Entrepreneurial Ability and Market Selection in an Infant Industry: Evidence from the Japanese Cotton Spinning Industry

Atsushi Ohyama, Serguey Braguinsky () and Kevin M. Murphy

Review of Economic Dynamics, 2004, vol. 7, issue 2, pages 354-381

Abstract: In this paper we develop a new insight into the process of learning in an infant industry, in a setting where entrepreneurs are differentiated by talent. The learning rate depends on the quality of ideas, not on the scale of the industry, and a competitive open economy regime may furnish a better environment for innovation-led industrial growth even in the presence of industry-wide increasing returns to scale. Competitive market selection of ablest entrepreneurs forms a crucial condition for successful industrialization. The model is tested against the evidence of the industrial revolution in Japan, which presents a unique historic experiment in which an internationally competitive textile industry was eventually set up without government protection after earlier experiments with subsidized firms had failed. (Copyright: Elsevier)

JEL-codes: F13 F14 O15 (search for similar items in EconPapers)
Date: 2004
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