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Leapfrogging: Time of Entry and Firm Productivity

Author

Listed:
  • Josh Ederington

    (University of Kentucky)

  • Georg Goetz

    (University of Giessen)

Abstract

We develop a model in which ex ante identical firms make endogenous entry and technology adoption decisions. We show that this model is capable of matching the stylized facts in which entry and adoption are dispersed over time and that, in many industries, it is the newest firms which are the most likely to exhibit high productivity growth and adopt new innovations (i.e., leapfrogging). We then derive the characteristics of those industries where such leapfrogging is likely to occur and show that leapfrogging can induce reverse preemption (i.e., forward-looking incumbent firms delaying entry and adoption due to leapfrogging behavior). As an application, we demonstrate how, in an industry conducive to leapfrogging, research subsidies can actually reduce short-run consumer welfare by discouraging firms from entering the market with a basic technology.

Suggested Citation

  • Josh Ederington & Georg Goetz, 2018. "Leapfrogging: Time of Entry and Firm Productivity," MAGKS Papers on Economics 201811, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201811
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    References listed on IDEAS

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    More about this item

    Keywords

    entry; technology adoption;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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