Incentives for Cost Reduction under Export Restraints. Incitations à l'innovation afin de réduire les coûts de production sous des restrictions quantitatives à l'importation..

The effect of trade quotas on firms’ incentive to invest in cost-reducing R&D is studied in a two-stage price-setting duopoly game. A domestic and a foreign firm first choose R&D levels and then set the prices of their differentiated products in the domestic market. With a quota imposed at, or close to, the free-trade level of imports, the domestic firm faces less competition than under free-trade and invests less in R&D. Contrarily, the constrained foreign firm invests more in R&D as the negative strategic effect of a reduction in its cost is now absent. These results differ partially from the Cournot duopoly case in which R&D expenditures are lower for both the firms. As the quota becomes more restrictive, the domestic firm increases and the foreign firm decreases its expenditures on R&D. Domestic welfare is always higher under free-trade than under any quota regardless of the degree of product substitutability.---------------------------------------------------------------------------Dans cet article, une firme nationale et une firme étrangère choisissent leurs niveaux de R&D dans un premier temps, puis fixent les prix de leurs produits différenciés sur le marché national. Si le quota imposé est égal ou est suffisamment proche du niveau des importations sous libre échange, la firme nationale investit moins en R&D. La firme étrangère contrainte investit plus, vu que l'effet stratégique négatif de la réduction des coûts par la R&D disparàît. On montre aussi que le niveau de bien-être national est toujours plus élevé sous libre échange indépendamment du degré de substituabilité des produits.

Entrepreneurial Time Commitment And Risk

This article examines the relationship between risk perception, risk propensity and the ideal duration of entrepreneurial commitment. Risk perception is the basic entrepreneurial characteristic, aiming to the control and avoidance of uncertainty. Related to the ideal duration of entrepreneurial commitment, risk perception leads to the development of risk propensity and perception of time. Risk perception depends on factors such as cultural idiosyncrasies, knowledge and flexibility etc, while risk propensity is being affected by external macroeconomic variables and some important personal traits. The average duration of entrepreneurial commitment depends on macro-environmental variables, cultural idiosyncrasies, personal characteristics and the specifics of the project and entrepreneurial motives. The findings of this paper have implications on both company level and macro-level and consequently have significant policy implications

Quantity Restrictions and Endogenous Quality Choice

In a vertical product differentiation model under Cournot competition both foreign and domestic firms respond by lowering their investment in long-run quality for a quantity restriction at, and in the neighborhood of, the free trade import level. Average quality increases only when the low-quality foreign firm faces a substantially restrictive quota/voluntary export restraint. The change in quality depends on whether the foreign firm is of high or low quality and upon the restrictiveness of the quota. The imposition of quantity restrictions has important strategic effects on the long-run choice of quality.The paper was written when Herguera and Petrakis were at the Universidad Carlos III. Thanks are also due to all the participants at the CEPR ERWIT conference at Rome in September 1994, and the participants at the IX Simposio de Analisis Econo´mico (1994) at the Universidad Autonoma, Barcelona. Two referees and especially the editor provided very helpful comments. Herguera acknowledges support from DGICYT No. PB93-235. Kujal and Petrakis acknowledge support from DGICYT No. PB95-287.Publicad

Entrepreneurial Creativity and Growth

The concept of creativity is multidimensional, helping to take advantage of entrepreneurial opportunities and favoring in this way economic growth. Next to this basic argument of neoclassical theory, which ignores the role of entrepreneurship in growth, the present chapter states that entrepreneurship should be included as a contributing factor of growth. Through this key argument, this chapter attempts to clarify the importance of creativity to entrepreneurial activity, concentrating on the factors that influence entrepreneurial creativity that in turn lead to economic growth, as well as to capture the way in which entrepreneurial creativity is affected by this procedure. These factors are knowledge and education, the management of disrupting technologies, spill-over creativity, the role of cultural background and personal characteristics of individuals, the motives and incentives of individuals, the existence of—and access to—resources, and the institutions that delineate the environment of action of the entrepreneur

Medium term effects of culture, transactions and institutions on opportunity entrepreneurship

Cultural evolution is a long-term endogenous process which is revealed in society's cultural traits and it is embodied in institutional characteristics (property rights protection, rule of law, etc.) and transaction characteristics (risk levels, time required for start-ups, corruption levels, literacy levels, etc.). In the short- and medium-term, culture, institutions and transactions are exogenous for the economic and societal system. The paper aims to explore the roles of cultural, transaction and institution characteristics in the determination of opportunity entrepreneurship, at the medium-term. A series of variables is used to express these roles, which are analysed with a principal component analysis and a regression analysis. As expected, the conclusions confirm that the cultural traits both positively and negatively affect opportunity entrepreneurship depending on the particular traits combination. Moreover, the effect of enhanced transaction characteristics and economic institutions is conducive to opportunity entrepreneurship. Performing a sensitivity analysis, we construct a hypothetical, more opportunity entrepreneurship-oriented world by postulating pro-entrepreneurship cultural traits. In this "new world", because cultural traits are no longer an issue, they present "entrepreneurial maturity"; the important factors in promoting opportunity entrepreneurship are transaction and economic institution characteristics

Tariffs, quality reversals and exit in vertically differentiated industries

In a vertically differentiated industry a domestic and a foreign firm first choose the quality of their goods and then compete in quantities, or prices, in the home market. We investigate the cases in which a tariff is chosen before, or after, the firms’ quality decision. These cases are referred to as the ex-ante and the ex-post game, respectively. Optimal ex-post tariffs are positive and ensure that the domestic firm always produces the high quality good. The optimal ex-ante tariff is prohibitive and welfare under domestic monopoly is lower than under ex-post tariffs, unless firms compete in prices and the domestic firm is high quality.The authors would like to thank Jim Markusen and the participants at the meetings in Aix-en-Provence, The International Conference in Industrial Organization (Carlos III), Bellatera (Barcelona), ASSET (Alicante), ETSG (Erasmus) and seminars at Bologna and Vigo universities. The paper was written when Herguera and Petrakis were at Carlos III. The authors would like to thank an anonymous referee, Berthold Herrendorf, and especially the Editor, Jonathan Eaton, for detailed comments that led to a complete rewrite of the paper. Kujal acknowledges support from grants DGESIC [PB98/0024 and CAM 06/0058/2001. Herguera acknowledges support from grant [PB93-236. All remaining errors are our ownPublicad

Why Coevolution of Culture and Institutions Matters for Economic Development and Growth?

Theoretical considerations that choose to make reference to the institutional and cultural considerations presuppose that these are in an optimal form. However, this is not the case in the real world. This chapter argues that the coevolution requirements of institutional and culture change are critical for economic outcomes. When institutions and culture coevolve in an optimal pattern, economic development and growth are facilitated. In contrast, when institutions and culture deviate from the optimal pace of coevolution, incompatible alterations of institutions and culture may end up causing an inability of the policy designers to implement the required changes in institutions and/or cultural behaviors. The result can be a series of failing attempts to implement a modernized progrowth framework of institutional settings and cultural behaviors. Using a dataset of 80 countries for the period 1981–2019, the analysis concludes that institutions and culture are complements—and not substitutes—in terms of their role in economic development, as when both sizes are strong it leads to higher levels of GDP per capita. When either or both of them are at a weak level, economic development is much lower