Research Focus

Industry Dynamics and Technological Change

Kenneth L. Simons

    How can we classify, understand, and respond to key alternative competitive dynamics of industries?  Why in many industries does the number of firms fall dramatically after an initial buildup in number of firms?  Why and how does technology typically play a key role in such shakeouts, and what is the role of technology in industries with contrasting competitive patterns?  In what ways do pre-entry competency and early-mover advantage affect firm and industry outcomes, and when does the "innovator's dilemma" of radical technological change matter or not matter?

    These questions, central to Dr. Simons' ongoing work, are yielding a stream of surprising answers.  Industry shakeouts despite rapid market growth appear to be associated with dramatic numbers of ongoing technological changes.  A succession of his papers has probed the causes of shakeouts and rejected many hypothetical (often popular) theories.  Instead, a few early entrants with the right skills and backgrounds benefit from a spiral of advantage that helps them become dominant market leaders while other firms are driven to extinction.  Dr. Simons' papers on this topic have appeared in diverse outlets including the Journal of Political Economy, Strategic Management Journal, and Industrial and Corporate Change.

    Technological change is at the core of such competitive processes.  By collecting detailed evidence about firm innovation and relating it to firm survival and market share, he has demonstrated that in industries with shakeouts (1) the leading firms dominate innovation in their products, and (2) innovation dramatically enhances survival and market share.  In other industries different patterns result in part from different types of technological change.  That this underlying dynamic is important and widespread ­ and driven by technology and market traits not random outcomes ­ is supported by his recent cross-national study of matched industries.

    Competitive strategy must be adapted to inter-industry differences, or risk failure due to systematic misunderstanding of market dynamics.  Shakeouts, and the inability of breakthrough innovators to overthrow market leaders in industries with shakeouts, belie the universality of recent strategic notions regarding disruptive technology.  To further understand inter-industry differences, he has collected detailed data from dozens of US and UK industries including the identities of firms, their dates of entry and exit, and technological evidence.  The information is facilitating a new breed of cross-industry analysis.  The role of IT is also the subject of some of his recent work, including an examination of whether, when, and how the Internet might disrupt modes of competition.

    Methods used in his work span a wide range.  He uses both theoretical and empirical work in his papers, including econometrics, analytical proof, and computational techniques for dynamic optimization and simulation.  Historical detail (witness for example his recent paper in Explorations in Economic History as well as the shakeout papers) is complemented with contemporary fact, using development of detailed new industry data as means to probe ever-present processes of industry competition.

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Rev. 31 October 2002