Industrial Organization in Canada

Industrial Organization in Canada: Empirical Evidence and Policy Challenges

ZHIQI CHEN
MARC DUHAMEL
Copyright Date: 2010
Pages: 600
https://www.jstor.org/stable/j.ctt817zh
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  • Book Info
    Industrial Organization in Canada
    Book Description:

    Using state-of-the-art empirical techniques, contributors address the policy challenges raised by globalization, the internet and other technological advances, innovation, and the rise of security measures in response to the 9/11 terrorist attacks. Chapters are organized around five themes: recent developments and policy challenges, Canadian firms in the information age, research and development and innovation, regulation and industrial performance, and securing trade and investment opportunities. The only substantive research volume on this subject in two decades, Industrial Organization in Canada is a welcome resource for policy makers, researchers, and academics concerned with industrial policy issues in contemporary Canada. Contributors include Ajay Agrawal (University of Toronto), Doug Allen (Simon Fraser University), Werner Antweiler (University of British Columbia), John Baldwin (Statistics Canada), Zhiqi Chen (Carleton University), Jean-Étienne de Bettignies (Queen’s University), Marc Duhamel (Industry Canada), James Gaisford (University of Calgary), Avi Goldfarb (University of Toronto), Wulong Gu (Statistics Canada), Kathryn Harrison (University of British Columbia), Patrick Joly (Industry Canada), William Kerr (University of Saskatchewan), Kevin Koch (PricewaterhouseCoopers), Donald G. McFetridge (Carleton University), Peter W. B. Phillips (University of Saskatchewan), Mohammed Rafiquzzaman (Industry Canada), Someshwar Rao (Institute for Research on Public Policy), Thomas W. Ross (University of British Columbia), Camille Ryan (University of Saskatchewan), Michel Sabbagh (Industry Canada), Guofu Tan (University of Southern California), Henry Thille (Guelph University), Johannes Van Biesebroeck (K.U. Leuven, Belgium), and Lasheng Yuan (University of Calgary).

    eISBN: 978-0-7735-8588-1
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Contributors
    (pp. vii-2)
  4. 1 Introduction
    (pp. 3-16)
    ZHIQI CHEN and MARC DUHAMEL

    One of the most striking and puzzling economic observations in the past decade has been the performance of the US economy in terms of output and productivity growth compared to other industrialized economies (see Figure 1). Since most industrial economies share the substantial knowledge and technological base available to American businesses, the American productivity surge bewildered many economists, policy analysts and public policy-makers.

    Much of the recent research suggests that the surge in productivity growth after the mid-1990s largely reflects significant labor and total factor productivity gains that are related to information and communication technology (ICT) investments and that those...

  5. PART ONE RECENT DEVELOPMENTS AND POLICY CHALLENGES FOR INDUSTRIAL ORGANIZATION
    • 2 Challenges and Opportunities for Industrial Organization Economists: Exciting Times
      (pp. 19-63)
      DONALD G. McFETRIDGE

      Research opportunities for industrial organization economists are almost unlimited. There are also many opportunities and challenges for research that addresses industrial policy issues in Canada. The purpose of this study is to discuss the possible contribution that research in certain areas of industrial organization could make to the evolution of some aspects of industrial policy in Canada.

      The study begins with a general description of the burgeoning field of industrial organization. It describes what industrial organization economists do and what analytical methods they use. It then turns to a discussion of the role that research in industrial organization could play...

    • 3 Recent Developments In Industrial Organization: A Selective Review
      (pp. 64-107)
      GUOFU TAN

      Google Inc., currently one of the most popular companies, recently went public. Its initial public offering (IPO) process has generated much debate among analysts, investors and the like. Two of the many issues discussed are most interesting from the perspective of industrial economics. One concerns Google’s new IPO mechanism and the other, its business model.

      Instead of following the customary IPO process, Google used a mechanism called a Dutch (or uniform-price) auction to allocate its equity shares. The usual IPO mechanism involves a group of investment banks helping the company to set a price, typically low, and initially allocating shares...

    • 4 Measuring the Performance of Canadian Markets
      (pp. 108-140)
      HENRY THILLE

      It is well known that imperfectly competitive markets do not necessarily provide the maximum benefits possible to an economy. In general, the less competitive a market, the more likely that society as a whole receives a lower surplus than is feasible. Economists have long been interested by this problem and, in recent decades, there has been an explosion of work using theoretical modeling techniques to investigate the implications of imperfect competition for market outcomes. However, theoretical models only tell us about possibilities. They remain silent on the extent of distortions due to imperfect competition in particular markets. Empirical analysis is...

  6. PART TWO CANADIAN FIRMS IN THE INFORMATION AGE
    • 5 A Global Village? Canadian and International Internet Firms in the US market
      (pp. 143-168)
      AVI GOLDFARB

      In titling her 1997 book, Frances Cairncross proclaimed that the Internet would bring aboutThe Death of Distance. The reduction in communication costs resulting from Internet technology would allow widely dispersed entities to communicate freely. Within the United States, there is some evidence of this. Goolsbee (2000) shows that the Internet allows people to circumvent local taxes. Stevenson (2003) shows evidence that the Internet reduces barriers to job search. Forman, Goldfarb and Greenstein (2003) show that rural firms are particularly likely to adopt Internet technology, presumably to allow them to better communicate with the rest of the country.

      On an...

    • 6 Non-price Strategies in the Canadian Online Book Industry
      (pp. 169-208)
      PATRICK JOLY and MICHEL SABBAGH

      Economic theory predicts that homogeneous goods sold through competitive marketplaces should satisfy the “law of one price” (Marshall, 1890). If the number of existing and potential sellers is large, such that the market structure is perfectly competitive, then the price of a homogeneous good would equal the marginal cost of the last unit produced. This feature also holds in oligopolistic markets when two or more firms selling a homogeneous good compete on the basis of price alone (the Bertrand paradox). These quite different models of competition and market structure imply that the price of homogeneous goods sold at different locations...

  7. PART THREE R&D AND INNOVATION BY CANADIAN FIRMS
    • 7 A Survey of R&D Governance in Canada and an Exploration of the Role of Social Relationships In Outsourcing R&D
      (pp. 211-239)
      AJAY AGRAWAL

      The objective of this chapter is to explore the topic of R&D governance and report findings on particular governance practices in Canada. We begin with an overview of economic theory concerning the boundaries of the firm. What are the advantages of conducting certain R&D activities within the firm? What are the advantages of engaging the intermediate market (e.g., by licensing, collaborative R&D, or contracting out field testing)? Under what conditions is one form of governance superior to another from the perspective of a profit-maximizing firm? We use basic microeconomics and in particular transactions cost theory to outline a conceptual basis...

    • 8 Trends and Complementarities in the Canadian Automobile Industry
      (pp. 240-283)
      JOHANNES VAN BIESEBROECK

      For most of the last 100 years, the automobile industry has been the most important manufacturing sector in North America. In 1950, 33 million cars and 7 million light trucks were registered in the United States. By 1973, total registrations had increased by two and a half, passing the 100 million light vehicles mark. Currently, there are 174 million passenger vehicles on US roads with an additional 18 million in both Canada and Mexico. While the growth rate in registrations is slowing gradually, it is anyone’s guess at what level it will top out. Total sales in North America have...

    • 9 Canadian Agricultural Biotechnology Clusters: Innovation and Performance
      (pp. 284-336)
      JAMES GAISFORD, WILLIAM KERR, PETER PHILLIPS and CAMILLE RYAN

      Clusters are frequently seen as an engine of development for modern knowledge economies and they have commanded commensurate policy attention. A knowledge-based cluster is a geographically concentrated group of private and public organizations that engage in a range of related innovative and supportive activities, some of which are joint and others separate. Within the parameters of this general definition, however, knowledgebased clusters appear to be highly non-uniform in terms of structure and performance. For this reason it is useful to consider at least one cluster in some depth. Given the limitations on the scope of this chapter, we focus principally...

  8. PART FOUR REGULATIONS AND INDUSTRIAL PERFORMANCE IN CANADA
    • 10 Environmental Regulatory Incentives Underlying Canadian Industrial Performance
      (pp. 339-403)
      WERNER ANTWEILER and KATHRYN HARRISON

      In this paper we review the impact of governmental and market influences on firm and industry environmental performance in Canada. Environment Canada’s NationalPollutant Release Inventory(NPRI) has been tracking emissions of toxic substances since 1993, providing a quantitative foundation for analysis and rational policy making. A similar toxic release inventory in the United States provides quantitative reference points for cross-border industrial performance comparisons. Armed with these data we evaluate the effectiveness of actual regulatory interventions, threats of regulatory intervention, voluntary efforts by industry, as well as industry efforts in response to pressures from consumers, shareholders, and communities.

      We address...

    • 11 The Impact of Regulatory Policies on Innovation: Evidence from G–7 Countries
      (pp. 404-438)
      KEVIN KOCH, MOHAMMED RAFIQUZZAMAN and SOMESHWAR RAO

      Innovation – the development and implementation of ideas, which lead to new or improved products and processes – is widely recognized as a driver of productivity and economic growth. Less well recognized is the role government might have in promoting and sustaining innovative activity.

      Although the government’s influence on innovation through its direct role in the creation and dissemination of knowledge is substantial in some sectors, its indirect influence is felt through a variety of other channels that have different impacts across industries (Cohen, 1995). The major form of indirect influence is through regulatory policies. Governments in all industrial countries employ a...

    • 12 Does It Pay to Be Clean? Competitiveness and GHG-Emission Intensity Targets
      (pp. 439-464)
      MARC DUHAMEL and LASHENG YUAN

      As of February 16 2005, the Kyoto Protocol is legally effective. Under this agreement, Canada committed to reduce its average annual greenhouse gas (GHG) emissions to 6% below their 1990 levels for the period covering 2008–2012 (the first commitment period). According to official forecasts, this objective will require a reduction of 240 megatons (Mt) of carbon dioxide equivalent (or CO2e) from a projected “business-as-usual” (BAU) benchmark (seeAn Assessment of the Economic and Environmental Implications for Canada of the Kyoto Protocol, National Climate Change Process). For example, large industrial emitters (LIEs) in industries such as electricity generation, oil and...

  9. PART FIVE SECURING TRADE AND INVESTMENT OPPORTUNITIES IN THE NEW WORLD ORDER
    • 13 The Sky Is Not Falling: The Economic Impact of Border Security After 9/11 on Canadian Industries
      (pp. 467-498)
      DOUGLAS W. ALLEN

      The terrorist attacks on the US Pentagon and the New York World Trade Center on the morning of September 11th, 2001 created a watershed moment in the history of North America. In total 3030 people died in four separate airline hijackings. Property damage amounted to approximately 50 billion dollars. Borders were closed. World leaders from Tony Blair to Yasser Arafat condemned the attack. It took over a year to clean up the space where the WTC once stood, and to this day reconstruction has not started. Afghanistan and then Iraq were invaded. In Canada and the US the state has...

    • 14 Multinationals, Foreign Ownership and Productivity Growth in Canadian Manufacturing
      (pp. 499-532)
      JOHN R. BALDWIN and WULONG GU

      This paper examines two benefits that are derived from the presence of foreign MNEs in the Canadian manufacturing sector: the superior performance of foreign MNEs and their spillover benefits to domestic-controlled firms. This issue has received an increasing amount of attention among researchers as countries around the globe compete for foreign direct investment.

      This paper extends previous studies on the relative performance of foreign- and domestic-controlled plants in the Canadian manufacturing sector. First, we compare the differences between foreign and domestic firms using a large number of characteristics – one of which is the level of productivity. In doing so, we...

    • 15 Public-Private Partnerships: Economic and International Dimensions
      (pp. 533-587)
      JEAN-ETIENNE DE BETTIGNIES and THOMAS W. ROSS

      In recent years governments in all parts of the world, in developed and developing economies, have been looking to deliver public services in new ways that achieve their public goals at a lower cost to taxpayers. In many cases the new directions they have explored, and continue to explore, involve the greater use of private enterprise than was familiar in more traditional approaches. To be certain, the private sector has always played some role in the provision of public services in market-based economies, for example through the manufacturing of supplies and other inputs used by the public sector, and by...