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

Franco Malerba and Luigi Orsenigo

Structural Change and Economic Dynamics, 2010, vol. 21, issue 1, 26-40

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.

Keywords: Industrial; dynamics; Technology; Innovation (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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Working Paper: User-producer relations, innovation and the evolution of market structures under alternative contractual regimes (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:21:y:2010:i:1:p:26-40

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