The economics of increasing returns, the size of the firm, industrial concentration, and technological competition

The purpose of this dissertation is to identify and integrate in a general model the most prominent contributions, in both economics and strategy theory, that have been advanced to explain large firms, skewed industrial structures, and technological monopolies. The theoretical framework that results from this integration conveys the idea that such polarized outcomes are better explained by a series of interrelated increasing returns mechanisms. Another implication of this general model is that inter-firm competition, industrial structures, and technological competition are the components of the business competition process, so it is better to treat them as a unified whole. The general model developed in this dissertation is suggested as a reference to correct some of the simplifications, misinterpretations, and overgeneralizations that some authors have made concerning the recent developments of the increasing returns literature.; One of these misinterpretations has to do with view that technological competition between virtual network technologies will necessarily end up with a technological monopoly. This dissertation, by comparing the videofilm industry and the videogame industry, shows that compatibility is a necessary but not a sufficient condition to produce technological monopoly. Specifically, this comparison should be helpful to prove that markets for virtual network technologies with strong content intensity may be rather ergodic. This dissertation also develops a better understanding of the technical and institutional factors that determine the strength, duration, and scope of increasing returns. The exploration of these factors should make evident that the presence of strong network effect does not necessarily imply a tendency toward technological monopoly.