Selection and Evolution of Industry

Jati K. Sengupta
Additional contact information
Jati K. Sengupta: University of California

Chapter 2 in Competition and Growth, 2004, pp 36-70 from Palgrave Macmillan

Abstract: Abstract The evolution of industry depends on the selection mechanism, that is, the process of entry and exit of firms and the various factors influencing the entry and exit decisions. Three major factors are most important in the selection process. One is the evolutionary perspective which emphasizes the firm’s ability and competence to alter their market position and hence through strong increasing returns to scale, to alter the market structure significantly. Following the Schumpeterian theory of technological innovations the main source of such increasing returns is the cumulative aspect of innovations, where “size begets size” causes industrial dynamics to be characterized by nonlinear and path dependent processes, where random events like a new technical process may have lasting and irreversible effects on the dynamic evolution of the selection process. Secondly, firms differ significantly in their commitment and ability to innovate. Thus innovations in products and processes are largely endogenous to the firm through R&D investment and learning-by-doing. Thus vigorous innovation has been found to generate more competitive market structures, while innovations requiring large investment generally involve more concentration through large size firms. Also due to the cumulative nature of technological innovations firms that discover new technologies are able to maintain their lead even after the particular technology is obsolete.

Keywords: Average Cost; Total Factor Productiv Growth; Exit Rate; Entry Barrier; Incumbent Firm (search for similar items in EconPapers)
Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (3)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-50531-5_2

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230505315

DOI: 10.1057/9780230505315_2

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().