The Dynamics and Evolution of Industries

The crow-th of modern econornles nas been charactenzed by the emergence, development and decline of different indusmes. Moreover. industrial evoiution is characterized by intense change, at any time scaie which michtbe considered. Sew rims enter the industry. some exit; some firms grow, other decline. In addition. econornlc entities expand or conuact their boundaries and undergo organizational change These remarks have been advanced by several economists in the past. Both Alfred Marshall and Joseph Schumpeter, although in different ways, focused their attention on the internal dynamism that occurs within any one industry. Moreover. in the Principles of Economics (1890) and the Economics of Indusny (1879) Marshall noticed that an economy is characterized by quite different sectors, some of which are fast growing while others are deciining and that their specific relevance for the overall economy may change over time. This point was greatly emphasized also by Schumpeter in "Business Cycles" which contains a lenghty and articulated discussion of the emergence and decline of leading industries in the development of the indusmal economies of the past centuries. Simon Kumets noticed also in "Secular, Movements in Prices and Production" (1930) that economic growth is characterized by shifts in the relative importance of leading indusmes wnich show life cycles in terms of sales and innovations. Colin Clark reaffirmed this point at a more aggregated level in "Conditions of Economic ProgressM (1940) by linking the stages of economic g~owth to the rise and decline of major sectors such as agriculture, manufacturing and services. ivnile Hollis Chenery in his "Patterns of developmenr 1950-70" analyzed the structural charactenstics of the economy by grouping indusmes in early, middle and late ones. Finally W. W. Rostow in "The Process of Economic Growth" (1 952) and "Stages of Economic Growth" (1 960) pointed to the fact that there are r e g h i t i e s in the dvnamics of industries, which usually starts with a take off and then moves to technoiogcal maturity, usually associated with high mass consumption. Most of these authors had in mind 3 broad d-mamic quaiitative analysis of the emergence. development and decline of indusmes. joinriy with the consideration of the turmoil generated by competition in the shorter run. They never entered inro the details of how indusmes change over time in terms of their structural features and forms of organization. but they certainly set up the stage for possible subsequent studies of the factors arfecting rhe structural evolution of indusmes: think, for instance, to Schumpeter's "Capitalism, Socialism and Dsmocracy" (1942). These studies did not take off and the insights of Marshall, Schumpeter and Kutznets about industrial dynamics were not developed. During the 1950s. 1960s and 1970s indusmal economists concentrated their effons on the static anaiysis of the structure of industries: in those years industrial economics became concerned with rhe expianation of the determinants of features of industrial structure and penomance. such as concenmrion. rims size and profitability. The pioneering conmbutions of leading indusmal economists such as hiason and Bain, and the so called "Harvard Tradition" in industrial organization during the 1960s and 1970s emphasized the importance of some relatively invariant features of production technoiogies as ultimate determinants of observed structures and performances under the implicit assumption that rnicroeconornic behaviours would be shapedat least in a first ideas prcscntcd in this paper owc 3 zrcu dcal 10 the conversarlons and discussions we have been having at Merent times =a in duiercnt places malnlv w~th ti: a Dos~. David Lane. Richard Nelson and Sidney Winter. Indeed, in various cases, they nave acruailv suggested them. we fully acknowledge their fimdamental conmbutions, we suongly emphasize that rhe usual disclaimers and caveats havc to be taken very senouslv in the present case.