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Does the “New Economy” Change the Frontiers of the Large Corporation?

Author

Listed:
  • Bruno AMABLE

    (University of Paris X, MODEM and CEPREMAP)

  • Régis BRETON

    (University of Paris X, FORUM)

  • Xavier RAGOT

    (CEPREMAP)

Abstract

This paper proposes a model of industrial innovation linked to financial liberalisation where agents are characterised by heterogeneous innovative abilities. Individual researchers may either be employed by a large firm and work together on the firm's innovative project, or they may alternatively set up an individual firm in order to commercialise their own innovation. The large firm's hiring decisions and the individual researcher's décision to set up his own firm depends on the researcher's innovative ability and on the financial conditions. Financial liberalisation leading to a lower cost of setting up a small firm will affect the size of the large firm and increase the number of small technology firms. A drop in the cost of starting a small firm may increase income inequality.

Suggested Citation

  • Bruno AMABLE & Régis BRETON & Xavier RAGOT, 2002. "Does the “New Economy” Change the Frontiers of the Large Corporation?," Discussion Papers (REL - Recherches Economiques de Louvain) 2002029, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvre:2002029
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    File URL: http://sites.uclouvain.be/econ/DP/REL/2002029.pdf
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    References listed on IDEAS

    as
    1. Mitchell Berlin, 1998. "That thing venture capitalist do," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 15-26.
    2. Bengt Holmstrom & Jean Tirole, 1997. "Financial Intermediation, Loanable Funds, and The Real Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 663-691.
    3. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Bergemann, Dirk & Hege, Ulrich, 1998. "Venture capital financing, moral hazard, and learning," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 703-735, August.
    5. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, vol. 50(1), pages 301-318, March.
    6. Stefan Ambec & Michel Poitevin, 2000. "Organizational Design of R & D Activities," Econometric Society World Congress 2000 Contributed Papers 0190, Econometric Society.
    7. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
    8. Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1185-1209.
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    Citations

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    Cited by:

    1. Paul J. Zak, 2002. "Institutions, Property Rights, and Growth," Recherches économiques de Louvain, De Boeck Université, vol. 68(1), pages 55-73.
    2. Paul J. ZAK, 2002. "Institutions, Property Rights and Growth," Discussion Papers (REL - Recherches Economiques de Louvain) 2002014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    Keywords

    Innovation; finance; industrial organisation;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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