Extraordinary Efficiency Growth in Response to New Technology Entry: The Carburetor's 'Last Gasp'

Abstract:     
Technologies often experience a period of extraordinary improvement or a “last gasp” before being superseded. Although last gasps are important both to technological transitions and firm strategies, their origin has been little studied. The most common explanation is that the materialization of a threat from a new technology causes adherents of the threatened technology to work harder to improve its performance. Anecdotal evidence has been cited in support of this “trying harder” explanation, but it has not yet been subjected to a test against alternative explanations. In this article, I develop two new explanations for last gasps. The first, a selection effect, is that new technologies force old technologies out of inefficient applications, making them appear to be more efficient. The second, a spillover effect, is that technologies introduced contemporaneously with a superseding technology may provide spillover improvements to incumbent technologies. I use data from the EPA and from carburetor repair manuals to test these and the existing “trying harder” explanation, I find that the carburetor’s last gasp was caused by both selection and spillover effects. However, only those firms that also produced the new technology were able to capture the benefits of these spillovers.

Number of Pages in PDF File: 29

Keywords: Innovation, Technology, Entry

JEL Classification: O31, O33

working papers series