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

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

56 p. 159]). 51 Other

56 p. 159]). 51 Other improvements involved the strains of mold used, fermentation ingredients, continuous control and feeding, waste treatment, air sterilization, extraction, and packaging. Semisynthetic penicillins required the same production techniques as natural penicillins, but added additional steps. A core ingredient, 6-APA, was either filtered directly from the production broth or created from penicillin G using an enzyme (Lein [1970, p. 67], Lee [1974, p. 401]). The 6-APA was then reacted synthetically, using any of several acylation methods, to attach a desired side chain, then extracted using solvents (Lein [1970, p. 67]). Conditions of acylation and solvent extraction methods had to be developed to suit each different form of semisynthetic penicillin (Industrial Chemist [1963, pp. 517-518]). The enzymatic production method was developed independently by Bristol, Beecham, Pfizer, and Bayer, all major firms, in 1960 (Lein [1970, p. 67]). How do these patterns of process innovation reflect on the determinants of the shakeout? Consider whether a major process innovation might have triggered the shakeout as in the innovative gamble theory. First, innovative progress clearly was made on many fronts through a large number of incremental advances. The individual advances that were emphasized as most outstanding did not come at the time of the shakeout but were pioneered during World War II and were freely licensed. Fermentation tanks, perhaps the mostly likely candidate around when the shakeout began in 1954, diffused rapidly through purchase from third-party suppliers, contrary to the notion that they required in-house development. Second, and again contrary to the theory, production scale economies do not seem to have been significant in penicillin (Schwartzman [1976, p. 308]). In the case of fermentors, plants operated large numbers of fermentation tanks, remaining well above any scale requirements related to this equipment. 51 Fermentors were developed under conditions which fermentation researcher Elmer Gaden [1956, p. 168] called an "extreme atmosphere of competitive secrecy," and by the mid-1950s had improved to achieve higher aeration, thorough agitation of production media using powerful stirring blades, complete elimination of contaminants, and close control of process variables.

57 In terms of the dominant design theory, the marked rise in process innovation anticipated to occur when the shakeout begins does not seem to have occurred. The government played a strong role in encouraging early process innovation, initiating a trajectory of heavy innovation that predated the shakeout by almost a decade. Large productivity improvements did continue after the shakeout began, but the price and yields data suggest a continuation or decrease in the rate of process improvement rather than an increase in process innovation. In terms of the increasing returns theory, the simultaneous development of production methods by multiple firms is consistent with the theory, as are scattered references in trade articles to major penicillin producers and equipment suppliers, rather than smaller producers of penicillin, as sources of process innovation. Also consistent with the theory, key equipment innovations diffused rapidly through sale by third-party firms. In contrast to the theory, however, process innovation seemingly did not rise over time as anticipated under the increasing returns theory. The large role played by the government in accelerating the exploration of process techniques no doubt distorted the pattern that would have arisen if penicillin manufacturing processes had developed solely at corporate expense. Indeed, the fact that firms were reluctant to invest heavily in manufacturing processes when synthetic production techniques seemed imminent, as documented by Elder [1970, p. 4], suggests that process innovation was much higher than it would have been initially given firms’ own perceptions of their payoffs from R&D. 7. Synthesis In this section, we bring together our key empirical findings and use them to proceed in three ways. First, we focus on empirical patterns common to all four products, asking how they fit with the theories. Second, we focus on the theories and ask what the empirical evidence says about them. Third, we focus on those aspects of each theory that seem to fit the evidence, using them to build a composite story about the role of technological change in shakeouts. Seven key findings from the four products are particularly pertinent to understanding shakeouts. Of these findings, the first four transcend all four products.

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