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Applied Evolutionary Economics and Complex Systems

Edited by John Foster and Werner Hölzl

This book takes up the challenge of developing an empirically based foundation for evolutionary economics built upon complex system theory. The authors argue that modern evolutionary economics is at a crossroads. At a theoretical level, modern evolutionary economics is moving away from the traditional focus of the operation of selection mechanisms and towards concepts of ‘complex adaptive systems’ and self-organisation. On an applied level, new and innovative methods of empirical research are being developed and considered. The contributors take up this challenge and examine aspects of complexity and evolution in applied contexts.
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Chapter 8: Shakeout in industrial dynamics: new developments, new puzzles

Jackie Krafft


Jackie Krafft 1. INTRODUCTION The growing body of analysis in the field of industrial dynamics since the 1980s may lead people to think that industrial dynamics is a new domain of research. This is of course a misperception since some early contributions provided first steps towards the elaboration of an industrial dynamics approach. Schumpeter (1912, 1942) did significant work emphasizing the role of the entrepreneur in the development of innovation, as well as the evolution of industry in a context of radical change. Marshall (1890, 1920) also proposed many lines of enquiry, such as the fact that the economy is composed of different sectors, the growth and decline of which are unequal and intrinsically dependent on the organization of knowledge. This misperception is certainly due to the fact that the post-Second World War decades were characterized by the development of industrial organization that focused on optimality properties and comparative efficiency studies of different equilibrium situations, and ignored the conditions under which an industry could emerge and evolve over time. From the late 1950s to the 1960s, the structure–conduct–performance paradigm, at the core of the Harvard tradition, focused essentially on the determinants of features of market structure and performance, such as concentration, firms’ size and profitability. In the 1970s and 1980s, more attention was given to how the behaviour of firms could have an impact on market structures and performances, with the emergence of new approaches such as the Chicago School, the Theory...

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