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Technological Extinctions of Industrial Firms: An Inquiry into their ...

Technological Extinctions of Industrial Firms: An Inquiry into their ...

16 starter and V-8 are

16 starter and V-8 are close to the start of the shakeout. Yet the self starter was widely purchased from its supplier, Dayton Engineering Laboratories, and the V-8 was not a major competitive force until the 1930s. Ultimately, the closed body may have had significant competitive implications in terms of the dies and presses required to produce it (cf. Katz [1971, pp. 295-302]), but it came too late to trigger the shakeout. 11 In terms of a dominant design triggering the shakeout, a case would have to be made for a dominant design emerging around 1909. The only possible candidate is the Model T. Abernathy [1978, p. 78] notes how the Model T solidified a number of features of the automobile and Langlois and Robertson [1991, pp. 366-7] discuss how the development of the Model T caused radical product innovation to give way to incremental product changes and how the focus of innovation began to shift toward process innovation, characteristic of a dominant design. Yet it is hard to see the Model T as defining a design that would not change much in future years, nor as defining a design that would make it safe to invest in process innovation without fear of obsolesence of the investment. By the early 1920s, product innovation had largely rendered obsolete the novel features of the Model T, which itself had undergone significant changes since 1908. Its magneto integrated into the flywheel, planetary transmission, and brakes were all targets for criticism when it was finally retired. Furthermore, four-cylinder engines had largely been replaced by six-cylinder ones, and closed bodies, which had been incorporated into the Model T in the 1920s, were widespread. Indeed, the Model A that replaced the Model T bore little resemblance to its famous forebear, embodying many of the advances that had made the Model T obsolete. Although identifying a dominant design requires considerable subjectivity, in their article on innovation and industry structure Utterback and Suarez [1993, p. 8] identify the all-steel closed body of 1923 as dating the emergence of a dominant design in autos. If it makes sense to single out a dominant design in the face of continual innovation, this seems a reasonable choice, but it comes too late to have triggered the shakeout. Moreover, as we relate in the next subsection, it comes well after the 11 Moreover, when it was introduced there were a number of major, independent body manufacturers supplying it, including the firm that produced it for Hudson.

17 enormous rise in process innovation that ushered in the industry’s era of "mass production" and thus could not have had the influence on innovation required of a dominant design. The timing and nature of product innovations is broadly consistent with the increasing returns theory. The theory predicts a decline in product innovation after the start of the shakeout, with product innovations dispersed widely. The former prediction is consistent with the finding of product innovation peaking around 1905, with later innovations largely refining the characteristics of the automobile rather than breaking new ground. The latter prediction is consistent with the large number of firms that contributed major product innovations and the fact that the two leading firms accounted for a smaller share of major innovations than their share of the market. Last, the theory assumes that innovations are imitated quickly and do not provide lasting competitive advantage, which is consistent with the widespread and rapid diffusion of product innovations. 3.3. Process Innovation We begin the analysis of process innovation by examining the pattern of innovation over time, using the Abernathy et al. list of process innovations supplemented with series on labor productivity and capital per wage earner. The five-year moving averages of process innovation, including both transilience weighted and unweighted indexes, are presented in Figure 3. In contrast to product innovation, the trend in process innovation is clearly upward from the start of the industry through 1915 or so. It then drops but reaches a new high around 1923 and an even greater high in the early 1930s, after which it drops sharply. Two measures of labor productivity, number of cars per wage earner and value added per wage earner, are presented for Census years in the period 1899-1937 in Table 3. Also presented are figures on capital per wage earner from 1904 through 1927. These series are crude indicators of process innovation, but they reflect a pattern similar to the process innovation counts. There was little change in productivity and capital per wage earner until 1909, then rapid growth in the period 1909 to 1921 at an annual rate of 12.5% for output per wage earner, 6.9% for value added per wage earner, and 13.3% for capital per wage earner. Between 1921 and

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