We analyze the effects of founding conditions on the survival of new firms. Based on arguments from several theoretical perspectives, namely economics, organizational ecology, and the resource-based ...view of the firm, we develop hypotheses that relate the survival of firms to the conditions confronted by firms at each moment and to those prevailing at the time of founding.We develop an empirical model that allows the effects of founding conditions to be transitory and estimate how long such effects last. The results of estimating such a model indicate that founding effects are important determinants of exit rates. Moreover, in most cases, their effect on survival seems to persist with little attenuation for several years following the founding of the firm. Overall, our findings suggest that there is no absolute superiority of any of the aforementioned theoretical perspectives over the others, and there are important elements in all of them to explain the survival of firms.
The literature on new technology diffusion is vast, and it spills over many conventional disciplinary boundaries. This paper surveys the literature by focusing on alternative explanations of the ...dominant stylized fact: that the usage of new technologies over time typically follows an S-curve. The most commonly found model which is used to account for this model is the so-called
epidemic model, which builds on the premise that what limits the speed of usage is the lack of information available about the new technology, how to use it and what it does. The leading alternate model is often called the
probit model, which follows from the premise that different firms, with different goals and abilities, are likely to want to adopt the new technology at different times. In this model, diffusion occurs as firms of different types gradually adopt it. There are actually many ways to generate an S-curve, and the third class of models which we examine are models of density dependence popularized by population ecologists. In these models, the twin forces of
legitimation and
competition help to establish new technologies and then ultimately limit their take-up. Finally, we look at models in which the initial choice between different variants of the new technology affect the subsequent diffusion speed of the chosen technology. Such models often rely on
information cascades, which drive herd like adoption behaviour when a particular variant is finally selected.
How do markets evolve? Why are some innovations picked up straightaway whilst others take years to be commercialized? Are there first-mover advantages? Why do we behave with 'irrational exuberance' ...in the early evolution of markets as was the case with the dot.com boom? Paul Geroski is a leading economist who has taught economics to business school students, managers, and executives at the London Business School. In this book he explains in a refreshingly clear style how markets develop. In particular he stresses how the early evolution of markets can significantly shape their later development and structure. His purpose is to show how a good grasp of economics can improve managers' business and investment decisions. Whilst using the development of the Internet as a case in point, Geroski also refers to other sectors and products, for example cars, television, mobile phones, and personal computers. This short book is an ideal introduction for managers, MBA students, and the general reader wanting to understand how markets evolve. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/0199248893/toc.html
What do we know about entry? Geroski, P.A.
International journal of industrial organization,
12/1995, Letnik:
13, Številka:
4
Journal Article
Recenzirano
This paper is a brief survey of recent empirical work on entry. It is organized as a series of stylized facts and a series of stylized results which together summarize much of what is generally ...understood - or believed - about what drives entry, and about the effects that entry has on markets.
This paper builds on the empirical literature on corporate growth rates - which suggests that corporate growth rates are very nearly random - and asks whether this empirical work is consistent with ...standard theories of the firm. We examine both static and dynamic optimizing models of firm output choice, before moving on to examine production functions modelling of corporate learning, models of R&D competition and diversification. In all cases, it seems clear that random corporate growth rates are more or less exactly what one would expect these models to predict. However, the literature on Penrose effects - dynamic managerial limitations to growth - and corporate competencies are not easy to reconcile with random corporate growth rates.
How persistently do firms innovate? Geroski, P.A.; Van Reenen, J.; Walters, C.F.
Research policy,
03/1997, Letnik:
26, Številka:
1
Journal Article
Recenzirano
This paper examines the innovative history of a number of UK firms using two large databases, looking for evidence consistent with the view that firms that innovate typically do so persistently. The ...first sample contains 3304 firms which registered at least one patent in the US at any time in the period 1969–1988, while the second consists of 1624 firms which produced at least one major innovation at any time in the UK from 1945 to 1982. Both data sets yield the same conclusion, namely that very few innovative firms are persistently innovative.
This paper examines four models which might be used to account for variations in the number of producers who operate in a particular market over the lifetime of that market. Two of these are standard ...economics textbook models, one is a non-standard model and one is a textbook model derived from the literature on organizational ecology. The four models have several observable differences and this opens up the possibility of testing any one against the others. We apply these four models to 93 years of data on the population of domestic car producers in the US car industry. The salient feature of this population is the very large rise and fall in the number of firms operating in the very early years of the industry, a phenomena which seems hard to account for using any of the three textbook models that we consider here.
This paper examines cyclical patterns of innovative activity in the United Kingdom over the period 1948-83. Innovative activity turns out to have many of the properties of a random walk, but does ...show a tendency to cluster during booms. There is clear evidence of a long-term secular relation between the level of innovative activity and the level of economic activity, although this may have changed in the 1980s. Finally, the data provide no reason for thinking that these clusters of innovation cause cyclic variations in economic activity, but variations in economic activity do Granger cause changes in innovative activity.
Thinking creatively about markets Geroski, P.A
International journal of industrial organization,
11/1998, Letnik:
16, Številka:
6
Journal Article
Recenzirano
The paper takes a broad view of how economists identify market boundaries. Three types of definition are distinguished: trading markets, anti-trust markets and strategic markets. The first is based ...on the familiar law of one price, while the second follows US DIJ guidelines and is designed to identify positions of market power. Neither of these definitions suits the needs of one of the more recent and fastest growing users of economics, namely those responsible for corporate strategy decisions inside firms. The paper reviews why market definitions are a fundamental part of strategy decisions, and identifies several ways that such users might define market boundaries.
Previous empirical work on corporate growth rates using cross-section or short-panel econometric techniques suggests that growth rates are random but that some degree of mean reversion exists. This ...means that size differences between firms are transitory. Another, more natural way to explore the long-run distribution of firm sizes is to examine data on the growth of particular firms over long periods of time. Using a sample of 147 UK firms observed continually for more than 30 years, our conclusions are that growth rates are highly variable over time and that differences in growth rates between firms do not persist for very long. Further, firms show no tendency to converge to either a common size or to a pattern of stable size differences over time. These results are compared and contrasted with standard approaches that suggest that firms reach and maintain stable positions in a skewed size distribution.
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