Dynamics of Entry and Exit of Product Varieties – what evolution dynamics can account for the empirical regularities?
Firm-level heterogeneity is substantial even in narrowly defined industries. This paper focuses on formulating evolution dynamics which can account for the observed heterogeneity and its maintenance. Based on examination of data on Swedish firm’ supply pattern to different markets over time, we present a parsimonious model that has the ambition to capture the picture of heterogeneous firms, while accommodating the simultaneous exit and entry of destination varieties in firms’ supply pattern. The model assumes both scale economies of firms and path-dependence, where the latter is manifested in such a way that the arrival rate of innovation ideas to an individual firm is a function of each firm’s stock of varieties at every given point in time. The path-dependence phenomenon is an “explosive” non-linearity, whereas conservation mechanisms include development of demand and exit of established varieties. The described path dependence explains the skewed distribution of varieties across firms, but the question of what keeps the “equilibrium” away from competitive exclusion where only few large firms remain. We make use of simulations to depict and assess the innovation dynamics of the proposed model.
|Date of creation:||23 Nov 2009|
|Date of revision:|
|Contact details of provider:|| Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden|
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Andersson & Börje Johansson, 2008. "Innovation Ideas and Regional Characteristics: Product Innovations and Export Entrepreneurship by Firms in Swedish Regions," Growth and Change, Wiley Blackwell, vol. 39(2), pages 193-224.
When requesting a correction, please mention this item's handle: RePEc:hhs:cesisp:0204. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vardan Hovsepyan)
If references are entirely missing, you can add them using this form.