industry evolution: implications for strategy, innovation and entrepreneurship · ·...

IndustryEvolution:ImplicationsforStrategy,Innovationand

Entrepreneurship

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Rajshree AgarwalRudolph P. Lamone Chair and Professor in Strategy and EntrepreneurshipDirector, Ed Snider Center for Enterprise and MarketsRobert H. Smith School of Business, University of Maryland

51,532citesjustforthetop 5scholarlywork!

Impact on knowledge

Creating Communities

FirmEvolutionNelson&

Winter(1982)

IndustryEvolutionGort and

Klepper (1982)

BiologicalEvolution

BehavioralTheoryofthe

Firm

AustrianEconomics

IndustrialOrganization

TimePaths&ProductInnovation- Gort&Klepper(1982)

No unique equilibrium number of firms, rather historical events from preceding stages drive the number of producers

Gort &Klepper 1982Internal Information

• Complementary Assets • Increase in Barriers to Entry &

Survival• Less efficient firms exit

External Information• Entrepreneurial rents

from exploiting discoveries

• High Profit Margins• Low Entry Barriers

TimePaths&ProductInnovation- Gort&Klepper(1982)Winter(1984)Routinized Regime

• Schumpeter Mark II• “Deepening” information• Established firms with existing

routines

Entrepreneurial Regime• Schumpeter Mark I• “Widening” information• Entrepreneurial entrants


Winter(1982)


Klepper (1982)

BiologicalEvolution


Firm

AustrianEconomics


IndustryLifecyclesandFirmPerformanceAgarwal,Sarkar&Echambadi (2002)

BirthofCapabilitiesHelfat &Lieberman

(2002)

Bringingfirmandindustryevolutiontogether…

Diversifying entrants

• Teece (1986)distinctionbetween– Coreand

complementarycapabilities

– Generalizedandspecializedcapabilities

Integrative or reconfiguration capabilities (Helfat and Raubitschek, 2000)

Helfat and Lieberman (2002)


Winter(1982)


Klepper (1982)

BiologicalEvolution


Firm

AustrianEconomics


DeliberatelearningandDC

Zollo &Winter(2002)

IndustrylifecyclesandFirmPerformanceAgarwal,Sarkar&Echambadi (2002)


(2002)

HumanCapitalTheory

EntrepreneurialSpinoffs

Klepper (2002)

…andincorporatingpeopleinthemix

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Early Stage- User and Academic Entrepreneurs-More product innovation as a result-“Outside” information-Complements or collaborators to established firms

Stage II/III (Growth Stage)-Employee Entrepreneurship-Increasing focus on process innovation-Competing with established firms

Stage IV/V: Mature Stage-Employee entrepreneurship-Niche entry by user entrepreneurs-Process more than product innovation-Competitors, collaborators and complements

Knowledge context of entrepreneurs Agarwal and Shah (2014)


Winter(1982)


Klepper (1982)

BiologicalEvolution


Firm

AustrianEconomics



Zollo &Winter(2002)



(2002)

HumanCapitalTheory


Klepper (2002)

Butwhataboutmarkets?

TechnologyEvolutionRosenberg(1982)


Winter(1982)


Klepper (1982)

EconomicHistory

BiologicalEvolution


Firm

AustrianEconomics


MarketsfortechnologyArora,Fosfuri andGambardella(2001)


Zollo &Winter(2002)



(2002)

HumanCapitalTheory


Klepper (2002)

Arichevolutionarytradition

• Withinandacrosslevelsofanalysis• Butcriticalquestionsremain!

– Attheintersectionsof“enterprise”and“markets”– Forunder-examined“time”and“place”

Diggingdeeperintoindividualsandcognition

Deliberatelearninganddynamiccapabilities

Knowledgecontextsofindividuals

• Decisionmakingacrosscareerlife-cycles

(Individualevolution)

• Withinvs.acrossvarianceamongindividualsindifferentknowledge

contexts

• Theroleof“selection,”notjust“treatment”ofindividualsintocontexts

An“industry”mayrepresentsmallerclustersthatco-evolveinanecosystem

BatteryMakers

ElectricMotor

Suppliers

GeneralSuppliers

AutoFirms Dealers Consumer

ChargingStationsUtilities

Garages

Marketsforproducts,capabilitiesandcorporatecontrol

• Howmightthe“monolithic”viewofindustryevolutionbemodifiedtoencompassthe“ecosystem”view?– Roleofintegratedvs.modularfirms?– Extentofcompetitionandcooperationamongfirms?– Conceptofdominantdesign:justaboutproductdesign,oralsoaboutorganizational/ecosystemdesign?

• Whataboutcompetitioninadjacentmarkets?– GoogleandApplewereonceallies,nowfiercecompetitors

– Howdoindustriesevolveifthereismulti-marketcompetition?

Whatwestilldon’tknow…

• Typicalindustryevolutioncontextstartsatinstanceoffirstproductcommercialization

• So,wheredoindustriesthemselvescomefrom?– The“nascent”stagesofindustryevolution

• Inceptionperiodfrom“technologicalshock”tofirstproductcommercialization

• Whattypesoffirmsenter,andwhatdotheydo?– Investment,sensemakingactivities– Internaldevelopment,alliancesandacquisitions

Classic“industryevolution”trendinAgriculturalBiotechnology

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1

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3

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6

7

8

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1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Num

ber o

f Firm

s

# commercializing firms

Moeen and Agarwal, (2017)

IncubationperiodofAgriculturalBiotechnology

20

0

5

10

15

20

25

30

35

40

45

50

1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Num

bero

fFirm

s

Year

#investingfirms

#commercializingfirms

1977TechnologyBreakthrough

1995IndustryInception

IncubationStage

Moeen and Agarwal, (2017)

Marketcreationandindustryemergence

• Implicitassumption,giventhatmuchoffirm/industryevolutionliteraturehasfocusedondevelopedcountriescontext:– Potentialuse(demand)ortechnology(supply)willbetheimpetusformarketactorstoinvestinindustryemergence

• Butwhatifmarketsdon’texist,asincontextslackingcommercialinstitutions?

• Who/whatarethetriggers?– Public(non-profit)andprivateinvestments

Insummary

• Gloriousevolutionofthoughtinthelast35years…– Systematicintegrationofrichscholarlytraditionstoanswerquestionscoretostrategy,innovationandentrepreneurship

• …whichsetsthestageforthenextgenerationofresearch– Needforbothadeepdive(focusonindividualsandcognition),andawidelens(focusonmarkets)

industry evolution: implications for strategy, innovation and entrepreneurship · ·...

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