Submarket Dynamics and Innovation: The Case of the U.S. Tire Industry
AbstractBeginning in 1922, the rate of exit of U.S. tire producers increased sharply and the industry began a severe and protracted shakeout. Just five years earlier, the tire industry experienced a surge in entry that led to a rise of over 80% in the number of producers. We propose an explanation for this episode based on the idea of industry submarkets, which we incorporate in a model of shakeouts. We test this theory and alternative explanations for the surge in entry and exit and the shakeout using a novel data set on patenting in tires and production in the early 1920s of the cord tire, a key innovation we feature in our theory. Our analysis suggests that the development of a new submarket can open up opportunities for entry but also stimulate innovation and in the process reinforce the advantages of the leading incumbents, accentuating the shakeout of producers.
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Bibliographic InfoPaper provided by Philipps University Marburg, Department of Geography in its series Papers on Economics and Evolution with number 2009-15.
Date of creation: Dec 2009
Date of revision:
Submarkets; Innovation; Shakeouts Length 31 pages;
Other versions of this item:
- Guido Buenstorf & Steven Klepper, 2010. "Submarket dynamics and innovation: the case of the US tire industry," Industrial and Corporate Change, Oxford University Press, vol. 19(5), pages 1563-1587, October.
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-COM-2010-01-16 (Industrial Competition)
- NEP-ENT-2010-01-16 (Entrepreneurship)
- NEP-HIS-2010-01-16 (Business, Economic & Financial History)
- NEP-INO-2010-01-16 (Innovation)
- NEP-TID-2010-01-16 (Technology & Industrial Dynamics)
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