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Theoretical issues
Primary aim: Principal perspectives on ip-analysis in view of Industrial
Economics
Industrial Economics:
Mainstream micro-eonomic theory applied to ip
Recent improvement: The New Institutional Economics based
on Coase’s and Williamsons Tranasaction Cost Approcah
Controversies concerning the industrial dynamics: Evolutionary
economics a new field
The New Industrial Economics’ contributions
to IP:
•
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Models of perfect competition not realistic – Competition
Policy
By means of game theory and theory of imperfect
competition a neo-classical foundation of the SCPparadigm
The SCP-paradigm:
Basic
Conditions
Market
Structure
Conduct
Performance
Criticism of the SCP-paradigm:
• Technological change exogenous (“Basic condition”)
•Trade-off between allocative and technical efficiency
•The causality
Other critics of the SCP-paradigm:
Strategic Trade Policy
•
Assumption about imperfect competition
•
Perspective altered from ‘sector’ to ‘firm’
•
Strategic choices by the firm
•
Competitive advantages (“barriers”) created through IP
Porter’s Diamond
Evolutionary Economics:
Controversies between Industrial Economics (IE) and
Evolutionary Economics (EE)
- While IE focuses on price competition, advocates of EE
argue that firms compete with new technology and
innovation (Schumpeterian competition)
- In EE premises such as perfect information, knowledge
and foresight are misleading (critical to the
understanding of ‘monopoly’)
The Austrian School (Schumpeter)
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•
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Procedural rationality – The rationality of the firms varies
with information and ability to interpret information
The market – A continuous process of discovering,
coordination and change
The entrepreneur – alert to new market opportunities by
creating information, knowledge and development
Entrepreneurial profit – is eliminated as innovations are
imitated.
Transaction-cost theory of organization (The
new institutional economics)
Organizational development (transactions inside firms or
through markets) is optimized:
Minimize (production + transaction costs)
subject to
- Incomplete contracts
- Opportunistic behavior (self-interest, incorrect
information)
- Preferences are given