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Evolutionary Economics

VIEWS: 1 PAGES: 53

									           Coevolution of
Industries and Academic Disciplines

         Wharton, March 26, 2004



Johann Peter Murmann
Road Map for Talk
1. General Hypothesis about Coevolution of National
   Industries & National Academic Disciplines

2. The Research Site: Synthetic Dye Industry 1850-1914

3. What are Evolutionary Explanations

4. Previous Research and my Definition of Coevolution

5. Analysis of Coevolution of Synthetic Dye Industry &
   Academic Chemistry

6. Formulating a General Hypothesis from the Study

7. Contributions of the Paper & Future Research
 Typology of Academic-Industrial (A-I) Complexes

     Strong
              Academic Laggard                 Power-Union


                     Quadrant I                Quadrant II
Industrial
  Sector

                     Quadrant III              Quadrant IV


               Union of the Weak              Industrial Laggard
      Weak

              Weak                Academic Discipline        Strong
Explanation of Symbols


        Academic discipline in particular country



        Industrial sector in particular country



Academic-industrial complexes




1          2          3            …                n
Co-Evolution Processes at the National Level    Time 1


     Strong




Industrial
  Sector




      Weak

              Weak     Academic Discipline     Strong
Co-Evolution Processes at the National Level    Time 2



     Strong




Industrial
  Sector




      Weak

              Weak     Academic Discipline     Strong
Co-Evolution Processes at the National Level    Time 3



     Strong




Industrial
  Sector




      Weak

              Weak     Academic Discipline     Strong
Co-Evolution Processes at the National Level    Time 4



     Strong




Industrial
  Sector




      Weak

              Weak     Academic Discipline     Strong
Key Argument of Current Paper
Coevolutionary analysis requires two steps

1. Need to show that both partners in the coevolutionary
   relationship can be conceptualized as populations
   that change through variation, selection, retention
   (VSR) processes.

2. Need to specify bi-directional causal mechanisms that
   link the fate of the two populations

      a. Exchange of personnel (EP)
      b. Commercial ties (CT)
      c. Lobbying for each other (L)
2. The Site: Synthetic Dye Industry
British and French Firms are the
Leaders in Dye Industry in 1862
           100

            90

            80

            70

            60

            50
Market
Share       40

            30

            20

            10

             0


   U. S.         Britain   Germany   Switzerland   France   Other
German Firms are Leaders in the
Dye Industry in 1873
           100

            90

            80

            70

            60

            50
Market
            40
Share
            30

            20

            10

             0


   U. S.         Britain   Germany   Switzerland   France   Other
German Firms Dominate World
Dye Industry in 1913
         100%


           90%


           80%


           70%


           60%


Market     50%


Share      40%


           30%


           20%


           10%


           0%

   U. S.         Britain   Germany   Switzerland   France   Other
Data & Methods
   Inductive Case Method (Eisenhardt, 1989)
   Comparative historical analysis (Stinchcombe, 1978,
    Tilly, 1984; Ragin, 1987, Chandler 1990)
   Repeated dialogue between ideas and evidence to
    develop new theories
   Constructed database of virtually all synthetic dye
    firms in the world from 1857 to 1914
               379 distinct dye firms (648 firms in database)
   Studied industry and firm histories
               6 case studies of a winner and loser in Britain,
               Germany and the U.S.
   Collected data on academic disciplines in five
    different countries.
   Studied biographies of leading industrialists and
    chemists
2. Background: Requirements for an
Evolutionary Explanation of Industrial Change
 Populations evolve not individuals

• Sources of Variation (Variation)
   – Innovations
• Process of Transformation (Selection)
   – Differential adoption and survival of routines in a
     population of entities
• Units of Transmission (Retention)
   – Routines (standard operating procedures)
• Mechanism of Transmission (Retention)
   – “Social intercourse,” i.e imitation
Industrial Change: A Selection Process
                                Selection
Population of Firms at Time 1     Filter    Population of Firms at Time 2




                                   e.g.
                                  Profits


   Standard Firm      Firm with Informal R&D       Firm with Formal R&D
Change in Cognitive Organization of Universities

  Population of Ideas at T1                 Population of Ideas at T2




                              Selection
                                Filter



     Humanities        Law       Medicine          Organic Chemistry
Evolutionary Change in Individual Discipline

Population of Ideas at T1               Population of Ideas at T2




                            Selection
                              Filter



    Inorganic Chemistry     Organic Chemistry
An Adaptation Process of Change

Population of Firms at Time 1    Heroic    Population of Firms at Time 2
                                Managers




   Standard Firm      Firm with Informal R&D       Firm with Formal R&D
The Firm as Viewed as an Evolving Population

     Firm at Time 1         Selection      Firm at Time 2
                              Filter




                              e.g.
                             Profits



   Character 1        Character        2       Character    3
4. Previous Research on “Coevolution”



 Burgelman, 2002                Coriat and Dosi, 1998
 Repenning & Sterman 2002       McKelvey, 1997
 Eisenhardt and Galunic, 2000   Haveman and Rao, 1997
 McKelvey, 1999                 Barnett and Hansen, 1996
 Lewin and Volberda, 1999       Levinthal and Myatt, 1995
 Baum and McKelvey, 1999        March, 1994
 Lewin et al., 1999             Baum and Singh, 1994
 Van De Ven and Grazman, 1999   Rosenkopf and Tushman, 1994
 Rosenkopf and Nerkar, 1999     Yates, 1993
 Koza and Lewin, 1998           Dosi & Kogut, 1993
                                Kieser, 1989
Diverse meanings “Coevolution”
1. Two things are developing in parallel
   • Technology and Organization
   • micro and macro level (firm evolves and industry evolves)

2. One thing that develops has a causal impact on a second thing
   that develops
   • Environment and organizational forms

3. Two things mutually influence each other’s development
   • Two (or more) business units (Eisenhardt and Galunic,
     2000)
   • Each thing changes to a large extent through a selection
     process

   •   Mutualism (not only competition) is important
       coevolutionary mechanism
My Definition of Coevolution

Two evolving populations coevolve
if and only if
they have a significant causal impact
on each other’s ability to persist
5. Analysis of Coevolution of Synthetic Dye
Industry & Academic Chemistry


Step 1:
  Need to identify two populations that
  change through VSR processes


Population 1: firms   (differing in blueprints for action)

Population 2: scientific ideas      (differing in their
                                     content)
Specific Evolutionary Mechanisms
               Industry               Academia
Variation   Entrepreneurs or          Researchers
             firm members             propose new
              develop new            scientific ideas
             action patterns
Selection    Profitable firms       Productive ideas
            grow, unprofitable        attract more
                firms die           researchers and
                                     gain influence
Retention     Blueprints for        Ideas are stored in
            actions are stored     individual memory
            in organizational        and the scientific
                 rules and               literature
                individual
                 memory
Evidence for evolutionary change in
the two populations

    Synthetic Dye Industry from 1857 to 1914
        Percentage of firms with local formal R&D laboratory
        Ownership structure of firms
        Percentage of firms with global sales force
        (Global market share of firms from particular country)


    Organic Chemistry
        Share of Organic Chemistry in the Literature of
         Chemistry
        (Global share of organic chemistry literature by
         researchers from particular country)
Frequency of Important Firm Traits 1
                % of Firms with Local Formal R&D Department

                          1860          1914

      Germany              0%           27%

      France               0%           14%

      Britain              0%           10%

      United States        0%            0%

      Switzerland          0%           60%
Frequency of Important Firm Traits 2
              % of Firms that are either
              Single individual firms, Family firms & Partnerships
                         1860           1914

    Germany             100%             9%

    France              100%            14%

    Britain              80%            30%

    United States         50%            0%
                        (1865)
    Switzerland          100%            0%
Industry Demography 1857-1914

                  Number of     Number of    Firm Failure
                 Firm Entries   Firm Exits      Rates
 Germany             116            91           78%

 France              63            55           87%

 Britain             47            36           77%

 United States       35            25           71%

 Switzerland         23            19           83%
Frequency of Organic Chemistry Ideas
                                                   1857-1914
  Germany         1871-75:       1891-95:       1910-14:
                    79%            88%            57%

  France        Becomes weak in aromatic organic
                chemistry
  Britain       Declines after 1865 but increases somewhat
                after 1890s.
  United States Weak in aromatic organic            1907
                chemistry, but good in              3.3%
                mineral soil, physical
                chemistry and chemical
                engineering
  Switzerland Organic chemistry becomes dominant in the
                field of chemistry in the 1890s.
Coevolutionary Analysis Step 2:

Identify bi-directional causal
mechanisms linking
population of industrial firms (representing
Industries) and
population of scientific ideas (representing
disciplines)

  1. Exchange of personnel (EP)
  2. Commercial ties (CT)
  3. Lobbying for each other (L)
Causal Relationships Connecting the two Populations: 1
Causal Relationships Connecting the two Populations: 2
Causal Relationships Connecting the two Populations: 3
Causal Relationships between the Coevolving Populations
               Industry                        Academia
Variation   Entrepreneurs or                   Researchers
             firm members                      propose new
              develop new        EP,CT        scientific ideas
            business actions
Selection    Profitable firms               Useful ideas attract
            grow, unprofitable               more researchers
                firms die        EP,CT, L   and gain influence,
                                             useless ideas lose
                                                 adherents
Retention     Blueprints for                 Ideas are stored in
            actions are stored              individual memory
            in organizational                 and the scientific
                 rules and         EP             literature
                individual
                 memory
British and French Firms are the
Leaders in Dye Industry in 1862
           100

            90

            80

            70

            60

            50
Market
Share       40

            30

            20

            10

             0


   U. S.         Britain   Germany   Switzerland   France   Other
German Firms are Leaders in the
Dye Industry in 1873
           100

            90

            80

            70

            60

            50
Market
            40
Share
            30

            20

            10

             0


   U. S.         Britain   Germany   Switzerland   France   Other
German Firms Dominate World
Dye Industry in 1913
         100%


           90%


           80%


           70%


           60%


Market     50%


Share      40%


           30%


           20%


           10%


           0%

   U. S.         Britain   Germany   Switzerland   France   Other
German Share of Aromatic Organic
Chemistry Publications cited in
France
                 Papers     German
               devoted to    Share
               aromatics
      1864        14%        35%

      1867       38%         85%

      1870       40%         96%

      1874       35%         97%
Global Share of Organic Chemistry
Publications
                        1877      1907

       Germany         50-67%    35-47%

       France          15.2%     12.2%

       Britain          5.9%     16.2%

       United States    0.9%      3.6%

       Switzerland     7.4-24%   5.0-17%
6. Generalizing the Argument
• National Industries and National Academic
  Disciplines coevolve


• This has profound implications for what
  industry and what academic discipline in a
  particular country will be strong in
 Typology of Academic-Industrial (A-I) Complexes

     Strong
              Academic Laggard                 Power-Union


                     Quadrant I                Quadrant II
Industrial
  Sector

                     Quadrant III              Quadrant IV


               Union of the Weak              Industrial Laggard
      Weak

              Weak                Academic Discipline        Strong
Explanation of Symbols Used in Presentation


          Academic discipline in particular country



          Industrial sector in particular country


Academic-industrial complexes




Britain   France Germany       Switzerland United States
 Organic Chemistry in Different Countries                         1850

     Strong




Industrial      No synthetic dye industry existed before 1857
  Sector




      Weak

              Weak                Academic Discipline           Strong
              Britain   France Germany     Switzerland United States
  Co-Evolution in the Synthetic Dye Industry                 1860

     Strong




Industrial
  Sector




      Weak

              Weak              Academic Discipline        Strong
              Britain   France Germany   Switzerland United States
  Co-Evolution in the Synthetic Dye Industry                 1870

     Strong




Industrial
  Sector




      Weak

              Weak              Academic Discipline        Strong
              Britain   France Germany   Switzerland United States
  Co-Evolution in the Synthetic Dye Industry                 1913

     Strong




Industrial
  Sector




      Weak

              Weak              Academic Discipline        Strong
              Britain   France Germany   Switzerland United States
Co-Evolution Processes at the National Level    Time 1


     Strong




Industrial
  Sector




      Weak

              Weak     Academic Discipline     Strong
Co-Evolution Processes at the National Level    Time 2



     Strong




Industrial
  Sector




      Weak

              Weak     Academic Discipline     Strong
Co-Evolution Processes at the National Level    Time 3



     Strong




Industrial
  Sector




      Weak

              Weak     Academic Discipline     Strong
Co-Evolution Processes at the National Level    Time 4



     Strong




Industrial
  Sector




      Weak

              Weak     Academic Discipline     Strong
7. Contributions

0. Strategy is also about changing the rules
   of the game.

1. Industries can influence the direction of
   cognitive change in universities through
       • Commercial ties
       • Lobbying
       • Exchange of personnel

2. Firm strategy needs to be tailored to
   specific institutional environment
Some other Cases & Future Research

Agriculture               1850-1914

Computer Software         1950-1996

Biotechnology             1973-2001



• These cases seem to support the
  coevolutionary hypothesis.

								
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