Christian Garavaglia

The Co-Evolution of Entrepreneurship and Clusters

Clustering of firms and spatial concentration of economic activities have received increasing attention over the last two decades from regional, international and industrial economists. Agglomeration economies, network effects and knowledge spillovers were believed to influence the growth of a territory and were perceived as key engines of cluster development in the economic literature. Furthermore, entrepreneurship has been increasingly considered as a crucial factor in determining the economic growth of a territory (Audretsch 2002; Acs and Audrestch 2003; Audretsch and Keilbach 2004). The generation, evolution and persistence of clusters seem to be strictly related to the entrepreneurial activities taking place in a given area. In this paper we investigate the co-evolution of entrepreneurship and emergence of clusters, we highlight the contributions of different theoretical perspectives in explaining the processes behind entrepreneurial activity and its influence on the process of cluster formation. On the one hand, entrepreneurial activity in a geographical area is perceived to be the means by which firms take advantage of the positive external spillovers generated in the area. On the other, some contributions recognise entrepreneurship to be strictly related and influenced by the social ties available in a spatially bounded region. The purpose of the paper is to explore theoretically the relationship between entrepreneurship and the development of spatial clusters of firms. How do clusters emerge and thrive? What is the relationship between entrepreneurship and cluster formation? What is the nature and impact of social networks and external economies in cluster development? In this paper, our first claim is that we find both supply and demand-side conditions in clusters for stimulating entrepreneurship. Our second

Entry, market structure and innovation in a history-friendly model of the evolution of the pharmaceutical industry

This paper examines how the nature of the technological regime governing innovative activities and the structure of demand interact in determining market structure, with specific reference to the pharmaceutical industry. The key question concerns the observation that - despite high degrees of R&Dand marketing-intensity - concentration has been consistently low during the whole evolution of the industry. Standard explanations of this phenomenon refer to the random nature of the innovative process, the patterns of imitation and the fragmented nature of the market into multiple, independent submarkets. We delve deeper into this issue by using an improved modified version of our previous “history-friendly” model of the evolution of pharmaceuticals. Thus, we explore how changes in the technological regime and/or in the structure of demand may generate or not substantially higher degrees of concentration. The main results are that, while technological regimes remain fundamental determinants of the patterns of innovation, demand structure plays indeed a crucial role in preventing the emergence of concentration through a partially endogenous process of discovery of new submarkets. However, it is not simply market fragmentation as such that produces this result, but rather the entity of the “prize” that innovators can gain relative to the overall size of the market. Similarities and differences with other approaches are also discussed.

Economics of the Craft Beer Revolution: A Comparative International Perspective

This paper summarizes key insights that derive from a comparative analysis of the craft beer developments and the beer industry transformation in the various countries. Our paper starts with a discussion on the definition of craft beer (and microbreweries). First, we document when the craft beer movements started in the various countries, and how they have evolved. Then, we discuss the role of changes in demand, the role of pioneers in craft brewing, and what factors determined the re-emergence of small brewers. Some of the factors we discuss refer to the role of information, networks, regulation, capital, and technology markets. The last part of the paper concentrates on the reaction of the macro-brewers to the growth of the craft beer market.

The Recent Advent of Micro Producers in the Spanish Brewing Industry

This chapter aims at investigating the birth and diffusion of craft brewing in Spain. We discuss the role of consumers: Lead and experimental consumers were influenced by the discovery of a richer culture and variety of beers in foreign countries. They founded consumer associations and fostered the creation of a new demand for beer in the Spanish beer market. This gradual change created new opportunities for new firms, which entered the market on a small scale to produce differentiated products with respect to the mass-market beer. The first entrepreneurs in the craft brewing sector had relations with foreign experiences or with the consumer associations. The role of the first entrepreneurs was decisive for spreading the idea of new business opportunities and for satisfying the demand of a new consumer attitude, more sophisticated, more local, more informed. The Catalonia region played a crucial role in this story.

The Birth and Diffusion of Craft Breweries in Italy

This research investigates the motives behind the entry of small firms in the Italian beer industry since the late 1980s. We argue that the evolutionary dynamics of the craft breweries must be connected to the dynamics of consumption, which have gradually changed consumer preferences since the 1980s. On the one hand, increasing revenues, growing interest in food knowledge, and the rise of new cultural and social meanings attached to food consumption generated a new demand for variety. On the other hand, international integration increased the knowledge of beer typologies and styles. These changes fostered the entry of new small specialized firms into the beer market. Afterward, a subsequent legitimisation and emulation effects played a key role in sustaining the diffusion and rise of these new breweries. The argument and discussion are based on original in-depth interviews with the pioneering entrepreneurs in Italy’s craft beer segment.

Innovation and Market Structure in Pharmaceuticals: an Econometric Analysis on Simulated Data

Summary The contribution of this paper is twofold. First, it presents the results of a “history-friendly” simulation model of evolution of the pharmaceutical industry. Second, it aims at contributing to a more general methodological discussion about agent-based models by proposing an econometric analysis of the results of the simulations. The case of the pharmaceutical industry has been studied extensively by scholars because, despite the high level of R&D intensity, the industry has been characterized by a relatively low levels of concentration. The model is able to reproduce the main stylized facts of the industry in an evolutionary perspective. In this paper we extend the analysis conducted in two previous works (Garavaglia et al. 2012, 2013) by further qualifying the findings with an extensive econometric investigation of the model outputs. The paper focuses the attention on the determinants of market structure, the innovative performance of the industry, the diversification in multiple submarkets and the level of prices. We find that the properties of the technological and demand regimes are key determinants of the patterns of industry evolution and that the main mechanisms driving the model are the random processes of search, the discovery of new submarkets as well as the interactions between patent protection, imitation and price competition. In addition, this paper emphasizes how the emerging leaders in the industry are those innovative early entrants which entered in large submarkets, showing the importance of the first mover advantage and of the size of the “prize” accruing to innovators when they discover a new rich submarket.