نوآوری، عملکرد بازار و رقابت: درسهایی از یک مدل چرخه زندگی

Detailed knowledge on how innovation, market performance, and competition are intertwined serves as a basis for decisions of firms and policy makers. In the course of market evolution various changes take place of which the emergence of consumers' preferences and of the knowledge that is needed to meet these preferences with appropriate products are the most important ones. In order to model the market evolution and the resulting changes, Dosi's concept of technological paradigms and Winter's concept of technological regimes are integrated into a product life cycle model. The simulations performed with this model help to understand how the dynamics of market evolution shapes market performance and competition. The results of the simulation runs show a much more differentiated picture than economic intuition suggests and therefore give useful hints for firms' strategies and innovation policy. The most striking result of the simulation runs for entrepreneurial strategies is that there are markets that are only interesting for firms which want to enter a market to realize some profits and then exit again whereas other markets are only interesting for firms which want to survive in the long-run. For policy makers the simulation results show clearly that policy measures must be carefully designed in order to have the intended effects.

Detailed knowledge on how innovation, market performance, and competition are intertwined serve as a basis for decisions of firms and of policy makers. Firms try to achieve their individual goals, i.e. to make profits and to survive in a competitive market environment by using knowledge on markets as a basis for their strategies. On the contrary, the same knowledge enables policy makers to aim at an overall increase of social welfare by identifying disturbances in competition, especially situations in which the exploitation of consumers is likely. Moreover, policy makers may realize deficits in market performance that emerge from a lack of appropriate institutions, e.g. that patent laws protect the property rights of innovators too long or too short so that the investment in R&D is hampered. It is clear that knowledge on innovation, market performance, and competition is crucial for entrepreneurial strategies as well as for policy. Unfortunately, it is not easy to derive guidelines for firms or policy makers from the literature on markets, because existing theoretical and empirical results provide a very complex and complicated picture on possible market environments. It is generally agreed that innovation, performance, and competition depend significantly on the maturity of markets (Dosi, 1997). The stage of maturity is usually presented by the market structure: new markets are normally described by competition between many small firms whereas older markets are more concentrated and are dominated by few larger firms. So, the turn of markets from new into mature ones is investigated in the following. At the core of the analysis is the question how does this change affect innovative output, market performance, and competition. The aim is to gain differentiated answers to this question within an evolutionary model of market dynamics and eventually to derive implications for entrepreneurial and political measures. In order to do so, first of all, the concepts of technological regimes, technological paradigms, and product life cycles are integrated (Section 2) and the market evolution is modelled accordingly (Section 3). The results of the simulation runs are discussed in Section 4 by especially taking into account the implications for entrepreneurial and for policy strategies. A brief summary and some hints for future research round the paper (Section 5).

To explore deeper into the possibilities of firms' behaviours and policy strategies in view of market evolution simulation models may be useful.9 In this paper, a relatively simple model was developed. Nevertheless, the results show that it is possible to gain differentiated insights into the intertwined processes of innovation, market performance, and competition together with some useful hints for firms and policy makers. Three theoretical pillars — the product life cycle, technological regimes, and technological paradigms (see Section 2) — have been put together here to model the evolution of markets in time. At the first glance, the simulation results seem to show many of the expected patterns of market evolution. The advantage of this is that economic intuition is corrobated by the simulation study. Although these insights are valuable as such still the question would arise why one has to make such an effort to get to know the known. Interestingly however, the results of the simulation runs are much more differentiated than economic intuition would suggest. Therefore, we could derive some meaningful implications for firms as well as for policy makers (Section 4). The most striking result of the simulation runs for entrepreneurial strategies is that there are markets that are only interesting for firms which want to enter a market to realize some profits and then exit again whereas other markets are only interesting for firms which want to survive in the long-run. For policy makers the simulation results show clearly that policy measures must be carefully designed in order to have the intended effects. An even more differentiated picture might be drawn if some of the simplifications of the simulation model used here would be undone. More could be learned about possible firms' strategies if more differences between firms are taken into account (e.g. different levels of innovation expenditures). Another promising starting point would be to model policy measures in more detailed ways as this would give more concrete hints how to design successful policy measures. Also the demand side could be modelled in a more realistic way by taking into account that the demand curve emerges during market evolution and that it therefore changes in shape and in time. It would be interesting to look at models with these extensions as all these modifications promise valuable insights in the functioning of markets and the resulting implications for firms and policy makers.