Patterns of Competition in Emerging Industries from the Automobile to the Personal Computer: An Abstract
New to the world innovations such as the automobile, telephone, airplane, radio, television, and personal computer have had profound impacts on society. Not only have they changed the way that consumers live and work, but they have given birth to entire industries, industries that in some cases have grown to exceed one trillion US dollars in worldwide revenues. Long before these economy-leading industries emerge, they are at best budding curiosities, with the potential to change the world but without any sense of how to achieve that potential. To understand how these early industries evolve, it would be helpful to look at the history of one to see if there are any identifiable patterns that might be found in other early industries.
An investigation of the early automobile industry reveals patterns of competition and economic forces that may be found in other industries spawned by new to the world innovations. Specifically, parallel patterns can be found in the personal computer industry.
In the earliest days of the auto industry, although it was not clear that demand was sufficient and sustainable to support an industry, prescient entrepreneurs at first trickled and then flooded into the field to compete in the nascent market. The early competitors were assemblers of parts that were readily available in the marketplace. While some entrants were from related industries (carriage and engine makers), the most successful entrants were new firms (Ford, GM).
Despite the economic pressures brought about by the Bank Panic of 1907 and World War I, compensating forces helped the fledgling industry. These included urbanization, an increasing and relatively wealthy population, increasing manufacturing capacity, and the lack of interstate trade barriers in the United States (vs. those faced by European auto manufacturers). Another economic development was the creation of a de facto Marshallian industrial zone. Although early auto manufacturers were located across the country from Iowa to New England, the three major manufacturers eventually migrated their firms to a triangle bounded by Lansing, Detroit, and Flint, Michigan.
The key that led to the shakeout of most competitors was the adoption of industry standards for body style, engine, braking, and steering, which enabled mass manufacturing. Other economic factors identified include complementary resources, lock-in, complementary products, and network externalities/public goods.
References Available Upon Request