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Firms’ operational costs, market entry and growth

Firms’ operational costs, market entry and growth Abstract The industrial organizational literature identifies operational costs as being an important determinant of industry evolution over time; however, it also shows that they can be endogenous and time-dependent. In this paper, we analyze the effects of endogenous and time-dependent operational costs on economic activity and, hence, on economic growth. We show that the particular nature of these costs determines the way in which the overall number of firms grows, which ultimately determines the pattern of economic growth. Our analysis differs from other approaches in that (i) a new firm is associated with the creation of a new product in such a way that a planned expenditure of resources is required (e.g. R&D), and (ii) an accumulation law for the growth of the number of firms is assumed. Hence, we show that growth can occur endogenously in an economy without any specific growth generating sector. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B.E. Journal of Macroeconomics de Gruyter

Firms’ operational costs, market entry and growth

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Publisher
de Gruyter
Copyright
Copyright © 2016 by the
ISSN
2194-6116
eISSN
1935-1690
DOI
10.1515/bejm-2014-0132
Publisher site
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Abstract

Abstract The industrial organizational literature identifies operational costs as being an important determinant of industry evolution over time; however, it also shows that they can be endogenous and time-dependent. In this paper, we analyze the effects of endogenous and time-dependent operational costs on economic activity and, hence, on economic growth. We show that the particular nature of these costs determines the way in which the overall number of firms grows, which ultimately determines the pattern of economic growth. Our analysis differs from other approaches in that (i) a new firm is associated with the creation of a new product in such a way that a planned expenditure of resources is required (e.g. R&D), and (ii) an accumulation law for the growth of the number of firms is assumed. Hence, we show that growth can occur endogenously in an economy without any specific growth generating sector.

Journal

The B.E. Journal of Macroeconomics – de Gruyter

Published: Jan 1, 2016

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