Boundaries, Structures and Strategies
Edited by Andrea Colli and Michelangelo Vasta
Chapter 10: ‘Leaping Frogs’ in the Demography of Manufacturing Firms (1911–71)
* Lucia Castellucci and Renato Giannetti INTRODUCTION 10.1 In business and economic history, there are basically two traditions of research on the dynamics of industrial firms. The first one emphasises the role of ‘clusters of technological innovations’ (henceforth CTI) which ‘punctuate’ the time arrow of economic history, as in Schumpeter (1939). According to this tradition, early in the history of an industry, when the technological cluster starts, uncertainty is very high while barriers to entry are very low, and new firms are the major innovators and the key factor in industrial evolution. Later, as the industry develops and eventually matures, according to a ‘technological trajectory’, economies of scale, learning curves, barriers to entry and financial resources become important in the competitive process (Chandler 1990; Freeman & Louça 2001). According to this tradition, start-ups and faster-growing entrants are more innovative, and tend to grow rapidly and to be persistent during the life-cycle of the technologies which they adopt. In contrast, the second research tradition emphasises the role of market competition between new entrants and incumbents as the key factor of the creative ‘innovation and destruction’ mechanism which continuously reshuffles the leading firms (Bartelsman et al., 2004). This tradition of research supports the idea of the unstable, transitory nature of the leading firms, and describes this dynamic as ‘leaping frog competition’ (henceforth LFC) (Sutton 2002). Both the research traditions emphasise that new firms grow rapidly, but this points to rather different features. In the case of the CTI traditions, new firms enter new...
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