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

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

44 the 1960s, the small

44 the 1960s, the small number of process innovations reflects the fact that color television did not fundamentally alter the production process. Color television sets involved a larger number of components that had to be assembled than black and white sets, and they required additional test and adjustment procedures relating to their use of color (McClane [1954]), but otherwise relied on the same production techniques as for black and white sets. 37 The productivity advances in the 1960s and 1970s in part reflect changes in product design, making it difficult to disentangle product and process innovation. Continual redesign of the television chassis reduced the number of parts that needed to be assembled, increasing labor productivity as well as reducing component costs (e.g., Levy [1981, p. 72]). The trade articles from which the list of innovations was compiled discuss innovations in the context of particular firms, and they provide a means to assess the relative amounts of innovation according to firm size. For innovations ranked 4 and higher, all the firms mentioned at some time had market shares exceeding 3%. Of the six U.S. firms that sometime during 1945-1970 achieved a market share exceeding 10%, five were mentioned in the context of these major innovations, and the remaining firm, Motorola, was mentioned in the context of innovations ranked 3. Among all the innovations, only 7 of 264 innovations were mentioned in the context of firms that never exceeded a 1% market share or that were too small to appear in market share surveys. 38 The tiny firms mentioned in the context of those 7 innovations constituted only 5 of 147 such firms. In contrast, of the 15 firms known to have achieved market shares exceeding 1%, 13 firms were mentioned in the trade and technical articles. Thus, process innovation, and particularly major innovation, was dominated by the industry’s largest firms. 37 Automated assembly equipment, while used by many of the major manufacturers for black and white sets starting in the 1950s, was not generally used for color television set manufacture until 1972 (Willard [1982, pp. 181-182]). Perhaps process innovation and the use of automated color TV set production techniques awaited the growth of the color market. 38 Of the 7 innovations created by such tiny firms, three involved cabinet manufacture and finishing, two involved testing equipment for sale to other manufacturers, one involved placing chassis into cabinets, and one involved manual pass-along assembly lines. This distribution of types of innovations by the tiny firms contrasts sharply with that of big firms, for which assembly- and automation-related innovations predominated.

45 Process innovations diffused quickly, particularly given the simultaneous development of similar innovations at multiple firms, which is why the table of innovations does not attribute innovations to specific firms. Equipment such as conveyors, soldering devices, automatic insertion machines, and circuit board printers was available from third-party suppliers, and descriptions of useful production methods were published in trade journals such as Electronics and were a source of prestige for industrial engineers. The quick diffusion also reflects the application of approaches used for radios and other electronics products. What do these process innovation patterns reveal about the determinants of the shakeout in TVs? In terms of the innovative gamble theory, Table 12 provides a means of establishing which major process innovations occurred around the time of the shakeout. The most important innovations were dip soldering, printed circuits, and automated assembly. Printed circuits were based on military developments, and all three innovations were developed for the electronics industry at large, not just for TVs, fitting Jovanovic and MacDonald’s [1994] characterization of a radical innovation that originates outside the industry. Yet throughout the 1950s these innovations were resisted by Zenith and other firms, in part because of concerns about effects on TV set quality. Despite not adopting these innovations, Zenith led the industry in profits and in the growth of market share. Moreover, there is no evidence of process innovations that contributed to a significant rise in the optimal size firm, which is a requisite characteristic of the triggering innovation in the innovative gamble theory. Indeed, based on his interviews with TV executives, Levy [1981, p. 69] found that the conventional sources of production scale economies were not significant for televisions. According to the dominant design theory, process innovation increases substantially around the time of the dominant design and the start of the shakeout. Yet the amount of process innovation in TVs was greatest initially as radio production knowledge was transferred to television production, and the amount of process innovation fell soon after the start of the shakeout in the 1950s. Judging from the innovative efforts that accompanied the fierce international competition of the 1970s, process innovation may have risen in the 1970s, but such innovation did not occur until

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