A product group consists of product varieties (phenotypes) that compete for the same customer budget. The paper introduces an approach to identifying separate markets by means of product group (genotype) delineation. The paper contrasts two basic ideas for analysing competition within a product group. The first idea relates to Lancaster’s suggestion that every product variety can be identified by its attributes or characteristics (L-model). The second idea relates to the monopolistic-competition model as popularised by Krugman (DS-model). With this latter approach, a product group potentially contains a large set of varieties, where customers as a group have a taste for variety. For each of the two paradigms, the paper presents and compares the process by which novel product varieties are introduced. In the framework of Lancaster, evolution tends to reduce the number of varieties due to development of superior alternatives. The Krugman framework rather predicts an evolution where the number of varieties may increase without limits. The contribution of the paper is to contrast the two perspectives, by comparing the change processes and by assessing the adhering equilibrium solutions. A major question is how these two conflicting perspectives should be interpreted. The paper ends by suggesting a framework that can resolve the conflict between the two perspectives. The L-model provides a theoretical framework for how a separated market can be delineated, whereas the DS-model is more ad hoc in this sense. The prime demarcation aspect is however that in the DS-model diversity of products is generated by customers’ taste for variety. This must not be interpreted as a case, in which each customer consumes of all varieties at each point in time. A more reasonable interpretation is that a customer during a time period exercises the taste for variety. In contrast, a customer in the L-model purchases two or several varieties only when there is no product available with the desired combination of attributes. Hence, in the L-model the tendency is towards a smaller set of superior varieties. However, heterogeneity among customers will counteract this tendency and generate product diversity in the L-model. The possibility of a superior product variety for each customer group is inherent in the L-model. One may also observe this phenomenon can associated with so-called technology lock-in effects (Arthur, 1989). In order to understand this, we may consider a product group for which an essential feature is mutual compatibility with other product variants. As some variant gets a large market share, the compatibility aspect will be an important attribute with a decisive role in customers’ preference functions. This type of feature is completely absent in the DS-model. In the L-model scale economies explain the dynamics when a superior product increases its market share by replacing established products. Scale economies are the driving force behind competitive exclusion. In the DS-model scale economies provide incentives for firms to develop economies of scope and to continue to expand the number of varieties. 

Production theory has remained substantially unchanged since the publication of the theory of production by Frisch (Theory of production, D. Reidel, Dordrecht, 1928; Nord 613 Tidskr Tek Okon 1:12-27, 1935). The theory is based on the idea of a firm deciding on the possible input and output combinations of a single unit of production. His theory was substantially copied in contributions by Carlson (A study on the pure theory of production, University of Chicago, Chicago, 1939) and Schneider (Einfuhrung in die Wirtschaftstheorie. 4 Bande, Mohr, Tubingen, 1947), and later by practically all textbooks in microeconomics. The idea is to model the firm as a black box in which a finite number of externally purchased inputs are transformed into a finite number of outputs to be sold in the market(s). Most of the time, the prices are externally determined. Often, the production process is summarized by some simplified production function as, for example, in the form of a CES function. Another and conceptually richer approach is the formulation of an activity analysis model. In the latter case, simple internal interdependencies can be included. In this paper, we indicate how internal interdependencies can also be modeled within a special CES framework. In recent decades, there has been a remarkable growth in the number of production units of firms such as IKEA, Walmart and Apple to name a few such global networking firms. Most of the analysis of these network firms has been modeled by logistics and other operations-research analysts (Simchi-Levi et al. 2008) and to a limited extent by researchers in business administration schools. Very little has been done in economics. We propose a modeling approach consistent with the microeconomic theory.

Firms in local industries maintain their capability to generate new export varieties by simultaneously exploiting internal and external knowledge resources. The paper introduces the notion 'variety triplet' to distinguish individual export varieties, where a triplet is a unique combination of a firm, a product code and a destination country. For each date, the set of variety triplets in each local industry records all remaining export varieties introduced in the past. In view of this, the paper examines how internal and external knowledge of local industries influence the industry's scope and value of export varieties. First, the paper contributes by considering a local industry's internal and external knowledge, as well as the conjunction of its internal and external knowledge sources. Second, the knowledge sources are shown to influence both the stock and the dynamics of a local industry's variety triplets, using firm-level data from Sweden.

Regional economic development has experienced considerable dynamism over the recent past. Perhaps the most stunning cases are China and India rising to emergent country status by the turn of the millennium, when most development economists believed in the mid to late twentieth century that such developments could not and would never occur. Paralleling these developments are similar stories of rapid growth at both the national (for example, the four little dragons-Hong Kong, Korea, Singapore and Taiwan; and also Malaysia and Brazil) and the sub-national regional level, which are elaborated on below. With time now for hindsight, some of the reasons these development successes are beginning to emerge are becoming known. The four little dragons' success is tied to what has come to be known as export-dominated development. By focusing on sizeable export markets for non-durable and to some extent durable goods at first and then later, on durables coupled with disciplined, educated and educable labor forces, these countries rose to developed status by the closing decade of the twentieth century. While all of this was going on, new thinking about economic growth-such as the 'new growth theory', along with recognition of emerging patterns of change such as agglomeration, clustering and entrepreneurship-began to modify the quasi-static development views of the neo-classical perspective on economic growth that had changed little since the 1950s following the work of Solow.

This paper studies the influence of metropolitan externalities on productivity for different types of long-run R&D engagement based on information from the Community Innovation Survey. We apply a dynamic general method of moments model to a panel of manufacturing and service firms with different locations in Sweden, classified as a metropolitan region, the largest metropolitan region, a metropolitan city, the largest metropolitan city and a nonmetropolitan area. This analysis generates three distinct results. First, the productivity premium associated with persistent R&D is close to 8 per cent in nonmetro locations and about 14 per cent in the largest city. Second, a firm without any R&D engagement does not benefit at all from the external milieu in metro areas. Third, no productivity premium is associated with occasional R&D effort regardless of the firm's location.

In recent years, policy makers have given much credence to the role of entrepreneurship in the transformation of regions. As a result, a new set of policy responses have emerged that focus on the support of new venture creation, small business growth and idea generation and commercialization. While there is a wealth of research about entrepreneurship in general, less attention has been given to the development of new tools and programs in support of entrepreneurial activities, and to the ways in which the emergence, the character and the types of entrepreneurship policies might differ between countries. in particular, the transatlantic perspective is of special interest because of the pioneering role of the United States in this area, and also due to the European Union’s focus on economic competitiveness. The contributions included in this book explore the emergence of entrepreneurship policies from a transatlantic comparative perspective and address different aspects of entrepreneurship policies including local entrepreneurship policies and the relationship between knowledge-based industries and entrepreneurship policies.

This volume provides an understanding of firms' R&D and innovation strategies and their economy-wide consequences. It is based on the premise that differences in firm-level returns, as well as economy-wide outcomes, may be linked to the heterogeneous ways in which firms organize and undertake R&D and innovation activities. It emphasizes innovation strategies of innovating firms, and reflects that innovation efforts do not represent a uniform type of expenditure. Organized into three parts the volume moves from the micro to the macro-level. This structure highlights the notion that R&D and innovation and growth are two interdependent perspectives. The first of these is micro-oriented and focuses on innovation processes of firms, where R&D activities and other innovation efforts give rise to consequences such as a strengthening of resource bases, growth of sales and employment, patents, new products, increasing productivity and profits, and improved chances of survival. The second perspective comprises economy-wide effects in the form of overall technological change, growth in total factor productivity, and structural change processes, where certain sectors may benefit from new inputs from other sectors while others experience declining markets and reduced output.