The Essence of the New Economy
The New Economy should not be discounted as a temporary stock market phenomenon, but should be recognized as a real and sustainable phenomenon. The basic feature of the transition towards the New Economy is the rising importance of information—both as output and input good—in virtually all sectors of the economy. It would be fallacious to interpret the New Economy as a sector-specific phenomenon. Information increasingly constitutes a crucial input factor both in modern and traditional industries, and the information content of a final output is continuously rising throughout the economy. Present technological change, which is based upon modern information and communications technologies and on biotechnology, measures up to the industrial revolutions of past centuries. It would be premature, however, to identify fundamental trend shifts in aggregate productivity growth, because certain measurement issues are still unsettled and the observation period is still too short. Private firms must develop new business strategies in order to cope with potential market failure resulting from the properties of information goods as public goods, network goods, and experience goods. Bundling and versioning of products, attracting free riders, and —above all— establishing reputation are among the most important business strategies for the New Economy. The New Economy can be expected to reshape the structure of firms and industrial relations. On the one hand, reduced transaction costs will foster small, network-oriented niche suppliers. On the other hand, the New Economy will create substantial firm-size economies of its own—resulting from low marginal costs of information goods and competitive advantages from bundling and the exploitation of reputation. In addition, new types of incentive contracts that can serve to monitor knowledge-intensive activities will gain ground. Since human capital will replace physical capital as the crucial factor of production, improving the qualifications of the labor force is essential to successfully cope with adjustment challenges of the New Economy to the labor market.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: Kiellinie 66, D-24105 Kiel|
Phone: +49 431 8814-1
Fax: +49 431 8814528
Web page: http://www.ifw-kiel.de/
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.:
- James R. Markusen & Anthony J. Venables, 1995.
"Multinational Firms and The New Trade Theory,"
NBER Working Papers
5036, National Bureau of Economic Research, Inc.
- Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
- Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
- S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
- Williamson, Oliver E, 1973. "Markets and Hierarchies: Some Elementary Considerations," American Economic Review, American Economic Association, vol. 63(2), pages 316-25, May.
- Daniel Piazolo, 2001. "The New Economy and the International Regulatory Framework," Kiel Working Papers 1030, Kiel Institute for the World Economy.
- Helpman, Elhanan, 1984.
"A Simple Theory of International Trade with Multinational Corporations,"
3445092, Harvard University Department of Economics.
- Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
- Yannis Bakos & Erik Brynjolfsson, 1999.
"Bundling Information Goods: Pricing, Profits, and Efficiency,"
INFORMS, vol. 45(12), pages 1613-1630, December.
- Yannis Bakos & Erik Brynjolfsson, 1997. "Bundling Information Goods: Pricing, Profits and Efficiency," Working Paper Series 199, MIT Center for Coordination Science.
- Stefano Scarpetta & Andrea Bassanini & Dirk Pilat & Paul Schreyer, 2000. "Economic Growth in the OECD Area: Recent Trends at the Aggregate and Sectoral Level," OECD Economics Department Working Papers 248, OECD Publishing.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
- Erich Gundlach, 2001. "Interpreting Productivity Growth in the New Economy: Some Agnostic Notes," Kiel Working Papers 1020, Kiel Institute for the World Economy.
When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkdp:375. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.