The Evolution of New Industries and the Determinants of Market Structure

Abstract

Several empirical regularities concerning firm growth rates and industry firm-size distributions have been developed by studying primarily mature industries. The primary purpose of this article is to bring together and extend empirical regularities on the evolution of new industries and to use these regularities to gain further insight into the forces governing industry evolution. To explain these regularities, a model is constructed which emphasizes how factors governing the early evolution of industries may shape their market structure at maturity. It stresses how chance events and exogenous factors that influence the number of potential entrants to the industry, the growth rate of incumbents, and the ease of imitation of industry leaders will influence the ultimate number and size distribution of firms in the industry.