Table Of ContentINDUSTRIAL DYNAMICS
STUDIES IN INDUSTRIAL ORGANIZATION
Volume 10
Series Editors:
H. W. de Jong, University of Amsterdam, The Netherlands
W. G. Shepherd, University of Michigan, Ann Arbor (Mich.), USA
Advisory Board
W. Adams, Michigan State University, East Lansing (Mich.), USA
R. E. Caves, Harvard University, Cambridge (Mass.), USA
K. D. George, University College, Cardiff, UK
E. Heusz, Friedrich Alexander University, Erlangen-Nurnberg, FRG
A. P. Jacquemin, University of Louvain, Belgium
E. Kantzenbach, University of Hamburg, Hamburg, FRG
H. W. Lambers, Erasmus University, Rotterdam, The Netherlands
R. Prodi, University of Bologna, Bologna, Italy
F. M. Scherer, Swarthmore College, Swarthmore (Penn.), USA
Other titles in the series:
1. De Jong, H. W. (ed.): The Structure of European Industry
2. Fennema, M.: International Networks of Banks and Industry
3. Bianchi, P.: Public and Private Control in Mass Product Industry: The Cement
Industry Cases
4. Kingston, W.: The Political Economy of Innovation
5. Pelkmans, J.: Market Integration in the European Community
6. De Jong, H. W. and Shepherd, W. G. (eds): Mainstreams in Industrial
Organization - Book I.
Book II - Policies: Antitrust, Deregulation and Industrial
7. Faltas, S.: Arms Markets and Armament Policy. The Changing Structure of Naval
Industries in Western Europe
8. De Jong, H. W. (ed.): The Structure of European Industry. Second Revised
Edition. 1988.
9. Schmidt/Rittaler: A Critical Evaluation of the Chicago School of Antitrust Analysis
Industrial Dynamics
Technological, Organizational, and
Structural Changes in Industries and Firms
Edited by
80 Carlsson
Research Program in Industrial Economics
Department of Economics
Case Western Reserve University
Cleveland, Ohio, U.S.A.
"~.
Kluwer Academic Publishers
BOSTON/DORDRECHT ILONDON
Distributors for North America:
Kluwer Academic Publishers
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Distributors for all other countries:
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Library of Congress Cataloging-in-Publication Data
Industrial dynamics.
(Recent economic thought series) (Studies in indus
trial organization ; 10)
"Based on the papers presented at a conference ...
held at Case Western Reserve University, Cleveland, Ohio,
June 8-10, 1987 ... organized by the Research Program in
Industrial Economics (RPIE) in the Department of Econ
omics at CWRU and ... sponsored by the Cleveland
Foundation, the Eaton Corporation, and the Standard Oil
Company (later named BP America, Inc.)"-Pref.
I. Industrial organization (Economic theory)
Congresses. I. Carisson, Bo, 1942- . II. Case
Western Reserve University. Research Program in Industrial
Economic. III. Series. IV. Series: Studies in industrial
organization I v. 10.
HD2326.I516 1989 338.6 89-19772
ISBN-\3 :978-94-0 10-6973-1 e-ISBN-13 :978-94-009-1075-1
DOl: 10.1007/978-94-009-1075-1
Copyright © 1989 by Kluwer Academic Publishers
Softcover reprint of the hardcover 1st edition 1989
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system
or transmitted in any form or by any means, mechanical, photocopying, recording, or other
wise, without the prior written permission of the publisher, Kluwer Academic Publishers, 101
Philip Drive, Assinippi Park, Norwell, Massachusetts 02061.
CONTENTS
List of Figures VII
List of Tables ix
Preface xi
Chapter 1 Industrial Dynamics: An Overview 1
Eo Carlsson
Chapter 2 The Dynamics of Supply and Economic Growth 21
Gunnar Eliasson
Chapter 3 The Supply Side: Technology and History 55
G.N. von Tunzelmann
Chapter 4 Economic Change and the Boundaries of the Firm 85
Richard N. Langlois
Chapter 5 'Development Blocks' in Industrial Economics 109
Erik Dahmen
Chapter 6 Evolution of Japan's Corporate and
Industrial Networks 123
Ken-ichi Imai
Chapter 7 Cooperation Between Rivals: Informal
Know-how Trading 157
Eric von Hippe!
Chapter 8 Capitalism as an Engine of Progress 177
Richard R. Nelson
Chapter 9 Rent and Technological Change in the Extractive
Industries 193
William S.Peirce
vi
Chapter 10 The U.S.-Japan Semiconductor Trade Agreement
in the Globalization of Imperfect and Dynamic
Competition 211
Asim Erdilek
Chapter 11 Adjustment to International Disturbances in
Imperfectly Competitive Markets: Canadian
Manufacturing in the 19705 239
Richard E. Caves
Chapter 12 Free versus Controlled Competition 271
H.W. De long
About the Contributors 299
Author Index 301
Subject Index 307
LIST OF FIGURES
2-1 The 10 largest companies' share of total Swedish
manufacturing employment, 1880-1983 27
2-2 Distribution of labor cost on various functions in
large Swedish manufacturing corporations, 1982 30
3-1 The classical schema 58
3-2 Supply and demand schema for an industry 61
3-3 Static and dynamic diminishing returns 71
3-4A Wages and population: poor-country case 74
3-4B Wages and population: advanced-country case 74
3-4C Wages and population: prudential-restraint case 75
4-1 The vertical and horizontal division of labor 93
4-2 The hypothesis refmed 97
6-1 The house of Mitsui 132
6-2 The Mitsubishi Group 136
6-3 Multifaceted network in the household goods industry 147
9-1 Expected exhaustion and user cost 197
9-2 Assumed availability of ore by grade 200
9-3 Assumed cost of metal from ore of various grades 200
9-4 Pellet shipments and price of ore, United States, 1945-1969 203
9-5 Coal mechanically loaded as a percentage of bituminous
coal mined underground, 1926-1971 204
12-1 Return on investment in the EC and US, 1960-1984 273
12-2 Large-scale mergers and takeovers in manufacturing
industry and service trades in the EC, 1973-1987 281
12-3 Profits and investments (corrected for inflation) in the EC 282
12-4 Development of sectors/economies 288
12-5 Demand fragmentation and scale economies 294
LIST OF TABLES
2-1 Average size of the largest five firms in 1984 26
2-2 The share in domestic manufacturing employment of
the largest manufacturing firms: global firm employment
in percent of domestic manufacturing employment, 1983 26
2-3 The four elements of economic activity 29
2-4 Investment in the 5 and the 37 largest Swedish
manufacturing groups, 1978 31
2-5 Modeling the knowledge-based economic growth process 43
6-1 Evolution of business networks in Japanese industry 143
7-1 US steel minim ill firm sample 160
7-2 Know-how trading patterns 161
7-3 Minimill costs per ton 162
9-1 Iron ore reserves and consumption, large steelmakers,
United States, 1948 202
9-2 Thickness of seam and output per person, underground
mining, bituminous coal and lignite, United States,
1945-1965 206
9-3 Thickness of seam as a predictor of output per person,
underground coal mining, 1945-1965 206
11-1 Determinants of percentage change in industry
selling price 251
11-2 Determinants of value of imports classified to each
industry 256
11-3 Determinants of capital expenditures on construction
and machinery 260
11-4 Determinants of industry employment 264
12-1 A comparison of Europe and the United States, 1960-1984 272
12-2 Gross domestic product per work-hour in various
countries, 1870 and 1979, in 1970 US relative prices 274
12-3 Gross domestic product per work-hour in the US, EC, and
Japan, 1870 and 1979, in 1970 US prices 275
12-4 The correlation between process and structure in the US
and the EC countries 278
12-5 Diversification and multi-divisionalization in
European firms 279
12-6 Share of subsidies in gross investments 279
x
12-7 Trends of US competition, 1939-1980 280
12-8 Overall concentration in US manufacturing industry 280
12-9 Output, employment, and productivity in the US and
in Europe, 1960-1978 281
12-10 Wage costs of a 1,OOO-employee Dutch 'standard ftrm,' 1985 283
12-11 Wage costs of a 1,OOO-employee ftrm in various
countries, 1985 284
12-12 Institutional factors in wage determination 285
12-13 Gross and net added real values as related to the
national product, 1960-1984 289
12-14.1 Number of ftrms in Japan, 1963-1981 290
12-14.2 Corporations and partnerships in the US, 1960-1983 291
12-14.3 Companies in West Germany, 1966-1984 292
12-15 Corporate tax and marginal income tax rates, 1981 294
PREFACE
This book is based on the papers presented at a conference on "New Issues in
Industrial Economics" held at Case Western Reserve University, Cleveland, Ohio,
June 8-10, 1987. The conference was organized by the Research Program in
Industrial Economics (RPIE) in the Department of Economics at CWRU and was
sponsored by The Cleveland Foundation, the Eaton Corporation, and The
Standard Oil Company (later renamed BP America, Inc.). Their generous support
is gratefully acknowledged. All of the papers have been revised, in several cases
extensively, since their presentation at the conference.
One of the primary reasons for organizing the conference was the concern that
Industrial Economics has become too narrowly focused in most academic
programs, largely being confined to Industrial Organization, i.e., issues of public
policy towards enterprise with emphasis on antitrust and regulatory policy. This
subject definition leaves out a number of interesting and important questions about
how industries evolve over time, what the role of technological change (and
organizational change) is in that process, and the associated structural changes
within industries and firms. The object of this book is to derme these issues and
suggest a framework within which they can be analyzed.
I would like to thank all the conference participants for their contributions,
particularly my colleagues at CWRU, Asim Erdilek and William S. Peirce, without
whose encouragement and support the conference would not have taken place.
Special thanks are due my research assistant, Erol Taymaz, whose wizardry at the
computer, diligent work, and attention to detail substantially shortened the editing
process and made the task much more manageable and pleasant than would
otherwise have been the case. I would also like to thank Lenora Mitchell who re
typed of some of the manuscripts.
Most of all I would like to thank my wife, Glenda, and children (Eric, Mark
and Amy) for their understanding, patience, and support throughout this whole
process. I dedicate this volume to them.
Cleveland, Ohio
May 1989
