Empirical complexity: A study of dynamic increasing returns in the semiconductor industry and its policy implications

The world is said to be in its third industrial stage---the information or technology age. In this new age, "dynamic increasing returns," the phenomena of increasing returns (more than doubling of output with the doubling of production factors) over time, thus dynamic, is the subject of a growing debate in economics, policy studies and other fields. The nature, the causes, policy implications, and negative as well as the positive effects of increasing returns are issues that need fuller research and analysis. The social costs that may be imposed upon society by dynamic returns due to the possibility of long run "lock-in" to an inferior technology may be significant and must be weighed against the positive gains from more efficient production. Thus, the policy implications of this research are very consequential but empirical analysis of dynamic returns is exceedingly sparse in the academic literature.;This dissertation takes an empirical and theoretical glance at dynamic returns in the US and Japanese semiconductor industries. It structures much of the analysis within the paradigm of complexity theory, tracing the historical and practical links between this theory and the theory of returns to scale. It offers policy prescriptions for dynamic returns industries based upon the analysis contained within.