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Product Innovation and Persistence of Leadership: Theory with Evidence from the Semiconductor Industry

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  • Harald Gruber

Abstract

This paper sets out to model the evolution of market shares in the semiconductor industry. The time profile of market shares for different firms in this industry has shown a striking regularity over successive generations of products. In a model of vertical product differentiation three distinct patterns of market shares emerge as an equilibrium outcome, reflecting three distinct strategies in respect of timing of entry into new generations. The main novelty of the model developed here, relative to the existing literature on vertical product differentiation, lies in the incorporation of 'learning by doing'.

Suggested Citation

  • Harald Gruber, 1990. "Product Innovation and Persistence of Leadership: Theory with Evidence from the Semiconductor Industry," STICERD - Economics of Industry Papers 02, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieip:02
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    References listed on IDEAS

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    1. Beath, John & Katsoulacos, Yannis & Ulph, David, 1987. "Sequential Product Innovation and Industry Evolution," Economic Journal, Royal Economic Society, vol. 97(388a), pages 32-43, Supplemen.
    2. Sutton, John, 1986. "Vertical Product Differentiation: Some Basic Themes," American Economic Review, American Economic Association, vol. 76(2), pages 393-398, May.
    3. Shaked, Avner & Sutton, John, 1987. "Product Differentiation and Industrial Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 131-146, December.
    4. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(1), pages 3-13.
    5. Vickers, John S, 1986. "The Evolution of Market Structure When There Is a Sequence of Innovations," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 1-12, September.
    6. Jennifer F. Reinganum, 1981. "On the Diffusion of New Technology: A Game Theoretic Approach," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(3), pages 395-405.
    7. Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 383-401.
    8. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-1483, September.
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    Cited by:

    1. Roper, Stephen & Hewitt-Dundas, Nola, 2008. "Innovation persistence: Survey and case-study evidence," Research Policy, Elsevier, vol. 37(1), pages 149-162, February.
    2. John Sutton, 2001. "Rich Trades, Scarce Capabilities: Industrial Development Revisited," STICERD - Economics of Industry Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

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