The Making of an Oligopoly: Firm Survival and Technological Change in the Evolution of the U.S. Tire Industry

Steven Klepper and Kenneth L. Simons

Journal of Political Economy, 2000, vol. 108, issue 4, 728-760

Abstract: The number of producers in the U.S. tire industry grew for 25 years and then declined sharply, and the industry evolved to be an oligopoly. The role of technological change in shaping the industry's market structure is explored. A model of industry evolution featuring technological change is used to derive predictions that are tested using a novel data set on firm entry, exit, size, location, distribution networks, and technological choices prior to the shakeout of producers. Consistent with the model, earlier-entering and larger firms survived longer, principally because of the influence of age and size on technological change.

Date: 2000
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