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

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

58 In contrast, the

58 In contrast, the latter three describe innovative patterns that vary over time and among the products. 1. Entry was concentrated early in all four products. An initial buildup in the number of firms lasted roughly ten to twenty-five years. Once the number of firms reached a peak, however, entry declined sharply and soon became negligible. With the exception of a modest late rise in entry in penicillin, entry remained negligible after it declined sharply, with virtually no entry after roughly ten years into the shakeouts of the products. 2. All four products experienced prolonged shakeouts. The decline in the number of producers continued for over thirty years, to at or near the end of our data series. The number of U.S.-based producers declined in autos from a peak of 274 firms in 1909 to a low of 7 in the mid-1950s, in tires from the same peak of 274 firms in 1922 to a low of 23 in 1970, in televisions from a peak of 89 firms in 1951 to 3 (U.S.-owned) firms by the end of our series in 1989, and in penicillin from 29 firms in 1953 to a low of 5 firms in 1991. These long-term declines occurred despite continued growth in output of the products. 3. Early entrants generally came to dominate each of the four products. The firms with the largest market shares by the times the shakeouts had begun nearly always attained their leading positions substantially before the onset of the shakeouts. Ford and GM were the early leaders in autos and maintained their leadership after the start of the shakeout. Goodrich, Goodyear, Firestone, and U.S. Rubber early on constituted the big four tire producers and maintained their dominant positions after the start of the shakeout. RCA, Zenith, and GE were the early market leaders in televisions and maintained their leadership until challenged by foreign competitors. Lilly, Wyeth, Squibb, and Bristol, all wartime penicillin producers, were the leaders of the industry early in its shakeout. With the exception of Squibb, which was displaced by another wartime producer, Pfizer, they all maintained their leadership for many subsequent years. Not only were the industries dominated by early entrants, but with the exception of Chryslers in autos, no firm that entered after the start of the shakeouts remained for long a major player, and in fact even Chrysler’s heritage dated back to an early entrant.

59 4. Industry leaders dominated product and process innovation in the four products, with the exception of product innovation in automobiles. Most and sometimes nearly all of the major product and process innovations developed by producers of the products came from the largest four or five firms. These firms’ share of innovations was not only the largest, but in fact substantially exceeded their market share. Firms outside the top eight played a negligible role in technological advance. The one exception was automobile product innovation. Smaller automobile producers contributed a substantially larger share of product innovations than their market share, although smaller producers still achieved far fewer innovations per firm than their larger competitors. 5. Individual innovations rarely stood out above the overall ongoing technical advance in each product, and the few that did stand out were not concentrated around the start of the shakeouts. Important innovations usually diffused rapidly, through imitation, licensing, and sale by third-party producers. Trajectories of related innovations occurring over extended periods sometimes had more potent effects, and two competitively significant trajectories, the Ford automobile manufacturing processes and the cord/balloon tire, occurred around the start of the shakeouts in autos and tires. 6. Product innovation started to decline around the start of the shakeouts in autos and tires but increased after the start of the shakeouts in television and penicillin. In autos, product innovation reached its highest peak in 1901 to 1904, gained a second and lesser peak when the shakeout began in 1910-1914, and peaked yet again in the mid-1920s. In tires, product innovation occurred most in the first decade of the 1900s, fell in the 1910s, and rose to a high level again when the shakeout began in the 1920s, after which it declined. In televisions, the rate of product innovation fell when the shakeout began in the 1950s, but the absolute number of innovations -- though perhaps not the importance of the innovations -- rose to its highest level beginning in the 1960s. In penicillin, product innovation increased dramatically after the advent of semisynthetic methods in 1958, a few years after the shakeout began.

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