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Organisation of industry and innovation dynamics

Author

Listed:
  • T. Ciarli
  • R. Leoncini
  • S. Montresor
  • M. Valente

Abstract

The paper aims at investigating how the organization of a certain industry evolves once the competition among its firms, producing a ‘complex’ (i.e. non-modular) product, is modeled as the intertwining of innovative search and organizational change. In order to take the full roster of participants into account, and to retain the inner complexity of their decisions, a Pseudo–NK model is built–up in which a population of firms is called to match a technological frontier. By evolving along different stagesof the sector’s life-cycle, such a kind of technological calls for a trade–off between two strategies of cost–reduction through either outsourcing ortechnological search. Overall, the simulation results confirm previous literature as, for example, in the introductory stage of the industry life–cycle,marked by frequent and intense jumps of the technological frontier, firms need to vertically integrate in order to have higher chances to win the competition for a new standard. On the contrary, in the decline stage,in which the technological frontier almost stabilizes, deverticalization allows firms to better compete on costs. These results change if suppliers are allowed to innovate, as they are more likely to lock the market in sub–optimal configurations.

Suggested Citation

  • T. Ciarli & R. Leoncini & S. Montresor & M. Valente, 2007. "Organisation of industry and innovation dynamics," Working Papers 609, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:609
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    File URL: http://amsacta.unibo.it/4663/1/609.pdf
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    References listed on IDEAS

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    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
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    4. Robertson, Paul L. & Langlois, Richard N., 1995. "Innovation, networks, and vertical integration," Research Policy, Elsevier, vol. 24(4), pages 543-562, July.
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    6. Bart Nooteboom, 2004. "Governance and competence: how can they be combined?," Cambridge Journal of Economics, Oxford University Press, vol. 28(4), pages 505-525, July.
    7. Marco Valente, 2008. "Pseudo-NK: an Enhanced Model of Complexity," LEM Papers Series 2008/26, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    8. Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
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    10. Giovanni Dosi & Mike Hobday & Luigi Marengo, 2000. "Problem-Solving Behaviours, Organisational Forms and the Complexity of Tasks," LEM Papers Series 2000/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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    12. Brusoni, Stefano & Prencipe, Andrea, 2001. "Unpacking the Black Box of Modularity: Technologies, Products and Organizations," Industrial and Corporate Change, Oxford University Press, vol. 10(1), pages 179-205, March.
    13. Herbert A. Simon, 1996. "The Sciences of the Artificial, 3rd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691914, January.
    14. Dieter Ernst, 2005. "Limits to Modularity: Reflections on Recent Developments in Chip Design," Industry and Innovation, Taylor & Francis Journals, vol. 12(3), pages 303-335.
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    Cited by:

    1. Tommaso Ciarli & Riccardo Leoncini & Sandro Montresor & Marco Valente, 2008. "Technological change and the vertical organization of industries," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 367-387, August.

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