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User-producer relations, innovation and the evolution of market structures under alternative contractual regimes

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  • Franco Malerba

    (KITeS, Bocconi Univerity - Milan - Italy)

  • Luigi Orsenigo

    (Università degli Studi di Brescia and KITeS, Bocconi Univerity - Milan - Italy)

Abstract

In this paper we examine the effects that user-producer interactions have on innovation and the dynamics of market structure of two vertically related industries under alternative contractual regimes. The existence of advantages stemming from users-producers relationships introduces a dynamic "matching" problem between firms characterized by heterogeneous capabilities and imperfect information who act in a continuously changing environment but are however able to improve their products also through interactive and interdependent learning processes. Our results highlight the subtle trade-offs and dynamic interdependencies that arise in these contexts. In particular, we show that: (a) a trade-off is present between the exploitation of past experience and the exploration of new suppliers; (b) externalities are present, even if the advantages arising from interactions do not spill over to other firms; (c) imperfect information and agents heterogeneity are crucial factors in determining the consequences of alternative contractual arrangements on industry dynamics; (d) vertical interdependencies propagate the effects of specific firms' decisions across industries and over time, so that the resulting dynamics is characterized by interacting path-dependent processes.
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Suggested Citation

  • Franco Malerba & Luigi Orsenigo, 2009. "User-producer relations, innovation and the evolution of market structures under alternative contractual regimes," KITeS Working Papers 001, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Dec 2009.
  • Handle: RePEc:cri:cespri:wp228
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    References listed on IDEAS

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    7. Franco Malerba & Luigi Orsenigo, 2002. "Innovation and market structure in the dynamics of the pharmaceutical industry and biotechnology: towards a history-friendly model," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 667-703, August.
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    Cited by:

    1. Yuxin Li & Derek Bosworth, 2020. "R&D spillovers in a supply chain and productivity performance in British firms," The Journal of Technology Transfer, Springer, vol. 45(1), pages 177-204, February.
    2. Roberto Fontana & Lorenzo Zirulia, 2015. "“…then came Cisco, and the rest is history”: a ‘history friendly’ model of the Local Area Networking industry," Journal of Evolutionary Economics, Springer, vol. 25(5), pages 875-899, November.
    3. Gianluca Capone & Franco Malerba & Richard R. Nelson & Luigi Orsenigo & Sidney G. Winter, 2019. "History friendly models: retrospective and future perspectives," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(1), pages 1-23, March.

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