Geographies of the global economy
Industry Evolution
Lecture 2: March 3rd, 2023
Etieno Enang
[email protected]
Module Overview
• Handbook and Canvas
• 6 weeks: lectures &
seminars
• Asynchronous material
• Group work and Report
• Work effectively together
• Deadline on 12th May
• Be proactive
• No such thing as
a silly question!!
Overview
Industrial emergence
… decline
… renewal
Wrap up: place matters or does it?
Industrial emergence
• The beginning
• Chance & paths
• What is already in place?
Geography
• Either businesses change their activities, or…
entrepreneurship
Industrial emergence
Santarelli E, Vivarelli M, 2007, “Entrepreneurship and the process
of firms’ entry, survival and growth” Industrial and Corporate
Change 16(3) 455–488
• Entrepreneurship: “the process by which new enterprises are
founded and become viable”
• Used in some endogenous growth theories (see Lecture 4) –
akin to knowledge production function
Industrial emergence
• Schumpeter (1908; 1912:
Creative destruction
“…the entrepreneur is the underlying
force of economic development, i.e.
the individual who ‘on the basis of a
stimulus towards a creative function,
breaks away from the path of
routine’…”
(from S&V, 2007)
Industrial emergence
• Schumpeter:
Creative destruction
• Clear links to:
Not just innovation, but…
FDI
Trade
Quality of life
Competitiveness / economic growth in general
Industrial emergence
• Regional differences in entrepreneurship
Rate
Endowments
Success
• Is new firm formation really beneficial?
Low survival rates (20-40% fail ≤ 2 y; 50-60% ≤ 7 y)
Entry & exit correlated

Industrial emergence
• Turbulence vs creative destruction
Actual role of entrepreneurship in economic growth?
• Theories of entrepreneurship
Profit triggers & barriers (exogenous (external) or
endogenous (internal))
Other reasons?
Industrial emergence
Individual decision making; characteristics individual & environment
Industrial emergence
• Self-employment theory
Risk aversion & risk of job vs self-employment
Difference wages – expected profit
Progressive – regressive determinants
Industrial emergence
• Individual determinants
Job experience
Family background
Financial constraints
Psychology
Industrial emergence
• Individual determinants
Job experience
Family background
Financial constraints
Psychology
Industrial emergence
• Individual determinants
Job experience
Family background
Financial constraints
Psychology
• Sectoral variety
More on this later in the lecture
• Geographic environment
• Different motivations and types of
entrepreneurs
• Entrepreneurship is not a ‘magic bullet’
• Place matters and influences where
and how small firms grow
Industrial emergence
Versus
Industrial renewal
Industrial emergence
• Some determinants of success
Start-up size
Science-based & specialized suppliers
Innovators
Large incumbents
Personal characteristics; education, family influence
Previous entrepreneurial / top management experience
Credit constraints
Psychological motivation
… etc.
Industrial emergence
• This is place, path dependent and varies by sector, over time
• Shakeout (not the same as the industrial decline we’ll discuss
later)
Scale advantages (market concentration)
Success in certain places (Detroit -> discussed in seminar)
Agglomeration economies (localization especially)
Factors (e.g. port)
Industrial emergence
From Klepper S, 2007, “Disagreements, Spinoffs, and the Evolution of Detroit as
the Capital of the U.S. Automobile Industry” Management Science 53(4) 616-631
Klepper is
recommended
reading material for
the next seminar on
Detroit!
Industrial emergence
Industrial emergence
&
Overview
Industrial emergence
… decline
… renewal
Globalization
Wrapping up
Industrial decline: Market concentration
Shakeout: slowing growth,
intense competition, declining
profitability, and a focus on
cost reduction.
Shakeout
Intro: slow growth, high
prices, low volumes, a
substantial need for
investment, and a high
risk of failure.
Maturity: little or no
growth, industry
consolidation, and high
barriers to entry.
Decline: negative
growth, excess
capacity, and intense
competition.
• Market concentration
Industrial decline
• Market concentration
• Rigidity
Organizational routines
Product/technology cycles
Scale

• E.g the case of Peru and the decline of guano exports
Industrial decline
(Bureau of Transportation statistics)
Industrial decline
Automotive: shares
of production since
1950 – 2017
• ‘Internal’ factors:
Management quality:
Organizational capabilities:
education, experience, etc.
quality of product or service, export strategy, control,
marketing quality
customers, suppliers, governments, business networks,
etc.
trademarks, patent, copyright
Relational factors:
Protected IPR:
• External factors: characteristics export market, domestic market
stuff such as: infrastructure, exchange rates
(under/overvalued), FDI (aiding trade/shaping and
directing trade), institutions..
Industrial decline
Industrial decline
• Decline in either the full industry, or just a part of it
• Demise of famous brands eg Woolworths
• Different sectors in different places…
• Some famous examples…
Industrial decline
• Market concentration
• Rigidity
Organizational routines
Product/technology cycles
Scale
• Decline
Abandoned GM factory in Canada
https://www.freaktography.com/abandoned-stcatharines-gm-plant/
Tesla factory
Industrial decline
• Market concentration
• Rigidity
Organizational routines
Product/technology cycles
Scale
• Decline in either the full industry, or just a part of it
• Reasons behind decline can be external / exogenous
Industrial decline
• Market concentration
• Rigidity
Organizational routines
Product/technology cycles
Scale
• Decline in either the full industry, or just a part of it
• Reasons behind decline can be external / exogenous
Decline in Coal fired power stations and usage of fossil fuels -> Paris agreements
Driver is regulations dealing with climate change
Industrial decline
• Market concentration
• Rigidity
Organizational routines
Product/technology cycles
Scale
• Decline in either the full industry, or just a part of it
• Reasons behind decline can be external / exogenous
Industrial decline
• Market concentration
• Rigidity
Organizational routines
Product/technology cycles
Scale
• Decline in either the full industry, or just a part of it
• Reasons behind decline can be external / exogenous

Industrial decline
• Regional repercussions?
• Decline takes place in particular places
• What is the impact of decline on people, places, investment,
quality of living
• Negative externalities – crime, ill health, out-migration, decline
Progressive – regressive determinants
Industrial emergence
• Self-employment theory
Risk aversion & risk of job vs self-employment
Difference wages – expected profit
Detroit (house price median is about 20k US dollars in the worst neighborhoods)
Parnassus Heights, CA, San Francisco (average home price of 1.5M US dollars)
Overview
Industrial emergence
… decline
… renewal
Globalization
Wrapping up
Industrial renewal
• New ‘wave’?
• Human capital?
Source: Ferasso & Bergamaschi, 2020 pg 59
• Place matters
• New industries
• Positive externalities
Renewal Social
media
Biotech
Enterpris
e
software
Venture
capital
Tech
giants
Misc.
computing
Automotive
• What role can governments play in creating industrial renewal
• FDI – attracting investment from elsewhere
• Supporting small firms to grow
• Innovation and spin outs from university research
• Entrepreneurship?
• Or… why not in existing companies? Intrapreneurship
Industrial renewal
Industrial renewal
• Why not in existing companies?
More resources
Better employees
Intrapreneurship
Scale
Stam E, 2013, “Knowledge and entrepreneurial employees: a
country-level analysis” Small Business Economics 41(4) 887–898
Globalization
• More intense competition
Faster product / industry cycles
Increased entrepreneurial opportunities (market integration,
low trade barriers, higher demand for products/services)
• What about place? Does it still matter for independent
entrepreneurship?
International venture capital?
Industrial emergence
• What about globalization?
More opportunities (market integration, low trade barriers,
higher demand for products/services)
• Is venture capital becoming international?
Industrial emergence
• What about globalization?
More opportunities (market integration, low trade barriers,
higher demand for products/services)
• Is venture capital becoming international?
• What about globalization?
More opportunities (market integration, low trade barriers,
higher demand for products/services)
• Is venture capital becoming international?
• What about globalization?
More opportunities (market integration, low trade barriers,
higher demand for products/services)
• Is venture capital becoming international?
Berlin Barcelona
HQ Tel Aviv
+ loc. in Berlin Berlin Hamburg
Can’t tell All over Germany HQ Berlin Berlin Miami
…etc
Overview
Industrial emergence
… decline
… renewal
Globalization: place matters or does it?
Wrapping up
Wrapping up
• Industries emerge – why?
Existing companies
Entrepreneurship
Regional & sectoral factors – impact on places?

• How does industrial emergence and decline play out in the
global economy – winners vs losers…?
Globalization
• ‘Placeless’ development….?
• Flat vs spiky-ness in the global economy…?
• How do the processes of globalization play out differently in
different places….?
• Key question that you are exploring in your Reports….
Wrapping up
• Emerging industries
Existing companies
Entrepreneurship
Regional & sectoral factors
• Eventual decline
Risks of specialization
• Seminar: case of Detroit
Wrapping up
• Emerging industries
Existing companies
Entrepreneurship
Regional & sectoral factors
• Eventual decline
Risks of specialization
• Seminar: case of Detroit
Thanks for your attention
Questions?
Etieno Enang
[email protected]