The dual role of market power in the Big Push: From evidence to theory

Abstract

This paper demonstrates that a firm with market power in an influential industry can play a crucial positive or negative role in the implementation of a Big Push policy, through its impact on the profits of firms in complementary industries. The firm has incentives to use its influence to tip the balance in favor of success. Conversely, if legal institutions are weak, the threat of hold-up may deter complementary investment and lead to failure of the Big Push. This is demonstrated in one of the first case-studies of a Big Push policy and in a model that generalizes the findings. © 2004 Elsevier B.V. All rights reserved.