Asexual reproduction of firms

Management scholars love to study corporate spin-offs. Every now and then companies decide to split off parts of their business or pursue new ideas by founding a new legal entity. Such an organizational split is supposed to be advantageous when it comes to managing certain types of innovative ventures. Google’s recent reorganization is an example that the large conglomerate of more or less independently operating companies seems to become more popular again in the tech world. Continue reading Asexual reproduction of firms

Economic History: Antibiotics

Some time ago I wrote about a paper of mine (Hünermund et al., 2015) in which my coauthors and me develop a model to explain the occurrence of industry shakeouts. Shakeouts are a phenomenon which we encounter frequently in new industries. At one point in time, a large number of relatively small firms, previously operating in a market, becomes unsustainable. Within a short period of time a lot of firms exit and, eventually, the industry becomes dominated by a few large players. Our model explains this frequently observed pattern by technological factors that change over the lifespan of an industry. Cost advantages — because of more efficient production technologies — allow a few firm to take over and squeeze all others out of the market. Continue reading Economic History: Antibiotics

Hurry up and wait

In a previous post I argued that a lot more work needs to be done by economists to understand the implications of dynamic strategic incentives. Actually, this was an act of shameless self-promotion. Because I have written a paper* together with Philipp Schmidt-Dengler and Yuya Takahashi on strategic interaction and how it can shape the evolution of industries over time. Continue reading Hurry up and wait