Examines the role of innovation in quickly evolving, turbulent industrial markets in the United States. Longitudinal data for more than 4.5 million U.S. businesses between 1976 and 1986 - found in the United States Small Business Data Base - are used to analyze the startup, survival, and overall entrepreneurship of industrial firms. Three factors are found to shape industrial evolution: technology, scale economies, and demand. Innovation, as the driving force behind these factors, is spread through technological regimes - that is, the underlying knowledge conditions of a particular industry that create the potential for innovation. Thus, entrepreneurship, measured by the extent to which an industry is comprised of new and young firms, also depends upon the underlying technological regimes. In industrial markets, asymmetries of knowledge and valuation can motivate individuals to start a new firm, despite a high level of risk and uncertainty. Firms are willing to remain in highly innovative industries, though the competitiveness of such a market lowers a firm's chance of contributing an innovative product, which is necessary to its growth and survival. Despite the high entry level of small firms in industrial markets, the majority are too small to survive unless they are able to achieve high growth rates or pursue a strategy of compensating factor differentials - for example, lowering the cost of production by cutting down and intensifying labor. These strategies are difficult to maintain, however, and the larger a firm is at establishment, and the faster its growth rate, the more likely it is to survive. Two different models of the final exiting stage of industrial evolution are also found, in which the majority of exiting firms are either new entrants, or incumbents displaced by newer firms. The book concludes that tendencies of the market cannot be predicted, as it is dynamic and varies considerably from industry to industry, though knowledge regimes appear to control innovation, which in turn accounts for variations in industry evolution across markets. (CJC)
