Industrial and Corporate Change - current issue

Vertical integration and disintegration of computer firms: a history-friendly model of the coevolution of the computer and semiconductor industries

Malerba, F., Nelson, R., Orsenigo, L., Winter, S. — 2008-03-20

In this article, we present a history-friendly model of the changing vertical scope of computer firms during the evolution of the computer and semiconductor industries. The model is "history-friendly," in that it attempts at replicating some basic, stylized qualitative features of the evolution of vertical integration on the basis of the causal mechanisms and processes, which we believe can explain the history. These factors are identified in the coevolution of capabilities, the size of markets, and the structure of industries. In particular, the basic assumption is that the principal force behind the patterns of vertical integration and disintegration of computer firms was the differential development of capabilities for designing and producing semiconductors among firms. On this basis, the changing boundaries of firms are analyzed in the context of dynamic and uncertain technological and market environments, characterized by periods of technological revolutions punctuating periods of relative technological stability and smooth technical progress. The model illustrates how the patterns of vertical integration and specialization in the computer industry change as a function of the evolving levels and distribution of firms’ capabilities over time and how they depend on the coevolution of the upstream and downstream sectors. Specific conditions in each of these markets—the size of the external market, the magnitude of the technological discontinuities, the lock-in effects in demand—exert critical effects and feedbacks on market structure and on the vertical scope of firms as time goes by.

Institutional reform and technological practice: the case of electricity

Kunneke, R. W. — 2008-03-20

This article proposes a framework for categorizing possible interrelations between technological and institutional change and applies this framework to the case of the restructuring of the electricity sector. It is argued that there is a need for coherence between institutions and technological practice, so as to safeguard the satisfactory functioning of electricity infrastructure. The identification of possible incoherences between institutions and technological practice allows for a better understanding of the potential drivers for change and the evolutionary processes of which they may be part. This article attempts to elaborate the nature of this co-evolution in somewhat more detail, using specific levels of analysis that are exemplified in a four-level model. In the case of the restructuring of the electricity sector, the institutional framework has changed from a public utility-oriented, towards a market-oriented system. However, the technological practice remained unchanged: a system-oriented approach that relies on centralized planning, control and operation. This discrepancy between institutions and technological practice leads to significant frictions in the functioning of the electricity sector, but it also offers opportunities for innovation. In order to make liberalization a success, it might be necessary to stimulate certain technical developments (i.e. distributed generation and intelligent networks).

The rise and fall of global network alliances

Ulset, S. — 2008-03-20

The purpose of this article is to develop an evolutionary transaction cost economics approach capable of explaining the rise and fall of global network alliances once created to provide global services to multinational companies. In this global services market, market contracting and integrated corporations eventually replaced global network alliances. Both inefficiently designed or applied governance and efficiently realigned governance may explain why alliances failed and subsequently were replaced by more appropriate market contracting and integrated firms. The global alliance story also illustrates the point that economic actors initially may not have the requisite capacity to look ahead and recognize contractual hazards, but that such capacity and recognition may gradually evolve as a product of negative experience.

How valuable is a piece of the spectrum? Determination of value in external resource acquisition

Ansari, S., Munir, K. — 2008-03-20

Based on an in-depth study of third generation mobile telephony licenses in the UK, we discuss what makes externally acquired resources more or less valuable for their owners. We find that value is influenced by competitive dynamics, the discourse that surrounds a particular resource, and the development of collaborative networks around the resource. We also find that the value of a resource is determined during the process that leads up to its acquisition and continues to vary in the post acquisition dynamics. Our analysis furthers existing understanding of value within the resource-based view, and bears important implications for firm-level capabilities.

Technological capabilities and late shakeouts: industrial dynamics in the advanced gas turbine industry, 1987-2002

Bergek, A., Tell, F., Berggren, C., Watson, J. — 2008-03-20

This article focuses on technological discontinuities and late shakeouts in mature industries. The empirical case is combined cycle gas turbine technology in the power generation industry, where two of four main incumbents (GE, ABB, Siemens, and Westinghouse) exited the industry after several years of competition. We show that the vast differences in firm performance are strongly related to variation in technological capabilities, such as sourcing and integration of knowledge from related industries and after-launch problem solving. The findings from this case may also be of general interest for studies of dynamics in other mature, complex industries.