Dynamic Stability, Paradoxical Comparative Statics, and Factor–Market Distortions in an Economy with Three Production Sectors

In an earlier paper the authors clarified the relationship between the stability of long–run equilibrium and the possibility of paradoxical comparative statics in the Lerner–Samuelson two–by–two model of production with factor–market distortions (see Review of International Economics 9 (1901) :383–400). The present paper extends the analysis to an economy with three production sectors. It is found that almost all properties of long–run equilibrium in the two–by–two model with factor–market distortions continue to hold, while some new properties, such as plurality of equilibrium, appear. Specifically, the instability of the adjustment process is not ruled out; a paradox cannot coexist with stable equilibrium in a small open economy, but may do so in a closed economy.     

A Dynamic Heckscher–Ohlin Model: The Case of Costly Factor Reallocation

The role of the static Heckscher–Ohlin model in providing general equilibrium comparative statics is emphasized. It is shown that (i) market-clearing dynamics can be constructed if and only if the costly reallocation of factors is accommodated, and (ii) the introduction of market-clearing and resource-using dynamics fails to sharpen (and may even blunt) the comparative statics. Thus, a new (non-)Correspondence Principle is derived.     

Market Structure and Factor Price Equalization

There is a widespread belief that factor price equalization is less likely if some industries are imperfectly competitive and, in particular, that this is so if some industries are under the control of strategy-playing oligopolists. However, it is shown that, if each category of oligopolists is recognized as a primary factor of production, then the dimensionality of the set of endowments compatible with factor price equalization is independent of market structure.
JEL Classification Numbers: D33, D43, F12, L13.     

Strategic Value Assessment and Explorative Learning Opportunities with Customers

This study recognizes that collaboration with customers for new product development may bring important financial benefits to firms, but at the same time may seriously hamper explorative learning. Many firms are approached by customers with requests to develop new products for them. While such requests may strengthen customer relationships and result in short‐term financial gains, it may force a firm in technologically undesirable directions. As a result, many firms struggle with the dilemma of, on the one hand, responding to customer requests, and on the other hand, safeguarding the long‐term competitive position of the firm. Firms with strong customer ties are particularly prone to this dilemma. Drawing on opportunity recognition literature, capability monitoring literature as well as goal setting theory, the authors have developed a framework arguing that Strategic Value Assessment (SVA) can help resolve this. SVA is defined as an a priori business evaluation of the value of a particular innovation collaboration, based on anticipated long‐term strategic benefits. It helps innovative firms to focus on collaboration with customers with lead user status and to develop intense relationships, allowing for more effective knowledge transfer and learning. The framework is tested using data collected from a sample of 136 business‐to‐business firms in the Netherlands. The sampling frame was a panel of small and medium‐sized high‐tech enterprises. The study finds positive direct and indirect effects of SVA on explorative learning. In addition, the findings show that the intense collaboration/learning relationship is positively moderated by customer lead user status, and negatively moderated by customer dependence. The findings suggest that SVA is a useful heuristic for managers to utilize opportunities for innovation involving collaboration with customers.