1. Theoretical issues
Primary aim: Principal perspectives on ip-analysis in view of Industrial Economics

2. Industrial Economics:
Mainstream micro-eonomic theory applied to ip
Recent improvement: The New Institutional Economics based on Coase’s and Williamsons Tranasaction Cost Approcah
Controversies concerning the industrial dynamics: Evolutionary economics a new field

3. The New Industrial Economics’ contributions to IP:
Models of perfect competition not realistic – Competition Policy
By means of game theory and theory of imperfect competition a neo-classical foundation of the SCP-paradigm

4. The SCP-paradigm: Criticism of the SCP-paradigm:
Per-
for-
mance
Basic
Conditions
Market
Struc-ture
Con-
duct
Criticism of the SCP-paradigm:
Technological change exogenous (“Basic condition”)
Trade-off between allocative and technical efficiency
The causality

5. Other critics of the SCP-paradigm:
Strategic Trade Policy
Assumption about imperfect competition
Perspective altered from ‘sector’ to ‘firm’
Strategic choices by the firm
Competitive advantages (“barriers”) created through IP

6. Porter’s Diamond

7. Evolutionary Economics:
Controversies between Industrial Economics (IE) and Evolutionary Economics (EE)
- While IE focuses on price competition, advocates of EE argue that firms compete with new technology and innovation (Schumpeterian competition)
- In EE premises such as perfect information, knowledge and foresight are misleading (critical to the understanding of ‘monopoly’)

8. The Austrian School (Schumpeter)
Procedural rationality – The rationality of the firms varies with information and ability to interpret information
The market – A continuous process of discovering, coordination and change
The entrepreneur – alert to new market opportunities by creating information, knowledge and development
Entrepreneurial profit – is eliminated as innovations are imitated.

9. Transaction-cost theory of organization (The new institutional economics)
Organizational development (transactions inside firms or through markets) is optimized:
Minimize (production + transaction costs)
subject to
- Incomplete contracts
- Opportunistic behavior (self-interest, incorrect
information)
- Preferences are given