Final answer:
Market failures hinder infant industries' competitiveness due to inadequate access to capital, lack of information, unfair competition, and limited R&D. These factors contribute to the inability of new industries to establish themselves and thrive in the market.
Step-by-step explanation:
How Market Failures Affect Infant Industries
Market failures can prevent infant industries from being competitive due to several reasons. One of the key issues is inadequate access to capital. New industries often struggle to get the initial investment required to start and scale their operations to a competitive level. This lack of funding can be due to a deficiency of information making investors wary, or because existing competition controls a large share of the market resources making it hard for new companies to find space.
Furthermore, market development is hampered when there is lack of information. Both consumers and investors might not be fully aware of the benefits or the potential of the infant industry's products or services, leading to lower demand and interest.
Additionally, unfair competition such as monopolies or oligopolies can dominate the market, making it difficult for new industries to find a foothold. Without proper regulations and support, these established players can engage in practices that stifle the growth of new competitors.
Lastly, limited resources for research and development (R&D) can significantly affect an industry's ability to innovate and improve its products or processes. R&D is crucial for an infant industry to evolve, compete, and meet the changing demands of the market. Immobility of resources can also lead to economic inefficiencies where factors of production like labor and capital cannot move freely to where they are most needed.
The combination of these market failures means that infant industries may not grow and develop as they otherwise could in a more supportive market environment.