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Submarkets and the Evolution of Market Structure

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Author Info
Peter Thompson () (Department of Economics, Florida International University)
Steven Klepper (Department of Social and Decision Sciences, Carnegie Mellon University)

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Abstract

We construct a model of industry evolution in which the central force for change is the creation and destruction of submarkets. Firms expand when they are able to exploit new opportunities that arrive in the form of submarkets; they contract and ultimately exit when the submarkets in which they operate are destroyed. This simple framework can transparently explain a wide range of well-known regularities about industry dynamics, most notably the subtle relationships between size, age, growth, and survival. Data on the laser industry, where submarkets are prominent, further illustrate the ability of the model to explain distinctive patterns in the evolution of industries and firms.

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File URL: http://www.fiu.edu/orgs/economics/wp2003/03-03.pdf
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Publisher Info
Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0303.

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Length: 51 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:fiu:wpaper:0303

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Related research
Keywords: Spinoffs; firm growth; survival; firm age; market structure; industry evolution; technological change;

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Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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References listed on IDEAS
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.:
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    Other versions:
Full references

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. Tommaso Ciarli & Riccardo Leoncini & Sandro Montresor & Marco Valente, 2008. "Technological change and the vertical organization of industries," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 367-387, August. [Downloadable!] (restricted)
  2. Hielke Buddelmeyer & Paul H. Jensen & Elizabeth Webster, 2006. "Innovation and the Determinants of Firm Survival," IZA Discussion Papers 2386, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Guido Buenstorf, 2007. "Evolution on the Shoulders of Giants: Entrepreneurship and Firm Survival in the German Laser Industry," Review of Industrial Organization, Springer, vol. 30(3), pages 179-202, May. [Downloadable!] (restricted)
    Other versions:
  4. G. Bünstorf, 2007. "Opportunity Spin-offs and Necessity Spin-offs," Papers on Economics and Evolution 2007-18, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  5. Alex Coad, 2008. "Firm growth and scaling of growth rate variance in multiplant firms," Economics Bulletin, Economics Bulletin, vol. 12(9), pages 1-15. [Downloadable!]
    Other versions:
  6. Franco Malerba, 2006. "Innovation and the evolution of industries," Journal of Evolutionary Economics, Springer, vol. 16(1), pages 3-23, April. [Downloadable!] (restricted)
    Other versions:
  7. Renata Kosova & Francine Lafontaine, 2006. "Firm Survival and Growth in Retail and Service Industries: Evidence from Franchised Chains," Working Papers 0007, School of Business, The George Washington University. [Downloadable!]
  8. G. Buenstorf, 2006. "Comparative Industrial Evolution and the Quest for an Evolutionary Theory of Market Dynamics," Papers on Economics and Evolution 2006-23, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  9. G. Buenstorf, 2006. "Perception and pursuit of entrepreneurial opportunities: an evolutionary economics perspective," Papers on Economics and Evolution 2006-01, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  10. Guido Buenstorf, 2007. "Creation and Pursuit of Entrepreneurial Opportunities: An Evolutionary Economics Perspective," Small Business Economics, Springer, vol. 28(4), pages 323-337, April. [Downloadable!] (restricted)
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