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The Life Cycle of the U.S. Tire Industry

Author

Listed:
  • Martin A. Carree
  • A. Roy Thurik

Abstract

We introduce a new theory of industry evolution. According to our model, the nonmonotonicity in firm numbers found in many young industries is a consequence of the gradual decline in unit costs. Early stages of the industry life cycle, when unit costs and profit margins are high, display positive net entry rates. In later stages, declining unit costs and increasing competition limit the market room for (fringe) firms accumulating in a shakeout. The model explains paths of output, price level, and firm numbers using a recursive system of equations. We apply the model to the U.S. tire industry.

Suggested Citation

  • Martin A. Carree & A. Roy Thurik, 2000. "The Life Cycle of the U.S. Tire Industry," Southern Economic Journal, Southern Economic Association, vol. 67(2), pages 254-278, July.
  • Handle: RePEc:sej:ancoec:v:67:2:y:2000:p:254-278
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    Citations

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    Cited by:

    1. Walter Elberfeld & Georg Götz, 2002. "Market Size, Technology Choice, and Market Structure," German Economic Review, Verein für Socialpolitik, vol. 3(1), pages 25-41, February.
    2. Grilo, I. & Thurik, A.R., 2004. "Determinants Of Entrepreneurship In Europe," ERIM Report Series Research in Management ERS-2004-106-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    3. Russell, Bonita I. & Shapiro, Daniel & Vining, Aidan R., 2010. "The evolution of the Canadian mining industry: The role of regulatory punctuation," Resources Policy, Elsevier, vol. 35(2), pages 90-97, June.
    4. Klepper, Steven & Simons, Kenneth L., 2005. "Industry shakeouts and technological change," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 23-43, February.
    5. Vincent Van Roy & Daniel Nepelski, 2017. "Determinants of high-tech entrepreneurship in Europe," JRC Working Papers JRC104865, Joint Research Centre (Seville site).
    6. Martin Carree & Emilio Congregado & Antonio Golpe & André van Stel, 2015. "Self-employment and job generation in metropolitan areas, 1969-2009," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 27(3-4), pages 181-201, April.
    7. Jonathan Levie & Erkko Autio, 2008. "A theoretical grounding and test of the GEM model," Small Business Economics, Springer, vol. 31(3), pages 235-263, October.
    8. Vincent Van Roy & Daniel Nepelski, 2016. "Assessment of Framework Conditions for the Creation and Growth of Firms in Europe," JRC Working Papers JRC103350, Joint Research Centre (Seville site).

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