Journal of Evolutionary Economics

, Volume 23, Issue 5, pp 1073–1098 | Cite as

Industry dynamics, technological regimes and the role of demand

  • Isabel Almudi
  • Francisco Fatas-Villafranca
  • Luis R. Izquierdo
Regular Article


In this paper, we propose an industrial dynamics model to analyze the interactions between the price-performance sensitivity of demand, the sources of innovation in a sector, and certain features of the corresponding pattern of industrial transformation. More precisely, we study market concentration in different technological regimes and demand conditions. The computational analysis of our model shows that market demand plays a key role in industrial dynamics. Thus, although for intermediate values of the price-performance sensitivity, our results show the well-known relationships in the literature between technological regimes and industry transformation, we find surprising outcomes when demand is strongly biased either towards price or performance. Hence, for different technological regimes, a high performance sensitivity of demand tends to concentrate the market. On the other hand, under conditions of high price sensitivity, the industry generally tends to atomize. That is to say, for extreme values of the price-performance sensitivity of demand, we find concentrated or atomized market structures no matter the technological regime we are in. These results highlight the importance of considering the role of demand in the analysis of industrial dynamics.


Industrial dynamics Demand Technological regimes Evolutionary economics 

JEL Classification

O33 B52 


  1. Almudi I, Fatas-Villafranca F, Izquierdo LR (2012) Innovation, catch-up and leadership in science-based industries. Ind Corp Change 21(2):345–375CrossRefGoogle Scholar
  2. Ariga K, Ohkusa Y, Nishimura KG (1999) Determinants of individual-firm markup in Japan: market concentration, market shares and FTC regulations. J Jpn Int Econ 13(4):424–450CrossRefGoogle Scholar
  3. Bresnahan T, Yin P (2010) Reallocating innovative resources around growth bottlenecks. Ind Corp Change 19(5):1589–1627CrossRefGoogle Scholar
  4. Breschi S, Malerba F, Orsenigo L (2000) Technological regimes and schumpeterian patterns of innovation. Econ J 110:388–410CrossRefGoogle Scholar
  5. Cohen W, Klepper S (1996) A reprise of size and R&D. Econ J 106(437):925–951CrossRefGoogle Scholar
  6. Dosi G (1988) Sources, procedures and microeconomic effects of innovation. J Econ Lit 26:1120–1171Google Scholar
  7. Dosi G (2001) Innovation, organization and economic dynamics. Edward Elgar, CheltenhamGoogle Scholar
  8. Dosi G, Nelson RR (2010) Technical change and industrial dynamics as evolutionary processes. In: Hall BH, Rosenberg N (eds) Handbook of the economics of innovation. Elsevier, North-HollandGoogle Scholar
  9. Dosi G, Marsili O, Orsenigo L, Salvatore R (1995) Learning, market selection and the evolution of industrial structures. Small Bus Econ 7(6):411–436CrossRefGoogle Scholar
  10. Fatas-Villafranca F, Saura D (2004) Understanding the demand-side of economic change. Econ Innov New Technol 13(8):695–716CrossRefGoogle Scholar
  11. Fatas-Villafranca F, Jarne G, Sanchez-Choliz J (2009) Industrial leadership in science based industries. J Econ Behav Organ 72(1):390–407CrossRefGoogle Scholar
  12. Fatas-Villafranca F, Saura D, Vazquez FJ (2011) A dynamic model of public opinion formation. J Public Econ Theory 13(3):417–441CrossRefGoogle Scholar
  13. Klepper S (1996) Entry, exit, growth and innovation over the product life cycle. Am Econ Rev 86(3):562–583Google Scholar
  14. Klepper S, Malerba F (2010) Demand, innovation and industrial dynamics: an introduction. Ind Corp Change 19(5):1515–1520CrossRefGoogle Scholar
  15. Malerba F (2006) Innovation and the evolution of industries. J Evol Econ 16:3–23CrossRefGoogle Scholar
  16. Malerba F (2007) Innovation and the dynamics and evolution of industries. Int J Ind Organ 25:675–699CrossRefGoogle Scholar
  17. Malerba F, Orsenigo L (1993) Technological regimes and firm behavior. Ind Corp Change 2:45–74CrossRefGoogle Scholar
  18. Malerba F, Orsenigo L (1996) Schumpeterian patterns of innovation are technology-specific. Res Policy 25:451–478CrossRefGoogle Scholar
  19. Marsili O (1999) Technological regimes: theory and evidence. Dynacom Working Paper.
  20. Marsili O (2001) The anatomy and evolution of industries: technological change and industry dynamics. Edward Elgar, CheltenhamGoogle Scholar
  21. Metcalfe JS (1998) Evolutionary economics and creative destruction. Routledge, LondonCrossRefGoogle Scholar
  22. Nelson RR (1982) The role of knowledge in R&D efficiency. Q J Econ 97(3):453–470CrossRefGoogle Scholar
  23. Nelson RR, Winter SG (1982) An evolutionary theory of economic change. Harvard University Press, CambridgeGoogle Scholar
  24. Pavitt K, Robson M, Townsend J (1989) Technological accumulation, diversification and organisation in UK companies, 1945–1983. Manag Sci 35:81–99CrossRefGoogle Scholar
  25. Romer PM (1990) Endogenous technological change. J Polit Econ 98(5):71–102CrossRefGoogle Scholar
  26. Rosenberg N (1976) Perspectives on technology. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  27. Silverberg G, Verspagen B (2005) Evolutionary theorizing on economic growth. In: Dopfer K (ed) The evolutionary foundations of economics. Cambridge University Press, CambridgeGoogle Scholar
  28. Teece DJ (1986) Profiting from technological innovation: implications for integration, collaboration, licensing and public policy. Res Policy 15:285–305CrossRefGoogle Scholar
  29. Winter SG (1984) Schumpeterian Competition in alternative technological regimes. J Econ Behav Organ 5:287–320CrossRefGoogle Scholar
  30. Winter SG (1987) Knowledge and competence as strategic assets. In: Teece DJ (ed)The competitive challenge. Strategies for industrial innovation and renewal. Ballinger Publishing Company, CambridgeGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  • Isabel Almudi
    • 1
  • Francisco Fatas-Villafranca
    • 1
  • Luis R. Izquierdo
    • 2
  1. 1.University of ZaragozaZaragozaSpain
  2. 2.University of BurgosBurgosSpain

Personalised recommendations