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The PC Industry: New Economy or Early Life-Cycle?

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Author Info
Mariana Mazzucato (Economics Department, The Open University)

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Abstract

The paper studies the co-evolution of industrial turbulence and financial volatility in the early phase of the life-cycle of an old high-tech industry and a new high-tech industry: the U.S. auto industry from 1899-1929 and the U.S. PC industry from 1974-2000. In both industries, the first three decades were characterized by industrial turbulence: radical technological change, high entry and exit rates, and rapidly falling prices. However, unlike in the auto industry, in the PC industry technological change and new entry did not lead to strong instability of market shares-at the core of the monopoly-destroying effect of Schumpeterian creative destruction-until the 1990s, when the lead of the incumbents from the pre-existing mainframe and minicomputer industries was undermined. In both industries, stock prices were the most volatile and idiosyncratic during those years in which technological change disrupted market shares the most (Autos: 1918-1928; PCs: 1990-2000).

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File URL: http://dx.doi.org/10.1006/redy.2002.0164
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 5 (2002)
Issue (Month): 2 (April)
Pages: 318-345
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Handle: RePEc:red:issued:v:5:y:2002:i:2:p:318-345

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Related research
Keywords: industry life-cycle new economy technological change risk stock price volatility.

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Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

References listed on IDEAS
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  1. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-47, April. [Downloadable!] (restricted)
    Other versions:
  2. John Y. Campbell, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Journal of Finance, American Finance Association, vol. 56(1), pages 1-43, 02. [Downloadable!] (restricted)
    Other versions:
  3. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  4. Klepper, Steven & Simons, Kenneth L, 1997. "Technological Extinctions of Industrial Firms: An Inquiry into Their Nature and Causes," Industrial and Corporate Change, Oxford University Press, vol. 6(2), pages 379-460, March.
  5. Darren Filson, 2001. "The Nature and Effects of Technological Change over the Industry Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 460-494, July. [Downloadable!] (restricted)
    Other versions:
  6. Campbell, John Y & Shiller, Robert J, 1988. " Stock Prices, Earnings, and Expected Dividends," Journal of Finance, American Finance Association, vol. 43(3), pages 661-76, July. [Downloadable!] (restricted)
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  7. Randall Morck & Bernard Yeung & Wayne Wu, 1999. "The Information Content of Stock Markets: Why do Emerging Markets have Synchronous Stock Price Movements?," William Davidson Institute Working Papers Series 44, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  8. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September. [Downloadable!] (restricted)
  9. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  10. Greenwood, J. & Jovanovic, B., 1999. "The IT Revolution and the Stock Market," RCER Working Papers 460, University of Rochester - Center for Economic Research (RCER). [Downloadable!]
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  11. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June. [Downloadable!] (restricted)
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  12. Stavins, Joanna, 1995. "Model Entry and Exit in a Differentiated-Product Industry: The Personal Computer Market," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 571-84, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Emin M. Dinlersoz & Rubén Hernández-Murillo, 2004. "The diffusion of electronic business in the U.S," Working Papers 2004-009, Federal Reserve Bank of St. Louis. [Downloadable!]
  2. Hui Guo & Robert Savickas, 2006. "The relation between time-series and cross-sectional effects of idiosyncratic variance on stock returns in G7 countries," Working Papers 2006-036, Federal Reserve Bank of St. Louis. [Downloadable!]
  3. Boyan Jovanovic, 2004. "The Pre-Producers," NBER Working Papers 10771, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Pástor, Lubos & Veronesi, Pietro, 2005. "Technological Revolutions and Stock Prices," CEPR Discussion Papers 5428, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Hui Guo & Robert Savickas, 2006. "Aggregate idiosyncratic volatility in G7 countries," Working Papers 2004-027, Federal Reserve Bank of St. Louis. [Downloadable!]
  6. Jackie Krafft & Jacques Laurent Ravix, 2008. "Corporate governance and the governance of knowledge: rethinking the relationship in terms of corporate coherence," Post-Print hal-00203550_v1, HAL. [Downloadable!]
    Other versions:
  7. Jackie Krafft & Jacques Laurent Ravix, 2005. "The governance of innovative firms: an evolutionary approach," Post-Print hal-00203620_v1, HAL. [Downloadable!]
  8. Michael Pakko, 2005. "Changing Technology Trends, Transition Dynamics, and Growth Accounting," Contributions to Macroeconomics, Berkeley Electronic Press, vol. 5(1), pages 1304-1304. [Downloadable!] (restricted)
    Other versions:
  9. Mariana Mazzucato & Massimiliano Tancioni, 2005. "Innovation and Idiosyncratic Risk," Computing in Economics and Finance 2005 81, Society for Computational Economics. [Downloadable!]
    Other versions:
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