Technological Progress and Change in Market Concentration in the U. S., 1963-77

Abstract

What effect does R & D-induced technological progress have on market structure? Do the concentration ratios, the most-used indices of market structure, increase or decrease in an industry that is faced with a high level of technological opportunity and exploits it through a high rate of R & D? This paper focusses on a model by Nelson and Winter as a theoretical starting point to deal with this question. In the Nelson and Winter model, concentration increases as a result of dynamic competition in the technologically progressive industries. But their model does not allow entry, and the effect on concentration may be reversed if the possibility of entry is considered. Empirically, this paper shows that concentration ratios in the high-R&D industries have decreased in the United States during 1963-77.