The PC Industry: New Economy or Early Life-Cycle?

The paper studies the co-evolution of industrial turbulence and financial volatility in the early phase of the life-cycle of an old high-tech industry and a new high-tech industry: the U.S. auto industry from 1899-1929 and the U.S. PC industry from 1974-2000. In both industries, the first three decades were characterized by industrial turbulence: radical technological change, high entry and exit rates, and rapidly falling prices. However, unlike in the auto industry, in the PC industry technological change and new entry did not lead to strong instability of market shares-at the core of the monopoly-destroying effect of Schumpeterian creative destruction-until the 1990s, when the lead of the incumbents from the pre-existing mainframe and minicomputer industries was undermined. In both industries, stock prices were the most volatile and idiosyncratic during those years in which technological change disrupted market shares the most (Autos: 1918-1928; PCs: 1990-2000).