Latent Submarket Dynamics and Industry Evolution: Lessons from the U.S. Laser Industry

Forthcoming, Industrial and Corporate Change

48 Pages Posted: 30 Sep 2012 Last revised: 14 Jan 2014

Ajay Bhaskarabhatla

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management

Steven Klepper

Carnegie Mellon University - David A. Tepper School of Business

Date Written: November 1, 2013

Abstract

In its first 35 years, the U.S. laser industry was characterized by steady growth in output and the number of producers, whereas subsequently the number of producers steadily declined despite continued growth in the industry’s output. A model of industry evolution that features the creation, destruction, and fusing of independent submarkets is developed to explain these two eras. Data on all laser producers are used to test various implications of the model concerning entry, exit, and innovation. The findings suggest that the emergence of an integrative submarket can fundamentally alter an industry’s market structure and the character of innovation, which is applied to explain historical developments in the evolution of various innovative industries.

Keywords: Submarkets, Shakeouts, Innovation

JEL Classification: L11, O33

Suggested Citation

Bhaskarabhatla, Ajay and Klepper, Steven, Latent Submarket Dynamics and Industry Evolution: Lessons from the U.S. Laser Industry (November 1, 2013). Forthcoming, Industrial and Corporate Change. Available at SSRN: https://ssrn.com/abstract=2154554 or http://dx.doi.org/10.2139/ssrn.2154554

Ajay Bhaskarabhatla (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 1004 (Phone)

HOME PAGE: http://people.few.eur.nl/bhaskarabhatla/

Erasmus Research Institute of Management ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1004 (Phone)

HOME PAGE: http://www.erim.eur.nl/people/ajay-bhaskarabhatla/

Steven Klepper

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-3235 (Phone)
412-268-6938 (Fax)

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