INNOVATION AND THE EVOLUTION OF INDUSTRIES: HISTORY-FRIENDLY MODELS

Transcription

1 INNOVATION AND THE EVOLUTION OF INDUSTRIES: HISTORY-FRIENDLY MODELS Franco Malerba Boccon Unversy GLOBELICS ACADEMY- May 2013

2 Why hsory frendly models? Characerscs of hese models The models developed so far Wha we have learned

3 VARIETY IN THE EVOLUTION OF INDUSTRIES From he emprcal cases and he hsorcal analyses of semconducors, compuers, pharmaceucals, arcraf, chemcals, exles, and so many oher ndusres s evden ha: he evoluon of ndusres presens a wde varey of paerns a rch se of facors can be denfed: varous ypes of capables, nnovave users, vercal and horzonal boundares of frms, acors such as unverses or governmen, specfc nsuons, and so on. -

4 CAN EXISTING MODELS ADDRESS EXAMINE THESE EVOLUTIONS? NO These models have mcroeconomc learnng processes; selecon wh heerogeneous populaon of frms; de-sraegsng conjecures; processes of expermenaon and mperfec ral and error Nelson and Wner, 1982; Dos, Kanovsk and Wner, 1999 Recognon of some sylzed facs and developmen of an evoluonary model able o reproduce hose phenomena (.e. he relaonshp beween nnovaon and concenraon; dffuson curves) Very absrac models. Focus on some generc basc properes of ndusral srucure and dynamcs

5 They manly focus on he relaonshp beween produc and process nnovaon, enry and frm growh, ex, ndusral concenraon Basc model of ndusry lfe cycle derved from he evdence of he auo ndusry (Klepper, 1996) Dfferen ndusry lfe cycles and dvergence from he sandard model due o facors such as he characerscs of demand, echnologcal dsconnues, he ype of compeon and nnovaon, pre-enry experence and frs mover advanages, as n several models by Klepper and assocaes

6 In sum, excep for some versons of he sandard ndusry lfe cycle model, here are no models whch focus on he evoluon of ndusres and on he facors ha have been denfed and examned by hsorcal analyses and case sudes Ths has been he nal orgnal movaon for he developmen of hsory-frendly models (HFMs).

7 The frs HFM was publshed n 1999 (ICC, 1999) A book on HFMs by Malerba, Nelson, Orsengo and Wner s on s way (CUP, 2014) Here I wan o presen he movaon of hese models, he broad feaures, he buldng seps, he man blocks, wha we have learned so far and he road ahead, and fnally presen an example of a HFM

8 WHAT ARE HFMs? HFMs are agen based smulaon models whch am o capure n sylsed form qualave heores abou mechansms and facors affecng nnovaon and ndusry evoluon These mechansms and facors are pu forh by emprcal research n ndusral organzaon, busness sraegy and organzaon and by he hsores of ndusres They am a esablshng a lnk beween emprcal evdence, developng sand alone smulaon models and formal heory HFMs am o explore wheher parcular mechansms and forces bul no he model can generae (explan) he paerns examned HFMs are guded by verbal explanaons and apprecave heorzng

9 THE MAIN FEATURES OF HFMs HFMs are evoluonary models: frms are boundedly raonal agens; her behavor s guded by rounes; learnng s a key process; heerogeney of agens and capables characerzes he ndusry These models am o analyze facors affecng he (shor-run and long-run) dynamcs of echnology, nnovaon, marke srucure, ndusry archecure and ndusral leadershp HFMs are complex dynamc sochasc sysems Non lneares are presen Boom up perspecve: aggregae properes are emergen ou of he repeaed neracon among agens

10 THE STEPS IN HFM Sudy of he characerscs of he phenomenon under examnaon (nnovaon, evoluon of he ndusry...). Idenfcaon of he man feaures o be analyzed and of he apprecave explanaory model, and consequenly also of he hypoheses o be examned and esed. Developmen of he model. Translaon of he heorecal srucure no he programmng language (varables, mehods and algorhm) of he model. Repeaed process of nernal verfcaon of he correcedness of he compuer mplemenaon, and balance beween accuracy of he model and explanaory power. Runs, calbraon, analyss of he resuls and sensvy analyss Good surveys are Garavagla, 2009 and Yoon 2009

11 THE EMPIRICAL VALIDATION OF HFM (1) I s no he purpose of hsory-frendly modelng o produce smulaons ha closely mach he quanave values observed n he hsores under nvesgaon. The goal s o mach overall paerns n qualave feaures, n parcular he rend behavour of he key descrpors of ndusry srucure and performance of a secor In a sense, HFMs represen also an absracon from he specfc movang hsorcal epsode The goal s o feaure some parcular causal mechansms ha have been proposed by he apprecave heores for he emprcal phenomena under examnaon So, HFMs do no aemp dealed quanave machng o hsorcal daa, nor dealed calbraon of he parameers

12 THE EMPIRICAL VALIDATION OF HFM (2) There s some common sense gudance and some basc learnng from he case sudes n he choce of he plausble orders of magnude of he parameers Moreover some of he dmensons known as relevan are no easly measurable, for example some rules and behavors Some value choces for parameers nvolve mplc un choces for varables, whch means ha he quanave varables are a he end somewha arbrary. However he relaons among parameers have o be made wh a vew o conssency So he mehodology s dfferen from he one by Werker and Brenner (2004) n whch models are consruced usng dealed emprcal daa on assumpons and on mplcaons

13 RUNS THAT MATCH AND THAT DO NOT MATCH THE QUALITATIVE FEATURES OF THE HISTORICAL PATTERNS Once he model s developed and he basc runs done, HFMs es he possbly of dfferen oucomes f he parameer values of some key varables are changed. More han developng dfferen hsores, hs s a way of esng he causaon mechansm whch are presen n he model For example, f he model proposes and he smulaons show ha one of he reason for ndusral concenraon s he presence of a hgh bandwagon effec a he demand level, would ndusral concenraon be lower f he bandwagon parameer s sgnfcanly smaller? Ths s parcularly useful as a normave ool n order o examne dfferen polces or soco-economc sengs

14 WHICH DIMENSIONS, ACTORS AND PROCESSES EXAMINED IN EMPIRICAL ANALYSES DO THESE MODELS TAKE INTO ACCOUNT? (1)

15 : C. 1 he subjec maer C. 2 mehodology C.3 Compuers C.4 Compuers and semconducors C. 5 Pharmaceucals

16 Cumulaveness and ncreasng reurns along dfferen produc rajecores. Technologcal and marke dsconnues. Bandwagon effecs a he demand level. Emergence and consoldaon of concenraon n some produc segmens, enry and compeon n ohers, dependng on he level of bandwagon effecs.

17 Hgh opporuny condons and major echnologcal and marke dsconnues n wo vercally lnked ndusres. Specalzaon and vercal negraon as co-deermned by he dynamcs of capables, echnology and frm sze n he upsream and downsream ndusres. Low cumulaveness of echnologcal advances, segmened demand and presence of IPR regmes. Generaon of low level of overall concenraon n he era of random screenng. Low level of overall concenraon also afer he boechnology revoluon, bu change n he composon of he ndusry wh new acors

18 WHAT DID WE LEARN? (1) From all hese models, we have learned ha he followng facors affec he shor-erm and long erm dynamcs of nnovaon and marke srucure and more broadly he evoluon of ndusres FIRMS CAPABILITIES: Learnng processes Level, ypes and dsrbuon of capables TECHNOLOGICAL REGIMES: Technologcal regmes n erms of echnologcal opporunes, knowledge accessbly, cumulaveness and approprably

19 WHAT DID WE LEARN? (2) DEMAND: Homogeneous, bandwagon and nework effecs, segmenaon, expermenal cusomers, new demand, user-producer relaonshps INSTITUTIONS: Unverses, publc polcy (ncludng compeon polcy and IPR)

20 WHAT DID WE LEARN (3) In addon, HFM have grealy progressed our undersandng of hree key ssues n ndusral dynamcs and ndusry evoluon: THE VERTICAL STRUCTURE OF PRODUCTION AND INNOVATION : The vercal srucure of producon and he dvson of nnovave labor s he resul of he level and dsrbuon of capables, echnologcal regmes, demand condons and he nsuonal envronmen. A he same me s a major facor affecng her changes SELECTION: Selecon processes are no oally exogenous. They emerge ou of he neracon among ndvdual frms. Ex rules are as mporan as enry condons EFFECTS OF PUBLIC POLICIES: There are major nerdependen, dynamc and un-nended effecs of publc polces

21 THE ROAD AHEAD (1) In he fuure, HFMs may develop along he followng lnes Expanson of ndusres examned The so-called radonal ndusres Agro-food Envronmenal secor (Olra San Jean) Servces Comparsons of ndusry evoluon across counres Emergng counres Cach up (Lee and Km, Yoon)

22 THE ROAD AHEAD (2) Enrchmen of he models Insuons (Murmann and Brenner) Spn-offs and enrans (Capone) Orgn and emergence of an ndusry Insde he frm Organzaon Behavoral rules

23 THE ROAD AHEAD (3) The hrd one nvolves a comparson among HFMs ha may denfy n an nducve way some general properes and some general hypoheses ha may apply o a wde range of emprcal dynamc phenomena ha share some common facors. In a sense, HFMs force o recognze and model wha s dfferen and secor specfc n ndusral change bu also wha are he broad smlares and regulares n ndusry evoluon

24 Wh Fabo Landn, we have developed a hsory-frendly smulaon model of cach-up, whch s general enough o nvesgae he role of dfferen wndows of opporunes and of he speed and ype of domesc frms learnng We have examned frms n wo counres: a leader counry and a follower counry. Frms n boh counres learn. Learnng s cumulave and sysemc. Frms may sell n one counry only or on boh counres Three ypes of wndows are examned: echnology, demand and polcy. Wndows open a a ceran me durng he evoluon of an ndusry Franco Malerba

25 The man resuls of he Landn and Malerba HFM Wndows of opporunes do affec cach-up. When hey are absen or oo small, cach up s very dffcul o succeed In he case of a echnology-based wndow, he sze of he wndow maers n a non rval way Learnng s an mporan facor n cachng up, parcularly when new opporunes are creaed Cachng up grealy benefs from he combnaon of dfferen wndows a he same me. Polcy nervenon s mporan n favorng he exploaon of echnology-based and demand-based wndows Franco Malerba

26 AS A WAY OF CONCLUSION In sum, HFMs play a key brdgng role beween general and absrac heores and dealed case sudes. Because hey play hs brdgng role, hey also provde a man message o he wo camps: he heorss and he hsorans/emprcal scholars To he heorss, HFMs sugges ha absrac and general modellng should ake no accoun some degree of realsm and conan emprcal foundaons To he hsoran/emprcal scholars, HFMs sugges some degree of formal dscplne and modellng of he emprcal analyses and hsorcal works, so ha rgorous and conssen explanaons of ndusry evoluon could be developed

27 AN EXAMPLE: A HISTORY FRIENDLY MODEL OF THE CHANGING VERTICAL SCOPE OF FIRMS IN THE COMPUTER AND SEMICONDUCTOR INDUSTRIES Malerba, Nelson, Orsengo and Wner ICC 2008

28 MOTIVATION Undersandng he deermnans of frms specalzaon and vercal negraon -n relaed ndusres -n unceran and dynamc envronmens, -characerzed by echnologcal dsconnues. Major facors: capables, echncal change and marke sze Co-evoluonary processes

29 1. The hsory of he ndusres 2. The concepual framework 3. Hsory-frendly models 4. The man srucure of he model 5. The baselne smulaon 6. Counerfacual analyses 7. Wha dd we learn?

30 Focus on: - he hsory of he Amercan ndusry - sandard componens - vercal negraon of sysem producers no componen R&D and producon (upsream vercal negraon) The model does no dscuss -Second sourcng -Inermedae organzaonal forms (such as R& neworks and paral negraon)

31 A BRIEF HISTORY OF THE COMPUTER AND SEMICONDUCTOR INDUSTRIES ( ) Three man perods examned: a. Manframes and ranssors as her man SC componens Emergence of IBM as monopols n manframes b. Inroducon of he negraed crcu (IC) c. Inroducon of mcroprocessors (MP) and brh of he personal compuer (PC) ndusry

32 Vercal negraon and specalzaon paerns Early n he hsory of he compuer ndusry, mos compuer producers were no vercally negraed. Then some became vercally negraed. Wh he nroducon of he negraed crcu, IBM was fully negraed no IC, because of coordnaon advanages (IC embedded sysem elemens), fears of leakages of sraegc nformaon and secury of supply reasons. Wh he nroducon of mcroprocessors (MP), IBM and oher vercally negraed producers ds-negraed from he large scale producon of sandard semconducors and moved o specalzaon, because hey faced a major echnologcal dsconnuy and que large and compeen MP frms.

33 - COMPETENCES: Relevan varables evdenced from hsory: accumulaon of compeences n specfc echnologcal or marke domans (IBM, Inel) coordnaon and negraon capables; - TECHNOLOGICAL DISCONTINUITIES f major, here s desrucon of esablshed compeences - SIZE OF FIRMS (whch affecs R&D expendures and secury of supply) - SIZE OF DEMAND - MARKET STRUCTURE of wo vercally relaed ndusres

34 Proposons on Vercal negraon Vercal negraon of sysem producers wll ake place - f componen capables and sysem capables are relaed n erms of knowledge - f he capables of coordnang and negrang componens and sysems no new producs are relevan. In addon, f echnologcal change n sysems has a major dsconnuy, - vercal negraon wll ake place because of he msalgnmen of he capables of sysem producers and componen producers

35 Proposon on specalzaon Specalzaon of sysem frms wll ake place f componen and sysem companes are que dfferen n her knowledge and compeences. In addon, when echnologcal change n componens has a major dsconnuy, specalzaon of sysem frms wll ake place f oally new capables are needed for developng new componens and enry s relevan.

36 Proposon on he sze of markes An addonal large exernal markes for componens wll suppor he growh and he specalzaon of componen supplers, whch can herefore develop her capables and become que nnovave compared o vercally negraed sysem frms. The absence of exernal markes, make componens producers que dependen on he decson o negrae or specalze by he exsng sysem ndusry.

37 Vercal negraon and specalzaon are codeermned by frms compeences, he rae of echncal change, and he sze of markes.

38 THE MODEL

39 Compuers have a mx of characerscs: cheapness and performance Compuers use semconducor (SC) componens SC componens are sold o compuer frms and o an exernal marke A he begnnng of he evoluon of he compuer ndusry: SC componen echnology (ranssors) makes possble o have manframes whch are sold o bg users (whch are more neresed n performance han n cheapness) Frs echnologcal dsconnuy n SC componens: negraed crcus (IC) Enry of new SC frms producng IC Manframe producers adop IC n manframes Second echnologcal dsconnuy n SC componens: mcroprocessor (MP) Enry of new SC frms producng MP MP are used n manframes and n he same me hey open a new marke: personal compuers (PC). The new PC marke appeals o a new se of consumers -ndvduals- who are more neresed n cheapness han n performance.

40 SPECIALIZATION AND INTEGRATION DECISIONS In he model VERTICAL INTEGRATION decson s led by: - he relave sze of he compuer frm compared o he larges SC componen producer -he age of he SC componen echnology SPECIALIZATION decson s led by: -Comparson beween he qualy of SC componens produced n-house and he qualy of SC componens avalable on he marke

41 Mer of desgn M of compuers 1,,, 1 S C M M A M C= componens S= sysems

42 1 1, 1, ) (1 s M L L L,,, Pr 1,,, z w M w = cheapness z = performance s= marke share

43 L C M 2 (1 s ), c, 1 2 Pr, C L C, L C,

44 PROFITS: PRICE: R&D OF INTEGRATED FIRMS: FIRM DRAWS: MEAN OF NORMAL DISTRIB: PUBLIC KNOWLEDGE: v R d,, C C R f c m R,,, K K h M h ) (1 1,, o M p M,,,,, ) (1,, m o p k K K c n e K k 1 1 lm O = cos

45 V V b Inegrae ob,,, 1 ) ( Pr 2, 1, 1 ; mn C q q g A V A =me from each dsconnuy q = sze

46 0, max max,,, C C C M M M Z Z Z A Specalze ob,,, 1 ) ( Pr

47 E 1 e), ( l e s, Ex f E, < E L = nverse of he number of frms acve n he marke a he begnnng of he smulaon E = consan

48 THE HISTORY-FRIENDLY SIMULATION - Manframes and he emergence of IBM IBM vercally negraes n SC componens - Invenon of negraed crcus (IC): Enry of new SC frms IBM remans vercally negraed - Invenon of mcroprocessors MP: Enry of new MP frms and a large exernal marke for MP A new compuer marke (PC) emerges for dfferen users (ndvduals) PC producers reman specalzed and buy MP A domnan mcroprocessor frm emerges n SC ndusry IBM ds-negraes

49 Fgure 1a: Herfndahl ndex Fgure 1b: negraon rao 1,2 1 0,8 0,6 0,4 0,2 0 MF PC Cmp ,2 1 0,8 0,6 0,4 0,2 0 mf pc

50 TESTING THE MODEL:COUNTERFACTUALS 1. Does lack of exernal markes lead o more vercal negraon? 2. Do no demand lock-ns n manframes lead o more specalzaon? 3. Do no demand lock-ns n semconducors lead o more vercal negraon? 4. Does a mnor echnologcal dsconnuy n mcroprocessors lead o more vercal negraon?

51 No exernal marke for SC 1,2 1 0,8 0,6 Fgure 2a: Herfndahl ndex MF PC Cmp 1,2 1 0,8 Fgure 2b: negraon rao 0,4 0,2 0,6 0,4 0,2 mf pc

52 No lock-ns effecs on Manframes 1 0,9 0,8 0,7 0,6 0,5 Fgure3a: Herfndahl ndex MF PC Cmp 1,2 1 0,8 0,6 Fgure3b: negraon rao mf 0,4 0,3 0,2 0,4 0,2 pc 0,

53 No lock-ns effecs on Mcroprocessors 1,2 Fgure4a: Herfndahl ndex 1,2 1 Fgure 4b: negraon rao 1 0,8 0,6 0,4 0,2 MF PC Cmp 0,8 0,6 0,4 0,2 mf pc

54 MP s no a major dsconnuy 1,2 1 0,8 0,6 Fgure 5a: Herfndahl ndex MF PC Cmp 1,2 1 0,8 mf pc Fgure 5b: negraon rao 0,4 0,2 0,6 0,4 0,

55 CONCLUSIONS FROM THIS HFM 1. Ths ICC 2008 hsory-frendly model s able o reproduce he man sylzed facs of compeon and vercal negraon n he compuer and semconducor ndusres 2. Specalzaon and vercal negraon are funcon of compeences, echnologcal change and sze of markes 3. Dynamc processes are relevan 4. Specfc condons affec he vercal scope of sysem frms: - Sze of exernal markes - Magnude of echnologcal dsconnues