In this paper we examine the effects that user-producer interactions have on innovation and the dynamics of market structure of two vertically related industries under alternative contractual regimes. The existence of advantages stemming from users-producers relationships introduces a dynamic “matching” problem between firms characterized by heterogeneous capabilities and imperfect information who act in a continuously changing environment but are however able to improve their products also through interactive and interdependent learning processes. Our results highlight the subtle trade-offs and dynamic interdependencies that arise in these contexts. In particular, we show that: a. a trade-off is present between the exploitation of past experience and the exploration of new suppliers; b. externalities are present, even if the advantages arising from interactions do not spill over to other firms; c. imperfect information and agents heterogeneity are crucial factors in determining the consequences of alternative contractual arrangements on industry dynamics; d. vertical interdependencies propagate the effects of specific firms’ decisions across industries and over time, so that the resulting dynamics is characterized by interacting path-dependent processes.

User-producer relations, innovation and the evolution of market structures under alternative contractual regimes

MALERBA, FRANCO;ORSENIGO, LUIGI
2010

Abstract

In this paper we examine the effects that user-producer interactions have on innovation and the dynamics of market structure of two vertically related industries under alternative contractual regimes. The existence of advantages stemming from users-producers relationships introduces a dynamic “matching” problem between firms characterized by heterogeneous capabilities and imperfect information who act in a continuously changing environment but are however able to improve their products also through interactive and interdependent learning processes. Our results highlight the subtle trade-offs and dynamic interdependencies that arise in these contexts. In particular, we show that: a. a trade-off is present between the exploitation of past experience and the exploration of new suppliers; b. externalities are present, even if the advantages arising from interactions do not spill over to other firms; c. imperfect information and agents heterogeneity are crucial factors in determining the consequences of alternative contractual arrangements on industry dynamics; d. vertical interdependencies propagate the effects of specific firms’ decisions across industries and over time, so that the resulting dynamics is characterized by interacting path-dependent processes.
2010
Malerba, Franco; Orsenigo, Luigi
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3715469
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