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High-Tech Competition Puzzles. How Globalization Affects Firm Behavior and Market Structure in the Electronics Industry

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  • Dieter Ernst

Abstract

This paper addresses two puzzles related to industrial dynamics and competition. The first of these puzzles is that a high degree of globalization may well go hand in hand with increasing concentration. I show that one of the most globalized sectors of the electronics industry, hard disk drives (HDD), also displays one of the highest degrees of concentration: multinational corporations, after all, may not be such effective “spoilers of concentration”, as claimed by Richard Caves (1982). 4 The second puzzle that I address in this paper is that, despite an extremely high degree of concentration, this industry fails to act like a stable global oligopoly. So far, market share volatility has been restricted to the oligopoly members. There are however indications that this may change and that market contestability may improve. The paper is organized as follows: I start with a discussion of the first puzzle, presenting evidence on globalization and concentration. I then address the second puzzle, linking high concentration to high volatility. Some possible explanations are reviewed in the third part of the paper, building on a conceptual framework introduced by G.B. Richardson ( 1996 and 1997). I analyze how globalization affects competition and distinguish forces that foster concentration and forces that are conducive for market disruption. I conclude with a few observations on what this implies for future research on the determinants of market structure and firm behavior.

Suggested Citation

  • Dieter Ernst, 1997. "High-Tech Competition Puzzles. How Globalization Affects Firm Behavior and Market Structure in the Electronics Industry," DRUID Working Papers 97-9, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  • Handle: RePEc:aal:abbswp:97-9
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    References listed on IDEAS

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    1. Chandler, Alfred D., 1990. "Scale and Scope: A Review Colloquium - Scale and Scope: The Dynamics of Industrial Capitalism. By Alfred D. ChandlerJr., with Takashi Hikino · Cambridge, Mass.: Harvard University Press, 1990. xix + ," Business History Review, Cambridge University Press, vol. 64(4), pages 690-735, January.
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    Cited by:

    1. Keld Laursen, 1998. "Do Export and Technological Specialisation Patterns Co-evolve in Terms of Convergence or Divergence? Evidence From 19 OECD Countries, 1971-1991," DRUID Working Papers 98-18, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    2. Riccardo Crescenzi & Simona Iammarino, 2017. "Global investments and regional development trajectories: the missing links," Regional Studies, Taylor & Francis Journals, vol. 51(1), pages 97-115, January.
    3. Dieter Ernst, 2002. "Global production networks and the changing geography of innovation systems. Implications for developing countries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(6), pages 497-523.
    4. Bengt-Åke Lundvall & Frank Skov Kristensen, 1997. "Organisational Change, Innovation and Human Resource Development as a Response to Increased Competition," DRUID Working Papers 97-16, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    5. Dieter Ernst & Jan Fagerberg & Jarle Hildrum, 2002. "Do Global Production Networks and Digital Information Systems Make Knowledge Spatially Fluid?," Economics Study Area Working Papers 43, East-West Center, Economics Study Area.
    6. Dieter Ernst, 1999. "Responses to the Crisis Constraints to a Rapid Trade Adjustment in East Asia´s Electronics Industry," DRUID Working Papers 99-2, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    7. Jarle Hildrum & Dieter Ernst & Jan Fagerberg, 2011. "The Complex Interaction between Global Production Networks, Digital Information Systems and International Knowledge Transfers," Chapters, in: Cristiano Antonelli (ed.), Handbook on the Economic Complexity of Technological Change, chapter 16, Edward Elgar Publishing.
    8. Kirsten Foss & Nicolai J. Foss, 1999. "Organizing Economic Experiments The Role of Firms," DRUID Working Papers 99-5, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    9. Dieter Ernst, 2000. "Placing the Networks on the Web: Challenges and Opportunities for Managing in Developing Asia," Economics Study Area Working Papers 05, East-West Center, Economics Study Area.
    10. Jukka Kaisla, 1998. "The Market Process and the Emergence of the Firm Some Indications of Entrepreneurship Under Genuine uncertainty," DRUID Working Papers 98-17, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    11. Peter Huber & Daniela Kletzan, 2000. "Bestimmungsfaktoren der Integration von Unternehmen in internationale Netzwerke," WIFO Studies, WIFO, number 19531, September.

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    More about this item

    Keywords

    competition; industrial dynamics; globalization; concentration; firm behavior; contestable markets; entry barriers; capabilities.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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