Industry Dynamics


In her list on Entry Anne Marie Knott focuses on research aimed at answering two important questions: (i) When are firms driven to enter new markets?; and (ii) Is entry viable? In exploring this fundamental topic, important links emerge with other topics included in the reader, most notably issues related to Corporate Diversification , Sustainability , Industry Evolution and Industry and Firm Effects . In the interests of focus, Knott limits her attention primarily to the incentives for incumbents to enter new markets; see Innovation for some of the different incentives facing new entrants.

Innovation is a huge topic, and one of central interest to many strategy scholars. In his reading list on the topic, Bruno Cassiman goes back to basics, to early IO theory and an analysis of the incentives for R&D and innovation. He then goes on to look at other elements of the firm environment affecting the incentive to invest in R&D and innovation. The focus is primarily on theoretical developments in the field reflecting Cassiman’s view that “we still do not have theoretical models that predict sufficiently well the observed phenomenon”; recent empirical applications in strategy research are also highlighted.

Belen Villalonga notes in her reading list on Corporate Diversification that this is one of the oldest topics in strategy research. For several decades strategy scholars have worked to understand the causes and consequences of diversification, focusing in particular on the degree of “relatedness” among a firm’s businesses. In her commentary Villalonga guides the reader through the evolution of the field, including the development of several key stylized facts such as the well-known “diversification discount,” but also highlights more recent work that challenges these stylized facts and opens up new avenues for future research

In Industry Evolution , Brian Silverman looks at the combined effect of entry, exit and growth on cumulative changes in industry characteristics over time. In tracing the development of the literature, Silverman notes the impressive progression from models in which industry change is exogenously imposed to those that grapple with endogenously driven change. The literature also encompasses an impressive diversity of theoretical perspectives, including theories rooted in traditional industrial organization, evolutionary economics, and more sociological perspectives – organizational ecology, resource partitioning and niche overlap. Recent work has also paid increasing attention to firm heterogeneity (providing a link to, for example, Sustainability ), and geography (see Geography and Agglomeration ).