Technology cycles, dominant design and firm survival in the early years of the tractor industry

Abstract

The history of western economic growth, especially North American, has been strongly influenced by farm mechanization. The dramatic increase in productivity which enabled the support of a hugely declining agricultural work force is due to a large extent to the arrival of motorization. In this, tractors, one of the most important components of a farm, have played a fundamental role. In this paper we identify a major technological breakthrough in the American tractor industry and test the hypothesis that it influenced firms’ survival. Based on the concepts of dominant designs and technology cycles our work aims to understand the mechanism behind the birth of new technologies that pushed agriculture forward. We focus our analysis on the early years of this industry, when most innovation happened and the dominant design emerged. We use the generalized gamma model and control for the effects of population density, market size, business cycles and entry timing. We consider both the complete set of data for the whole industry as well as the submarkets of general purpose tractors and garden tractors. The results show that firms that entered the industry in the initial development phase, have a much lower expected duration than the remaining firms. Many of these firms may have spent a lot of resources in experimentation during a non-standardized and low volume phase of the industry. For given values of the control variables, the firms that entered after the dominant design have the highest expected duration.