Seminar (M.Sc.) Industrial Dynamics Fachbereich Wirtschaftswissenschaften Economic Policy Research Group (Professor Dr. Guido Bünstorf) Summer Term 2015 Time and location Monday, 16.00-18.00 (first class on April 20, 2015); Systembau 2 Moritzstrasse, Room 0205 Overview In recent years, the development of markets and industries has attracted substantial scholarly attention. A rich theoretical and empirical literature on industrial dynamics and industry life cycles has been developed to complement the game-theoretic approach to industrial organization. This literature has yielded important new insights into the conditions and dynamics of entry, exit, market structure and innovation activities in competitive industries. Evolutionary approaches to industrial dynamics have highlighted the relevance of firm heterogeneity. At the same time, the research on industrial dynamics is closely related to current work in entrepreneurship and strategic management. This course differs from earlier courses with the same title in that it will adopt a seminar format throughout the term. Based on students classroom presentations, we will discuss the key theoretical and empirical contributions to the literature on industry evolution. To be successful, this requires that all participants prepare the mandatory readings ahead of class. Requirements (6 ECTS Credits): Seminar paper (about 15 pages; due date September 30, 2015) plus oral presentation (about 20 minutes) Completion of mandatory reading assignments before the respective seminar session Attendance throughout the course and active participation in the seminar discussion Registration and choice of topics by E-Mail to buenstorf@uni-kassel.de (starting immediately; please name three preferred topics ). Maximum number of participants: 30 1
Topics and reading assignments Part A: Models of industry evolution Week 1 (April 20, 2015): Stylized facts of industry evolution / Introduction to survival analysis Week 2 (April 27, 2015): Reading assignment for all students: Klepper, S. (1996): Entry, Exit and Growth, and Innovation over the Product Life Cycle, American Economic Review, 86: 562-583. (READ ONLY PAGES 562-568) Topic 1: Cost spreading and the shakeout: the model of Klepper (1996) Introductory reading: Klepper, S. (1996): Entry, Exit and Growth, and Innovation over the Product Life Cycle, American Economic Review, 86: 562-583. Type of reading: Advanced mathematical model (Note: Cantner and Dressler (2006) provide a good German - language introduction) Week 3 (May 4, 2015): Reading assignment for all students: Utterback, J. M., Suárez, F. F. (1993) : Innovation, competition, and industry structure, Research Policy: 22, 1 21. (READ ONLY PAGES 1-4) Topic 2: Dominant designs and the shakeout: the theory of Utterback and Suarez (1993) Introductory reading: Utterback, J. M., Suárez, F. F. (1993): Innovation, competition, and industry structure, Research Policy: 22, 1 21. Type of reading: Verbal theorizing Topic 3: Technology shocks and the shakeout: the model of Jovanovic and MacDonald (1994) Introductory reading: Jovanovic, B., MacDonald, G. M. (1994): The life cycle of a competitive industry, Journal of Political Economy, 102: 332 347. Type of reading: Advanced mathematical model 2
Week 4 (May 11, 2015): Reading assignment for all students: Bhaskarabhatla, A., Klepper, S. (2014): Latent submarket dynamics and industry evolution: lessons from the US laser industry, Industrial and Corporate Change, 23(6): 1381 1415. (READ ONLY PAGES 1381-1392). Topic 4: From submarkets to the shakeout: Bhaskarabhatla and Klepper (2014) Introductory reading: Bhaskarabhatla, A., Klepper, S. (2014): Latent submarket dynamics and industry evolution: lessons from the US laser industry, Industrial and Corporate Change, 23(6): 1381 1415. Type of reading: Mathematical model and econometric analysis Part B: Incumbents versus entrants Week 5 (May 18, 2015): First-mover advantage, innovation and survival Topic 5: Survival in different stages of the industry life cycle Introductory reading: Agarwal, R. (1997): Survival of firms over the product life cycle, Southern Economic Journal, 63: 571-84. Topic 6 Time of entry and innovation as determinants of firm survival Introductory reading: Klepper, S., Simons, K. L. (2005): Industry shakeouts and technological change, International Journal of Industrial Organization, 23: 23-43. Week 6 (June 1, 2015): When and why are incumbent firms disadvantaged? Reading assignment for all students: Christensen, C. M, Rosenbloom, R. S. (1995): Explaining the attacker's advantage: Technological paradigms, organizational dynamics, and the value network, Research Policy, 24(2):233-257 (READ ONLY SECTIONS 1-4 / PAGES 233-242). Topic 7: Incumbent disadvantage (I): Architectural innovation Introductory reading: Henderson, R. M., Clark, K. B. (1990): Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms, Administrative Science Quarterly, 35(1): 9-30. Type of reading: Verbal theorizing and qualitative empirical analysis 3
Topic 8: Incumbent disadvantage (II): Value networks Introductory reading: Christensen, C. M, Rosenbloom, R. S. (1995): Explaining the attacker's advantage: Technological paradigms, organizational dynamics, and the value network, Research Policy, 24(2):233-257. Type of reading: Verbal theorizing and qualitative empirical analysis Part C: Pre-entry experience and firm performance Week 7 (June 8, 2015): Related diversification Reading assignment for all students: Helfat, C. E., M. B. Lieberman (2002): The birth of capabilities: market entry and the importance of pre-history, Industrial and Corporate Change, 11: 725-760 (READ ONLY SECTIONS 1-3 / PAGES 725-731). Topic 9: Diversification and firm performance in historical U.S. shipbuilding Introductory reading: Thompson, P. (2005): Selection and firm survival: Evidence from the shipbuilding industry, 1825 1914, Review of Economics and Statistics, 87: 26 36. Topic 10: Diversification and firm performance in the U.S. television receiver industry Introductory reading: Klepper, S., Simons, K. L. (2000): Dominance by Birthright: Entry of Prior Radio Producers and Competitive Ramifications in the U.S. Television Receiver Industry, Strategic Management Journal, 21: 997-1016. Week 8 (June 15, 2015): Spin-offs (I) Reading assignment for all students: Klepper, S. (2009): Spinoffs: A Review and Synthesis, European Management Review, 6: 159-171. Topic 11: Intra-industry spin-offs: determinants Introductory reading: Agarwal, R., Echambadi, R., Franco, A. M., Sarkar, M. B. (2004): Knowledge Transfer through Inheritance: Spin-out Generation, Development and Survival, Academy of Management Journal, 47: 501-522. (note: if requested by student, this topic can alternatively be based on a theoretical introductory reading) 4
Topic 12: Intra-industry spin-offs: performance Introductory reading: Chatterji, A. K. (2009): Spawned with a silver spoon? Entrepreneurial performance and innovation in the medical device industry, Strategic Management Journal, 30: 185 206. Week 9 (June 22, 2015): Spin-offs (II) Topic 13: Intra-industry spin-offs: effects on parent firms Introductory reading: McKendrick, D. G., Wade, J. B., Jaffe, J. (2009): A Good Riddance? Spin-Offs and the Technological Performance of Parent Firms, Organization Science, 20(6): 979 992. Topic 14: Entry from downstream markets Introductory reading: Fontana, R., Malerba, F. (2010): Demand as a source of entry and the survival of new semiconductor firms, Industrial and Corporate Change, 19(5): 1629-1654. Part D: Where do new industries emerge and evolve? Week 10 (June 29, 2015): Entry into new industries at the regional level Reading assignment for all students: Frenken, K., Boschma, R. A. (20 12): Economic development as a branching process, in: G. Buenstorf (ed.): Evolution, Organization and Economic Behavior, Edward Elgar, pp. 185-196. Topic 15: The theory of regional branching Introductory reading: Frenken, K., Boschma, R. A. (2007): A theoretical framework for evolutionary economic geography: industrial dynamics and urban growth as a branching process, Journal of Economic Geography, 7(5): 635-649. Type of reading: Verbal theorizing with sketch of mathematical model Topic 16: Empirical evidence of regional branching Introductory reading: Neffke, F., Henning, M., Boschma, R. A. (2011 ): How Do Regions Diversify over Time? Industry Relatedness and the Development of New Growth Paths in Regions, Econ. Geography, 87(3): 237-265. 5
Week 11 (July 6, 2015): Entry into new industries at the country level Reading assignment for all students: Hidalgo, C. A., Klinger, B., Barabasi, A. L., Hausmann, R. (2007): The Product Space Conditions the Development of Nations, Science, 317: 482-487. Topic 17: New industries and economic development Introductory reading: Hidalgo, C. A., Klinger, B., Barabasi, A. L., Hausmann, R. (2007): The Product Space Conditions the Development of Nations, Science, 317: 482-487. Type of reading: Empirical analysis using various methods prior knowledge of international trade theory and/or social network analysis is helpful Topic 18: Industrial policy did economics get it wrong? Introductory reading: Rodrik, D. (2008): Normalizing Industrial Policy, Commission on Growth and Development Working Paper No. 3. Type of reading: Verbal argument Week 12 (July 13, 2015): How is industry evolution shaped by external factors? Topic 19: Institutions and industry evolution Introductory reading: Chesbrough, H. (1999): Arrested development: the experience of European hard disk drive firms in comparison with US and Japanese firms, Journal of Evolutionary Economics, 9: 287-329. Type of reading: Qualitative empirical analysis Topic 20: Co-evolution of public research and industry Introductory reading: Murmann, J. P. (2013): The coevolution of industries and important features of their environments, Organization Science, 24: 58-78. Type of reading: Verbal theorizing and qualitative empirical analysis Background reading for the course: Cantner, U., Dressler, K. (2006): Industrielebenszyklen, WiSt, Juni 2006: 302-307. (in German) Helfat, C. E., M. B. Lieberman (2002): The birth of capabilities: market entry and the importance of pre-history, Industrial and Corporate Change, 11: 725-760. Klepper, S. (1997): Industry life cycles, Industrial and Corporate Change, 6, 145 181. Peltoniemi, M. (2011): Reviewing industry life-cycle theory: avenues for future research, International Journal of Management Reviews, 13: 349-375. 6