Technology Change and the Rise of New Industries

Technology Change and the Rise of New Industries

Technology Change and the Rise of New Industries

Technology Change and the Rise of New Industries

Synopsis

Technology Change and the Rise of New Industries explores why new industries emerge at specific moments in time and in certain countries. Part I shows that technologies which experience "exponential" improvements in cost and performance have a greater chance of becoming new industries. When "low-end" discontinuities incur exponential improvements, they often displace the dominant technologies and become "disruptive" innovations. Part II explores this phenomenon and instances in which discontinuities spawn new industries because they impact higher-level systems. Part III addresses a different set of questions-ones that consider the challenges of new industries for firms and governments. Part IV uses ideas from the previous chapters to analyze the present and future of selected technologies.

Based on analyses of many industries, including those with an electronic and clean energy focus, this book challenges the conventional wisdom that performance dramatically rises following the emergence of a new technology, that costs fall due to increases in cumulative production, and that low-end innovations automatically become disruptive ones.

Excerpt

The U.S. and other governments spend far more money subsidizing the production of clean energy technologies, such as electric vehicles, wind turbines, and solar cells, than they do on clean energy research and development (R&D). Why? A major reason is that many believe that costs fall as a function of cumulative production in a so-called learning or experience curve, and thus stimulating demand is the best way to reduce costs. According to such a curve, product costs drop a certain percentage each time cumulative production doubles as automated manufacturing equipment is introduced and organized into flow lines. Although such a learning curve does not explicitly exclude activities performed outside of a factory, the fact that learning curves link cost reductions with cumulative production focuses our attention on the production of a final product and implies that learning gained outside of a factory is either unimportant or is driven by that production.

But is this true? Are cumulative production and its associated activities in a factory the most important sources of cost reductions for clean energy or any other technology for that matter? Among other things, this book shows that most improvements in wind turbines, solar cells, and electric vehicles are being implemented outside of factories and that many of them are only indirectly related to production. Engineers and scientists are increasing the physical scale of wind turbines, increasing the efficiencies as well as reducing the material thicknesses of solar cells, and improving the energy storage densities of batteries for electric vehicles, primarily in laboratories and not in factories. This suggests that increases in production volumes, particularly those of existing technologies, are less important than increases in spending on R&D (i.e., supply-side approaches)β€”an argument that Bill Gates and other business . . .

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