Public policies and changing boundaries of firms in a "history friendly" model of the co-evolution of the computer and semiconductor industries

Abstract

In this paper, we explore the effects of alternative policies, ranging from antitrust to public procurement, open standards, information diffusion and basic research support on the dynamics of two vertically related industries in changing and uncertain technological and market environments. The two industries are a system industry and a component industry, and the evolution of these industries is characterized by periods of technological revolutions punctuating periods of relative technological stability and smooth technical progress. We have been inspired by the co-evolution of the computer and component industries from their inceptions to the 1980s. On the basis of that evolution, we have developed a history friendly-model this co-evolution. In sum, this paper has stressed that various types of policies may sometimes have contrasting effects on the industry, mainly on concentration and technical change and innovation. It has also shown that the consequences of policies may spillover from one industry to another, and from one type of firms to another. Policies that aim at a specific industry may provoke major changes in a related industry through the product market, the changing boundaries of firms or knowledge and technological interdependencies. The policy maker has to be aware of that. Finally, a major point of the paper regards the unintended consequences of policies.