Paul Geroski

What do we know about entry

Abstract 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.

MODELS OF TECHNOLOGY DIFFUSION

The literature on new technology diffusion is vast, and it spills over many conventional disciplinary boundaries. This paper surveys this literature by focussing on alternative explanations of the dominant stylized fact in this are: namely, 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 looks 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.

The Profitability of Innovating Firms

This article seeks to evaluate the effects on corporate profitability of producing a major innovation. We examine two types of effect: innovations can have a direct but transitory effect on profitability associated with the production of a new product or the use of a new process, and innovations can have an indirect effect on how firms generate profits because they signal the transformation of a firms internal capabilities associated with the process of innovating. Positive direct effects on the order of [[sterling]]2.1 million spread over seven years are observed for a sample of 721 large, quoted U.K. firms. More fundamentally, large indirect effects are also observed, not least because innovating firms seem to be more able to benefit from spillovers and are relatively insensitive to adverse macroeconomic shocks. These indirect effects associated with the transformation of a firms internal capabilities may be as much as three times larger than the direct effects of innovation.

Market structure, corporate performance and innovative activity

Innovation - in products and processes - is an increasingly significant source of competitive advantage for firms and nations. Analysing extensive data on major innovations in the UK, this book examines the role of innovative activity in the structure of markets and the performance of firms. From this the author draws lessons on strategies for innovation for governments and firms alike. In particular, he addresses four questions which have long attracted the interst of economists: - does the structure of product markets affect the pace of innovative activity? - what are the effects of innovative activity on market structure? - how large a contribution does innovative activity make to productivity growth? - how does innovative activity affect corporate performance? In answering these important questions the author draws lessons for makers of public and business policy towards innovation.

How persistently do firms innovate

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 who innovate typically do so persistently. The first sample contains 3,304 firms who registered at least one patent in the United States during the period 1969–88, while the second consists of 1,624 firms who produced at least one major innovation at any time in the United Kingdom from 1945–82. Both datasets yield the same conclusion, namely that very few innovative firms are persistently innovative.

The Persistence of Profits - a European Comparison

This paper is concerned with modeling the movements in profits of firms over time. At the heart of the emp irical model is a latent variables problem which arises from the fact that entry and imitation do not actually have to occur to have an ef fect on profits. A solution to this problem is explored, and then emp irical results are presented comparing a sample of firms from the Uni ted Kingdom, France, and West Germany. Copyright 1988 by Royal Economic Society.

Innovative Activity over the Business Cycle

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. Copyright 1995 by Royal Economic Society.

Entry and market contestability : an international comparison

1. Entry, Exit and the Competitive Process: D. Mueller 2. Entry and Market Contestability: The Evidence from the US: I. Kessides 3. Sunk Costs and Entry by Small and Large Plants: J. Mata 4. Domestic and Foreign Entry in the UK: 1983-84: P.A. Geroski 5. Domestic Entry in Norweigian Manufacturing Industries: N-H. Morch van der Fehr 6. Entry and Exit in Belgian Manufacturing: L. Sleuwaegen and W. Dehandschutter 7. Entry, Exit, Concentration and Market Contestability: J. Schwalbach 8. Entry During Explosive Growth: Korea During Take-off: K-Y. Jeong and R. Masson 9. The Effects of Business Conditions on Net Entry: Evidence from Japan: H. Yamawaki 10. Variation in Producer Turnover Across US Manufacturing Industries: T. Dunne and M. Roberts 11. Patterns of Entry, Exit and Merger in Yugoslavia: S. Estrin and T. Petrin 12. Innovation as a Means of Entry: An Overview: D. Audretswch and Z. Acs 13. Entry, Exit and Productivity Growth: J. Baldwin and P. Goreski 14. International Comparisons of Entry and Exit: J. Cable and J. Schwalbach 15. Some Data-driven Reflections on the Entry Process: P. Geroski.

Entry, Innovation and Productivity Growth

This paper examines the effect of entry and innovative activity on total factor productivity growth. Using a sample of seventy-nine industries in the United Kingdom, 1976-79, significant effects are observed that persist over time, with innovative activity accounting for a larger positive effect on total factor productivity growth than domestic entry. Foreign entry has little apparent effect on productivity growth. Copyright 1989 by MIT Press.

Corporate Growth and Profitability

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 U.K. firms over the period 1976-82, the authors 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, they find that variations in corporate growth rates are difficult to predict. Copyright 1997 by Blackwell Publishing Ltd