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
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.
What do we know about entry? Geroski, P.A.
International journal of industrial organization,
12/1995, Volume:
13, Issue:
4
Journal Article
Peer reviewed
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.
It is widely believed that the implementation of the Single Market Programme in 1992 has induced a transformation in industrial structures across Europe. Some people believe that it has driven Europe ...towards a common industrial structure. However, using a newly available database covering nearly every firm above 100 employees in 14 European countries over the time period 1994 to 1998, the hypothesis of convergence in corporate sizes within industries is unambiguously rejected by the data. A Gibrat process best describes the growth of very large and mature firms, but smaller and younger firms depart from this prediction. Pre-post 1992 comparisons using another database for larger listed firms reveal that the speed of convergence actually decreased post-1992.
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.
This paper explores the link between learning and corporate growth by developing different models of learning and showing that they produce observably different models of corporate growth. Using data ...on the growth of a number of firms in the US automobile industry during the 20th century, we compare these different models of growth in an effort to identify the major sources of learning which these firms seem to have relied on. Although there are interesting differences between growth processes before and after the Second World War, the basic conclusion that we are drawn to is that learning in this sector is largely unsystematic and opportunistic.
How persistently do firms innovate? Geroski, P.A.; Van Reenen, J.; Walters, C.F.
Research policy,
03/1997, Volume:
26, Issue:
1
Journal Article
Peer reviewed
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.
Corporate Growth and Profitability Geroski, Paul A.; Machin, Stephen J.; Walters, Christopher F.
The Journal of industrial economics,
June 1997, Volume:
45, Issue:
2
Journal Article
Peer reviewed
This paper argues that current period corporate growth rates reflect changes in current expectations about the long run profitability of a firm. This means that growth rates are likely to vary ...randomly over time. Using data from 271 large, quoted UK firms over the period 1976-1982, we report the existence of a positive, statistically significant and robust correlation between current period growth rates and a natural measure of changes in current expectations about long run profitability, namely changes in the stock market valuation of the firm. Nevertheless, we find that variations in corporate growth rates are difficult to predict.
Most previous studies of the dynamics of industry structure, by emphasizing changes in concentration, conceal much of the nature of underlying competitive processes. Here we employ a stochastic firm ...growth model, estimated on U.K. data of 1979-1986 for over 200 leading firms, to derive joint predictions about the stability of market shares and the change of concentration. We find that changes in the market shares of surviving firms are the dominant influence on concentration, which is typically fairly stable in spite of considerable market-share turbulence. Advertising plays a major role in the dynamics of market shares and, therefore, affects both concentration and turbulence.
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