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Submarkets and the Evolution of Market Structure

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  • Peter Thompson

    ()
    (Department of Economics, Florida International University)

  • Steven Klepper

    (Department of Social and Decision Sciences, Carnegie Mellon University)

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://casgroup.fiu.edu/pages/docs/2248/1280267787_03-03.pdf
File Function: Revised version, 2005
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Bibliographic 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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Postal: Miami, FL 33199
Phone: (305) 348-2316
Fax: (305) 348-1524
Web page: http://casgroup.fiu.edu/Economics/
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Related research

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

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References

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