Open versus closed firms and the dynamics of industry evolution

Arora, Ashish and Bokhari, Farasat (2007) Open versus closed firms and the dynamics of industry evolution. Journal of Industrial Economics, 55 (3). pp. 499-527. ISSN 1467-6451

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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.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
Depositing User: Julie Frith
Date Deposited: 16 Jan 2013 16:36
Last Modified: 06 Nov 2018 15:37
URI: https://ueaeprints.uea.ac.uk/id/eprint/40805
DOI: 10.1111/j.1467-6451.2007.00321.x

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