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Melkonyan, Tigran A., Banks, Dwayne and Wendel, Jeanne (2017) Industrial policy to develop a multi-firm industry. Journal of Industry, Competition and Trade, 17 (3). pp. 283-303. doi:10.1007/s10842-016-0242-z
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Official URL: http://doi.org/10.1007/s10842-016-0242-z
Abstract
AbstractGovernments face pressure to act when coordination and learning externalities block development of otherwise-profitable industries that would produce merit goods for the domestic market. A short-term subsidy that offsets these externalities could potentially jump-start a multi-firm industry, if the subsidy induces a pioneer firm to enter and then the pioneer’s first-period output generates coordination and learning externalities. These externalities could induce subsequent entry by input suppliers and/or competitors. However, empirical evidence raises questions about the ability of governments to use short-term subsidies to jump-start new industries. We explore one explanation for the difficulty of jump-starting new industries: the subsidy could generate counter-productive incentives for the pioneer firm to prevent entry of additional firms. We model the jump-start strategy and examine whether coupling a short-term fixed subsidy with a per-unit subsidy can achieve the objective of creating a multi-firm industry.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HD Industries. Land use. Labor | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
| SWORD Depositor: | Library Publications Router | ||||||||
| Library of Congress Subject Headings (LCSH): | Competition, International., Industrial policy., Public investments., Subsidies., International business enterprises -- Government policy., Technological innovations -- Economic aspects., Free enterprise., Competition, International -- Government policy. | ||||||||
| Journal or Publication Title: | Journal of Industry, Competition and Trade | ||||||||
| Publisher: | Springer US | ||||||||
| ISSN: | 1573-7012 | ||||||||
| Official Date: | September 2017 | ||||||||
| Dates: |
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| Date of first compliant deposit: | 10 April 2018 | ||||||||
| Volume: | 17 | ||||||||
| Number: | 3 | ||||||||
| Page Range: | pp. 283-303 | ||||||||
| DOI: | 10.1007/s10842-016-0242-z | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Publisher Statement: | ** From Springer Nature via Jisc Publications Router. ** History: received 11-08-2016; rev-recd 27-11-2016; accepted 21-12-2016; epub 23-01-2017; ppub 09-2017. ** Licence for this article: http://creativecommons.org/licenses/by/4.0/ | ||||||||
| Access rights to Published version: | Open Access |
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