Learning and Strategic Product Innovation: Theory and Evidence for the Semiconductor Industry

Abstract

Introduction. Product Innovation and Evolution of Market Structure. Some stylised facts from the EPROM market. A survey of the literature on product differentiation and innovation. A model of vertical product differentiation. The diffusion of new products. Learning spillovers. Conclusions. Learning and Product Innovation: The Case of Semiconductor Memory Chips. A survey of the literature on the learning curve. Past empirical research on the learning curve. The learning curve for memory chips at industry level. The learning curve at the firm level. A digression: DRAM production and economies of scale. Implications of the learning curve for the firm's strategies. A theoretical framework for the process-product matrix. Conclusions. Product Innovation and Trade Policy. The literature on trade policy with differentiated products. Vertical product differentiation and product innovation: the two-firm case. Vertical product differentiation and product innovation: the three-firm case. Trade policy regimes and their effects on product innovation. Market access and frictions in semiconductor trade. Summary of the main theoretical results. Conclusions. Appendix I: Proof of Propositions 1,2, and 3. Appendix II: Technical Description of Semiconductors. The classification of semiconductors. MOS memory chips. The manufacturing of integrated circuits. Yield modelling in semiconductor production. Appendix III: The Learning Curve by Generations of Memory Chips. Appendix IV: Analytical Derivations of Subgame Perfect Equilibria. References. Index.

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