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

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

68 evolutionary process.

68 evolutionary process. The rapid rate of technical change in the four products, coupled with the dominance of innovation by the largest firms, nearly all of which entered early, suggests technical change played a key role in the shakeouts by imparting an advantage to some of the earliest entrants. In particular, a technology-related process of increasing returns seems to have propelled some early entrants to large market shares. These leading firms retained or improved their market shares with the help of their large outputs, which lowered per-unit R&D costs. 56 The dynamic of increasing returns explains the eventual drying up of entry and the long-term decline in the number of producers that occurred in all four products. Rising competition from the leading firms put pressure on prices and product quality, eventually making entry untenable and steadily forcing out smaller and less capable firms with relatively high costs and low quality. The continual processes of technological advance that fueled competition often involved trajectories of related innovations. At times, these trajectories of innovations had a substantial impact on the competitive process, as noted in finding 5. The innovations involved were both technically challenging and costly to adopt. In automobiles, Ford led the industry in implementing efficient mass production techniques which were put into use in the 1910s and 1920s. In tires, a series of innovations related to cord tires beginning in the 1910s led eventually to the development of balloon tires which took over the market in the 1920s. In televisions, color TV development led initially by RCA in the 1950s and 1960s eventually opened up the color television market. To some extent, the decision to pursue these trajectories of innovations amounted to gambles, and the idea of the innovative gamble helps to capture the competitive dangers experienced by firms participating in major, as yet untried, trajectories. Firms choosing to pursue these trajectories established sustained and very expensive programs of R&D, ranging from applied research in laboratories to plant-floor engineering. 56 Alternatively, progressive cost reduction and the progressive accumulation of technology might be thought to generate R&D-related increasing returns. However, the rapid diffusion of technologies suggests that contemporary improvements, rather than those developed many years in the past, were most competitively relevant.

69 The gradual path of product innovation, for all the products except pencillin, eventually led to the establishment of various de facto and de jure product standards. Thus, the products tended to become increasingly defined over time, eventually developing a number of lasting characteristics that might be termed a dominant design. Automobiles perhaps conforms most to this pattern. Major innovations such as bigger engines, electric starters, sliding gear transmissions, four wheel brakes, and inexpensive closed bodies diffused rapidly, and by roughly the late 1920s, product innovation had slowed and become more incremental. In tires, the shape and size of tires, methods of attachment to wheel rims, types of fabric or cords used to build the tires, and chemical additives went through a number of types and phases until finally coalescing around standard designs after the widespread adoption of balloon tires in the late 1920s. In televisions, the working out of basic black-and-white electronics and transmission standards by the 1940s and the spread of color television in the 1960s helped to define a basic design for televisions; other features of televisions, though, continued to change for decades, with degaussing, tuning, and tracking systems pioneered in the mid-1960s through the 1970s and various picture tube innovations ongoing through at least the 1970s. The principal exception to convergence toward a dominant design was penicillin, which experienced a proliferation of designs over time. This is consistent with Utterback’s [1994] restriction of dominant designs to complex assembled products. Thus, for the three complex assembled products, the gradual standardization on a dominant design seems a useful way to characterize technical change over the long run. 8. Conclusion To probe the role of technological change in industry shakeouts, we investigated whether four diverse products that experienced severe shakeouts, automobiles, tires, televisions, and penicillin, experienced common patterns in the way they evolved. Using three theoretical perspectives on how technological change could lead to industry shakeouts, we focused on how entry, the number of firms, the market shares of the leading firms, and various characteristics of product and process innovation evolved over time in the four products. Common features in how the products evolved were

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