Chapter 6: Innovation, Competition and Quality Management

Title: Competition in increasing returns and network industries

Reference: WORLD SUSTAINABLE DEVELOPMENT OUTLOOK 2006 pp. 178 - 184

Abstract/Summary: This paper reviews and integrates in a conceptual model heretofore disjointed theoretical contributions that explicitly and implicitly report the notion of increasing returns (IR) to address dynamic polarisation phenomena in business competition. Competition in IRIs is characterised by a comprehensive framework where a variety of IR mechanisms combine to explain simultaneously three likely features of IR competition: (i) big firms with non-negligible market shares cluster around concentrated industrial structures with skewed distribution of firm size and market share, (ii) there is a tendency of certain cases of technology competition to end up in a temporary monopoly, (iii) the competition process usually follows a dynamic, cumulative pattern that starts symmetric and ends up asymmetric. For an industrial policy toward promoting economic growth it would be of prior importance to complementarise IRIs which would enhance their value creation and competitiveness.

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