Cosmopolitan Networks in Commerce and Society 1660–1914

Networks in Economic and Business History
out of business: if the new product is successful then the established
retailer may quit, while if it fails then the innovator will quit. An
established retailer defeated by an innovation may retire to a more
remote location where he can monopolize a small market with his
traditional product.
The link between innovation and agglomeration explains why a
market may be regarded as a ‘self-organizing’ system. Volatility in
the environment continually creates new consumer problems, and a
consequent demand for new products to solve them. At the same
time, the social accumulation of technological knowledge allows new
types of product to be developed. But an innovation is only viable if
it can find a market, and its market is to be found where its closest
competitor is sold. To make as much profit as early as possible, a confident
innovator will head for the largest market (possibly after ‘proving’
the product in a smaller market first), which is where the contest
between the new product and the old product will be played out.
The continuous influx of new products increases both the novelty
and the diversity of the products available at a major hub. The
greater intensity of competition means that older obsolete products
will be expelled from large markets before they are expelled from
smaller ones. The larger the market, therefore, the greater is the
diversity and the lower is the average age of the product.
On the other hand, the risks faced by the consumer are greater in
a large market because a higher proportion of the products will be
unproven. A large market will therefore attract buyers who are confident
of their ability to judge design and quality, and who value
novelty for its own sake, while smaller markets will retain the custom
of less confident people, and those who prefer proven traditional
designs. Optimal innovation strategy therefore explains both the
capacity of the market system to renew itself continually by up-dating
its product range, and also the concentration of novelty in the
largest markets.
3. Varieties of Transport Hub
Meeting points and major markets constitute information hubs.
People visit these centres specifically to meet other people. Travel to
the hub both sustains the existing division of labour and also helps to
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