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Gaining the competitive edge using internal and external spillovers: a dynamic analysis

Gian Italo Bischi (), H. Dawid and Michael Kopel ()

Journal of Economic Dynamics and Control, 2003, vol. 27, issue 11, 2171-2193

Abstract: This paper studies the evolution of two clusters of firms competing on a common market. Firms exit and enter a cluster based on the perceived chances for profits inside and outside the cluster. Information about profits are diffused by direct communication between firms. Internal and external spillover effects reduce the overall costs of firms in the clusters depending on the number of firms in the own and the competing cluster. A discrete time deterministic dynamical system describing the evolution of cluster sizes is derived. An analysis of the long run attractors of the system and their basins of attraction is used to compare the effects of advantages of a cluster with respect to the size of internal and external spillover effects, respectively. Furthermore, the implications of slow and fast exit and entry behavior of firms for the long run survival and the size of the clusters are studied.

Keywords: Spillover effects; Evolutionary dynamics; Equilibrium selection; Basins of attraction; Critical curves (search for similar items in EconPapers)
JEL-codes: D62 D83 L52 (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:27:y:2003:i:11:p:2171-2193

DOI: 10.1016/S0165-1889(02)00120-3

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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