Industry lifecycle
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Industry lifecycle is a theory linking the intensity of competition in a particular market with the time since the breakthrough innovation that made that market possible.
The lifecycle passes through 5 distinct stages:
- I - dormant stage with low numbers of competitors enjoying high monopoly profits
- II - "takeoff" stage with soaring entry and virtually non-existent exit from the market
- III - high turnover stage with many firms entering the market and leaving it
- IV - "shakeout" stage with mass exit via mergers, bankruptcies, etc.
- V - stabilisation stage during which a stable oligopoly emerges
Industry lifecycle is commonly correlated with the cycle of product and process innovation. Other factors that may launch industry lifecycle include:
- government intervention (e.g., deregulation),
- liberalization of external trade,
- lower transportation costs.
[edit] References
- Michael Gort, Steven Klepper. Time paths in the diffusion of product innovations. Economic Journal, vol.92, no.367. (September, 1982) Pp.630-653.
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