OPEN VERSUS CLOSED FIRMS AND THE DYNAMICS OF INDUSTRY EVOLUTION -super-*

Ashish Arora () and Farasat A.S. Bokhari ()

Journal of Industrial Economics, 2007, vol. 55, issue 3, pages 499-527

Abstract: We develop a model of industry evolution in which firms choose proprietary standards (closed firm) or adopt a common standard (open firm). A closed entrant can capture multiple profits whereas an open entrant faces lower entry barriers: The odds of closed entry (relative to open entry) decrease with price and eventually open entry becomes more likely. While initially closed firms have better survival because they can offset losses in one component with profits from another, the situation is reversed when prices fall below a threshold. These entry and exit dynamics can lead the industry away from its long run equilibrium. Copyright 2007 Blackwell Publishing Ltd..

Date: 2007

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Journal of Industrial Economics is edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

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