INDUSTRIAL DYNAMICS
Instructional goals
The main goal of this course is to enable students to understand and analyze the forces that determine the structure and dynamics of industrial sectors. During the lectures, the papers representing the milestones on the subject will be presented in class
Intended learning outcomes
At the end of the course students will be able to:
Understand, design and conduct analyses on the characteristics and evolution of the sectors.
Analyze and describe the evolution of businesses, with particular attention to business demographics and entrepreneurship.
Develop strategic analysis skills.
Understand the role of innovation for industrial dynamics.
Course Contents
The course deals with the structure, dynamics and evolution of industrial sectors.
Business growth (Gibrat's law), market structure, determinants of the entry and exit of companies from a sector and the life cycle of industry, will be the subject of the first part of the course. We will then continue with the main theories on entrepreneurship, with the study of sectorial models of innovation and with the examination of the characteristics of the fourth industrial revolution. Each of these topics will have a practical-application part consisting of exercises with data on the Italian manufacturing industry.
The course is based on the fundamental works that created the field of industrial dynamics. The papers, almost all in English, will be illustrated and explained in detail during the lessons in order to make them usable. However, not all papers included in the "reading list" will be treated in class. We also reserve the right to add during the course further papers currently not included in the reading list to be treated in class (which will therefore become a subject for examination) if the course and class discussions requires to.
Reference Books
The course is based on the fundamental works that created the field of industrial dynamics. The papers, almost all in English, will be illustrated and explained in detail during the lessons. However, not all papers included in the "reading list" will be treated in class. We also reserve the right to add during the course. The slides will be provided to students at the end of each lecture
Teaching Methods
The course consists of lectures, class discussion, exercises, simulations, and on group-works that will be presented in class at the end of the course.
Assessment Method
The assessment for attending students consists of a mid-term evaluation (based on the presentation of group work), which accounts for 30% of the final grade, and a final oral exam (70%). The assessment for non-attending students consists of an oral exam covering the entire course syllabus as well as an additional reading to be agreed upon with the instructors.
Thesis assignment criteria
In general, an interest in the subject. From a master's degree student we expect: 1) ability to propose a thesis that can be traced back to the topics or the tools presented during the course; 2) ability to conduct quantitative analyses; 3) initiative and critical thinking when using data and bibliographical resources.
Week 1
Market structure theories Theories on the dynamics of the market structure Readings: J.Sutton (2006), Market Structure: Theory and Evidence, Handbook of Industrial Organization
Week 2
The size distribution of firms and Gibrat's law Insights into Gibrat's law Readings: Rossi-Hansberg, E., and M. L. J. Wright, (2007). "Establishment Size Dynamics in the Aggregate Economy. "American Economic Review, 97 (5): 1639-1666. * Lotti, F., E. Santarelli and M. Vivarelli, (2003). "Does Gibrat's Law hold among young, small firms ?," Journal of Evolutionary Economics, Springer, vol. 13 (3), pages 213-235, August. * D.B. Audretsch & L. Klomp & E. Santarelli & A.R. Thurik, 2004. "Gibrat's Law: Are the Services Different ?," Review of Industrial Organization, Springer, vol. 24 (3), pages 301-324, 05. Lotti, F., E. Santarelli and M. Vivarelli (2009), Defending Gibrat's Law as a long-run regularity, Small Business Economic Journal, 32, 31-44. * Lotti, F. (2007), "Firm dynamics in manufacturing and services: a broken mirror ?," Industrial and Corporate Change, Oxford University Press, vol. 16 (3), pages 347-369, June.
Week 3
The profit-driven theory on business entry, main criticisms and stylized facts Stylized facts on the entry of businesses. Readings: * Chapter 12, Cabral, Industrial Economics (2018), Entry, Exit and Strategic Behavior * Garavaglia, (2014), Analysis of the determinants of the entry of new companies in the industrial sectors: a review, LIUC Papers n. 144 * Geroski P. (1995), What do we Know about Entry ?, International Journal of Industrial Organization, 13, 421-441.
Week 4
Innovation and the life cycle of industries: Klepper’s model Sectors’ shakeout. Readings: * Garavaglia, (2014), Analysis of the determinants of the entry of new companies in the industrial sectors: a review, LIUC Papers n. 144 * Klepper, S, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86 (3), pages 562-83, June. * Klepper, S. & Miller, J. H., 1995. "Entry, exit, and shakeouts in the United States in new manufactured products," International Journal of Industrial Organization, Elsevier, vol. 13 (4), pages 567-591, December.
Week 5
Business dynamics and job creation How business demographics are measured Readings: * Haltiwanger (2012) "Job Creation and Firm Dynamics in the United States" Chapter in NBER book Innovation Policy and the Economy, Volume 12 (2012), Josh Lerner and Scott Stern, editors (p. 17 - 38)
Week 6
Data from Italian industry: companies from different points of view The main indicators for empirical analyzes on Italian industry.
Week 7
Industrial sectors and sectoral systems of innovation: the models of Pavitt (1984) and Audescht (1995) Applications of Pavitt's taxonomy Readings: * Pavitt, K. (1984), 'Sectoral Patterns of Technical Change: Towards a Taxonomy and a Theory ', Research Policy, vol. 13, pp. 343–73.
Week 8
Schumpeterian patterns of Malerba and Orsenigo innovation Insights into innovation patterns Readings: * Malerba, Franco & Orsenigo, Luigi, 2014. Technological regimes and sectorial patterns of innovation, in Economics of Innovation, edited by F.Malerba. * Malerba, Franco & Orsenigo, Luigi, 2014. Industrial dynamics e relations between companies, in Economics of Innovation, edited by F. Malerba.
Week 9
Industrial sectors and sectoral systems of innovation: the models of Pavitt (1984) and Audretsch (1995) Schumpeterian patterns of innovation (Malerba and Orsenigo) Readings: * Pavitt, K. (1984), 'Sectoral Patterns of Technical Change: Towards a Taxonomy and a Theory ', Research Policy, vol. 13, pp. 343–73. * Malerba, Franco & Orsenigo, Luigi, 2014. Technological regimes and patterns innovation sectors, in Economics of Innovation, edited by F. Malerba * Malerba, Franco & Orsenigo, Luigi, 2014. Industrial dynamics relations between companies, in Economics of Innovation, edited by F. Malerba.
Week 10
New Technologies and Structural Change: The Fourth Industrial Revolution Group work presentations Readings: McAfee, Andrew and Erik Brynjolfsson. "Big Data: The Management Revolution". Harvard Business Review, October 2012. Brynjolfsson, Erik, and Andrew McAfee, "Winning the Race with Ever-Smarter Machines" MIT Sloan Management Review, Winter 2012 Inside the digital revolution, Rullani and Rullani, Giappichelli publisher Gordon, Robert (2012). 'Is US economic growth over? Faltering innovation confronts the six headwinds', CEPR Policy Insight No 63.
Week 11
Fourth industrial revolution and its effects on work Group work presentations Readings: Arntz, M., T. Gregory, and U. Zierahn (2016). The Risk of Automation for Jobs in OECD Countries: A Comparative Analysis. OECD Social, Employment and Migration Working Papers, No. 189, OECD Publishing. Brynjolfsson, E., Mitchell, T., & Rock, D. (2018, May). What can machines learn, and what does it mean for occupations and the economy ?. In AEA Papers and Proceedings (Vol. 108, pp. 43-47). Frey, C. B. and Osborne, M. A. (2017). The future of employment: How susceptible are jobs to computerization? Technological Forecasting & Social Change, 114: 254-280. Acemoglu, D. & Autor, D. (2012). What does human capital do? A review of Goldin and Katz's The race between education and technology. Journal of Economic Literature, 50 (2), 426-63. Vivarelli, M., 2014. Innovation, employment and skills in advanced and developing countries: A survey of economic literature. Journal of Economic Issues, 48 (1), pp. 123-154.
Week 12
Theories on entrepreneurship Group work Readings: Ardagna, S. and Lusardi, A., 2008. Explaining international differences in entrepreneurship: The role of individual characteristics and regulatory constraints (No. w14012). National Bureau of Economic Research. * Lazear, E. (2005), "Entrepreneurship," Journal of Labor Economics, 23: 4. p649. Fritsch, M. and Mueller, P., 2008. The effect of new business formation on regional development over time: the case of Germany. Small Business Economics, 30 (1), pp. 15-29. Fritsch, M. and Schroeter, A., 2011. Does quality make a difference? Employment effects of high-and low-quality start-ups.