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Incentives and Option Value in the Silicon-Valley Tournament Game (Revised)

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  • Masahiko Aoki
  • Hirokazu Takizawa

Abstract

This paper analyzes the ``Silicon Valley model'' as a novel economic institution in the domain of technological product system innovation such as computers. We focus on the information structural relationship as well as governance relationships between venture capitalists and a cluster of entrepreneurial firms. The informational conditions under which the Silicon Valley model is efficient are identified, leading to understanding the significance of standardization of interfaces, modularization and information encapsulation. We then examine the governance/incentive aspect of the model by integrating the models by Aoki(2001)and Baldwin and Clark(2000)to give comparative statics results regarding the optimal number of entrepreneurial firms competing in the same component product. The analyses enable us to evaluate the applicability of the model beyond specific localities and industries.

Suggested Citation

  • Masahiko Aoki & Hirokazu Takizawa, 2002. "Incentives and Option Value in the Silicon-Valley Tournament Game (Revised)," Discussion papers 02001, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:02001
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    File URL: https://www.rieti.go.jp/jp/publications/dp/02e001.pdf
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    References listed on IDEAS

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    Cited by:

    1. Joan Crespo & Jérôme Vicente & Frédéric Amblard, 2016. "Micro-behaviors and structural properties of knowledge networks: toward a ‘one size fits one’ cluster policy," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(6), pages 533-552, September.
    2. Carliss Y. Baldwin & Kim B. Clark, 2006. "The Architecture of Participation: Does Code Architecture Mitigate Free Riding in the Open Source Development Model?," Management Science, INFORMS, vol. 52(7), pages 1116-1127, July.
    3. Masahiko Aoki & Geoffrey Rothwell, 2013. "A comparative institutional analysis of the Fukushima nuclear disaster: Lessons and policy implications," Chapters, in: Comparative Institutional Analysis, chapter 8, pages 105-132, Edward Elgar Publishing.

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