Research

Publications

  • Lee, K., & Lee, S.H. 2022. A Schumpeterian approach to entry barrier and firm profitability: cycle time of technology. Economics of Innovation and New Technology. DOI: 10.1080/10438599.2022.2067150.
    Link: https://www.tandfonline.com/doi/abs/10.1080/10438599.2022.2067150

    Abstract
    Entry barrier has long been considered as a major determinant of firm profitability. Although a less competitive market structure has been commonly known as an indicator of an entry barrier, pieces of past empirical evidence are mixed. Moreover, technological factors, such as R&D intensity, have also been considered. However, no satisfactory empirical analysis has been made, mostly due to the lack of a suitable proxy variable that can reflect the technological environment of a sector. This study addresses this problem by trying a new proxy variable, cycle time of technologies (CTT), and shows, using the US firm data, that firms in a sector with a long CTT tend to enjoy higher profitability and values than others. A long CTT of a sector presents a high entry barrier against any entrant because in such sectors, an existing stock of knowledge tends to be important for a longer period of time, making new innovation continuously rely on old knowledge owned by incumbents and protected by patent rights.

Working Papers

  • Sung Hoon Lee, The Technological Regime and Barriers to Entry (Revise and Resubmit, Industrial and Corporate Change)

The impact of the technological regime, defined in terms of appropriability, cumulativeness, and opportunity conditions, on firms has been examined in multiple studies. Within the analysis on technological regimes, firm entry in particular has been of consistent interest due to its implications on competition and on how firms may decide to enter an industry. However, where cross-industry differences are concerned, many analyses consider only a few types of technological regimes, providing only a limited understanding of how the technological regime affects firm entry. Two issues, in particular, have not been analyzed as thoroughly as they should have been. First, the interaction effects of the various dimensions of technological regimes have not necessarily been analyzed in detail in the literature, despite the theoretical and empirical evidence that such interaction effects may be relevant. In addition, the characteristics of the entrants has not been disentangled when discussing the impact of the technological regime. This study thus aims to address this gap, which can have major implications for both firm strategy and policy.


  • Sung Hoon Lee, Roberto Fontana, & Franco Malerba, Where do firms come from? Knowledge relatedness and firm entry (Target: Strategic Management Journal)

The role of knowledge, in particular its relatedness to that of the target industry, is often emphasized as one of the main drivers in firms’ entry decisions. However, empirical analyses seem to show that knowledge relatedness may not always have a positive impact on entry, because the relationship is potentially nonlinear and may vary by entrant type. This study aims to explore these issues by proposing a perspective that may shed light on the mechanisms that govern the relationship between knowledge relatedness and firm entry. It then empirically tests these mechanisms by using a dataset constructed from the Western Electronics Manufacturer Association (WEMA) directory, spanning a time period from 1960 to 1990. The results suggest that the relationship takes an inverted U shape, which however can change drastically depending on the type of entrant.


  • Sung Hoon Lee, Roberto Fontana, & Franco Malerba, Who enters and when? Knowledge relatedness, entrant heterogeneity, and industry characteristics (Target: Strategic Management Journal)

The knowledge relatedness of potential entrants to the target industry is often cited as one of the main drivers of entry. However, empirical evidence shows that the relationship between relatedness and the probability to enter often varies across industry and time, suggesting therefore that industry characteristics may act as moderators in this relationship. This study provides a theoretical framework to identify these moderators, focusing on modularity, rate of change, technological discontinuities, and concentration across different types of entrants. It then empirically tests this framework using a dataset of firms active in the US electronics industry between 1960 and 1990. The results of this paper show that industry characteristics matter in moderating the relationship between knowledge relatedness and entry, but some are more relevant than others.