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The Handbook of Technology and Innovation Management by Scott Shane

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1.1. The Life cycle Phenomenon

Scholars across a range of disciplines have found the life cycle metaphor useful in describing the evolution of industries. Subsequent to the first commercialization of a product, industries are seen to go through a progression that has substantial regularities in the time trends of key variables, such as number of firms, sales, price, and innovation patterns. Although life cycle models apply to a broad range of settings, our focus in this chapter is on the relationship between technological and industry evolution, two processes that we posit are inextricably linked. We begin by developing stylized observations about technology and industry development – that is, a generic industry life cycle model, building on empirical work from three areas of the literature: technology management, evolutionary economics, and organizational ecology. We then compare and contrast these literatures and finally propose a future research agenda motivated by this comparison.

For purposes of exposition, we distinguish three stages of evolution – emergence/ growth, shakeout, and maturity[] – to describe the basic model put forth in the literature (Table 1.1). In the initial stage, high levels of uncertainty permeate every aspect of an industry. Firms experiment with a variety of technologies, since the performance trajectory of different technologies is unclear. Customers have undeveloped preferences and explore a range of product uses. The market is small and production ...

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