrd's experience with small- and medium-sized businesses in central and eastern europe," Journal of Business Venturing, Elsevier, vol. 14(5-6), pages 519-539.
    10. Degner, Harald, 2010. "Windows of technological opportunity: do technological booms influence the relationship between firm size and innovativeness?," FZID Discussion Papers 15-2010, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    11. Hirshleifer, David & Lim, Sonya S. & Teoh, Siew Hong, 2004. "Disclosure to a Credulous Audience: The Role of Limited Attention," MPRA Paper 5198, University Library of Munich, Germany.
    12. Shaker A. Zahra, 1994. "New Product Innovation in Established Companies: Associations with Industry and Strategy Variables," Entrepreneurship Theory and Practice, , vol. 18(2), pages 47-69, January.
    13. Katsuya Takii, 2005. "Limited Attention, Interaction and the Growth of a Firm," Macroeconomics 0506005, University Library of Munich, Germany.
    14. Pitelis, Christos & Panagopoulosi, Andreas, 2009. "Innovation Governance for Value Capture -The Problem and a Proposed Simple Model-based Solution," Papers DYNREG42, Economic and Social Research Institute (ESRI).

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